Document:

ex10_1.htm

    
      

    

    Exhibit
10.1

     

    AMENDMENT
NO. 1 TO SECURITY AGREEMENT,

    SECURED
TERM A NOTE, SECURED TERM B NOTE

    AND
DEFERRED PURCHASE PRICE NOTES

    

    THIS
AMENDMENT (this “Amendment”) is dated
as of July 11, 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”), (b) Secured Term Note A dated March 31, 2008 (as amended,
modified, supplemented and/or restated from time to time, the “Secured Term A Note”)
in the original principal amount of $1,800,000 from the Companies in favor of
Valens Offshore SPV II, Corp., (c) Secured Term B Note dated July 11, 2008 (as
amended, modified, supplemented and/or restated from time to time, the “Secured Term B Note”)
in the original principal amount of $1,500,000 from the Companies in favor of
Valens U.S. SPV I, LLC (“Valens US”), (d)
Amended and Restated Deferred Purchase Price Note dated July 11, 2008 (as
amended, modified, supplemented and/or restated from time to time, the “Laurus Deferred Purchase
Price Note”) in the original principal amount of $2,290,450.56 from the
Companies in favor of Laurus Master Fund, Ltd. and (e) Amended and Restated
Deferred Purchase Price Note dated July 11, 2008 (as amended, modified,
supplemented and/or restated from time to time, the “Valens US Deferred Purchase
Price Note”) in the original principal amount of $292,709.40 from the
Companies in favor of Valens US.

    

    BACKGROUND

    

    WHEREAS,
pursuant to the Security Agreement, the Lenders have made financial
accommodations to the Companies that remain outstanding; and

    

    WHEREAS,
it is a condition to Companies receiving additional financial accommodations
from Lenders that the Parent or an Eligible Subsidiary have received the FCC
Approval.

    

    WHEREAS,
the Companies have requested that the Creditor Parties agree to provide
Companies with additional financial accommodations based upon a Special
Temporary Authorization from the FCC and the Creditor Parties are willing to do
so, but only on the terms and conditions hereinafter set forth.

    

    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)           Creditor
Parties agree that the Secured Party Sale Condition requiring the receipt of FCC
Approval has been temporarily satisfied by the Special Temporary Authorization
issued by the FCC to Telenational on June 20, 2008 (the “STA”).  Companies
agree to diligently provide the FCC with such information as the FCC requests in
order for the FCC to issue the permanent FCC Approval and to diligently pursue
the permanent FCC Approval.  In the event the FCC has not placed the
transfer of control on public notice by July 18, 2008, Companies shall request
and diligently pursue an extension of the STA.  In the event such
extension of the STA is not granted by August 19, 2008 and Companies have not
yet obtained the permanent FCC approval, it shall constitute an Event of Default
under the Security Agreement.

    

    (b)           Annex A- Commitment
Annex to the Security Agreement is hereby amended by deleting such Annex
in its entity and inserting in lieu thereof Annex A-Commitment
Annex attached hereto

    

    (c)           The
defined term “Revolving Commitment
Conditions” contained in the Security Agreement is amended to provide as
follows:

    

    “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) the consummation of
the Secured Party Sale, (b) no Event of Default shall have occurred and then be
continuing, (c) the execution and delivery by the Companies of the Secured
Revolving Notes, (d) the issuance of Revolving Warrants, (e) 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 and (f) 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.”

    

    (d)           The
definition of  “Secured Term A Notes”
is hereby amended by deleting the phrase “One Million Seven Hundred Thousand
Dollars ($1,700,000)” and inserting in lieu thereof the phrase “One Million
Eight Hundred Thousand Dollars ($1,800,000).”

    

    (e)           The
definition of “Secured
Term B Notes” is hereby amended by deleting the phrase “One Million Six
Hundred Thousand Dollars ($1,600,000)” and inserting in lieu thereof the phrase
“One Million Five Hundred Thousand Dollars ($1,500,000).”

    

    (f)           The
following defined terms are inserted in the appropriate alphabetical order in
Annex-A-Definitions:

    

    “Available Revolving
Commitment Amount” means (a) until the First EBITDA Target is achieved,
$0, (b) following the achievement of the First EBITDA Target until the
achievement of the Second EBITDA Target, the lesser of (i) fifty percent of the
Capital Availability Amount minus Reserves and (ii) fifty percent of the Formula
Amount and (c) following the achievement of the Second EBITDA Target, the lesser
of (i) the Capital Availability Amount minus Reserves and (ii) the Formula
Amount.

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    “First EBITDA Target”
means Consolidated EBITDA of the Companies and their Domestic Subsidiaries for
the period commencing on July 1, 2008 and ending on December 31, 2008, as
evidenced by the financial statements delivered to Agent pursuant to Section 11
for the fiscal year ending December 31, 2008, of $401,272.

    

    “Revolving Warrants”
means the issuance of Warrants to the Lenders for shares of Common Stock in an
amount equal to (a) on the achievement of the First EBITDA Target, twenty five
percent (25%) of $600,000 divided by the Share Price and (b) on the achievement
of the Second EBITDA Target, twenty five percent (25%) of $1,200,000 minus
$600,000 if the First EBITA Target has been achieved, divided by the Share
Price.

    

    “Second EBITDA Target”
means Consolidated EBITDA of the Companies and their Domestic Subsidiaries for
the period commencing on July 1, 2008 and ending on June 30, 2009, as evidenced
by the financial statements delivered to Agent pursuant to Section 11 for the
fiscal period ending June 30, 2009, of $1,329,509

    

    (g)           The
following is added at the end of Section 2(a)(i) of the Security
Agreement:

    

    “Notwithstanding
the foregoing, (W) the amount of Revolving Loans at any time shall not exceed
the applicable Available Revolving Commitment, (X) following the achievement of
the First EBITDA Target and the Second EBITDA Target , no Lender may make
Revolving Loans until Rapid Link shall deliver to each Lender the applicable
Revolving Warrants and Rapid Link shall deliver such Revolving Warrants within
three (3) Business Days of the achievement of the First EBITDA Target or the
Second EBITDA Target, as applicable.

