FUNDS ESCROW AGREEMENT
Exhibit
10.3
This
Funds Escrow Agreement (this “Agreement”) is dated
as of July 11, 2008 among Rapid Link, Inc., a Delaware corporation (the “Parent”),
Telenational Communications, Inc., a Delaware corporation, One Ring Networks,
Inc., a Delaware corporation (collectively with the Parent, the “Companies”), Laurus
Master Fund, Ltd. (“Laurus”), Valens U.S.
SPV I, LLC (“Valens
US”), Valens Offshore SPV II, Corp. (“Valens Offshore” and
together with Valens US and Laurus, collectively, the “Lenders”), and Loeb
& Loeb LLP (the “Escrow
Agent”).
W I T N E S S E T H:
WHEREAS,
LV Administrative Services, Inc., as administrative and collateral agent for the
Lenders (the “Agent”), has advised
the Escrow Agent that (a) the Companies, the Agent and the Lenders have entered
into a Security Agreement (the “Security Agreement”)
pursuant to which the Companies issued to the Lenders secured term notes (the
“Term Notes”),
secured revolving notes (the “Revolving Notes”) and
deferred purchase price notes (the “Deferred Purchase Price
Notes”), (b) the Parent has issued to Valens US and Valens Offshore
common stock purchase warrants (the “Warrants”) and (c)
the Parent, Valens US and Valens Offshore have entered into Registration Rights
Agreements covering the registration of the Parent’s common stock underlying the
Warrants (the “Registration Rights
Agreements”);
WHEREAS,
the Company and the Lenders wish to deliver to the Escrow Agent copies of the
Documents (as hereafter defined) and, following the satisfaction of all closing
conditions relating to the Documents, the Lenders to deliver the Escrowed
Payment (as hereafter defined), in each case, to be held and released by Escrow
Agent in accordance with the terms and conditions of this Agreement;
and
WHEREAS,
the Escrow Agent is willing to serve as escrow agent pursuant to the terms and
conditions of this Agreement;
NOW
THEREFORE, the parties agree as follows:
ARTICLE
I
INTERPRETATION
1.1. Definitions. Whenever
used in this Agreement, the following terms shall have the meanings set forth
below.
(a) “Agreement” means this
Agreement, as amended, modified and/or supplemented from time to time by written
agreement among the parties hereto.
(b) “Closing Payment”
means the closing payment to be paid to Valens Capital Management, LLC, the
investment manager of Valens US and Valens Offshore, in the amount of
$94,500.
(c) “Creditor Parties”
means collectively, the Agent and the Lenders.
(d) “Disbursement Letter”
means that certain letter delivered to the Escrow Agent by the Companies,
acceptable in form and substance to the Agent, setting forth wire instructions
and amounts to be funded at the Closing.
(e) “Documents” means
copies of the Disbursement Letter, the Security Agreement, the Term Notes, the
Revolving Notes, Deferred Purchase Price Notes the Warrants and the Registration
Rights Agreements.
(f) “Escrowed Payment”
means $1,500,000.
1.2. Entire
Agreement. This Agreement constitutes the entire agreement
among the parties hereto with respect to the arrangement with the Escrow Agent
and supersedes all prior agreements, understandings, negotiations and
discussions of the parties, whether oral or written with respect to the
arrangement with the Escrow Agent. There are no warranties,
representations and other agreements made by the parties in connection with the
arrangement with the Escrow Agent except as specifically set forth in this
Agreement.
1.3. Extended
Meanings. In this Agreement words importing the singular
number include the plural and vice versa; words importing the masculine gender
include the feminine and neuter genders. The word “person” includes
an individual, body corporate, partnership, trustee or trust or unincorporated
association, executor, administrator or legal representative.
1.4. Waivers and
Amendments. This Agreement may be amended, modified,
superseded, cancelled, renewed or extended, and the terms and conditions hereof
may be waived, in each case only by a written instrument signed by all parties
hereto, or, in the case of a waiver, by the party waiving
compliance. Except as expressly stated herein, no delay on the part
of any party in exercising any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any waiver on the part of any party of any right,
power or privilege hereunder preclude any other or future exercise of any other
right, power or privilege hereunder.
1.5. Headings. The
division of this Agreement into articles, sections, subsections and paragraphs
and the insertion of headings are for convenience of reference only and shall
not affect the construction or interpretation of this Agreement.
