AMENDMENT NO. 1 TO SECURITY AGREEMENT, SECURED TERM A NOTE, SECURED TERM B NOTE AND DEFERRED PURCHASE PRICE NOTES
Exhibit
10.1
AMENDMENT
NO. 1 TO SECURITY AGREEMENT,
SECURED
TERM A NOTE, SECURED TERM B NOTE
AND
DEFERRED PURCHASE PRICE NOTES
THIS
AMENDMENT (this “Amendment”) is dated
as of July 11, 2008 with respect to that certain (a) Security Agreement dated as
of March 31, 2008 (as amended, modified, supplemented and/or restated from time
to time, the “Security
Agreement”) by and among RAPID LINK, INCORPORATED (“Rapid Link”),
TELENATIONAL COMMUNICATIONS, INC. (“Telenational”), ONE
RING NETWORKS, INC. (“One Ring” and
together with Rapid Link and Telenational, collectively, the “Companies” and each a
“Company”), the
lenders from time to time party thereto (collectively, the “Lenders”) and LV
ADMINISTRATIVE SERIVCES, INC., as administrative and collateral agent to the
Lenders (in such capacity, the “Agent” and together
with the Lenders, collectively, the “Creditor Parties” and
each a “Creditor
Party”), (b) Secured Term Note A dated March 31, 2008 (as amended,
modified, supplemented and/or restated from time to time, the “Secured Term A Note”)
in the original principal amount of $1,800,000 from the Companies in favor of
Valens Offshore SPV II, Corp., (c) Secured Term B Note dated July 11, 2008 (as
amended, modified, supplemented and/or restated from time to time, the “Secured Term B Note”)
in the original principal amount of $1,500,000 from the Companies in favor of
Valens U.S. SPV I, LLC (“Valens US”), (d)
Amended and Restated Deferred Purchase Price Note dated July 11, 2008 (as
amended, modified, supplemented and/or restated from time to time, the “Laurus Deferred Purchase
Price Note”) in the original principal amount of $2,290,450.56 from the
Companies in favor of Laurus Master Fund, Ltd. and (e) Amended and Restated
Deferred Purchase Price Note dated July 11, 2008 (as amended, modified,
supplemented and/or restated from time to time, the “Valens US Deferred Purchase
Price Note”) in the original principal amount of $292,709.40 from the
Companies in favor of Valens US.
BACKGROUND
WHEREAS,
pursuant to the Security Agreement, the Lenders have made financial
accommodations to the Companies that remain outstanding; and
WHEREAS,
it is a condition to Companies receiving additional financial accommodations
from Lenders that the Parent or an Eligible Subsidiary have received the FCC
Approval.
WHEREAS,
the Companies have requested that the Creditor Parties agree to provide
Companies with additional financial accommodations based upon a Special
Temporary Authorization from the FCC and the Creditor Parties are willing to do
so, but only on the terms and conditions hereinafter set forth.
NOW,
THEREFORE, in consideration of any loan or advance or grant of credit heretofore
or hereafter made to or for the account of the Companies by the Creditor
Parties, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1.
Definitions. All
capitalized terms not otherwise defined herein shall have the meanings given to
them in the Security Agreement.
2.
Amendments to Security
Agreement.
(a) Creditor
Parties agree that the Secured Party Sale Condition requiring the receipt of FCC
Approval has been temporarily satisfied by the Special Temporary Authorization
issued by the FCC to Telenational on June 20, 2008 (the “STA”). Companies
agree to diligently provide the FCC with such information as the FCC requests in
order for the FCC to issue the permanent FCC Approval and to diligently pursue
the permanent FCC Approval. In the event the FCC has not placed the
transfer of control on public notice by July 18, 2008, Companies shall request
and diligently pursue an extension of the STA. In the event such
extension of the STA is not granted by August 19, 2008 and Companies have not
yet obtained the permanent FCC approval, it shall constitute an Event of Default
under the Security Agreement.
(b) Annex A- Commitment
Annex to the Security Agreement is hereby amended by deleting such Annex
in its entity and inserting in lieu thereof Annex A-Commitment
Annex attached hereto
(c) The
defined term “Revolving Commitment
Conditions” contained in the Security Agreement is amended to provide as
follows:
“Revolving Commitment
Conditions” means satisfaction of the following conditions in a manner,
and evidenced as applicable by agreements, instruments and documents,
satisfactory in form and substance to Agent: (a) the consummation of
the Secured Party Sale, (b) no Event of Default shall have occurred and then be
continuing, (c) the execution and delivery by the Companies of the Secured
Revolving Notes, (d) the issuance of Revolving Warrants, (e) Agent shall have
completed a roll forward of its previous Collateral audit which indicates that
no event or condition has occurred or is existing which could reasonably be
expected to have a Material Adverse Effect and (f) Agent shall have received a
borrowing base certificate as of the date of funding of the initial Revolving
Loans in form and substance acceptable to Agent.”
