SUBORDINATION AGREEMENT
Exhibit
10.8
This
Subordination Agreement (this “Agreement”) is entered into as of the 31st
day of March, 2008, by and among GCA Strategic Investment Fund Limited, a
Bermuda corporation (the “Subordinated Lender”), and LV Administrative Services,
Inc., a Delaware corporation, as agent (in such capacity, the “Agent”) for
itself and the Lenders from time to time party to the Security Agreement
referred to below (each, a “Lender” and, together with the Agent, the “Senior
Lenders” ). Unless otherwise defined herein, capitalized terms used
herein shall have the meaning provided such terms in the Security Agreement
referred to below.
BACKGROUND
WHEREAS,
it is a condition to each Lender’s making an investment in Rapid Link,
Incorporated, a Delaware corporation (“Rapid Link”), Telenational
Communications, Inc., a Delaware corporation (“Telenational”), and One Ring
Networks, Inc., a Georgia corporation (“One Ring” and together with Rapid Link
and Telenational, collectively, the “Companies” and each, a “Company”), pursuant
to, and in accordance with, (i) that certain Security Agreement dated as of the
date hereof by and among the Companies, Agent and the Lenders (as
amended, modified or supplemented from time to time, the “Security Agreement”)
and (ii) the Ancillary Agreements referred to in the Security Agreement, that
the Subordinated Lender enter into this Agreement.
WHEREAS,
the Subordinated Lender has made or will make loans structured as convertible
notes to one or more of the Companies.
NOW,
THEREFORE, the Subordinated Lender and the Agent, on behalf of Senior Lenders,
hereby agree as follows:
TERMS
1. All
obligations of the Companies and/or any of their Subsidiaries to any Senior
Lender, howsoever created, arising or evidenced, whether direct or indirect,
absolute or contingent or now or hereafter existing, or due or to become due are
referred to as “Senior Liabilities”. Any and all loans made by the
Subordinated Lender to the Companies and/or any of their Subsidiaries, together
with all other obligations (whether monetary or otherwise) of the Companies
and/or any of their Subsidiaries to the Subordinated Lender (in each case,
including any interest, fees or penalties related thereto), howsoever created,
arising or evidenced, whether direct or indirect, absolute or contingent or now
or hereafter existing, or due or to become due are referred to as “Junior
Liabilities”. It is expressly understood and agreed that the term
“Senior Liabilities”, as used in this Agreement, shall include, without
limitation, any and all interest, fees and penalties accruing on any of the
Senior Liabilities after the commencement of any proceedings referred to in
paragraph 4 of this Agreement, notwithstanding any provision or rule of law
which might restrict the rights of any Senior Lender, as against any Company,
its Subsidiaries or anyone else, to collect such interest, fees or penalties, as
the case may be.
2. Except
as expressly otherwise provided in this Agreement or as the Agent on its own
behalf and on behalf of the Lenders may otherwise expressly consent in writing,
the payment of the Junior Liabilities shall be postponed and subordinated in
right of payment and priority to the payment in full of all Senior
Liabilities. Furthermore, whether directly or indirectly, no payments
or other distributions whatsoever in respect of any Junior Liabilities shall be
made (whether at stated maturity, by acceleration or otherwise), nor shall any
property or assets of any Company or any of its Subsidiaries be applied to the
purchase or other acquisition or retirement of any Junior Liability until such
time as the Senior Liabilities have been indefeasibly paid in
full. Notwithstanding anything to the contrary contained in this
paragraph 2 or elsewhere in this Agreement, the Companies and their Subsidiaries
may make regularly scheduled interest payments to the Subordinated Lender with
respect to the Junior Liabilities, so long as (a) no Event of Default (as
defined in the Security Agreement or any Ancillary Agreement) has occurred and
is continuing at the time of any such payment or after giving effect to such
payment and (b) the rate of interest, with respect to the Junior Liabilities, is
not increased from that in effect on the date hereof. Nothing
contained in this Agreement, the Security Agreement or the Ancillary Agreements
referred to in the Security Agreement shall restrict, impair or prohibit the
Subordinated Lender from exercising its rights in accordance with Rule 144 of
the Securities Act of 1933, as amended, to convert and sell shares of common
stock of Rapid Link pursuant to the Securities Purchase Agreements dated January
28, 2002 and July 24, 2003, as amended. Nor shall any compliance by
Rapid Link with any notice of conversion issued by Subordinated Lender create a
default with the Senior Lender unless Rapid Link’s compliance with such
conversion would result in a change of control.
