As filed with the Securities and Exchange Commission on
November 5, 1996.
Registration No. 333-14549
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Tel-Save Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
23-2827736
(I.R.S. Employee Identification Number)
6805 Route 202, New Hope, Pa. 18938 (215) 862-1500
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Aloysius T. Lawn, IV
General Counsel and Secretary
Tel-Save Holdings, Inc.
6805 Route 202
New Hope, PA 18938
(215) 862-1500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Approximate date of commencement of proposed sale to the public: From
time to time after this Registration Statement becomes effective.
<PAGE>
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. ( )
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933 (as defined below), other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box. (x)
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. ( ) ___________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. ( ) __________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. ( )
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of Maximum Maximum
Shares Amount Aggregate Aggregate Amount of
To Be To Be Price Offering Registration
Registered Registered Per Unit Price Fee(1)
- ---------- ---------- -------- ----- ---
Common 1,308,446 $24.09 $31,520,464 $9,551.66
Stock
(1) Calculated pursuant to paragraph (c) of Rule 457 under the Securities Act of
1933, as amended, on the basis of the average of the high and low sale prices
for a share of common stock on the Nasdaq National Market on October 30, 1996,
which is within five business days prior to filing.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
<PAGE>
Subject to Completion,
November 5, 1996
Prospectus
2,308,446 Shares
Tel-Save Holdings, Inc.
Common Stock
This Prospectus covers the offering for resale of 2,308,446 shares (the
"Shares") of common stock, par value $.01 per share (the "Common Stock"), of
Tel-Save Holdings, Inc., a Delaware corporation (the "Company"), which the
Company issued or will issue upon the exercise of warrants and may be offered
from time to time by the Selling Stockholders named herein under "Selling
Stockholders." The Company will receive no part of the proceeds of sales made
hereunder, although certain portions of the proceeds will be used to repay
indebtedness to the Company. All expenses of registration incurred in connection
with this public offering are being borne by the Company, except for the fees,
expenses and disbursements of the Selling Stockholders' counsel. None of the
Shares have been registered prior to the filing of the Registration Statement of
which this Prospectus is part.
The Common Stock is quoted on the Nasdaq National Market under the symbol
"TALK." On November 4, 1996, the last reported sale price of the Common Stock
was $24.75 per share.
The Shares may be offered by the Selling Stockholders for sale through
underwriters or dealers or from time to time on the Nasdaq National Market, or
otherwise, at prices then obtainable. The Company has agreed to indemnify the
Selling Stockholders against certain liabilities, including liabilities under
the Securities Act of 1933, as amended (the "Securities Act"). The Selling
Stockholders and any broker executing selling orders on behalf of the Selling
Stockholders may be deemed to be underwriters within the meaning of the
Securities Act. Commissions received by underwriters or by any such broker may
be deemed to be underwriting commissions under the Securities Act. See "PLAN OF
DISTRIBUTION."
Prospective investors should consider carefully the matters discussed
under "RISK FACTORS" beginning on page 5.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
No dealer, salesperson or other individual has been authorized to give
any information or to make any representations other than those contained in or
incorporated by reference in this Prospectus in connection with the offering
made by this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the Company
or any of its agents. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create an implication that there has
been no change in the affairs of the Company since the date as of which
information is given in this Prospectus. This Prospectus does not constitute an
offer or solicitation by anyone in any jurisdiction in which the person making
such offer or solicitation is not qualified to do so or to any person to whom
it is unlawful to make such solicitation.
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AVAILABLE INFORMATION
The Company is subject to the information reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files periodic reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information can be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the Commission located at Seven World Trade Center, 13th
Floor, New York, New York 10048 and Northwestern Atrium Center, 500 West Madison
Street (Suite 1400), Chicago, Illinois 60661. Copies of all or part of such
materials may also be obtained at prescribed rates from the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. In addition, the Commission maintains a
Web site at http://www.sec.gov that contains reports, proxy statements and other
information. Such material also can be inspected at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
The Company has filed with the Commission a registration statement (which
term shall encompass any amendments thereto) on Form S-3 under the Securities
Act of 1933, as amended (the "Securities Act") with respect to the securities
offered hereby (the "Registration Statement"). This Prospectus, which
constitutes part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement, certain items of which are
contained in exhibits to the Registration Statement as permitted by the rules
and regulations of the Commission. For further information with respect to the
Company and the securities offered by this Prospectus, reference is made to the
Registration Statement, including the exhibits thereto, and the financial
statements and notes thereto filed or incorporated by reference as a part
thereof, which are on file at the offices of the Commission and may be obtained
upon payment of the fee prescribed by the Commission, or may be examined without
charge at the offices of the Commission. Statements made in this Prospectus
concerning the contents of any document referred to herein are not necessarily
complete, and, in each such instance, are qualified in all respects by reference
to the applicable documents filed with the Commission. The Registration
Statement and the exhibits thereto filed by the Company with the Commission may
be inspected and copied at the locations described above.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant
to the Exchange Act (Commission File No. 0-26728) are incorporated herein by
reference:
(a) the Company's annual report on Form 10-K for the year ended
December 31, 1995;
(b) the Company's quarterly reports on Form 10-Q for the
quarters ended March 31, 1996 and June 30, 1996;
(c) the description of the Company's Common Stock contained in
the Company's registration statement pursuant to Section 12(g) of the
Exchange Act on Form 8-A, filed on September 8, 1995.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the filing of a post-effective amendment that indicates the termination of
this offering shall be deemed to be incorporated in this Prospectus by reference
and to be a part hereof from the date of filing of such documents.
Any statements contained herein or in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide, without charge to each person to whom this
Prospectus has been delivered, a copy of any or all of the documents referred to
above that have been or may be incorporated by reference herein other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference therein). Requests for such copies should be directed to Tel-Save
Holdings, Inc., 6805 Route 202, New Hope, Pennsylvania 18938 Attention: Aloysius
T. Lawn, IV, General Counsel and Secretary. Telephone requests may be directed
to (215) 862-1500.
THIS PROSPECTUS CONTAINS AND INCORPORATES BY REFERENCE CERTAIN FORWARD
LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995 WITH RESPECT TO
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THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF THE COMPANY,
INCLUDING, WITHOUT LIMITATION, STATEMENTS HEREIN UNDER "RECENT DEVELOPMENTS" AND
STATEMENTS UNDER THE CAPTION "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" IN THE COMPANY'S ANNUAL AND QUARTERLY
REPORTS. THESE FORWARD LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND
UNCERTAINTIES. NO ASSURANCE CAN BE GIVEN THAT ANY OF SUCH MATTERS WILL BE
REALIZED. FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
CONTEMPLATED BY SUCH FORWARD LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THE
FACTORS DISCUSSED IN THE SECTION HEREIN ENTITLED "RISK FACTORS."
RISK FACTORS
Dependence on AT&T
The design for the Company's long distance network, which is known as
"OBN" or "One Better Network," relies upon AT&T Corp. ("AT&T") transmission
facilities, international long distance services, and operator services. If AT&T
were to terminate the Company's use of AT&T transmission facilities,
international long distance services, or operator services, the Company would
seek to enter into similar arrangements with other long distance providers.
There can be no assurance that the terms of such agreements would be favorable
to the Company. The Company's current operations and strategy with OBN emphasize
the quality and functionality of the AT&T (now Lucent Technologies, Inc.,
hereinafter "Lucent") manufactured equipment, AT&T-provided transmission
facilities and billing services, and AT&T operator services. Loss of the ability
to market OBN emphasizing the quality of these AT&T-based services could have a
material adverse effect on the Company's results of operations and financial
condition.
The Company also will continue to depend on AT&T to provide the AT&T
telecommunication services that the Company resells directly to end users and to
independent marketing companies known as "partitions," which in turn resell the
services on the AT&T network to end users. The Company's ability to resell such
services on the AT&T network depends upon whether it can continue to maintain a
favorable relationship with AT&T. AT&T may terminate the provision of services
under its tariffs for limited reasons, including for nonpayment by the Company,
for national defense purposes or if the provision of services to the Company
were to have a substantial adverse impact on AT&T's network. While AT&T policy
historically has been to provide 30-day notice prior to termination of services,
there are no specific notice requirements with respect to such termination.
Although the Company has no specific contingency arrangements in place to
provide service to end users if AT&T were to discontinue its service to the
Company, based upon discussions that the Company has had with other long
distance providers and based upon
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such providers' published tariffs, the Company believes that it could negotiate
and obtain contracts with other long distance providers to resell long distance
services at rates comparable to its current contract tariffs with AT&T. If the
Company were to enter into contracts with another provider, however, the Company
believes it would take approximately 14 to 28 days to switch end users to that
provider. Although the Company believes it may have the right to switch end
users without their consent to such other providers, end users have the right to
discontinue such service at any time. Accordingly, the termination or
non-renewal of the Company's contract tariffs with AT&T or the loss of
telecommunication services from AT&T would have a material adverse effect on the
Company's result of operations and financial condition. See "RECENT
DEVELOPMENTS."
Risks Related to Development of OBN
Prior to the deployment of OBN, the Company marketed services by
emphasizing its use of AT&T's transmission facilities and switches ("AT&T
network") and billing services. Although such marketing can continue for
services on the AT&T network that the Company resells under the new AT&T
contract tariff described herein under the heading "Recent Developments," the
Company has had to reduce its emphasis on AT&T in marketing OBN, which makes
less use of the AT&T network. There can be no assurance that the Company will be
able to market OBN successfully, even though OBN uses Company-owned, AT&T (now
Lucent) manufactured switching equipment and AT&T transmission facilities, and
employs the billing services of AT&T and AT&T's College and University Systems
("ACUS"), a wholly-owned strategic business unit of AT&T. Failure to market OBN
successfully would have a material adverse effect on the Company's financial
condition and results of operations.
Additionally, there can be no assurance that the Company will be able to
maintain or secure AT&T contract tariffs for transmission on OBN at
cost-effective rates. Further, to the extent that the Company, rather than AT&T,
is responsible for providing the Company's telecommunications services, the
Company's potential liability increases if such services are not provided.
OBN utilizes AT&T (now Lucent) manufactured 5ESS-2000 switching
equipment, which employs the new Digital Networking Unit-SONET (Synchronous
Optical Network) technology and the 5E10 software. While the 5ESS-2000 switches
have operated successfully in the local environment, the Digital Networking
Unit-SONET and 5E10 software offer new technologies that have not been used
extensively, and there can be no assurance that the switches will function
effectively.
Additional management personnel and information systems are required to
support OBN, the costs of which are increasing the Company's overhead. In order
for the Company to provide service over OBN, the Company must operate and be
responsible
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for the maintenance of its own switching equipment. While the Company has hired
additional personnel with experience in operating a switch-based provider, there
can be no assurance that the Company will be successful in operating as a
switch-based provider.
Moreover, operation as a switch-based provider subjects the Company to
risk of significant interruption in the provision of services on OBN in the
event of damage to the Company's facilities (switching equipment or connections
to AT&T transmission facilities) such as could be caused by fire or natural
disaster. Such interruptions could have a material adverse effect on the
Company's financial condition and results of operations.
The Company's deployment of OBN is intended to increase gross margins,
which have decreased over the past 3 years during which the Company has operated
as a switchless, nonfacilities-based reseller of AT&T services. Gross profit, as
a percentage of sales, has decreased largely as a result of the Company's
offering higher volume discounts to new and larger partitions. Any difficulties
in rendering OBN fully functional could result in a negative impact on margins
and the results of operations, and the more gradual transitioning of existing
end users to OBN that the Company now plans as a result of its new AT&T contract
tariff described herein under the heading "RECENT DEVELOPMENTS" will delay the
Company's realization of improved gross margins.
Potential Decline in Pricing of Long Distance Services
Although the basic rates of the three largest long distance carriers --
AT&T, MCI Communications Corp. and Sprint Corporation -- have consistently
increased over the past three years and remained generally unchanged through the
third quarter of 1996, AT&T and other carriers have announced new price plans
aimed at residential customers with significantly simplified rate structures,
which may have the impact of lowering overall long distance prices. There can be
no assurance that AT&T or other carriers will not make similar offerings
available to the small to medium-sized businesses that the Company serves.
Although OBN makes the Company more price competitive, a reduction in long
distance prices still may have a material adverse impact on the Company's
profitability.
Dependence Upon Key Personnel
The success of the Company's operations during the foreseeable future
will depend largely upon the continued services of Daniel Borislow and Gary W.
McCulla. Mr. Borislow and Mr. McCulla have entered into employment agreements
with the Company that contain non-competition covenants that extend for a period
of up to 18 months following termination of employment.
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The Company's success also depends in part on its ability to manage,
attract and retain qualified personnel. Competition for such personnel is
intense. There can be no assurance that the Company will be successful in
attracting and retaining the personnel that it requires to manage the growth of
its business successfully. The Company's results of operations could be
adversely affected if the Company were unable to attract, manage and retain
these personnel, or if revenue were to fail to increase at a rate sufficient to
absorb the resulting increase in expenses.
Reliance on AT&T Billing Services
The Company uses billing services provided by AT&T and ACUS. There can be
no assurance that either AT&T or ACUS will continue to offer billing services to
the Company on terms acceptable to the Company. AT&T has begun to remove its
name on bills for which it provides billing services and could further obscure
its role in providing billing services or cease providing billing services
altogether. Loss of the AT&T and ACUS billing services or decreased customer
awareness of the AT&T name could have a material adverse effect on the Company's
marketing strategy and retention of existing partitions and end users. The
Company is developing its own information systems in order to have its own
billing capacity, although the Company has not provided such direct billing
services to end users in the past.
Competition
The long distance telecommunications industry is highly competitive and
affected by the introduction of new services by, and the market activities of,
major industry participants. Competition in the long distance business is based
upon pricing, customer service, billing services and perceived quality. The
Company competes against various national and regional long distance carriers
and competes against the numerous companies in the long distance
telecommunications market that offer essentially the same services as the
Company. Several of the Company's competitors are substantially larger and have
greater financial, technical and marketing resources than the Company. The
Company's competitors that resell non-AT&T services do so at prices below that
which the Company can provide as an AT&T switchless reseller, although the
deployment of OBN enables the Company to be price competitive with non-AT&T
resellers at current industry pricing levels. The ability of the Company to
compete effectively in the telecommunications industry will depend upon the
Company's continued ability to provide high quality services at prices generally
competitive with, or lower than, those charged by its competitors. Although the
Company's gross margins are expected to improve following the
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deployment of OBN, revenues could decline if competition for long distance
service forced the Company to offer services at greater discounts.
Recent changes in the regulation of the telecommunications industry may
impact the Company's competitive position. The Telecommunications Act of 1996
(the "1996 Act") effectively opens up the long distance market to competition
from the Bell Operating Companies and Regional Holding Companies (collectively,
"RBOCs"). The entry of these well-capitalized and well-known entities into the
long distance market could significantly alter the competitive environment in
which the Company operates because of the established relationship the RBOCs
have with their local service customers (and the likelihood that the RBOCs will
take advantage of those relationships), as well as the possibility of
interpretations of the 1996 Act favorable to the RBOCs, which may make it more
difficult for other providers, such as the Company, to compete to provide long
distance services.
Maintenance of End User Base
End users are not obligated to purchase any minimum usage amount and can
discontinue service, without penalty, at any time. There can be no assurance
that end users will continue to buy their long distance telephone service
through the Company or through partitions that purchase services from the
Company. In the event that a significant portion of the Company's end users
decides to purchase long distance service from another long distance service
provider, there can be no assurance that the Company will be able to replace its
end user base from other sources. Loss of a significant portion of the Company's
end users would have a material adverse effect on the Company's results of
operations and financial condition.
A high level of customer attrition is inherent in the long distance
industry, and the Company's revenues are affected by such attrition. Attrition
is attributable to a variety of factors, including termination of customers by
the Company for non-payment and the initiatives of existing and new competitors
as they engage in, among other things, national advertising campaigns,
telemarketing programs and the issuance of cash or other forms of incentives.
Reliance on Independent Carrier and Marketing Companies; Lack of Control Over
Marketing Activities
The Company markets services primarily through independent carriers and
marketing companies known as "partitions," which generally have entered into
non-exclusive agreements with the Company. Most partitions to date have made no
minimum use or revenue commitments to the Company under these
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agreements. If the Company were to lose access to services on the AT&T network
or billing services or experiences difficulties with OBN, the Company's
agreements with partitions could be adversely impacted.
One partition, The Furst Group, Inc., accounted for approximately 13
percent of the Company's sales in the third quarter of 1996. Two other
partitions together accounted for approximately 8 percent of the Company's sales
in the third quarter of 1996. The Company's direct marketing operations
accounted for less than one percent of the Company's sales in the third quarter
of 1996. In the event that any of the partitions, and particularly the three
significant partitions noted above, were to cease doing business with the
Company, the financial condition or results of operations of the Company could
be materially adversely affected.
Certain marketing practices, including the methods and means to convert a
customer's long distance telephone service from one carrier to another, have
recently been subject to increased regulatory review at both the federal and
state levels. This increased regulatory review could affect possible future
acquisitions of new business from new partitions or other resellers. Provisions
in the Company's partition agreements mandate compliance by the partitions with
applicable state and federal regulations. Because the Company's partitions are
independent carriers and marketing companies, the Company is unable to control
completely such partitions' activities. The Company is also unable to predict
the extent of its partitions' compliance with applicable regulations or the
effect of such increased regulatory review.
Government Regulation
The Company is subject to regulation by the Federal Communications
Commission ("FCC") and by various state public service and public utility
commissions as a nondominant provider of long distance services. The Company and
its partitions no longer will be required to file tariffs for interstate service
with the FCC under an FCC order adopted on October 29, 1996. See "RECENT
DEVELOPMENTS." The Company and its partitions, however, are still required to
file tariffs for international service with the FCC and to obtain approval for
intrastate service provided in most of the states in which they market long
distance services. Changes in existing policies or regulations in any state or
by the FCC could materially adversely affect the Company's results of
operations, particularly if those policies make it more difficult to obtain
service from AT&T or other long distance companies at competitive rates, or
otherwise increase the cost and regulatory burdens of providing services. There
can be no assurance that the regulatory authorities in one or more states or the
FCC will not take action having an adverse effect on the business or
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financial condition or results of operations of the Company. Regulatory action
by the FCC or the states also could adversely affect the partitions, or
otherwise increase the partitions' cost and regulatory burdens of providing long
distance services. As it engages in direct marketing to end users, the Company
will be subject to applicable regulatory standards for marketing activities and
the increased FCC and state attention to certain marketing practices may become
more significant to the Company.
Adverse Effect of Rapid Change in Technology and Service
The telecommunications industry has been characterized by rapid
technological change, frequent new service introductions and evolving industry
standards. The Company believes that its future success will depend on its
ability to anticipate such changes and to offer on a timely basis services that
meet these evolving standards. There can be no assurance that the Company will
have sufficient resources to make necessary investments or to introduce new
services that would satisfy an expanded range of partition and end user needs.
Expansion into New Business Activities
In addition to relying on marketing performed by its partitions, the
Company has begun to market its long distance service directly to end users.
Such direct marketing has and is expected to continue to increase the Company's
costs as it hires new employees, provides increased customer support and
collection services, and acquires additional equipment and facilities. The
Company is required to comply with additional regulatory standards for direct
marketing of telecommunications services. Direct marketing by the Company may
also adversely affect its relationship with its partitions as both the Company
and the partitions will be competing to provide similar services.
The Company plans to provide a full range of telecommunications services
to tenants of multi-tenant office and residential buildings and complexes as a
competitive telecommunications provider or "CTP." To provide such services, the
Company will invest in additional equipment and software and augment its
customer service and direct sales force. The Company may also be subject to
additional regulatory requirements. The Company will need the approval of the
owners, developers or mortgagors of the buildings to provide these services, and
there can be no assurance that the Company will be able to obtain the requisite
approvals. The Company has not functioned previously in this context and faces
competition from other providers that offer similar services.
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Control by Existing Stockholders; Anti-Takeover Considerations
As of the date of this Prospectus, Mr. Borislow owns beneficially
approximately 45.6% of the outstanding Common Stock, including approximately
12.7% pursuant to a voting trust with Paul Rosenberg. In addition, certain
warrant holders have agreed to hold the shares of Common Stock that they receive
upon the exercise of their warrants in voting trusts, the voting trustee for
which would be Mr. Borislow. See "SELLING STOCKHOLDERS." Accordingly, Mr.
Borislow, individually, effectively has the ability to control the election of
all of the members of the Company's Board of Directors and the outcome of
corporate actions requiring majority stockholder approval. Even as to corporate
transactions in which super-majority approval may be required, such as certain
fundamental corporate transactions, Mr. Borislow effectively will control the
outcome of such actions.
The Company also has an authorized class of 5,000,000 shares of preferred
stock that may be issued by the Board of Directors on such terms and with such
rights, preferences and designations as the Board may determine. Issuance of
such preferred stock, depending upon the rights, preferences and designations
thereof, may have the effect of delaying, deterring or preventing a change in
control of the Company. In addition, the Delaware General Corporation Law and
other provisions of the Company's Amended and Restated Certificate of
Incorporation, including the provision of the Amended and Restated Certificate
that provides that the Board of Directors be divided into three classes each of
which is elected for three years, and the Bylaws contain provisions that may
have the effect of delaying or preventing a change in control of the Company.
Such anti-takeover effects may deter a third party who would propose to
acquire the Company or to engage in a similar transaction affecting control of
the Company in which the Company's stockholders might receive a premium for
their shares over the then-current market value.
Shares Eligible for Future Sale
Future sales of substantial amounts of the Company's Common Stock could
adversely affect the market price of the Common Stock. As of the date of this
Prospectus, Mr. Borislow owns beneficially 45.6% of the outstanding Common
Stock, and a decision by Mr. Borislow to sell his shares could adversely affect
the market price of the Common Stock. Of the Company's 29,917,446 outstanding
shares of Common Stock, 16,342,446 shares are freely tradeable by persons other
than "affiliates" of the Company. Of the remaining 13,575,000 shares of Common
Stock, none are, under current interpretations, eligible for resale until after
the expiration of the lock-up period pursuant to Rule 144 under the Securities
Act in September 1997.
There are outstanding options to purchase 3,829,900 shares of Common
Stock held by employees, former employees or directors of the Company.
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In addition to the Warrants underlying the shares being offered by this
Prospectus, there are warrants to purchase up to 1,816,000 shares of Common
Stock ("Other Warrants").
Paul Rosenberg, the holder of 3,795,000 shares of Common Stock, has the
right, under certain conditions, to participate in future registrations of
Common Stock and to cause the Company to register certain shares of Common Stock
owned by him. Holders of the Other Warrants also have registration rights under
certain conditions.
Sales of substantial amounts of Common Stock in the public market, or the
perception that such sales could occur, may adversely affect the market price of
the Common Stock.
THE COMPANY
The Company, originally incorporated in 1989 as Tel-Save, Inc., provides
long distance telephone service throughout the United States primarily to small
and medium-sized businesses. For further information about the business and
operations of the Company, reference is made to the Company's reports
incorporated herein by reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
The principal executive offices of the Company are located at 6805 Route
202, New Hope, Pennsylvania 18938, and its telephone number is (215) 862-1500.
RECENT DEVELOPMENTS
In October 1996, the Company subscribed to a new AT&T contract tariff,
which permits the Company to continue to resell AT&T long distance services,
including AT&T-SDN service, through mid-1998. The new AT&T contract tariff also
includes other AT&T services (such as international long distance, inbound and
outbound services) that will be used in the Company's new nationwide long
distance network, OBN. The rates that the Company will pay under the new AT&T
contract tariff are more favorable to the Company than under previous tariffs.
During its term, the new AT&T contract tariff will enable the Company to
minimize possible attrition that might result from moving existing end users
from the AT&T network to OBN. The new AT&T contract tariff also permits a more
gradual introduction of OBN, which should reduce the expense of providing the
capacity required in a more rapid phase-in of OBN and lessen the impact of any
technical difficulties during the phase-in of OBN. The more gradual introduction
of OBN, however, will postpone the Company's
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realization of the anticipated benefit of the more favorable margins for OBN
service, and the new AT&T contract tariff requires the Company to commit to
purchase $240 million of service from AT&T over the next 4 years. This
commitment is larger than any previous commitment that the Company has made, but
the Company believes that it can be met based on its current purchases of long
distance service from AT&T of approximately $10 million per month. Further, the
Company can terminate the new contract tariff without liability to AT&T at the
end of 18 months if the Company has purchased $90 million in services from AT&T
under the new contract tariff. The Company can also terminate the new contract
tariff without liability to AT&T in the first 18 months if the Company and AT&T
enter into a new contact tariff or another contract with a revenue commitment of
at least $5 million per month and a term of at least the difference between 18
months and the number of months that the Company subscribed to the contract
tariff, provided that the Company must purchase or pay for AT&T services under
the contract tariff of at least $5 million per month for the months prior to
such termination.
The Company is continuing the deployment of OBN, which features five
Company-owned, AT&T (now Lucent) manufactured 5ESS-2000 switches connected by
AT&T digital transmission facilities. Installation of the transmission
facilities and the five switches -- in Jacksonville, New York City, Chicago,
Dallas and San Francisco -- is substantially complete, and testing of the
network is being performed by the Company and the local exchange carriers
("LECs") whose local networks interconnect with the Company's long distance
network. The Company is now in the process of activating access to the local
areas that will be served by each switch, and has begun placing end users on OBN
through the Jacksonville switch. OBN includes echo cancellation equipment
purchased from Lucent. The Company expects OBN to become functional over the
next three months.
The Company believes that gross operating margins for OBN long distance
service will be higher than for AT&T long distance service. AT&T long distance
service is "bundled," which means that the Company pays a single, all-inclusive
price to AT&T for switching, transmission, and LEC access. OBN long distance
service is "unbundled," which means that the Company provides its own switching,
pays AT&T for transmission, and pays access fees directly to LECs. The
"unbundled" charges per call on OBN are expected to be less than the "bundled"
charge paid to AT&T. In addition, OBN should result in a faster and more
reliable "provisioning" process, in which end users who have requested the
Company's services actually begin to receive those services.
