Document:

ex4_2.htm

    
      

    

    
      Exhibit 4.2

       

      THIS
WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (B) AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS.

       

      Right to
Purchase up to 8,750,000 Shares of Common Stock of

      Rapid Link,
Incorporated

      (subject
to adjustment as provided herein)

       

      COMMON
STOCK PURCHASE WARRANT

      

      
        
          	
                  No.
      _________________

                	 
      	
                  Issue
      Date:  October 31,
2008

                

        

      

       

      RAPID
LINK, INCORPORATED, a corporation organized under the laws of the State of
Delaware (the “Company”), hereby certifies
that, for value received, VALENS U.S. SPV I, LLC, or its assigns (the “Holder”), is entitled, subject
to the terms set forth below, to purchase from the Company (as defined herein)
at any time from and after the Issue Date of this Warrant, up to 8,750,000 fully
paid and non-assessable shares of Common Stock (as hereinafter defined), $0.001
par value per share, at the applicable Exercise Price per share (as defined
below).  The number and character of such shares of Common Stock and
the applicable Exercise Price per share are subject to adjustment as provided
herein.

       

      As used
herein the following terms, unless the context otherwise requires, have the
following respective meanings:

       

      (a)           Common Stock” means (i) the
Company’s Common Stock, par value $0.001 per share; and (ii) any other
securities into which or for which any of the securities described in the
preceding clause (i) may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or
otherwise.

       

      (b)           “Company” means Rapid Link,
Incorporated and any person or entity which shall succeed, or assume the
obligations of, Rapid Link, Incorporated hereunder.

       

      (c)           “Exercise Price” means a price
of $0.01 per share.

       

      (d)           “Other Securities” means any
stock (other than Common Stock) and other securities of the Company or any other
person (corporate or otherwise) which the Holder at any time shall be entitled
to receive, or shall have received, on the exercise of this Warrant, in lieu of
or in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 4 or otherwise.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      (e)           “Security Agreement” means the
Security Agreement dated as of March 31, 2008 among the Company, various
Subsidiaries of the Company party thereto, the Holder, the other Lenders (as
defined therein) from time to time party thereto and LV Administrative Services,
Inc., as administrative and collateral agent for the Lenders (as defined
therein), as amended, modified, restated and/or supplemented from time to
time.

       

      (f)           “Date of FMV Calculation”
means the date that precedes the date on which the Exercise Notice is deemed
delivered to the Company pursuant to Section 14 of this Warrant.

       

      1.           
 Exercise of
Warrant.

       

      1.1           Number of Shares Issuable
upon Exercise.  From and after the date hereof, the Holder
shall be entitled to receive, upon exercise of this Warrant in whole or in part,
by delivery of an original or fax copy of an exercise notice in the form
attached hereto as Exhibit A (the “Exercise Notice”), shares of
Common Stock of the Company, subject to adjustment pursuant to Section
4.

       

      1.2           Fair Market
Value.  For purposes hereof, the “Fair Market Value” of a share
of Common Stock as of a particular date (the “Determination Date”) shall
mean:

       

      (a)           If
the Company’s Common Stock is traded on the American Stock Exchange
or  another national exchange or is quoted on the National or Capital
Market of The Nasdaq Stock Market, Inc. (“Nasdaq”), then the closing or
last sale price, respectively, reported for the last business day immediately
preceding the Determination Date.

       

      (b)           If
the Company’s Common Stock is not traded on the American Stock Exchange or
another national exchange or on the Nasdaq but is traded on the Nasdaq Over the
Counter Bulletin Board, then the mean of the average of the closing bid and
asked prices reported for the last business day immediately preceding the
Determination Date.

       

      (c)           Except
as provided in clause (d) below, if the Company’s Common Stock is not publicly
traded, then as the Holder and the Company agree or in the absence of agreement
by arbitration in accordance with the rules then in effect of the American
Arbitration Association, before a single arbitrator to be chosen from a panel of
persons qualified by education and training to pass on the matter to be
decided.

       

      (d)           If
the Determination Date is the date of a liquidation, dissolution or winding up,
or any event deemed to be a liquidation, dissolution or winding up pursuant to
the Company’s charter, then all amounts to be payable per share to holders of
the Common Stock pursuant to the charter in the event of such liquidation,
dissolution or winding up, plus all other amounts to be payable per share in
respect of the Common Stock in liquidation under the charter, assuming for the
purposes of this clause (d) that all of the shares of Common Stock then issuable
upon exercise of this Warrant are outstanding at the Determination
Date.