    

    3.         
   Amendment to Secured Term A
Note.  Section 1.3 of the Secured Term A Note is hereby amended
by deleting such section in its entirety and inserting in lieu thereof the
following:

    

    “The
Companies may prepay this Note, in whole or in part, at any time without premium
or penalty.”

    

    4.          
  Amendment
to Secured Term B Note.  Section 1.3 of the Secured Term B Note
is hereby amended by deleting such section in its entirety and inserting in lieu
thereof the following:

    

    “The
Companies may prepay this Note, in whole or in part, at any time without premium
or penalty.”

    

    5.     
       Amendment to Laurus Deferred
Price Note.  Section 1.3 of the Laurus Deferred Purchase Price
Note is hereby amended by deleting such section in its entirety and inserting in
lieu thereof the following:

    

    “The
Companies may prepay this Note, in whole or in part, at any time without premium
or penalty.”

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    6.        
    Amendment to Valens US
Deferred Purchase Price Note.  Section 1.3 of the Valens US
Deferred Purchase Note is hereby amended by deleting such section in its
entirety and inserting in lieu thereof the following:

    

    “The
Companies may prepay this Note, in whole or in part, at any time without premium
or penalty.”

    

    7.        
    Agreement Regarding
Fees.  Notwithstanding anything to the contrary contained in
Section 5(b)(i) of the Security Agreement, the payments set forth in clauses
5(b)(i)(A), 5(b)(i)(B) and 5(b)(i)(C) relating to the Secured Revolving Notes
and Secured Term B Notes, shall be deemed fully earned on the Effective Date (as
defined below) and shall be paid on the Effective Date pursuant to a
disbursement letter executed in connection herewith.

    

    8.       
     Conditions of
Effectiveness.  This Amendment shall become effective (the
“Effective
Date”) upon receipt by the Agent of counterparts of this Amendment duly
executed and delivered by the Companies and the Creditor Parties.

    

    9.         
   Representations and
Warranties.  Each Company hereby represents and warrants as
follows:

    

    (a)           This
Amendment and the Security Agreement, as amended hereby, constitute legal, valid
and binding obligations of the Company and are enforceable against the Company
in accordance with their respective terms.

    

    (b)           Upon
the effectiveness of this Amendment, the 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 after giving
effect to this Amendment.

    

    (d)           No
Company has any defense, counterclaim or offset with respect to any
Document.

    

    10.           Effect on the Loan
Agreement.

    

    (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.

    

    11.           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.

    

    12.           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.

    

    13.           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:

            	 
      

    

     

    SIGNATURE PAGE TO

    AMENDMENT NO. 1

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

     

    
      	 
      	
              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

       

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    Annex
A

    

    Commitment
Annex

    (as
of the Closing Date)

    

    

    
      	
              Lender

            	 	
              Revolving
      Commitment Amount

            	 	 	
              Revolving
      Commitment Percentage

            	 	 	
              Term
      Loan A Commitment Amount

            	 	 	
              Term
      Loan A Percentage

            	 	 	
              Term
      Loan B Commitment Amount

            	 	 	
              Term
      Loan B Percentage

            	 	 	
              Deferred
      Purchase Price Commitment Amount

            	 	 	
              Deferred
      Purchase Price Percentage

            	 
	
              Valens
      U.S. SPV I, LLC

            	 	$	
              1,200,000

            	 	 	 	
              100

            	%	 	$	
              0

            	 	 	 	
              0

            	%	 	$	
              1,500,000

            	 	 	 	
              0

            	%	 	$	
              292,709.40

            	 	 	 	
              11.33

            	%
	
              Valens
      Offshore SPV II, Corp.

            	 	$	
              0

            	
               

            	 	 	
              0

            	%	 	$	
              1,800,000

            	 	 	 	
              100

            	%	 	$	
              0

            	 	 	 	
              100

            	%	 	 	
              0

            	%	 	 	
              0

            	%
	
              Laurus
      Master Fund, Ltd.

            	 	$	
              0

            	 	 	 	
              0

            	%	 	$	
              0

            	 	 	 	
              0

            	%	 	$	
              0

            	 	 	 	
              0

            	%	 	$	
              2,290,450.56

            	 	 	 	
              88.67

            	%
	 
      	 	 	
               

            	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
               

            	 	 	 	 	 
	
              Total

            	 	$	
              1,200,000

            	 	 	 	
              100

            	%	 	$	
              1,800,000

            	 	 	 	
              100

            	%	 	$	
              1,500,000

            	 	 	 	
              100

            	%	 	$	
              2,583,159.96

            	 	 	 	
              100

            	%ex10_2.htm

    
      

    

    Exhibit
10.2

     

    REGISTRATION
RIGHTS AGREEMENT

    

    This
Registration Rights Agreement (as amended, modified or supplemented from time to
time, this “Agreement”) is made
and entered into as of July 11, 2008, by and between Rapid Link, Incorporated, a
Delaware corporation (the “Company”), and Valens
U.S. SPV I, LLC (the “Investor”).

    

    This
Agreement is made pursuant to the Security Agreement, dated as of the date
hereof, by and between the Agent, the Lenders, the Company, the Eligible
Subsidiaries from time to time party thereto (as amended, modified or
supplemented from time to time, the “Security Agreement”)
and pursuant to the Warrants referred to therein.

    

    The
Company and the Investor hereby agree as follows:

    

    1.         
   Definitions.  Capitalized
terms used and not otherwise defined herein that are defined in the Security
Agreement shall have the meanings given such terms in the Security
Agreement.  As used in this Agreement, the following terms shall have
the following meanings:

    

    “Commission” means the
Securities and Exchange Commission.

    

    “Common Stock” means shares
of the Company’s common stock, par value $0.001 per share.

    

    “Company” has the meaning
given to such term in the Preamble hereto.

    

    “Effectiveness Date” means,
(i) with respect to the initial Registration Statement required to be filed in
connection with the Warrants issued on the date hereof, a date no later than one
hundred eighty (180) days following the date on which Holder exercises its
rights under Section 2(a) hereof and (ii) with respect to each additional
Registration Statement required to be filed hereunder (if any), a date no later
than thirty (30) days following the applicable Filing Date other than an
additional Registration Statement required to be filed pursuant to Section
2(a)(2) hereof, a date no later than seventy-five (75) days following the
applicable Filing Date.

