Exhibit 4.2
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into as of 15th day of June, 2007 by and among Rapid Link Inc., a
corporation organized and existing under the laws of the State of Delaware
("RPID" or the "Company"), and Westside Capital LLC, a Delaware limited
liability company (hereinafter referred to as the "Investor"). Unless
defined otherwise, capitalized terms herein shall have the identical meaning
as in the Common Stock Purchase Agreement.
PRELIMINARY STATEMENT
---------------------
WHEREAS, pursuant to the Common Stock Purchase Agreement, of even date
herewith, by and among the Company and the Investor, as part of the
consideration, Investor shall receive Common Stock and Warrants, which upon
exercise, in accordance with the terms of the Warrant Agreement, entitle the
Investor to receive Shares of the Company; and
WHEREAS, the ability of the Investor to sell its Shares of Common Stock
is subject to certain restrictions under the 1933 Act; and
WHEREAS, as a condition to the Common Stock Purchase Agreement, The
Company has agreed to provide the Investor with a mechanism that will permit
such Investor, subject to a market stand-off agreement, to sell its Shares
of Common Stock in the future.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements, and subject to the terms and conditions herein
contained, the parties hereto hereby agree as follows:
ARTICLE I
INCORPORATION BY REFERENCE, SUPERSEDER
--------------------------------------
1.1 Incorporation by Reference. The foregoing recitals and the Exhibits
attached hereto and referred to herein, are hereby acknowledged to be true
and accurate, and are incorporated herein by this reference.
1.2 Superseder. This Agreement, to the extent that it is inconsistent with
any other instrument or understanding among the parties governing the
affairs of the Company, shall supersede such instrument or understanding to
the fullest extent permitted by law. A copy of this Agreement shall be
filed at the Company's principal office.
ARTICLE II
DEMAND REGISTRATION RIGHTS
--------------------------
2.1 Registrable Securities. "Registrable Securities" shall mean and include
the Common Stock issued and the Shares of the Company underlying the
Warrants issued pursuant to the Common Stock Purchase Agreement and Warrant
Agreement. As to any particular Registrable Securities, such securities will
cease to be Registrable Securities when (a) they have been effectively
registered under the 1933 Act and disposed of in accordance with the
registration statement covering them, (b) they are or may be freely traded
without registration pursuant to Rule 144 under the 1933 Act (or any similar
provisions that are then in effect), or (c) they have been otherwise
transferred and new certificates for them not bearing a restrictive legend
have been issued by the Company and the Company shall not have "stop
transfer" instructions against them. "Shares" shall mean, collectively, the
shares of Common Stock of the Company and the shares of Common Stock of the
Company issuable to the Investor upon exercise of the Warrants.
2.2 Registration of Registrable Securities. The Company shall prepare and
file within thirty (30) days following the date hereof (the "Filing Date") a
registration statement (the "Registration Statement") covering the resale of
such number of shares of the Registrable Securities as the Investor shall
elect by written notice to the Company, and absent such election, covering
the resale of all of the shares of the Registrable Securities. The Company
shall use its best efforts to cause the Registration Statement to be
declared effective by the SEC on the earlier of (i) 120 days following the
Closing Date with respect to the Registration Statement, (ii) ten (10) days
following the receipt of a "No Review" or similar letter from the SEC or
(iii) the first business day following the day the SEC determines the
Registration Statement eligible to be declared effective (the "Required
Effectiveness Date"). Nothing contained herein shall be deemed to limit the
number of Registrable Securities to be registered by the Company hereunder.