1.6. Law Governing this
Agreement; Consent to Jurisdiction. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. With respect to
any suit, action or proceeding relating to this Agreement or to the transactions
contemplated hereby (“Proceedings”), each
party hereto irrevocably submits to the exclusive jurisdiction of the courts of
the County of New York, State of New York and the United States District court
located in the county of New York in the State of New York. Each
party hereto hereby irrevocably and unconditionally (a) waives trial by jury in
any Proceeding relating to this Agreement and for any related counterclaim and
(b) waives any objection which it may have at any time to the laying of venue of
any Proceeding brought in any such court, waives any claim that such Proceedings
have been brought in an inconvenient forum and further waives the right to
object, with respect to such Proceedings, that such court does not have
jurisdiction over such party. As between the Companies and the
Lenders, the prevailing party shall be entitled to recover from the other party
its reasonable attorneys’ fees and costs. In the event that any
provision of this Agreement is determined by a court of competent jurisdiction
to be invalid or unenforceable, then the remainder of this Agreement shall not
be affected and shall remain in full force and effect.
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1.7. Construction. Each
party acknowledges that its legal counsel participated in the preparation of
this Agreement and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be applied
in the interpretation of this Agreement to favor any party against the
other.
ARTICLE
II
APPOINTMENT
OF AND DELIVERIES TO THE ESCROW AGENT
2.1. Appointment. The
Companies and the Lenders hereby irrevocably designate and appoint the Escrow
Agent as their escrow agent for the purposes set forth herein, and the Escrow
Agent by its execution and delivery of this Agreement hereby accepts such
appointment under the terms and conditions set forth herein.
2.2. Copies of Documents to
Escrow Agent. On or about the date hereof, the Creditor
Parties and the Companies shall deliver to the Escrow Agent copies of the
Documents executed by such parties.
2.3. Delivery of Escrowed Payment
to Escrow Agent. Following the satisfaction of all closing
conditions relating to the Documents (other than the funding of the Escrowed
Payment), the Lenders shall deliver to the Escrow Agent the Escrowed
Payment. At such time, the Escrow Agent shall hold the Escrowed
Payment as agent for the Companies, subject to the terms and conditions of this
Agreement.
2.4. Intention to Create Escrow
Over the Escrowed Payment. The Lenders and the Companies
intend that the Escrowed Payment shall be held in escrow by the Escrow Agent and
released from escrow by the Escrow Agent only in accordance with the terms and
conditions of this Agreement.
ARTICLE
III
RELEASE
OF ESCROW
3.1. Release of
Escrow. Subject to the provisions of Section 4.2, the
Escrow Agent shall release the Escrowed Payment from escrow as
follows:
(a) Upon
receipt by the Escrow Agent of (i) oral instructions from Xxxxx Grin and/or
Xxxxxx Grin (each of whom is a principal of the Lenders) consenting to the
release of the Escrowed Payment from escrow in accordance with the Disbursement
Letter following the Escrow Agent’s receipt of the Escrowed Payment, (ii) the
Disbursement Letter, and (iii) the Escrowed Payment, the Escrowed Payment shall
promptly be disbursed in accordance with the Disbursement Letter. The
Disbursement Letter shall include, without limitation, Escrow Agent’s
authorization to retain from the Escrowed Payment Escrow Agent’s fee for acting
as Escrow Agent hereunder and the Closing Payment for delivery to Valens Capital
Management, LLC in accordance with the Disbursement Letter.
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(b) Upon
receipt by the Escrow Agent of a final and non-appealable judgment, order,
decree or award of a court of competent jurisdiction (a “Court Order”)
relating to the Escrowed Payment, the Escrow Agent shall remit the Escrowed
Payment in accordance with the Court Order. Any Court Order shall be
accompanied by an opinion of counsel for the party presenting the Court Order to
the Escrow Agent (which opinion shall be satisfactory to the Escrow Agent) to
the effect that the court issuing the Court Order is a court of competent
jurisdiction and that the Court Order is final and non-appealable.
3.2. Acknowledgement of Companies
and Lenders; Disputes. The Companies and the Lenders
acknowledge that the only terms and conditions upon which the Escrowed Payment
are to be released from escrow are as set forth in Sections 3 and 4 of this
Agreement. The Companies and the Lenders reaffirm their agreement to
abide by the terms and conditions of this Agreement with respect to the release
of the Escrowed Payment. Any dispute with respect to the release of
the Escrowed Payment shall be resolved pursuant to Section 4.2 or by
written agreement between the Companies and the Lenders.