OBN is the focus of the Company's current direct marketing efforts to end
users. The Company is also encouraging OBN sales through independent
telecommunications carriers known as "partitions" that purchase the Company's
services for resale to end users. The Company expects that by the end of the
fourth quarter of 1996 a significant portion of its new end users will be
provisioned to OBN.
OBN also will provide the local service capabilities needed to support
the Company's planned provision of CTP services. The Company intends to begin
activities in planning and marketing CTP services, and purchasing, installing
and testing the switching modules necessary to provide such services after OBN
becomes fully functional.
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The Company has used a portion of the proceeds from its 1996 stock
offering for: (i) advances to new and existing partitions to support their
marketing efforts, (ii) procurement of additional hardware and software for OBN,
(iii) direct marketing efforts, including the purchase of a direct marketing
center in Clearwater, Florida, and (iv) the purchase of a new headquarters
building in New Hope, Pennsylvania. The Company intends to use the remaining
proceeds: (i) to further fund new and existing partitions, (ii) to expand direct
marketing efforts, including the build out of the direct marketing center, and
(iii) to take advantage of growth opportunities, including but not limited to,
possible acquisitions and development of CTP services. The Company expects to
spend less of the proceeds of the 1996 stock offering to start up OBN than
originally planned because of the new AT&T contract tariff, which will allow the
Company to avoid some of the costs associated with moving existing end users to
OBN and permit the Company to phase in OBN more cost effectively by not leasing
transmission facilities before traffic levels are sufficient to fill them. There
can be no assurance that the Company's financial performance will meet analyst
expectations in the future.
On October 29, 1996, the FCC announced that, following a nine month
transition period, long distance carriers would no longer file tariffs for
interstate domestic long distance service, and that the relationship between
carriers and their customers would be governed by contracts. Carriers also would
have the option immediately to cease filing tariffs. The FCC's order will be
effective 30 days after publication in the Federal Register. The Company does
not expect the FCC's detariffing order to have a material effect on its
business.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 100,000,000 shares of
Common Stock, $.01 par value per share, and 5,000,000 shares of undesignated
Preferred Stock, $.01 par value per share. As of October 29, 1996, 29,917,446
shares of Common Stock were issued and outstanding. There were no shares of
Preferred Stock designated or issued. For further information about the
Company's authorized capital stock, reference is made to the Company's reports
incorporated herein by reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
USE OF PROCEEDS
The Company will not directly receive any of the proceeds from the sale
of the Common Stock offered by this Prospectus. A Selling Stockholder,
Collective Communications Services, Inc. ("CCS"), will distribute its proceeds
from the sale of Common Stock offered by this Prospectus to its stockholders,
four of whom collectively are indebted to the Company in the principal amount of
$600,000 and have agreed to repay this indebtedness with part of the proceeds
that they will receive from CCS. See "SELLING STOCKHOLDERS -- CCS."
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SELLING STOCKHOLDERS
The Selling Stockholders offer for resale in this Prospectus the shares
of Common Stock that they acquired or will acquire upon the exercise of Warrants
that the Company granted to five partitions (the "Partitions") that market the
Company's telecommunications services and to the managing underwriter of the
Company's initial public offering of Common Stock in September and October 1995,
Gerard Klauer Mattison & Co., LLC, a New York limited liability company ("Gerard
Klauer Mattison" or "GKM"). The Partitions are Collective Communications
Services, Inc., a Pennsylvania corporation ("CCS"), Network Plus, Inc., a
Massachusetts corporation ("Network Plus" or "NP"), Anne Marie Co., LLC, a New
Jersey limited liability company ("AMC"), Eastern Telecommunications
Incorporated, a New York corporation ("Eastern"), and The Furst Group, Inc., a
New Jersey corporation ("The Furst Group" or "TFG"). The Company's grant of the
Warrants to the Partitions and GKM was made pursuant to the exemption from
registration under the Securities Act provided by Section 4(2) thereof.
CCS
The Company entered into a warrant agreement with CCS dated as of January
11, 1996 (the "CCS Warrant"), which provides that CCS can purchase, subject to
certain conditions and adjustments, 240,000 shares of Common Stock at a price of
$14.00 per share between June 1, 1996 and December 31, 1996. The market price of
the Common Stock on the date of grant of the CCS Warrant was $12.25 per share.
On March 15, 1996, the Company effected a 3-for-2 stock split in the form of a
50% stock dividend, which caused the CCS Warrant to cover as of the date of this
Prospectus 360,000 shares of Common Stock at a price of $9.33 per share. Vesting
of the CCS Warrant is subject to certain performance contingencies related to
conduct of business with the Company, which the Company believes to have been
satisfied as of the date of this Prospectus. Upon exercise of the CCS Warrant,
CCS will hold the shares of Common Stock that it will acquire in a voting trust,
the voting trustee for which will be Daniel Borislow, the Company's Chairman,
Chief Executive Officer and largest stockholder. CCS may sell the shares of
Common Stock in the voting trust at any time, and the voting trust will dissolve
whenever CCS sells all of the shares of Common Stock it obtains upon exercise of
the CCS Warrant. The Company has a right of first refusal upon sale or transfer
of the CCS Warrant or the shares issued upon the exercise thereof. CCS
anticipates distributing proceeds from the sale of shares underlying the CCS
Warrant to its shareholders, four of whom collectively are indebted to the
Company in the amount of $600,000 and have agreed to use a portion of the
proceeds to repay said indebtedness. As of the date of this Prospectus, CCS owns
no shares of the Company's Common Stock and is offering in this Prospectus all
of the shares of Common Stock that it will own upon the exercise of the CCS
Warrant. CCS holds another warrant to purchase 360,000 shares of Common Stock at
a price of $9.33 per share.
Network Plus
The Company entered into a warrant agreement with Network Plus dated as
of January 11, 1996 (the "NP Warrant") which provides that NP can purchase,
subject to certain conditions and adjustments, 200,000 shares of Common Stock at
a price of $14.00 per share between September 1, 1996 and January 10, 1997. The
market price of the Common Stock on the date of grant of the NP Warrant was
$12.25 per share. On March 15, 1996, the Company effected a 3-for-2 stock split
in the form of a 50% stock dividend, which caused the NP Warrant to cover as of
the date of this Prospectus 300,000 shares of Common Stock at a price of $9.33
per share. Pursuant to the terms of a Settlement Agreement and Release, Network
Plus has transferred one third of the NP Warrant to Jenkintown Ltd., a
Pennsylvania corporation. Thus, the following persons (the "NP Selling
Stockholders") offer the following number of shares underlying the NP Warrant in
this Prospectus:
Network Plus 200,000
Jenkintown, Ltd. 100,000
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Vesting of the NP Warrant is subject to certain performance contingencies
related to conduct of business with the Company, which the Company believes to
have been satisfied as of the date of this Prospectus. Upon exercise of the NP
Warrant, the NP Selling Stockholders will hold the shares of Common Stock that
they will acquire in a voting trust, the voting trustee for which will be Daniel
Borislow, the Company's Chairman, Chief Executive Officer and largest
shareholder. The NP Selling Stockholders may sell the shares of Common Stock in
the voting trust at any time, and the voting trust will dissolve whenever the NP
Selling Stockholders sell all of the shares they obtain upon exercise of the NP
Warrant. The Company has a right of first refusal upon sale or transfer of the
NP Warrant or the shares issued upon the exercise thereof. As of the date of
this Prospectus, the NP Selling Stockholders own no shares of the Company's
Common Stock, and are offering in this Prospectus all of the shares of Common
Stock that they will own upon the exercise of the NP Warrant. Network Plus holds
warrants, which have not yet vested, to purchase an additional 382,500 shares of
Common Stock at a price of $9.33 per share. Network Plus and The Furst Group are
negotiating a Settlement Agreement and Release, which may result in the transfer
of warrants to purchase up to 100,000 shares of Common Stock from Network Plus
to The Furst Group. See also "--The Furst Group" regarding other shares offered
in this Prospectus.
AMC
The Company entered into a warrant agreement with AMC dated as of January
12, 1996 (the "AMC Warrant"), which provides that AMC can purchase, between
September 1, 1996, and January 11, 1997, subject to certain conditions and
adjustments, 20,000 shares of Common Stock at a price of $12.375 per share,
which was the market price of the Common Stock on the date of grant. On March
15, 1996, the Company effected a 3-for-2 stock split in the form of a 50% stock
dividend, which caused the AMC Warrant to cover 30,000 shares of Common Stock at
a price of $8.25 per share. Vesting of the AMC Warrant is subject to certain
performance contingencies related to conduct of business with the Company, which
the Company believes to have been satisfied as of the date of this Prospectus.
AMC has agreed that, upon exercise of the AMC Warrant, it will hold the shares
of Common Stock that it will acquire in a voting trust, the voting trustee for
which will be Daniel Borislow, the Company's Chairman, Chief Executive Officer
and largest shareholder. AMC may sell the shares of Common Stock in the voting
trust at any time, and the voting trust will dissolve whenever AMC sells all of
the shares of Common Stock it obtains upon exercise of the AMC Warrant. The
Company has a right of first refusal upon sale or transfer of the AMC Warrant or
the shares issued upon the exercise thereof. As of the date of this Prospectus,
AMC owns no shares of the Company's Common Stock, and is offering in this
Prospectus all of the shares of Common Stock that it will own upon the exercise
of the AMC Warrant.
Eastern
The Company entered into a warrant agreement with Eastern dated as of
January 12, 1996 (the "Eastern Warrant"), which provides that Eastern can
purchase, between May 12, 1996, and February 15, 1997, subject to certain
conditions and adjustments, 200,000 shares of Common Stock at a price of $12.25
per share, which was the market price of the Common Stock on January 11, 1996.
On March 15, 1996, the Company effected a 3-for-2 stock split in the form of a
50% stock dividend, which caused the Eastern Warrant to cover 300,000 shares of
Common Stock at a price of $8.167 per share. Vesting of the Eastern Warrant is
subject to certain performance contingencies related to conduct of business with
the Company, which the Company believes to have been satisfied as of the date of
this Prospectus. Eastern owns no shares of the Company's Common Stock as of the
date of this Prospectus and is offering in this Prospectus all of the shares of
Common Stock that it will own upon the exercise of the Eastern Warrant. Eastern
holds additional warrants, which have not yet vested, to purchase 673,500 shares
of Common Stock at a price of $8.167 per share.
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The Furst Group
The Company and The Furst Group entered into a telecommunications
services agreement dated as of March 14, 1996 (the "TFG Agreement"), pursuant to
which The Furst Group agreed to purchase certain telecommunications services and
other associated services from the Company. Simultaneous with the execution of
the Agreement, the Company issued The Furst Group warrants (the "TFG Warrants")
to purchase, subject to certain adjustments and conditions, 1,000,000 shares of
Common Stock at an exercise price of $17.00 per share, which was the market
price of the Common Stock on the date of the TFG Agreement. The Company effected
a 3-for-2 stock split in the form of a 50 percent stock dividend on March 15,
1996, which caused the TFG Warrants to cover 1,500,000 shares of Common Stock at
an exercise price of $11.33 per share. The TFG Warrants had a net exercise
provision, which provided for a cashless exercise in which the TFG Warrants were
exchanged for shares of Common Stock. The TFG Warrants were transferable only to
TFG's stockholders, and TFG made such a transfer to its stockholders, who
exercised the TFG Warrants, and are offering the shares of Common Stock obtained
upon the exercise of the TFG Warrants in this Prospectus (the "TFG Selling
Stockholders"). The names of the TFG Selling Stockholders and the number of
shares that they are offering in this Prospectus are as follows:
Selling Stockholder Shares
------------------- ------
James D. Kaylor 403,829
John S. Streep 395,144
Kristen M. Streep 4,342
J. Ryan Streep 4,342
Jeffrey L. Bockol 30,395
Leslie J. Bockol 4,342
Matthew A. Bockol 4,342
Marcia L. Bockol 4,342
Wayne C. Phipps 8,684
Hubert A. Streep 8,684
Under certain circumstances, the Company has a right of first refusal upon the
sale or transfer of the shares of Common Stock that the TFG Selling Stockholders
hold. As of the date of this Prospectus, the TFG Selling Stockholders own no
shares of Common Stock other than those that they acquired upon the exercise of
the TFG Warrants, and are offering all of the shares of Common Stock that they
acquired upon the exercise of the TFG Warrants in this Prospectus. As described
herein under "SELLING STOCKHOLDERS -- Network Plus," TFG is negotiating with
Network Plus and may obtain a portion of the NP Warrant to purchase up to
100,000 shares of the Company's Common Stock; the resale of the Common Stock
that TFG would own upon the exercise of that warrant is being registered in this
Prospectus.
Gerard Klauer Mattison
In connection with the initial public offering of its Common Stock
in September and October 1995 (the "IPO"), the Company granted the managing
underwriter of the IPO, GKM, warrants to purchase up to 300,000 shares of its
Common Stock at a price of $17.1875 per share between September 20, 1996 and
September 20, 2000 (the "GKM Warrants"). The price to the public of Common Stock
in the IPO was $13.75 per share. The GKM Warrants could not be transferred,
sold, assigned or hypothecated for a period of one year commencing from the date
of the IPO, except that they could be transferred in whole or in part to any
person who was an officer or partner of GKM or to any of the underwriters in the
IPO or members of the selling group and/or officers or partners thereof during
such period, subject to compliance with applicable securities laws, and certain
provisions for appropriate adjustments in the event of stock splits, stock
dividends, combinations, reorganizations, recapitalizations and other customary
anti-dilution provisions. On March 15, 1996, the Company effected a 3-for-2
stock split in the form of a 50% stock dividend, which caused the GKM Warrants
to cover as of the date of this Prospectus 450,000 shares of Common Stock at a
price of $11.46 per share. GKM was co-managing underwriter of the Company's
public offering of Common Stock in March and April 1996. As of the date of this
Prospectus, GKM owns no shares of the Common Stock, although from time to time
it owns shares of the Common Stock in its capacity as a market maker in the
Company's Common stock; GKM is offering all of the shares of the Common Stock
that it will acquire upon the exercise of the GKM Warrants in this Prospectus.
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PLAN OF DISTRIBUTION
The Selling Stockholders have advised the Company that, depending on
market conditions and other factors, they may sell the Shares of Common Stock
offered hereby from time to time, in one or more transactions, which may involve
block transactions, on the Nasdaq National Market, or otherwise, at market
prices prevailing at the time of sale, at negotiated prices, or at fixed prices,
which may be changed. Such sales may be effected directly, or through agents, or
through underwriters or dealers, which may include Salomon Brothers Inc.
To the extent required pursuant to Rule 424 under the Securities Act, a
Prospectus Supplement will be filed with the Securities and Exchange Commission
with respect to a particular offering setting forth the terms of any offering,
including the name or names of any underwriters or agents, if any, any
underwriting discounts and other items constituting underwriters' compensation,
the offering price and any discounts or concessions allowed or reallowed or paid
to dealers. Any offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
If underwriters are used in a sale, shares of Common Stock will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
The shares may be offered to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one or more
firms acting as underwriters. The underwriter or underwriters with respect to a
particular underwritten offering of shares to be named in the Prospectus
Supplement relating to such offering and, if an underwriting syndicate is used,
the managing underwriter or underwriters, will be set forth on the cover of such
Prospectus Supplement. Unless otherwise set forth in the Prospectus Supplement
relating thereto, the obligations of the underwriters to purchase the Offered
Securities will be subject to conditions precedent and the underwriters will be
obligated to purchase all of the shares if any are purchased.
If dealers are utilized in the sale of shares of Common Stock in respect
of which this Prospectus is delivered, the Selling Stockholders will sell such
shares to the dealers as principals. The dealers may then resell such shares to
the public at varying prices to be determined by such dealers at the time of
resale. The names of the dealers and the terms of the transaction will be set
forth in a Prospectus Supplement relating thereto.
If an agent is used, the agent will be named, and the terms of the agency
and any commissions will be set forth in a Prospectus Supplement relating
thereto. Unless otherwise indicated in the Prospectus Supplement, any such agent
will be acting on a best efforts basis for the period of its appointment.
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Shares of Common Stock may sold directly by the Selling Stockholders to
institutional investors or others, who may be deemed to be underwriters within
the meaning of the Securities Act with respect to any resale thereof. The terms
of any such sales, including the terms of any bidding or auction process, will
be described in the Prospectus Supplement relating thereto.
Agents, dealers and underwriters may be entitled under agreements entered
into with the Selling Stockholders to indemnification against certain civil
liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments which such agents, dealers or underwriters may be
required to make in respect thereof. Agents, dealers and underwriters may be
customers of, engage in transactions with, or perform services for the Company
or the Selling Stockholders in the ordinary course of business.
One of the Selling Stockholders, GKM, served as managing and co-managing
underwriter of the Company's initial public offering of Common Stock in
September and October 1995 and public offering of Common Stock in March and
April 1996, respectively, and received warrants as part of its underwriting
compensation in the initial public offering. See "SELLING STOCKHOLDERS -- Gerard
Klauer Mattison."
The Company will bear all costs and expenses of the registration of the
Common Stock under the Securities Act and certain state securities laws, other
than fees of counsel for the Selling Stockholders and any discounts or
commissions payable with respect to sales of such Common Stock. The Selling
Stockholders will pay any transaction costs associated with effecting any sales
that occur.
The Selling Stockholders are not restricted as to the price or prices at
which they may sell shares of Common Stock acquired upon the exercise of the
Warrants. Such sales may have an adverse effect on the market price of the
Common Stock. Moreover, the Selling Stockholders are not restricted as to the
number of shares of Common Stock that may be sold at any one time, and it is
possible that a significant number of shares could be sold at the same time,
which also may have an adverse effect on the market price of the Common Stock.
The Company has agreed to indemnify the Selling Stockholders against
certain civil liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Aloysius T. Lawn, IV, the Company's General Counsel and Secretary, will
render an opinion to the effect that the Common Stock offered by this Prospectus
is duly authorized, validly issued, fully paid and non-assessable. Mr. Lawn
holds options, which will vest on December 4, 1996, to purchase 90,000 Shares of
Common Stock at a price of $9.50 per share and 30,000 shares of Common Stock at
a price of $23.25 per share. Mr. Lawn's employment contract provides that on
December 4, 1996 he shall be granted immediately exercisable options to purchase
an additional 45,000 shares of Common Stock at the market price of the Common
Stock on December 4, 1996.
EXPERTS
The consolidated financial statements and schedule incorporated by
reference in this Prospectus have been audited by BDO Seidman LLP, independent
certified public accountants, to the extent and for the periods set forth in
their reports incorporated herein by reference, and are incorporated herein in
reliance upon such reports given upon the authority of said firm as experts in
accounting and auditing.
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TABLE OF CONTENTS
Page
----
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . . . . . . 4
RISK FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
RECENT DEVELOPMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 13
DESCRIPTION OF CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . 15
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SELLING STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . 16
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . 19
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
SEC registration . . . . . . . . . . . $17,733
Printing and engraving expenses . . . . 1,000*
Legal fees and expenses . . . . . . . . 40,000*
Accounting fees and expenses . . . . . 15,000*
Transfer agent and trustee fees . . . . 1,000*
Miscellaneous . . . . . . . . . . . . . 1,000*
Nasdaq Filing Fee . . . . . . . . . . . 17,500
Total . . . . . . . . . . . . . . . . . $93,233
*Estimates
Item 15. Indemnification or Director and Officers.
The Delaware General Corporation Law provides, in substance, that
Delaware corporations shall have the power, under specified circumstances, to
indemnify their directors, officers, employees and agents in connection with
actions or suits by or in the right of the corporation, by reason of the fact
that they were or are such directors, officers, employees and agents, against
expenses (including attorneys' fees) and, in the case of actions, suits or
proceedings brought by third parties, against judgment, fines and amounts paid
in settlement actually and reasonably incurred in any such action, suit or
proceeding.
The Company's Bylaws also provide for indemnification to the fullest
extent permitted by the Delaware General Corporation Law. Reference is made to
the Company's Bylaws.
As permitted by the Delaware General Corporation Law, the Company's
Bylaws eliminate the personal liability of its directors to the Company and its
stockholders, in certain circumstances, for monetary damages arising from a
breach of the director's duty of care. Additionally, the Company has entered
into indemnification agreements with some of its directors and officers. These
agreements provide for indemnification to the fullest extent permitted by law
and, in certain respects, may provide greater protection than that specifically
provided for by the Delaware General Corporation Law. The agreements do not
provide indemnification for, among other things, conduct which is adjudged to be
fraud, deliberate dishonesty or wilful misconduct.
The Company has purchased an insurance policy that purports to insure the
officers and directors against certain
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liabilities incurred by them in the discharge of their functions as officers and
directors.
Item 16. Exhibits.
Exhibit No. Description
4.1 Amended and Restated Certificate of Incorporation of the
Company, as amended (incorporated by reference to Exhibit 3.1
to the Company's registration statement on Form S-1 (File No.
33-94940)).
4.2 Amendment to the Amended and Restated Certificate of
Incorporation of the Company effective as of April 15, 1996
(incorporated by reference to Exhibit 3.3 to the Company's
registration statement on Form S-1 (File No. 333-2738)).
4.3 Bylaws of the Company (incorporated by reference to Exhibit
3.2 to the Company's registration statement on Form S-1 (File
No. 33-94940)).
4.4 Form of Nontransferable Warrant To Purchase Common Stock of
Tel-Save Holdings, Inc. issued to Stockholders of The Furst
Group, Inc.
4.5 Warrant Agreement between Collective Communications Services,
Inc. and Tel-Save Holdings, Inc., dated as of January 11,
1996, to purchase Common Stock of Tel-Save Holdings, Inc.
4.6 Warrant Agreement between Network Plus, Inc. and Tel-Save
Holdings, Inc., dated as of January 11, 1996, to purchase
Common Stock of Tel-Save Holdings, Inc.
4.7 Warrant Agreement between Anne Marie Co., LLC and Tel-Save
Holdings, Inc., dated as of January 12, 1996, to purchase
Common Stock of Tel-Save Holdings, Inc.
4.8 Warrant Agreement between Eastern Telecommunications
Incorporated and Tel-Save Holdings, Inc., dated as of January
12, 1996, to purchase Common Stock of Tel-Save Holdings, Inc.
4.9 Warrant, dated as of September 25, 1995, granted to Gerard
Klauer Mattison & Co., LLC to purchase common stock of
Tel-Save Holdings, Inc.
5.1 Opinion of Aloysius T. Lawn, IV.
23.1 Consent of BDO Seidman, LLP.
23.2 Consent of Aloysius T. Lawn, IV (included as part of Exhibit
5.1).
24.1 Power of Attorney (included as part of the signature page).
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
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<PAGE>
(ii) To reflect in the prospectus any facts or events arising after the
effective date of registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represents a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement; provided,
however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from the registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
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<PAGE>
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Township of Solebury, Commonwealth of Pennsylvania, on
November 5, 1996.
TEL-SAVE HOLDINGS, INC.
By: /s/ Daniel Borislow
_____________________________
Daniel Borislow
Chairman of the Board of
Directors, Chief Executive
Officer and Director
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Daniel Borislow and Aloysius T. Lawn, IV,
and each of them, each with full power to act without the other, his true and
lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution, for such person and in his name, place and stead, in any and all
capacities, to sign any or all further amendments or supplements (including
post-effective amendments) to this Form S-3 Registration Statement and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto each of
said attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully as to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that each of said attorneys-in-fact
and agents, or his substitutes, may lawfully do or cause to be done by virtue
thereof.
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<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated below:
Signature Title Date
--------- ----- ----
/s/ Daniel Borislow Chairman of the Board November 5, 1996
_____________________ of Directors, Chief
Daniel Borislow Executive Officer and
Director (Principal
Executive Officer)
/s/ Gary W. McCulla President, Director November 5, 1996
____________________ of Sales and Marketing
Gary W. McCulla and Director
/s/ Emanuel J. DeMaio Chief Operations November 5, 1996
_____________________ Officer and Director
Emanuel J. DeMaio
/s/ Joseph A Schenk Chief Financial Officer November 5, 1996
_____________________ and Director (Principal
Joseph A. Schenk Financial Officer)
/s/ Kevin R. Kelly Controller (Principal November 5, 1996
_____________________ Accounting Officer)
Kevin R. Kelly
/s/ Harold First Director November 5, 1996
_____________________
Harold First
/s/ Ronald R. Thoma Director November 5, 1996
_____________________
Ronald R. Thoma
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<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
4.1 Amended and Restated Certificate of Incorporation of the
Company, as amended (incorporated by reference to Exhibit 3.1
to the Company's registration statement on Form S-1 (File No.
33-94940)).
4.2 Amendment to the Amended and Restated Certificate of
Incorporation of the Company effective as of April 15, 1996
(incorporated by reference to Exhibit 3.3 to the Company's
registration statement on Form S-1 (File No. 333-2738)).
4.3 Bylaws of the Company (incorporated by reference to Exhibit
3.2 to the Company's registration statement on Form S-1 (File
No. 33-94940)).
4.4 Form of Nontransferable Warrant To Purchase Common Stock of
Tel-Save Holdings, Inc. Issued to Stockholders of The Furst
Group, Inc.
4.5 Warrant Agreement between Collective Communications Services,
Inc. and Tel-Save Holdings, Inc., dated as of January 11,
1996, to purchase Common Stock of Tel-Save Holdings, Inc.
4.6 Warrant Agreement between Network Plus, Inc. and Tel-Save
Holdings, Inc., dated as of January 11, 1996, to purchase
Common Stock of Tel-Save Holdings, Inc.
4.7 Warrant Agreement between Anne Marie Co., LLC and Tel-Save
Holdings, Inc., dated as of January 12, 1996, to purchase
Common Stock of Tel-Save Holdings, Inc.
