EXHIBIT 4.5
SUBORDINATION AGREEMENT
This Subordination Agreement (the "Agreement") is entered into as of
the 8th day of March 2006, by and between RAPID LINK INCORPORATED, a
Delaware corporation (the "Company"), CHARGER INVESTMENTS, LLC, a California
limited liability corporation, an individual resident of the State of
California (the "Subordinate Lender") and TRIDENT GROWTH FUND, L.P., a
Delaware limited partnership (the "Senior Lender").
RECITALS
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WHEREAS, in connection with a loan transactions (the "Subordinate
Lender Loan") between Subordinate Lender and the Company, the Company
executed, among other documents, a 10% Secured Convertible Debenture in the
amount of $400,000 of even date herewith, as such promissory note has been
thereafter amended or modified in writing or otherwise (the "Subordinate
Lender Note"). It is expressly understood and agreed that all amounts loaned
to the Company by the Subordinate Lender at any time, whether described in
the Subordinate Lender Note or the Subordinate Loan Documents (as defined
below) shall be considered part of the Subordinate Lender Loan for purposes
of this Agreement. The Subordinate Lender Note, the Security Agreement, if
any, and any other documents, instruments or written or oral agreements
evidencing or securing payment of the Subordinate Lender Loan are
hereinafter collectively referred to as the "Subordinate Loan Documents";
and
WHEREAS, in connection with a certain loan transaction (the "Senior
Lender Loan") between Senior Lender and the Company, the Company shall
execute, among other documents, a 10% Secured Convertible Debenture (the
"Senior Lender Note") and Loan Agreement in the stated principal amount of
$600,000.00, payable to the order of Senior Lender. The payment of the
indebtedness evidenced by the Senior Lender Loan shall be secured by, among
other things, a Security Agreement covering the Collateral. The Senior
Lender Note, the Loan Agreement, and any other documents, instruments or
written agreements evidencing or securing payment of the Senior Lender Loan
are hereinafter collectively referred to as the "Senior Lender Loan
Documents"; and
WHEREAS, the Company and Senior Lender propose for the indebtedness
evidenced by the Senior Lender Note to be secured by, among other things, a
first lien on and priority security interest in and to the Collateral.
Accordingly, Senior Lender has required, as a condition to making the Senior
Lender Loan, that all obligations, liens, or rights to the property or
assets of the Company, howsoever created, arising or evidenced, whether
direct or indirect, absolute or contingent or now or hereafter existing, or
due or to become due, including but not limited to those created in
connection with the Subordinate Lender Loan, to the Subordinate Lender in
connection with the Subordinate Lender Loan or otherwise (the "Junior
Liabilities") be made subordinate to the liens, security interests, and
rights of the Senior Lender and the Senior Lender Loan, as well as all
obligations of Company, howsoever created, arising or evidenced, whether
direct or indirect, absolute or contingent or now or hereafter existing, or
due or to become due to the Senior Lender (the "Senior Liabilities"), it
being expressly understood and agreed that the term Senior Liabilities, as
used in this Agreement, shall include, without limitation, any and all
interest, fees and penalties accruing on any of the Senior Liabilities
after the commencement of any proceedings referred to in paragraph 4 of this
Agreement, notwithstanding any provision or rule of law which might restrict
the rights of the Senior Lender, as against Company or anyone else, to
collect such interest; and
WHEREAS, Senior Lender and Subordinate Lender desire to enter into this
Agreement to evidence, as more particularly described herein, Subordinate
Lender's subordination of the Subordinate Lender Liens and other rights to
the Senior Lender Liens and rights;
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Subordination of the Subordinate Liabilities. Subordinate Lender
hereby expressly subordinates the Junior Liabilities to the Senior
Liabilities and acknowledges and agrees that the Senior Liabilities shall be
superior and prior to the Junior Liabilities. Accordingly, except as
expressly otherwise provided in this Agreement or as the Senior Lender may
otherwise expressly consent in writing, the payment of any Junior Liability
shall be postponed and subordinated to the payment in full of all Senior
Liabilities, and no payments or other distributions whatsoever in respect of
any Junior Liability shall be made, nor shall any property or assets of the
Company be applied to the purchase or other acquisition or retirement of the
Junior Liability.
