WARRANT EXERCISE FEE AGREEMENT
AGREEMENT dated as of the ______ day of _____________, 1999, by and among
Schneider Securities, Inc. ("Schneider"), Multi-Link Telecommunications, Inc.
(the "Company") and American Securities Transfer & Trust, Inc. (the "Warrant
Agent").
W I T N E S S E T H:
WHEREAS, in connection with a public offering of 1,150,000 Units (or up to
1,322,500 Units including the over-allotment option), the Company proposes to
issue, in accordance with an agreement dated as of ____________________, 1999,
by and between the Company and the Warrant Agent (the "Warrant Agreement"),
Warrants to purchase shares of Common Stock; and
WHEREAS, the parties hereto wish to provide Schneider, a member of the
National Association of Securities Dealers, Inc. ("NASD"), with certain rights
on an exclusive basis in connection with the exercise of the Warrants.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth, the parties hereto agree as follows:
Section 1. Description of the Warrants. The Company's Warrants may be
exercised on or after _____________, 1999 and expire at 5:00 p.m. Colorado time
on ____________, 2002 (the "Expiration Date"), subject to redemption rights
commencing on or after _________, 2000. In accordance with the provisions of the
Warrant Agreement, the holder of each Warrant shall have the right to purchase
from the Company, and the Company shall issue and sell to such holders of
Warrants, one fully paid and non-assessable share of the Company's Common Stock
for every two Warrants exercised at an exercise price of $9.00 per share (the
"Exercise Price"), subject to adjustment as provided in the Warrant Agreement.
Section 2. Notification of Exercise. Within ten (10) days of the last day
of each month commencing one year from the date of the Company's Prospectus, the
Warrant Agent or the Company will notify Schneider of each Warrant certificate
which has been properly completed and delivered for exercise by holders of
Warrants during each such month, the determination of the proper completion to
be in the sole and absolute reasonable discretion of the Company and the Warrant
Agent. The Company or the Warrant Agent will provide Schneider with such
information, in connection with the exercise of each Warrant, as Schneider shall
reasonably request.
Section 3. Payment to Schneider. The Company hereby agrees to pay to
Schneider an amount equal to five (5%) percent of the exercise price (i.e. ,$.45
per share based on the initial Exercise Price of the Warrants which is $9.00 per
share) for each Warrant exercised (the "Exercise Fee") a portion of which may be
allowed by Schneider to the dealer who solicited the exercise (which may also be
Schneider) provided that:
(a) such Warrant is exercised on or after _________, 2000, which is
one year from the effective date of the Company's Registration Statement;
(b) at the time of exercise, the market price of the Company's Common
Stock is higher than the applicable Exercise Price of the Warrant being
exercised; (c) the holders of Warrants being exercised have specifically
indicated in writing, either in the Form of Election contained on the
specimen Warrant Certificate or by written documents signed and dated by
the holders that the exercise of such Warrants was solicited by Schneider
or another member of the NASD; and
(d) Schneider and/or the member of the NASD which solicited the
exercise of Warrants delivers a certificate to the Company within five (5)
business days of receipt of information relating to such exercised Warrants
from the Company or the Warrant Agent in the form attached hereto as
Exhibit A, stating that:
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(1) The Warrants exercised were not held in a discretionary
account;
(2) The member which solicited the exercise of Warrants did not
(unless granted an exemption by the Securities and Exchange Commission
("the Commission") from the provisions thereof), within the applicable
number of business days under Regulation M immediately preceding the
date of exercise of the Warrant bid for or purchase the Common Stock
of the Company or any securities of the Company immediately
convertible into or exchangeable for the Common Stock (including the
Warrants) or otherwise engage in any activity that would be prohibited
by Regulation M under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), to a broker-dealer engaged in a distribution of
the Company's securities; and
(3) In connection with the solicitation, it disclosed the
compensation it would receive upon exercise of the Warrant.
Section 4. Payment of the Exercise Fee. The Company hereby agrees to pay
over to Schneider within two (2) business days after receipt by the Company of
the certificate described in Section 3(d) above, the Exercise Fee out of the
proceeds it received from the applicable Exercise Price paid for the Warrants to
which the certificate relates.
Section 5. Inspection of Records. Schneider may at any time during business
hours, at its expense, examine the records of the Company and the Warrant Agent
which relate to the exercise of the Warrants.
