Exhibit 4.1
EXTENSION AGREEMENT
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This EXTENSION AGREEMENT ("Agreement") is entered into effective as
of March 8, 2007 (the "Effective Date"), by and between Trident Growth
Fund, L.P., a Delaware limited partnership ("Trident" or "Lender") and
Rapid Link Incorporated, a Delaware corporation ("Rapid Link" or the
"Company").
R E C I T A L S:
A. Rapid Link executed and delivered to Lender that certain 10%
Secured Convertible Debenture (the "Debenture") dated March 8,
2006, payable to the order of Lender in the principal amount of
$600,000; and
B. Lender and Rapid Link executed that certain Security Agreement
(the "Security Agreement") dated of even date with the Debenture,
to secure the payment of the Debenture and performance by Rapid
Link of the other obligations set forth in the the Debenture; and
C. Rapid Link executed and delivered to Lender that certain Common
Stock Purchase Warrant (the "Warrant") dated March 8, 2006,
whereby Lender became entitled, for a term of five (5) years, to
subscribe for and purchase from Rapid Link shares of common stock
(the "Warrant Shares") upon the terms and subject to the
conditions set forth in the Warrant; and
D. Lender and Rapid Link executed that certain Securities Purchase
Agreement (the "Securities Purchase Agreement") dated of even date
with the Debenture and the Warrant, whereby Rapid Link sold to
Lender the Debenture and the Warrant for an aggregate amount of
SIX HUNDRED THOUSAND and NO/100 DOLLARS ($600,000.00); and
E. Lender, Rapid Link, and Charger Investments, LLC ("Charger" or
the "Subordinate Lender"), executed that certain Subordination
Agreement (the "Subordination Agreement") dated of even date with
the Debenture and Warrant, whereby the obligations created in the
Subordinate Loan Documents (as defined in the Subordination
Agreement) were subordinated to the obligations created by the
Loan Documents (as defined below); and
F. All of the above documents are hereinafter collectively referred
to herein as the "Loan Documents"; and
G. Rapid Link and Lender have agreed to extend the maturity date of
the Debenture by one year (the "Extension") upon and subject to
the satisfaction of the terms and conditions contained herein; and
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Lender and Rapid Link hereby agree as follows:
1. Recitals. The above recitals serve as the basis for this
Agreement, and are incorporated herein and made a part hereof for
all purposes. Rapid Link and Lender each hereby acknowledge the
above recitals to be true and correct as of the date hereof and
are incorporated herein and made a part hereof for all purposes.
The recitals are a substantive, contractual part of this
Agreement.
2. Extension of Terms. Effective as of the Effective Date, the
following modifications shall be deemed made to the Loan
Documents:
(a) the Maturity Date of the Debenture, as that term is defined
in the Debenture, shall be extended to the earlier of (i)
March 8, 2008; or (ii) the consummation of a Change of
Control Transaction, as that term is defined in the Loan
Documents (the "New Maturity Date"); and
(b) the Termination Date of the Warrant, as that term is defined
in the Warrant, shall be extended to March 8, 2012.
3. Additional Warrant Shares. In consideration of the Extension,
Rapid Link shall grant to Lender additional warrant shares (the
"Additional Warrant Shares") in accordance with the terms and
conditions of the Common Stock Purchase Warrant attached hereto as
Exhibit "A" (the "New Warrant"). The Additional Warrant Shares
described in Clause (b) in the first page of the New Warrant are
in addition to the Warrant Shares described in Clause (c) in the
first page of the Warrant.
4. Affirmation of Security. Rapid Link hereby renews, but does not
extinguish, the security interests created and evidenced by the
Security Agreement and the other Loan Documents. Rapid Link
covenants to observe, comply with and perform each of the terms
and provisions of the Loan Documents, as modified hereby.
5. Confirmation of Subordination Agreement. Charger hereby
acknowledges that the terms and provisions of the Subordination
Agreement remain in full force and effect, and that the
Subordinate Loan Documents remain subordinate to the Loan
Documents, as modified hereby.
6. Acknowledgment by Rapid Link. Except as otherwise specified
herein, the terms and provisions hereof shall in no manner impair,
limit, restrict or otherwise affect the obligations of Rapid Link
to Lender, as evidenced by the Loan Documents. Rapid Link hereby
acknowledges, agrees and represents that (i) Lender has extended
the term of the Debenture and Rapid Link is indebted to Lender
pursuant to the terms of the Debenture for the extended term,
which ends on the New Maturity Date; (ii) Rapid Link has agreed,
in consideration of the Extension, to grant to Lender the
Additional Warrant Shares in accordance with the terms of the New
Warrant, (iii) the security interests created and evidenced by the
Loan Documents are valid and subsisting security interests of the
respective dignity and priority recited in the Loan Documents;
(iv) there are no claims or offsets against, or defenses or
counterclaims to, the terms or provision of the Loan Documents,
and the other obligations created or evidenced by the Loan
Documents, as modified hereby; (v) Rapid Link has no claims,
offsets, defenses or counterclaims arising from any Lender's acts
or omissions with respect to the Loan Documents or Lender's
performance under the Loan Documents; (vi) the representations and
warranties contained in the Loan Documents are true and correct
representations and warranties of Rapid Link, as of the date
hereof; (vii) Lender is not in default and no event has occurred
which, with the passage of time, giving of notice, or both, would
constitute a default by Lender of Lender's obligations under the
terms and provisions of the Loan Documents; and (viii) Lender has
no obligation to advance any additional funds to Rapid Link or any
other party pursuant to the Loan Documents. To the extent Rapid
Link now has, or in the future possesses, any claims, offsets,
defenses or counterclaims against Lender for the repayment of all
or a portion of the Debenture, whether known or unknown, fixed or
contingent, same are hereby forever irrevocably waived and
released in their entirety.
