RAPID LINK, INCORPORATED
Exhibit
10.1
AMENDMENT
NO. 2 TO SECURITY AGREEMENT AND AMENDMENT NO. 1 TO THE SECURED REVOLVING
NOTE
THIS
AMENDMENT NO. 2 to the Security Agreement and Amendment No. 1 to the Secured
Revolving Note (this “Amendment”) is dated
as of October 31, 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”), and (b) Secured Revolving Note dated July 11, 2008 (as amended,
modified, supplemented and/or restated from time to time, the “Secured Revolving
Note”) in the original principal amount of $1,200,000 issued by the
Companies in favor of Valens U.S. SPV I, LLC.
BACKGROUND
WHEREAS,
pursuant to the Security Agreement, the Lenders have made financial
accommodations to the Companies that remain outstanding; and
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) The
definition of “Accounts
Availability” set forth in Annex A of the Security Agreement is hereby
amended by deleting said definition in its entirety and inserting the following
new definition in lieu thereof:
“Accounts
Availability” means the lesser of (x) ninety percent (90%) of the net
face amount of Eligible Accounts and (y) Six Hundred Thousand Dollars
($600,000).
(b) The
definition of “Reserves” set forth
in Annex A of the Security Agreement is hereby amended by deleting said
definition in its entirety and inserting the following new definition in lieu
thereof:
“Reserves” means such
reserves as the Agent may reasonably in its good faith judgment deem proper and
necessary from time to time.
(c) The
definition of “Revolving Commitment
Conditions” set forth in Annex A of the Security Agreement is hereby
amended by deleting said definition in its entirety and inserting the following
new definition in lieu thereof:
“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) no Event of Default
shall have occurred and then be continuing, (b) 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 (the “Collateral Audit”), (c) 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 and (d) the Companies
shall have entered into, and caused the Lockbox Bank to enter into,
documentation satisfactory to the Agent in respect of the Lockbox as set forth
in Section 8 of this Agreement”
(d) The
definition of “Revolving Warrants”
set forth in Annex A to the Security Agreement is hereby amended by deleting
said definition in its entirety and inserting the following new definition in
lieu thereof:
“Revolving Warrants”
means the Common Stock Purchase Warrant dated October 31, 2008, exercisable into
7,500,000 shares of Common Stock, issued by Rapid Link to the Lenders holding a
Revolving Commitment Percentage on October 31, 2008.
(e) The
last sentence of Section 2(a)(i) of the Security Agreement is hereby deleted in
its entirety.
(f) The
definitions of “First
EBITDA Target” and “Second EBITDA Target”
contained in Annex A of the Security Agreement are hereby deleted in their
entirety.
3.
Amendments to Secured
Revolving Note.
(a) The
fourth paragraph of the Secured Revolving Note is hereby deleted in its entirety
and the follow new fourth paragraph of the Secured Revolving Note is hereby
inserted in lieu thereof:
“Capitalized
terms used herein without definition shall have the meanings ascribed to such
terms in the Security Agreement dated as of March 31, 2008 (as amended,
restated, modified and/or supplemented from time to time, the “Security Agreement”) among the
Companies, the Holder, each other Lender and LV Administrative Services, Inc.,
as administrative and collateral agent for the Lenders (the “Agent” together with the
Lenders, collectively, the “Creditor
Parties”).”
(b) Section
1.1 of the Secured Revolving Note is hereby deleted in its entirety and the
following new Section 1.1 is hereby inserted in lieu thereof:
1.1 Contract
Rate. Subject to Sections 2.2 and 3.9, interest payable on the
outstanding principal amount of this Note (the “Principal Amount”) shall
accrue at a rate per annum equal to ten percent (10%) (the “Contract
Rate”). Interest shall be (i) calculated on the basis of a 360
day year, and (ii) payable monthly, in arrears, commencing on the first day of
the first month following the initial Revolving Loan, on the first Business Day
of each consecutive calendar month thereafter through and including the Maturity
Date, and on the Maturity Date, whether by acceleration or
otherwise.
(c) Section
1.3 of the Secured Revolving Note is hereby deleted in its
entirety.
4.
The Companies hereby agree to reimburse the Creditor Parties for the
expense of the Collateral Audit (as defined in the Security Agreement after
giving to this Amendment); provided that the Companies reimbursement obligation
under this Section 5 shall not exceed $10,000.
5.
Each Creditor Party hereby agrees to the sale of the
Companies’ business located in ▇▇▇▇▇▇ and Calaveras Counties, California (such
business previously know as Communications Advantage/Web Breeze) (the “Asset Sale”), provided that
(i) no Event of Default is in existence on the date of the consummation of such
Asset Sale, (ii) such Asset Sale generates net proceeds payable to the Companies
in an aggregate amount of at least $200,000, (iii) all documentation in respect
of the Asset Sale (including without limitation any letter of intent and the
definitive sale agreements, and the description of the assets subject to such
Asset Sale) is satisfactory to the Agent and (iv) any seller note or notes
provided by the buyer in connection with the Asset Sale is pledged, endorsed in
blank and duly delivered by the Companies to the Agent, for the benefit of the
Lenders, as security for the Obligations, pursuant to documentation satisfactory
to the Agent. Each Creditor Party further agrees that (i) the cash proceeds
received by the Companies in connection with the Asset Sale shall not be
required to be utilized to repay the Obligations at the time of receipt by the
Companies, so long as no Event of Default is in existence at such time and (ii)
it shall promptly following the consummation of such Asset Sale, release all
liens, security interests and guarantees related to the assets subject to the
Asset Sale, which any Company may have granted to any Creditor Party under the
Security Agreement or any Ancillary Agreement. Each Company hereby
agrees that the documentation setting forth any such release referred to in the
immediately preceding sentence, shall in all respects be satisfactory to, and
approved by, the Agent on behalf of the Lenders (including the specific
description of the assets subject to the Asset Sale).
6.
Conditions of
Effectiveness. This Amendment shall become effective (the
“Effective
Date”) upon (i) receipt by the Agent of counterparts of this Amendment
duly executed and delivered by the Companies and the Creditor Parties and (ii)
the issuance of the Revolving Warrants (as defined after giving effect to this
Amendment) by the Parent to the Lenders holding a Revolving Commitment
Percentage.
7.
Representations and
Warranties. Each Company hereby represents and warrants as
follows:
(a) This
Amendment, the Security Agreement, the Secured Revolving Note and the Revolving
Warrants, as amended hereby, constitute legal, valid and binding obligations of
each Company, and are enforceable against each Company in accordance with their
respective terms.
(b) Upon
the effectiveness of this Amendment, each 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 both before and
after giving effect to this Amendment.
(d) No
Company has any defense, counterclaim or offset with respect to any
Document.
8.
Effect on
the Documents.
(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.
9.
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.
10. 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.
11. 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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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