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

       

      1.3           Company
Acknowledgment.  The Company will, at the time of the exercise
of this Warrant, upon the request of the Holder acknowledge in writing its
continuing obligation to afford to the Holder any rights to which the Holder
shall continue to be entitled after such exercise in accordance with the
provisions of this Warrant.  If the Holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to the Holder any such rights.

       

      1.4           Trustee for Warrant
Holders.  In the event that a bank or trust company shall have
been appointed as trustee for the Holder pursuant to Subsection 3.2, such bank
or trust company shall have all the powers and duties of a warrant agent (as
hereinafter described) and shall accept, in its own name for the account of the
Company or such successor person as may be entitled thereto, all amounts
otherwise payable to the Company or such successor, as the case may be, on
exercise of this Warrant pursuant to this Section 1.

       

      2.            
Procedure for
Exercise.

       

      2.1           Delivery of Stock
Certificates, Etc., on Exercise.  The Company agrees that the
shares of Common Stock purchased upon exercise of this Warrant shall be deemed
to be issued to the Holder as the record owner of such shares as of the close of
business on the date on which this Warrant shall have been surrendered and
payment made for such shares in accordance herewith.  As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within three (3) business days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the Holder, or as the Holder (upon
payment by the Holder of any applicable transfer taxes) may direct in compliance
with applicable securities laws, a certificate or certificates for the number of
duly and validly issued, fully paid and non-assessable shares of Common Stock
(or Other Securities) to which the Holder shall be entitled on such exercise,
plus, in lieu of any fractional share to which the Holder would otherwise be
entitled, one full share of the Company’s Common Stock to replace such
fractional share, together with any other stock or other securities and property
(including cash, where applicable) to which the Holder is entitled upon such
exercise pursuant to Section 1 or otherwise.

       

      2.2           Exercise.

       

      (a)           Payment
may be made either (i) in cash by wire transfer of immediately available funds
or by certified or official bank check payable to the order of the Company equal
to the applicable aggregate Exercise Price, (ii) by delivery of this Warrant, or
shares of Common Stock and/or Common Stock receivable upon exercise of this
Warrant in accordance with the formula set forth in subsection (b) below, or
(iii) by a combination of any of the foregoing methods, for the number of shares
of Common Stock specified in such Exercise Notice (as such exercise number shall
be adjusted to reflect any adjustment in the total number of shares of Common
Stock issuable to the Holder per the terms of this Warrant) and the Holder shall
thereupon be entitled to receive the number of duly authorized, validly issued,
fully-paid and non-assessable shares of Common Stock (or Other Securities)
determined as provided herein.

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

       

      (b)           If
the Fair Market Value of one share of Common Stock is greater than the Exercise
Price on the Date of FMV Calculation and (i) the Warrant Shares have not been
registered or (ii) may not be sold under Rule 144(b) or any successor provision
if exercised by payment in cash, in lieu of exercising this Warrant for cash,
the Holder may elect to receive shares equal to the value (as determined below)
of this Warrant (or the portion thereof being exercised) by surrender of this
Warrant at the principal office of the Company together with the properly
endorsed Exercise Notice in which event the Company shall issue to the Holder a
number of shares of Common Stock computed using the following
formula:

      
         

        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    	
                                            X=

                                          	 	
                                            Y(A-B)

                                          	 
      
	 
      	 	
                                            A

                                          	 
      
	 	 	 
	
                                            Where
      X =    

                                          	 	
                                            the
      number of shares of Common Stock to be issued to the
  Holder

                                          
	 	 	 
	
                                            Y
      =

                                          	 	
                                            the
      number of shares of Common Stock purchasable under this Warrant or, if
      only a portion of this Warrant is being exercised, the portion of this
      Warrant being exercised (at the date of such
  calculation)

                                          
	 	 	 
	
                                            A
      =

                                          	 	
                                            the
      Fair Market Value of one share of the Company’s Common Stock (at the Date
      of FMV Calculation)

                                          
	 	 	 
