EXHIBIT 10.3
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (this "Pledge Agreement") is made as of May
5, 2006, by and between Rapid Link, Incorporated, a Delaware corporation, as
pledgor ("Rapid Link"), and Apex Acquisitions, Inc., a Delaware corporation,
as pledgee ("Apex").
RECITALS
A. Pursuant to that certain Stock Purchase Agreement dated as of
May 3, 2006, as amended by that certain Amendment No. 1 of Stock Purchase
Agreement dated as of May 5, 2006 (the "Purchase Agreement"), by and between
Rapid Link and Apex, as partial consideration for the sale by Apex of all of
the issued and outstanding capital stock (the "Shares") of Telenational
Communications, Inc., a Delaware corporation ("Telenational") to Rapid Link,
Rapid Link issued a Secured Recourse Promissory Note in favor of Apex in the
aggregate principal amount of $1,000,000, dated as of May 5, 2006 (the
"Note").
B. Pursuant to the terms of the Purchase Agreement and the Note,
Rapid Link is required to execute this Pledge Agreement to secure payment
in full of all obligations under the Note, whether for principal, interest,
fees, expenses or otherwise and to ensure compliance with the terms and
conditions of the Purchase Agreement and this Pledge Agreement.
C. Defined terms which are used but not defined herein shall have the
definitions set forth in the Purchase Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and conditions contained herein, the parties hereto agree
as follows:
1. Grant of Security Interest in the Shares. Rapid Link hereby grants
to Apex a security interest in the Shares, pledges and hypothecates the
Shares to Apex, and deposits the certificates evidencing the Shares (the
"Certificates") with Apex as collateral security for the payment by Rapid
Link of all obligations existing under the Note, whether for principal,
interest, fees, expenses or otherwise. The Certificates, together with
one or more stock assignments duly executed in blank with signatures
appropriately witnessed, are being delivered herewith to Apex, to be
retained by Apex as the pledgeholder for the Shares.
2. Representation and Warranty of Rapid Link. Rapid Link represents
and warrants to Apex that the Shares are free and clear of all claims,
mortgages, pledges, liens and other encumbrances of any nature whatsoever,
except (a) the liens and restrictions set forth herein and in the Note and
(b) any restrictions upon sale and distribution imposed by the Securities
Act of 1933, as amended (the "Act"), and applicable state securities laws.
3. Voting of Shares. So long as there shall exist no Event of Default
(as defined in the Note), Rapid Link shall be entitled to exercise, as Rapid
Link deems proper but in a manner not inconsistent with the terms hereof,
Rapid Link's rights to voting power with respect to the Shares. Apex, and
not Rapid Link, shall be entitled to vote the Shares at any time that an
Event of Default has occurred and is continuing.
4. Dividends. So long as no Event of Default has occurred and is
continuing, Rapid Link shall be entitled to receive any dividend (ordinary
or extraordinary, whether paid in cash, stock or property) or other
distribution with respect to the Shares. If an Event of Default has
occurred and is continuing, such dividend or other distribution shall be
delivered to Apex to be held as additional collateral security under this
Pledge Agreement.
5. Apex's Duties. So long as Apex exercises reasonable care with respect
to the Shares in its possession, Apex shall have no liability for any loss
or damage to such Shares, and in no event shall Apex have liability for
any diminution in value of the Shares occasioned by economic or market
conditions or events. Apex shall be deemed to have exercised reasonable
care within the meaning of the preceding sentence if the Shares in its
possession are accorded treatment substantially equal to that which Apex
accords its own property, it being understood that Apex shall not have any
responsibility under this Pledge Agreement for (a) ascertaining or taking
action with respect to calls, conversions, exchanges, maturities, tenders or
other matters relating to the Shares, whether or not Apex has or is deemed
to have knowledge of such matters, or (b) taking any necessary steps to
preserve rights against any person or entity with respect to the Shares.