ARTICLE
IV
CONCERNING
THE ESCROW AGENT
4.1. Duties and Responsibilities
of the Escrow Agent. The Escrow Agent’s duties and
responsibilities shall be subject to the following terms and
conditions:
(a) The
Lenders and the Companies acknowledge and agree that the Escrow Agent (i) shall
not be required to inquire into whether the Creditor Parties, the Companies or
any other party is entitled to receipt of any Document or all or any portion of
the Escrowed Payment; (ii) shall not be called upon to construe or review any
Document or any other document, instrument or agreement entered into in
connection therewith; (iii) shall be obligated only for the performance of such
duties as are specifically assumed by the Escrow Agent pursuant to this
Agreement; (iv) may rely on and shall be protected in acting or refraining from
acting upon any written notice, instruction, instrument, statement, request or
document furnished to it hereunder and believed by the Escrow Agent in good
faith to be genuine and to have been signed or presented by the proper person or
party, without being required to determine the authenticity or correctness of
any fact stated therein or the propriety or validity or the service thereof; (v)
may assume that any person purporting to give notice or make any statement or
execute any document in connection with the provisions hereof has been duly
authorized to do so; (vi) shall not be responsible for the identity, authority
or rights of any person, firm or company executing or delivering or purporting
to execute or deliver this Agreement or any Document or any funds deposited
hereunder or any endorsement thereon or assignment thereof; (vii) shall not be
under any duty to give the property held by Escrow Agent hereunder any greater
degree of care than Escrow Agent gives its own similar property; and (viii) may
consult counsel satisfactory to Escrow Agent (including, without limitation,
Loeb & Loeb LLP or such other counsel of Escrow Agent’s choosing), the
opinion of such counsel to be full and complete authorization and protection in
respect of any action taken, suffered or omitted by Escrow Agent hereunder in
good faith and in accordance with the opinion of such counsel.
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(b) The
Lenders and the Companies acknowledge that the Escrow Agent is acting solely as
a stakeholder at their request and that the Escrow Agent shall not be liable for
any action taken by Escrow Agent in good faith and believed by Escrow Agent to
be authorized or within the rights or powers conferred upon Escrow Agent by this
Agreement. The Lenders and the Companies hereby, jointly and
severally, indemnify and hold harmless the Escrow Agent and any of Escrow
Agent’s partners, employees, agents and representatives from and against any and
all actions taken or omitted to be taken by Escrow Agent or any of them
hereunder and any and all claims, losses, liabilities, costs, damages and
expenses suffered and/or incurred by the Escrow Agent arising in any manner
whatsoever out of the transactions contemplated by this Agreement and/or any
transaction related in any way hereto, including the fees of outside counsel and
other costs and expenses of defending itself against any claims, losses,
liabilities, costs, damages and expenses arising in any manner whatsoever out
the transactions contemplated by this Agreement and/or any transaction related
in any way hereto, except for such claims, losses, liabilities, costs, damages
and expenses incurred by reason of the Escrow Agent’s gross negligence or
willful misconduct. The Escrow Agent shall owe a duty only to the
Lenders and the Companies under this Agreement and to no other
person.
(c) The
Lenders and the Companies shall jointly and severally reimburse the Escrow Agent
for its reasonable out-of-pocket expenses (including counsel fees (which counsel
may be Loeb & Loeb LLP or such other counsel of the Escrow Agent’s choosing)
incurred in connection with the performance of its duties and responsibilities
hereunder, which shall not (subject to Section 4.1(b))
exceed $1,500.
(d) The
Escrow Agent may at any time resign as escrow agent hereunder by giving five (5)
business days prior written notice of resignation to the Lenders and the
Companies. Prior to the effective date of resignation as specified in
such notice, the Lenders and the Companies will issue to the Escrow Agent a
joint instruction authorizing delivery of the Documents and the Escrowed Payment
to a substitute escrow agent selected by the Lenders and the
Companies. If no successor escrow agent is named by the Lenders and
the Companies, the Escrow Agent may apply to a court of competent jurisdiction
in the State of New York for appointment of a successor escrow agent, and
deposit the Documents and the Escrowed Payment with the clerk of any such court,
and/or otherwise commence an interpleader or similar action for a determination
of where to deposit the same.
(e) The
Escrow Agent does not have and will not have any interest in the Documents and
the Escrowed Payment, but is serving only as escrow agent, having only
possession thereof.
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(f) The
Escrow Agent shall not be liable for any action taken or omitted by it in good
faith and reasonably believed by it to be authorized hereby or within the rights
or powers conferred upon it hereunder, nor for action taken or omitted by it in
good faith, and in accordance with advice of counsel (which counsel may be Loeb
& Loeb LLP or such other counsel of the Escrow Agent’s choosing), and shall
not be liable for any mistake of fact or error of judgment or for any acts or
omissions of any kind except to the extent any such liability arose from its own
willful misconduct or gross negligence.
(g) This
Agreement sets forth exclusively the duties of the Escrow Agent with respect to
any and all matters pertinent thereto and no implied duties or obligations shall
be read into this Agreement.
(h) The
Escrow Agent shall be permitted to act as counsel for the Creditor Parties or
the Companies, as the case may be, in any dispute as to the disposition of the
Documents and the Escrowed Payment, in any other dispute between the Creditor
Parties and the Companies, whether or not the Escrow Agent is then holding the
Documents and/or the Escrowed Payment and continues to act as the Escrow Agent
hereunder.