As a result, should the Registration Statement not relate to the maximum
number of Registrable Securities acquired by (or potentially acquirable by)
the holders of the Shares of the Company issued to the Investor pursuant to
the Common Stock Purchase Agreement and Warrant Agreement, the Company shall
be required to promptly file a separate registration statement (utilizing
Rule 462 promulgated under the 1933 Act, where applicable) relating to such
Registrable Securities which then remain unregistered. The provisions of
this Agreement shall relate to any such separate registration statement as
if it were an amendment to the Registration Statement. In addition,
notwithstanding anything above to the contrary, if the SEC determines that
the Company may not register the Registrable Securities on the Registration
Statement because such registration statement does not meet the requirements
of Rule 415 promulgated under the Exchange Act ("Rule 415"), then the
Company may, without penalty, withdraw the Registration Statement, and shall
have no further obligation to register that number of Registrable Securities
pursuant to this Section 2.2 greater than the number of shares permitted to
be registered by the SEC. For the purpose of clarity, the Company shall not
be required to register any Registrable Securities under this Section 2.2 if
the SEC does not allow the Registration Statement to go effective due to
non-compliance with Rule 415. Both the Company and Westside Capital will
work together to register the appropriate amount of shares underlying the
warrants so that in all likelihood the registration statement becomes
effective and that the warrants and number of shares are priced accordingly
to satisfy Section 2 of the warrant agreements. The Company will endeavor
to register a minimum of sixteen (16) million shares.
2.3 Demand Registration. Subject to the limitations of Section 2.2, at any
time and from time to time, the Investor may request the registration under
the 1933 Act of all or part of the Registrable Shares then outstanding (a
"Demand Registration"). Subject to the conditions of Section 3, the Company
shall use its best efforts to file such registration statement under the
1933 Act as promptly as practicable after the date any such request is
received by the Company and to cause such registration statement to be
declared effective. The Company shall notify the Investor promptly when any
such registration statement has been declared effective.
2.4 Registration Statement Form. Registrations under Section 2.2 and
Section 2.3 shall be on the appropriate registration form of the SEC as
shall permit the disposition of such Registrable Securities in accordance
with the intended method or methods of disposition specified in the
Registration Statement; provided, however, such intended method of
disposition shall not include an underwritten offering of the Registrable
Securities.
2.5 Expenses. The Company will pay all Registration expenses in connection
with any registration required by under Sections 2.2 and Section 2.3 herein.
2.6 Effective Registration Statement. A registration requested pursuant to
Sections 2.2 and Section 2.3 shall not be deemed to have been effected (i)
unless a registration statement with respect thereto has become effective
within the time period specified herein, provided that a registration which
does not become effective after the Company filed a registration statement
with respect thereto solely by reason of the refusal to proceed of any
holder of Registrable Securities (other than a refusal to proceed based upon
the advice of counsel in the form of a letter signed by such counsel and
provided to the Company relating to a disclosure matter unrelated to such
holder) shall be deemed to have been effected by the Company unless the
holders of the Registrable Securities shall have elected to pay all
Registration Expenses in connection with such registration, (ii) if, after
it has become effective, such registration becomes subject to any stop
order, injunction or other order or extraordinary requirement of the SEC or
other governmental agency or court for any reason or (iii) if, after it has
become effective, such registration ceases to be effective for more than the
allowable Black-Out Periods (as defined herein).
2.7 Plan of Distribution. The Company hereby agrees that the Registration
Statement shall include a plan of distribution section reasonably acceptable
to the Investor; provided, however, such plan of distribution section shall
be modified by the Company so as to not provide for the disposition of the
Registrable Securities on the basis of an underwritten offering.
