Exhibit 4.1
COMMON STOCK PURCHASE AGREEMENT
BETWEEN
RAPID LINK INC.
AND
WESTSIDE CAPITAL LLC
DATED
June 15, 2007
COMMON STOCK PURCHASE AGREEMENT
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This COMMON STOCK PURCHASE AGREEMENT (the "Agreement") is made and
entered into as of the 15th day of June, 2007 between Rapid Link Inc., a
corporation organized and existing under the laws of the State of Delaware
("RPID" or the "Company") and Westside Capital LLC, a Delaware limited
liability company ("Investor").
PRELIMINARY STATEMENT
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WHEREAS, the Investor wishes to purchase from the Company, upon the
terms and subject to the conditions of this Agreement, Three Hundred Twelve
Thousand Five Hundred (357,143) shares of common stock of the Company for
the Purchase Price set forth in Section 1.3.13 hereof. In addition, the
Company will issue to the Investor three Common Stock Purchase Warrants (the
"Warrants") to purchase up to an additional Fifty Million (50,000,000)
shares of common stock of the Company at exercise prices as stated in the
Warrants; and
WHEREAS, the parties intend to memorialize the purchase and sale of
such Common Stock and the Warrants.
NOW, THEREFORE, in consideration of the mutual covenants and premises
contained herein, and for other good and valuable consideration, the receipt
and adequacy of which are hereby conclusively acknowledged, the parties
hereto, intending to be legally bound, agree as follows:
ARTICLE I
INCORPORATION BY REFERENCE, SUPERSEDER AND DEFINITIONS
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1.1 Incorporation by Reference. The foregoing recitals and the Exhibits and
Schedules attached hereto and referred to herein, are hereby acknowledged to
be true and accurate, and are incorporated herein by this reference.
1.2 Superseder. This Agreement, to the extent that it is inconsistent with
any other instrument or understanding among the parties governing the
affairs of the Company, shall supersede such instrument or understanding to
the fullest extent permitted by law. A copy of this Agreement shall be
filed at the Company's principal office.
1.3 Certain Definitions. For purposes of this Agreement, the following
capitalized terms shall have the following meanings (all capitalized terms
used in this Agreement that are not defined in this Article 1 shall have the
meanings set forth elsewhere in this Agreement):
1.3.1 "1933 Act" means the Securities Act of 1933, as amended.
1.3.2 "1934 Act" means the Securities Exchange Act of 1934, as
amended.
1.3.3 "Affiliate" means a Person or Persons directly or indirectly,
through one or more intermediaries, controlling, controlled by or under
common control with the Person(s) in question. The term "control," as used
in the immediately preceding sentence, means, with respect to a Person that
is a corporation, the right to the exercise, directly or indirectly, of more
than 50 percent of the voting rights attributable to the shares of such
controlled corporation and, with respect to a Person that is not a
corporation, the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of such controlled
Person.
1.3.4 "Articles" means the Certificate of Incorporation of the
Company, as the same may be amended from time to time.
1.3.5 "CEO" shall mean John Jenkins
1.3.6 "Closing" shall mean the Closing of the transactions
contemplated by this Agreement on the Closing Date.
1.3.7 "Closing Date" means the date on which the payment of the
Purchase Price (as defined herein) by the Investor to the Company is
completed pursuant to this Agreement to purchase the Common Stock and
Warrants, which shall occur on or after June 15, 2007.
1.3.8 "Common Stock" means shares of common stock of the Company,
par value $0.001 per share.
1.3.9 "Exempt Issuance" means the issuance of (a) shares of Common
Stock or options to employees, officers, consultants, or directors of the
Company pursuant to any stock or option plan duly adopted by a majority of
the non-employee members of the Board of Directors of the Company or a
majority of the members of a committee of non-employee directors established
for such purpose, (b) securities upon the exercise of or conversion of any
securities issued hereunder or issued prior to the date hereof and disclosed
in the Company's SEC Documents, and (c) securities issued pursuant to
acquisitions or strategic transactions, provided any such issuance shall
only be to a Person which is, itself or through its subsidiaries, an
operating company in a business synergistic with the business of the Company
and in which the Company receives benefits in addition to the investment of
funds, but shall not include a transaction in which the Company is issuing
securities primarily for the purpose of raising capital or to an entity
whose primary business is investing in securities.
1.3.10 "Material Adverse Effect" shall mean any adverse effect on
the business, operations, properties or financial condition of the Company
that is material and adverse to the Company and its subsidiaries and
affiliates, taken as a whole and/or any condition, circumstance, or
situation that would prohibit or otherwise materially interfere with the
ability of the Company to perform any of its material obligations under this
Agreement or the Registration Rights Agreement or to perform its obligations
under any other material agreement.
1.3.11 "Delaware Act" means the Delaware General Corporation Law, as
amended.