(i) The
provisions of this Section 4.1 shall
survive the resignation of the Escrow Agent or the termination of this
Agreement.
4.2. Dispute Resolution;
Judgments. Resolution of disputes arising under this Agreement
shall be subject to the following terms and conditions:
(a) If
any dispute shall arise with respect to the delivery, ownership, right of
possession or disposition of the Documents and/or the Escrowed Payment, or if
the Escrow Agent shall in good faith be uncertain as to its duties or rights
hereunder, the Escrow Agent shall be authorized, without liability to anyone, to
(i) refrain from taking any action other than to continue to hold the Documents
and the Escrowed Payment pending receipt of a joint instruction from the Lenders
and the Companies, (ii) commence an interpleader or similar action, suit or
proceeding for the resolution of any such dispute; and/or (iii) deposit the
Documents and the Escrowed Payment with any court of competent jurisdiction in
the State of New York, in which event the Escrow Agent shall give written notice
thereof to the Lenders and the Companies and shall thereupon be relieved and
discharged from all further obligations pursuant to this
Agreement. The Escrow Agent may, but shall be under no duty to,
institute or defend any legal proceedings which relate to the Documents and the
Escrowed Payment. The Escrow Agent shall have the right to retain
counsel if it becomes involved in any disagreement, dispute or litigation on
account of this Agreement or otherwise determines that it is necessary to
consult counsel which such counsel may be Loeb & Loeb LLP or such other counsel of the
Escrow Agent’s choosing.
(b) The
Escrow Agent is hereby expressly authorized to comply with and obey any Court
Order. In case the Escrow Agent obeys or complies with a Court Order,
the Escrow Agent shall not be liable to the Creditor Parties, the Companies or
any other person, firm, company or entity by reason of such
compliance.
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ARTICLE
V
GENERAL
MATTERS
5.1. Termination. This
escrow shall terminate upon disbursement of the Escrowed Payment in accordance
with the terms of this Agreement or earlier upon the agreement in writing of the
Lenders and the Companies or resignation of the Escrow Agent in accordance with
the terms hereof.
5.2. Notices. All
notices, requests, demands and other communications required or permitted
hereunder shall be in writing and shall be deemed to have been duly given one
(1) day after being sent by telecopy (with copy delivered by overnight courier,
regular or certified mail):
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If
to the Companies, to:
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Rapid
Link, Inc.
0000
Xx 00xx
Xxxxxx
Xxxxx,
XX 00000
Attention:
Xxxxx Xxxxxxxx
Telephone: 000-000-0000
Fax:
000-000-0000
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With
a copy to:
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Xxxxxx
Xxxxxxx LLP
000
Xxxxx 00xx
Xxxxxx, Xxxxx 000
Xxxxxxx,
Xxxxxxxx 00000
Attention: Xxxxxx
X. Xxxxxxx
Telephone:
000-000-0000
Facsimile:
000-000-0000
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If
to the Lenders, to:
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c/o
Valens Capital Management LLC
000
Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attention: Portfolio
Services
Fax: (000)
000-0000
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If
to the Escrow Agent, to:
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Loeb
& Loeb LLP
000
Xxxx Xxxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attention: Xxxxx
X. Xxxxxxxx, Esq.
Fax: (000)
000-0000
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or to
such other address as any of them shall give to the others by notice made
pursuant to this Section
5.2.
5.3. Interest. The
Escrowed Payment shall not be held in an interest bearing account nor will
interest be payable in connection therewith.
5.4. Assignment; Binding
Agreement. Neither this Agreement nor any right or obligation
hereunder shall be assignable by any party without the prior written consent of
the other parties hereto. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective legal
representatives, successors and assigns.
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5.5. Invalidity. In
the event that any one or more of the provisions contained herein, or the
application thereof in any circumstance, is held invalid, illegal, or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be in any way impaired thereby, it being
intended that all of the rights and privileges of the parties hereto shall be
enforceable to the fullest extent permitted by law.
5.6. Counterparts/Execution. This
Agreement may be executed in any number of counterparts and by different
signatories hereto on separate counterparts, each of which, when so executed,
shall be deemed an original, but all such counterparts shall constitute but one
and the same agreement. This Agreement may be executed by facsimile
or electronic transmission.
[Signature
Page to Follow]
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IN
WITNESS WHEREOF, the parties hereto have executed this Funds Escrow Agreement as
of the date and year first above written.
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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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SIGNATURE PAGE TO
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VALENS
OFFSHORE SPV II, CORP.
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By:
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
U.S. SPV I, LLC
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By:
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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LAURUS
MASTER FUND, LTD.
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By:
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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LOEB
& LOEB LLP
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By:
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Name:
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Title:
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SIGNATURE PAGE TO