ARTICLE III
INCIDENTAL REGISTRATION RIGHTS
------------------------------
3.1 Right to Include ("Piggy-Back") Registrable Securities. Provided that
the Registrable Securities have not been registered, if at any time after
the date hereof but before the second anniversary of the date hereof, the
Company proposes to register any of its securities under the 1933 Act (other
than by a registration in connection with an acquisition in a manner which
would not permit registration of Registrable Securities for sale to the
public, on Form S-8, or any successor form thereto, on Form S-4, or any
successor form thereto and other than pursuant to Section 2), on an
underwritten basis (either best-efforts or firm-commitment), then, the
Company will each such time give prompt written notice to all holders of
Registrable Securities of its intention to do so and of such holders of
Registrable Securities' rights under this Section 3.1. Upon the written
request of any such holders of Registrable Securities made within ten (10)
days after the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such holders of
Registrable Securities and the intended method of disposition thereof), the
Company will, subject to the terms of this Agreement, use its commercially
reasonable efforts to effect the registration under the 1933 Act of the
Registrable Securities, to the extent requisite to permit the disposition
(in accordance with the intended methods thereof as aforesaid) of such
Registrable Securities so to be registered, by inclusion of such Registrable
Securities in the registration statement which covers the securities which
the Company proposes to register, provided that if, at any time after
written notice of its intention to register any securities and prior to the
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason either not to
register or to delay registration of such securities, the Company may, at
its election, give written notice of such determination to each holder of
Registrable Securities and, thereupon, (i) in the case of a determination
not to register, shall be relieved of this obligation to register any
Registrable Securities in connection with such registration (but not from
its obligation to pay the Registration Expenses in connection therewith),
without prejudice, however, to the rights of any holder or holders of
Registrable Securities entitled to do so to request that such registration
be effected as a registration under Section 2, and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering
any Registrable Securities, for the same period as the delay in registering
such other securities. No registration affected under this Section 3.1 shall
relieve the Company of its obligation to affect any registration upon
request under Section 2. The Company will pay all Registration Expenses in
connection with each registration of Registrable Securities requested
pursuant to this Section 3.1. The right provided the Holders of the
Registrable Securities pursuant to this Section shall be exercisable at
their sole discretion and will in no way limit any of the Company's
obligations to pay the Securities according to their terms.
3.2 Priority in Incidental Registrations. If the managing underwriter of
the underwritten offering contemplated by this Section 3 shall inform the
Company and holders of the Registrable Securities requesting such
registration by letter of its belief that the number of securities requested
to be included in such registration exceeds the number which can be sold in
such offering, then the Company will include in such registration, to the
extent of the number which the Company is so advised can be sold in such
offering, (i) first securities proposed by the Company to be sold for its
own account, and (ii) second Registrable Securities and (iii) securities of
other selling security holders requested to be included in such
registration.
ARTICLE IV
REGISTRATION PROCEDURES
-----------------------
4.1 Registration Procedures. If and whenever the Company is required to
effect the registration of any Registrable Securities under the 1933 Act as
provided in Section 2.2 and, as applicable, 2.3, the Company shall, as
expeditiously as possible:
(i) prepare and file with the SEC the Registration Statement, or
amendments thereto, to effect such registration (including such audited
financial statements as may be required by the 1933 Act or the rules and
regulations promulgated thereunder) and thereafter use its commercially
reasonable best efforts to cause such registration statement to be declared
effective by the SEC, as soon as practicable, but in any event no later than
the Required Effectiveness Date (with respect to a registration pursuant to
Section 2.2); provided, however, that before filing such registration
statement or any amendments thereto, the Company will furnish to the counsel
selected by the holders of Registrable Securities which are to be included
in such registration, copies of all such documents proposed to be filed;
(ii) with respect to any registration statement pursuant to Section 2.2
or Section 2.3, prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the 1933 Act with respect to
the disposition of all Registrable Securities covered by such registration
statement until the earlier to occur of thirty six (36) months after the
date of this Agreement (subject to the right of the Company to suspend the
effectiveness thereof for not more than 10 consecutive Trading Days or an
aggregate of 10 Trading Days during each year (each a "Black-Out Period"))
or such time as all of the securities which are the subject of such
registration statement cease to be Registrable Securities (such period, in
each case, the "Registration Maintenance Period"). The Company must notify
the Investor within 48 hours prior to any Black-Out Period;
(iii) furnish to each holder of Registrable Securities covered by
such registration statement such number of conformed copies of such
registration statement and of each such amendment and supplement thereto (in
each case including all exhibits), such number of copies of the prospectus
contained in such registration statement (including each preliminary
prospectus and any summary prospectus) and any other prospectus filed under
Rule 424 under the 1933 Act, in conformity with the requirements of the 1933
Act, and such other documents, as such holder of Registrable Securities and
underwriter, if any, may reasonably request in order to facilitate the
public sale or other disposition of the Registrable Securities owned by such
holder of Registrable Securities;
(iv) use its commercially reasonable efforts to register or qualify all
Registrable Securities and other securities covered by such registration
statement under such other U.S. federal or state securities laws or U.S.