    

    “Effectiveness Period” has
the meaning set forth in Section 2(a).

    

    “Event” has the meaning set
forth in Section 2(b).

    

    “Event Date” has the meaning
set forth in Section 2(b).

    

    “Exchange Act” means the
Securities Exchange Act of 1934, as amended, and any successor
statute.

    

    “Filing Date” means, with
respect to (1) the Registration Statement required to be filed in connection
with the shares of Common Stock issuable to the Holder upon exercise of any
Warrant issued as of the date hereof, the date which is ninety (90) days
following the date on which Holder exercises its rights under Section 2(a)
hereof, (2) the Registration Statement required to be filed in connection with
the shares of Common Stock issuable to the Holder upon exercise of any Warrant
issued after the date hereof, the date which is thirty (30) days after the
issuance of such Warrant and (3) the Registration Statement required to be filed
in connection with the shares of Common Stock issuable to the Holder as a result
of adjustments to the Exercise Price made pursuant to Section 4 of the Warrant
or otherwise, thirty (30) days after the occurrence of such event or the date of
the adjustment of the Exercise Price.

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    “Holder” or “Holders” means the Investor
or any of its affiliates or transferees to the extent any of them hold
Registrable Securities, other than those purchasing Registrable Securities in a
market transaction.

    

    “Indemnified Party” has the
meaning set forth in Section 5(c).

    

    “Indemnifying Party” has the
meaning set forth in Section 5(c).

    

    “Notes” shall mean the Secured
Term A Notes, the Secured Revolving Notes and the Secured Term B
Notes.

    

    “Proceeding” means an action,
claim, suit, investigation or proceeding (including, without limitation, an
investigation or partial proceeding, such as a deposition), whether commenced or
threatened.

    

    “Prospectus” means the
prospectus included in a Registration Statement (including, without limitation,
a prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Registrable Securities covered by such Registration Statement, and all
other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.

    

    “Registrable Securities”
means the shares of Common Stock issuable upon exercise of the
Warrants.

    

    “Registration Statement”
means each registration statement required to be filed hereunder, including the
Prospectus therein, amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits thereto,
and all material incorporated by reference or deemed to be incorporated by
reference in such registration statement.

    

    “Rule 144” means Rule 144
promulgated by the Commission pursuant to the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such
Rule.

    

    “Rule 415” means Rule 415
promulgated by the Commission pursuant to the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such
Rule.

    

    
      
        
           

        

        
          2

          
            

          

        

        
           

        

      

    

    

    “Securities Act” means the
Securities Act of 1933, as amended, and any successor statute.

    

    “Security Agreement” has the
meaning given to such term in the Preamble hereto.

    

    “Trading Market” means any of
the NASD Over The Counter Bulletin Board, NASDAQ Capital Market, the NASDAQ
Global Market, the American Stock Exchange or the New York Stock
Exchange.

    

    “Warrants” means the Common
Stock purchase warrants issued in connection with the Security Agreement,
whether on the date thereof or thereafter.

    

    2.        
    Registration.

    

    (a)           The
Company covenants and agrees that in the event the Investor or any assignee of
the Investor attempts to sell any Registrable Securities after that date which
is six (6) months following the date hereof and is unable, for any reason, to do
so pursuant to an exemption to registration under Rule 144, then, the Investor
by written demand to the Company may require the Company to file a registration
statement under the Securities Act covering the registration of the Registrable
Securities that have not been registered, whereupon the Company
shall:

    

    (1)           as
soon as practicable, and in any event by the Filing Date, file with the
Commission a Registration Statement covering all Registrable Securities for a
selling stockholder resale offering to be made on a continuous basis pursuant to
Rule 415; and

    

    (2)           use
its best efforts to cause such Registration Statement to be declared effective
by the Commission as promptly as possible after the filing thereof, but in no
event later than the Effectiveness Date.  On or prior to each Filing
Date, the Company shall prepare and file with the Commission a Registration
Statement covering the Registrable Securities for a selling stockholder resale
offering to be made on a continuous basis pursuant to Rule 415.  Each
Registration Statement shall be on Form S-3 (except if the Company is not then
eligible to register for resale the Registrable Securities on Form S-3, in which
case such registration shall be on another appropriate form in accordance
herewith).  Notwithstanding the
registration obligations set forth in Section 2(a)(1), in the event the
Commission informs the Company that all of the Registrable Securities cannot, as
a result of the application of Rule 415, be registered for resale as a secondary
offering on a single Registration Statement, the Company agrees to promptly (i)
inform each Investor thereof, (ii) use its best efforts to file amendments to
the initial Registration Statement (“Initial Registration Statement”) as
required by the Commission and/or (iii) withdraw the Initial Registration
Statement and file a new Registration Statement (“New Registration Statement”),
in either case covering the maximum number of Securities permitted to be
registered by the SEC on Form S-3 or such other form available to register for
resale the Securities as a secondary offering, with the number of shares
included on such amendment or the New Registration Statement cut back
proportionally for each Investor.  In the event the Company amends the
Initial Registration Statement or files a New Registration Statement, as the
case may be, under clauses (ii) or (iii) above, the Company will use its
commercially reasonable efforts to file with the SEC, as promptly as allowed by
the SEC, one or more registration statements on Form S-3 or such other form
available to register for resale those Securities that were not registered for
resale on the Initial Registration Statement, as amended, or the New
Registration Statement.  The Company shall cause each
Registration Statement to become effective and remain effective as provided
herein.  The Company shall use its best efforts to cause each
Registration Statement to be declared effective under the Securities Act as
promptly as possible after the filing thereof, but in any event no later than
the Effectiveness Date.  The Company shall use its best efforts to
keep each Registration Statement continuously effective under the Securities Act
until the date which is the earlier date of  (i) when all Registrable
Securities covered by such Registration Statement have been sold, (ii) when all
Registrable Securities covered by such Registration Statement may be sold
immediately without registration under the Securities Act and without volume
restrictions pursuant to Rule 144(b)(1)(i), as determined by the counsel to the
Company pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company’s transfer agent and the affected Holders, or (iii)
the second anniversary of the date on which the SEC declares such Registration
Statement effective (each, an “Effectiveness
Period”).