(d) The
definition of “Secured Term A Notes”
is hereby amended by deleting the phrase “One Million Seven Hundred Thousand
Dollars ($1,700,000)” and inserting in lieu thereof the phrase “One Million
Eight Hundred Thousand Dollars ($1,800,000).”
(e) The
definition of “Secured
Term B Notes” is hereby amended by deleting the phrase “One Million Six
Hundred Thousand Dollars ($1,600,000)” and inserting in lieu thereof the phrase
“One Million Five Hundred Thousand Dollars ($1,500,000).”
(f) The
following defined terms are inserted in the appropriate alphabetical order in
Annex-A-Definitions:
“Available Revolving
Commitment Amount” means (a) until the First EBITDA Target is achieved,
$0, (b) following the achievement of the First EBITDA Target until the
achievement of the Second EBITDA Target, the lesser of (i) fifty percent of the
Capital Availability Amount minus Reserves and (ii) fifty percent of the Formula
Amount and (c) following the achievement of the Second EBITDA Target, the lesser
of (i) the Capital Availability Amount minus Reserves and (ii) the Formula
Amount.
“First EBITDA Target”
means Consolidated EBITDA of the Companies and their Domestic Subsidiaries for
the period commencing on July 1, 2008 and ending on December 31, 2008, as
evidenced by the financial statements delivered to Agent pursuant to Section 11
for the fiscal year ending December 31, 2008, of $401,272.
“Revolving Warrants”
means the issuance of Warrants to the Lenders for shares of Common Stock in an
amount equal to (a) on the achievement of the First EBITDA Target, twenty five
percent (25%) of $600,000 divided by the Share Price and (b) on the achievement
of the Second EBITDA Target, twenty five percent (25%) of $1,200,000 minus
$600,000 if the First EBITA Target has been achieved, divided by the Share
Price.
“Second EBITDA Target”
means Consolidated EBITDA of the Companies and their Domestic Subsidiaries for
the period commencing on July 1, 2008 and ending on June 30, 2009, as evidenced
by the financial statements delivered to Agent pursuant to Section 11 for the
fiscal period ending June 30, 2009, of $1,329,509
(g) The
following is added at the end of Section 2(a)(i) of the Security
Agreement:
“Notwithstanding
the foregoing, (W) the amount of Revolving Loans at any time shall not exceed
the applicable Available Revolving Commitment, (X) following the achievement of
the First EBITDA Target and the Second EBITDA Target , no Lender may make
Revolving Loans until Rapid Link shall deliver to each Lender the applicable
Revolving Warrants and Rapid Link shall deliver such Revolving Warrants within
three (3) Business Days of the achievement of the First EBITDA Target or the
Second EBITDA Target, as applicable.
3.
Amendment to Secured Term A
Note. Section 1.3 of the Secured Term A Note is hereby amended
by deleting such section in its entirety and inserting in lieu thereof the
following:
“The
Companies may prepay this Note, in whole or in part, at any time without premium
or penalty.”
4.
Amendment
to Secured Term B Note. Section 1.3 of the Secured Term B Note
is hereby amended by deleting such section in its entirety and inserting in lieu
thereof the following:
“The
Companies may prepay this Note, in whole or in part, at any time without premium
or penalty.”
5.
Amendment to Laurus Deferred
Price Note. Section 1.3 of the Laurus Deferred Purchase Price
Note is hereby amended by deleting such section in its entirety and inserting in
lieu thereof the following:
“The
Companies may prepay this Note, in whole or in part, at any time without premium
or penalty.”
6.
Amendment to Valens US
Deferred Purchase Price Note. Section 1.3 of the Valens US
Deferred Purchase Note is hereby amended by deleting such section in its
entirety and inserting in lieu thereof the following:
“The
Companies may prepay this Note, in whole or in part, at any time without premium
or penalty.”
7.
Agreement Regarding
Fees. Notwithstanding anything to the contrary contained in
Section 5(b)(i) of the Security Agreement, the payments set forth in clauses
5(b)(i)(A), 5(b)(i)(B) and 5(b)(i)(C) relating to the Secured Revolving Notes
and Secured Term B Notes, shall be deemed fully earned on the Effective Date (as
defined below) and shall be paid on the Effective Date pursuant to a
disbursement letter executed in connection herewith.
8.