7. No Waiver of Remedies. Except as may be expressly set forth
herein, nothing contained in this Agreement shall prejudice, act
as, or be deemed to be a waiver of any right or remedy available
to Lender by reason of the occurrence or existence of any fact,
circumstance or event constituting a default under the Loan
Documents.
8. Costs and Expenses. Contemporaneously with the execution and
delivery hereof, Rapid Link shall pay, or cause to be paid, all
costs and expenses incident to the preparation and execution
hereof and the consummation of the transaction contemplated
hereby, including, but not limited to, reasonable fees and
expenses of legal counsel to Lender.
9. Additional Documentation. From time to time, Rapid Link shall
execute or procure and deliver to Lender such other and further
documents and instruments evidencing, securing or pertaining to
the Loan Documents as shall be reasonably requested by Lender so
as to evidence or effect the terms and provisions hereof. Upon
Lender's request, Rapid Link shall cause to be delivered to
Lender an opinion of counsel, satisfactory to Lender as to form,
substance and rendering attorney, opining to (i) the validity and
enforceability of this Agreement and the terms and provisions
hereof, and any other agreement executed in connection with the
transaction contemplated hereby; (ii) the authority of Rapid
Link, and any constituents of Rapid Link, to execute, deliver
and perform its or their respective obligations under the Loan
Documents, as hereby modified; and (iii) such other matters as
reasonably requested by Lender.
10. Effectiveness of the Loan Documents. Except as expressly
modified by the terms and provisions hereof, each of the terms
and provisions of the Loan Documents are hereby ratified and
shall remain in full force and effect, as modified hereby.
11. Governing Law. THE TERMS AND PROVISIONS HEREOF SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN.
12. Time. Time is of the essence in the performance of the covenants
contained herein and in the Loan Documents.
13. Binding Agreement. This Agreement shall be binding upon the
heirs, executors, administrators, personal representatives,
successors and assigns of the parties hereto.
14. Headings. The section headings hereof are inserted for
convenience of reference only and shall in no way alter, amend,
define or be used in construction or interpretation of the text
of such section.
15. Construction. Whenever the context hereof so requires, reference
to the singular shall include the plural and likewise, the plural
shall include the singular; words denoting gender shall be
construed to mean the masculine, feminine or neuter, as
appropriate; and specific enumeration shall not exclude the
general, but shall be construed as cumulative of the general
recitation.
16. Severability. If any clause or provision of this Agreement is or
should ever be held to be illegal, invalid or unenforceable under
any present or future law applicable to the terms hereof, then and
in that event, it is the intention of the parties hereto that the
remainder of this Agreement shall not be affected thereby, and
that in lieu of each such clause or provision of this Agreement
that is illegal, invalid or unenforceable, such clause or
provision shall be judicially construed and interpreted to be
as similar in substance and content to such illegal, invalid or
unenforceable clause or provision, as the context thereof would
reasonably suggest, so as to thereafter be legal, valid and
enforceable.
17. Counterparts. To facilitate execution, this Agreement may be
executed in as many counterparts as may be convenient or required.
It shall not be necessary that the signature and acknowledgment
of, or on behalf of, each party, or that the signature and
acknowledgment of all persons required to bind any party,
appear on each counterpart. All counterparts shall collectively
constitute a single instrument. It shall not be necessary in
making proof of this Agreement to produce or account for more
than a single counterpart containing the respective signatures and
acknowledgment of, or on behalf of, each of the parties hereto.
Any signature and acknowledgment page to any counterpart may be
detached from such counterpart without impairing the legal effect
of the signatures and acknowledgments thereon and thereafter
attached to another counterpart identical thereto except having
attached to it additional signature and acknowledgment pages.
18. Notice of Final Agreement. THIS EXTENSION AND THE OTHER LOAN
DOCUMENTS EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES
HERETO AND THERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS,
AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN
OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF
AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS
OF THE PARTIES HERETO OR THERETO. THERE ARE NO ORAL AGREEMENTS
AMONG THE PARTIES HERETO OR THERETO. THE PROVISIONS OF THIS
MODIFICATION AND THE OTHER LOAN DOCUMENTS MAY BE AMENDED OR WAIVED
ONLY BY AN INSTRUMENT IN WRITING SIGNED BY THE RESPECTIVE PARTIES
TO SUCH DOCUMENTS.