    

    
      
        
           

        

        
          3

          
            

          

        

        
           

        

      

    

    

    (b)           If:
(i) the Registration Statement is not filed on or prior to the Filing Date; (ii)
the Registration Statement is not declared effective by the Commission by the
Effectiveness Date; (iii) after the Registration Statement is filed with and
declared effective by the Commission, the Registration Statement ceases to be
effective (by suspension or otherwise) as to all Registrable Securities to which
it is required to relate at any time prior to the expiration of the
Effectiveness Period (without being succeeded immediately by an additional
registration statement filed and declared effective) for a period of time which
shall exceed 45 days in the aggregate per year or more than 30 consecutive
calendar days (defined as a period of 365 days commencing on the date the
Registration Statement is declared effective); or (iv) the Common Stock is not
listed or quoted, or is suspended from trading on any Trading Market for a
period of three (3) consecutive Trading Days (provided the Company shall not
have been able to cure such trading suspension within 30 days of the notice
thereof or list the Common Stock on another Trading Market); (any such failure
or breach being referred to as an “Event,” and for purposes of clause (i) or
(ii) the date on which such Event occurs, or for purposes of clause (iii) the
date which such 45 day or 30 consecutive day period (as the case may be) is
exceeded, or for purposes of clause (iv) the date on which such three (3)
Trading Day period is exceeded, being referred to as “Event Date”), then
until the applicable Event is cured, the Company shall pay to each Holder an
amount in cash, as liquidated damages and not as a penalty, equal to 1.0% for
each thirty (30) day period (prorated for partial periods) on a daily basis of
the aggregate original principal amount of the Notes.  While such
Event continues, such liquidated damages shall be paid not less often than each
thirty (30) days.  Any unpaid liquidated damages as of the date when
an Event has been cured by the Company shall be paid within three (3) days
following the date on which such Event has been cured by the
Company.  No liquidated damages shall
accrue for periods during which the Registrable Securities (assuming cashless
exercise, if so required for Rule 144 eligibility) may be sold without
restriction under Rule 144(b)(1)(i).

    

    (c)           Within
three (3) business days of the Effectiveness Date, the Company shall cause its
counsel to issue a blanket opinion in the form attached hereto as Exhibit A, to
the transfer agent stating that the shares are subject to an effective
registration statement and can be reissued free of restrictive legend upon
notice of a sale by the Investor and confirmation by the Investor that it has
complied with the prospectus delivery requirements, provided that the
Company has not advised the transfer agent orally or in writing that the opinion
has been withdrawn. Copies of the blanket opinion required by this Section 2(c)
shall be delivered to the Investor within the time frame set forth
above.

    

    
      
        
           

        

        
          4

          
            

          

        

        
           

        

      

    

    

    3.          
  Registration
Procedures.  If and whenever the Company is required by the
provisions hereof to effect the registration of any Registrable Securities under
the Securities Act, the Company will, as expeditiously as possible:

    

    (a)           prepare
and file with the Commission a Registration Statement with respect to such
Registrable Securities, respond as promptly as possible to any comments received
from the Commission, and use its best efforts to cause such Registration
Statement to become and remain effective for the Effectiveness Period with
respect thereto, and promptly provide to the Investor copies of all filings and
Commission letters of comment relating thereto and before filing a Registration
Statement or Prospectus or any amendments or supplements thereto, furnish to the
Investor copies of all such documents proposed to be filed, including documents
incorporated by reference in the Prospectus and, if requested by the
Investor, the exhibits incorporated by reference, and the Investor shall
have the opportunity to object to any information pertaining to itself that
is contained therein and the Company will make the corrections reasonably
requested by the Investor with respect to such information prior to filing
any Registration Statement or amendment thereto or any Prospectus or any
supplement thereto;

    

    (b)           prepare
and file with the Commission such amendments and supplements to such
Registration Statement and the Prospectus used in connection therewith as may be
necessary to comply with the provisions of the Securities Act with respect to
the disposition of all Registrable Securities covered by such Registration
Statement and to keep such Registration Statement effective until the expiration
of the Effectiveness Period applicable to such Registration
Statement;

    

    (c)           furnish
to the Investor such number of copies of the Registration Statement and the
Prospectus included therein (including each preliminary Prospectus and any
amendments and supplements to the Registration Statement and the Prospectus) and
such other documents as the Investor reasonably may request to facilitate the
public sale or disposition of the Registrable Securities covered by such
Registration Statement;

    

    (d)           use
its best efforts to register or qualify the Investor’s Registrable Securities
covered by such Registration Statement under the securities or “blue sky” laws
of such jurisdictions within the United States as the Investor may reasonably
request and do any and all other acts and things which may be reasonably
necessary or advisable to enable the Investor to consummate the disposition in
such jurisdiction of the Registrable Securities, provided, however, that the
Company shall not for any such purpose be required to qualify generally to
transact business as a foreign corporation in any jurisdiction where it is not
so qualified or to consent to general service of process in any such
jurisdiction;

    

    (e)           list
the Registrable Securities covered by such Registration Statement with any
Trading Market exchange on which the Common Stock of the Company is then listed
or quoted and, if the Common Stock is not then listed or quoted , list or quoted
the Registrable Securities on NASDAQ’s Over the Counter Bulletin, NASDAQ or a
national securities exchange selected by the Company;

    

    
      
        
           

        

        
          5

          
            

          

        

        
           

        

      

    

    

    (f)           immediately
notify the Investor at any time when a Prospectus relating thereto is required
to be delivered under the Securities Act, of the happening of any event as a
result of which the Prospectus contained in such Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and, at the request of the Investor, the Company shall
prepare a supplement or amendment to such Prospectus so that, as thereafter
delivered to the purchasers of Registrable Securities, such Prospectus shall not
contain an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statement therein
not misleading;

    

    (g)           make
available for inspection by the Investor and any attorney, accountant or other
agent retained by the Investor, all publicly available, non-confidential
financial and other records, pertinent corporate documents and properties of the
Company, and cause the Company’s officers, directors and employees to supply all
publicly available, non-confidential information reasonably requested by the
attorney, accountant or agent of the Investor;

    

    (h)           provide
a transfer agent and registrar for all such Registrable Securities not later
than the effective date of such Registration Statement;

    