	
                                            B
      =

                                          	 	
                                            the
      Exercise Price per share (as adjusted to the date of such
      calculation)

                                          

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

         

      

      3.          
  Effect of
Reorganization, Etc.; Adjustment of Exercise Price.

       

      3.1           Reorganization,
Consolidation, Merger, Etc.  If there occurs any capital
reorganization or any reclassification of the Common Stock of the Company, the
consolidation or merger of the Company with or into another person (other than a
merger or consolidation of the Company in which the Company is the continuing
entity and which does not result in any reorganization or reclassification of
its outstanding Common Stock) or the sale or conveyance of all or substantially
all of the assets of the Company to another person, then, as a condition
precedent to any such reorganization, reclassification, consolidation, merger,
sale or conveyance, the Holder will be entitled to receive upon surrender of
this Warrant to the Company (x) to the extent there are cash proceeds resulting
from the consummation of such reorganization, reclassification, consolidation,
merger, sale or conveyance, in exchange for such Warrant, cash in an amount
equal to the cash proceeds that would have been payable to the Holder had the
Holder exercised such Warrant immediately prior to the consummation of such
reorganization, reclassification, consolidation, merger, sale or conveyance,
less the aggregate Exercise Price payable upon exercise of this Warrant, and (y)
to the extent that the Holder would be entitled to receive Common stock (or
Other Securities) (in addition to or in lieu of cash in connection with any such
reorganization, reclassification, consolidation, merger, sale or conveyance),
the same kind and amounts of securities or other assets, or both, that are
issuable or distributable to the holders of outstanding Common Stock (or Other
Securities) of the Company with respect to their Common Stock (or Other
Securities) upon such reorganization, reclassification, consolidation, merger,
sale or conveyance, as would have been deliverable to the Holder had the Holder
exercised such Warrant immediately prior to the consummation of such
reorganization, reclassification, consolidation, merger, sale or conveyance less
an amount of such securities having a value equal to the aggregate Exercise
Price payable upon exercise of this Warrant.

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

       

      3.2           Dissolution.  In
the event of any dissolution of the Company following the transfer of all or
substantially all of its properties or assets, the Company, concurrently with
any distributions made to holders of its Common Stock, shall at its expense
deliver or cause to be delivered to the Holder the stock and other securities
and property (including cash, where applicable) receivable by the Holder
pursuant to Section 3.1, or, if the Holder shall so instruct the Company, to a
bank or trust company specified by the Holder and having its principal office in
New York, NY as trustee for the Holder (the “Trustee”).

       

      3.3           Continuation of
Terms.  Upon any reorganization, consolidation, merger or
transfer (and any dissolution following any transfer) referred to in this
Section 3, this Warrant shall continue in full force and effect and the terms
hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section
4.  In the event this Warrant does not continue in full force and
effect after the consummation of the transactions described in this Section 3,
then the Company’s securities and property (including cash, where applicable)
receivable by the Holder will be delivered to the Holder or the Trustee as
contemplated by Section 3.2.

       

      4.         
   Extraordinary Events
Regarding Common Stock.  In the event that the Company shall
(a) issue additional shares of the Common Stock as a dividend or other
distribution on outstanding Common Stock or any preferred stock issued by the
Company, (b) subdivide its outstanding shares of Common Stock or (c) combine its
outstanding shares of the Common Stock into a smaller number of shares of the
Common Stock, then, in each such event, the Exercise Price shall, simultaneously
with the happening of such event, be adjusted by multiplying the then Exercise
Price by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such event and the denominator of
which shall be the number of shares of Common Stock outstanding immediately
after such event, and the product so obtained shall thereafter be the Exercise
Price then in effect. The Exercise Price, as so adjusted, shall be readjusted in
the same manner upon the happening of any successive event or events described
herein in this Section 4.  The number of shares of Common Stock that
the Holder shall thereafter, on the exercise hereof as provided in Section 1, be
entitled to receive shall be adjusted to a number determined by multiplying the
number of shares of Common Stock that would otherwise (but for the provisions of
this Section 4) be issuable on such exercise by a fraction of which (a) the
numerator is the Exercise Price that would otherwise (but for the provisions of
this Section 4) be in effect, and (b) the denominator is the Exercise Price in
effect on the date of such exercise (taking into account the provisions of this
Section 4).  Notwithstanding the foregoing, in no event shall the
Exercise Price be less than the par value of the Common Stock.