{See next page for signature pages}
EXECUTED effective as of the date first above written:
LENDER:
TRIDENT GROWTH FUND, L.P.
By: TRIDENT MANAGEMENT, LLC,
GENERAL PARTNER
By: /s/ Xxxxx Xxxx
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Name: Xxxxx Xxxx
Title: Authorized Signatory
RAPID LINK:
RAPID LINK INCORPORATED
By: /s/ Xxxx Xxxxxxx
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Name: Xxxx Xxxxxxx
Title: Chief Executive Officer
SUBORDINATE LENDER:
CHARGER INVESTMENTS, LLC
By: /s/ Xxxxx Xxxxxxxx
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Name: Xxxxx Xxxxxxxx
Title: General Partner, Authorized
Signatory
EXHIBIT "A"
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL
TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON
EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES AS PERMITTED BY LAW
AND THE SECURITIES PURCHASE AGREEMENT PURSUANT TO WHICH THE SECURITIES WERE
ISSUED.
COMMON STOCK PURCHASE WARRANT NO. 2
To Purchase Shares of Common Stock of
RAPID LINK INCORPORATED
This COMMON STOCK PURCHASE WARRANT (this "Warrant") certifies that, for
value received, TRIDENT GROWTH FUND, L.P., a Delaware limited partnership
(the "Holder"), is entitled, upon the terms and subject to the limitations
on exercise and the conditions hereinafter set forth, at any time on or
after the date hereof, March 8, 2007 (the "Initial Exercise Date"), and on
or prior to the close of business on the fifth anniversary of the Initial
Exercise Date (the "Termination Date"), to subscribe for and purchase from
RAPID LINK INCORPORATED, a Delaware corporation (the "Company"), such number
of shares of common stock, par value $001 per share, of the Company (the
"Common Stock"), subject to adjustment herein (the "Warrant Shares") as
follows:
a) 1, 200,000 at an Exercise Price equal to $.10; plus
b) an additional 30,000 per month to vest and become exercisable
on the last day of each Rapid Link fiscal quarter to the Company's
satisfaction in full of the Debenture, or the Holder's complete conversion
thereof, as the case may be, such Warrant Shares to have an Exercise Price
equal to $.10 per share.
Section 1. Definitions. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in that certain Securities
Purchase Agreement (the "Purchase Agreement"), dated March 8, 2006, entered
into by and among the Company and the Holder.
Section 2. Exercise.
a) Exercise of Warrant. Exercise of the purchase rights
represented by this Warrant may be made at any time or times on or
after the Initial Exercise Date and on or before the Termination Date
(each, an "Exercise Date") by delivery to the Company of a duly
executed facsimile copy of the Notice of Exercise Form annexed hereto
(or such other office or agency of the Company as it may designate by
notice in writing to the registered Holder at the address of such
Holder appearing on the books of the Company); provided, however,
within five Business Days of the date said Notice of Exercise is
delivered to the Company, the Holder shall have surrendered this
Warrant to the Company and the Company shall have received payment of
the aggregate Exercise Price of the shares thereby purchased by wire
transfer or cashier's check drawn on a United States bank.
Exercise Price. The Exercise Price (so called herein) of
each share of Common Stock under this Warrant shall be equal to the amount
set forth above in the paragraph immediately preceding Section 1. Any
reference to the Exercise Price herein shall relate to the Exercise Price
relevant to such Warrant Shares as described above.
b) Cashless Exercise. If at any time after one year from the date
of issuance of this Warrant there is no effective Registration
Statement registering the resale of the Warrant Shares by the Holder,
then this Warrant may also be exercised at such time by means of a
"cashless exercise" in which the Holder shall be entitled to receive a
certificate for the number of Warrant Shares equal to the quotient
obtained by dividing [(A-B) (X)] by (A), where:
(A) = the price of said Common Stock determined by reference
to the last reported sale price for the Common Stock on such
day on the principal securities exchange on which the Common
Stock is listed or admitted to trading or if no such sale
takes place on such date, the average of the closing bid and
asked prices thereof as officially reported, or, if not so
listed or admitted to trading on any securities exchange,
the last sale price for the Common Stock on the National
Association of Securities Dealers national market system on
such date, or, if there shall have been no trading on such
date or if the Common Stock shall not be listed on such
system, the average of the closing bid and asked prices in
the over-the-counter market as furnished by any NASD member
firm selected from time to time by the Company for such
purpose or, if the Common Stock is not traded, then such
price as is reasonably determined by the Company's Board
of Directors (the "Market Value");
(B) = the Exercise Price of this Warrant, as adjusted; and
(X) = the number of Warrant Shares issuable upon exercise of
this Warrant in accordance with the terms of this Warrant by
means of a cash exercise rather than a cashless exercise.