1.3.12 "Person" means an individual, partnership, firm, limited
liability company, trust, joint venture, association, corporation, or any
other legal entity.
1.3.13 "Purchase Price" means the Twenty-Five Thousand Dollars
($25,000.00) paid by the Investor to the Company for the Common Stock and
the Warrants.
1.3.14 "Registration Rights Agreement" shall mean the registration
rights agreement between the Investor and the Company attached hereto as
Exhibit A.
1.3.15 "Registration Statement" shall mean the registration
statement under the 1933 Act to be filed with the Securities and Exchange
Commission for the registration of the Shares pursuant to the Registration
Rights Agreement attached hereto as Exhibit A.
1.3.16 "SEC" means the Securities and Exchange Commission.
1.3.17 "SEC Documents" shall mean the Company's latest Form 10-K or
10-KSB as of the time in question, all Forms 10-Q or 10-QSB and 8-K filed
thereafter, and the Proxy Statement for its latest fiscal year as of the
time in question until such time as the Company no longer has an obligation
to maintain the effectiveness of a Registration Statement as set forth in
the Registration Rights Agreement.
1.3.18 "Shares" shall mean, collectively, the shares of Common Stock of
the Company and those shares of Common Stock issuable to the Investor upon
exercise of the Warrants.
1.3.19 "Subsequent Financing" shall mean any offer and sale of shares
of Preferred Stock or debt that is initially convertible into shares of
Common Stock.
1.3.20 "Transaction Documents" shall mean this Agreement, all Schedules
and Exhibits attached hereto and all other documents and instruments to
be executed and delivered by the parties in order to consummate the
transactions contemplated hereby, including, but not limited to the
documents listed in Sections 3.2 and 3.3 hereof.
1.3.21 "Warrants" shall mean the Common Stock Purchase Warrants in
the form attached hereto Exhibit B.
ARTICLE II
SALE AND PURCHASE OF RAPID LINK INC. COMMON STOCK AND WARRANTS
PURCHASE PRICE
2.1 Sale of Common Stock and Issuance of Warrants.
(a) Upon the terms and subject to the conditions set forth herein, and
in accordance with applicable law, the Company agrees to sell to the
Investor, and the Investor agrees to purchase from the Company, on the
Closing Date 357,143 shares of Common Stock and the Warrants for the (the
"Purchase Price") of Twenty-Five Thousand Dollars ($25,000.00). The
Purchase Price shall be paid by the Investor to the Company on the Closing
Date by a wire transfer or check of the Purchase Price. The Company shall
cause the Common Stock and the Warrants to be issued to the Investor upon
receipt of the wire by the Company. The Company shall register the shares
of Common Stock and the shares underlying the Warrants pursuant to the terms
and conditions of a Registration Rights Agreement attached hereto as Exhibit
A.
(b) Upon execution and delivery of this Agreement and the Company's
receipt of the Purchase Price, the Company shall issue to the Investor the
Warrant to purchase an aggregate of 50,000,000 shares of Common Stock at
exercise prices as stated in the Warrants, all pursuant to the terms and
conditions of the form of Warrants attached hereto as Exhibit B; provided,
however, that the Investor shall not be entitled to exercise the Warrants
and receive shares of Common Stock that would result in beneficial ownership
by the Investor and its affiliates of more than 4.9% of the then outstanding
number of shares of Common Stock on such date. For the purposes of the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13d-3 thereunder.
2.2 Purchase Price. The Purchase Price shall be delivered by the Investor
in the form of a check or wire transfer made payable to the Company in
United States Dollars from the Investor to the Company on the Closing Date.
ARTICLE III
CLOSING DATE AND DELIVERIES AT CLOSING
3.1 Closing Date. The closing of the transactions contemplated by this
Agreement (the "Closing"), unless expressly determined herein, shall be held
at the offices of the Company, at 5:00 P.M. local time, on the Closing Date
or on such other date and at such other place as may be mutually agreed by
the parties, including closing by facsimile with originals to follow.
Conversion of Securities
3.2 Deliveries by the Company. In addition to and without limiting any
other provision of this Agreement, the Company agrees to deliver, or cause
to be delivered the following:
(a) At or prior to Closing, an executed Agreement with all exhibits and
schedules attached hereto;
(b) At or prior to Closing, an executed Warrant in the name of the
Investor in the form attached hereto as Exhibit B;
(c) The executed Registration Rights Agreement;
(d) Evidence of approval of the Board of Directors and Shareholders of
the Company of the Transaction Documents and the transactions
contemplated hereby;
(e) An opinion from the Company's counsel concerning the Transaction
Documents and the transactions contemplated hereby in form and
substance reasonably acceptable to Investor; and;
(f) Stock Certificate in the name of Investor evidencing the Common
Stock; and
3.3 Deliveries by Investor. In addition to and without limiting any other
provision of this Agreement, the Investor agrees to deliver, or cause to be
delivered, the following:
(a) A deposit in the amount of the Investor Funds;
(b) The executed Agreement with all Exhibits and Schedules attached
hereto; and
(c) The executed Registration Rights Agreement.