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

       

      5.           
 Certificate as
to Adjustments.  In each case of any adjustment or readjustment
in the shares of Common Stock (or Other Securities) issuable on the exercise of
this Warrant, the Company at its expense will promptly cause its Chief Financial
Officer or other appropriate designee to compute such adjustment or readjustment
in accordance with the terms of this Warrant and prepare a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any additional shares of
Common Stock (or Other Securities) issued or sold or deemed to have been issued
or sold, (b) the number of shares of Common Stock (or Other Securities)
outstanding or deemed to be outstanding, and (c) the Exercise Price and the
number of shares of Common Stock to be received upon exercise of this Warrant,
in effect immediately prior to such adjustment or readjustment and as adjusted
or readjusted as provided in this Warrant.  The Company will forthwith
mail a copy of each such certificate to the Holder and any warrant agent of the
Company (appointed pursuant to Section 11 hereof).

       

      6.          
  Reservation of Stock, Etc.,
Issuable on Exercise of Warrant.  The Company will at all times
reserve and keep available, solely for issuance and delivery on the exercise of
this Warrant, shares of Common Stock (or Other Securities) from time to time
issuable on the exercise of this Warrant.

       

      7.         
   Assignment; Exchange of
Warrant.  Subject to compliance with applicable securities
laws, this Warrant, and the rights evidenced hereby, may be transferred by any
registered holder hereof (a “Transferor”) in whole or in
part.  On the surrender for exchange of this Warrant, with the
Transferor’s endorsement in the form of Exhibit B attached
hereto (the “Transferor
Endorsement Form”) and together with evidence reasonably satisfactory to
the Company demonstrating compliance with applicable securities laws, which
shall include, without limitation, a legal opinion from the Transferor’s counsel
(which reasonable fees shall be at the Company’s expense) that provides that
such transfer is exempt from the registration requirements of applicable
securities laws, the Company at its expense (but with payment by the Transferor
of any applicable transfer taxes) will issue and deliver to or on the order of
the Transferor thereof a new Warrant of like tenor, in the name of the
Transferor and/or the transferee(s) specified in such Transferor Endorsement
Form (each a “Transferee”), calling in the
aggregate on the face or faces thereof for the number of shares of Common Stock
called for on the face or faces of this Warrant so surrendered by the
Transferor.

       

      8.           
 Replacement of
Warrant.  On receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of any such loss, theft or destruction of this Warrant, on delivery of
an indemnity agreement or security reasonably satisfactory in form and amount to
the Company or, in the case of any such mutilation, on surrender and
cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.

       

      9.           
 Registration
Rights.  The Holder has been granted certain registration
rights by the Company.  These registration rights are set forth in a
Registration Rights Agreement entered into by the Company and Holder dated as of
July 11, 2008, as the same may be amended, restated, modified and/or
supplemented from time to time.

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

       

      10.           Maximum
Exercise.  Notwithstanding anything herein to the contrary, in
no event shall the Holder be entitled to exercise any portion of this Warrant in
excess of that portion of this Warrant upon exercise of which the sum of (1) the
number of shares of Common Stock beneficially owned by the Holder and its
Affiliates (other than shares of Common Stock which may be deemed beneficially
owned through the ownership of the unexercised portion of this Warrant or the
unexercised or unconverted portion of any other security of the Holder subject
to a limitation on conversion analogous to the limitations contained herein) and
(2) the number of shares of Common Stock issuable upon the exercise of the
portion of this Warrant with respect to which the determination of this proviso
is being made, would result in beneficial ownership by the Holder and its
Affiliates of any amount greater than 9.99% of the then outstanding shares of
Common Stock (whether or not, at the time of such exercise, the Holder and its
Affiliates beneficially own more than 9.99% of the then outstanding shares of
Common Stock). As used herein, the term “Affiliate” means any person or
entity that, directly or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with a person or entity, as such
terms are used in and construed under Rule 144 under the Securities Act of 1933,
as amended.   For purposes of the second preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulations 13D-G thereunder, except as
otherwise provided in clause (1) of such sentence.  For any reason at any
time, upon written or oral request of the Holder, the Company shall within one
(1) business day confirm orally and in writing to the Holder the number of
shares of Common Stock outstanding as of any given date.  The
limitations set forth herein (x) shall automatically become null and void
following notice to the Company upon the occurrence and during the continuance
of an Event of Default (as defined in the Security Agreement) and (y) may
be waived by the Holder upon provision of no less than sixty-one (61) days prior
written notice to the Company; provided, however, that, such written notice of
waiver shall only be effective to the extent that no indebtedness (including
principal, interest, fees and charges) of the Company to the Holder or any of
its Affiliates is outstanding.  Notwithstanding the foregoing, at no
time shall the Company be obligated to issue any shares of Common Stock pursuant
to the terms of this Warrant, the Security Agreement or any Ancillary Agreement
(as defined in the Security Agreement) if the issuance of such shares of Common
Stock would exceed the aggregate number of shares of Common Stock which the
Company may issue pursuant to the terms of this Warrant, the Security Agreement
or any Ancillary Agreement without violating the rules or regulations of the
Principal Market (the “Exchange
Cap”), except that such limitation shall not apply in the event that the
Company obtains the approval of its stockholders as required by the applicable
rules or regulations of the Principal Market for issuances of Common Stock in
excess of such amount.