Notwithstanding anything herein to the contrary, on the
Termination Date, this Warrant shall be automatically exercised via
cashless exercise pursuant to this Section 2(c).
c) Exercise Limitations. The Holder shall not have the right to
exercise any portion of this Warrant, pursuant to Section 2 or
otherwise, to the extent that after giving effect to such issuance
after exercise, the Holder (together with the Holder's affiliates), as
set forth on the applicable Notice of Exercise, would beneficially own
in excess of 4.99% (or as applicable, 9.99%) of the number of shares of
the Common Stock outstanding immediately after giving effect to such
issuance. For purposes of the foregoing determination, the number of
shares of Common Stock beneficially owned by the Holder and its
affiliates shall include the number of shares of Common Stock issuable
upon such exercise of this Warrant less the number of shares of Common
Stock which would be issuable upon (A) exercise of the remaining,
nonexercised portion of this Warrant and (B) exercise or conversion of
the unexercised or unconverted portion of any other Securities
(including, without limitation, any other Debentures or Warrants)
subject to a limitation on conversion or exercise analogous to the
limitation contained herein beneficially owned by the Holder. Except
as set forth in the preceding sentence, for purposes of this Section
2(c), beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act. To the extent that the limitation
contained in this Section 2(c) applies, the determination of whether
this Warrant is exercisable (in relation to other securities owned by
the Holder) and of which a portion of this Warrant is exercisable shall
be in the sole discretion of such Holder. For purposes of this Section
2(c), in determining the number of outstanding shares of Common Stock,
the Holder may rely on the number of outstanding shares of Common Stock
as reflected in (x) Schedule 3.1(g) to the Purchase Agreement, (y) a
more recent public announcement by the Company, including the most
recent annual or quarterly report of Form 10-KSB or 10-QSB filed with
the Commission; or (z) any other notice by the Company or the Company's
transfer agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of the Holder, the
Company shall within two Business Days confirm orally and in writing to
the Holder the number of shares of Common Stock then outstanding. The
provisions of this Section 2(c) may be waived by the Holder upon, at
the election of the Holder, not less than 61 days' prior notice to the
Company, and the provisions of this Section 2(c) shall continue to
apply until such 61st day (or such later date, as determined by the
Holder, as may be specified in such notice of waiver).
d) Mechanics of Exercise.
i. Authorization of Warrant Shares. The Company
covenants that all Warrant Shares which may be issued upon
the exercise of the purchase rights represented by this
Warrant will, upon exercise of the purchase rights
represented by this Warrant, be duly authorized, validly
issued, fully paid and non-assessable and free from all
taxes, liens and charges in respect of the issuance thereof
(other than taxes in respect of any transfer occurring
contemporaneously with such issuance). The Company covenants
that during the period the Warrant is outstanding, it will
reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of
the Warrant Shares upon the exercise of any purchase rights
under this Warrant. The Company further covenants that its
issuance of this Warrant shall constitute full authority to
its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates
for the Warrant Shares upon the exercise of the purchase
rights under this Warrant. The Company will take all such
reasonable action as may be necessary to assure that such
Warrant Shares may be issued as provided herein without
violation of any applicable law or regulation, or of any
requirements of the Trading Market upon which the Common
Stock may be listed.
ii. Delivery of Certificates Upon Exercise.
Certificates for shares purchased hereunder shall be
transmitted by the transfer agent of the Company to the
Holder by crediting the account of the Holder's prime broker
with the Depository Trust Company through its Deposit
Withdrawal Agent Commission ("DWAC") system if the Company is
a participant in such system and if the certificates may be
issued without a restrictive legend in accordance with
applicable federal securities laws, and otherwise by physical
delivery to the address specified by the Holder in the Notice
of Exercise within two (2) Business Days from the delivery to
the Company of the Notice of Exercise Form, surrender of this
Warrant and payment of the aggregate Exercise Price as set
forth above ("Warrant Share Delivery Date"). This Warrant
shall be deemed to have been exercised on the date the
Exercise Price is received by the Company. The Warrant
Shares shall be deemed to have been issued, and Holder or any
other person so designated to be named therein shall be
deemed to have become a holder of record of such shares for
all purposes, as of the date the Warrant has been exercised
by payment to the Company of the Exercise Price and all taxes
required to be paid by the Holder, if any, pursuant to
Section 2(d)(vii) prior to the issuance of such shares, have
been paid.
iii. Delivery of New Warrants Upon Exercise. If this
Warrant shall have been exercised in part, the Company shall,
at the time of delivery of the certificate or certificates
representing Warrant Shares, deliver to Holder a new Warrant
evidencing the rights of Holder to purchase the unpurchased
Warrant Shares called for by this Warrant, which new Warrant
shall in all other respects be identical with this Warrant.
iv. Rescission Rights. If the Company fails to cause
its transfer agent to transmit to the Holder a certificate or
certificates representing the Warrant Shares pursuant to this
Section 2(d)(iv) by the Warrant Share Delivery Date, then the
Holder will have the right to rescind such exercise.
v. Failure to Timely Deliver Certificates Upon Exercise.