In the event any document provided to the other party in Paragraphs 3.2 and
3.3 herein are provided by facsimile, the party shall forward an original
document to the other party within seven (7) business days.
3.4 Further Assurances. The Company and the Investor shall, upon request,
on or after the Closing Date, cooperate with each other (specifically, the
Company shall cooperate with the Investor, and the Investor shall cooperate
with the Company) by furnishing any additional information, executing and
delivering any additional documents and/or other instruments and doing any
and all such things as may be reasonably required by the parties or their
counsel to consummate or otherwise implement the transactions contemplated
by this Agreement.
3.5 Waiver. The Investor may waive any of the requirements of Section 3.2
of this Agreement, and the Company at its discretion may waive any of the
provisions of Section 3.3 of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
RAPID LINK INC.
Except as set forth in the Disclosure Schedule and the SEC Documents,
the Company represents and warrants to the Investor as of the date hereof
and as of Closing (which warranties and representations shall survive the
Closing regardless of what examinations, inspections, audits and other
investigations the Investor has heretofore made or may hereinafter make with
respect to such warranties and representations) as follows:
4.1 Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware, and has the requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as it
is now being conducted and is duly qualified to do business in any other
jurisdiction by virtue of the nature of the businesses conducted by it
or the ownership or leasing of its properties, except where the failure to
be so qualified will not, when taken together with all other such failures,
have a Material Adverse Effect on the business, operations, properties,
assets, financial condition or results of operation of the Company and
its subsidiaries taken as a whole.
4.2 Articles of Incorporation and By-Laws. The complete and correct copies
of the Company's Articles and By-Laws, as amended or restated to date
which have been filed with the Securities and Exchange Commission are a
complete and correct copy of such document as in effect on the date hereof
and as of the Closing Date.
4.3 Capitalization.
4.3.1 The authorized and outstanding capital stock of the Company
is set forth in the Company's Quarterly Report on Form 10-QSB, filed on June
14, 2007 with the Securities and Exchange Commission and updated on all
subsequent SEC Documents. All shares of capital stock have been duly
authorized and are validly issued, and are fully paid and no assessable, and
free of preemptive rights.
4.3.2 As of the date of this Agreement, the authorized capital
stock of the Company is as outlined in the most recent SEC Documents.
4.3.3 Except pursuant to this Agreement and as set forth in
Schedule 4.3 hereto, and as set forth in the Company's SEC Documents, filed
with the SEC, as of the date hereof and as of the Closing Date, there are
not now outstanding options, warrants, rights to subscribe for, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, shares of any class of capital stock
of the Company, or agreements, understandings or arrangements to which the
Company is a party, or by which the Company is or may be bound, to issue
additional shares of its capital stock or options, warrants, scrip or rights
to subscribe for, calls or commitment of any character whatsoever relating
to, or securities or rights convertible into or exchangeable for, any shares
of any class of its capital stock. The Company agrees to inform the
Investors in writing of any additional warrants granted prior to the Closing
Date.
4.3.4 The Company on the Closing Date (i) will have full right,
power, and authority to sell, assign, transfer, and deliver, by reason of
record and beneficial ownership, to the Investor, the Company Shares
hereunder, free and clear of all liens, charges, claims, options, pledges,
restrictions, and encumbrances whatsoever; and (ii) upon proper exercise of
the Warrants, the Investor will acquire good and marketable title to such
Shares, free and clear of all liens, charges, claims, options, pledges,
restrictions, and encumbrances whatsoever, except as otherwise provided in
this Agreement as to the limitation on the voting rights of such Shares in
certain circumstances.
4.4 Authority. The Company has all requisite corporate power and authority
to execute and deliver this Agreement, the Common Stock, and the Warrants,
to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of
this Agreement by the Company and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action and no other corporate proceedings on the part of the Company is
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby except as disclosed in this Agreement. This Agreement
has been duly executed and delivered by the Company and constitutes the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms.
4.5 No Conflict; Required Filings and Consents. The execution and delivery
of this Agreement by the Company does not, and the performance by the
Company of their respective obligations hereunder will not: (i) conflict
with or violate the Articles or By-Laws of the Company; (ii) conflict with,
breach or violate any federal, state, foreign or local law, statute,
ordinance, rule, regulation, order, judgment or decree (collectively,
"Laws") in effect as of the date of this Agreement and applicable to the
Company; or (iii) result in any breach of, constitute a default (or an event
that with notice or lapse of time or both would become a default) under,
give to any other entity any right of termination, amendment, acceleration
or cancellation of, require payment under, or result in the creation
of a lien or encumbrance on any of the properties or assets of the Company
pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to
which the Company is a party or by the Company or any of its properties
or assets is bound. Excluding from the foregoing are such violations,
conflicts, breaches, defaults, terminations, accelerations, creations of
liens, or incumbency that would not, in the aggregate, have a Material
Adverse Effect.