6. Release from Pledge. No Shares may be transferred, unless Rapid Link
has made payment to Apex of all unpaid obligations existing under the Note
(whether or not then due and payable), whether for principal, interest,
fees, expenses or otherwise. Upon receipt by Apex of the payment as
required by this section, the Shares shall be released from this Pledge
Agreement.
7. Sale of Collateral. Upon the occurrence of any Event of Default,
Apex shall have all the rights and remedies of a secured party under the
applicable Uniform Commercial Code and also may, without notice, except as
specified below, at its option, sell all or any part of the Shares, for
cash, note or other property upon credit for future delivery or upon such
other terms as Apex may deem commercially reasonable. Upon such sale, Apex,
unless prohibited by a provision of any applicable statute, may purchase all
or any part of the Shares being sold, free from and discharged of all
trusts, claims, rights of redemption and equities of Rapid Link. If the
proceeds of any sale of the Shares shall be insufficient to pay all amounts
due under the Note and satisfy the obligations of Rapid Link under this
Pledge Agreement, including collection costs and expenses of such sale,
Rapid Link shall remain obligated and liable for any deficiency with respect
thereto. If, at any time when Apex shall determine to exercise its rights
to sell all or any part of the Shares pursuant to this Section 7, such
Shares, or the part thereof to be sold, shall not be effectively registered
under the Act as then in effect or any similar statute then in force,
subject to the provisions of Section 8 hereof, Apex, in its sole and
absolute discretion, is hereby expressly authorized to sell such Shares,
or any part thereof, by private sale in such manner and under such
circumstances as Apex may deem necessary or advisable in order that such
sale may be effectuated legally without such registration. Without limiting
the generality of the foregoing, Apex, in its sole and absolute discretion,
may approach and negotiate with a restricted number of potential purchasers
to effectuate such sale or restrict such sale to a purchaser or purchasers
who shall represent and agree that such purchaser or purchasers are
purchasing for its or their own account, for investment only, and not with
a view to the distribution or sale of such Shares or any part thereof. Any
sale conducted in the manner described in the foregoing sentence shall be
deemed to be a sale conducted in a commercially reasonable manner within
the meaning of the applicable Uniform Commercial Code, and Rapid Link hereby
consents and agrees that Apex shall incur no responsibility or liability for
selling all or any part of the Shares at a price which is not unreasonably
low, notwithstanding the possibility that a substantially higher price might
be realized if the sale were public. Apex shall not be obligated to make
any sale of the Shares regardless of notice of sale having been given. Apex
may adjourn any public or private sale from time to time by announcement at
the time and place fixed therefor, and any such sale may, without further
notice, be made at the time and place to which it was so adjourned.
8. Redemption of Collateral. Notwithstanding any other provision of this
Pledge Agreement, upon the occurrence of an Event of Default, Apex shall
give Rapid Link written notice of the time and place of any public sale or
of the time on or after which any private sale or other transfer is to be
made at least ten days before the date fixed for any public sale or before
the day on or after which any private sale or other transfer is to be made.
Rapid Link agrees that, to the extent notice of sale shall be required by
law, such ten days' notice shall constitute reasonable notification. This
notice shall also specify the aggregate outstanding monetary obligations of
the Rapid Link to Apex at the date of such notice (the "Total Obligation").
At any time during such ten-day period, Rapid Link shall have the right to
make a payment by certified or bank cashier's check of an amount equal to
the Total Obligation.
9. Termination. This Pledge Agreement shall terminate only upon payment
to Apex of all unpaid obligations existing under the Note, whether for
principal, interest, fees, expenses or otherwise. Upon termination of
this Pledge Agreement, Rapid Link shall be entitled to the return of the
Certificates then held by Apex and any other collateral security then held
by the Apex pursuant to Section 4 of this Pledge Agreement.
10. Cumulation of Remedies; Waiver of Rights. The remedies provided herein
in favor of Apex shall not be deemed exclusive but shall be cumulative and
shall be in addition to all of the remedies in favor of Apex existing at
law or in equity. Nothing in this Pledge Agreement shall require Apex to
proceed against or exhaust its remedies against the Shares before proceeding
against Rapid Link or executing against any other security or collateral
securing performance of Rapid Link's obligations to Apex under the Note or
this Pledge Agreement. No delay on the part of Apex in exercising any of
its options, powers or rights, or the partial or single exercise thereof,
shall constitute a waiver thereof.