4.8 Warrant Agreement between Eastern Telecommunications
Incorporated and Tel-Save Holdings, Inc., dated as of January
12, 1996, to purchase Common Stock of Tel-Save Holdings, Inc.
4.9 Warrant, dated as of September 25, 1995, granted to Gerard
Klauer Mattison & Co., LLC to purchase common stock of
Tel-Save Holdings, Inc.
5.1 Opinion of Aloysius T. Lawn, IV.
23.1 Consent of BDO Seidman, LLP.
23.2 Consent of Aloysius T. Lawn, IV (included as part of Exhibit
5.1).
24.1 Power of Attorney (included as part of the signature page).
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Exhibit 4.4
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES LAWS AND
MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS TEL-SAVE HOLDINGS, INC. RECEIVES AN OPINION OF
COUNSEL ACCEPTABLE TO IT THAT SUCH SALE, TRANSFER OR ASSIGNMENT IS
EXEMPT FROM ANY REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
NONTRANSFERABLE WARRANT TO PURCHASE
COMMON STOCK OF
TEL-SAVE HOLDINGS, INC.
Date of Grant: As of March 14, 1996.
Void after 5:00 PM. Eastern Standard Time on
March 13, 1998 (subject to extension or earlier
termination, as herein provided)
No. W-TFG-[ ]
FOR VALUE RECEIVED, Tel-Save Holdings, Inc., a Delaware corporation
(together with its successors and assigns, the "Company") hereby certifies and
agrees that [Warrant Holder Name] (the "Holder") is entitled, subject to the
terms, conditions and adjustments hereof, to receive, in one or more exercises
of this Warrant, from time to time, from the Company such number of shares of
Common Stock, par value $.01 per share, of the Company (the "Common Stock") as
is determined under Paragraph 1 hereof, during the period commencing at 9:00
AM., Eastern Standard Time on September 14, 1996 (the "Commencement Date") and
ending at 5:00 PM. Eastern Standard Time on the earlier of March 13, 1998
(subject to extension as provided herein) and the Earlier Termination Date (as
defined in Paragraph 1 hereof) (such time on such earlier date, the "Termination
Date") at an exercise price (the "Exercise Price") of $11.33 per share (such
Exercise Price reflecting an "Exercise Price" of $17.00 per share on March 14,
1996, the date as of which the Original Warrant (as defined below) was issued,
as adjusted pursuant to the terms of this Warrant to reflect the three-for-two
stock split in the form of a 50% stock dividend effective as of March 15, 1996).
The number of shares of Common Stock issuable upon exercise of this Warrant
("this Warrant") and the exercise price per share shall be
<PAGE>
subject to further adjustment from time to time upon the occurrence of certain
events as set forth below. This Warrant is one of several Warrants issued in
exchange for the Warrant (the "Original Warrant") issued to The Furst Group,
Inc., a New Jersey corporation ("TFG"), in conjunction with, and referenced as
the "Warrant" in, the Telecommunication Services Agreement, dated as of March
14, 1996 (the "Services Agreement"), between Tel-Save, Inc., a wholly owned
subsidiary of the Company, and TFG. The aggregate number of "Warrant Shares" (as
defined below) under this Warrant and all such other Warrants issued in exchange
for the Original Warrant (and any Warrants issued in exchange for any thereof)
and at any time outstanding shall not exceed 1,500,000, as such number shall
have been adjusted and reduced after March 18, 1996 as herein provided.
The shares of Common Stock or any other shares or other units of stock or
other securities or property or any combination thereof receivable upon exercise
of this Warrant, as adjusted from time to time, are sometimes referred to herein
as the "Exercise Shares."
1. Exercise of Warrant; Issuance of Exercise Shares.
(a) Exercise of Warrant. This Warrant may be exercised as to the then
remaining Warrant Shares (as hereinafter defined) by the Holder in whole at any
time or in part from time to time on or after the Commencement Date and until
and including the Termination Date. For purposes of this Warrant, "Warrant
Shares" shall mean [Number of Shares] shares of Common Stock, subject to further
adjustment as provided in Paragraph 8 hereof and to successive reduction upon
any exercise of this Warrant as provided below in this clause (a). Following the
Termination Date, in the absence of the exercise hereof, the Holder shall have
no rights herein to acquire any Exercise Shares and this Warrant shall lapse as
to such rights. This Warrant may be exercised on any business day by delivering
to the Company at its principal office, presently located at the address of the
Company set forth in Paragraph 11 hereof (or such other office of the Company as
shall theretofore have been designated by the Company by written notice to the
Holder), a completed and executed irrevocable Notice of Warrant Exercise in the
form set forth in Appendix A hereto and made a part hereof (or facsimile copy
thereof, provided that the original executed Notice of Warrant Exercise is so
delivered to the Company within two days thereafter), specifying therein the
number of Warrant Shares (which shall not exceed the number thereof then
remaining as to which no Notice of Warrant Exercise has previously been given)
with respect to which the Holder is then exercising its rights hereunder,
provided that this Warrant is so delivered to the Company not later than the
original executed copy of such Notice
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<PAGE>
of Warrant Exercise. The Company, pursuant to such Notice of Warrant Exercise
from Holder, duly completed, and in accordance with Subparagraph 1(c) hereof,
shall, upon receipt of this Warrant and the original executed copy of such
Notice of Warrant Exercise, issue, and deliver a certificate evidencing, such
number of Exercise Shares as shall equal the result of (x) the product of (i)
the difference between the Current Market Price (as defined in Subparagraph 8(d)
hereof) on the date of delivery of such Notice Of Warrant Exercise and the then
Exercise Price, multiplied by (ii) the number of Warrant Shares specified in
such Notice of Warrant Exercise, divided by (y) the Current Market Price on the
date of delivery of such Notice Of Warrant Exercise. Upon such exercise pursuant
to a Notice of Warrant Exercise, the number of Warrant Shares automatically
shall be reduced by the number thereof specified in such Notice of Warrant
Exercise.
In the event that this Warrant shall be duly exercised in part prior to the
Termination Date, the Company shall issue a new Warrant of like tenor evidencing
the rights of the Holder thereof with respect to the balance of the Warrant
Shares under the Warrant so surrendered.
No adjustments shall be made for any cash dividends on Exercise Shares
issuable upon exercise of this Warrant.
(b) Earlier Termination Date. Holder's right to purchase any Exercise
Shares under this Warrant shall terminate and be of no further force and effect
on the date (the "Earlier Termination Date") that (i) Continuing Customers shall
be transferred or disconnected from the Services after a "Change of Control" (as
defined in the Services Agreement) in breach of the terms of Section 6.4 of the
Services Agreement (less than 105 days after a "Change of Control" (as defined
in the Services Agreement)), and (ii) such transferred or disconnected
Continuing Customers shall not have been replaced within 30 days after notice of
such breach by TS with customers of equivalent value that remain on the Services
for at least 105 days.
(c) Issuance of Exercise Shares; Delivery of Warrant Certificates. The
Company shall, within three (3) business days after the exercise of this Warrant
or as soon thereafter as is practicable, issue in the name of the Holder (or
such other person or persons, if any, as specifically permitted under the terms
hereof and as the Holder shall have designated in the Notice of Warrant
Exercise) one or more certificates representing the Exercise Shares to which the
Holder (or such other persons or persons) shall be entitled upon such exercise
under the terms hereof. Such certificate or certificates shall be deemed to have
been issued and the Holder (or such other person or persons so permitted and
designated) shall be deemed to have become the
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<PAGE>
record holder of the Exercise Shares as of the date of the due exercise of this
Warrant.
(d) Exercise Shares Fully Paid and Non-assessable. The Company agrees and
covenants that all Exercise Shares issued or delivered upon the due exercise of
this Warrant will, upon issuance in accordance with the terms hereof, be duly
authorized, validly issued, fully paid and non-assessable and free and clear of
all taxes (other than those taxes which, pursuant to Paragraph 2 hereof, the
Company shall not be obligated to pay), liens, charges and security interests
created by or in favor of the Company with respect to the issuance thereof
(other than the limitations on such Exercise Shares imposed by applicable
securities laws and limitations expressly included in this Warrant).
(e) Fractional Shares. The Company shall not be required to issue
fractional shares of capital stock upon the exercise of this Warrant or to
deliver certificates that evidence fractional shares of capital stock. In the
event that any fraction of an Exercise Share would, except for the provisions of
this Subparagraph (e), be issuable upon the exercise of this Warrant, the
Company shall pay to the Holder exercising the Warrant an amount in cash equal
to such fraction multiplied by the "Current Market Price" of the Exercise Share.
2. Payment of Taxes. The Company will pay all documentary stamp taxes, if
any, attributable to the issuance of Exercise Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax or taxes that may be payable in respect of any transfer of this Warrant or
any transfer involved in the issue of any Warrant Certificates or any
certificates for Exercise Shares in a name other than that of the Holder of this
Warrant, and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
3. Mutilated or Missing Warrant. In case this Warrant shall be mutilated,
lost, stolen or destroyed, the Company may in its discretion issue, in exchange
and substitution for and upon cancellation of, this Warrant, if mutilated, or in
lieu of and in substitution for this Warrant if lost, stolen or destroyed, a new
Warrant of like tenor and in the same aggregate denomination (but reflecting the
number of Warrant Shares as to which this Warrant was then exercisable), but
only (i) in the case of loss, theft or destruction, upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction of
this Warrant
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<PAGE>
and, in the case of TFG as the Holder, TFG's indemnity, and, in the case of any
other Person as the holder, indemnity or bond, if requested, in each case also
reasonably satisfactory to the Company, and (ii) in the case of mutilation, upon
surrender of this Warrant. The Applicant for such substitute Warrant shall also
comply with such other reasonable regulations and pay such other reasonable
charges as the Company or its counsel may prescribe.
4. Rights of Holder. The Holder shall not, by virtue of anything contained
in this Warrant or otherwise, be entitled to any right whatsoever, either in law
or equity, of a stockholder of the Company, including, without limitation, the
right to receive dividends or to vote or to consent or to receive notice as a
shareholder in respect of the meetings of shareholders or the election of
directors of the Company or any other matter.
5. Notices of Corporate Action. In the event of a proposal by the Company
(or of which the Company shall have knowledge) for:
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend (other than a regular periodic dividend
payable in cash) or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, any consolidation or
merger involving the Company and any other Person or any transfer of all or
substantially all the assets of the Company to any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
the Company will deliver to the Holder a notice specifying (i) the date or
expected date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and the amount and character of such dividend,
distribution or right, or (ii) the date or expected date on which any such
reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place and the time,
if any such time is to be fixed, as of which the holders of record of Common
Stock shall be entitled to exchange
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<PAGE>
their shares of Common Stock for the securities or other property deliverable
upon such reorganization, reclassification, recapitalization, consolidation,
merger, transfer, dissolution, liquidation or winding-up. Such notice shall with
respect to Subparagraphs (a) and (b) hereof, be furnished at least 20 days prior
to the date therein specified and, with respect to subparagraph (c) hereof, be
furnished promptly upon the commencement of any event described therein.
6. Right of First Refusal. Until March 14, 2000, except for bona fide
gifts, or sales by any Holder of up to an aggregate of 100,000 Exercise Shares
in any single transaction to the same Person (provided that sales to any
affiliate of such Person shall be, for these purpose, considered a sale to such
Person), the Exercise Shares issued pursuant to this Warrant may not be sold or
transferred by the Holder (and any such sale or transfer will be invalid),
unless such Holder shall have first notified the Company in writing of the
number of Exercise Shares it proposes to sell and shall have offered to sell
such Exercise Shares to the Company at the Market Price (as defined below in
this Paragraph) on the trading day next preceding the date of such notice and
the Company shall not have elected irrevocably in writing to the Holder, within
three (3) business days after such notice, to purchase all, but not less than
all, of such Exercise Shares so offered at such price by the close of business
on the third business day after such Holder notice; if the Company shall have
waived or been deemed to have waived such right to purchase such Exercise
Shares, the Holder may proceed to sell the Exercise Shares that were the subject
of such Holder notice, provided that such sales must be completed within the
three calendar month period after the Holder notice to the Company of intention
to sell such Exercise Shares. If the Company elects to purchase such Exercise
Shares so offered by a Holder notice, Holder shall sell such Exercise Shares to
the Company and payment therefor in immediately available funds shall be made
not later than the close of business on the third business day after such
Holder's notice, subject to receipt by the Company of certificates, in proper
form for transfer, for such Exercise Shares and the Holder's delivery to the
Company of such Exercise Shares free and clear of any liens, charges, claims or
encumbrances. For the purposes of this Paragraph and Paragraph 7 hereof, "Market
Price" as of any date shall be the average of the high and low sales prices,
regular way, of the Common Stock on such day, as reported by NASDAQ.
7. Forfeiture of Exercise Shares. By accepting any Exercise Shares upon
exercise of this Warrant, the Holder agrees that, subject to the next succeeding
sentence, if Continuing Customers shall be transferred or disconnected from the
Services after a Change of Control in breach of the terms of Section 6.4
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<PAGE>
of the Services Agreement (less than 105 days after a Change of Control) and
there is an Early Termination Date of the Warrant pursuant to Paragraph 1(b)
hereof, all Exercise Shares issued hereunder upon delivery of a Notice of
Warrant Exercise during the period beginning on the 90th day prior to a Control
Change Date and ending on the 105th day after such Control Change Date (the
"Covered Exercise Shares") (or an amount in readily available funds equal to any
proceeds from the sale or other disposition of such Covered Exercise Shares if
such sale or other disposition was a bona fide, arm's-length sales transaction
for cash with a Person not affiliated with the Holder and otherwise equal to the
Market Price of the shares on the date of such sale or other disposition) shall
immediately be forfeited and returned (or paid over) to the Company, for no
consideration, free and clear, in the case of forfeited and returned shares, of
any lien, charge, claim or encumbrance. The foregoing sentence will not apply
and the Covered Exercise Shares referenced therein (or the proceeds thereof, as
the case may be) will not be forfeited to the Company if either (i) TFG
irrevocably waives, before exercise, its rights to give notice and transfer
customers under Section 6.4 of the Services Agreement and shall not transfer any
Continuing Customers (as defined in the Services Agreement) in violation of the
105-day advance written notice requirement of Section 6.4 of the Services
Agreement in a manner that causes an Early Termination Date or (ii) TFG or the
successor, if any, to TFG upon or in connection with a Change of Control giving
rise to the Control Change Date, as the case may be, shall agree in writing not
to, and shall not, transfer the then Continuing Customers under Section 6.4 of
the Services Agreement in violation of the 105-day advance written notice
requirement of such Section in a manner that causes an Early Termination Date.
For purposes of this Paragraph, "Change of Control" shall be defined as in the
Services Agreement and "Control Change Date" shall mean the date as of which a
Change of Control shall occur. This Section shall not limit the rights or
obligations of any party under the Services Agreement.
8. Adjustment of Exercise Price, Warrant Shares and Exercise Shares. The
Exercise Price, the number of Warrant Shares and the kind of Exercise Shares
issuable upon the exercise of this Warrant shall be subject to adjustment from
time to time upon the happening of certain events after March 18, 1996 as
hereinafter provided. The Exercise Price in effect at any time, the number of
Warrant Shares and the kind of securities issuable upon exercise of this Warrant
shall be subject to adjustment as follows:
(a) If the Company shall after March 18, 1996 (i) pay a dividend or make a
distribution on its shares of Common Stock in shares of Common Stock, (ii)
subdivide or classify its
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<PAGE>
outstanding Common Stock into a greater number of shares, or (iii) combine or
reclassify its outstanding Common Stock into a smaller number of shares, the
Exercise Price in effect at the time of the record date for such dividend or
distribution or of the effective date of such subdivision, combination or reclas
sification shall be proportionally adjusted so that the Holder of this Warrant
exercised after such date shall be entitled to receive the aggregate number and
kind of shares that, if this Warrant had been exercised by such Holder
immediately prior to such date, such Holder would have owned upon such exercise
and been entitled to receive upon such dividend, subdivision, combination or
reclassification. For example, if the Company declares a 2 for 1 stock dividend
or stock split and the Exercise Price immediately prior to such event was $5.00
per share, the adjusted Exercise Price immediately after such event would be
$2.50 per share. Such adjustment shall be made successively whenever any event
listed above shall occur.
(b) In case the Company shall after March 18, 1996 issue rights or warrants
to all holders of its Common Stock entitling them to subscribe for or purchase
shares of Common Stock (or securities convertible into Common Stock) at a price
(or having a conversion price per share) less than the "Current Market Price" of
the Common Stock (as defined in Subparagraph (d) of this Paragraph below) on the
record date mentioned below, the Exercise Price shall be adjusted so that the
same shall equal the price determined by multiplying the Exercise Price in
effect immediately prior to the date of such issuance by a fraction, the
numerator of which shall be the sum of the number of shares of Common Stock
outstanding on the record date mentioned below and the number of additional
shares of Common Stock that the aggregate offering price of the total number of
shares of Common Stock so offered (or the aggregate conversion price of the
convertible securities so offered) would purchase at the "Current Market Price"
per share of the Common Stock, and the denominator of which shall be the sum of
the number of shares of Common Stock outstanding on such record date and the
number of additional shares of Common Stock offered for subscription or
purchases (or into which the convertible securities so offered are convertible).
Such adjustment shall be made successively whenever such rights or warrants are
issued and shall become effective immediately after the record date for the
determination of shareholders entitled to receive such rights or warrants; and,
to the extent that shares of Common Stock are not delivered (or securities
convertible into Common Stock are not delivered) after the expiration of such
rights or warrants, the Exercise Price shall be readjusted to the Exercise Price
that would then be in effect had the adjustment made upon the issuance of such
rights or warrants been made upon the basis of delivery of only the
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<PAGE>
number of shares of Common Stock (or securities convertible into Common Stock)
actually delivered.
(c) Whenever the Exercise Price payable upon exercise of this Warrant is
adjusted pursuant to Subparagraphs (a) and (b) above, the number of Warrant
Shares as to which a Notice of Warrant Exercise may be given shall
simultaneously be adjusted by multiplying (x) the number of Warrant Shares then
remaining as to which no Notice of Warrant Exercise has theretofore been given
by (y) the Exercise Price in effect just prior to such adjustment, and dividing
the product so obtained by the Exercise Price, as adjusted.
(d) For the purpose of any computation in this Warrant, the "Current Market
Price" per share of Common Stock at any date shall be deemed to be the average
of the daily closing prices for 10 consecutive business days before such date.
The closing price for each day shall be the last sale price regular way or, in
case no such reported sale takes place on such day, the average of the last
reported bid and lowest reported asked prices as reported by NASDAQ, or other
similar organizations if NASDAQ is no longer reporting such information, or if
not so available, the fair market price as determined by the Board of Directors.
(e) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least ten cents ($0.10)
in such price; provided, however, that any adjustments that by reason of this
Subparagraph (e) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment required to be made hereunder. All
calculations under this Paragraph 8 shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the case may be. Anything in this Paragraph
8 to the contrary notwithstanding, the Company shall be entitled, but shall not
be required, to make such additional reductions in the Exercise Price, in
addition to those required by this Paragraph 8, as it, in its sole discretion,
shall determine to be advisable in order that any dividend or distribution in
shares of Common Stock, subdivision, reclassification or combination of Common
Stock, issuance of warrants to purchase Common Stock or distribution of
evidences of indebtedness or other assets (excluding cash dividends) referred to
hereinabove in this Paragraph 8 hereafter made by the Company to the Holders of
its Common Stock shall not result in any tax to the Holders of its Common Stock
or securities convertible into Common Stock.
(f) Whenever the Exercise Price is adjusted as herein provided or the
Termination Date extended as herein provided, the Company shall promptly cause a
notice, setting forth the adjusted Exercise Price and adjusted number of Warrant
Shares as to which
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a Notice of Warrant Exercise may be given under this Warrant and/or the extended
Termination Date, to be mailed to the Holders, at their last addresses appearing
in the books of the Company, and shall cause a certified copy thereof to be
mailed to its transfer agent, if any. The Company may retain a firm of
independent certified public accountants selected by the Board of Directors (who
may be the regular accountants employed by the Company) to make any computation
required by this Paragraph 8, and a certificate signed by such firm shall be
conclusive evidence of the correctness of such adjustment.
(g) In the event that at any time, as a result of an adjustment made
pursuant to Subparagraph 8(a) above, the Holder of this Warrant thereafter shall
become entitled to receive any Exercise Shares of the Company, other than Common
Stock, thereafter the number of such other shares so receivable upon exercise of
this Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Subparagraphs (a) to (e), inclusive, of Paragraph 8
above.
(h) Irrespective of any adjustments in the Exercise Price, the number of
Warrant Shares or kind of Exercise Shares purchasable upon exercise of this
Warrant, Warrants theretofore or thereafter issued in exchange or substitution
for this Warrant or any part thereof may continue to express the same price and
number and kind of shares as are stated in this Warrant.
(i) Whenever the Exercise Price shall be adjusted or the Termination Date
extended, in each case as required by the provisions hereof, the Company shall
forthwith file in the custody of its Secretary or an Assistant Secretary at its
principal office and with its stock transfer agent, if any, an officer's
certificate showing the adjusted Exercise Price determined as herein provided
and/or the Termination Date extended and, in the case of an Exercise Price
adjustment, setting forth in reasonable detail the facts requiring such
adjustment, including a statement of the number of additional shares of Common
Stock, if any, and such other facts as shall be necessary to show the reason for
and the manner of computing such adjustment. Each such officer's certificate
shall be made available at all reasonable times for inspection by the Holder and
the Company shall, forthwith after each such adjustment, mail a copy by
certified mail or such certificate to the Holder.
9. Restrictions on Transferability; Restrictive Legends; Indemnification.
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(a) Neither this Warrant nor the right to exercise this Warrant or to
receive Exercise Shares upon any such exercise may be sold, assigned or
transferred by the Holder, except that this Warrant and such rights may be
transferred, upon compliance with the other Subparagraphs of this Paragraph 9,
(i) by TFG, as the Holder, to any successor to TFG by reason of a merger or
consolidation of TFG or any successor to all or substantially all of TFG's
assets if such successor assumes in writing this Warrant and all of TFG's
liabilities and obligations under the Services Agreement (subject to the
provisions of Section 6.4 thereof) and (ii) by TFG, as the Holder, to the
shareholders of TFG as of the date of this Warrant if TFG guarantees in writing
the performance by each such transferee of such transferee's obligations under
the Warrant transferred. Any sale, assignment or transfer of this Warrant in
violation of this Paragraph 9 is null and void as of the time of such transfer.
(b) No Exercise Share may be offered for sale or sold, or otherwise
transferred or sold in any transaction that would constitute a sale thereof
within the meaning of the Securities Act (except to the Company pursuant to
Paragraph 6 hereof), unless (i) such security has been registered for sale under
the Securities Act and registered or qualified under applicable state securities
laws relating to the offer and sale of securities, or (ii) an exemption from the
registration requirements of the Securities Act and the registration or
qualifications requirements of all such state securities laws are available and
the Company shall have received an opinion of counsel (which may be an opinion
that covers multiple or all subsequent sales) satisfactory to the Company that
the proposed sale or other disposition of such securities may be effected
without registration under the Securities Act, such counsel and such opinion to
be satisfactory to the Company.
(c) Except as otherwise permitted by this Paragraph 9, this Warrant and any
Warrant issued upon direct or indirect transfer of or in substitution for this
Warrant or any part thereof shall be stamped or otherwise imprinted with a
legend substantially in the form of the legend with respect to transfer
limitation and securities acts at the head of this Warrant.
(d) Except as otherwise permitted by this Paragraph 9, each certificate for
an Exercise Share issued upon exercise of this Warrant or any Warrant issued
upon direct or indirect transfer of or in substitution for this Warrant or any
part thereof shall be stamped or otherwise imprinted with a legend in
substantially the following form:
The shares represented by this certificate (i) have not been
registered under the Securities Act of 1933, as
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amended, and may not be transferred in the absence of such
registration or an exemption therefrom under such Act, except under
circumstances where neither such registration nor such an exemption is
required by law and (ii) are subject to the provisions of a Warrant
agreement, dated as of March 14, 1996, between Tel-Save Holdings, Inc.
and The Furst Group, Inc., a copy of which Warrant agreement is on
file at the principal office of Tel-Save Holdings, Inc.
; and, subject to Subparagraph 9(e) below, each certificate issued upon direct
or indirect transfer of any such Exercise Share shall be stamped or otherwise
imprinted with a legend in substantially the following form:
The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be transferred in
the absence of such registration or an exemption therefrom under such Act,
except under circumstances where neither such registration nor such an
exemption is required by law.
(e) The Company shall, at the request of any registered holder of an
Exercise Share, exchange the certificate representing such security for a
certificate representing the same security not bearing the restrictive legend
required by Subparagraph 9(d) if the Exercise Shares may be sold or transferred
pursuant to the provisions of Rule 144(k) and, in the opinion of counsel to the
Company, such restrictive legend is no longer necessary. In addition, the legend
shall be appropriately modified to remove clause (ii) thereof if the Exercise
Shares are no longer subject to any restriction under this Warrant.
(f) The Holder agrees to indemnify and hold harmless the Company against
any loss, damage, claim or liability arising from the disposition of this
Warrant or any Exercise Share held by such Holder or any interest therein in
violation of the provisions of this Paragraph 9.
10. Registration Rights.
(a) Certain Definitions. For purpose of this Paragraph 10, the following
terms will be defined as follows:
"Commission" means the Securities and Exchange Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"Holder" means The Furst Group, Inc., a New Jersey corporation, as the
Holder of the Original Warrant, and any successor or assign thereof that is
permitted pursuant to Subparagraph 9(a) of the Original Warrant.
"Person" means an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
"Prospectus" means the prospectus included in any Registration Statement,
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
the Registration Statement and by all other amendments and supplements to the
prospectus, including post-effective amendments and all material incorporated by
reference in such prospectus.