4.6 Report and Financial Statements. The Company's Annual Report on
Form 10-K, filed on January 29, 2007 with the SEC contains the audited
financial statements of the Company. The Company has previously provided to
the Investor the reviewed financial statements of the Company for the
three months ended June 14, 2007 (the "Financial Statements"). Each of
the balance sheets contained in or incorporated by reference into any
such Financial Statements (including the related notes and schedules
thereto) fairly presented the financial position of the Company, as of its
date, and each of the statements of income and changes in stockholders'
equity and cash flows or equivalent statements in such Financial Statements
(including any related notes and schedules thereto) fairly presents, changes
in stockholders' equity and changes in cash flows, as the case may be, of
the Company, for the periods to which they relate, in each case in
accordance with United States generally accepted accounting principles
("U.S. GAAP") consistently applied during the periods involved, except in
each case as may be noted therein, subject to normal year-end audit
adjustments in the case of unaudited statements. The books and records of
the Company have been, and are being, maintained in all material respects in
accordance with U.S. GAAP and any other applicable legal and accounting
requirements and reflect only actual transaction.
4.7 Compliance with Applicable Laws. The Company is not in violation of,
or, to the knowledge of the Company is under investigation with respect to
or has been given notice or has been charged with the violation of any
Law of a governmental agency, except for violations which individually or
in the aggregate do not have a Material Adverse Effect.
4.8 Brokers. Except as set forth on Schedule 4.8, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
Commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company.
4.9 SEC Documents. The Company acknowledges that the Company is a
publicly held company and has made available to the Investor after demand
true and complete copies of any requested SEC Documents. The Company has
registered its Common Stock pursuant to Section 12(d) or 15(d) of the 1934
Act, and the Common Stock is quoted and traded on the OTC Bulletin Board of
the National Association of Securities Dealers, Inc. The Company has
received no notice, either oral or written, with respect to the continued
quotation or trading of the Common Stock on the OTC Bulletin Board. The
Company has not provided to the Investor any information that, according to
applicable law, rule or regulation, should have been disclosed publicly
prior to the date hereof by the Company, but which has not been so
disclosed. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act, and rules and
regulations of the SEC promulgated thereunder and the SEC Documents did not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
4.10 Litigation. Except as outlined in the Company's most recent SEC
Documents, to the knowledge of the Company, no litigation, claim, or other
proceeding before any court or governmental agency is pending or to the
knowledge of the Company, threatened against the Company, the prosecution or
outcome of which may have a Material Adverse Effect.
4.11 Exemption from Registration. Subject to the accuracy of the Investor's
representations in Article V, except as required pursuant to the
Registration Rights Agreement, the sale of the Common Stock and Warrants by
the Company to the Investor will not require registration under the 1933
Act, but may require registration under New York state securities law if
applicable to the Investor. Upon exercise of the Warrants in accordance
with their terms, the Shares underlying the Warrants will be duly and
validly issued, fully paid, and non-assessable. The Company is issuing the
Common Stock and the Warrants in accordance with and in reliance upon the
exemption from securities registration afforded, inter alia, by Rule 506
under Regulation D as promulgated by the SEC under the 1933 Act, and/or
Section 4(2) of the 1933 Act; provided, however, that certain filings and
registrations may be required under state securities "blue sky" laws
depending upon the residency of the Investor.
4.12 No General Solicitation or Advertising in Regard to this Transaction.
Assuming that the representations and warranties of the Investors in Section
5 are complete and accurate, neither the Company nor any of its Affiliates
nor, to the knowledge of the Company, any Person acting on its or their
behalf (i) has conducted or will conduct any general solicitation (as that
term is used in Rule 502(c) of Regulation D as promulgated by the SEC under
the 1933 Act) or general advertising with respect to the sale of the Common
Stock or Warrants, or (ii) made any offers or sales of any security or
solicited any offers to buy any security under any circumstances that would
require registration of the Common Stock or Warrants, under the 1933 Act,
except as required herein.
4.13 No Material Adverse Effect. Except as set forth in Schedule 4.13
attached hereto, since June 14, 2007, no event or circumstance resulting in
a Material Adverse Effect has occurred or exists with respect to the
Company. No material supplier or customer has given notice, oral or written,
that it intends to cease or reduce the volume of its business with the
Company from historical levels. Since June 14, 2007, no event or
circumstance has occurred or exists with respect to the Company or its
businesses, properties, prospects, operations or financial condition, that,
under any applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been
so publicly announced or disclosed in writing to the Investor.