11. Execution of Endorsements, Assignments, Etc. Upon the occurrence and
during the continuation of an Event of Default, Apex shall have the right
for and in the name, place and stead of Rapid Link to execute endorsements,
assignments or other instruments of conveyance or transfer with respect to
all or any of the Shares and any other shares of the capital stock of
Telenational or other property which is held by Apex as collateral security
pursuant to this Pledge Agreement.
12. Miscellaneous.
(a) Further Assurances; Changes in Capitalization. Each party hereto
agrees to perform any further acts and execute and deliver any documents
which may be reasonably necessary to carry out the intent of this Pledge
Agreement. The provisions of this Pledge Agreement shall apply to any and
all stock or other securities of Telenational or any successor or assign
of Telenational, which may be issued in respect of, in exchange for or
in substitution of, the Shares by reason of any split, reverse split,
recapitalization, reclassification, combination, merger, consolidation or
otherwise, and such Shares or other securities shall be encompassed within
the term "Shares" for purposes of this Pledge Agreement and Apex shall have
a security interest in all such securities on the same terms set forth in
this Pledge Agreement.
(b) Notice. Except as otherwise provided herein, all notices,
requests, demands and other communications under this Pledge Agreement shall
be in writing, and if by telecopy, shall be deemed to have been validly
served, given or delivered when sent, or if by personal delivery or
messenger or courier service, or by registered or certified mail, shall be
deemed to have been validly served, given or delivered upon actual delivery,
at the following addresses and facsimile numbers (or such other addresses
and facsimile numbers a party may designate for itself by like notice):
If to Rapid Link: Rapid Link, Incorporated
17383 Sunset Boulevard, Suite 350
Los Angeles, California 90272
Attention: John Jenkins, Chief Executive Officer
Telecopy: (310) 573-7067
If to Apex: Apex Acquisitions, Inc.
P.O. Box 8658
52 Marks Lane
Breckenridge, Colorado 80424
Attention: Christopher Canfield, Chief Executive Officer
Telecopy: (402) 392-7545
(c) Amendments. This Pledge Agreement may be amended only by a
written agreement executed by the parties hereto.
(d) Governing Law. This Pledge Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
(e) Disputes. In the event of any dispute between the parties arising
out of this Pledge Agreement, the prevailing party shall be entitled to
recover from the non-prevailing party the reasonable expenses of the
prevailing party including, without limitation, reasonable attorneys' fees
and costs.
(f) Entire Agreement. This Pledge Agreement constitutes the entire
agreement and understanding among the parties pertaining to the subject
matter hereof and supersedes any and all prior agreements, whether written
or oral, relating hereto.
(g) Successors and Assigns. Unless specifically provided herein to
the contrary, neither party hereto may assign any or all of its rights or
obligations, or delegate any or all of its duties under this Pledge
Agreement without the prior written consent of the other party. Upon an
assignment of any or all of a party's rights or obligations, or a delegation
of any or all of its duties under this Pledge Agreement in accordance with
the terms of this Pledge Agreement, this Pledge Agreement shall inure to
the benefit of, and be binding upon, such party's respective affiliates,
successors or assigns in the same manner and to the same extent as if
such affiliates, successors or assigns were original parties hereto.
(h) Counterparts. This Pledge Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and both of
which, when taken together, shall constitute one and the same Pledge
Agreement.
[Signatures on next page]
IN WITNESS WHEREOF, the parties hereto have duly executed this Pledge
Agreement as of the day and year first above written.
"RAPID LINK"
Rapid Link, Incorporated
a Delaware corporation
By:
---------------------------------------------------
John Jenkins, Chief Executive Officer
"APEX"
Apex Acquisitions, Inc.,
a Delaware corporation
By:
---------------------------------------------------
Christopher Canfield, Chief Executive Officer