3. The
Subordinated Lender hereby subordinates all claims and security interests it may
have against, or with respect to, any of the assets of the Companies and/or any
of their Subsidiaries (the “Subordinated Lender Liens”), to the security
interests granted by the Companies and/or any of their Subsidiaries to each
Senior Lender in respect of the Senior Liabilities. No Senior Lender
shall owe any duty to the Subordinated Lender as a result of or in
connection with any Subordinated Lender Liens, including without limitation any
marshalling of assets or protection of the rights or interests of any
Subordinated Lender. The Agent, on its own behalf and on behalf of
the Lenders, shall have the exclusive right to manage, perform and enforce the
underlying terms of the Security Agreement, the Ancillary Agreements and each
other document, instrument and agreement executed from time to time in
connection therewith (collectively, the “Security Agreements”) relating to the
assets of the Companies and their Subsidiaries and to exercise and enforce its
rights according to its discretion. The Subordinated Lender waives
all rights to affect the method or challenge the appropriateness of any action
taken by any Senior Lender in connection with any Senior Lender’s enforcement of
its rights under the Security Agreements. Only the Agent, on its own
behalf and on behalf of the Lenders, shall have the right to
restrict permit, approve or disapprove the sale, transfer or other
disposition of the assets of any Company or any of its
Subsidiaries. As between each Senior Lender and the Subordinated
Lender, the terms of this Agreement shall govern even if all or part of any
Senior Lender’s liens are avoided, disallowed, set aside or otherwise
invalidated.
4. In
the event of any dissolution, winding up, liquidation, readjustment,
reorganization or other similar proceedings relating to any Company and/or any
of its Subsidiaries or to its creditors, as such, or to its property (whether
voluntary or involuntary, partial or complete, and whether in bankruptcy,
insolvency or receivership, or upon an assignment for the benefit of creditors,
or any other marshalling of the assets and liabilities of any Company and/or any
of its Subsidiaries, or any sale of all or substantially all of the assets of
any Company and/or any of its Subsidiaries, or otherwise), the Senior
Liabilities shall first be irrevocably paid in full before the Subordinated
Lender shall be entitled to receive and to retain any payment, distribution,
other rights or benefits in respect of any Junior Liability. In order
to enable each Senior Lender to enforce its rights hereunder in any such action
or proceeding, the Agent, on behalf of the Senior Lenders, is hereby irrevocably
authorized and empowered in its discretion as attorney in fact for the
Subordinated Lender to (a) if the Subordinated Lender fails to file proof(s) of
claim against any Company and/or any Subsidiary on or before the date that is
ten (10) days prior to any bar date established in any bankruptcy proceeding
filed by or against any Company and/or any Subsidiary, make and present for and
on behalf of the Subordinated Lender such proof(s) of claims against any Company
and/or any Subsidiary as the Agent may deem expedient or proper, (b) to vote
such proofs of claims in any such proceeding and (c) receive and collect any and
all dividends or other payments or disbursements made thereon in whatever form
the same may be paid or issued and to apply same on account of any the Senior
Liabilities. In the event, prior to indefeasible payment in full of
the Senior Liabilities, the Subordinated Lender shall receive any payment in
respect of the Junior Liabilities and/or in connection with the enforcement of
the Subordinated Lender’s rights and remedies against any Company and/or any of
its Subsidiaries, whether arising in connection with the Junior Liabilities or
otherwise, then the Subordinated Lender shall forthwith deliver, or cause to be
delivered, the same to the Agent in precisely the form held by the Subordinated
Lender (except for any necessary endorsement) and until so delivered the same
shall be held in trust by the Subordinated Lender as the property of the Senior
Lender.
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5. The
Subordinated Lender will xxxx its books and records so as to clearly indicate
that its respective Junior Liabilities are subordinated in accordance with the
terms of this Agreement. The Subordinated Lender will execute such
further documents or instruments and take such further action as the Agent may
reasonably request from time to time to carry out the intent of this
Agreement.