"Registrable Securities" means the Exercise Shares issued upon exercise of
this Warrant and any securities issued or issuable with respect to any of such
Exercise Shares (x) by way of stock split, stock dividend or other distribution,
(y) in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or (z) in any other way. Any Registrable
Security will cease to be a Registrable Security when (i) a Registration
Statement covering such Registrable Security has been declared effective by the
Commission and it has been disposed of or purchased, as the case may be,
pursuant to such effective Registration Statement, (ii) it is sold under
circumstances in which all of the applicable conditions of Rule 144 (or any
similar provisions then in force) under the Securities Act are met or it may be
sold pursuant to Rule 144(k) under the Securities Act or (iii) it has been
otherwise transferred, the Company has delivered a new certificate or other
evidence of ownership for it not bearing a legend and it may be resold without
subsequent registration under the Securities Act.
"Registration Statement" means any registration statement of the Company,
including the prospectus, amendments and supplements to such Registration
Statement, including post-effective amendments, and all exhibits and all
material incorporated by reference in such Registration Statement, which relates
to Registrable Securities.
"Shelf Registration" means the shelf registration statement filed by the
Company in accordance with Subparagraph 10(b) hereof.
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"Underwriter" means a securities dealer that purchases any Registrable
Securities as principal and not as part of such dealer's market-making
activities.
(b) Shelf Registrations
(i) (1) The Company will file a "shelf" registration statement with respect
to the resale of at least 1,000,000 shares of the Registrable Securities
pursuant to Rule 415 (or any similar provision that may be adopted by the
Commission) under the Securities Act (the "Shelf Registration") within 2
business days after the first date that the Company is first permitted to file a
registration statement on Form S-3, but not later than October 1, 1996.
(2) If the Company is not able to file a registration statement on Form S-3
on the date required by clause (1) of this clause (i), it will, by such time,
file a registration statement on such other form as will permit the registration
for resale of the Registrable Securities and such other registration statement
will be the "Shelf Registration" until replaced by another registration
statement so permitting such sales.
(ii) The Company agrees to use its best efforts to have the Shelf
Registration declared effective as soon as practicable after the date of filing
thereof and to keep the Shelf Registration continuously effective until the
first date there shall be no remaining Registrable Securities (including by
reason of the fact that all Registrable Securities may be sold pursuant to Rule
144(k) under the Securities Act).
(iii) The Company may require the Holder to furnish to the Company such
information regarding the distribution of such securities as the Company may
from time to time reasonably request in writing as being necessary or
appropriate for completion of the Registration Statement.
(iv) The Holder agrees by acquisition of the Registrable Securities that,
at any time when any Registration Statement is effective, upon receipt of any
written notice from the Company of the happening of any of the following events:
(1) any request by the Commission for amendments or supplements to the
Registration Statement or the Prospectus or for additional information, (2) the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose,
(3) the receipt by the Company of any notification with respect to the
suspension of the qualification of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose, and (4) the existence of any fact
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that results in the Registration Statement, the Prospectus or any document
incorporated therein by reference containing an untrue statement of material
fact or omitting 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, in the case of the Prospectus) not misleading, such Holder
will forthwith discontinue disposition of Registrable Securities pursuant to the
Registration Statement until such Holder's receipt of copies of a supplemented
or amended Prospectus that does not contain an untrue statement of a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they are made, not misleading, or
until it is advised in writing by the Company that the use of the Prospectus may
be resumed, and has received copies of any additional or supplemental filings
that are incorporated by reference in the Prospectus, and, if so directed by the
Company, Holder will deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in Holder's possession, of the
Prospectus covering such Registrable Securities current at the time of receipt
of such notice. If the Company shall give any such notice, the time period
mentioned in Subparagraph (b) of this Paragraph 10 shall be extended by the
number of days during the period from and including the date of the giving of
such notice to and including the date when the Holder either receives the copies
of the supplemented or amended prospectus contemplated above or is advised in
writing by the Company that the use of the Prospectus may be resumed.
(v) The Holder agrees by acquisition of the Registrable Securities to
cooperate with the Company in all reasonable respects in connection with the
preparation and filing of Registra- tion Statements hereunder in which such
Registrable Securities are included or expected to be included.
(vi) In the event that the number of Exercise Shares exceeds 1,000,000
shares, the Company will amend the Registration Statement and/or file another
Registration Statement (which shall be part of the Shelf Registration for all
purposes of this Paragraph 10) covering such additional Exercise Shares.
(c) Company Registrations. If the Company at any time after this Warrant
becomes exercisable proposes to register for sale by the Company in an
underwritten offering any of its Common Stock under the Securities Act on any
form of general application (other than registration statements on Forms S-4 or
S-8 or other similar or substitute forms), it will each such time give written
notice to the Holder of its intention to do so and, upon the written request of
the Holder made within 30 days after the receipt of any such notice (which
request shall specify the number of Registrable Shares intended to be disposed
of by the
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Holder), the Company will include among the securities that it then endeavors to
register under the Securities Act all of the Registrable Shares that the Company
has been so requested to register; provided, however, that if, in the written
opinion of the managing Underwriter or Underwriters, the total number of
Registrable Shares requested to be included by the Holder, together with all
shares of Common Stock to be offered by the Company and other holders of the
Company's securities, will exceed the maximum number of shares that can be
marketed (i) at a price reasonably related to their then current market value,
or (ii) without otherwise materially and adversely affecting the entire
offering, then the number of shares of Common Stock otherwise to be included in
the registration statement by the Holder and other holders of the Company's
securities requesting registration shall be reduced as follows: (1) there shall
first be excluded shares of Common Stock proposed to be included by holders of
the Company's securities not possessing legal rights to include the same; and
(2) any further reduction shall be pro rata among such holders (having such
legal right) requesting such registration in the proportion of the number of
shares of Common Stock then owned by each with respect to which it has
registration rights; provided, however, that there shall be no reduction
pursuant to the provisions hereof in the number of shares to be included therein
(i) by the Company and (ii) by a person or persons with a legal right to demand
such registration if the registration is at the demand of such person or persons
pursuant to such legal right.
(d) Fees and Expenses. The Company will pay all registration expenses in
connection with each registration pursuant to this Paragraph 10 other than
underwriting discounts and commissions and the fees, expenses and disbursements
of counsel, if any, retained by the Holder.
(e) Registration Procedures. If and whenever the Company is required to
effect the registration of any Registrable Securities under the Securities Act
as provided in this Paragraph 10, the Company will as expeditiously as possible:
(i) prepare in conformity with the requirements of the Securities Act
and file with the Commission a Registration Statement with respect to such
Registrable Securities and use its best efforts to cause such Registration
Statement to become effective;
(ii) prepare in conformity with the requirements of the Securities Act
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 keep such Registration Statement effective and to comply with the
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<PAGE>
provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement (1) in the case of the Shelf
Registration, for the time period set forth in Subparagraph (b) of this
Paragraph 10, and (2) in the case of a Registration Statement under Subparagraph
(c) of this Paragraph 10, until (A) such time as all of such securities have
been disposed of in accordance with the intended methods of disposition by the
seller or sellers thereof set forth in such Registration Statement, but (B) in
no event for a period of more than 120 days after such Registration Statement
becomes effective;
(iii) furnish to the Holder of such Registrable Securities such number
of conformed copies of such Registration Statement and of each such amendment
and supplement thereto (in each case including all exhibits and one fully
executed copy of such Registration Statement and of each such amendment and
supplement thereto), such number of copies of the prospectus contained in such
Registration Statement (including each preliminary prospectus and any summary
prospectus), in conformity with the requirements of the Securities Act, and such
other documents, as such Seller may reasonably request;
(iv) use its reasonable best efforts to register or qualify such
Registrable Securities covered by such Registration Statement under such other
securities or blue sky laws of such jurisdictions as the Holder shall reasonably
request, and take any other action as may be necessary or advisable to enable
such Holder to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such Holder, except that the Company shall not
for any purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not, but for the requirements
of this paragraph, be so qualified or to consent to general service of process
in any such jurisdiction;
(v) notify the Holder of any such Registrable Securities covered by
such Registration Statement, 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 included in such Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing,
and prepare and furnish to such Holder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such prospectus shall
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
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<PAGE>
therein not misleading in light of the circumstances then existing; and
(vi) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its securities
holders, as soon as reasonably practicable but in any event not later than
eighteen months after the effective date of the Registration Statement, an
earnings statement covering the period of at least twelve consecutive months,
beginning with the first month of the first quarter after the effective date of
such Registration Statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act.
The Company may require each seller of any securities as to which any
registration is being effected to furnish the Company such information regarding
such seller and the distribution of such securities as the Company may from time
to time request in writing and as shall be required by law or by the Commission
in connection therewith.
(f) Underwriting.
(i) If a registration pursuant to this Paragraph 10 involves an
underwritten offering, the Company shall have the right to select the
Underwriters therefor.
(ii) If requested by the Underwriters for any underwritten offering, the
Company will enter into an underwriting agreement with such Underwriters for
such offering, such agreement to contain such representations and warranties by
the Company and such other terms and provisions as are customarily contained in
agreements of this type. The Holder requesting registration for sale in such
underwritten offering under this Paragraph 10 shall be a party to such
underwriting agreement and the representations and warranties by, and the other
agreements on the part of, the Company to and for the benefit of such
Underwriters shall also be made to and for the benefit of such Holder and the
conditions precedent to the obligations of such Underwriters under such
underwriting agreement shall be conditions precedent to the obligations of such
Holder. Such Holder shall not be required to make any representations or
warranties to or agreements with the Company or its Underwriters other than
representations, warranties or agreements regarding such Holder and such
Holder's intended method of distribution. No Person may participate in any
underwritten registration hereunder unless such Person (a) agrees to sell such
Person's securities on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires,
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powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements.
(iii) The Holder, if such Holder is then the beneficial owner (as provided
in Rule 13d-3 under the Exchange Act) of 2% or more of the Common Stock of the
Company and if requested by the managing Underwriters in any underwritten
offering of Common Stock of the Company (whether or not any Registrable
Securities of such Holder are included in such offering), agrees not to effect
any public sale or distribution of the Registrable Securities, including a sale
pursuant to Rule 144 under the Securities Act (except as part of such
underwritten offering), during the 10-day period prior to, and during a period
of up to 90 days beginning on, the closing date of such underwritten offering,
to the extent timely notified in writing by the Company or the managing
Underwriters, provided that the Company's directors and executive officers and
all other beneficial holders of the same percentage of shares as the Holder
similarly agree.
(g) Indemnification
(i) Indemnification by Company. The Company shall indemnify and hold
harmless the Holder, its officers, directors, employees and Agents and each
Person who controls such Holder within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act (each such person being
sometimes hereinafter referred to as an "Indemnified Holder") from and against
all losses, claims, damages, liabilities and expenses (including reasonable
costs of investigation and legal expenses) arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement or Prospectus or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or based upon any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages, liabilities or expenses arise out of or
are based upon any such untrue statement or
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omission or allegation thereof based upon information furnished in writing to
the Company by such Holder specifically for use therein; provided, that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, liability or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any preliminary prospectus if (i) such Holder failed to send or deliver (if and
to the extent required under the Securities Act) a copy of the Prospectus with
or prior to the delivery of written confirmation of the sale of Registrable
Securities and (ii) the Prospectus would have completely corrected such untrue
statement or omission; and provided, further, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission in the Prospectus, if
such untrue statement or alleged untrue statement, omission or alleged omission
is completely corrected in an amendment or supplement to the Prospectus and if,
having previously been furnished by or on behalf of the Company with copies of
the Prospectus as so amended or supplemented, such Holder thereafter fails to
deliver (if and to the extent required by the Securities Act) such Prospectus as
so amended or supplemented, prior to or concurrently with the sale of a
Registrable Security to the person asserting such loss, claim, damage, liability
or expense who purchased such Registrable Security which is the subject thereof
from such Holder. The Company will also indemnify Underwriters, selling brokers,
dealer managers and similar securities industry professionals participating in
the distribution, their officers and directors and each Person who controls such
Persons (within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act) to the same extent as provided above with respect to the
indemnification of the Indemnified Holders; provided, however, if such
Underwriters, selling brokers, dealer managers or similar securities industry
professionals require or agree to indemnification provisions different from
those set forth herein, but standard in the industry, the Company agrees to
provide them such indemnification rather than the indemnification provided for
herein.
If any action or proceeding (including any governmental investigation or
inquiry) shall be brought or asserted against an Indemnified Holder in respect
of which indemnity may be sought from the Company, such Indemnified Holder shall
promptly notify the Company in writing, and the Company shall assume the defense
thereof, including the employment of counsel satisfactory to such Indemnified
Holder and the payment of all expenses. Such Indemnified Holder shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall be the expense
of such Indemnified Holder unless (a) the Company has agreed to pay such fees
and expenses or (b) the Company shall have failed to assume the defense of such
action or proceeding and has failed to employ counsel satisfactory to such
Indemnified Holder in any such action or proceeding or (c) the named parties to
any such action or proceeding (including any impleaded parties) include both
such Indemnified Holder and the Company, and such Indemnified Holder shall have
been advised by counsel reasonably satisfactory to the Company that there may be
one or more legal defenses available to such Indemnified Holder which are
different from or additional to those available to the
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Company (in which case, if such Indemnified Holder notifies the Company in
writing that it elects to employ separate counsel at the expense of the Company,
the Company shall not have the right to assume the defense of such action or
proceeding on behalf of such Indemnified Holder, it being understood, however,
that the Company shall not, in connection with any one such action or proceeding
or separate but substantially similar or related actions or proceedings in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate firm of
attorneys at any time for such Indemnified Holder and any other Indemnified
Holders, which firm shall be designated in writing by such Indemnified Holders).
The Company shall not be liable for any settlement of any such action or
proceeding effected without its written consent (which will not be unreasonably
withheld), but if settled with its written consent, or if there be a final
judgment for the plaintiff in any such action or proceeding, the Company agrees
to indemnify and hold harmless such Indemnified Holders from and against any
loss or liability by reason of such settlement or judgment.
(ii) Indemnification by Holder of Registrable Securities. The Holder agrees
to indemnify and hold harmless the Company, its directors and officers and each
Person, if any, who controls the Company within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity from the Company to such Holder, but only with respect
to information relating to such Holder furnished in writing by such Holder
specifically for use in any Registration Statement or Prospectus, or any
amendment or supplement thereto, or any preliminary prospectus. In case any
action or proceeding shall be brought against the Company or its directors or
officers or any such controlling person, in respect of which indemnity may be
sought against a Holder, such Holder shall have the rights and duties given the
Company and the Company or its directors or officers or such controlling person
shall have the rights and duties given to each Holder by the preceding
paragraph.
The Company shall be entitled to receive indemnities from Underwriters,
selling brokers, dealer managers and similar securities industry professionals
participating in the distribution, to the same extent as provided above with
respect to information so furnished in writing by such Persons specifically for
inclusion in any Prospectus or Registration Statement or any amendment or
supplement thereto, or any preliminary prospectus.
(iii) Contribution. If the indemnification provided for in this
Subparagraph (g) is unavailable to an indemnified
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party under clause (i) or (ii) of this Subparagraph (g) (other than by reason of
exceptions provided in those clauses) in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then each applicable indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or expenses in such proportion as is appropriate to
reflect the relative fault of the Company on the one hand and of the Indemnified
Holder on the other in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative fault of the Company
on the one hand and of the Indemnified Holder on the other shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or by the
Indemnified Holder and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in the second paragraph of clause (i) of
this Subparagraph (g), any legal or other fees or expenses reasonably incurred
by such party in connection with investigating or defending any action or claim.
The Company and the Holder agree that it would not be just and equitable if
contribution pursuant to this clause (iii) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(h) Termination Date Extension. If, by reason of its agreement under
Subparagraph 10(f)(iii) hereof, Holder is not permitted to sell Registrable
Securities for a period that includes the Termination Date (before any
adjustment under this Subparagraph), the Termination Date will be extended by
such number of days as equals the number of days from the beginning of such
period that Holder is so prevented from selling to the Termination Date (before
any adjustment under this Subparagraph). If, by reason of its agreement under
Subparagraph 10(b)(iv) hereof, Holder is not permitted to sell Registrable
Securities for more than 30 days in any twelve-month period, the Termination
Date will be extended by such number of days in such twelve-month
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period as Holder is so prevented from selling as exceeds such 30 days.
11. Notices. All notices or other communications under this Warrant shall
be in writing and shall be deemed to have been given if delivered by hand or
mailed by certified mail, postage prepaid, return receipt requested, or
delivered by facsimile transmission (which shall be followed by delivery of an
original copy), addressed as follows:
If to the Company:
Tel-Save Holdings, Inc.
22 Village Square
New Hope, PA 18939
Facsimile No. 215-862-1083
with a copy to:
Aloysius T. Lawn, IV, Esquire
General Counsel and Secretary
22 Village Square
New Hope, PA 10939
Facsimile No.: 215-862-1085
and to the Holder:
at the address (or facsimile number) of the Holder appearing on the
books of the Company or the Company's transfer agent, if any.
Either of the Company or the Holder may from time to time change the
address or facsimile number to which notices to it are to be mailed hereunder by
notice in accordance with the provisions of this Paragraph 11.
12. Supplements and Amendments. Except as otherwise provided herein, 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.
13. Successors and Assigns. This Warrant shall inure to the benefit of and
be binding on the Company and the Holder and their respective successors and
assigns, subject to the limitations on transfer of this Warrant and the rights
hereunder by the Holder. Any successor to the Company by merger or consolidation
(if other than the Company) will, upon such succession, assume in writing the
Company's obligations hereunder.
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<PAGE>
14. Severability. If for any reason any provision, paragraph or terms of
this Warrant is held to be invalid or unenforceable, all other valid provisions
herein shall remain in full force and effect and all terms, provisions and
paragraphs of this Warrant shall be deemed to be severable.
15. Governing Law. This Warrant shall be deemed to be a contract made under
the laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of said State.
16. Entire Agreement. This Warrant consists of all the terms and conditions
contained herein and all documents incorporated herein specifically by reference
and constitutes the complete and exclusive statement of the understandings
between the parties and supersedes all proposals and prior agreements (oral or
written) between the parties relating to the rights and obligations provided
hereunder.
17. Headings; Etc. Paragraph and Subparagraph headings used herein are
included herein for conveniences of reference only and shall not affect the
construction of this Warrant nor constitute a part of this Warrant for any other
purpose. The words "herein," "hereof," "hereby," "hereto," "hereunder" and words
of similar import refer to this Warrant as a whole and not to any particular
article, section, paragraph, subparagraph or other subdivision of this Warrant.
Defined terms shall include the plural and the singular as the context shall
require.
18. Consent and Acknowledgment of Holder. The terms and conditions of this
Warrant are agreed and consented to by the Holder, as evidenced by Holder's
signature on the line provided below. This Warrant shall bind and be enforceable
by and against the Holder and such Holder's successors, heirs, estates,
representatives and assigns and the Company and its successors and assigns.
IN WITNESS WHEREOF, the Company and the Holder have caused these presents
to be duly executed as of the day and year written above.
TEL-SAVE HOLDINGS, INC.
By:_______________________
Chief Executive Officer
[Name of Holder]
as the Holder
___________________________
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<PAGE>
APPENDIX A
NOTICE OF WARRANT EXERCISE
Pursuant to the attached Warrant ("Warrant"), by and between the
undersigned and Tel-Save Holdings, Inc., a Delaware corporation (the "Company"),
dated as of March 14, 1996, the undersigned hereby irrevocably elects to
exercise the Warrant with respect to ________________ Warrant Shares (as defined
in the Warrant) as provided for therein.
The undersigned requests that a certificate for the Exercise Shares be
issued in the name of:
________________________________________
_________________________________________
_______________________________________________________
(Please print name, address and social security number)
Dated: ___________________________________
Address: ___________________________________
___________________________________
___________________________________
Signature: ___________________________________
WARRANT AGREEMENT #1 TO PURCHASE
COMMON STOCK OF
TEL-SAVE HOLDINGS, INC.
Date of Grant: January 11, 1996.
Void after 5:00 p.m. Eastern Standard Time on December 31, 1996.
This is to verify that, FOR VALUE RECEIVED, Collective Communications
Services, with a principal address as indicated on the Company's books and
records, or only those assigns specifically permitted under the terms hereof
(hereinafter referred to as the "Holder") is entitled to purchase, subject to
the terms and conditions hereof, from Tel-Save Holdings, Inc., a Delaware
corporation ("Company"), or its assigns, 240,000 shares of Common Stock (the
"Common Stock") during the period commencing at 9:00 a.m., Eastern Standard Time
on June 1, 1996 (the "Commencement Date") and ending at 5:00 p.m. Eastern
Standard Time on December 31, 1996 (the "Termination Date") at an exercise price
of $14.00* per share of Common Stock. The number of shares of Common Stock
purchasable upon the exercise of this Warrant (the "Warrant(s)") and the
exercise price per share shall be subject to adjustment from time to time upon
the occurrence of certain events as set forth below.
The shares of Common Stock or any other shares or other units of stock or
other securities or property, or any combination thereof then receivable upon
exercise of this Warrant, as adjusted from time to time, are sometimes referred
to hereinafter as "Exercise Shares." The exercise price per share as from time
to time in effect is referred to hereinafter as the "Exercise Price."
1. Vesting and Exercise of Warrant; Issuance of Exercise Shares.
(a) Exercise of Warrant. Subject to compliance with the vesting provisions
identified at Subparagraph (b) below, this Warrant may be exercised in whole or
in part at any time or from time to time on or after the Commencement Date and
until and including the Termination Date. Following the Termination Date, in the
absence of the exercise hereof, the Holder shall have no rights herein and this
Warrant shall lapse. This Warrant may be surrendered on any business day to the
Company at its principal office, presently located at the address of the Company
set forth in paragraph 11 hereof (or such other office of the Company, if any,
as shall theretofore have been designated by the Company by written
- ----------
*The closing price of the Company's Common Stock on The NASDAQ Stock Market on
the date of the grant was $12.25.
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<PAGE>
notice to the Holder), together with: (i) a completed and executed Notice of
Warrant Exercise in the form set forth in Appendix A hereto and made a part
hereof and (ii) (A) payment of the full Exercise Price for the amount of
Exercise Shares set forth in the Notice of Warrant Exercise, in lawful money of
the United States of America by certified check or cashier's check, made payable
to the order of the Company or (B) at the request of Holder and to the extent
permitted by applicable law, the Company in its sole discretion may selectively
approve arrangements with a brokerage firm under which such brokerage firm, on
behalf of the Holder, shall pay the Company the Exercise Price, and the Company,
pursuant to an irrevocable notice from Holder (the form of which is satisfactory
to the Company), shall promptly deliver the Exercise Shares being purchased to
such firm. In the event of an Assignment (as hereinafter defined), the Company
shall deliver to the Assignee (as hereinafter defined) any Warrants surrendered
for exercise, together with the related Notice of Warrant exercise and the
Exercise Price and, to the extent payment is to be effected in accordance with
clause (ii) (B) above, payment shall be made to the Assignee against delivery by
the Assignee of the Exercise Shares.
In the event that this Warrant shall be duly exercised in part prior to
the Termination Date, the Company shall issue a new Warrant or Warrants of like
tenor evidencing the rights of the Holder thereof to purchase the balance of the
Exercise Shares purchasable under the Warrant so surrendered that shall not have
been purchased.
No adjustments shall be made for any cash dividends on Exercise Shares
issuable upon exercise of the Warrant. The Company shall cancel Warrant
Certificates surrendered upon exercise of Warrants.
(b) Vesting Contingency. Notwithstanding anything to the contrary
contained herein, the Holder's right, title and interest in and to this Warrant
shall only vest, and the Company's obligation to issue the Exercise Shares shall
only remain in effect provided that (1) the Holder is current in all payments
for billing from the Company, (2) the Holder is in general good standing with
the Company and is in compliance with the tariff or contract terms with the
Company, (3) the Company or one of its subsidiaries has entered into definitive
and exclusive agreements with The General Motors Corporation Commercial Mortgage
("GMCCM") pursuant to which the Company or one of its subsidiaries is to provide
shares tenant telecommunication services to tenants of multi-tenant office
buildings and building complexes and residences developed, owned or financed by
GMCCM ("Shared Tenant Agreement"), and (5) disclosure of the Shared Tenant
Agreement and related information has been made and/or provided by GMCCM or
Holder to the Company, as the Company determines.
(c) Issuance of Exercise Shares; Delivery of Warrant Certificate. The
Company or the Assignee, as applicable, shall, within ten (10) business days or
as soon thereafter as is practicable of the exercise of this Warrant, issue in
the name of and cause to be delivered, or in the case of an Assignment shall
deliver (together with a duly executed stock power), to the Holder (or such
other person or persons, if any, as specifically permitted under the terms
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<PAGE>
hereof and as the Holder shall have designated in the Notice of Warrant
Exercise) one or more certificates representing the Exercise Shares to which the
Holder (or such other person or persons) shall be entitled upon such exercise
under the terms hereof. Such certificate or certificates shall be deemed to have
been issued and the Holder (or such other person or persons so permitted and
designated) shall be deemed to have become the record holder of the Exercise
Shares as of the date of the due exercise of this Warrant.
(d) Exercise Shares Fully Paid and Non-assessable. The Company agrees and
covenants for itself and on behalf of any Assignee that all Exercise Shares
issuable or deliverable upon the due exercise of the Warrant represented by this
Warrant Certificate will, upon issuance in accordance with the terms hereof, be
duly authorized, validly issued, fully paid and non-assessable and free and
clear of all taxes (other than those taxes which, pursuant to Paragraph 2
hereof, the Company shall not be obligated to pay) or liens, charges, and
security interests created by the Company with respect to the issuance thereof.