    (i)           if
requested, cause to be delivered, immediately prior to the effectiveness of the
Registration Statement, letters from the Company’s independent certified public
accountants addressed to the Investor (unless the Investor does not provide to
such accountants the appropriate representation letter required by rules
governing the accounting profession) stating that such accountants are
independent public accountants within the meaning of the Securities Act and the
applicable rules and regulations adopted by the SEC thereunder, and otherwise in
customary form and covering such financial and accounting matters as are
customarily covered by letters of the independent certified public accountants
delivered in connection with primary or secondary underwritten public offerings,
as the case may be; and

    

    (j)           at
all times after the Company has filed a Registration Statement with the SEC
pursuant to the requirements of either the Securities Act or the Exchange Act,
the Company shall file all reports required to be filed by it under the
Securities Act and the Exchange Act and the rules and regulations adopted by the
SEC thereunder, and take such further action as the Investor may reasonably
request, all to the extent required to enable the Investor to be eligible to
sell Registrable Securities pursuant to Rule 144 (or any similar rule then in
effect).

    

    4.       
     Registration
Expenses.  All expenses relating to the Company’s compliance
with Sections 2 and 3 hereof, including, without limitation, all registration,
filing and listing application fees, costs of distributing any prospectuses and
supplements thereto, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company, fees and expenses (including
counsel fees) incurred in connection with complying with state securities or
“blue sky” laws, fees of the FINRA, NASDAQ, transfer taxes, fees of transfer
agents and registrars, fees of, and disbursements incurred by, one counsel for
the Holders are called “Registration Expenses.” All selling commissions
applicable to the sale of Registrable Securities, including any fees and
disbursements of any special counsel to the Holders beyond those included in
Registration Expenses, are called “Selling Expenses.”  The Company
shall only be responsible for all Registration Expenses.  The
obligation of the Company to bear the expenses
described  above  shall apply irrespective of whether a
registration, becomes effective, is withdrawn or suspended, is converted to
another form of registration and irrespective of when any of the foregoing shall
occur.

    

    
      
        
           

        

        
          6

          
            

          

        

        
           

        

      

    

    

    5.          
  Indemnification.

    

    (a)           In
the event of a registration of any Registrable Securities under the Securities
Act pursuant to this Agreement, the Company will indemnify and hold harmless
each Holder, and its officers, directors and each other person, if any, who
controls such Holder within the meaning of the Securities Act, against any
losses, claims, damages or liabilities, joint or several, to which such Holder,
or such persons may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any Registration Statement under
which such Registrable Securities were registered under the Securities Act
pursuant to this Agreement, any preliminary Prospectus or final Prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading or any violation or alleged violation by the Company of the
Securities Act, the Exchange Act or applicable “blue sky” laws, and will
reimburse such Holder, and each such person for any legal or other expenses
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the
Company will not be liable in any such case if and to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished by or on behalf of the Investor or any
such person in writing specifically for use in any such document.

    

    (b)           In
the event of a registration of the Registrable Securities under the Securities
Act pursuant to this Agreement, the Investor will indemnify and hold harmless
the Company, and its officers, directors and each other person, if any, who
controls the Company within the meaning of the Securities Act, against all
losses, claims, damages or liabilities, joint or several, to which the Company
or such persons may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact which was furnished in writing by the Investor to
the Company expressly for use in (and such information is contained in) the
Registration Statement under which such Registrable Securities were registered
under the Securities Act pursuant to this Agreement, any preliminary Prospectus
or final Prospectus contained therein, or any amendment or supplement thereof,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and each such
person for any reasonable legal or other expenses incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action, provided, however, that the
Investor will be liable in any such case if and only to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished in writing to the Company by or on behalf
of the Investor specifically for use in any such
document.  Notwithstanding the provisions of this paragraph, the
Investor shall not be required to indemnify any person or entity in excess of
the amount of the aggregate net proceeds received by the Investor in respect of
Registrable Securities in connection with any such registration under the
Securities Act.

    

    
      
        
           

        

        
          7

          
            

          

        

        
           

        

      

    

    

    (c)           Promptly
after receipt by a party entitled to claim indemnification hereunder (an “Indemnified Party”)
of notice of the commencement of any action, such Indemnified Party shall, if a
claim for indemnification in respect thereof is to be made against a party
hereto obligated to indemnify such Indemnified Party (an “Indemnifying Party”),
notify the Indemnifying Party in writing thereof, but the omission so to notify
the Indemnifying Party shall not relieve it from any liability which it may have
to such Indemnified Party other than under this Section 5(c) and shall only
relieve it from any liability which it may have to such Indemnified Party under
this Section 5(c) if and to the extent the Indemnifying Party is prejudiced by
such omission. In case any such action shall be brought against any Indemnified
Party and it shall notify the Indemnifying Party of the commencement thereof,
the Indemnifying Party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such Indemnified Party, and, after notice from the Indemnifying
Party to such Indemnified Party of its election so to assume and undertake the
defense thereof, the Indemnifying Party shall not be liable to such Indemnified
Party under this Section 5(c) for any legal expenses subsequently incurred by
such Indemnified Party in connection with the defense thereof; if the
Indemnified Party retains its own counsel, then the Indemnified Party shall pay
all fees, costs and expenses of such counsel, provided, however, that, if the
defendants in any such action include both the Indemnified Party and the
Indemnifying Party and the Indemnified Party shall have reasonably concluded
that there may be reasonable defenses available to it which are different from
or additional to those available to the Indemnifying Party or if the interests
of the Indemnified Party reasonably may be deemed to conflict with the interests
of the Indemnifying Party, the Indemnified Party shall have the right to select
one separate counsel and to assume such legal defenses and otherwise to
participate in the defense of such action, with the reasonable expenses and fees
of such separate counsel and other expenses related to such participation to be
reimbursed by the Indemnifying Party as incurred.