       

      11.           Warrant
Agent.  The Company may, by written notice to the Holder of
this Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 1, exchanging
this Warrant pursuant to Section 7, and replacing this Warrant pursuant to
Section 8, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such
agent.

       

      12.           Transfer on the Company’s
Books.  Until this Warrant is transferred on the books of the
Company, the Company may treat the registered holder hereof as the absolute
owner hereof for all purposes, notwithstanding any notice to the
contrary.

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

       

      13.           Rights of
Shareholders.  The Holder shall not be entitled to vote or
receive dividends or be deemed the holder of the shares of Common Stock or any
other securities of the Company which may at any time be issuable upon exercise
of this Warrant for any purpose (the “Warrant Shares”), nor shall
anything contained herein be construed to confer upon the Holder, as such, any
of the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon the recapitalization, issuance of shares, reclassification of shares,
change of nominal value, consolidation, merger, conveyance or otherwise) or to
receive notice of meetings, or to receive dividends or subscription rights or
otherwise, in each case, until the earlier to occur of (x) the date of actual
delivery to Holder (or its designee) of the Warrant Shares issuable upon the
exercise hereof or (y) the third business day following the date such Warrant
Shares first become deliverable to Holder, as provided herein.

       

      14.           Notices,
Etc.  Except as set forth in this Section 14, all notices and
other communications from the Company to the Holder shall be mailed by first
class registered or certified mail, postage prepaid, or by any national
recognized overnight delivery service (“Overnight Courier”), at such address as
may have been furnished to the Company in writing by the Holder from time to
time.  Exercise Notices shall be delivered to the Company via
facsimile (“fax”) transmission to the Company (receipt confirmed electronically)
or via Overnight Courier.  The date on which an Exercise Notice shall
be deemed delivered to the Company shall be (a) in the event of a cashless
exercise, the date of the electronically confirmed receipt of the fax
transmission, provided such fax transmission is received by the Company before
5:00 pm Omaha, Nebraska time, or if not received during before 5:00 pm Omaha,
Nebraska time, then on the next business day after the date of delivery of such
facsimile; or (b) if the exercise is to be made by cash payment of the Exercise
Price, the date which is second business day following the date of mailing of
the original Exercise Notice and payment via Overnight Courier.

       

      15.           Miscellaneous.  This
Warrant and any term hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such change, waiver, discharge or termination is sought. THIS WARRANT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.  ANY ACTION
BROUGHT CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS WARRANT SHALL BE
BROUGHT ONLY IN THE STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN
THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT THE HOLDER MAY CHOOSE TO WAIVE
THIS PROVISION AND BRING AN ACTION OUTSIDE THE STATE OF NEW YORK.  The
individuals executing this Warrant on behalf of the Company agree to submit to
the jurisdiction of such courts and waive trial by jury.  The
prevailing party shall be entitled to recover from the other party its
reasonable attorneys’ fees and costs.  In the event that any provision
of this Warrant is invalid or unenforceable under any applicable statute or rule
of law, then such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform with such statute
or rule of law.  Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision of this Warrant.  The headings in this Warrant are
for purposes of reference only, and shall not limit or otherwise affect any of
the terms hereof.  The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provision hereof.  The Company acknowledges that legal counsel
participated in the preparation of this Warrant and, therefore, stipulates that
the rule of construction that ambiguities are to be resolved against the
drafting party shall not be applied in the interpretation of this Warrant to
favor any party against the other party.