(e) Reservation of Exercise Shares. In connection with or as soon as
practicable after any action which would cause an adjustment pursuant to
Paragraph 8 hereof increasing the number of shares of capital stock constituting
the Exercise Shares, the Company will take as soon as practicable after such
action any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company have remaining, after such adjustment, a
number of shares of such capital stock unissued and unreserved for other
purposes sufficient to permit the exercise of all the then outstanding Warrants
of like tenor immediately after such adjustment; the Company will also from time
to time take action to increase the authorized amount of its capital stock
constituting the Exercise Shares if at any time the number of shares of capital
stock authorized but remaining unissued and unreserved for other purposes shall
be insufficient to permit the exercise of the Warrants then outstanding. The
Company may but shall not be required to reserve and keep available, out of the
aggregate of its authorized but unissued shares of capital stock, for the
purpose of enabling it to satisfy any obligation to issue Exercise Shares upon
exercise of Warrants, through the Termination Date, the number of Exercise
Shares deliverable upon the full exercise of this Warrant and all other Warrants
of like tenor then outstanding.
At the time of or before taking any action which would cause an adjustment
pursuant to Paragraph 8 hereof, reducing the Exercise Price below then par value
(if any) of the Exercise Shares issuable upon exercise of the Warrants, the
Company will take any corporate action which may, in the opinion of its counsel,
be necessary in order to assure that the par value per share of the Exercise
Shares is at all times equal to or less than the Exercise Price per share and so
that the Company may validly and legally issue fully paid and non-assessable
Exercise Shares at the Exercise Price, as so adjusted; the Company will also
from time to time take such action if at any time the Exercise Price is below
the then par value of the Exercise Shares.
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<PAGE>
(f) Fractional Shares. Neither, the Company nor any Assignee shall be
required to the issue fractional shares of capital stock upon the exercise of
this Warrant or to deliver Warrant Certificates which evidence fractional shares
of capital stock. In the event that any fraction of an Exercise Share would,
except for the provisions of this Subparagraph (f), be issuable upon the
exercise of this Warrant, the Company or the Assignee, as the case may be, shall
pay to the Holder exercising the Warrant an amount in cash equal to such
fraction multiplied by the "Current Market Value" of the Exercise Share. For
purposes of this Subparagraph (f), the "Current Market Value" shall be
determined as follows:
(i) if the Exercise Shares are traded in the over-the-counter market
and not on any national securities exchange and not in the NASDAQ Reporting
System, the average of the mean between the last bid and asked prices per share,
as reported by the National Quotation Bureau, Inc., or an equivalent generally
accepted reporting service, for the last business day prior to the date on which
this Warrant is exercised, or if not so reported, the average of the closing bid
and asked prices for an Exercise Share as furnished to the Company by any member
of the National Association of Securities Dealers, Inc., selected by the Company
for that purpose.
(ii) if the Exercise Shares are listed or traded on a national
securities exchange or in the NASDAQ Reporting System, the closing price on the
principal national securities exchange on which they are so listed or traded or
in the National Market, as the case may be, on the last business day prior to
the date of the exercise of this Warrant. The closing price referred to in this
clause (ii) shall be the last reported sales price, or, in case no such reported
sale takes place on such day, the average of the reported closing bid and asked
prices, in either case on the national securities exchange on which the Exercise
shares are then listed or in the NASDAQ Reporting System; or
(iii) if no such closing price or closing bid and asked prices are
available, as determined in any reasonable manner as may be prescribed by the
Board of Directors of the Company.
2. Payment of Taxes. The Company will pay all documentary stamp taxes, if any,
attributable to the initial issuance of Exercise Shares upon the exercise of
this Warrant; provided, however, that the Company shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in the
issue of any Warrant Certificates or any certificates for Exercise Shares in a
name other than that of the Holder of a Warrant Certificate surrendered upon the
exercise of a Warrant, and the Company shall not be required to issue or deliver
such certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
3. Mutilated or Missing Warrant Certificates. In case any Warrant Certificate
shall be mutilated, lost, stolen or destroyed, the Company may in its discretion
issue, in exchange and substitution for and upon cancellation of the mutilated
Warrant Certificate, or in lieu of
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<PAGE>
an in substitution for the Warrant Certificate lost, stolen or destroyed, a new
Warrant Certificate or Warrant Certificates of like tenor and in the same
aggregate denomination, but only (i) in the case of loss, theft or destruction,
upon receipt of evidence satisfactory to the Company of such loss, theft or
destruction of such Warrant Certificate and indemnity or bond, if requested,
also satisfactory to them and (ii) in the case of mutilation, upon surrender of
the mutilated Warrant. Applicants for such substitute Warrant Certificates shall
also comply with such other reasonable regulations and pay such other reasonable
charges as the Company or its counsel may prescribe.
4. Rights of Holder. The Holder shall not, by virtue of anything contained in
this Warrant Certificate or otherwise, be entitled to any right whatsoever,
either in law or equity, of a stockholder of the Company, including without
limitation, the right to receive dividends or to vote or to consent or to
receive notice as a shareholder in respect of the meetings of shareholders or
the election of directors of the Company or any other matter.
5. Release. Holder and any assignee of Holder, on behalf of itself, its past and
present subsidiaries, successors, assigns and its and their officers, directors,
employees, agents, creditors, trustees, attorneys and successors (collectively
"Holder Releasors"), does hereby release, acquit and forever discharge Company,
Assignee or any assignor of this Warrant (i.e. a previous Holder) and the
Company's past and present subsidiaries, affiliates, stockholders, successors,
assigns, customers, investment bankers, agents and its and their officers,
directors, employees, agents, attorneys, and their estates, assigns and
successors (collectively, "Company Releasees"), from any and all claims,
actions, causes of action, suits, demands, rights, damages, costs, loss of
service, service, expenses, or compensation of any sort whatsoever, known or
unknown, foreseen or unforeseen, which Holder Releasors ever had, now have or
hereafter can, shall or may have against Company Releasees, by reason of any
matter, cause, event, action, or inaction or thing from whatsoever from the
beginning of time to the date of this Warrant.
6. Right of First Refusal.
(a) If at any time any Holder determines to sell or transfer any or all of
this Warrant or the Exercise Shares and/or receives a bona fide written offer to
purchase any or all of this Warrant or any or all of such Exercise Shares
(hereafter referred to in either case as an "Offer") which the Holder or any
subsequent Holder desires to accept, Holder or any subsequent Holder must first
offer (hereafter called the "Right of First Refusal") to sell such Warrant or
Exercise Shares, or any portion thereof, to the Company upon the "Offer Terms"
(as described below). Notwithstanding the foregoing, the Right of First Refusal
shall not apply to the one-time transfer of the Warrant from Holder to Jackie
O'Neal Cook, Jr., Lawrence H. Baird, Jeff Earhart, Terence T. Baird, Gregory M.
Baird, and Kathleen M. Brooker, the existing shareholders of Holder
(collectively, "CCS Shareholders" and individually, "CCS Shareholder").
5
<PAGE>
(b) In the event Holder or any subsequent Holder receives an Offer, Holder
or any subsequent Holder, as the case may be, shall notify the Company in
writing of such Offer, including the proposed price and other terms and
conditions of the Offer ("Offer Terms"), and the Company shall have ten (10)
business days after the date such written notice is sent to the Company by first
class mail (with a copy sent by facsimile on the date of mailing if the Company
has a facsimile machine) to elect to exercise its Right of First Refusal. Such
election shall be made by the Company by sending written notice to Holder or any
subsequent Holder by first class mail (with a copy sent by facsimile on the date
of mailing if Holder has a facsimile machine) within such ten (10) day period.
In the absence of such written notice, the Company shall be deemed to have
waived its Right of First Refusal with respect to such Offer but not with
respect to any other proposed sale by (or offer that he receives) which is
subject to the right of First Refusal contained herein.
(c) Contemporaneous with the execution hereof, Holder and any subsequent
Holder agrees to enter into the Voting Trust Agreement in the form attached
hereto as Appendix B.
7. Registration of Transfers and Exchanges. This Warrant shall be transferable,
subject to the provisions of this Paragraph and Paragraph 9 hereof, only upon
the books of the Company if any, to be maintained by it for that purpose, upon
surrender of the Warrant Certificate to the Company at its principal office
accompanied (if so required by it) by a written instrument or instruments of
transfer in form satisfactory to the Company and duly executed by the Holder
thereof or by the duly appointed legal representative thereof or by a duly
authorized attorney and upon payment of any necessary transfer tax or other
governmental charge imposed upon such transfer. In all cases of transfer by a
power of attorney, the original power of attorney, duly approved, or a power of
official copy thereof, duly certified, shall be deposited and remain with the
Company. In case of transfer by executors, administrators, guardians or other
legal representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited and remain with the Company in its
discretion. Any registration of transfer of the Warrant is subject to transferee
agreeing to and accepting the terms of this Warrant Agreement and upon such
acceptance, a new Warrant Certificate shall be issued to the transferee named in
such instrument of transfer, and the surrendered Warrant Certificate shall be
canceled by the Company.
Any Warrant Certificate may be exchanged, at the option of the Holders
thereof and without change, when surrendered to the Company at its principal
office, or at the office of its transfer agent, if any, for another Warrant
Certificate or other Warrant Certificates of like tenor and representing in the
aggregate the right to purchase from the Company a like number and kind of
Exercise Shares as the Warrant Certificate surrendered for exchange or transfer,
and the Warrant Certificate so surrendered shall be canceled by the Company or
transfer agent, as the case may be.
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<PAGE>
8. Adjustment of Exercise Shares and Exercise Price. The Exercise Price and the
number and kind of Exercise Shares purchasable upon the exercise of this Warrant
shall be subject to adjustment from time to time upon the happening of certain
events as hereinafter provided. The Exercise Price in effect at any time and the
number and kind of securities purchasable upon exercise of each Warrant shall be
subject to adjustment as follows:
(a) In the case the Company shall (i) pay a dividend or make a
distribution on its shares of Common Stock in shares of Common Stock, (ii)
subdivide or classify its outstanding Common Stock into a greater number of
shares, or (iii) combine or reclassify its outstanding Common Stock into a
smaller number of shares, the Exercise Price in effect at the time of the record
date for such dividend or distribution or of the effective date of such
subdivision, combination or reclassification shall be proportionally adjusted so
that the Holder of this Warrant exercised after such date shall be entitled to
receive the aggregate number and kind of shares which, if this Warrant had been
exercised by such Holder immediately prior to such date, he would have owned
upon such exercise and been entitled to receive upon such dividend, subdivision,
combination or reclassification. For example, if the Company declares a 2 for 1
stock dividend or stock split and the Exercise Price immediately prior to such
event was $5.00 per share, the adjusted Exercise Price immediately after such
event would be $2.50 per share. Such adjustment shall be made successively
whenever any event listed above shall occur.
(b) In case the Company shall hereafter issue rights or warrants to all
Holders of its Common Stock entitling them to subscribe for or purchase shares
of Common Stock (or securities convertible into Common Stock) at a price (or
having a conversion price per share) less than the "Current Market Price" of the
Common Stock (as defined in Subparagraph (d) of this Paragraph below) on the
record date mentioned below, the Exercise Price shall be adjusted so that the
same shall equal the price determined by multiplying the Exercise Price in
effect immediately prior to the date of such issuance by a fraction, the
numerator of which shall be the sum of the number of shares of Common Stock
outstanding on the record date mentioned below and the number of additional
shares of Common Stock which the aggregate offering price of the total number of
shares of Common Stock so offered (or the aggregate conversion price of the
convertible securities so offered) would purchase at the "Current Market Price"
per share of the Common Stock, and the denominator of which shall be the sum of
the number of shares of Common Stock outstanding on such record date and the
number of additional shares of Common Stock offered for subscription or purchase
(or into which the convertible securities so offered are convertible). Such
adjustment shall be made successively whenever such rights or warrants are
issued and shall become effective immediately after the record date for the
determination of shareholders entitled to receive such rights or warrants; and
to the extent that shares of Common Stock are not delivered (or securities
convertible into Common Stock are not delivered) after the expiration of such
rights or warrants the Exercise Price shall be readjusted to the Exercise Price
which would then be in effect had the adjustments made upon the issuance of such
rights or warrants been made upon the basis of delivery of only the number of
shares of Common Stock (or securities convertible into Common Stock) actually
delivered.
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<PAGE>
(c) Whenever the Exercise Price payable upon exercise of each Warrant is
adjusted pursuant to Subparagraphs (a) and (b) above, the number of Exercise
Shares purchasable upon exercise of this Warrant shall simultaneously be
adjusted by multiplying the number of Exercise Shares initially issuable upon
exercise of this Warrant by the Exercise Price in effect on the date hereof and
dividing the product so obtained by the Exercise Price, as adjusted.
(d) For the purpose of any computation under Subparagraph (b) above, the
"Current Market Price" per share of Common Stock at any date shall be deemed to
be the average of the daily closing prices for 30 consecutive business days
before such date. The closing price for each day shall be the last sale price
regular way or, in case no such reported sale takes place on such day, the
average of the last reported bid and lowest reported asked prices as reported by
NASDAQ, or other similar organization if NASDAQ is no longer reporting such
information, or if not so available, the fair market price as determined by the
Board of Directors.
(e) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least ten cents ($0.10)
in such price; provided, however, that any adjustments which by reason of this
Subparagraph (e) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment required to be made hereunder. All
calculations under this Paragraph 8 shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the case may be. Anything in this Paragraph
8 to the contrary notwithstanding, the Company shall be entitled, but shall not
be required, to make such changes in the Exercise Price, in addition to those
required by this Paragraph 8, as it, in its sole discretion, shall determine to
be advisable in order that any dividend or distribution in shares of Common
Stock, subdivision, reclassification or combination of Common Stock, issuance of
Warrants to Purchase Common Stock or distribution of evidences of indebtedness
or other assets (excluding cash dividends) referred to hereinabove in this
Paragraph 8 hereafter made by the Company to the Holders of its Common Stock
shall not result in any tax to the Holders of its Common Stock or securities
convertible into Common Stock.
(f) Whenever the Exercise Price is adjusted, as herein provided, the
Company shall promptly cause a notice setting forth the adjusted Exercise Price
and adjusted number of Exercise Shares issuable upon exercise of each Warrant to
be mailed to the Holders, at their last addresses appearing in the books of the
Company, and shall cause a certified copy thereof to be mailed to its transfer
agent, if any. The Company may retain a firm of independent certified public
accountants selected by the Board of Directors (who may be the regular
accountants employed by the Company) to make any computation required by this
Paragraph 8, and a certificate signed by such firm shall be conclusive evidence
of the correctness of such adjustment.
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(g) In the event that at any time, as a result of an adjustment made
pursuant to Subparagraph 8(a) above, the Holder of this Warrant thereafter shall
become entitled to receive any Exercise Shares of the Company, other than Common
Stock, thereafter the number of such other shares so receivable upon exercise of
this Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Subparagraphs (a) to (e) of Paragraph 8, inclusive
above.
(h) Irrespective of any adjustments in the Exercise Price or the number or
kind of Exercise Shares purchasable upon exercise of this Warrant, Warrant
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the similar Warrants initially
issuable pursuant to this Agreement.
(i) Whenever the Exercise Price shall be adjusted as required by the
provisions of the foregoing Section, the Company shall forthwith file in the
custody of its Secretary or an Assistant Secretary at its principal office and
with its stock transfer agent, if any, an officer's certificate showing the
adjusted Exercise Price determined as herein provided, setting forth in
reasonable detail the facts requiring such adjustment, including a statement of
the number of additional shares of Common Stock, if any, and such other facts as
shall be necessary to show the reason for and the manner of computing such
adjustment. Each such officer's certificate shall be made available at all
reasonable times for inspection by the Holder and the Company shall, forthwith
after each such adjustment, mail a copy by certified mail of such certificate to
the Holder.
9. Restrictions on Transferability; Restrictive Legend. This Warrant may not be
transferred by the Holder without the prior written consent of the Company
except (1) the one-time transfer of the Warrants from Holder to CCS
Shareholders, and (2) by means of intestacy or testamentary bequest. Any
transfer of this Warrant in violation of this Paragraph 9 is null and void as of
the time of such transfer. In addition, neither this Warrant nor the Exercise
Shares shall be transferable except in accordance with the provisions of this
paragraph.
(a) Restrictions on Transfer; Indemnification. Neither this Warrant nor
any Exercise Share may be offered for sale or sold, or otherwise transferred or
sold in any transaction which would constitute a sale thereof within the meaning
of the Securities Act of 1933, as amended (the "1933 Act"), unless (i) such
security has been registered for sale under the 1933 Act and registered or
qualified under applicable state securities laws relating to the offer and sale
of securities, or (ii) exemptions from the registration requirements of the 1933
Act and the registration or qualification requirements of all such state
securities laws are available and the Company shall have received an opinion of
counsel satisfactory to the Company that the proposed sale or other disposition
of such securities may be effected without registration under the 1933 Act and
would not result in any violation of any applicable state securities laws
relating to the registration or qualification of securities for sale, such
counsel and such opinion to be satisfactory to the Company.
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The Holder agrees to indemnify and hold harmless the Company, or Assignee
against any loss, damage, claim or liability arising from the disposition of
this Warrant or any Exercise Share held by such Holder or any interest therein
in violation of the provisions of this Paragraph 9.
(b) Restrictive Legends. Unless and until otherwise permitted by this
Paragraph 9 this Warrant Certificate, each Warrant Certificate issued to the
Holder or to any transferee or assignee of this Warrant Certificate, and each
stock certificate representing Exercise Shares issued upon exercise of this
Warrant or to any transferee of the person to whom the Exercise Shares were
issued, shall bear a legend setting forth the requirements of Subparagraph (a)
of this Paragraph 9, together with such other legend or legends as may otherwise
be deemed necessary or appropriate by counsel to the Company.
(c) Notice of Proposed Transfers. In addition to the provisions of Section
6 hereof, prior to any transfer, offer to transfer or attempted transfer of this
Warrant or any Exercise Share, the Holder of such security shall give written
notice to the Company of such Holder's intention to effect such transfer. Each
such notice shall (x) describe the manner and circumstances of the proposed
transfer in sufficient detail, and shall contain an undertaking by the person
giving such notice to furnish such other information as may be required, to
enable counsel to render the opinions referred to below, and shall (y) designate
the counsel for the person giving such notice, such counsel to be satisfactory
to the Company. The person giving such notice shall submit a copy thereof to the
counsel designated in such notice and the Company shall submit a copy thereof to
its counsel, and the following provisions shall apply:
(i) If, in the opinion of each such counsel, the proposed transfer
of this Warrant or Exercise Shares, as appropriate, may be effected without
registration of such security under the 1933 Act, the Company shall, as promptly
as practicable, so notify the Holder of such security and such Holder shall
thereupon be entitled to transfer such security in accordance with the terms of
the notice delivered by such Holder to the Company. Each certificate evidencing
the securities thus to be transferred (and each certificate evidencing any
untransferred balance of the securities evidenced by such certificate) shall
bear the restrictive legends referred to in Subparagraph (b) above, unless in
the opinion of such counsel such legend is not required in order to insure
compliance with the 1933 Act.
(ii) If, in the opinion of either of such counsel, the proposed
transfer of securities may not be effected without registration under the 1933
Act, the Company shall, as promptly as practicable, so notify the Holder
thereof. However, the Company shall have no obligation to register such
securities under the 1933 Act, except as otherwise provided herein or in the
Agreement of Sale.
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The Holder of the securities giving the notice under this Subparagraph (c)
shall not be entitled to transfer any of the securities until receipt of notice
from the Company under Paragraph (i) of this Subparagraph (c) or registration of
such securities under the 1933 Act has become effective.
(d) Removal of Legend. The Company shall, at the request of any registered
Holder of a Warrant or Exercise Share, exchange the certificate representing
such security for a certificate representing the same security not bearing the
restrictive legend required by Subparagraph (b) if, in the opinion of counsel to
the Company, such restrictive legend is no longer necessary.
10. Registration Rights. The Holder hereof shall be entitled to the registration
rights set forth in a certain Registration Rights Agreement of even date
herewith by and between the Company and such Holder.
11. Notices. All notices or other communications under this Warrant Certificate
shall be in writing and shall be deemed to have been given if delivered by hand
or mailed by certified mail, postage prepaid, return receipt request, addressed
as follows:
If to the Company:
Tel-Save Holdings, Inc.
22 Village Square
New Hope, PA 18939
with a copy to:
Aloysius T. Lawn, IV, Esquire
General Counsel and Secretary
22 Village Square
New Hope, PA 18939
and to the Holder:
at the address of the Holder appearing on the books of the company
or the Company's transfer agent, if any.
Either of the Company or the Holder may from time to time change the
address to which notices to it are to be mailed hereunder by notice in
accordance with the provisions of this Paragraph 11.
12. Supplements and Amendments. The Company may from time to time supplement or
amend this Warrant Certificate without the approval of any Holders of Warrants
in order to cure any ambiguity or to correct or supplement any provision
contained herein which may be
11
<PAGE>
defective or inconsistent with any other provision, or to make any other
provisions in regard to matters or questions herein arising hereunder which the
Company may deem necessary or desirable and which shall not materially adversely
affect the interests of the Holder.
13. Successors and Assigns. This Warrant shall inure to the benefit of and be
binding on the respective successors, assigns and legal representatives of the
Holder and the Company. The Company may assign (the "Assignment") its rights to
deliver the Exercise Shares pursuant to this Warrant to one or more stockholders
of the Company ("Assignee") who would agree to sell the Exercise Shares to the
Holder upon exercise hereof and to otherwise assume with respect to the delivery
of the Exercise Shares only, all obligations of the Company, with respect to the
delivery of the Exercise Shares only, under this Warrant. In addition, the
Company may assign to another party its right, under the Right of First Refusal.
14. Severability. If for any reason any provision, paragraph or terms of this
Warrant Certificate is held to be invalid or unenforceable, all other valid
provisions herein shall remain in full force and effect and all terms,
provisions and paragraphs of this Warrant shall be deemed to be severable.
15. Governing Law. This Warrant shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of said State.
16. Headings. Paragraph and subparagraph headings, used herein are included
herein for convenience of reference only shall not affect the construction of
this Warrant Certificate nor constitute a part of this Warrant Certificate for
any other purpose.
17. Consent and Acknowledgment of Holder. The terms and conditions of this
Warrant are agreed and consented to by the Holder, as evidenced by Holder's
signature on the line provided below. This Warrant shall bind, benefit and be
enforceable by or against Holder and its heirs, legal and personal
representatives, estate, beneficiaries and assigns, and the Company, Assignee
and its successors and assigns.
IN WITNESS WHEREOF, the Company has caused these presents to be duly executed as
of the day and year written above.
TEL-SAVE HOLDINGS, INC.
By: /s/ Daniel Borislow
--------------------------------
Chief Executive Officer
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The terms of this Warrant are
agreed to and accepted by:
HOLDER
/s/ Jeffrey M. Earhart
- ----------------------------
Signature:
Jeffrey M. Earhart
- ----------------------------
Print Name
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<PAGE>
APPENDIX A
NOTICE OF WARRANT EXERCISE
Pursuant to a Warrant Agreement, ("Warrant") by and between the
undersigned and Tel-Save Holdings, Inc., a Delaware corporation (the "Company"),
dated as of January __, 1996, and subject to the vesting periods set forth
therein, the undersigned hereby irrevocably elects to exercise its warrant to
the extent of purchasing ______ shares of Common Stock (the "Warrant Shares"),
of the Company as provided for therein.
The undersigned hereby represents and agrees that the Warrant Shares
purchased pursuant hereto are being purchased for investment and not with a view
to the distribution or resale thereof, and that the undersigned understands that
said Warrant Shares have not been registered under the Securities Act of 1933,
as amended.
The undersigned, on behalf of itself, its past and present subsidiaries,
successors, assigns and any assignee of Holder and its and their officers,
directors, employees, agents, creditors, trustees, agents and successors
(collectively "Holder Releasors"), does hereby release, acquit and forever
discharge Company, "Assignee" (as defined in the Warrant) and any assignor of
the Warrant (i.e., previous Holder) and the Company's past and present
subsidiaries, affiliates, stockholders, successors, assigns, customers,
investment bankers, agents and its and their officers, directors, employees,
customers, agents, attorneys, and their estates, assigns and successors
(collectively "Company Releasees"), from any and all claims, actions, causes of
action, suits, demands, rights, damages, costs, loss of service, service,
expenses, or compensation of any sort whatsoever, known or unknown, foreseen or
unforeseen, which Holder Releasors ever had, now have or hereafter can, shall or
may have against Company Releasees, by reason of any matter, cause, event,
action, or inaction or thing from whatsoever from the beginning of time to the
date of this Notice.
Payment of the full Exercise Price (as defined in the Warrant) of the
Warrant Shares is enclosed herewith, in the form of a check made payable to the
Company or Assignee, as the case may be.
The undersigned requests that a certificate for the Warrant Shares be
issued in the name of:
________________________________________________
________________________________________________
________________________________________________
(Please print name, address and social security numbers)
Dated: ________________________________________________
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Address: ________________________________________________
________________________________________________
________________________________________________
Signature: ________________________________________________
15
WARRANT AGREEMENT #1 TO PURCHASE
COMMON STOCK OF
TEL-SAVE HOLDINGS, INC.
Date of Grant: January 11, 1996.
Void after 5:00 p.m. Eastern Standard Time on January 10, 1997.
This is to verify that, FOR VALUE RECEIVED, Network Plus, with a principal
address as indicated on the Company's books and records, or only those assigns
specifically permitted under the terms hereof (hereinafter referred to as the
"Holder") is entitled to purchase, subject to the terms and conditions hereof,
from Tel-Save Holdings, Inc., a Delaware corporation ("Company"), or its
assigns, 200,000 shares of Common Stock (the "Common Stock") during the period
commencing at 9:00 a.m., Eastern Standard Time on September 1, 1995 (the
"Commencement Date") and ending at 5:00 p.m. Eastern Standard Time on January
10, 1997 (the "Termination Date") at an exercise price of $14.00* per share of
Common Stock. The number of shares of Common Stock purchasable upon the exercise
price per share shall be subject to adjustment from time to time upon the
occurrence of certain events as set forth below.