state blue sky laws as any U.S. holder of Registrable Securities thereof
shall reasonably request, to keep such registrations or qualifications in
effect for so long as such registration statement remains in effect, and
take any other action which may be reasonably necessary to enable such
holder of Registrable Securities to consummate the disposition in such
jurisdictions of the securities owned by such holder of Registrable
Securities, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the requirements of this
subdivision (iv) be obligated to be so qualified or to consent to general
service of process in any such jurisdiction;
(v) use its commercially reasonable efforts to cause all Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the U.S. holder of Registrable Securities thereof to
consummate the disposition of such Registrable Securities; and
(vi) notify the Investor and its counsel promptly and confirm such
advice in writing promptly after the Company has knowledge thereof:
(a) when the Registration Statement, the prospectus or any
prospectus supplement related thereto or post-effective amendment to the
Registration Statement has been filed, and, with respect to the Registration
Statement or any post-effective amendment thereto, when the same has become
effective;
(b) of any request by the SEC for amendments or supplements to
the Registration Statement or the prospectus or for additional information;
(c) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings by any Person for that purpose; and
(d) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any Registrable Securities
for sale under the securities or blue sky laws of any jurisdiction or the
initiation or threat of any proceeding for such purpose;
(vii) notify each holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act, upon discovery that, or upon
the happening of any event as a result of which, the prospectus included in
such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state any material facts required to be
stated therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing, and at the request of any such
holder of Registrable Securities promptly prepare and furnish to such holder
of Registrable Securities a reasonable number of copies of a supplement to
or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing; use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of the Registration Statement at the earliest
possible moment;
(viii) otherwise use its commercially reasonable efforts to comply
with all applicable rules and regulations of the SEC, and make available to
its security holders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months, but not more than
eighteen months, beginning with the first full calendar month after the
effective date of such registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the 1933 Act and Rule 158
thereunder;
(ix) enter into such agreements and take such other actions as the
Investors shall reasonably request in writing (at the expense of the
requesting or benefiting Investors) in order to expedite or facilitate the
disposition of such Registrable Securities; and
(x) Use its commercially reasonable efforts to list all Registrable
Securities covered by such registration statement on any securities exchange
on which any of the Registrable Securities are then listed.
The Company may require each holder of Registrable Securities
as to which any registration is being affected to furnish the Company such
information regarding such holder of Registrable Securities and the
distribution of such securities as the Company may from time to time
reasonably request in writing.
4.2 The Company will not file any registration statement pursuant to
Section 2.2 or Section 2.3, or amendment thereto or any prospectus or any
supplement thereto to which the Investors shall reasonably object, provided
that the Company may file such documents in a form required by law or upon
the advice of its counsel.
4.3 The Company represents and warrants to each holder of Registrable
Securities that it has obtained all necessary waivers, consents and
authorizations necessary to execute this Agreement and consummate the
transactions contemplated hereby other than such waivers, consents and / or
authorizations specifically contemplated by the Common Stock Purchase
Agreement.