2. Subject to the terms of this Agreement, Subordinate Lender hereby
consents, without the necessity of any other documentation, to the Senior
Lender Loan and acknowledges and agrees that the neither the Senior Lender
Loan nor the Senior Liabilities created thereby constitute a default under
the Subordinate Lender Loan and/or Loan Documents, and if either the Senior
Lender Loan or the creation of the Senior Liabilities does in fact
constitute a default thereunder, Subordinate Lender agrees to amend such
Subordinate Loan Documents, as soon as reasonably practicable, to permit the
Senior Lender Loan and Senior Liabilities. Subordinate Lender further,
without the necessity of any other documentation, acknowledges and agrees to
forebear from exercising its rights and remedies under the Subordinate Loan
Documents on account of any existing or future default under the Subordinate
Lender Loan until the termination of this Agreement.
3. The Subordinate Lender hereby subordinates all security interests
created pursuant to any Security Agreement entered into with the Company and
any other security interest created in connection with the Subordinate
Lender Loan in any manner, to the security interests of the Senior Lender in
all of the Collateral and all other property of the Company, now owned or
hereafter acquired by same.
4. In the event of any dissolution, winding up, liquidation,
readjustment, reorganization or other similar proceedings relating to the
Company or to its creditors, as such, or to its property (whether voluntary
or involuntary, partial or complete, and whether in bankruptcy, insolvency
or receivership, or upon an assignment for the benefit of creditors, or any
other marshalling of the assets and liabilities of the Company, or any sale
of all or substantially all of the assets of the Company, or otherwise), the
Senior Liabilities shall first be paid in full before the Subordinate Lender
shall be entitled to receive and to retain any payment or distribution in
respect of the Junior Liability.
5. The Subordinate Lender will mark the Subordinate Loan Documents,
its books and records so as to clearly indicate that the Junior Liability is
subordinated in accordance with the terms of this Agreement. Upon request
by Senior Lender, Subordinate Lender agrees to execute and deliver such
additional documents and instruments and to take such actions as may be
reasonably necessary in order to further evidence and carry out the
purposes, goals, and intents of this Agreement or to correct any error in
this Agreement or any documents executed in connection herewith that was
caused by any clerical mistake, computer malfunction, printing error or
similar error.
6. The Subordinate Lender hereby waives all diligence in collection
or protection of or realization upon the Senior Liabilities or any security
for the Senior Liabilities. In exercising rights and remedies with respect
to the Collateral, the Senior Lender may enforce the provisions of the
Senior Loan Documents and exercise remedies thereunder and under any other
Senior Loan Documents, all in such order and in such manner as it may
determine in its sole and absolute discretion. Such exercise and enforcement
shall include, without limitation, the rights to sell or otherwise dispose
of Collateral, to incur expenses in connection with such sale or disposition
and to exercise all the rights and remedies of a secured lender under the
Uniform Commercial Code of any applicable jurisdiction and of a secured
creditor under bankruptcy or similar laws of any applicable jurisdiction.
7. During the term hereof, the Subordinate Lender will not without
the prior written consent of the Senior Lender: (a) attempt to enforce or
collect the Junior Liability or any rights in respect of the Junior
Liability; (b) take any Collateral or enforce any rights in respect of any
Security Agreement; (c) sell, assign, transfer, pledge, or give a security
interest in the Junior Liabilities; (d) commence, prosecute or participate
in any administrative, legal or equitable action against the Company or in
any administrative, legal, or in any administrative, legal or equitable
action that might adversely affect the Company or its interest; (e) take any
lien or security on any of the Company's property, real or personal; (f)
incur any obligation to or receive any loan advances, or gifts from the
Company; or (g) commence, or join with any other creditor in commencing, any
bankruptcy, reorganization or insolvency proceedings with respect to the
Company.