4.14 Material Non-Public Information. The Company has not disclosed to the
Investors any material non-public information that (i) if disclosed, would
reasonably be expected to have a material effect on the price of the Common
Stock or (ii) according to applicable law, rule or regulation, should have
been disclosed publicly by the Company prior to the date hereof but which
has not been so disclosed.
4.15 Internal Controls And Procedures. The Company maintains books and
records and internal accounting controls which provide reasonable assurance
that (i) all transactions to which the Company or any subsidiary is a party
or by which its properties are bound are executed with management's
authorization; (ii) the recorded accounting of the Company's consolidated
assets is compared with existing assets at regular intervals; (iii) access
to the Company's consolidated assets is permitted only in accordance with
management's authorization; and (iv) all transactions to which the Company
or any subsidiary is a party or by which its properties are bound are
recorded as necessary to permit preparation of the financial statements of
the Company in accordance with U.S. generally accepted accounting
principles.
4.16 Full Disclosure. No representation or warranty made by the Company in
this Agreement and no certificate or document furnished or to be furnished
to the Investor pursuant to this Agreement contains or will contain any
untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements contained herein or therein
not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
The Investor represents and warrants to the Company that:
5.1 Organization and Standing of the Investor. The Investor is a limited
liability company duly formed, validly existing and in good standing under
the laws of the State of Delaware. The state in which any offer to purchase
shares hereunder was made or accepted by such Investor is the state shown as
such Investor's address. The Investor was not formed for the purpose of
investing solely in the Common Stock, the Warrants or the shares of Common
Stock which are the subject of this Agreement.
5.2 Authorization and Power. The Investor has the requisite power and
authority to enter into and perform this Agreement and to purchase the
securities being sold to it hereunder. The execution, delivery and
performance of this Agreement by the Investor and the consummation by the
Investor of the transactions contemplated hereby have been duly authorized
by all necessary partnership action where appropriate. This Agreement and
the Registration Rights Agreement have been duly executed and delivered by
the Investor and at the Closing shall constitute valid and binding
obligations of the Investor enforceable against the Investor in accordance
with their terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application.
5.3 No Conflicts. The execution, delivery and performance of this Agreement
and the consummation by the Investor of the transactions contemplated hereby
or relating hereto do not and will not (i) result in a violation of such
Investor's charter documents or bylaws where appropriate or (ii) conflict
with, or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of any agreement,
indenture or instrument to which the Investor is a party, or result in a
violation of any law, rule, or regulation, or any order, judgment or decree
of any court or governmental agency applicable to the Investor or its
properties (except for such conflicts, defaults and violations as would not,
individually or in the aggregate, have a Material Adverse Effect on such
Investor). The Investor is not required to obtain any consent, authorization
or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of
such Investor's obligations under this Agreement or to purchase the
securities from the Company in accordance with the terms hereof, provided
that for purposes of the representation made in this sentence, the Investor
is assuming and relying upon the accuracy of the relevant representations
and agreements of the Company herein.
5.4 Financial Risks. The Investor acknowledges that such Investor is able
to bear the financial risks associated with an investment in the securities
being purchased by the Investor from the Company and that it has been given
full access to such records of the Company and the subsidiaries and to the
officers of the Company and the subsidiaries as it has deemed necessary or
appropriate to conduct its due diligence investigation. The Investor is
capable of evaluating the risks and merits of an investment in the
securities being purchased by the Investor from the Company by virtue of its
experience as an investor and its knowledge, experience, and sophistication
in financial and business matters and the Investor is capable of bearing the
entire loss of its investment in the securities being purchased by the
Investor from the Company.
5.5 Accredited Investor. The Investor is (i) an "accredited investor" as
that term is defined in Rule 501 of Regulation D promulgated under the 1933
Act by reason of Rule 501(a)(3) and (6), (ii) experienced in making
investments of the kind described in this Agreement and the related
documents, (iii) able, by reason of the business and financial experience of
its officers (if an entity) and professional advisors (who are not
affiliated with or compensated in any way by the Company or any of its
affiliates or selling agents), to protect its own interests in connection
with the transactions described in this Agreement, and the related
documents, and (iv) able to afford the entire loss of its investment in the
securities being purchased by the Investor from the Company.
5.6 Brokers. Except as set forth in Schedule 4.8, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
Commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Investor.
5.7 Knowledge of Company. The Investor and such Investor's advisors, if
any, have been, upon request, furnished with all materials relating to the
business, finances and operations of the Company and materials relating to
the offer and sale of the securities being purchased by the Investor from
the Company. The Investor and such Investor's advisors, if any, have been
afforded the opportunity to ask questions of the Company and have received
complete and satisfactory answers to any such inquiries.
5.8 Risk Factors. The Investor understands that such Investor's investment
in the securities being purchased by the Investor from the Company involves
a high degree of risk. The Investor understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the securities being
purchased by the Investor from the Company. The Investor warrants that such
Investor is able to bear the complete loss of such Investor's investment in
the securities being purchased by the Investor from the Company.