4.4 Each holder of Registrable Securities agrees that, upon receipt of any
notice from the Company of the occurrence of any event of the kind described
in subdivision (viii) of Section 4.1, such Holder will forthwith discontinue
such holder of Registrable Securities' disposition of Registrable Securities
pursuant to the Registration Statement relating to such Registrable
Securities until such holder of Registrable Securities' receipt of the
copies of the supplemented or amended prospectus contemplated by subdivision
(viii) of Section 4.1 and, if so directed by the Company, will deliver to
the Company (at the Company's expense) all copies, other than permanent file
copies, then in such Holder's possession of the prospectus relating to such
Registrable Securities current at the time of receipt of such notice.
ARTICLE V
UNDERWRITTEN OFFERINGS
----------------------
5.1 Incidental Underwritten Offerings. If the Company at any time proposes
to register any of its securities under the 1933 Act as contemplated by
Section 3.1 and such securities are to be distributed by or through one or
more underwriters, the Company will, if requested by any holder of
Registrable Securities as provided in Section 3.1 and subject to the
provisions of Section 3.2, use its commercially reasonable efforts to
arrange for such underwriters to include all the Registrable Securities to
be offered and sold by such holder among the securities to be distributed by
such underwriters. In no event shall any Investor be deemed an underwriter
for purposes of this Agreement.
5.2 Participation in Underwritten Offerings. No holder of Registrable
Securities may participate in any underwritten offering under Section 3.1
unless such holder of Registrable Securities (i) agrees to sell such
Person's securities on the basis provided in any underwriting arrangements
approved, subject to the terms and conditions hereof, by the holders of a
majority of Registrable Securities to be included in such underwritten
offering and (ii) completes and executes all questionnaires, indemnities,
underwriting agreements and other documents (other than powers of attorney)
required under the terms of such underwriting arrangements. Notwithstanding
the foregoing, no underwriting agreement (or other agreement in connection
with such offering) shall require any holder of Registrable Securities to
make a representation or warranty to or agreements with the Company or the
underwriters other than representations and warranties contained in a
writing furnished by such holder of Registrable Securities expressly for use
in the related registration statement or representations, warranties or
agreements regarding such holder of Registrable Securities, such holder's
Registrable Securities and such holder's intended method of distribution and
any other representation required by law.
5.3 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the 1933 Act
pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement, and their
respective counsel and accountants, the opportunity to participate in the
preparation of such registration statement, each prospectus included therein
or filed with the SEC, and each amendment thereof or supplement thereto, and
will give each of them such access to its books and records and such
opportunities to discuss the business of the Company with its officers and
the independent public accountants who have certified its financial
statements as shall be necessary, in the reasonable opinion of such holders'
and such underwriters' respective counsel, to conduct a reasonable
investigation within the meaning of the 1933 Act.
ARTICLE VI
INDEMNIFICATION
---------------
6.1 Indemnification by the Company. In the event of any registration of any
securities of the Company under the 1933 Act, the Company will, and hereby
does agree to indemnify and hold harmless the holder of any Registrable
Securities covered by such registration statement, its directors and
officers, each other Person who participates as an underwriter in the
offering or sale of such securities and each other Person, if any, who
controls such holder or any such underwriter within the meaning of the 1933
Act against any losses, claims, damages or liabilities, joint or several, to
which such holder or any such director or officer or underwriter or
controlling person may become subject under the 1933 Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the 1933 Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment
or supplement thereto, or any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and the Company will reimburse such
holder and each such director, officer, underwriter and controlling person
for any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, liability,
action or proceeding, provided that the Company shall not be liable in any
such case to the extent that any such loss, claim, damage, liability, (or
action or proceeding in respect thereof) or expense arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by such holder or underwriter stating that it is for use in the
preparation thereof and, provided further that the Company shall not be
liable to any Person who participates as an underwriter in the offering or
sale of Registrable Securities or to any other Person, if any, who controls
such underwriter within the meaning of the 1933 Act, in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding
in respect thereof) or expense arises out of such Person's failure to send
or give a copy of the final prospectus, as the same may be then supplemented
or amended, within the time required by the 1933 Act to the Person asserting
the existence of an untrue statement or alleged untrue statement or omission
or alleged omission at or prior to the written confirmation of the sale of
Registrable Securities to such Person if such statement or omission was
corrected in such final prospectus or an amendment or supplement thereto.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such holder or any such director,
officer, underwriter or controlling person and shall survive the transfer of
such securities by such holder. The indemnification by the Company shall be
limited to ten thousand dollars per holder.