8. As an additional security for the Senior Liabilities, and to
secure the performance of all of the Subordinate Lender's obligations
hereunder, Subordinate Lender hereby transfers, grants a security interest
in, and assigns to the Senior Lender all of Subordinate Lenders' rights to
any payments or distributions which might otherwise be due to the
Subordinate Lender from the Company. Senior Lender is hereby irrevocably
constituted and appointed the attorney-in-fact of Subordinate Lender to file
any and all proofs of claim (if Subordinate Lender has not demonstrated to
the satisfaction of the Senior Lender, no later than 20 days prior to the
applicable bar date, that such Subordinate Lender has filed an appropriate
claim or proof of claim), financing statements, and any other documents
and to take all other action, either in Senior Lender's name, or in the
Subordinate Lender's name, whichever is necessary to enable Senior Lender to
obtain all such payments. The Company hereby agrees to make such payments,
if any, to the Senior Lender.
9. This Agreement and the obligations, rights and benefits of the
parties hereto shall terminate upon the earlier to occur of (a) payment in
full of the indebtedness evidenced by the Subordinate Lender Loan Documents
and the Junior Liabilities as a whole, or (b) the payment in full of the
indebtedness evidenced by the Senior Lender Loan Documents and the Senior
Liabilities as a whole.
10. The Senior Lender may, from time to time, during the term of this
Agreement, at its sole discretion and without notice to the Subordinate
Lender, take any or all of the following actions: (a) retain or obtain a
security interest in any property to secure any of the Senior Liabilities;
(b) retain or obtain the primary or secondary obligation of any other
obligor or obligors with respect to any of the Senior Liabilities; (c)
extend or renew for one or more periods (whether or not longer than the
original period), alter or exchange any of the Senior Liabilities, or
release or compromise any obligation of any nature of any obligor with
respect to any of the Senior Liabilities; and (d) release their security
interest in, or surrender, release or permit any substitution or exchange
for, all or any part of any property securing any of the Senior Liabilities,
or extend or renew for one or more periods (whether or not longer than the
original period) or release, compromise, alter or exchange any obligations
of any nature of any obligor with respect to any such property.
11. The Senior Lender may, from time to time, during the term of this
Agreement, without notice to the Subordinate Lender, assign or transfer any
or all of the Senior Liabilities or any interest in the Senior Liabilities
as well as this Agreement; and, notwithstanding any such assignment or
transfer or any subsequent assignment or transfer of the Senior Liabilities,
such Senior Liabilities shall be and remain Senior Liabilities for the
purposes of this Agreement, and every immediate and successive assignee or
transferee of any of the Senior Liabilities or of any interest in the Senior
Liabilities shall, to the extent of the interest of such assignee or
transferee in the Senior Liabilities, be entitled to the benefits of this
Agreement to the same extent as if such assignee or transferee were the
Senior Lender, as applicable; provided, however, that, unless the Senior
Lender shall otherwise consent in writing, the Senior Lender shall have an
unimpaired right, prior, and superior to that of any such assignee or
transferee, to enforce this Agreement, for the benefit of the Senior Lender,
as to those of the Senior Liabilities which the Senior Lender has not
assigned or transferred.
12. The Senior Lender shall not be prejudiced in its rights under this
Agreement by any act or failure to act of the Company or the Subordinate
Lender, or any noncompliance by the Company or the Subordinate Lender with
any agreement or obligation, regardless of any knowledge thereof which the
Senior Lender may have or with which the Senior Lender may be charged; and
no action of the Senior Lender permitted under this Agreement shall in any
way affect or impair the rights of the Senior Lender and the obligations of
the Subordinate Lender under this Agreement.
13. No delay on the part of the Senior Lender in the exercise of any
right or remedy shall operate as a waiver of such right or remedy, and no
single or partial exercise by the Senior Lender of any right or remedy shall
preclude other or further exercise of such right or remedy or the exercise
of any other right or remedy; nor shall any modification or waiver of any of
the provisions of this Agreement be binding upon the Senior Lender except as
expressly set forth in a writing duly signed and delivered on behalf of the
Senior Lender. For the purposes of this Agreement, Senior Liabilities shall
include all obligations of the Company to the Senior Lender, notwithstanding
any right or power of the Company or anyone else to assert any claim or
defense as to the invalidity or unenforceability of any such obligation, and
no such claim or defense shall affect or impair the agreements and
obligations of the Subordinate Lender under this Agreement.