       

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      SIGNATURE
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          8

          
            

          

        

        
           

        

      

       

      IN
WITNESS WHEREOF, the Company has executed this Warrant as of the date first
written above.

       

      

      
        
          
            
              
                	
                        WITNESS:

                      	 
      	
                        RAPID
      LINK, INCORPORATED

                      
	 
      	 
      	 
      	 
      
	 
      	 
      	
                        By:

                      	 
      
	 
      	 
      	 
      	
                        Name:

                      
	 
      	 
      	 
      	
                        Title:

                      

              

            

          

        

      

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

       

      EXHIBIT
A

       

      FORM
OF SUBSCRIPTION

       

      (To Be
Signed Only On Exercise Of Warrant)

      

      
        
          	
                  To:

                	 	
                  Rapid
      Link, Incorporated

                	 
      
	 
      	 	
                  _____________________

                	 
      
	 
      	 	
                  _____________________

                	 
      
	
                   

                	 	
                  Attention:

                	 
      

        

      

       

      The
undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____) (the “Warrant”), hereby irrevocably
elects to purchase (check applicable box):

      
        
          
            
              	________	 
      	
                      ________
      shares of the common stock covered by the Warrant; or

                    
	 	 	 
	________	 
      	
                      the
      maximum number of shares of common stock covered by the Warrant pursuant
      to the cashless exercise procedure set forth in Section 2 of the
      Warrant.

                    

            

          

        

      

       

      The
undersigned herewith makes payment of the full Exercise Price for such shares at
the price per share provided for in the Warrant, which is
$___________.  Such payment takes the form of (check applicable box or
boxes):

       

      
        
          
            
              
                	________	 
      	
                        $__________
      in lawful money of the United States; and/or

                      
	 	 	 
	________	 
      	
                        the
      cancellation of such portion of the Warrant as is exercisable for a total
      of _______ shares of Common Stock (using a Fair Market Value of $_______
      per share for purposes of this calculation); and/or

                      
	 	 	 
	________	 
      	
                        the
      cancellation of such number of shares of Common Stock as is necessary, in
      accordance with the formula set forth in Section 2.2 of the Warrant, to
      exercise this Warrant with respect to the maximum number of shares of
      Common Stock purchasable pursuant to the cashless exercise procedure set
      forth in Section 2 of the
Warrant.

                      

              

            

          

        

      

       

      The
undersigned requests that the certificates for such shares be issued in the name
of, and delivered to ______________________________________________ whose
address is
___________________________________________________________________________.

       

      The
undersigned represents and warrants that all offers and sales by the undersigned
of the securities issuable upon exercise of the Warrant shall be made pursuant
to registration of the Common Stock under the Securities Act of 1933, as amended
(the “Securities Act”)
or pursuant to an exemption from registration under the Securities
Act.

       

      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  Dated:

                                	 
      	 	 
      
	 
      	 
      	 	
                                  (Signature
      must conform to name of holder as specified on the face of the
      Warrant)

                                
	 
      	 
      	 	
                                  Address: 

                                	 
	 	 	 	 	 

                        

                      

                    

                  

                

              

            

          

        

      

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

       

      EXHIBIT
B

       

      FORM
OF TRANSFEROR ENDORSEMENT

       

      (To Be
Signed Only On Transfer Of Warrant)

       

      For value
received, the undersigned hereby sells, assigns, and transfers unto the
person(s) named below under the heading “Transferees” the right represented by
the within Warrant to purchase the percentage and number of shares of Common
Stock of Rapid Link, Incorporated. into which the within Warrant relates
specified under the headings “Percentage Transferred” and “Number Transferred,”
respectively, opposite the name(s) of such person(s) and appoints each such
person Attorney to transfer its respective right on the books of Rapid Link,
Incorporated with full power of substitution in the premises.