The shares of Common Stock or any other shares or other units of stock or
other securities or property, or any combination thereof then receivable upon
exercise of this Warrant, as adjusted from time to time, are sometimes referred
to hereinafter as "Exercise Shares." The exercise price per share as from time
to time in effect is referred to hereinafter as the "Exercise Price."
1. Vesting and Exercise of Warrant; Issuance of Exercise Shares.
(a) Exercise of Warrant. Subject to compliance with the vesting provisions
identified at Subparagraph (b) below, this Warrant may be exercised in whole or
in part at any time or from time to time on or after the Commencement Date and
until and including the Termination Date. Following the Termination Date, in the
absence of the exercise hereof, the Holder shall have no rights herein and this
Warrant shall lapse. This Warrant may be surrendered on any business day to the
Company at its principal office, presently located at the address of the Company
set forth together with: (i) a completed and executed Notice of Warrant Exercise
in the form set forth in Appendix A hereto and made a part hereof and (ii) (A)
payment of the full Exercise Price for the amount of Exercise Shares set forth
in the
- ----------
*The closing price of the Company's Common Stock on The NASDAQ Stock Market on
the date of the grant was $12.25.
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Notice of Warrant Exercise, in lawful money of the United States of America by
certified check or cashier's check, made payable to the order of the Company or
(B) at the request of Holder and to the extent permitted by applicable law, the
Company in its sole discretion may selectively approve arrangements with a
brokerage firm under which such brokerage firm, on behalf of the Holder, shall
pay the Company the Exercise Price, and the Company, pursuant to an irrevocable
notice from Holder (the form of which is satisfactory to the Company), shall
promptly deliver the Exercise Shares being purchased to such firm. In the event
of an Assignment (as hereinafter defined), the Company shall deliver to the
Assignee (as hereinafter defined) any Warrants surrendered for exercise,
together with the related Notice of Warrant exercise and the Exercise Price and,
to the extent payment is to be effected in accordance with clause (ii) (B)
above, payment shall be made to the Assignee against delivery by the Assignee of
the Exercise Shares.
In the event that this Warrant shall be duly exercised in part prior to
the Termination Date, the Company shall issue a new Warrant or Warrants of like
tenor evidencing the rights of the Holder thereof to purchase the balance of the
Exercise Shares purchasable under the Warrant so surrendered that shall not have
been purchased.
No adjustments shall be made for any cash dividends on Exercise Shares
issuable upon exercise of the Warrant. The Company shall cancel Warrant
Certificates surrendered upon exercise of Warrants.
(b) Vesting Contingency.
(A) The Company and Holder specifically acknowledge and agree that
this Warrant (and the related agreements outlined in Appendix B) (i) is being
entered into to enhance the long term relationship between Holder and Company
with respect to the sale/purchase of telecommunications services under the
company's own long distance network known as "One Better Net" and (ii) that
there is no assurance to maintain existing business with the Company or that
Holder can achieve or maintain if achieved the levels of monthly billings
outlined in this Warrant.
(B) Notwithstanding anything to the contrary contained herein, the
Holder's right, title and interest in and to this Warrant shall only vest, and
the Company's obligation to issue the Exercise Shares shall only remain in
effect provided that (i) the Holder and the Company shall enter into and
maintain definitive agreements or subscribe to a tariff obtained by the Company,
the general terms of which are outlined in Appendix B, (ii) the Holder is
current in all payments for billing from the Company, and (iii) the Holder is in
general good standing with the Company and is in compliance with the tariff or
contract terms with the Company.
(c) Issuance of Exercise Shares; Delivery of Warrant Certificate. The
Company or the Assignee, as applicable, shall, within ten (10) business days or
as soon thereafter as is practicable of the exercise of this Warrant, issue in
the name of and cause to be delivered, or
2
<PAGE>
in the case of an Assignment shall deliver (together with a duly executed stock
power), to the Holder (or such other person or persons, if any, as specifically
permitted under the terms hereof and as the Holder shall have designated in the
Notice of Warrant Exercise) one or more certificates representing the Exercise
Shares to which the Holder (or such other person or persons) shall be entitled
upon such exercise under the terms hereof. Such certificate or certificates
shall be deemed to have been issued and the Holder (or such other person or
persons so permitted and designated) shall be deemed to have become the record
holder of the Exercise Shares as of the date of the due exercise of this
Warrant.
(d) Exercise Shares Fully Paid and Non-assessable. The Company agrees and
covenants for itself and on behalf of any Assignee that all Exercise Shares
issuable or deliverable upon the due exercise of the Warrant represented by this
Warrant Certificate will, upon issuance in accordance with the terms hereof, be
duly authorized, validly issued, fully paid and non-assessable and free and
clear of all taxes (other than those taxes which, pursuant to Paragraph 2
hereof, the Company shall not be obligated to pay) or liens, charges, and
security interests created by the Company with respect to the issuance thereof.
(e) Reservation of Exercise Shares. In connection with or as soon as
practicable after any action which would cause an adjustment pursuant to
Paragraph 8 hereof increasing the number of shares of capital stock constituting
the Exercise Shares, the Company will take as soon as practicable after such
action any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company have remaining, after such adjustment, a
number of shares of such capital stock unissued and unreserved for other
purposes sufficient to permit the exercise of all the then outstanding Warrants
of like tenor immediately after such adjustment; the Company will also from time
to time take action to increase the authorized amount of its capital stock
constituting the Exercise Shares if at any time the number of shares of capital
stock authorized but remaining unissued and unreserved for other purposes shall
be insufficient to permit the exercise of the Warrants then outstanding. The
Company may but shall not be required to reserve and keep available, out of the
aggregate of its authorized but unissued shares of capital stock, for the
purpose of enabling it to satisfy any obligation to issue Exercise Shares upon
exercise of Warrants, through the Termination Date, the number of Exercise
Shares deliverable upon the full exercise of this Warrant and all other Warrants
of like tenor then outstanding.
At the time of or before taking any action which would cause an adjustment
pursuant to Paragraph 8 hereof, reducing the Exercise Price below then par value
(if any) of the Exercise Shares issuable upon exercise of the Warrants, the
Company will take any corporate action which may, in the opinion of its counsel,
be necessary in order to assure that the par value per share of the Exercise
Shares is at all times equal to or less than the Exercise Price per share and so
that the Company may validly and legally issue fully paid and non-assessable
Exercise Shares at the Exercise Price, as so adjusted; the Company will also
from time to time take such action if at any time the Exercise Price is below
the then par value of the Exercise Shares.
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<PAGE>
(f) Fractional Shares. Neither, the Company nor any Assignee shall be
required to the issue fractional shares of capital stock upon the exercise of
this Warrant or to deliver Warrant Certificates which evidence fractional shares
of capital stock. In the event that any fraction of an Exercise Share would,
except for the provisions of this Subparagraph (f), be issuable upon the
exercise of this Warrant, the Company or the Assignee, as the case may be, shall
pay to the Holder exercising the Warrant an amount in cash equal to such
fraction multiplied by the "Current Market Value" of the Exercise Share. For
purposes of this Subparagraph (f), the "Current Market Value" shall be
determined as follows:
(i) if the Exercise Shares are traded in the over-the-counter market
and not on any national securities exchange and not in the NASDAQ Reporting
System, the average of the mean between the last bid and asked prices per share,
as reported by the National Quotation Bureau, Inc., or an equivalent generally
accepted reporting service, for the last business day prior to the date on which
this Warrant is exercised, or if not so reported, the average of the closing bid
and asked prices for an Exercise Share as furnished to the Company by any member
of the National Association of Securities Dealers, Inc., selected by the Company
for that purpose.
(ii) if the Exercise Shares are listed or traded on a national
securities exchange or in the NASDAQ Reporting System, the closing price on the
principal national securities exchange on which they are so listed or traded or
in the National Market, as the case may be, on the last business day prior to
the date of the exercise of this Warrant. The closing price referred to in this
clause (ii) shall be the last reported sales price, or, in case no such reported
sale takes place on such day, the average of the reported closing bid and asked
prices, in either case on the national securities exchange on which the Exercise
shares are then listed or in the NASDAQ Reporting System; or
(iii) if no such closing price or closing bid and asked prices are
available, as determined in any reasonable manner as may be prescribed by the
Board of Directors of the Company.
2. Payment of Taxes. The Company will pay all documentary stamp taxes, if any,
attributable to the initial issuance of Exercise Shares upon the exercise of
this Warrant; provided, however, that the Company shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in the
issue of any Warrant Certificates or any certificates for Exercise Shares in a
name other than that of the Holder of a Warrant Certificate surrendered upon the
exercise of a Warrant, and the Company shall not be required to issue or deliver
such certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
3. Mutilated or Missing Warrant Certificates. In case any Warrant Certificate
shall be mutilated, lost, stolen or destroyed, the Company may in its discretion
issue, in exchange and substitution for and upon cancellation of the mutilated
Warrant Certificate, or in lieu of
4
<PAGE>
an in substitution for the Warrant Certificate lost, stolen or destroyed, a new
Warrant Certificate or Warrant Certificates of like tenor and in the same
aggregate denomination, but only (i) in the case of loss, theft or destruction,
upon receipt of evidence satisfactory to the Company of such loss, theft or
destruction of such Warrant Certificate and indemnity or bond, if requested,
also satisfactory to them and (ii) in the case of mutilation, upon surrender of
the mutilated Warrant. Applicants for such substitute Warrant Certificates shall
also comply with such other reasonable regulations and pay such other reasonable
charges as the Company or its counsel may prescribe.
4. Rights of Holder. The Holder shall not, by virtue of anything contained in
this Warrant Certificate or otherwise, be entitled to any right whatsoever,
either in law or equity, of a stockholder of the Company, including without
limitation, the right to receive dividends or to vote or to consent or to
receive notice as a shareholder in respect of the meetings of shareholders or
the election of directors of the Company or any other matter.
5. Release. Holder and any assignee of Holder, on behalf of itself, its past and
present subsidiaries, successors, assigns and its and their officers, directors,
employees, agents, creditors, trustees, and successors (collectively "Holder
Releasors"), does hereby release, acquit and forever discharge Company, Assignee
or any assignor of this Warrant (i.e. a previous Holder) and the Company's past
and present subsidiaries, affiliates, stockholders, successors, assigns,
customers, investment bankers, agents and its and their officers, directors,
employees, agents, attorneys, and their estates, assigns and successors
(collectively, "Company Releasees"), from any and all claims, actions, causes of
action, suits, demands, rights, damages, costs, loss of service, service,
expenses, or compensation of any sort whatsoever, known or unknown, foreseen or
unforeseen, which Holder Releasors ever had, now have or hereafter can, shall or
may have against Company Releases, by reason of any matter, cause, event,
action, or inaction or thing from whatsoever from the beginning of time to the
date of this Warrant.
6. Right of First Refusal.
(a) If at any time any Holder determines to sell or transfer any or all of
this Warrant or the Exercise Shares and/or receives a bona fide written offer to
purchase any or all of this Warrant or any or all of such Exercise Shares
(hereafter referred to in either case as an "Offer") which the Holder or any
subsequent Holder desires to accept, Holder or any subsequent Holder must first
offer (hereafter called the "Right of First Refusal") to sell such Warrant or
Exercise Shares, or any portion thereof, to the Company upon the "Offer Terms"
(as described below). Notwithstanding the foregoing, the Right of First Refusal
shall not apply to the one-time transfer of the Warrant from Holder to
________________ ("Permitted Transferees").
(b) In the event Holder or any subsequent Holder receives an Offer, Holder
or any subsequent Holder, as the case may be, shall notify the Company in
writing of such Offer, including the proposed price and other terms and
conditions of the Offer, including the
5
<PAGE>
proposed price and other terms and conditions of the Offer ("Offer Terms"), and
the Company shall have ten (10) business days after the date such written notice
is sent to the Company by first class mail (with a copy sent by facsimile on the
date of mailing if the Company has a facsimile machine) to elect to exercise its
Right of First Refusal. Such election shall be made by the Company by sending
written notice to Holder or any subsequent Holder by first class mail (with a
copy sent by facsimile on the date of mailing if Holder has a facsimile machine)
within such ten (10) day period. In the absence of such written notice, the
Company shall be deemed to have waived its Right of First Refusal with respect
to such Offer but not with respect to any other proposed sale by (or offer that
he receives) which is subject to the right of First Refusal contained herein.
(c) Contemporaneous with the execution hereof, Holder and any subsequent
Holder agrees to enter into the Voting Trust Agreement in the form attached
hereto as Appendix C.
7. Registration of Transfers and Exchanges. This Warrant shall be transferable,
subject to the provisions of this Paragraph and Paragraph 9 hereof, only upon
the books of the Company if any, to be maintained by it for that purpose, upon
surrender of the Warrant Certificate to the Company at its principal office
accompanied (if so required by it) by a written instrument or instruments of
transfer in form satisfactory to the Company and duly executed by the Holder
thereof or by the duly appointed legal representative thereof or by a duly
authorized attorney and upon payment of any necessary transfer tax or other
governmental charge imposed upon such transfer. In all cases of transfer by a
power of attorney, the original power of attorney, duly approved, or a power of
official copy thereof, duly certified, shall be deposited and remain with the
Company. In case of transfer by executors, administrators, guardians or other
legal representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited and remain with the Company in its
discretion. Any registration of transfer of the Warrant is subject to transferee
agreeing to and accepting the terms of this Warrant Agreement and upon such
acceptance, a new Warrant shall be issued to the transferee named in such
instrument of transfer, and the surrendered Warrant shall be canceled by the
Company.
Any warrant may be exchanged, at the option of the Holder thereof and
without change, when surrendered to the Company at its principal office, or at
the office of its transfer agent, if any, for another Warrant or other Warrant
of like tenor and representing in the aggregate the right to purchase from the
Company a like number and kind of Exercise Shares as the Warrant surrendered for
exchange or transfer, and the Warrant so surrendered shall be canceled by the
Company or transfer agent, as the case may be.
8. Adjustment of Exercise Shares and Exercise Price. The Exercise Price and the
number and kind of Exercise Shares purchasable upon the exercise of this Warrant
shall be subject to adjustment from time to time upon the happening of certain
events as hereinafter provided.
6
<PAGE>
The Exercise Price in effect at any time and the number and kind of securities
purchasable upon exercise of each Warrant shall be subject to adjustment as
follows:
(a) In the case the Company shall (i) pay a dividend or make a
distribution on its shares of Common Stock in shares of Common Stock, (ii)
subdivide or classify its outstanding Common Stock into a greater number of
shares, or (iii) combine or reclassify its outstanding Common Stock into a
smaller number of shares, the Exercise Price in effect at the time of the record
date for such dividend or distribution or of the effective date of such
subdivision, combination or reclassification shall be proportionally adjusted so
that the Holder of this Warrant exercised after such date shall be entitled to
receive the aggregate number and kind of shares which, if this Warrant had been
exercised by such Holder immediately prior to such date, he would have owned
upon such exercise and been entitled to receive upon such dividend, subdivision,
combination or reclassification. For example, if the Company declares a 2 for 1
stock dividend or stock split and the Exercise Price immediately prior to such
event was $5.00 per share, the adjusted Exercise Price immediately after such
event would be $2.50 per share. Such adjustment shall be made successively
whenever any event listed above shall occur.
(b) In case the Company shall hereafter issue rights or warrants to all
Holders of its Common Stock entitling them to subscribe for or purchase shares
of Common Stock (or securities convertible into Common Stock) at a price (or
having a conversion price per share) less than the "Current Market Price" of the
Common Stock (as defined in Subparagraph (d) of this Paragraph below) on the
record date mentioned below, the Exercise Price shall be adjusted so that the
same shall equal the price determined by multiplying the Exercise Price in
effect immediately prior to the date of such issuance by a fraction, the
numerator of which shall be the sum of the number of shares of Common Stock
outstanding on the record date mentioned below and the number of additional
shares of Common Stock which the aggregate offering price of the total number of
shares of Common Stock so offered (or the aggregate conversion price of the
convertible securities so offered) would purchase at the "Current Market Price"
per share of the Common Stock, and the denominator of which shall be the sum of
the number of shares of Common Stock outstanding on such record date and the
number of additional shares of Common Stock offered for subscription or purchase
(or into which the convertible securities so offered are convertible). Such
adjustment shall be made successively whenever such rights or warrants are
issued and shall become effective immediately after the record date for the
determination of shareholders entitled to receive such rights or warrants; and
to the extent that shares of Common Stock are not delivered (or securities
convertible into Common Stock are not delivered) after the expiration of such
rights or warrants the Exercise Price shall be readjusted to the Exercise Price
which would then be in effect had the adjustments made upon the issuance of such
rights or warrants been made upon the basis of delivery of only the number of
shares of Common Stock (or securities convertible into Common Stock) actually
delivered.
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<PAGE>
(c) Whenever the Exercise Price payable upon exercise of this Warrant is
adjusted pursuant to Subparagraphs (a) and (b) above, the number of Exercise
Shares purchasable upon exercise of this Warrant shall simultaneously be
adjusted by multiplying the number of Exercise Shares initially issuable upon
exercise of this Warrant by the Exercise Price in effect on the date hereof and
dividing the product so obtained by the Exercise Price, as adjusted.
(d) For the purpose of any computation under Subparagraph (b) above, the
"Current Market Price" per share of Common Stock at any date shall be deemed to
be the average of the daily closing prices for 30 consecutive business days
before such date. The closing price for each day shall be the last sale price
regular way or, in case no such reported sale takes place on such day, the
average of the last reported bid and lowest reported asked prices as reported by
NASDAQ, or other similar organization if NASDAQ is no longer reporting such
information, or if not so available, the fair market price as determined by the
Board of Directors.
(e) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least ten cents ($0.10)
in such price; provided, however, that any adjustments which by reason of this
Subparagraph (e) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment required to be made hereunder. All
calculations under this Paragraph 8 shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the case may be. Anything in this Paragraph
8 to the contrary notwithstanding, the Company shall be entitled, but shall not
be required, to make such changes in the Exercise Price, in addition to those
required by this Paragraph 8, as it, in its sole discretion, shall determine to
be advisable in order that any dividend or distribution in shares of Common
Stock, subdivision, reclassification or combination of Common Stock, issuance of
Warrants to Purchase Common Stock or distribution of evidences of indebtedness
or other assets (excluding cash dividends) referred to hereinabove in this
Paragraph 8 hereafter made by the Company to the Holders of its Common Stock
shall not result in any tax to the Holders of its Common Stock or securities
convertible into Common Stock.
(f) Whenever the Exercise Price is adjusted, as herein provided, the
Company shall promptly cause a notice setting forth the adjusted Exercise Price
and adjusted number of Exercise Shares issuable upon exercise of each Warrant to
be mailed to the Holders, at their last addresses appearing in the books of the
Company, and shall cause a certified copy thereof to be mailed to its transfer
agent, if any. The Company may retain a firm of independent certified public
accountants selected by the Board of Directors (who may be the regular
accountants employed by the Company) to make any computation required by this
Paragraph 8, and a certificate signed by such firm shall be conclusive evidence
of the correctness of such adjustment.
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(g) In the event that at any time, as a result of an adjustment made
pursuant to Subparagraph 8(a) above, the Holder of this Warrant thereafter shall
become entitled to receive any Exercise Shares of the Company, other than Common
Stock, thereafter the number of such other shares so receivable upon exercise of
this Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Subparagraphs (a) to (e) of Paragraph 8, inclusive
above.
(h) Irrespective of any adjustments in the Exercise Price or the number or
kind of Exercise Shares purchasable upon exercise of this Warrant, Warrant
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the similar Warrants initially
issuable pursuant to this Agreement.
(i) Whenever the Exercise Price shall be adjusted as required by the
provisions of the foregoing Section, the Company shall forthwith file in the
custody of its Secretary or an Assistant Secretary at its principal office and
with its stock transfer agent, if any, an officer's certificate showing the
adjusted Exercise Price determined as herein provided, setting forth in
reasonable detail the facts requiring such adjustment, including a statement of
the number of additional shares of Common Stock, if any, and such other facts as
shall be necessary to show the reason for and the manner of computing such
adjustment. Each such officer's certificate shall be made available at all
reasonable times for inspection by the Holder and the Company shall, forthwith
after each such adjustment, mail a copy by certified mail of such certificate to
the Holder.
9. Restrictions on Transferability; Restrictive Legend. This Warrant may not be
transferred by the Holder without the prior written consent of the Company
except (1) the one-time transfer of the Warrants from Holder to Permitted
Transferee and (2) by means of intestacy or testamentary bequest. Any transfer
of this Warrant in violation of this Paragraph 9 is null and void as of the time
of such transfer. In addition, neither this Warrant nor the Exercise Shares
shall be transferable except in accordance with the provisions of this
paragraph.
(a) Restrictions on Transfer; Indemnification. Neither this Warrant nor
any Exercise Share may be offered for sale or sold, or otherwise transferred or
sold in any transaction which would constitute a sale thereof within the meaning
of the Securities Act of 1933, as amended (the "1933 Act"), unless (i) such
security has been registered for sale under the 1933 Act and registered or
qualified under applicable state securities laws relating to the offer and sale
of securities, or (ii) exemptions from the registration requirements of the 1933
Act and the registration or qualification requirements of all such state
securities laws are available and the Company shall have received an opinion of
counsel satisfactory to the Company that the proposed sale or other disposition
of such securities may be effected without registration under the 1933 Act and
would not result in any violation of any applicable state securities laws
relating to the registration or qualification of securities for sale, such
counsel and such opinion to be satisfactory to the Company.
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The Holder agrees to indemnify and hold harmless the Company, or Assignee
against any loss, damage, claim or liability arising from the disposition of
this Warrant or any Exercise Share held by such Holder or any interest therein
in violation of the provisions of this Paragraph 9.
(b) Restrictive Legends. Unless and until otherwise permitted by this
Paragraph 9 this Warrant Certificate, each Warrant Certificate issued to the
Holder or to any transferee or assignee of this Warrant Certificate, and each
stock certificate representing Exercise Shares issued upon exercise of this
Warrant or to any transferee of the person to whom the Exercise Shares were
issued, shall bear a legend setting forth the requirements of Subparagraph (a)
of this Paragraph 9, together with such other legend or legends as may otherwise
be deemed necessary or appropriate by counsel to the Company.
(c) Notice of Proposed Transfers. In addition to the provisions of Section
6 hereof, prior to any transfer, offer to transfer or attempted transfer of this
Warrant or any Exercise Share, the Holder of such security shall give written
notice to the Company of such Holder's intention to effect such transfer. Each
such notice shall (x) describe the manner and circumstances of the proposed
transfer in sufficient detail, and shall contain an undertaking by the person
giving such notice to furnish such other information as may be required, to
enable counsel to render the opinions referred to below, and shall (y) designate
the counsel for the person giving such notice, such counsel to be satisfactory
to the Company. The person giving such notice shall submit a copy thereof to the
counsel designated in such notice and the Company shall submit a copy thereof to
its counsel, and the following provisions shall apply:
(i) If, in the opinion of each such counsel, the proposed transfer
of this Warrant or Exercise Shares, as appropriate, may be effected without
registration of such security under the 1933 Act, the Company shall, as promptly
as practicable, so notify the Holder of such security and such Holder shall
thereupon be entitled to transfer such security in accordance with the terms of
the notice delivered by such Holder to the Company. Each certificate evidencing
the securities thus to be transferred (and each certificate evidencing any
untransferred balance of the securities evidenced by such certificate) shall
bear the restrictive legends referred to in Subparagraph (b) above, unless in
the opinion of such counsel such legend is not required in order to insure
compliance with the 1933 Act.
(ii) If, in the opinion of either of such counsel, the proposed
transfer of securities may not be effected without registration under the 1933
Act, the Company shall, as promptly as practicable, so notify the Holder
thereof. However, the Company shall have no obligation to register such
securities under the 1933 Act, except as otherwise provided herein or in the
Agreement of Sale.
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The Holder of the securities giving the notice under this Subparagraph (c)
shall not be entitled to transfer any of the securities until receipt of notice
from the Company under Paragraph (i) of this Subparagraph (c) or registration of
such securities under the 1933 Act has become effective.
(d) Removal of Legend. The Company shall, at the request of any registered
Holder of a Warrant or Exercise Share, exchange the certificate representing
such security for a certificate representing the same security not bearing the
restrictive legend required by Subparagraph (b) if, in the opinion of counsel to
the Company, such restrictive legend is no longer necessary.
10. Registration Rights. The Holder hereof shall be entitled to the registration
rights set forth in a certain Registration Rights Agreement of even date
herewith by and between the Company and such Holder.
11. Notices. All notices or other communications under this Warrant Certificate
shall be in writing and shall be deemed to have been given if delivered by hand
or mailed by certified mail, postage prepaid, return receipt request, addressed
as follows:
If to the Company:
Tel-Save Holdings, Inc.
22 Village Square
New Hope, PA 18939
with a copy to:
Aloysius T. Lawn, IV, Esquire
General Counsel and Secretary
22 Village Square
New Hope, PA 18939
and to the Holder:
at the address of the Holder appearing on the books of the company
or the Company's transfer agent, if any.
Either of the Company or the Holder may from time to time change the
address to which notices to it are to be mailed hereunder by notice in
accordance with the provisions of this Paragraph 11.
12. Supplements and Amendments. The Company may from time to time supplement or
amend this Warrant Certificate without the approval of any Holders of Warrants
in order to cure any ambiguity or to correct or supplement any provision
contained herein which may be
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<PAGE>
defective or inconsistent with any other provision, or to make any other
provisions in regard to matters or questions herein arising hereunder which the
Company may deem necessary or desirable and which shall not materially adversely
affect the interests of the Holder.