6. The
Subordinated Lender hereby waives all diligence in collection or protection of
or realization upon the Senior Liabilities or any security for the Senior
Liabilities.
7. Subordinated
Lender hereby consents to and approves of the execution, delivery and
performance by the Companies of the Security Agreement and the Ancillary
Agreements and the consummation of the transactions contemplated thereby,
notwithstanding anything to the contrary contained in any of the agreements,
instruments and documents executed in connection with the Junior
Liabilities.
8. The
Subordinated Lender hereby extends to June 30, 2011 the maturity date for any
and all Junior Liabilities existing as of the date of this
Agreement. All documentation associated with the Junior Liabilities
is hereby amended by this reference to reflect the extended maturity
date.
9. Except
as otherwise provided in paragraph 2 of this Agreement with respect to
Subordinated Lender’s conversion rights, until such time as the Senior
Liabilities have been indefeasibly paid in full, the Subordinated Lender shall
not, without the prior written consent of the Agent, (a) attempt to
enforce or collect any Junior Liability or any rights in respect of any Junior
Liability or any other rights or remedies of any kind or nature whatsoever
against any Company and/or any of its respective Subsidiaries whether in respect
of the Junior Liabilities or otherwise, or (b) commence, or join with any
other creditor in commencing, any bankruptcy, reorganization or insolvency
proceedings with respect to any Company and/or any of its
Subsidiaries.
3
10. The
Agent, on its own behalf and on behalf of the Lenders, may, from time to time,
at its sole discretion and without notice to the Subordinated Lender, take any
or all of the following actions: (a) retain or obtain a security
interest in any property to secure any of the Senior Liabilities; (b) retain or
obtain the primary or secondary obligation of any other obligor or obligors with
respect to any of the Senior Liabilities; (c) extend or renew for one or more
periods (whether or not longer than the original period), alter, increase or
exchange any of the Senior Liabilities, or release or compromise any obligation
of any nature of any obligor with respect to any of the Senior Liabilities; and
(d) release its security interest in, or surrender, release or permit any
substitution or exchange for, all or any part of any property securing any of
the Senior Liabilities, or extend or renew for one or more periods (whether or
not longer than the original period) or release, compromise, alter or exchange
any obligations of any nature of any obligor with respect to any such
property.
11. The
Agent, on its own behalf and on behalf of the Lenders, may, from time to time,
during the term of this Agreement, without notice to the Subordinated Lender,
assign or transfer any or all of the Senior Liabilities or any interest in the
Senior Liabilities; and, notwithstanding any such assignment or transfer or any
subsequent assignment or transfer of the Senior Liabilities, such Senior
Liabilities shall be and remain Senior Liabilities for the purposes of this
Agreement, and every immediate and successive assignee or transferee of any of
the Senior Liabilities or of any interest in the Senior Liabilities shall, to
the extent of the interest of such assignee or transferee in the Senior
Liabilities, be entitled to the benefits of this Agreement to the same extent as
if such assignee or transferee were a Senior Lender, as applicable; provided,
however, that, unless the Agent on its own behalf and on behalf of the Lenders,
shall otherwise consent in writing, the Senior Lenders shall have an unimpaired
right, prior and superior to that of any such assignee or transferee, to enforce
this Agreement, for the benefit of the Senior Lenders, as to those of the Senior
Liabilities which the Senior Lenders have not assigned or
transferred.
12. The
Senior Lenders shall not be prejudiced in their rights under this Agreement by
any act or failure to act of the Subordinated Lender, or any noncompliance of
the Subordinated Lender with any agreement or obligation, regardless of any
knowledge thereof which any Senior Lender may have or with which any Senior
Lender may be charged; and no action of any Senior Lender permitted under this
Agreement shall in any way affect or impair the rights of any other Senior
Lender and the obligations of the Subordinated Lender under this
Agreement.
13. No
delay on the part of any Senior Lender in the exercise of any right or remedy
shall operate as a waiver of such right or remedy, and no single or partial
exercise by the Senior Lenders of any right or remedy shall preclude other or
further exercise of such right or remedy or the exercise of any other right or
remedy; nor shall any modification or waiver of any of the provisions of this
Agreement be binding upon any Senior Lender except as expressly set forth in a
writing duly signed and delivered by the Agent on it own behalf and on behalf of
the Senior Lenders. For the purposes of this Agreement, Senior
Liabilities shall have the meaning set forth in Section 1 above, notwithstanding
any right or power of the Subordinated Lender or anyone else to assert any claim
or defense as to the invalidity or unenforceability of any such obligation, and
no such claim or defense shall affect or impair the agreements and obligations
of the Subordinated Lender under this Agreement.