6.2 Indemnification by the Investor. In the event of any registration of
any securities of the Company under the 1933 Act, the Investor (and any
subsequent holder of Registrable Securities) will, and hereby does agree to
indemnify and hold harmless indemnify and hold harmless (in the same manner
and to the same extent as set forth in Section 6.1) the Company, each
director of the Company, each officer of the Company and each other Person,
if any, who controls the Company within the meaning of the 1933 Act, with
respect to any statement or alleged statement in or omission or alleged
omission from such registration statement, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, if such statement or alleged statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by
such holder of Registrable Securities specifically stating that it is for
use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement.
Any such indemnity shall remain in full force and effect, regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of such
securities by such Investor. The indemnification by the Investor shall be
limited to ten thousand dollars or the amount of net proceeds from the sale
of the Registrable Securities, whichever is greater.
6.3 Notices Of Claims, Etc. Promptly after receipt by an indemnified party
of notice of the commencement of any action or proceeding involving a claim
referred to in Sections 6.1 and Section 6.2, such indemnified party will, if
claim in respect thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such action, provided
that the failure of any indemnified party to give notice as provided herein
shall not relieve the indemnifying party of its obligations under Sections
6.1 and Section 6.2, except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice. In case any such action
is brought against an indemnified party, unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the indemnifying
party shall be entitled to participate in and to assume the defense thereof,
jointly with any other indemnifying party similarly notified, to the extent
that the indemnifying party may wish, with counsel reasonably satisfactory
to such indemnified party, and after notice from the indemnifying party to
such indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any
legal or other expenses subsequently incurred by the latter in connection
with the defense thereof other than reasonable costs of investigation. No
indemnifying party shall, without the consent of the indemnified party,
consent to entry of any judgment or enter into any settlement of any such
action which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability, or a covenant not to xxx, in respect to such claim or litigation.
No indemnified party shall consent to entry of any judgment or enter into
any settlement of any such action the defense of which has been assumed by
an indemnifying party without the consent of such indemnifying party.
6.4 Other Indemnification. Indemnification similar to that specified in
Sections 6.1 and Section 6.2 (with appropriate modifications) shall be given
by the Company and each holder of Registrable Securities (but only if and to
the extent required pursuant to the terms herein) with respect to any
required registration or other qualification of securities under any Federal
or state law or regulation of any governmental authority, other than the
1933 Act.
6.5 Indemnification Payments. The indemnification required by Sections 6.1
and Section 6.2 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
6.6 Contribution. If the indemnification provided for in Sections 6.1 and
Section 6.2 is unavailable to an indemnified party in respect of any
expense, loss, claim, damage or liability referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a
result of such expense, loss, claim, damage or liability (i) in such
proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand and the holder of Registrable Securities or
underwriter, as the case may be, on the other from the distribution of the
Registrable Securities or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the one hand and of
the holder of Registrable Securities or underwriter, as the case may be, on
the other in connection with the statements or omissions which resulted in
such expense, loss, damage or liability, as well as any other relevant
equitable considerations. The relative benefits received by the Company on
the one hand and the holder of Registrable Securities or underwriter, as the
case may be, on the other in connection with the distribution of the
Registrable Securities shall be deemed to be in the same proportion as the
total net proceeds received by the Company from the initial sale of the
Registrable Securities by the Company to the purchasers bear to the gain, if
any, realized by all selling holders participating in such offering or the
underwriting discounts and commissions received by the underwriter, as the
case may be. The relative fault of the Company on the one hand and of the
holder of Registrable Securities or underwriter, as the case may be, on the
other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or omission to state a
material fact relates to information supplied by the Company, by the holder
of Registrable Securities or by the underwriter and the parties' relative
intent, knowledge, access to information supplied by the Company, by the
holder of Registrable Securities or by the underwriter and the parties'
relative intent, knowledge, access to information and opportunity to correct
or prevent such statement or omission, provided that the foregoing
contribution agreement shall not inure to the benefit of any indemnified
party if indemnification would be unavailable to such indemnified party by
reason of the provisions contained herein, and in no event shall the
obligation of any indemnifying party to contribute under this Section 6.6
exceed the amount that such indemnifying party would have been obligated to
pay by way of indemnification if the indemnification provided for hereunder
had been available under the circumstances.