In addition to any other rights available to the Holder, if
the Company or the Company's transfer agent fails to cause
delivery to the Holder of a certificate or certificates
representing the Warrant Shares or if the Company or its
transfer agent fails to deliver such certificates without the
restrictive legend (if applicable) on or before the Warrant
Share Delivery Date, the Company shall pay to Purchaser, in
cash, as partial liquidated damages and not as a penalty, the
greater of (i) $500 for each Business Day after the Warrant
Share Delivery Date until such certificate is delivered with
an appropriate legend or without a restrictive legend, as the
case may be; and (ii) the difference in the Market Value of
the Warrant Shares on the Warrant Share Delivery Date and the
date such shares are actually received by the Holder.
Nothing herein shall limit Purchaser's right to pursue actual
damages for the Company's failure to deliver certificates
representing any Securities as required herein, and Purchaser
shall have the right to pursue all remedies available to it
at law or in equity including, without limitation, a decree
of specific performance and/or injunctive relief.
vi. No Fractional Shares or Scrip. No fractional shares
or scrip representing fractional shares shall be issued upon
the exercise of this Warrant. As to any fraction of a share
which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall round such fractional share
up to the next whole number.
vii. Charges, Taxes and Expenses. Issuance of
certificates for Warrant Shares shall be made without charge
to the Holder for any issue or transfer tax or other
incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid by
the Company, and such certificates shall be issued in the
name of the Holder or in such name or names as may be
directed by the Holder; provided, however, that in the event
certificates for Warrant Shares are to be issued in a name
other than the name of the Holder, this Warrant when
surrendered for exercise shall be accompanied by the
Assignment Form attached hereto duly executed by the Holder;
and the Company may require, as a condition thereto, the
payment of a sum sufficient to reimburse it for any transfer
tax incidental thereto.
viii. Closing of Books. The Company will not close its
stockholder books or records in any manner which prevents the
timely exercise of this Warrant, pursuant to the terms
hereof.
Section 3. Certain Adjustments.
a) Stock Dividends and Splits. If the Company, at any time while
this Warrant is outstanding: (A) pays a stock dividend or otherwise
make a distribution or distributions on shares of its Common Stock or
any other equity or equity equivalent securities payable in shares of
Common Stock (which, for avoidance of doubt, shall not include any
shares of Common Stock issued by the Company pursuant to this Warrant),
(B) subdivides outstanding shares of Common Stock into a larger number
of shares, (C) combines (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of shares, or
(D) issues by reclassification of shares of the Common Stock any shares
of capital stock of the Company, then in each case the Exercise Price
shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock (excluding treasury shares, if any)
outstanding before such event and of which the denominator shall be the
number of shares of Common Stock outstanding after such event and the
number of shares issuable upon exercise of this Warrant shall be
proportionately adjusted. Any adjustment made pursuant to this Section
3(a) shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective
date in the case of a subdivision, combination or re-classification.
b) Subsequent Equity Sales. If the Company at any time while this
Warrant is outstanding, shall offer, sell, grant any option to purchase
or offer, sell or grant any right to reprice its securities, or
otherwise dispose of or issue any Common Stock or Common Stock
Equivalents entitling any Person to acquire shares of Common Stock, at
an effective price per share less than the then Exercise Price (such
lower price, the "Base Share Price" and such issuances collectively, a
"Dilutive Issuance"), as adjusted hereunder (if the holder of the
Common Stock or Common Stock Equivalents so issued shall at any time,
whether by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise, or due
to warrants, options or rights per share which is issued in connection
with such issuance, be entitled to receive shares of Common Stock at an
effective price per share which is less than the Exercise Price, such
issuance shall be deemed to have occurred for less than the Exercise
Price), then, the Exercise Price shall be reduced to equal the Base
Share Price. Such adjustment shall be made whenever such Common Stock
or Common Stock Equivalents are issued. The Company shall notify the
Holder in writing, no later than the Business Day following the
issuance of any Common Stock or Common Stock Equivalents subject to
this section, indicating therein the applicable issuance price, or of
applicable reset price, exchange price, conversion price and other
pricing terms (such notice the "Dilutive Issuance Notice"). For
purposes of clarification, whether or not the Company provides a
Dilutive Issuance Notice pursuant to this Section 3(b), upon the
occurrence of any Dilutive Issuance, after the date of such Dilutive
Issuance the Holder is entitled to receive a number of Warrant Shares
based upon the Base Share Price regardless of whether the Holder
accurately refers to the Base Share Price in the Notice of Exercise.
c) Pro Rata Distributions. If the Company, at any time prior to
the Termination Date, shall distribute to all holders of Common Stock
(and not to Holders of the Warrants) evidences of its indebtedness or
assets or rights or warrants to subscribe for or purchase any security
other than the Common Stock (which shall be subject to Section 3(b)),
then in each such case the Exercise Price shall be adjusted by
multiplying the Exercise Price in effect immediately prior to the
record date fixed for determination of stockholders entitled to receive
such distribution by a fraction of which the denominator shall be the
closing bid price of the Common Stock on the then principal Trading
Market determined as of the record date mentioned above (if the closing
bid price of the Common Stock on the then principal Trading Market
shall then be determinable and otherwise the fair market value per
share as determined by the Board of Directors in good faith, and of
which the numerator shall be such closing bid price of the Common Stock
on the then principal Trading Market on such record date less the then
per share fair market value at such record date of the portion of such
assets or evidence of indebtedness so distributed applicable to one
outstanding share of the Common Stock as determined by the Board of
Directors in good faith. In either case the adjustments shall be
described in a statement provided to the Holders of the portion of
assets or evidences of indebtedness so distributed or such subscription
rights applicable to one share of Common Stock. Such adjustment shall
be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above.