13. Successors and Assigns. This Warrant shall inure to the benefit of and be
binding on the respective successors, assigns and legal representatives of the
Holder and the Company. The Company may assign (the "Assignment") its rights to
deliver the Exercise Shares pursuant to this Warrant to one or more stockholders
of the Company ("Assignee") who would agree to sell the Exercise Shares to the
Holder upon exercise hereof and to otherwise assume with respect to the delivery
of the Exercise Shares only, all obligations of the Company, with respect to the
delivery of the Exercise Shares only, under this Warrant. In addition, the
Company may assign to another party its right, under the Right of First Refusal.
14. Severability. If for any reason any provision, paragraph or terms of this
Warrant Certificate is held to be invalid or unenforceable, all other valid
provisions herein shall remain in full force and effect and all terms,
provisions and paragraphs of this Warrant shall be deemed to be severable.
15. Governing Law. This Warrant shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of said State.
16. Headings. Paragraph and subparagraph headings, used herein are included
herein for convenience of reference only shall not affect the construction of
this Warrant Certificate nor constitute a part of this Warrant Certificate for
any other purpose.
17. Consent and Acknowledgment of Holder. The terms and conditions of this
Warrant are agreed and consented to by the Holder, as evidenced by Holder's
signature on the line provided below. This Warrant shall bind, benefit and be
enforceable by or against Holder and its heirs, legal and personal
representatives, estate, beneficiaries and assigns, and the Company, Assignee
and its successors and assigns.
IN WITNESS WHEREOF, the Company has caused these presents to be duly executed as
of the day and year written above.
TEL-SAVE HOLDINGS, INC.
By: /s/ Daniel Borislow
--------------------------------
Chief Executive Officer
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The terms of this Warrant are
agreed to and accepted by:
HOLDER
/s/ Robert T. Hale, Jr.
- ----------------------------
Signature:
Robert T. Hale, Jr.
- ----------------------------
Print Name
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APPENDIX A
NOTICE OF WARRANT EXERCISE
Pursuant to a Warrant Agreement, ("Warrant") by and between the
undersigned and Tel-Save Holdings, Inc., a Delaware corporation (the "Company"),
dated as of January 9, 1996, and subject to the vesting periods set forth
therein, the undersigned hereby irrevocably elects to exercise its warrant to
the extent of purchasing _____ shares of Common Stock (the "Warrant Shares"), of
the Company as provided for therein.
The undersigned hereby represents and agrees that the Warrant Shares
purchased pursuant hereto are being purchased for investment and not with a view
to the distribution or resale thereof, and that the undersigned understands that
said Warrant Shares have not been registered under the Securities Act of 1933,
as amended.
The undersigned, on behalf of itself, its past and present subsidiaries,
successors, assigns and any assignee of Holder and its and their officers,
directors, employees, creditors, trustees, agents and successors (collectively
"Holder Releasors"), does hereby release, acquit and forever discharge Company,
"Assignee" (as defined in the Warrant) and any assignor of the Warrant (i.e.,
previous Holder) and the Company's past and present subsidiaries, affiliates,
stockholders, successors, assigns, investment bankers, agents, creditors,
trustees, and its and their officers, directors, employees, customers, agents,
attorneys, and their estates, assigns and successors (collectively "Company
Releasees"), from any and all claims, actions, causes of action, suits, demands,
rights, damages, costs, loss of service, service, expenses, or compensation of
any sort whatsoever, known or unknown, foreseen or unforeseen, which Holder
Releasors ever had, now have or hereafter can, shall or may have against Company
Releasees, by reason of any matter, cause, event, action, or inaction or thing
from whatsoever from the beginning of time to the date of this Notice.
Payment of the full Exercise Price (as defined in the Warrant) of the
Warrant Shares is enclosed herewith, in the form of a check made payable to the
Company or Assignee, as the case may be.
The undersigned requests that a certificate for the Warrant Shares be
issued in the name of:
________________________________________________
________________________________________________
________________________________________________
(Please print name, address and social security numbers)
Dated: ________________________________________________
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Address: ________________________________________________
________________________________________________
________________________________________________
Signature: ________________________________________________
15
WARRANT AGREEMENT TO PURCHASE
COMMON STOCK OF
TEL-SAVE HOLDINGS, INC.
Date of Grant: January 12, 1996.
Void after 5:00 p.m. Eastern Standard Time on January 11, 1997.
This is to verify that, FOR VALUE RECEIVED, Anne Marie Co., LLC, with a
principal address as indicated on the Company's books and records, or only those
assigns specifically permitted under the terms hereof (hereinafter referred to
as the "Holder") is entitled to purchase, subject to the terms and conditions
hereof, from Tel-Save Holdings, Inc., a Delaware corporation ("Company"), or its
assigns, 20,000 shares of Common Stock (the "Common Stock") during the period
commencing at 9:00 a.m., Eastern Standard Time on September 1, 1996 (the
"Commencement Date") and ending at 5:00 p.m. Eastern Standard Time on January
11, 1997 (the "Termination Date") at an exercise price of $12.375* per share of
Common Stock. The number of shares of Common Stock purchasable upon the exercise
of this Warrant Agreement (the "Warrant(s)") and the exercise price per share
shall be subject to adjustment from time to time upon the occurrence of certain
events as set forth below.
The shares of Common Stock or any other shares or other units of stock or
other securities or property, or any combination thereof then receivable upon
exercise of this Warrant, as adjusted from time to time, are sometimes referred
to hereinafter as "Exercise Shares." The exercise price per share as from time
to time in effect is referred to hereinafter as the "Exercise Price."
1. Vesting and Exercise of Warrant; Issuance of Exercise Shares.
(a) Exercise of Warrant. Subject to compliance with the vesting provisions
identified at Subparagraph (b) below, this Warrant may be exercised in whole or
in part at any time or from time to time on or after the Commencement Date and
until and including the Termination Date. Following the Termination Date, in the
absence of the exercise hereof, the Holder shall have no rights herein and this
Warrant shall lapse. This Warrant may be surrendered on any business day to the
Company at its principal office, presently located at the address of the Company
set forth in Paragraph 11 hereof, (or such other office of the Company, if any,
as shall theretofore have been designated by the Company by written
- ----------
*The closing price of the Company's Common Stock on The NASDAQ Stock Market on
the date of the grant was $12.375.
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<PAGE>
notice to the Holder), together with: (i) a completed and executed Notice of
Warrant Exercise in the form set forth in Appendix A hereto and made a part
hereof and (ii) (A) payment of the full Exercise Price for the amount of
Exercise Shares set forth in the Notice of Warrant Exercise, in lawful money of
the United States of America by certified check or cashier's check, made payable
to the order of the Company or (B) at the request of Holder and to the extent
permitted by applicable law, the Company in its sole discretion may selectively
approve arrangements with a brokerage firm under which such brokerage firm, on
behalf of the Holder, shall pay the Company the Exercise Price, and the Company,
pursuant to an irrevocable notice from Holder (the form of which is satisfactory
to the Company), shall promptly deliver the Exercise Shares being purchased to
such firm. In the event of an Assignment (as hereinafter defined), the Company
shall deliver to the Assignee (as hereinafter defined) any Warrants surrendered
for exercise, together with the related Notice of Warrant exercise and the
Exercise Price and, to the extent payment is to be effected in accordance with
clause (ii) (B) above, payment shall be made to the Assignee against delivery by
the Assignee of the Exercise Shares.
In the event that this Warrant shall be duly exercised in part prior to
the Termination Date, the Company shall issue a new Warrant or Warrants of like
tenor evidencing the rights of the Holder thereof to purchase the balance of the
Exercise Shares purchasable under the Warrant so surrendered that shall not have
been purchased.
No adjustments shall be made for any cash dividends on Exercise Shares
issuable upon exercise of the Warrant. The Company shall cancel Warrant
Certificates surrendered upon exercise of Warrants.
(b) Vesting Contingency.
(A) The Company and Holder specifically acknowledge and agree that
this Warrant (and the related agreements outlined in Appendix B) (i) is being
entered into to enhance the long term relationship between Holder and Company
with respect to the sale/purchase of telecommunications services under the
company's own long distance network known as "One Better Net" and (ii) that
there is no assurance to maintain existing business with the Company or that
Holder can achieve or maintain if achieved the levels of monthly billings
outlined in this Warrant.
(B) Notwithstanding anything to the contrary contained herein, the
Holder's right, title and interest in and to this Warrant shall only vest, and
the Company's obligation to issue the Exercise Shares shall only remain in
effect provided that (i) the Holder and the Company shall enter into and
maintain definitive agreements or subscribe to a tariff obtained by the Company,
the general terms of which will include the requirement of provisioning of at
least $200,000 of traffic, (ii) the Holder is current in all payments for
billing from the Company, and (iii) the Holder is in general good standing with
the Company and is in compliance with the tariff or contract terms with the
Company.
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<PAGE>
(c) Issuance of Exercise Shares; Delivery of Warrant Certificate. The
Company or the Assignee, as applicable, shall, within ten (10) business days or
as soon thereafter as is practicable of the exercise of this Warrant, issue in
the name of and cause to be delivered, or in the case of an Assignment shall
deliver (together with a duly executed stock power), to the Holder (or such
other person or persons, if any, as specifically permitted under the terms
hereof and as the Holder shall have designated in the Notice of Warrant
Exercise) one or more certificates representing the Exercise Shares to which the
Holder (or such other person or persons) shall be entitled upon such exercise
under the terms hereof. Such certificate or certificates shall be deemed to have
been issued and the Holder (or such other person or persons so permitted and
designated) shall be deemed to have become the record holder of the Exercise
Shares as of the date of the due exercise of this Warrant.
(d) Exercise Shares Fully Paid and Non-assessable. The Company agrees and
covenants for itself and on behalf of any Assignee that all Exercise Shares
issuable or deliverable upon the due exercise of the Warrant represented by this
Warrant Certificate will, upon issuance in accordance with the terms hereof, be
duly authorized, validly issued, fully paid and non-assessable and free and
clear of all taxes (other than those taxes which, pursuant to Paragraph 2
hereof, the Company shall not be obligated to pay) or liens, charges, and
security interests created by the Company with respect to the issuance thereof.
(e) Reservation of Exercise Shares. In connection with or as soon as
practicable after any action which would cause an adjustment pursuant to
Paragraph 8 hereof increasing the number of shares of capital stock constituting
the Exercise Shares, the Company will take as soon as practicable after such
action any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company have remaining, after such adjustment, a
number of shares of such capital stock unissued and unreserved for other
purposes sufficient to permit the exercise of all the then outstanding Warrants
of like tenor immediately after such adjustment; the Company will also from time
to time take action to increase the authorized amount of its capital stock
constituting the Exercise Shares if at any time the number of shares of capital
stock authorized but remaining unissued and unreserved for other purposes shall
be insufficient to permit the exercise of the Warrants then outstanding. The
Company may but shall not be required to reserve and keep available, out of the
aggregate of its authorized but unissued shares of capital stock, for the
purpose of enabling it to satisfy any obligation to issue Exercise Shares upon
exercise of Warrants, through the Termination Date, the number of Exercise
Shares deliverable upon the full exercise of this Warrant and all other Warrants
of like tenor then outstanding.
At the time of or before taking any action which would cause an adjustment
pursuant to Paragraph 8 hereof, reducing the Exercise Price below then par value
(if any) of the Exercise Shares issuable upon exercise of the Warrants, the
Company will take any corporate action which may, in the opinion of its counsel,
be necessary in order to assure that the par value per share of the Exercise
Shares is at all times equal to or less than the Exercise Price per share and so
that the Company may validly and legally issue fully paid and non-assessable
Exercise Shares at the Exercise Price, as so adjusted; the Company will also
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<PAGE>
from time to time take such action if at any time the Exercise Price is below
the then par value of the Exercise Shares.
(f) Fractional Shares. Neither, the Company nor any Assignee shall be
required to the issue fractional shares of capital stock upon the exercise of
this Warrant or to deliver Warrant Certificates which evidence fractional shares
of capital stock. In the event that any fraction of an Exercise Share would,
except for the provisions of this Subparagraph (f), be issuable upon the
exercise of this Warrant, the Company or the Assignee, as the case may be, shall
pay to the Holder exercising the Warrant an amount in cash equal to such
fraction multiplied by the "Current Market Value" of the Exercise Share. For
purposes of this Subparagraph (f), the "Current Market Value" shall be
determined as follows:
(i) if the Exercise Shares are traded in the over-the-counter market
and not on any national securities exchange and not in the NASDAQ Reporting
System, the average of the mean between the last bid and asked prices per share,
as reported by the National Quotation Bureau, Inc., or an equivalent generally
accepted reporting service, for the last business day prior to the date on which
this Warrant is exercised, or if not so reported, the average of the closing bid
and asked prices for an Exercise Share as furnished to the Company by any member
of the National Association of Securities Dealers, Inc., selected by the Company
for that purpose.
(ii) if the Exercise Shares are listed or traded on a national
securities exchange or in the NASDAQ Reporting System, the closing price on the
principal national securities exchange on which they are so listed or traded or
in the National Market, as the case may be, on the last business day prior to
the date of the exercise of this Warrant. The closing price referred to in this
clause (ii) shall be the last reported sales price, or, in case no such reported
sale takes place on such day, the average of the reported closing bid and asked
prices, in either case on the national securities exchange on which the Exercise
shares are then listed or in the NASDAQ Reporting System; or
(iii) if no such closing price or closing bid and asked prices are
available, as determined in any reasonable manner as may be prescribed by the
Board of Directors of the Company.
2. Payment of Taxes. The Company will pay all documentary stamp taxes, if any,
attributable to the initial issuance of Exercise Shares upon the exercise of
this Warrant; provided, however, that the Company shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in the
issue of any Warrant Certificates or any certificates for Exercise Shares in a
name other than that of the Holder of a Warrant Certificate surrendered upon the
exercise of a Warrant, and the Company shall not be required to issue or deliver
such certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
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<PAGE>
3. Mutilated or Missing Warrant Certificates. In case any Warrant Certificate
shall be mutilated, lost, stolen or destroyed, the Company may in its discretion
issue, in exchange and substitution for and upon cancellation of the mutilated
Warrant Certificate, or in lieu of an in substitution for the Warrant
Certificate lost, stolen or destroyed, a new Warrant Certificate or Warrant
Certificates of like tenor and in the same aggregate denomination, but only (i)
in the case of loss, theft or destruction, upon receipt of evidence satisfactory
to the Company of such loss, theft or destruction of such Warrant Certificate
and indemnity or bond, if requested, also satisfactory to them and (ii) in the
case of mutilation, upon surrender of the mutilated Warrant. Applicants for such
substitute Warrant Certificates shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company or its counsel
may prescribe.
4. Rights of Holder. The Holder shall not, by virtue of anything contained in
this Warrant Certificate or otherwise, be entitled to any right whatsoever,
either in law or equity, of a stockholder of the Company, including without
limitation, the right to receive dividends or to vote or to consent or to
receive notice as a shareholder in respect of the meetings of shareholders or
the election of directors of the Company or any other matter.
5. Release. Holder and any assignee of Holder, on behalf of itself, its past and
present subsidiaries, successors, assigns and its and their officers, directors,
employees, agents, creditors, trustees, and successors (collectively "Holder
Releasors"), does hereby release, acquit and forever discharge Company, Assignee
or any assignor of this Warrant (i.e. a previous Holder) and the Company's past
and present subsidiaries, affiliates, stockholders, successors, assigns,
customers, investment bankers, agents and its and their officers, directors,
employees, agents, attorneys, and their estates, assigns and successors
(collectively, "Company Releasees"), from any and all claims, actions, causes of
action, suits, demands, rights, damages, costs, loss of service, service,
expenses, or compensation of any sort whatsoever, known or unknown, foreseen or
unforeseen, which Holder Releasors ever had, now have or hereafter can, shall or
may have against Company Releases, by reason of any matter, cause, event,
action, or inaction or thing from whatsoever from the beginning of time to the
date of this Warrant.
6. Right of First Refusal.
(a) If at any time any Holder determines to sell or transfer any or all of
this Warrant or the Exercise Shares and/or receives a bona fide written offer to
purchase any or all of this Warrant or any or all of such Exercise Shares
(hereafter referred to in either case as an "Offer") which the Holder or any
subsequent Holder desires to accept, Holder or any subsequent Holder must first
offer (hereafter called the "Right of First Refusal") to sell such Warrant or
Exercise Shares to the Company upon the "Offer Terms" (as described below).
(b) In the event Holder receives an Offer, Holder shall notify the Company
in writing of such Offer, including the proposed price and other terms and
conditions of the Offer ("Offer Terms"), and the Company shall have ten (10)
business days after the date
5
<PAGE>
such written notice is sent to the Company by first class mail (with a copy sent
by facsimile on the date of mailing if the Company has a facsimile machine) to
elect to exercise its Right of First Refusal. Such election shall be made by the
Company by sending written notice to Holder or any subsequent Holder by first
class mail (with a copy sent by facsimile on the date of mailing if Holder has a
facsimile machine) within such ten (10) day period. In the absence of such
written notice, the Company shall be deemed to have waived its Right of First
Refusal with respect to such Offer but not with respect to any other proposed
sale by (or offer that he receives) which is subject to the Right of First
Refusal contained herein.
(c) Contemporaneous with the execution hereof, Holder and any subsequent
Holder agrees to enter into the Voting Trust Agreement in the form attached
hereto as Appendix B.
7. Registration of Transfers and Exchanges. This Warrant shall be transferable,
subject to the provisions of this Paragraph and Paragraph 9 hereof, only upon
the books of the Company if any, to be maintained by it for that purpose, upon
surrender of the Warrant Certificate to the Company at its principal office
accompanied (if so required by it) by a written instrument or instruments of
transfer in form satisfactory to the Company and duly executed by the Holder
thereof or by the duly appointed legal representative thereof or by a duly
authorized attorney and upon payment of any necessary transfer tax or other
governmental charge imposed upon such transfer. In all cases of transfer by a
power of attorney, the original power of attorney, duly approved, or a power of
official copy thereof, duly certified, shall be deposited and remain with the
Company. In case of transfer by executors, administrators, guardians or other
legal representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited and remain with the Company in its
discretion. Any registration of transfer of the Warrant is subject to transferee
agreeing to and accepting the terms of this Warrant Agreement and upon such
acceptance, a new Warrant Certificate shall be issued to the transferee named in
such instrument of transfer, and the surrendered Warrant Certificate shall be
canceled by the Company.
Any Warrant Certificate may be exchanged, at the option of the Holder
thereof and without change, when surrendered to the Company at its principal
office, or at the office of its transfer agent, if any, for another Warrant
Certificate or other Warrant Certificates of like tenor and representing in the
aggregate the right to purchase from the Company a like number and kind of
Exercise Shares as the Warrant Certificate surrendered for exchange or transfer,
and the Warrant Certificate so surrendered shall be canceled by the Company or
transfer agent, as the case may be.
8. Adjustment of Exercise Shares and Exercise Price. The Exercise Price and the
number and kind of Exercise Shares purchasable upon the exercise of this Warrant
shall be subject to adjustment from time to time upon the happening of certain
events as hereinafter provided.
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The Exercise Price in effect at any time and the number and kind of securities
purchasable upon exercise of each Warrant shall be subject to adjustment as
follows:
(a) In the case the Company shall (i) pay a dividend or make a
distribution on its shares of Common Stock in shares of Common Stock, (ii)
subdivide or classify its outstanding Common Stock into a greater number of
shares, or (iii) combine or reclassify its outstanding Common Stock into a
smaller number of shares, the Exercise Price in effect at the time of the record
date for such dividend or distribution or of the effective date of such
subdivision, combination or reclassification shall be proportionally adjusted so
that the Holder of this Warrant exercised after such date shall be entitled to
receive the aggregate number and kind of shares which, if this Warrant had been
exercised by such Holder immediately prior to such date, he would have owned
upon such exercise and been entitled to receive upon such dividend, subdivision,
combination or reclassification. For example, if the Company declares a 2 for 1
stock dividend or stock split and the Exercise Price immediately prior to such
event was $5.00 per share, the adjusted Exercise Price immediately after such
event would be $2.50 per share. Such adjustment shall be made successively
whenever any event listed above shall occur.
(b) In case the Company shall hereafter issue rights or warrants to all
Holders of its Common Stock entitling them to subscribe for or purchase shares
of Common Stock (or securities convertible into Common Stock) at a price (or
having a conversion price per share) less than the "Current Market Price" of the
Common Stock (as defined in Subparagraph (d) of this Paragraph below) on the
record date mentioned below, the Exercise Price shall be adjusted so that the
same shall equal the price determined by multiplying the Exercise Price in
effect immediately prior to the date of such issuance by a fraction, the
numerator of which shall be the sum of the number of shares of Common Stock
outstanding on the record date mentioned below and the number of additional
shares of Common Stock which the aggregate offering price of the total number of
shares of Common Stock so offered (or the aggregate conversion price of the
convertible securities so offered) would purchase at the "Current Market Price"
per share of the Common Stock, and the denominator of which shall be the sum of
the number of shares of Common Stock outstanding on such record date and the
number of additional shares of Common Stock offered for subscription or purchase
(or into which the convertible securities so offered are convertible). Such
adjustment shall be made successively whenever such rights or warrants are
issued and shall become effective immediately after the record date for the
determination of shareholders entitled to receive such rights or warrants; and
to the extent that shares of Common Stock are not delivered (or securities
convertible into Common Stock are not delivered) after the expiration of such
rights or warrants the Exercise Price shall be readjusted to the Exercise Price
which would then be in effect had the adjustments made upon the issuance of such
rights or warrants been made upon the basis of delivery of only the number of
shares of Common Stock (or securities convertible into Common Stock) actually
delivered.
7
<PAGE>
(c) Whenever the Exercise Price payable upon exercise of each Warrant is
adjusted pursuant to Subparagraphs (a) and (b) above, the number of Exercise
Shares purchasable upon exercise of this Warrant shall simultaneously be
adjusted by multiplying the number of Exercise Shares initially issuable upon
exercise of this Warrant by the Exercise Price in effect on the date hereof and
dividing the product so obtained by the Exercise Price, as adjusted.
(d) For the purpose of any computation under Subparagraph (b) above, the
"Current Market Price" per share of Common Stock at any date shall be deemed to
be the average of the daily closing prices for 30 consecutive business days
before such date. The closing price for each day shall be the last sale price
regular way or, in case no such reported sale takes place on such day, the
average of the last reported bid and lowest reported asked prices as reported by
NASDAQ, or other similar organization if NASDAQ is no longer reporting such
information, or if not so available, the fair market price as determined by the
Board of Directors.
(e) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least ten cents ($0.10)
in such price; provided, however, that any adjustments which by reason of this
Subparagraph (e) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment required to be made hereunder. All
calculations under this Paragraph 8 shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the case may be. Anything in this Paragraph
8 to the contrary notwithstanding, the Company shall be entitled, but shall not
be required, to make such changes in the Exercise Price, in addition to those
required by this Paragraph 8, as it, in its sole discretion, shall determine to
be advisable in order that any dividend or distribution in shares of Common
Stock, subdivision, reclassification or combination of Common Stock, issuance of
Warrants to Purchase Common Stock or distribution of evidences of indebtedness
or other assets (excluding cash dividends) referred to hereinabove in this
Paragraph 8 hereafter made by the Company to the Holders of its Common Stock
shall not result in any tax to the Holders of its Common Stock or securities
convertible into Common Stock.
(f) Whenever the Exercise Price is adjusted, as herein provided, the
Company shall promptly cause a notice setting forth the adjusted Exercise Price
and adjusted number of Exercise Shares issuable upon exercise of each Warrant to
be mailed to the Holders, at their last addresses appearing in the books of the
Company, and shall cause a certified copy thereof to be mailed to its transfer
agent, if any. The Company may retain a firm of independent certified public
accountants selected by the Board of Directors (who may be the regular
accountants employed by the Company) to make any computation required by this
Paragraph 8, and a certificate signed by such firm shall be conclusive evidence
of the correctness of such adjustment.
8
<PAGE>
(g) In the event that at any time, as a result of an adjustment made
pursuant to Subparagraph 8(a) above, the Holder of this Warrant thereafter shall
become entitled to receive any Exercise Shares of the Company, other than Common
Stock, thereafter the number of such other shares so receivable upon exercise of
this Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Subparagraphs (a) to (e) of Paragraph 8, inclusive
above.
(h) Irrespective of any adjustments in the Exercise Price or the number or
kind of Exercise Shares purchasable upon exercise of this Warrant, Warrant
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the similar Warrants initially
issuable pursuant to this Agreement.
(i) Whenever the Exercise Price shall be adjusted as required by the
provisions of the foregoing Section, the Company shall forthwith file in the
custody of its Secretary or an Assistant Secretary at its principal office and
with its stock transfer agent, if any, an officer's certificate showing the
adjusted Exercise Price determined as herein provided, setting forth in
reasonable detail the facts requiring such adjustment, including a statement of
the number of additional shares of Common Stock, if any, and such other facts as
shall be necessary to show the reason for and the manner of computing such
adjustment. Each such officer's certificate shall be made available at all
reasonable times for inspection by the Holder and the Company shall, forthwith
after each such adjustment, mail a copy by certified mail of such certificate to
the Holder.
9. Restrictions on Transferability; Restrictive Legend. This Warrant may not be
transferred by the Holder without the prior written consent of the Company
except by means of intestacy or testamentary bequest. Any transfer of this
Warrant in violation of this Paragraph 9 is null and void as of the time of such
transfer. In addition, neither this Warrant nor the Exercise Shares shall be
transferable except in accordance with the provisions of this paragraph.