Section 6. Termination. Schneider shall be entitled to terminate this
Agreement prior to the exercise of all Warrants at any time upon five (5)
business days' prior notice to the Company and the Warrant Agent.
Notwithstanding any such termination notice, Schneider shall be entitled to
receive an Exercise Fee for the exercise of any Warrant for which it has already
delivered to the Company prior to any such termination the certificate required
by Section 3(d) of this Agreement.
Section 7. Representations and Warranties of Schneider. At the date of
execution hereof and at the time of solicitation of exercise of Warrants,
Schneider represents that it is, and will, (i) be registered as a broker-dealer
under the Exchange Act, (ii) be a member in good standing of the NASD, and (iii)
maintain its registration, qualification and membership in full force and effect
and in good standing throughout the term of this Agreement. Schneider
acknowledges and agrees that it will not solicit the exercise of Warrants, or
offer or sell the underlying Common Stock, in any state or jurisdiction except
those in which the Common Stock underlying the Warrants has been qualified or
qualification is not required. Further, Schneider agrees to comply with the laws
of the states in which it may solicit exercise of the Warrants or in which the
Common Stock underlying the Warrants may be offered or sold by it, with the
applicable rules and regulations of the NASD, and will comply with federal laws
including, but not limited to, the Securities Act of 1933, as amended (the
"Act"), the Exchange Act and the rules and regulations of the Commission
thereunder.
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Section 8. Indemnification.
a. Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless any and all statutory or designated
underwriters (the "Underwriters"), the representative of the Underwriters,
if any (the "Representative"), and each of their officers, directors,
partners, employees, agents, and counsel, and each person, if any, who
controls the Representative or any one of the Underwriters within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act,
against any and all loss, liability, claim, damage, and expense whatsoever
(which shall include, for all purposes of this Section 8, but not be
limited to, attorneys' fees and any and all expense whatsoever incurred in
investigating, preparing, or defending against any litigation, commenced or
threatened, or any claim whatsoever and any and all amounts paid in
settlement of any claim or litigation) as and when incurred arising out of,
based upon, or in connection with (i) any untrue statement or alleged
untrue statement of a material fact contained (A) in any preliminary
prospectus, the registration statement, or any post-effective amendment
thereto, or the prospectus (as from time to time amended and supplemented),
or any amendment or supplement thereto, relating to the offer or sale of
Common Stock underlying the Warrants or the solicitation of exercise of the
Warrants (such preliminary prospectus, registration statement,
post-effective amendment or prospectus hereinafter collectively, the
"Offering Documents") or (B) in any application or other document or
communication (in this Section 8 collectively called an "application") in
any jurisdiction in order to qualify the Common Stock and Warrants under
the "blue sky" or securities laws thereof or filed with the Commission or
any securities exchange; or any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or (ii) any breach of any
representation, warranty, covenant, or agreement of the Company contained
in this Agreement. The foregoing agreement to indemnify shall be in
addition to any liability the Company may otherwise have, including
liabilities arising under this Agreement; however, the Company shall have
no liability under this Section 8 if such statement or omission was made in
reliance upon and in conformity with written information furnished to the
Company as stated in Section 8(b) with respect to the Underwriters by or on
behalf of the Underwriters expressly for inclusion in any of the Offering
Documents, or in any application, as the case may be.
If any action is brought against the Underwriters, the Representative
or any of their officers, directors, partners, employees, agents, or
counsel, or any controlling persons of an Underwriter or the Representative
(an "indemnified party") in respect of which indemnity may be sought
against the Company pursuant to the foregoing paragraph, such indemnified
party or parties shall promptly notify the Company in writing of the
institution of such action (but the failure so to notify shall not relieve
the Company from any liability it may have other than pursuant to this
Section 8(a)) and the Company shall promptly assume the defense of such
action, including the employment of counsel (satisfactory to such
indemnified party or parties) and payment of expenses. Such indemnified
party or parties shall have the right to employ its or their own counsel in
any such case, but the fees and expenses of such counsel shall be at the
expense of such indemnified party or parties unless the employment of such
counsel shall have been authorized in writing by the Company in connection
with the defense of such action or the Company shall not have promptly
employed counsel satisfactory to such indemnified party or parties to have
charge of the defense of such action or such indemnified party or parties
shall have reasonably concluded that there may be one or more legal
defenses available to it or them or to other indemnified parties which are
different from or additional to those available to the Company, in any of
which events such fees and expenses shall be borne by the Company. Anything
in this paragraph to the contrary notwithstanding, the Company shall not be
liable for any settlement of any such claim or action effected without its
written consent. The Company agrees promptly to notify the Underwriters and
the Representative of the commencement of any litigation or proceedings
against the Company or against any of its officers or directors in
connection with the sale of the Common Stock underlying the Warrants, any
Offering Documents, or any application.