The Company and the holders of Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this Section 6.6
were determined by pro rata allocation (even if the holders of Registrable
Securities and any underwriters were treated as one entity for such purpose)
or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the
losses, claims, damages and liabilities referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations
set forth herein, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such
action or claim.
Notwithstanding the provisions of this Section 6.6, no holder of
Registrable Securities or underwriter shall be required to contribute any
amount in excess of the amount by which (i) in the case of any such holder,
the net proceeds received by such holder from the sale of Registrable
Securities in the applicable Registration Statement or (ii) in the case of
an underwriter, the total price at which the Registrable Securities
purchased by it and distributed to the public were offered to the public
exceeds, in any such case, the amount of any damages that such holder or
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
ARTICLE VII
RULE 144
--------
7.1 Rule 144. The Company shall file in a timely manner the reports
required to be filed by the Company under the 1933 Act and the 1934 Act
(including but not limited to the reports under Sections 13 and 15(d) of the
Exchange Act referred to in subparagraph (c) of Rule 144 adopted by the SEC
under the 0000 Xxx) and the rules and regulations adopted by the SEC
thereunder (or, if the Company is not required to file such reports, will,
upon the request of any holder of Registrable Securities, make publicly
available other information) and will take such further action as any holder
of Registrable Securities may reasonably request, all to the extent required
from time to time to enable such holder to sell Registrable Securities
without registration under the 1933 Act within the limitation of the
exemptions provided by (a) Rule 144 under the 1933 Act, as such Rule may be
amended from time to time, or (b) any similar rule or regulation hereafter
adopted by the SEC.
ARTICLE VIII
MISCELLANEOUS
-------------
8.1 Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the holder
or holders of a majority of the shares of (i) Registrable Securities issued
at such time, plus (ii) Registrable Securities issuable upon exercise or
conversion of the Securities then constituting derivative securities (if
such Securities were not fully exchanged or converted in full as of the date
such consent if sought). Each holder of any Registrable Securities at the
time or thereafter outstanding shall be bound by any consent authorized by
this Section 8.1, whether or not such Registrable Securities shall have been
marked to indicate such consent.
8.2 Nominees for Beneficial Owners. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election, be treated as the holder of
such Registrable Securities for purposes of any request or other action by
any holder or holders of Registrable Securities pursuant to this Agreement
or any determination of any number of percentage of shares of Registrable
Securities held by a holder or holders of Registrable Securities
contemplated by this Agreement. If the beneficial owner of any Registrable
Securities so elects, the Company may require assurances reasonably
satisfactory to it of such owner's beneficial ownership or such Registrable
Securities.