14. Subordinate Lender further agrees that in case Subordinate Lender
should take or receive any security interest in, or lien by way of
attachment, execution, or otherwise on any of the property, real or
personal, of the Company, or should take or join in any other measure or
advantage contrary to this Agreement, at any time prior to the payment in
full of all of the Senior Liabilities, Senior Lender shall be entitled to
have the same vacated, dissolved and set aside by such proceedings or law,
or otherwise, as the Senior Lender may deem appropriate, and this Agreement
shall be and constitute full and sufficient grounds therefore and shall
entitle the Senior Lender to become a party to any proceedings at law, or
otherwise, initiated by the Senior Lender or by any other party, in or by
which the Senior Lender deems it appropriate to protect its interests
hereunder. Subordinate Lender agrees that if it violates this Agreement, it
shall be liable to the Senior Lender for all losses and damages sustained by
the Senior Lender by reason of such breach, including Senior Lender's
attorney's fees and costs in any such legal action.
15. Except as otherwise expressly agreed to herein, if Subordinate
Lender shall receive any payments, security interests, or other rights in
any property of the Company in violation of this Agreement, such payment or
property shall be received by Subordinate Lender in trust for the Senior
Lender and shall subsequently be delivered and transferred to the Senior
Lender immediately upon receipt thereof.
16. This Agreement shall be binding upon the Subordinate Lender and
the Company as well as their respective successors and assigns, and shall
inure to the benefit of Senior Lender and its successors and assigns.
17. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be sent by first class U.S.
mail, or by cable, telex, telegram, facsimile transmission, or by other
electronic means or delivered by hand or by overnight or similar delivery
service, fees prepaid, to the party to whom it is to be given at the address
of such party set forth below or to such other address for notice as such
party shall provide in accordance with the terms of this section. Except as
otherwise specifically provided in this Agreement, notice so given shall, in
the case of notice given by certified mail (or by such comparable method) be
deemed to be given and received on the date of certification (or comparable
act) thereof, in the case of notice so given by overnight delivery service,
on the date of actual delivery, and, in the case of notice so given by
cable, telegram, facsimile transmission, telex or personal delivery, on the
date of actual transmission or, as the case may be, personal delivery. If
any communication is sent by e-mail or such other electronic means, such
communication shall be effective upon confirmation (whether by return e-mail
or otherwise) of receipt of such e-mail or electronic transmission.
If to the Company: 17383 Sunset Boulevard
Suite 350
Pacific Palisades, California 90272
Telephone: (310) 566-1700
Facsimile: (310) 573-9435
Attn: John Jenkins, CEO
If to Subordinate Lender:
If to Senior Lender: Trident Growth Fund, LP
700 Gemini
Houston, Texas 77058
Phone: (281) 488-8484
Facsimile: (281) 488-8404
Attention: Larry St. Martin
18. This Agreement shall be construed in accordance with and governed
by the laws of the State of Texas without regard to conflict of laws
provisions. Venue for any action hereunder shall be brought in and shall be
proper exclusively in Dallas County, Texas.
19. If any provision or provisions of this Agreement should be held to
be invalid or ineffective, then all other provisions shall continue in full
force and effect to the same extent and in the same manner as though such
invalid or unenforceable provision had never been contained herein to the
extent the remaining provisions further accomplish the goals and intents of
this Agreement.
[signature page follows]
IN WITNESS WHEREOF, this Subordination Agreement has been made and
delivered as of the first date written above.
SUBORDINATE LENDER:
_________________________________________
By:
Charger Investments, LLC
SENIOR LENDER:
Trident Growth Fund, LP
By: Trident Management, LLC,
its General Partner
By:_________________________
Its: Authorized Member
The Company hereby acknowledges receipt of a copy of the foregoing
Subordination Agreement, waives notice of acceptance of the Subordination
Agreement by the Senior Lender, and agrees to be bound by the terms and
provisions of the Subordination Agreement, to make no payments or
distributions contrary to the terms and provisions of the Subordination
Agreement, and to do every other act and thing necessary or appropriate to
carry out such terms and provisions.
Dated: As of the First Date Written Above
COMPANY
RAPID LINK INCORPORATED
By: _______________________________
John Jenkins, CEO