b. The Underwriters agree to indemnify and hold harmless the Company,
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each director of the Company, each officer of the Company who shall have
signed the Registration Statement, each other person, if any, who controls
the Company within the meaning of Section 15 of the Act or Section 20(a) of
the Exchange Act, to the same extent as the foregoing indemnity from the
Company to the Underwriters in Section 8(a), but only with respect to
statements or omissions, if any, made in any of the Offering Documents, or
in any application, in reliance upon and in conformity with written
information furnished to the Company as stated in this Section 8(b) with
respect to the Underwriters by or on behalf of the Underwriters expressly
for inclusion in any of the Offering Documents, or in any application, as
the case may be; provided, however, that the obligation of the Underwriters
to provide indemnity under the provisions of this Section 8(b) shall be
limited to the amount which represents the product of the number of shares
of Common Stock issued on exercise of Warrants and the Warrant Exercise
Price. For all purposes of this Agreement, the amounts of the Exercise Fee
set forth in the Offering Documents, the information under "Plan of
Distribution" and the identification of counsel to the Representative under
"Legal Matters" constitute the only information furnished in writing by or
on behalf of the Underwriters expressly for inclusion in any of the
Offering Documents, or in any application, as the case may be. If any
action shall be brought against the Company or any other person so
indemnified based on any of the Offering Documents, or any application, and
in respect of which indemnity may be sought against the Underwriters
pursuant to this Section 8(b), the Underwriters shall have the rights and
duties given to the Company, and the Company and each other person so
indemnified shall have the rights and duties given to the indemnified
parties, by the provisions of Section 8(a).
c. In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in this Section
8 is for any reason held to be unavailable to the Underwriters or the
Company, then the Company shall contribute to the damages paid by the
several Underwriters, and the several Underwriters shall contribute to the
damages paid by the Company; provided, however, that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. In determining the amount of
contribution to which the respective parties are entitled, there shall be
considered the relative benefits received by each party from the sale of
the Common Stock underlying the Warrants (taking into account the portion
of the proceeds of the offering realized by each), the parties' relative
knowledge and access to information concerning the matter with respect to
which the claim was asserted, the opportunity to correct and prevent any
statement or omission, and any other equitable considerations appropriate
in the circumstances. The Company and the Underwriters agree that it would
not be equitable if the amount of such contribution were determined by pro
rata or per capita allocation (even if the Underwriters were treated as one
entity for such purpose). No Underwriter or person controlling such
Underwriter shall be obligated to make contribution hereunder which in the
aggregate exceeds the total Exercise Price of the Warrants, exercise of
which was solicited by such Underwriter under this Agreement, less the
aggregate amount of any damages which such Underwriter and its controlling
persons have otherwise been required to pay in respect of the same or any
substantially similar claim. The Underwriters' obligations to contribute
hereunder are several in proportion to their respective underwriting
obligations and not joint. For purposes of this Section, each person, if
any, who controls an Underwriter within the meaning of Section 15 of the
Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Offering Documents, and each person, if any, who controls the Company
within the meaning of Section 15 of the Act, shall have the same rights to
contribution as the Company. Anything in this Section 8(c) to the contrary
notwithstanding, no party shall be liable for contribution with respect to
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the settlement of any claim or action effected without its written consent.
This Section 8(c) is intended to supersede any right to contribution under
the Act, the Exchange Act, or otherwise.
Section 9. Notices. Any notice or other communication required or permitted
to be given pursuant to this Agreement shall be in writing and shall be deemed
sufficiently given if sent by first class certified mail, return receipt
requested, postage prepaid, addressed as follows:
if to the Company: Shawn B. Stickle, President and Chief Operating Officer
Nigel V. Alexander, Chief Executive Officer
Multi-Link Telecommunications, Inc.