       

      
        
          
            
              
                	
                        Transferees

                      	
                        Address

                      	
                        Percentage Transferred

                      	
                        Number Transferred

                      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      

              

            

          

        

      

      

      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  	
                                          Dated:

                                        	 
      	 	 
      
	 
      	 
      	 	
                                          (Signature
      must conform to name of holder as specified on the face of the
      Warrant)

                                        
	 
      	 
      	 	
                                          Address: 

                                        	 
	 	 	 	 	 
	 	 	 	 
	 
      	 
      	 	
                                          SIGNED
      IN THE PRESENCE OF:

                                        
	 	 	 	 	 
	 
      	 
      	 	 
      
	 
      	 
      	 	
                                          (Name)

                                        

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

      

      
        
          
            
              	
                      ACCEPTED
      AND AGREED:

                      [TRANSFEREE]

                    	 
      
	 	 
	 
      	 
      
	
                      (Name)ex10_1.htm

    
      

    

    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 Amador 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.

           

          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            
                                                              
                                                                
                                                                  
                                                                    
                                                                      
                                                                        
                                                                          
                                                                            
                                                                              
                                                                                
                                                                                  
                                                                                    	 
      	
                                                                                            RAPID
      LINK, INCORPORATED

                                                                                          
	 	 
	 
      	
                                                                                            By:

                                                                                          	 
      
	 
      	 
      	
                                                                                            Name:

                                                                                          
	 
      	 
      	
                                                                                            Title:

                                                                                          
	 	 
	 
      	
                                                                                            TELENATIONAL
      COMMUNICATIONS, INC.

                                                                                          
	 	 
	 
      	
                                                                                            By:

                                                                                          	 
      
	 
      	 
      	
                                                                                            Name:

                                                                                          
	 
      	 
      	
                                                                                            Title:

                                                                                          
	 	 
	 
      	
                                                                                            ONE
      RING NETWORKS, INC.

                                                                                          
	 	 	 
	 
      	
                                                                                            By:

                                                                                          	 
      
	 
      	 
      	
                                                                                            Name:

                                                                                          
	 
      	 
      	
                                                                                            Title:

                                                                                          
	 	 
	 
      	
                                                                                            LV
      ADMINISTRATIVE SERVICES, INC.,

                                                                                          
	 
      	
                                                                                            as
      Agent

                                                                                          
	 	 	 
	 
      	
                                                                                            By:

                                                                                          	 
      
	 
      	 
      	
                                                                                            Name:

                                                                                          
	 
      	 
      	
                                                                                            Title:

                                                                                          
	 	 
	 
      	
                                                                                            LAURUS
      MASTER FUND, LTD.

                                                                                          
	 	 	 
	 
      	
                                                                                            By:

                                                                                          	
                                                                                            Laurus
      Capital Management, LLC, its investment manager

                                                                                          
	 	 	 
	 
      	
                                                                                            By:

                                                                                          	 
      
	 
      	 
      	
                                                                                            Name:

                                                                                          
	 
      	 
      	
                                                                                            Title:

                                                                                          
	 
      	 
      	 
      
	 
      	
                                                                                            VALENS
      U.S. SPV I, LLC, as a Lender

                                                                                          
	 	 	 
	 
      	
                                                                                            By:

                                                                                          	
                                                                                            Valens
      Capital Management, LLC, its investment manager

                                                                                          
	 	 	 
	 
      	
                                                                                            By:

                                                                                          	 
      
	 
      	 
      	
                                                                                            Name:

                                                                                          
	 
      	 
      	
                                                                                            Title:

                                                                                          
	 	 
	 
      	
                                                                                            VALENS
      OFFSHORE SPV II, CORP., as a Lender

                                                                                          
	 	 	 
	 
      	
                                                                                            By:

                                                                                          	
                                                                                            Valens
      Capital Management, LLC, its investment manager

                                                                                          
	 	 	 
	 
      	
                                                                                            By:

                                                                                          	 
      
	 
      	 
      	
                                                                                            Name:

                                                                                          
	 
      	 
      	
                                                                                            Title:

                                                                                          

                                                                                  

                                                                                

                                                                              

                                                                            

                                                                          

                                                                        

                                                                      

                                                                    

                                                                  

                                                                

                                                              

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

          
 

            SIGNATURE
PAGE TO

            AMENDMENT
NO. 1

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