d) Fundamental Transaction. If, at any time while this Warrant is
outstanding, there occurs a Fundamental Transaction, then, upon any
subsequent conversion of this Warrant, the Holder shall have the right
to receive, for each Warrant Share that would have been issuable upon
such exercise absent such Fundamental Transaction, at the option of the
Holder, (a) upon exercise of this Warrant, the number of shares of
Common Stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and Alternate
Consideration receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a
Holder of the number of shares of Common Stock for which this Warrant
is exercisable immediately prior to such event or (b) if the Company is
acquired in an all cash transaction, cash equal to the value of this
Warrant as determined by the difference between the applicable Exercise
Price and the amount of cash paid per share to the shareholders of the
Company (the "Alternate Consideration"). For purposes of any such
exercise, the determination of the Exercise Price shall be
appropriately adjusted to apply to such Alternate Consideration based
on the amount of Alternate Consideration issuable in respect of one
share of Common Stock in such Fundamental Transaction, and the Company
shall apportion the Exercise Price among the Alternate Consideration in
a reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common Stock
are given any choice as to the securities, cash or property to be
received in a Fundamental Transaction, then the Holder shall be given
the same choice as to the Alternate Consideration it receives upon any
exercise of this Warrant following such Fundamental Transaction. To
the extent necessary to effectuate the foregoing provisions, any
successor to the Company or surviving entity in such Fundamental
Transaction shall issue to the Holder a new warrant consistent with the
foregoing provisions and evidencing the Holder's right to exercise such
warrant into Alternate Consideration. The terms of any agreement
pursuant to which a Fundamental Transaction is effected shall include
terms requiring any such successor or surviving entity to comply with
the provisions of this Section 3(d) and insuring that this Warrant (or
any such replacement security) will be similarly adjusted upon any
subsequent transaction analogous to a Fundamental Transaction.
e) Exempt Issuance. Notwithstanding the foregoing, no adjustments,
Alternate Consideration, nor notices shall be made, paid, or issued
under this Section 3 in respect of an Exempt Issuance.
f) Calculations. All calculations under this Section 3 shall be
made to the nearest cent or the nearest 1/100th of a share, as the case
may be. The number of shares of Common Stock outstanding at any given
time shall not includes shares of Common Stock owned or held by or for
the account of the Company, and the description of any such shares of
Common Stock shall be considered on issue or sale of Common Stock.
For purposes of this Section 3, the number of shares of Common Stock
deemed to be issued and outstanding as of a given date shall be the sum
of the number of shares of Common Stock (excluding treasury shares, if
any) issued and outstanding.
g) Voluntary Adjustment By Company. The Company may at any time
during the term of this Warrant reduce the then current Exercise Price
to any amount and for any period of time deemed appropriate by the
Board of Directors of the Company.
h) Intentionally Omitted.
i) Notice to Holders.
i. Adjustment to Exercise Price. Whenever the Exercise
Price is adjusted pursuant to this Section 3, the Company
shall promptly mail to each Holder a notice setting forth the
Exercise Price after such adjustment and setting forth a
brief statement of the facts requiring such adjustment. If
the Company issues a variable rate security, the Company
shall be deemed to have issued Common Stock or Common Stock
Equivalents at the lowest possible conversion or exercise
price at which such securities may be converted or exercised
in the case of a Variable Rate Transaction (as defined in the
Purchase Agreement), or the lowest possible adjustment price
in the case of an MFN Transaction. The term "MFN
Transaction" shall mean a transaction in which the Company
issues or sells any securities in a capital raising
transaction or series of related transactions which grants to
an investor the right to receive additional shares based upon
future transactions of the Company on terms more favorable
than those granted to such investor in such offering.
ii. Notice to Allow Exercise by Holder. If (A) the
Company shall declare a dividend (or any other distribution)
on the Common Stock; (B) the Company shall declare a special
nonrecurring cash dividend on or a redemption of the Common
Stock; (C) the Company shall authorize the granting to all
holders of the Common Stock rights or warrants to subscribe
for or purchase any shares of capital stock of any class or
of any rights; (D) the approval of any stockholders of the
Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or
merger to which the Company is a party, any sale or transfer
of all or substantially all of the assets of the Company, of
any compulsory share exchange whereby the Common Stock is
converted into other securities, cash or property; (E) the
Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the
Company; then, in each case, the Company shall cause to be
mailed to the Holder at its last address as it shall appear
upon the Warrant Register of the Company, at least 20
calendar days prior to the applicable record or effective
date hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if
a record is not to be taken, the date as of which the holders
of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are
to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or
share exchange is expected to become effective or close, and
the date as of which it is expected that holders of the
Common Stock of record shall be entitled to exchange their
shares of the Common Stock for securities, cash or other
property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange;
provided, however that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the
validity of the corporate action required to be specified in
such notice. The Holder is entitled to exercise this Warrant
during the 20-day period commencing the date of such notice
to the effective date of the event triggering such notice.