811 Lincoln Street
Fifth Floor
Denver, Colorado 80203
With a copy to: Thomas S. Smith, Esq.
Smith McCullough, P.C.
4643 South Ulster Street
Suite 900
Denver, Colorado 80237
If to Schneider: Keith Koch, Director of Corporate Finance
Schneider Securities, Inc.
1120 Lincoln Street, Suite 900
Denver, Colorado 80203
With a copy to: Robert W. Walter, Esq.
Berliner Zisser Walter & Gallegos, P.C.
1700 Lincoln Street, Suite 4700
Denver, Colorado 80203
and if to the Warrant
Agent: Administrative Services
American Securities Transfer & Trust, Inc.
938 Quail Street, Suite 101
Lakewood, Colorado 80215
or such other address as such party shall have given notice to other parties
hereto in accordance with this Section. All such notices or other communications
shall be deemed given three (3) business days after mailing, as aforesaid.
Section 10. Supplements and Amendments. The Company, the Warrant Agent and
Schneider may from time-to-time supplement or amend this Agreement by a written
instrument signed by the party to be charged, without the approval of any
holders of Warrants in order to cure any ambiguity or to correct or supplement
any provisions contained herein or to make any other provisions in regard to
matters or questions arising hereunder which the Company, the Warrant Agent and
Schneider may deem necessary or desirable and which do not adversely affect the
interest of the holders of Warrants.
Section 11. Assignment. This Agreement may not be assigned by any party
without the express written approval of all other parties, except that Schneider
may assign this Agreement to its successors, if any.
Section 12. Governing Law. This Agreement will be deemed made under the
laws of the State of Colorado with respect to matters of contract law and for
all purposes shall be governed by and construed in accordance with the internal
laws of said State, without regard to the conflicts of laws provisions thereof.
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Section 13. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give any person or corporation other than the Company, the Warrant
Agent and Schneider any legal or equitable right, remedy or claim under this
Agreement; and this Agreement shall be for the sole and exclusive benefit of,
and be binding upon, the Company, the Warrant Agent and Schneider and their
respective successors and permitted assigns.
Section 14. Descriptive Headings. The descriptive headings of the sections
of this Agreement are inserted for convenience only and shall not control or
affect the meanings or construction of any of the provisions hereof.
Section 15. Superseding Agreement. This Agreement supersedes any and all
prior agreements between the parties with respect to the subject matter hereof.
Section 16. Exclusive Agreement. It is understood that this Agreement is on
an exclusive basis to solicit the exercise of the Warrants and that the Company
shall not engage other broker-dealers to solicit the exercise of Warrants
without the consent of Schneider.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
MULTI-LINK TELECOMMUNICATIONS, INC.
By:
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Nigel V. Alexander,
Chief Executive Officer
By:
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Shawn B. Stickle,
President and Chief Executive Officer
SCHNEIDER SECURITIES, INC.
By:
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Thomas Schneider, President
AMERICAN SECURITIES TRANSFER & TRUST, INC.
By:
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Gregory Tubbs, Senior Vice President
EXHIBIT A
CERTIFICATE
The undersigned, being the _______________ of _________________________
(the "NASD Member") pursuant to Section 3(d) of the Warrant Exercise Fee
Agreement relating to the exercise of Warrants dated _________, 1999 among
Multi-Link Telecommunications, Inc. (the "Company"), Schneider Securities, Inc.
and American Securities Transfer & Trust, Inc. (the "Warrant Agent") hereby
certifies that:
1. The Company or the Warrant Agent has notified the NASD Member that
____________ Warrants (as defined in the Agreement) have been exercised during
_______________.
2. The exercise of _________ of such Warrants was solicited by the NASD
Member.
3. Such Warrants were not held in a discretionary account.
4. The NASD Member did not, within _____ business days immediately
preceding _______________, bid for or purchase the Common Stock of the Company
or any securities of the Company immediately convertible into or exchangeable
for the Common Stock (including Warrants) or otherwise engage in any activity
that would be prohibited by Regulation M under the Securities Exchange Act of
1934, as amended, to one engaged in a distribution of the Company's securities.
5. In connection with the solicitation of the exercise of the Warrants, the
NASD Member disclosed to holders of the Warrants the compensation it will
receive.
DATED: _______________
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(Firm Name)
By:
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Title:
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