5.9 Full Disclosure. No representation or warranty made by the Investor in
this Agreement and no certificate or document furnished or to be furnished
to the Company pursuant to this Agreement contains or will contain any
untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements contained herein or therein
not misleading. Except as set forth or referred to in this Agreement,
Investor does not have any agreement or understanding with any person
relating to acquiring, holding, voting or disposing of any equity securities
of the Company.
ARTICLE VI
COVENANTS OF THE COMPANY
6.1 Registration Rights. The Company shall cause the Registration Rights
Agreement to remain in full force and effect according to the provisions of
the Registration Rights Agreement and the Company shall comply in all
material respects with the terms thereof.
6.2 Reservation of Common Stock. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, shares of Common Stock for the purpose of
enabling the Company to issue the shares of Common Stock and the shares of
Common Stock underlying the Warrants.
6.3 Compliance with Laws. The Company hereby agrees to comply in all
respects with the Company's reporting, filing and other obligations under
the Laws.
6.4 Exchange Act Registration. The Company (a) will continue its obligation
to report to the SEC under Section 12(g) of the 1934 Act and will use its
best efforts to comply in all respects with its reporting and filing
obligations under the 1934 Act, and will not take any action or file any
document (whether or not permitted by the 1934 Act or the rules thereunder)
to terminate or suspend any such registration or to terminate or suspend its
reporting and filing obligations under the 1934 Act until the Investors have
disposed of all of their Shares.
6.5 Preferred Stock . On or prior to the Closing Date, the Company will
cause to be cancelled all preferred stock in the Company. For a period of
two years from the closing the Company will not issue any preferred stock of
the Company.
6.6 Independent Directors. The Company shall have caused the appointment of
the majority of the board of directors to be qualified independent
directors, as defined by the NASD within six months post closing.
6.7 Independent Directors Become Majority of Audit and Compensation
Committees. The Company will cause the appointment of a majority of outside
directors to the audit and compensation committees of the board of directors
within six months post Closing.
6.8 Insider Selling. The earliest any "Insiders" can start selling their
shares shall be two years from Closing. Insiders shall include John Jenkins,
as CEO and Chris Canfield, as President and CFO of the Company. Westside
Capital LLC shall not be considered "Insiders".
6.9 Employment and Consulting Contracts. For two years after the Closing
Company must have a current unanimous opinion from the Compensation
Committee of the Board of Directors that any awards other than salary are
usual, appropriate and reasonable for any officer, director, employee or
consultant holding a similar position in other public fully reporting
companies with independent majority boards with similar market
capitalizations in the same industry with securities listed on the OTCBB,
AMEX, NYSE or NASDAQ.
6.10 Stock Splits. All forward and reverse stock splits shall effect all
equity and derivative holders proportionately.
ARTICLE VII
COVENANTS OF THE INVESTOR
7.1 Compliance with Law. The Investor's trading activities with respect to
shares of the Company's Common Stock will be in compliance with all
applicable state and federal securities laws, rules and regulations and
rules and regulations of any public market on which the Company's Common
Stock is listed.
7.2 Transfer Restrictions. The Investor's acknowledge that (1) the Common
Stock, Warrants and shares underlying Warrants have not been registered
under the provisions of the 1933 Act, and may not be transferred unless (A)
subsequently registered thereunder or (B) the Investor shall have delivered
to the Company an opinion of counsel, reasonably satisfactory in form, scope
and substance to the Company, to the effect that the Common Stock, Warrants
and shares underlying Warrants to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration; and (2) any
sale of the Common Stock, Warrants and shares underlying the Warrants made
in reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance
with some other exemption under the 1933 Act or the rules and regulations of
the SEC thereunder.
7.3 Restrictive Legend. The Investor acknowledges and agrees that the
Common Stock, the Warrants and the Shares underlying the Warrants, and,
until such time as the Common Stock and Shares underlying and Warrants have
been registered under the 1933 Act and sold in accordance with an effective
Registration Statement, certificates and other instruments representing any
of the Shares, shall bear a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of
any such securities):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER
SUCH SHARES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER
THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR
(2) IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S, OR (3)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT."
ARTICLE VIII
CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS
The obligation of the Company to consummate the transactions
contemplated hereby shall be subject to the fulfillment, on or prior to
Closing Date, of the following conditions:
8.1 No Termination. This Agreement shall not have been terminated pursuant
to Article X hereof.
8.2 Representations True and Correct. The representations and warranties
of the Investor contained in this Agreement shall be true and correct in all
material respects on and as of the Closing Date with the same force and
effect as if made on as of the Closing Date.
8.3 Compliance with Covenants. The Investor shall have performed and
complied in all material respects with all covenants, agreements, and
conditions required by this Agreement to be performed or complied by it
prior to or at the Closing Date.