    

    (d)           In
order to provide for just and equitable contribution in the event of joint
liability under the Securities Act in any case in which either (i) the Investor,
or any officer, director or controlling person of the Investor, makes a claim
for indemnification pursuant to this Section 5 but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and the expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case notwithstanding the
fact that this Section 5 provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the part of the
Investor or such officer, director or controlling person of the Investor in
circumstances for which indemnification is provided under this Section 5; then,
and in each such case, the Company and the Investor will contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that the Investor is
responsible only for the portion represented by the percentage that the public
offering price of its securities offered by the Registration Statement bears to
the public offering price of all securities offered by such Registration
Statement, provided, however, that, in any
such case, (A) the Investor will not be required to contribute any amount in
excess of the public offering price of all such securities offered by it
pursuant to such Registration Statement; and (B) no person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 10(f) of the Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.

    

    
      
        
           

        

        
          8

          
            

          

        

        
           

        

      

    

    

    (e)           The
indemnification provided for under this Agreement shall remain in full force and
effect regardless of any investigation made by or on behalf of the indemnified
party or any officer, director or controlling Person of such indemnified party
and shall survive the transfer of securities.

    

    6.     
       Representations and
Warranties.

    

    (a)           The
Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange
Act and, except with respect to certain matters which the Company has disclosed
to the Investor on Schedule 12(u) to the
Security Agreement, the Company has timely filed all proxy statements, reports,
schedules, forms, statements and other documents required to be filed by it
under the Exchange Act.  The Company has filed (i) its Annual Report
on Form 10-KSB for its fiscal year
ended            October
31, 2007 and (ii) its Quarterly Report on Form 10-QSB for the fiscal quarters
ended January 31, 2008, July 31, 2007, April 30, 2007 and January 31, 2007
(collectively, the “SEC Reports”).  Each SEC Report was, at the time
of its filing, in substantial compliance with the requirements of its respective
form and none of the SEC Reports, nor the financial statements (and the notes
thereto) included in the SEC Reports, as of their respective filing dates,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading.  The financial statements of the Company included in the
SEC Reports comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission or other applicable rules and regulations with respect
thereto.  Such financial statements have been prepared in accordance
with generally accepted accounting principles (“GAAP”) applied on a
consistent basis during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or (ii) in the case
of unaudited interim statements, to the extent they may not include footnotes or
may be condensed) and fairly present in all material respects the financial
condition, the results of operations and the cash flows of the Company and its
subsidiaries, on a consolidated basis, as of, and for, the periods presented in
each such SEC Report.

    

    (b)           The
Common Stock is listed or quoted, as applicable, for trading on the NASDAQ Over
The Counter Bulletin Board and satisfies all requirements for the continuation
of such listing or quotation, as applicable, and the Company shall do all things
necessary for the continuation of such listing or quotation, as
applicable.  The Company has not received any notice that its Common
Stock will be delisted from or no longer be quoted on, as applicable, the NASDAQ
Over The Counter Bulletin Board (except for prior notices which have been fully
remedied) or that the Common Stock does not meet all requirements for the
continuation of such listing or quotation, as applicable.

    

    
      
        
           

        

        
          9

          
            

          

        

        
           

        

      

    

    

    (c)           Neither
the Company, nor any of its affiliates, nor any person acting on its or their
behalf, has directly or indirectly made any offers or sales of any security or
solicited any offers to buy any security under circumstances that would cause
the offering of the Securities pursuant to the Security Agreement to be
integrated with prior offerings by the Company for purposes of the Securities
Act which would prevent the Company from selling the Common Stock pursuant to
Rule 506 under the Securities Act, or any applicable exchange-related
stockholder approval provisions, nor will the Company or any of its affiliates
or subsidiaries take any action or steps that would cause the offering of the
Securities to be integrated with other offerings (other than such concurrent
offering to the Investor).

    

    (d)           The
Warrants and the shares of Common Stock that the Investor may acquire pursuant
to the Warrants are all restricted securities under the Securities Act as of the
date of this Agreement.  The Company will not issue any stop transfer
order or other order impeding the sale and delivery of any of the Registrable
Securities at such time as such Registrable Securities are registered for public
sale or an exemption from registration is available, except as required by
federal or state securities laws.

    

    (e)           The
Company understands the nature of the Registrable Securities issuable upon the
exercise of each Warrant and recognizes that the issuance of such Registrable
Securities may have a potential dilutive effect.  The Company
specifically acknowledges that its obligation to issue the Registrable
Securities is binding upon the Company and enforceable regardless of the
dilution such issuance may have on the ownership interests of other shareholders
of the Company.

    

    (f)           Except
for agreements made in the ordinary course of business, there is no agreement
that has not been filed with the Commission as an exhibit to a registration
statement or to a form required to be filed by the Company under the Exchange
Act, the breach of which could reasonably be expected to have a material and
adverse effect on the Company and its subsidiaries, or would prohibit or
otherwise interfere with the ability of the Company to enter into and perform
any of its obligations under this Agreement in any material
respect.

    

    (g)           The
Company will at all times have authorized and reserved a sufficient number of
shares of Common Stock for the full exercise of the Warrants.

    

    (h)           The
Company shall provide written notice to each Holder of (i) the occurrence of
each Discontinuation Event (as defined below) and (ii) the declaration of
effectiveness by the SEC of each Registration Statement required to be filed
hereunder, in each case within one (1) business day of the date of each such
occurrence and/or declaration.

    

    7.       
     Miscellaneous.

    

    (a)           Remedies.  In the
event of a breach by the Company or by a Holder, of any of their respective
obligations under this Agreement, each Holder or the Company, as the case may
be, in addition to being entitled to exercise all rights granted by law and
under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement.

    

    
      
        
           

        

        
          10

          
            

          

        

        
           

        

      

    

    

    (b)           No Piggyback on
Registrations.  Except as and to the extent set forth on
Schedule 7(b) hereto, neither the Company nor any of its security holders (other
than the Holders in such capacity pursuant hereto) may include securities of the
Company in any Registration Statement other than the Registrable Securities, and
the Company shall not after the date hereof enter into any agreement providing
any such right for inclusion of shares in the Registration Statement to any of
its security holders.  Except as and to the extent specified in Schedule 7(b) hereto,
the Company has not previously entered into any agreement granting any
registration rights with respect to any of its securities to any person or
entity that have not been fully satisfied.