Section 4. Transfer of Warrant.
a) Transferability. Subject to compliance with any applicable
securities laws and the conditions set forth in Sections 5(a) and 4(d)
hereof and to the provisions of Section 4.1 of the Purchase Agreement,
this Warrant and all rights hereunder are transferable, in whole or in
part, upon surrender of this Warrant at the principal office of the
Company, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the Holder
or its agent or attorney and funds sufficient to pay any transfer taxes
payable upon the making of such transfer. Upon such surrender and, if
required, such payment, the Company shall execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denomination or denominations specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing
the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled. A Warrant, if properly assigned, may be
exercised by a new holder for the purchase of Warrant Shares without
having a new Warrant issued.
b) New Warrants. This Warrant may be divided or combined with
other Warrants upon presentation hereof at the aforesaid office of the
Company, together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by the
Holder or its agent or attorney. Subject to compliance with Section
4(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or
combined in accordance with such notice.
c) Warrant Register. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time.
The Company may deem and treat the registered Holder of this Warrant
as the absolute owner hereof for the purpose of any exercise hereof or
any distribution to the Holder, and for all other purposes, absent
actual notice to the contrary.
d) Transfer Restrictions. If, at the time of the surrender of this
Warrant in connection with any transfer of this Warrant, the transfer
of this Warrant shall not be registered pursuant to an effective
registration statement under the Securities Act and under applicable
state securities or blue sky laws, the Company may require, as a
condition of allowing such transfer (i) that the Holder or transferee
of this Warrant, as the case may be, furnish to the Company a written
opinion of counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions) to the
effect that such transfer may be made without registration under the
Securities Act and under applicable state securities or blue sky laws,
(ii) that the holder or transferee execute and deliver to the Company
an investment letter in form and substance acceptable to the Company
and (iii) that the transferee be an "accredited investor" as defined in
Rule 501(a) of Regulation D promulgated under the Securities Act or a
qualified institutional buyer as defined in Rule 144A(a) under the
Securities Act.
Section 5. Covenants.
(a) Negative Covenants. So long as any portion of this Warrant is
outstanding, without the prior written consent of the Holder, which consent
may be withheld in the sole discretion of the Holder, the Company will not
and will not permit any of its Subsidiaries to directly or indirectly:
i. Sale of Assets, Dissolution, Etc. Transfer, sell,
assign, lease or otherwise dispose of all or substantially all of
its properties or assets, or any assets or properties necessary or
desirable for the proper conduct of its business, or transfer,
sell, assign or otherwise dispose of any of its accounts, or
contract rights to any person or entity, or change the nature of
its business, wind-up, liquidate or dissolve, or agree to any of
the foregoing, other than in the ordinary course of business;
ii. No Further Issuance of Securities. Other than in
accordance herewith or with respect to an Exempt Issuance, create,
issue or permit the issuance of any additional securities of the
Company or of any of its Subsidiaries (including with respect to
any Qualifying Transaction), if any, or any rights, options or
warrants to acquire any such securities; provided, however, that
in the event that Company desires to issue securities with
preferences or rights greater than that which the Common Stock has
and the Holder consents to same, the Holder will then have the
option of converting all or any part of this Debenture into such
stock in lieu of the Common Stock;;
iii. Agreement. Enter into any agreement obligating the
Company to undertake any of the matters set forth in this Section
5(a).
(b) Affirmative Covenants. So long as any portion of this
Warrant is outstanding and unless the Holder otherwise consents in writing,
which consent may be withheld in the sole discretion of the Holder, the
Company will:
i. True Books. Keep true books of record and account in
which full, true and correct entries will be made of all of its
dealings and transactions, and set aside on its books such
reserves as may be required by GAAP, consistently applied, with
respect to all taxes, assessments, charges, levies and claims
referred to in (a) above, and with respect to its business in
general, and include such reserves in interim as well as year-end
financial statements; and
ii. Right of Inspection. Permit any person designated by
the Holder, at the Holder's expense, to visit and inspect any of
the properties, books and financial reports of the Company, all at
such reasonable times upon three (3) Business Days prior notice to
the Company, and as often as the Holder may reasonably request,
provided the Holder does not unreasonably interfere with the daily
operations of the Company and Holder executes a confidentiality
agreement.