8.3 Notices. Except as otherwise provided in this Agreement, all notices,
requests and other communications to any Person provided for hereunder shall
be in writing and shall be given to such Person (a) in the case of a party
hereto other than the Company, addressed to such party in the manner set
forth in the Common Stock Purchase Agreement or at such other address as
such party shall have furnished to the Company in writing, or (b) in the
case of any other holder of Registrable Securities, at the address that such
holder shall have furnished to the Company in writing, or, until any such
other holder so furnishes to the Company an address, then to and at the
address of the last holder of such Registrable Securities who has furnished
an address to the Company, or (c) in the case of the Company, at the address
set forth on the signature page hereto, to the attention of its President,
or at such other address, or to the attention of such other officer, as the
Company shall have furnished to each holder of Registrable Securities at the
time outstanding. Each such notice, request or other communication shall be
effective (i) if given by mail, 72 hours after such communication is
deposited in the mail with first class postage prepaid, addressed as
aforesaid or (ii) if given by any other means (including, without
limitation, by fax or air courier), when delivered at the address specified
above, provided that any such notice, request or communication shall not be
effective until received.
8.4 Assignment. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto. In addition, and
whether or not any express assignment shall have been made, the provisions
of this Agreement which are for the benefit of the parties hereto other than
the Company shall also be for the benefit of and enforceable by any
subsequent holder of any Registrable Securities. Each of the Holders of the
Registrable Securities agrees, by accepting any portion of the Registrable
Securities after the date hereof, to the provisions of this Agreement
including, without limitation, appointment of the Investors' Representative
to act on behalf of such Holder pursuant to the terms hereof which such
actions shall be made in the good faith discretion of the Investors'
Representative and be binding on all persons for all purposes.
8.5 Descriptive Headings. The descriptive headings of the several sections
and paragraphs of this Agreement are inserted for reference only and shall
not limit or otherwise affect the meaning hereof.
8.6 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California, without giving effect
to applicable principles of conflicts of law.
8.7 Jurisdiction. This Agreement shall be exclusively governed by and
construed in accordance with the laws of the State of California. If any
action is brought among the parties with respect to this Agreement or
otherwise, by way of a claim or counterclaim, the parties agree that in any
such action, and on all issues, the parties irrevocably waive their right to
a trial by jury. Exclusive jurisdiction and venue for any such action shall
be the State or Federal Courts serving the State of California. In the event
suit or action is brought by any party under this Agreement to enforce any
of its terms, or in any appeal there from, it is agreed that the prevailing
party shall be entitled to reasonable attorneys fees to be fixed by the
arbitrator, trial court, and/or appellate court.
8.8 Severability. If any provision of this Agreement, or the application of
such provisions to any Person or circumstance, shall be held invalid, the
remainder of this Agreement, or the application of such provision to Persons
or circumstances other than those to which it is held invalid, shall not be
affected thereby.
8.9 Binding Effect. All the terms and provisions of this Agreement whether
so expressed or not, shall be binding upon, inure to the benefit of, and be
enforceable by the parties and their respective administrators, executors,
legal representatives, heirs, successors and assignees.
8.10 Preparation of Agreement. This Agreement shall not be construed more
strongly against any party regardless of who is responsible for its
preparation. The parties acknowledge each contributed and is equally
responsible for its preparation.
8.11 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or
delay on the part of any party hereto in the exercise of any right hereunder
shall impair such right or be construed to be a waiver of, or acquiescence
in, any breach of any representation, warranty, covenant or agreement
herein, nor shall nay single or partial exercise of any such right preclude
other or further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive
of, any rights or remedies otherwise available.
8.12 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original, but all of
which taken together shall constitute one and the same agreement. A
facsimile transmission of this signed Agreement shall be legal and binding
on all parties hereto.
[SIGNATURES ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the Investors and the Company have as of the date
first written above executed this Agreement.
Rapid Link Inc.
/s/ Xxxx Xxxxxxx
------------------------------
By: Xxxx Xxxxxxx
Title: Chief Executive Officer
INVESTOR
Westside Capital LLC
By: /s/ Xxxxxx X. Xxxxx
------------------------------
Xxxxxx X. Xxxxx
Managing Member
000 Xxxx 00xx, Xxxxx 0X
Xxx Xxxx XX 00000