    

    (c)           Compliance.  Each
Holder covenants and agrees that it will comply with the prospectus delivery
requirements of the Securities Act as applicable to it in connection with sales
of Registrable Securities pursuant to any Registration
Statement.  Each Holder further
covenants and agrees that it will not effect any disposition of the Registrable
Securities or its right to purchase the Registrable Securities that would
constitute a sale within the meaning of the Securities Act other than
transactions exempt from the registration requirements of the Securities Act, or
as contemplated in the Registration Statement, and that it will promptly notify the
Company of any material changes in the information set forth in the Registration
Statement regarding the Holders or its plan of distribution.

    

    (d)           Discontinued
Disposition.  Each Holder agrees by its acquisition of such
Registrable Securities that, upon receipt of a notice from the Company of the
occurrence of a Discontinuation Event (as defined below), such Holder will
forthwith discontinue disposition of such Registrable Securities under the
applicable Registration Statement until such Holder’s receipt of the copies of
the supplemented Prospectus and/or amended Registration Statement or until it is
advised in writing (the “Advice”) by the
Company that the use of the applicable Prospectus may be resumed, and, in either
case, has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement.  The Company may provide appropriate stop
orders to enforce the provisions of this paragraph.  For purposes of
this Agreement, a “Discontinuation Event” shall mean (i) when the Commission
notifies the Company whether there will be a “review” of such Registration
Statement and whenever the Commission comments in writing on such Registration
Statement (the Company shall provide true and complete copies thereof and all
written responses thereto to each of the Holders); (ii) any request by the
Commission or any other Federal or state governmental authority for amendments
or supplements to such Registration Statement or Prospectus or for additional
information; (iii) the issuance by the Commission of any stop order suspending
the effectiveness of such Registration Statement covering any or all of the
Registrable Securities or the initiation of any Proceedings for that purpose;
(iv) the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any Proceeding for such purpose; and/or (v) the occurrence of any
event or passage of time that makes the financial statements included in such
Registration Statement ineligible for inclusion therein or any statement made in
such Registration Statement or Prospectus or any document incorporated or deemed
to be incorporated therein by reference untrue in any material respect or that
requires any revisions to such Registration Statement, Prospectus or other
documents so that, in the case of such Registration Statement or Prospectus, as
the case may be, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.

    

    
      
        
           

        

        
          11

          
            

          

        

        
           

        

      

    

    

    (e)           Piggy-Back
Registrations.  If at any time during the applicable
Effectiveness Period there is not an effective Registration Statement covering
all of the Registrable Securities required to be covered during such
Effectiveness Period and the Company shall determine to prepare and file with
the Commission a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall promptly send to each Holder written
notice of such determination and, if within fifteen (15) days after receipt of
such notice, any such Holder shall so request in writing, the Company shall
include in such registration statement all or any part of such Registrable
Securities such Holder requests to be registered, to the extent the Company may
do so without violating registration rights of others which exist as of the date
of this Agreement, subject to customary underwriter cutbacks applicable to all
holders of registration rights and subject to obtaining any required consent of
any selling stockholder(s) to such inclusion under such registration statement
and subject to any limitations mandated by the SEC, including, without
limitation, restrictions on the number of shares registrable pursuant to Rule
415.

    

    (f)           Amendments and
Waivers.  The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the same shall be in writing and signed by the Company and the Holders of
majority of the then outstanding Registrable
Securities.  Notwithstanding the foregoing, a waiver or consent to
depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of certain Holders and that does not directly or
indirectly affect the rights of other Holders may be given by Holders of at
least a majority of the Registrable Securities to which such waiver or consent
relates; provided, however, that the
provisions of this sentence may not be amended, modified, or supplemented except
in accordance with the provisions of the immediately preceding
sentence.

    

    (g)           Notices.  Any
notice, request, correspondence or document required to be delivered hereunder
may be given to the Company or the Investor at the respective addresses set
forth below or as may hereafter be specified in a notice designated as a change
of address under this Section 7(g).  Any notice, request,
correspondence or document required to be delivered hereunder shall be given by
registered or certified mail, return receipt requested, hand delivery, overnight
mail, Federal Express or other national overnight next day carrier
(collectively, “Courier”) or telecopy
(confirmed by mail).  Notices, requests, correspondence or documents
required to be delivered hereunder shall be, in the case of those by hand
delivery, deemed to have been given when delivered to any party to whom it is
addressed, in the case of those by mail or overnight mail, deemed to have been
given three (3) business days after the date when deposited in the mail or with
the overnight mail carrier, in the case of a Courier, the next business day
following timely delivery of the package with the Courier, and, in the case of a
telecopy, when confirmed.  The address for such notices and
communications shall be as follows:

    

    
      
        
           

        

        
          12

          
            

          

        

        
           

        

      

    

    

    
      	
               
      

            	
              If to the
      Company:

            	
              Rapid
      Link, Incorporated

            

    

    5408 No.
99th
Street

    Omaha, NE
68134

    Attention:         Chris
Canfield

    Telephone:       970-547-8165

    Facsimile:          420-392-7545

    

    with
a copy to:

    Crosby
Guenzel LLP

    134 South
13th
Street

    Lincoln,
Nebraska 68508

    Attention:         Thomas
E. Jeffers

    Telephone:       (402)
434-7300

    Facsimile:          (402)434-7303

    

    
      	
               
      

            	
              If to
      Investor:

            	
              To
      the address set forth under Investor’s name on the signature pages
      hereto.

            

    

    

    If
to any other Person who is

    
      	
               
      

            	
              then the registered
      Holder:

            	
              To
      the address of such Holder as it appears in the stock transfer books of
      the Company

            

    

    

    or such
other address as may be designated in writing hereafter in accordance with this
Section 7(g) by such Person.

    

    (h)           Successors and
Assigns.  This Agreement shall inure to the benefit of and be
binding upon the successors and permitted assigns of each of the parties and
shall inure to the benefit of each Holder.  The Company may not assign
its rights or obligations hereunder without the prior written consent of each
Holder.  Each Holder may assign their respective rights hereunder in
the manner and to the persons and entities as permitted under the Security
Agreement.

    

    (i)           Execution and
Counterparts.  This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same
agreement.  In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.