8.4 No Adverse Proceedings. On the Closing Date, no action or proceeding
shall be pending by any public authority or individual or entity before any
court or administrative body to restrain, enjoin, or otherwise prevent the
consummation of this Agreement or the transactions contemplated hereby or to
recover any damages or obtain other relief as a result of the transactions
proposed hereby.
ARTICLE IX
CONDITIONS PRECEDENT TO INVESTOR'S OBLIGATIONS
The obligation of the Investors to consummate the transactions
contemplated hereby shall be subject to the fulfillment, on or prior to
Closing Date unless specified otherwise, of the following conditions:
9.1 No Termination. This Agreement shall not have been terminated pursuant
to Article X hereof.
9.2 Representations True and Correct. The representations and warranties
of the Company contained in this Agreement shall be true and correct in all
material respects on and as of the Closing Date with the same force and
effect as if made on as of the Closing Date.
9.3 Compliance with Covenants. The Company shall have performed and
complied in all material respects with all covenants, agreements, and
conditions required by this Agreement to be performed or complied by it
prior to or at the Closing Date.
9.4 No Adverse Proceedings. On the Closing Date, no action or proceeding
shall be pending by any public authority or individual or entity before any
court or administrative body to restrain, enjoin, or otherwise prevent the
consummation of this Agreement or the transactions contemplated hereby or to
recover any damages or obtain other relief as a result of the transactions
proposed hereby.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
10.1 Termination. This Agreement may be terminated at any time prior to the
Closing Date:
10.1.1 by mutual written consent of the Investor and the Company;
10.1.2 by the Company upon a material breach of any representation,
warranty, covenant or agreement on the part of the Investor set forth in
this Agreement, or the Investor upon a material breach of any
representation, warranty, covenant or agreement on the part of the Company
set forth in this Agreement, or if any representation or warranty of the
Company or the Investor, respectively, shall have become untrue, in either
case such that any of the conditions set forth in Article VIII or Article IX
hereof would not be satisfied (a "Terminating Breach"), and such breach
shall, if capable of cure, not have been cured within five (5) business days
after receipt by the party in breach of a notice from the non-breaching
party setting forth in detail the nature of such breach.
10.2 Effect of Termination. Except as otherwise provided herein, in the
event of the termination of this Agreement pursuant to Section 10.1
hereof, there shall be no liability on the part of the Company or the
Investor or any of their respective officers, directors, agents or other
representatives and all rights and obligations of any party hereto shall
cease.
10.3 Amendment. This Agreement may be amended by the parties hereto any time
prior to the Closing Date by an instrument in writing signed by the parties
hereto.
10.4 Waiver. At any time prior to the Closing Date, the Company and the
Investor by mutual consent, may: (a) extend the time for the performance of
any of the obligations or other acts of other party or; (b) waive any
inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto which have been made to it or them;
or (c) waive compliance with any of the agreements or conditions contained
herein for its or their benefit. Any such extension or waiver shall be
valid only if set forth in an instrument in writing signed by the party or
parties to be bound hereby.
ARTICLE XI
GENERAL PROVISIONS
11.1 Transaction Costs. Except as otherwise provided herein, each of the
parties shall pay all of his or its costs and expenses (including attorney
fees and other legal costs and expenses and accountants' fees and other
accounting costs and expenses) incurred by that party in connection with
this Agreement.
11.2 Indemnification. The Investor agrees to indemnify, defend and hold the
Company (following the Closing Date) and its officers and directors harmless
against and in respect of any and all claims, demands, losses, costs,
expenses, obligations, liabilities or damages, including interest, penalties
and reasonable attorney's fees, that it shall incur or suffer, which arise
out of or result from any breach of this Agreement by such Investor or
failure by such Investor to perform with respect to any of its
representations, warranties or covenants contained in this Agreement or in
any exhibit or other instrument furnished or to be furnished under this
Agreement. The Company agrees to indemnify, defend and hold the Investor
harmless against and in respect of any and all claims, demands, losses,
costs, expenses, obligations, liabilities or damages, including interest,
penalties and reasonable attorney's fees, that it shall incur or suffer,
which arise out of, result from or relate to any breach of this Agreement or
failure by the Company to perform with respect to any of its
representations, warranties or covenants contained in this Agreement or in
any exhibit or other instrument furnished or to be furnished under this
Agreement. In no event shall the Company or the Investors be entitled to
recover consequential or punitive damages resulting from a breach or
violation of this Agreement nor shall any party have any liability hereunder
in the event of gross negligence or willful misconduct of the indemnified
party. In the event of a breach of this Agreement by either party, the
other party shall be entitled to pursue a remedy of specific performance
upon tender into the Court an amount equal to the Purchase Price or the
securities being sold hereunder. The indemnification by the Investor and the
Company shall be limited to $10,000.00.