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14. This
Agreement shall continue in full force and effect after the filing of any
petition (“Petition”) by or
against any Company and/or any of its Subsidiaries under the United States
Bankruptcy Code (the “Code”) and all
converted or succeeding cases in respect thereof. All references
herein to any Company and/or any of its Subsidiaries shall be deemed to apply to
such Company and such Subsidiaries as debtor(s)-in-possession and to a trustee
for any such Company and/or any such Subsidiary. If any Company or
any of its Subsidiaries shall become subject to a proceeding under the Code, and
if the Senior Lenders shall desire to permit the use of cash collateral or to
permit or provide post-Petition financing from any Senior Lender (or an
affiliate or a third party satisfactory to the Senior Lenders) to any Company or
any such Subsidiary under the Code, the Subordinated Lender agrees as
follows: (1) adequate notice to the Subordinated Lender
shall be deemed to have been provided for such consent or post-Petition
financing if the Subordinated Lender receives notice thereof five (5) business
days (or such shorter notice as is given to the Senior Lenders) prior to the
earlier of (a) any hearing on a request to approve such post-petition financing
or (b) the date of entry of an order approving same and (2) no objection will be
raised by the Subordinated Lender to any such use of cash collateral or such
post-Petition financing from any Senior Lender (or an affiliate of the Senior
Lender).
15. This
Agreement shall be binding upon the Subordinated Lender and upon the heirs,
legal representatives, successors and assigns of the Subordinated
Lender. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original and all of which together shall be
deemed to constitute one agreement. It is understood and agreed that
if facsimile copies of this Agreement bearing facsimile signatures are exchanged
between the parties hereto, such copies shall in all respects have the same
weight, force and legal effect and shall be fully as valid, binding, and
enforceable as if such signed facsimile copies were original documents bearing
original signature.
16. THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED, INTERPRETED AND ENFORCED
ACCORDING TO, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS PROVISIONS THEREOF AND SHALL BE BINDING UPON THE PARTIES HERETO
AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS. ANY ACTION BROUGHT
CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT SHALL BE BROUGHT ONLY
IN THE STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN THE STATE OF
NEW YORK; PROVIDED, HOWEVER, THAT ANY SENIOR LENDER MAY CHOOSE TO WAIVE THIS
PROVISION AND BRING AN ACTION OUTSIDE THE STATE OF NEW YORK. The
individual(s) executing this Agreement on behalf of the Subordinated Lender
agree(s) to submit to the jurisdiction of such courts and waive trial by
jury. The prevailing party shall be entitled to recover from the
other party its reasonable attorneys’ fees and costs. Wherever
possible each provision of this Agreement shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under such law, such provision shall
be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
[signature
page follows]
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IN
WITNESS WHEREOF, this Agreement has been made and delivered this 31st
day of March, 2008.
| GCA STRATEGIC INVESTMENT FUND LIMITED | |||
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By:
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/s/
Xxxxxxx X. Xxxxx
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Name:
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Xxxxxxx
X. Xxxxx
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Title:
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Director
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| LV ADMINISTRATIVE SERVICES, INC., individually and as Agent | |||
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By:
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/s/
Xxxxx Xxxxxxxxx
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Name:
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Xxxxx
Xxxxxxxxx
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Title:
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Authorized
Signatory
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Acknowledged
and Agreed to by:
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RAPID
LINK, INCORPORATED
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By:
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/s/
Xxxxx Xxxxxxxx
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Name:
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Xxxxx
Xxxxxxxx
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Title:
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CFO
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TELENATIONAL
COMMUNICATIONS, INC.
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By:
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/s/
Xxxxx Xxxxxxxx
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Name:
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Xxxxx
Xxxxxxxx
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Title:
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CFO
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ONE
RING NETWORKS, INC.
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By:
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/s/
Xxxxx Xxxxxxxx
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Name:
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Xxxxx
Xxxxxxxx
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Title:
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CFO
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