Conditions of
Effectiveness. This Amendment shall become effective (the
“Effective
Date”) upon receipt by the Agent of counterparts of this Amendment duly
executed and delivered by the Companies and the Creditor Parties.
9.
Representations and
Warranties. Each Company hereby represents and warrants as
follows:
(a) This
Amendment and the Security Agreement, as amended hereby, constitute legal, valid
and binding obligations of the Company and are enforceable against the Company
in accordance with their respective terms.
(b) Upon
the effectiveness of this Amendment, the Company hereby reaffirms all covenants,
representations and warranties made in the Security Agreement, any Ancillary
Agreement and any other documents, instruments and agreements entered into in
connection with the transactions contemplated thereby (collectively, the “Documents”) and
agrees that all such covenants, representations and warranties shall be deemed
to have been remade as of the effective date of this Amendment (or if any such
representation, covenant or warranty is expressly stated to have been made as of
a specific date, as of such specific date).
(c) No
Event of Default has occurred and is continuing or would exist after giving
effect to this Amendment.
(d) No
Company has any defense, counterclaim or offset with respect to any
Document.
10. Effect on the Loan
Agreement.
(a) Upon
the effectiveness of Section 2 hereof,
each reference in the Security Agreement to “this Security Agreement”
“hereunder,” “hereof,” “herein” or words of like import shall mean and be a
reference to the Security Agreement as amended hereby.
(b) Except
as specifically amended herein, the Security Agreement and all other documents,
instruments and agreements executed and/or delivered in connection therewith,
shall remain in full force and effect, and are hereby ratified and
confirmed.
(c) The
execution, delivery and effectiveness of this Amendment shall not operate as a
waiver of any right, power or remedy of any Creditor Party, nor constitute a
waiver of any provision of the Security Agreement, any Document or any other
documents, instruments or agreements executed and/or delivered under or in
connection therewith.
11. Governing
Law. This Amendment shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns and
shall be governed by and construed in accordance with the laws of the State of
New York.
12. Headings. Section
headings in this Amendment are included herein for convenience of reference only
and shall not constitute a part of this Amendment for any other
purpose.
13. Counterparts; Electronic
Transmission. This Amendment may be executed by the parties
hereto in one or more counterparts, each of which shall be deemed an original
and all of which when taken together shall constitute one and the same
agreement. Any signature delivered by a party by facsimile or PDF
transmission shall be deemed to be an original signature hereto.
IN
WITNESS WHEREOF, this Amendment has been duly executed as of the day and year
first written above.
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RAPID
LINK, INCORPORATED
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By:
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Name:
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Title:
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TELENATIONAL
COMMUNICATIONS, INC.
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By:
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Name:
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Title:
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ONE
RING NETWORKS, INC.
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By:
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Name:
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Title:
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LV
ADMINISTRATIVE SERVICES, INC.,
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as
Agent
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By:
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Name:
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Title:
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LAURUS
MASTER FUND, LTD.
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By:
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Laurus
Capital Management, LLC, its investment manager
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By:
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Name:
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Title:
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SIGNATURE PAGE TO
AMENDMENT NO. 1
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VALENS
U.S. SPV I, LLC, as a Lender
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By:
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Valens
Capital Management, LLC, its investment manager
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By:
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Name:
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Title:
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VALENS
OFFSHORE SPV II, CORP., as a Lender
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By:
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Valens
Capital Management, LLC, its investment manager
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By:
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Name:
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Title:
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SIGNATURE PAGE TO
AMENDMENT NO. 1
Annex
A
Commitment
Annex
(as
of the Closing Date)
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Lender
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Revolving
Commitment Amount
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Revolving
Commitment Percentage
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Term
Loan A Commitment Amount
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Term
Loan A Percentage
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Term
Loan B Commitment Amount
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Term
Loan B Percentage
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Deferred
Purchase Price Commitment Amount
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Deferred
Purchase Price Percentage
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Valens
U.S. SPV I, LLC
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$ |
1,200,000
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100
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% | $ |
0
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0
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% | $ |
1,500,000
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0
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% | $ |
292,709.40
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11.33
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% | ||||||||||||||||
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Valens
Offshore SPV II, Corp.
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$ |
0
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0
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% | $ |
1,800,000
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100
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% | $ |
0
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100
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% |
0
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% |
0
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% | |||||||||||||||
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Laurus
Master Fund, Ltd.
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$ |
0
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0
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% | $ |
0
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0
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% | $ |
0
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0
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% | $ |
2,290,450.56
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88.67
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% | ||||||||||||||||
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Total
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$ |
1,200,000
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100
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% | $ |
1,800,000
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100
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% | $ |
1,500,000
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100
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% | $ |
2,583,159.96
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100
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% | ||||||||||||||||