11.3 Headings. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
11.4 Entire Agreement. This Agreement (together with the Schedule, Exhibits,
Warrants and documents referred to herein) constitute the entire agreement
of the parties and supersede all prior agreements and undertakings, both
written and oral, between the parties, or any of them, with respect to the
subject matter hereof.
11.5 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given (i) on the date they are
delivered if delivered in person; (ii) on the date initially received if
delivered by facsimile transmission followed by registered or certified mail
confirmation; (iii) on the date delivered by an overnight courier service;
or (iv) on the third business day after it is mailed by registered or
certified mail, return receipt requested with postage and other fees prepaid
as follows:
If to the Company:
-----------------
Rapid Link, Inc.
17383 Sunset Boulevard, Suite 350
Los Angeles, CA 90272
Attn: John Jenkins
With a copy to:
--------------
RICHARDSON & PATEL LLP
10900 Wilshire Blvd, Suite 500
Los Angeles, CA 90024
Facsimile No.: (310) 208-1154
Attn: Ryan Hong, Esq.
If to the Investor:
------------------
Westside Capital LLC
302 West 79th Street, Suite 6D
New York, New York 10024
Attn: Thomas Sauve
11.6 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in
any manner materially adverse to any party. Upon such determination that
any such term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
11.7 Binding Effect. All the terms and provisions of this Agreement whether
so expressed or not, shall be binding upon, inure to the benefit of, and be
enforceable by the parties and their respective administrators, executors,
legal representatives, heirs, successors and assignees.
11.8 Preparation of Agreement. This Agreement shall not be construed more
strongly against any party regardless of who is responsible for its
preparation. The parties acknowledge each contributed and is equally
responsible for its preparation.
11.9 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California, without giving effect
to applicable principles of conflicts of law.
11.10 Jurisdiction. This Agreement shall be exclusively governed by and
construed in accordance with the laws of the State of California. If any
action is brought among the parties with respect to this Agreement or
otherwise, by way of a claim or counterclaim, the parties agree that in any
such action, and on all issues, the parties irrevocably waive their right to
a trial by jury. Exclusive jurisdiction and venue for any such action shall
be the Federal Courts serving the State of California. In the event suit or
action is brought by any party under this Agreement to enforce any of its
terms, or in any appeal therefrom, it is agreed that the prevailing party
shall be entitled to reasonable attorneys fees to be fixed by the
arbitrator, trial court, and/or appellate court.
11.11 Preparation and Filing of Securities and Exchange Commission filings.
The Investor shall reasonably assist and cooperate with the Company in the
preparation of all filings with the SEC after the Closing Date due after the
Closing Date.
11.12 Further Assurances, Cooperation. Each party shall, upon reasonable
request by the other party, execute and deliver any additional documents
necessary or desirable to complete the transactions herein pursuant to and
in the manner contemplated by this Agreement. The parties hereto agree to
cooperate and use their respective best efforts to consummate the
transactions contemplated by this Agreement.
11.13 Survival. The representations, warranties, covenants and
agreements made herein shall survive the Closing of the transaction
contemplated hereby.
11.14 Third Parties. Except as disclosed in this Agreement, nothing in
this Agreement, whether express or implied, is intended to confer any rights
or remedies under or by reason of this Agreement on any persons other than
the parties hereto and their respective administrators, executors, legal
representatives, heirs, successors and assignees. Nothing in this Agreement
is intended to relieve or discharge the obligation or liability of any third
persons to any party to this Agreement, nor shall any provision give any
third persons any right of subrogation or action over or against any party
to this Agreement.
11.15 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure
or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty, covenant or
agreement herein, nor shall nay single or partial exercise of any such
right preclude other or further exercise thereof or of any other right. All
rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
11.16 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original, but all of
which taken together shall constitute one and the same agreement. A
facsimile transmission of this signed Agreement shall be legal and binding
on all parties hereto.
[SIGNATURES ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the Investors and the Company have as of the date
first written above executed this Agreement.
THE COMPANY:
RAPID LINK INC.
/s/ John Jenkins
------------------------------
By: John Jenkins
--------------------------
Title: Chief Executive Officer
-----------------------
INVESTOR:
Westside Capital LLC
/s/ Thomas M. Sauve
------------------------------
Thomas M. Sauve
Managing Member
302 West 79th Street, Suite 6D
New York NY 10024
Schedule A
----------
NUMBER OF SHARES
AMOUNT OF NUMBER OF SHARES UNDERLYING
NAME AND ADDRESS INVESTMENT OF COMMON STOCK WARRANTS
---------------- ---------- --------------- --------
Westside Capital LLC
302 West 79th Street,
Suite 6D $25,000.00 357,143 50,000,000
New York, NY 10024
Exhibit A
---------
Registration Rights Agreement
-----------------------------
Exhibit B
---------
Warrants
--------