Section 6. Miscellaneous.
a) Title to Warrant. Prior to the Termination Date and subject to
compliance with applicable laws and Section 4 of this Warrant, this
Warrant and all rights hereunder are transferable, in whole or in part,
at the office or agency of the Company by the Holder in person or by
duly authorized attorney, upon surrender of this Warrant together with
the Assignment Form annexed hereto properly endorsed. The transferee
shall sign an investment letter in form and substance reasonably
satisfactory to the Company.
b) No Rights as Shareholder Until Exercise. This Warrant does not
entitle the Holder to any voting rights or other rights as a
shareholder of the Company prior to the exercise hereof. Upon the
surrender of this Warrant and the payment of the aggregate Exercise
Price (or by means of a cashless exercise), the Warrant Shares so
purchased shall be and be deemed to be issued to such Holder as the
record owner of such shares as of the close of business on the later of
the date of such surrender or payment.
c) Loss, Theft, Destruction or Mutilation of Warrant. The Company
covenants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant or any stock certificate relating to the Warrant Shares,
and in case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to it (which, in the case of the Warrant, shall
not include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated, the
Company will make and deliver a new Warrant or stock certificate of
like tenor and dated as of such cancellation, in lieu of such Warrant
or stock certificate.
d) Saturdays, Sundays, Holidays, etc. If the last or appointed
day for the taking of any action or the expiration of any right
required or granted herein shall be a Saturday, Sunday or a legal
holiday, then such action may be taken or such right may be exercised
on the next succeeding day not a Saturday, Sunday or legal holiday.
e) Authorized Shares.
The Company covenants that during the period the Warrant is
outstanding, it will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of the
Warrant Shares upon the exercise of any purchase rights under this
Warrant. The Company further covenants that its issuance of this
Warrant shall constitute full authority to its officers who are charged
with the duty of executing stock certificates to execute and issue the
necessary certificates for the Warrant Shares upon the exercise of the
purchase rights under this Warrant. The Company will take all such
reasonable action as may be necessary to assure that such Warrant
Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the Trading
Market upon which the Common Stock may be listed.
Except and to the extent as waived or consented to by the Holder,
the Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of Holder as set forth
in this Warrant against impairment. Without limiting the generality of
the foregoing, the Company will (a) not increase the par value of any
Warrant Shares above the amount payable therefor upon such exercise
immediately prior to such increase in par value, (b) take all such
action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable Warrant Shares
upon the exercise of this Warrant, and (c) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents from
any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this
Warrant.
Before taking any action which would result in an adjustment in
the number of Warrant Shares for which this Warrant is exercisable or
in the Exercise Price, the Company shall obtain all such authorizations
or exemptions thereof, or consents thereto, as may be necessary from
any public regulatory body or bodies having jurisdiction thereof.
f) Jurisdiction. All questions concerning the construction,
validity, enforcement and interpretation of this Warrant shall be
determined in accordance with the provisions of the Purchase Agreement.
g) Restrictions. The Holder acknowledges that the Warrant Shares
acquired upon the exercise of this Warrant, if not registered, will
have restrictions upon resale imposed by state and federal securities
laws.
h) Expenses. If the Company willfully and knowingly fails to
comply with any provision of this Warrant, which results in any
material damages to the Holder, the Company shall pay to Holder such
amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys' fees, including
those of appellate proceedings, incurred by Holder in collecting any
amounts due pursuant hereto or in otherwise enforcing any of its
rights, powers or remedies hereunder.
i) Notices. Any notice, request or other document required or
permitted to be given or delivered to the Holder by the Company shall
be delivered in accordance with the notice provisions of the Purchase
Agreement.
j) Limitation of Liability. No provision hereof, in the absence
of any affirmative action by Holder to exercise this Warrant or
purchase Warrant Shares, and no enumeration herein of the rights or
privileges of Holder, shall give rise to any liability of Holder for
the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by
creditors of the Company.
k) Remedies. Holder, in addition to being entitled to exercise
all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Warrant. The
Company agrees that monetary damages would not be adequate compensation
for any loss incurred by reason of a breach by it of the provisions of
this Warrant and hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
l) Successors and Assigns. Subject to applicable securities laws,
this Warrant and the rights and obligations evidenced hereby shall
inure to the benefit of and be binding upon the successors of the
Company and the successors and permitted assigns of Holder. The
provisions of this Warrant are intended to be for the benefit of all
Holders from time to time of this Warrant and shall be enforceable by
any such Holder or holder of Warrant Shares.
m) Amendment and Waiver. This Warrant may be modified or amended
only with the written consent of the Company and the Holder. No course
of dealing or any delay or failure to exercise any right hereunder on
the part of Holder shall operate as a waiver of such right or otherwise
prejudice Holder's rights, powers or remedies, notwithstanding the fact
that all rights hereunder terminate on the Termination Date.
n) Severability. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Warrant shall
be prohibited by or invalid under applicable law, such provision shall
be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining
provisions of this Warrant.
o) Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed
a part of this Warrant.
p) Registration Rights. The Holder has certain rights with respect
to the registration of the Warrant Shares upon exercise of this
Warrant, such rights being specifically set forth in the Purchase
Agreement entered into by and between Holder and the Company on the
date hereof.
[Signature Page Follows]
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officer thereunto duly authorized as of the date first
written above.
RAPID LINK INCORPORATED
By: /s/ Xxxx Xxxxxxx
-----------------------------
Name: Xxxx Xxxxxxx
Title: Chief Executive Officer