    

    
      
        
           

        

        
          13

          
            

          

        

        
           

        

      

    

    

    (j)           Governing Law, Jurisdiction and
Waiver of Jury Trial.  THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.  The Company hereby consents and
agrees that the state or federal courts located in the County of New York, State
of New York shall have exclusion jurisdiction to hear and determine any
Proceeding between the Company, on the one hand, and the Investor, on the other
hand, pertaining to this Agreement or to any matter arising out of or related to
this Agreement; provided, that the
Investor and the Company acknowledge that any appeals from those courts may have
to be heard by a court located outside of the County of New York, State of New
York, and further provided, that
nothing in this Agreement shall be deemed or operate to preclude the Investor
from bringing a Proceeding in any other jurisdiction to collect the obligations,
to realize on the Collateral or any other security for the obligations, or to
enforce a judgment or other court order in favor of the Investor.  The
Company expressly submits and consents in advance to such jurisdiction in any
Proceeding commenced in any such court, and the Company hereby waives any
objection which it may have based upon lack of personal jurisdiction, improper
venue or forum non
conveniens.  The Company hereby waives personal service of the
summons, complaint and other process issued in any such Proceeding and agrees
that service of such summons, complaint and other process may be made by
registered or certified mail addressed to the Company at the address set forth
in Section 7(g) and that service so made shall be deemed completed upon the
earlier of the Company’s actual receipt thereof or three (3) days after deposit
in the U.S. mails, proper postage prepaid.  The parties hereto desire
that their disputes be resolved by a judge applying such applicable
laws.  Therefore, to achieve the best combination of the benefits of
the judicial system and of arbitration, the parties hereto waive all rights to
trial by jury in any Proceeding brought to resolve any dispute, whether arising
in contract, tort, or otherwise between the Investor and/or the Company arising
out of, connected with, related or incidental to the relationship established
between then in connection with this Agreement.  If either party
hereto shall commence a Proceeding to enforce any provisions of this Agreement,
the Security Agreement or any other Ancillary Agreement, then the prevailing
party in such Proceeding shall be reimbursed by the other party for its
reasonable attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such Proceeding.

    

    (k)           Cumulative
Remedies.  The remedies provided herein are cumulative and not
exclusive of any remedies provided by law.

    

    (l)           Severability.  If
any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.

    

    (m)           Headings.  The
headings in this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.

    

    [Balance
of page intentionally left blank; signature page follows]

    

    
      
        
           

        

        
          14

          
            

          

        

        
           

        

      

    

    

    IN
WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as
of the date first written above.

    

    

    
      	 
      	
              RAPID
      LINK, INCORPORATED

            	 
      
	 
      	 
      	 
      	 
      
	 
      	
              By:

            	 
      	 
      
	 
      	 
      	
              Name:

            	 
      
	 
      	 
      	
              Title:

            	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
              VALENS
      U.S. SPV I, LLC

            	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
              By:

            	
              Valens
      Capital Management, LLC, its investment manager

            	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
              By:

            	 
      	 
      
	 
      	 
      	
              Name:

            	 
      
	 
      	 
      	
              Title:

            	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
              Address
      for Notices:

            	 
      
	 
      	 
      	 
      	 
      
	 
      	
              c/o
      Valens Capital Management, LLC

            	 
      
	 
      	
              335
      Madison Avenue, 10th
      Floor

            	 
      
	 
      	
              New
      York, NY  10017

            	 
      
	 
      	
              Attention:  Portfolio
      Services

            	 
      
	 
      	
              Facsimile:  212-581-5037

            	 
      

    

     

    SIGNATURE PAGE TO

    REGISTRATION RIGHTS AGREEMENT

    

    
      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

    

    

    EXHIBIT
A

    

    ____________,
200___

    

    [Continental
Stock Transfer

    &
Trust Company

    Two
Broadway

    New York,
New York  10004

    Attn:  William
Seegraber]

    

    
      	
               
      

            	
              Re:           Rapid Link,
      Incorporated Registration Statement on Form
  [S-3]

            

    

    

    Ladies
and Gentlemen:

    

    As
counsel to Rapid Link, Incorporated, a Delaware corporation (the “Company”), we have
been requested to render our opinion to you in connection with the resale by the
individuals or entitles listed on Schedule A attached
hereto (the “Selling
Stockholders”), of an aggregate of __________ shares (the “Shares”) of the
Company’s Common Stock.

    

    A
Registration Statement on Form [S-3] under the Securities Act of 1933, as
amended (the “Act”), with respect
to the resale of the Shares was declared effective by the Securities and
Exchange Commission on [date].  Enclosed is the Prospectus dated
[date].  We understand that the Shares are to be offered and sold in
the manner described in the Prospectus.

    

    Based
upon the foregoing, upon request by the Selling Stockholders at any time while
the registration statement remains effective, it is our opinion that the Shares
have been registered for resale under the Act and new certificates evidencing
the Shares upon their transfer or re-registration by the Selling Stockholders
may be issued without restrictive legend.  We will advise you if the
registration statement is not available or effective at any point in the
future.

    

    
      	 
      	
              Very
      truly yours,

            
	 
      	 
      
	 
      	
              [Company
      counsel]

            

    

    

    
      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

    

    

    Schedule
A to Exhibit A

     

    

    
      	
              Selling
      Stockholder

            	
              R/N/O

            	
              Shares

              Being
      Offered

            

    

    

    
      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

    

    

    SCHEDULE
7(b)

    

    Security
Holders

    

    Stockholders
(as defined below)

    Web
Breeze Networks, LLC

    Communications
Advantage, LLC

    Trident
Growth Fund, L.P.

    Charger
Investments, LLP

    

    Agreements Granting
Registration Rights

    

    Stock
Purchase Agreement entered into by and among Rapid Link, Incorporated, One Ring
Networks, Inc. and the stockholders of One Ring Networks, Inc. (collectively,
the “Stockholders”) on March 28, 2008.

    

    Asset
Purchase Agreement entered into by and among Rapid Link, Incorporated, on the
one hand, and Web Breeze Networks, LLC and Communications Advantage, LLC, on the
other hand, dated October 31, 2007

    

    Securities
Purchase Agreement dated March 8, 2006 entered into by and between Rapid Link,
Incorporated and Trident Growth Fund, L.P.

    

    Securities
Purchase Agreement dated March 8, 2006 entered into by and between Rapid Link,
Incorporated and Charger Investments, LLP.

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