(a) Restrictions on Transfer; Indemnification. Neither this Warrant nor
any Exercise Share may be offered for sale or sold, or otherwise transferred or
sold in any transaction which would constitute a sale thereof within the meaning
of the Securities Act of 1933, as amended (the "1933 Act"), unless (i) such
security has been registered for sale under the 1933 Act and registered or
qualified under applicable state securities laws relating to the offer and sale
of securities, or (ii) exemptions from the registration requirements of the 1933
Act and the registration or qualification requirements of all such state
securities laws are available and the Company shall have received an opinion of
counsel satisfactory to the Company that the proposed sale or other disposition
of such securities may be effected without registration under the 1933 Act and
would not result in any violation of any applicable state securities laws
relating to the registration or qualification of securities for sale, such
counsel and such opinion to be satisfactory to the Company.
9
<PAGE>
The Holder agrees to indemnify and hold harmless the Company or Assignee
against any loss, damage, claim or liability arising from the disposition of
this Warrant or any Exercise Share held by such Holder or any interest therein
in violation of the provisions of this Paragraph 9.
(b) Restrictive Legends. Unless and until otherwise permitted by this
Paragraph 9 this Warrant Certificate, each Warrant Certificate issued to the
Holder or to any transferee or assignee of this Warrant Certificate, and each
stock certificate representing Exercise Shares issued upon exercise of this
Warrant or to any transferee of the person to whom the Exercise Shares were
issued, shall bear a legend setting forth the requirements of Subparagraph (a)
of this Paragraph 9, together with such other legend or legends as may otherwise
be deemed necessary or appropriate by counsel to the Company.
(c) Notice of Proposed Transfers. In addition to the provisions of Section
6 hereof, prior to any transfer, offer to transfer or attempted transfer of this
Warrant or any Exercise Share, the Holder of such security shall give written
notice to the Company of such Holder's intention to effect such transfer. Each
such notice shall (x) describe the manner and circumstances of the proposed
transfer in sufficient detail, and shall contain an undertaking by the person
giving such notice to furnish such other information as may be required, to
enable counsel to render the opinions referred to below, and shall (y) designate
the counsel for the person giving such notice, such counsel to be satisfactory
to the Company. The person giving such notice shall submit a copy thereof to the
counsel designated in such notice and the Company shall submit a copy thereof to
its counsel, and the following provisions shall apply:
(i) If, in the opinion of each such counsel, the proposed transfer
of this Warrant or Exercise Shares, as appropriate, may be effected without
registration of such security under the 1933 Act, the Company shall, as promptly
as practicable, so notify the Holder of such security and such Holder shall
thereupon be entitled to transfer such security in accordance with the terms of
the notice delivered by such Holder to the Company. Each certificate evidencing
the securities thus to be transferred (and each certificate evidencing any
untransferred balance of the securities evidenced by such certificate) shall
bear the restrictive legends referred to in Subparagraph (b) above, unless in
the opinion of such counsel such legend is not required in order to insure
compliance with the 1933 Act.
(ii) If, in the opinion of either of such counsel, the proposed
transfer of securities may not be effected without registration under the 1933
Act, the Company shall, as promptly as practicable, so notify the Holder
thereof. However, the Company shall have no obligation to register such
securities under the 1933 Act, except as otherwise provided herein or in the
Agreement of Sale.
10
<PAGE>
The Holder of the securities giving the notice under this Subparagraph (c)
shall not be entitled to transfer any of the securities until receipt of notice
from the Company under Paragraph (i) of this Subparagraph (c) or registration of
such securities under the 1933 Act has become effective.
(d) Removal of Legend. The Company shall, at the request of any registered
Holder of a Warrant or Exercise Share, exchange the certificate representing
such security for a certificate representing the same security not bearing the
restrictive legend required by Subparagraph (b) if, in the opinion of counsel to
the Company, such restrictive legend is no longer necessary.
10. Registration Rights. The Holder hereof shall be entitled to the registration
rights set forth in a certain Registration Rights Agreement of even date
herewith by and between the Company and such Holder.
11. Notices. All notices or other communications under this Warrant Certificate
shall be in writing and shall be deemed to have been given if delivered by hand
or mailed by certified mail, postage prepaid, return receipt request, addressed
as follows:
If to the Company:
Tel-Save Holdings, Inc.
22 Village Square
New Hope, PA 18939
with a copy to:
Aloysius T. Lawn, IV, Esquire
General Counsel and Secretary
22 Village Square
New Hope, PA 18939
and to the Holder:
at the address of the Holder appearing on the books of the company
or the Company's transfer agent, if any.
Either of the Company or the Holder may from time to time change the
address to which notices to it are to be mailed hereunder by notice in
accordance with the provisions of this Paragraph 11.
12. Supplements and Amendments. The Company may from time to time supplement or
amend this Warrant Certificate without the approval of any Holders of Warrants
in order to cure any ambiguity or to correct or supplement any provision
contained herein which may be
11
<PAGE>
defective or inconsistent with any other provision, or to make any other
provisions in regard to matters or questions herein arising hereunder which the
Company may deem necessary or desirable and which shall not materially adversely
affect the interests of the Holder.
13. Successors and Assigns. This Warrant shall inure to the benefit of and be
binding on the respective successors, assigns and legal representatives of the
Holder and the Company. The Company may assign (the "Assignment") its rights to
deliver the Exercise Shares pursuant to this Warrant to one or more stockholders
of the Company ("Assignee") who would agree to sell the Exercise Shares to the
Holder upon exercise hereof and to otherwise assume with respect to the delivery
of the Exercise Shares only, all obligations of the Company, with respect to the
delivery of the Exercise Shares only, under this Warrant. In addition, the
Company may assign to another party its right, under the Right of First Refusal.
14. Severability. If for any reason any provision, paragraph or terms of this
Warrant Certificate is held to be invalid or unenforceable, all other valid
provisions herein shall remain in full force and effect and all terms,
provisions and paragraphs of this Warrant shall be deemed to be severable.
15. Governing Law. This Warrant shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of said State.
16. Headings. Paragraph and subparagraph headings, used herein are included
herein for convenience of reference only shall not affect the construction of
this Warrant Certificate nor constitute a part of this Warrant Certificate for
any other purpose.
17. Consent and Acknowledgment of Holder. The terms and conditions of this
Warrant are agreed and consented to by the Holder, as evidenced by Holder's
signature on the line provided below. This Warrant shall bind, benefit and be
enforceable by or against Holder and its heirs, legal and personal
representatives, estate, beneficiaries and assigns, and the Company, Assignee
and its successors and assigns.
IN WITNESS WHEREOF, the Company has caused these presents to be duly executed as
of the day and year written above.
TEL-SAVE HOLDINGS, INC.
By: /s/ Daniel Borislow
--------------------------------
Chief Executive Officer
12
<PAGE>
The terms of this Warrant are
agreed to and accepted by:
HOLDER
ANNE MARIE CO., LLC
/s/ Mary Louise Filomeno
- --------------------------------
Signature:
Mary Louise Filomeno
- --------------------------------
Print Name
13
<PAGE>
APPENDIX A
NOTICE OF WARRANT EXERCISE
Pursuant to a Warrant by and between the undersigned and Tel-Save
Holdings, Inc., a Delaware corporation (the "Company"), dated as of January __,
_____, and subject to the vesting periods set forth therein, the undersigned
hereby irrevocably elects to exercise its warrant to the extent of purchasing
_______ shares of Common Stock (the "Warrant Shares"), of the Company as
provided for therein.
The undersigned hereby represents and agrees that the Warrant Shares
purchased pursuant hereto are being purchased for investment and not with a view
to the distribution or resale thereof, and that the undersigned understands that
said Warrant Shares have not been registered under the Securities Act of 1933,
as amended.
The undersigned, on behalf of itself, its past and present subsidiaries,
successors, assigns and any assignee of Holder and its and their officers,
directors, employees, creditors, trustees, agents and successors (collectively
"Holder Releasors"), does hereby release, acquit and forever discharge Company,
"Assignee" (as defined in the Warrant) and any assignor of the Warrant (i.e., a
previous Holder) and the Company's past and present subsidiaries, affiliates,
stockholders, successors, assigns, investment bankers, agents and its and their
officers, directors, employees, customers, agents, attorneys, and their estates,
assigns and successors (collectively "Company Releasees"), from any and all
claims, actions, causes of action, suits, demands, rights, damages, costs, loss
of service, service, expenses, or compensation of any sort whatsoever, known or
unknown, foreseen or unforeseen, which Holder Releasors ever had, now have or
hereafter can, shall or may have against Company Releasees, by reason of any
matter, cause, event, action, or inaction or thing from whatsoever from the
beginning of time to the date of this Notice.
Payment of the full Exercise Price (as defined in the Warrant) of the
Warrant Shares is enclosed herewith, in the form of a check made payable to the
Company or Assignee, as the case may be.
The undersigned requests that a certificate for the Warrant Shares be
issued in the name of:
________________________________________________
________________________________________________
________________________________________________
(Please print name, address and social security numbers)
Dated: ________________________________________________
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<PAGE>
Address: ________________________________________________
________________________________________________
________________________________________________
Signature: ________________________________________________
15
WARRANT AGREEMENT #1 TO PURCHASE
COMMON STOCK OF
TEL-SAVE HOLDINGS, INC.
Date of Grant: January 12, 1996.
Void after 5:00 p.m. Eastern Standard Time on February 15, 1997.
This is to verify that, FOR VALUE RECEIVED, Eastern Telecommunications,
Inc., with a principal address as indicated on the Company's books and records,
or only those assigns specifically permitted under the terms hereof (hereinafter
referred to as the "Holder") is entitled to purchase, subject to the terms and
conditions hereof, from Tel-Save Holdings, Inc., a Delaware corporation
("Company"), or its assigns, 200,000 shares of Common Stock (the "Common Stock")
during the period commencing at 9:00 a.m., Eastern Standard Time on May 12, 1996
(the "Commencement Date") and ending at 5:00 p.m. Eastern Standard Time on
February 15, 1997 (the "Termination Date") at an exercise price of $12.25* per
share of Common Stock. The number of shares of Common Stock purchasable upon the
exercise price per share shall be subject to adjustment from time to time upon
the occurrence of certain events as set forth below.
The shares of Common Stock or any other shares or other units of stock or
other securities or property, or any combination thereof then receivable upon
exercise of this Warrant, as adjusted from time to time, are sometimes referred
to hereinafter as "Exercise Shares." The exercise price per share as from time
to time in effect is referred to hereinafter as the "Exercise Price."
1. Vesting and Exercise of Warrant; Issuance of Exercise Shares.
(a) Exercise of Warrant. Subject to compliance with the vesting provisions
identified at Subparagraph (b)(1) below, this Warrant may be exercised in whole
or in part at any time or from time to time on or after the Commencement Date
and until and including the Termination Date. Following the Termination Date, in
the absence of the exercise hereof, the Holder shall have no rights herein and
this Warrant shall lapse. This Warrant may be surrendered on any business day to
the Company at its principal office, presently located at the address of the
Company set forth in Paragraph 11 hereof, (or such other office of the Company,
if any, as shall theretofore have been designated by the Company by written
notice to the Holder), together with: (i) a completed and executed Notice of
Warrant
- ----------
*The closing price of the Company's Common Stock on The NASDAQ Stock Market on
the date of the grant was $12.25.
1
<PAGE>
Exercise in the form set forth in Appendix A hereto and made a part hereof and
(ii) (A) payment of the full Exercise Price for the amount of Exercise Shares
set forth in the Notice of Warrant Exercise, in lawful money of the United
States of America by certified check or cashier's check, made payable to the
order of the Company or (B) at the request of the Holder and to the extent
permitted by applicable law, the Company in its sole discretion may selectively
approve arrangements with a brokerage firm under which such brokerage firm, on
behalf of the Holder, shall pay the Company the Exercise Price, and the Company,
pursuant to an irrevocable notice from Holder (the form of which is satisfactory
to the Company), shall promptly deliver the Exercise Shares being purchased to
such firm. In the event of an Assignment (as hereinafter defined), the Company
shall deliver to the Assignee (as hereinafter defined) any Warrants surrendered
for exercise, together with the related Notice of Warrant exercise and the
Exercise Price and, to the extent payment is to be effected in accordance with
clause (ii) (B) above, payment shall be made to the Assignee against delivery by
the Assignee of the Exercise Shares.
In the event that this Warrant shall be duly exercised in part prior to
the Termination Date, the Company shall issue a new Warrant or Warrants of like
tenor evidencing the rights of the Holder thereof to purchase the balance of the
Exercise Shares purchasable under the Warrant so surrendered that shall not have
been purchased.
No adjustments shall be made for any cash dividends on Exercise Shares
issuable upon exercise of the Warrant. The Company shall cancel Warrant
Certificates surrendered upon exercise of Warrants.
(b) Vesting Contingency.
(1) The Company and Holder specifically acknowledge and agree (i)
that this Warrant is being entered into to enhance the long term relationship
between Holder and Company with respect to the sale/purchase of
telecommunications services under the company's own long distance network known
as "One Better Net" and (ii) that there is no assurance to maintain existing
business with the Company or maintain if achieved the levels of monthly billings
outlined in this Warrant.
(2) Notwithstanding anything to the contrary contained herein,
except as provided in the immediately following subparagraph and except to the
extent expressly waived in writing by the Company, the Holder's right, title and
interest in and to this Warrant shall only vest, and the Company's obligation to
issue the Exercise Shares shall only remain in effect provided that at the time
of exercise the Holder is in general good standing with the Company, which shall
be defined as being in compliance with its contract terms with the Company, and
to the extent that the Company determines that Holder is not in compliance with
such contract terms or is not current in all payments for billings from the
Company, the Company shall give Holder written notice of such noncompliance.
2
<PAGE>
(3)(A) Notwithstanding the vesting contingencies of subparagraph
1(b)(2) above, in the event that any person, other than an affiliate of the
Company, commences a tender offer to purchase all of the outstanding shares of
equity securities of the Company, this Warrant shall become exercisable in full
upon the commencement of such tender offer.
(B) The Company acknowledges as of the Date of Grant, that Holder is
in general good standing with the Company, and its subsidiaries.
(c) Issuance of Exercise Shares; Delivery of Warrant Certificate. The
Company or the Assignee, as applicable, shall, within ten (10) business days or
as soon thereafter as is practicable of the exercise of this Warrant, issue in
the name of and cause to be delivered, or in the case of an Assignment shall
deliver (together with a duly executed stock power), to the Holder (or such
other person or persons, if any, as specifically permitted under the terms
hereof and as the Holder shall have designated in the Notice of Warrant
Exercise) one or more certificates representing the Exercise Shares to which the
Holder (or such other person or persons) shall be entitled upon such exercise
under the terms hereof. Such certificate or certificates shall be deemed to have
been issued and the Holder (or such other person or persons so permitted and
designated) shall be deemed to have become the record holder of the Exercise
Shares as of the date of the due exercise of this Warrant.
(d) Exercise Shares Fully Paid and Non-assessable. The Company agrees and
covenants for itself and on behalf of any Assignee that all Exercise Shares
issuable or deliverable upon the due exercise of the Warrant represented by this
Warrant Certificate will, upon issuance in accordance with the terms hereof, be
duly authorized, validly issued, fully paid and non-assessable and free and
clear of all taxes (other than those taxes which, pursuant to Paragraph 2
hereof, the Company shall not be obligated to pay) or liens, charges, and
security interests created by the Company with respect to the issuance thereof.
(e) Reservation of Exercise Shares. In connection with or as soon as
practicable after any action which would cause an adjustment pursuant to
Paragraph 8 hereof increasing the number of shares of capital stock constituting
the Exercise Shares, the Company will take as soon as practicable after such
action any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company have remaining, after such adjustment, a
number of shares of such capital stock unissued and unreserved for other
purposes sufficient to permit the exercise of all the then outstanding Warrants
of like tenor immediately after such adjustment; the Company will also from time
to time take actin to increase the authorized amount of its capital stock
constituting the Exercise Shares if at any time the number of shares of capital
stock authorized but remaining unissued and unreserved for other purposes shall
be insufficient to permit the exercise of the Warrants then outstanding. The
Company shall be required as soon as practicable to reserve and keep available,
out of the aggregate of its authorized but unissued shares of capital stock, for
the purpose of enabling it to satisfy any obligation to issue Exercise Shares
upon exercise of Warrants, through the Termination Date, the number of Exercise
Shares deliverable upon the full exercise of this Warrant and all other Warrants
of like tenor then outstanding.
3
<PAGE>
At the time of or before taking any action which would cause an adjustment
pursuant to Paragraph 8 hereof, reducing the Exercise Price below then par value
(if any) of the Exercise Shares issuable upon exercise of the Warrants, the
Company will take any corporate action which may, in the opinion of its counsel,
be necessary in order to assure that the par value per share of the Exercise
Shares is at all times equal to or less than the Exercise Price per share and so
that the Company may validly and legally issue fully paid and non-assessable
Exercise Shares at the Exercise Price, as so adjusted; the Company will also
from time to time take such action if at any time the Exercise Price is below
the then par value of the Exercise Shares.
(f) Fractional Shares. Neither, the Company nor any Assignee shall be
required to the issue fractional shares of capital stock upon the exercise of
this Warrant or to deliver Warrant Certificates which evidence fractional shares
of capital stock. In the event that any fraction of an Exercise Share would,
except for the provisions of this Subparagraph (f), be issuable upon the
exercise of this Warrant, the Company or the Assignee, as the case may be, shall
pay to the Holder exercising the Warrant an amount in cash equal to such
fraction multiplied by the "Current Market Value" of the Exercise Share. For
purposes of this Subparagraph (f), the "Current Market Value" shall be
determined as follows:
(i) if the Exercise Shares are traded in the over-the-counter market
and not on any national securities exchange and not in the NASDAQ Reporting
System, the average of the mean between the last bid and asked prices per share,
as reported by the National Quotation Bureau, Inc., or an equivalent generally
accepted reporting service, for the last business day prior to the date on which
this Warrant is exercised, or if not so reported, the average of the closing bid
and asked prices for an Exercise Share as furnished to the Company by any member
of the National Association of Securities Dealers, Inc., selected by the Company
for that purpose.
(ii) if the Exercise Shares are listed or traded on a national
securities exchange or in the NASDAQ Reporting System, the closing price on the
principal national securities exchange on which they are so listed or traded or
in the National Market, as the case may be, on the last business day prior to
the date of the exercise of this Warrant. The closing price referred to in this
clause (ii) shall be the last reported sales price, or, in case no such reported
sale takes place on such day, the average of the reported closing bid and asked
prices, in either case on the national securities exchange on which the Exercise
shares are then listed or in the NASDAQ Reporting System; or
(iii) if no such closing price or closing bid and asked prices are
available, as determined in any reasonable manner as may be prescribed by the
Board of Directors of the Company.
2. Payment of Taxes. The Company will pay all documentary stamp taxes, if any,
attributable to the initial issuance of Exercise Shares upon the exercise of
this Warrant; provided, however, that the Company shall not be required to pay
any tax or taxes which
4
<PAGE>
may be payable in respect of any transfer involved in the issue of any Warrant
Certificates or any certificates for Exercise Shares in a name other than that
of the Holder of a Warrant Certificate surrendered upon the exercise of a
Warrant, and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
3. Mutilated or Missing Warrant Certificates. In case any Warrant Certificate
shall be mutilated, lost, stolen or destroyed, the Company shall issue, in
exchange and substitution for and upon cancellation of the mutilated Warrant
Certificate, or in lieu of an in substitution for the Warrant Certificate lost,
stolen or destroyed, a new Warrant Certificate or Warrant Certificates of like
tenor and in the same aggregate denomination, but only (i) in the case of loss,
theft or destruction, upon receipt of evidence satisfactory to the Company of
such loss, theft or destruction of such Warrant Certificate and indemnity or
bond, if requested, also satisfactory to them and (ii) in the case of
mutilation, upon surrender of the mutilated Warrant. Applicants for such
substitute Warrant Certificates shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company or its counsel
may prescribe.
4. Rights of Holder. The Holder shall not, by virtue of anything contained in
this Warrant Certificate or otherwise, be entitled to any right whatsoever,
either in law or equity, of a stockholder of the Company, including without
limitation, the right to receive dividends or to vote or to consent or to
receive notice as a shareholder in respect of the meetings of shareholders or
the election of directors of the Company or any other matter.
5. Release. Holder and any assignee of Holder, on behalf of itself, its past and
present subsidiaries, successors, assigns and its and their officers, directors,
employees, agents, creditors, trustees, and successors (collectively "Holder
Releasors"), does hereby release, acquit and forever discharge Company, Assignee
or any assignor of this Warrant and the Company's past and present subsidiaries,
affiliates, stockholders, successors, assigns, customers, investment bankers,
agents and its and their officers, directors, employees, agents, attorneys, and
their estates, assigns and successors (collectively, "Company Releasees"), from
any and all claims, actions, causes of action, suits, demands, rights, damages,
costs, loss of service, service, expenses, or compensation of any sort
whatsoever, known or unknown, foreseen or unforeseen, which Holder Releasors
ever had, now have or hereafter can, shall or may have against Company Releases,
by reason of any matter, cause, event, action, or inaction or thing from
whatsoever from the beginning of time to the date of this Warrant.
6. [Intentionally omitted].
7. Registration of Transfers and Exchanges. The Warrant shall be transferable,
subject to the provisions of this Paragraph and Paragraph 9 hereof, only upon
the books of the Company if any, to be maintained by it for that purpose, upon
surrender of the Warrant
5
<PAGE>
Certificate to the Company at its principal office accompanied (if so required
by it) by a written instrument or instruments of transfer in form satisfactory
to the Company and duly executed by the Holder thereof or by the duly appointed
legal representative thereof or by a duly authorized attorney and upon payment
of any necessary transfer tax or other governmental charge imposed upon such
transfer. In all cases of transfer by a power of attorney, the original power of
attorney, duly approved, or a power of official copy thereof, duly certified,
shall be deposited and remain with the Company. In case of transfer by
executors, administrators, guardians or other legal representatives, duly
authenticated evidence of their authority shall be produced, and may be required
to be deposited and remain with the Company in its discretion. Any registration
of transfer of the Warrant is subject to transferee agreeing to and accepting
the terms of this Warrant Agreement and upon such acceptance, a new Warrant
Certificate shall be issued to the transferee named in such instrument of
transfer, and the surrendered Warrant Certificate shall be canceled by the
Company.
Any Warrant Certificate may be exchanged, at the option of the Holder
thereof and without change, when surrendered to the Company at its principal
office, or at the office of its transfer agent, if any, for another Warrant
Certificate or other Warrant Certificates of like tenor and representing in the
aggregate the right to purchase from the Company a like number and kind of
Exercise Shares as the Warrant Certificate surrendered for exchange or transfer,
and the Warrant Certificate so surrendered shall be canceled by the Company or
transfer agent, as the case may be.
8. Adjustment of Exercise Shares and Exercise Price. The Exercise Price and the
number and kind of Exercise Shares purchasable upon the exercise of this Warrant
shall be subject to adjustment from time to time upon the happening of certain
events as hereinafter provided. The Exercise Price in effect at any time and the
number and kind of securities purchasable upon exercise of each Warrant shall be
subject to adjustment as follows:
(a) In the case the Company shall (i) pay a dividend or make a
distribution on its shares of Common Stock in shares of Common Stock, (ii)
subdivide or classify its outstanding Common Stock into a greater number of
shares, or (iii) combine or reclassify its outstanding Common Stock into a
smaller number of shares, the Exercise Price in effect at the time of the record
date for such dividend or distribution or of the effective date of such
subdivision, combination or reclassification shall be proportionally adjusted so
that the Holder of this Warrant exercised after such date shall be entitled to
receive the aggregate number and kind of shares which, if this Warrant had been
exercised by such Holder immediately prior to such date, he would have owned
upon such exercise and been entitled to receive upon such dividend, subdivision,
combination or reclassification. For example, if the Company declares a 2 for 1
stock dividend or stock split and the Exercise Price immediately prior to such
event was $5.00 per share, the adjusted Exercise Price immediately after such
event would be $2.50 per share. Such adjustment shall be made successively
whenever any event listed above shall occur.
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(b) In case the Company shall hereafter issue rights or warrants to all
Holders of its Common Stock entitling them to subscribe for or purchase shares
of Common Stock (or securities convertible into Common Stock) at a price (or
having a conversion price per share) less than the "Current Market Price" of the
Common Stock (as defined in Subparagraph (d) of this Paragraph below) on the
record date mentioned below, the Exercise Price shall be adjusted so that the
same shall equal the price determined by multiplying the Exercise Price in
effect immediately prior to the date of such issuance by a fraction, the
numerator of which shall be the sum of the number of shares of Common Stock
outstanding on the record date mentioned below and the number of additional
shares of Common Stock which the aggregate offering price of the total number of
shares of Common Stock so offered (or the aggregate conversion price of the
convertible securities so offered) would purchase at the "Current Market Price"
per share of the Common Stock, and the denominator of which shall be the sum of
the number of shares of Common Stock outstanding on such record date and the
number of additional shares of Common Stock offered for subscription or purchase
(or into which the convertible securities so offered are convertible). Such
adjustment shall be made successively whenever such rights or warrants are
issued and shall become effective immediately after the record date for the
determination of shareholders entitled to receive such rights or warrants; and
to the extent that shares of Common Stock are not delivered (or securities
convertible into Common Stock are not delivered) after the expiration of such
rights or warrants the Exercise Price shall be readjusted to the Exercise Price
which would then be in effect had the adjustments made upon the issuance of such
rights or warrants been made upon the basis of delivery of only the number of
shares of Common Stock (or securities convertible into Common Stock) actually
delivered.
(c) Whenever the Exercise Price payable upon exercise of each Warrant is
adjusted pursuant to Subparagraphs (a) and (b) above, the number of Exercise
Shares purchasable upon exercise of this Warrant shall simultaneously be
adjusted by multiplying the number of Exercise Shares initially issuable upon
exercise of this Warrant by the Exercise Price in effect on the date hereof and
dividing the product so obtained by the Exercise Price, as adjusted.
(d) For the purpose of any computation under Subparagraph (b) above, the
"Current Market Price" per share of Common Stock at any date shall be deemed to
be the average of the daily closing prices for 30 consecutive business days
before such date. The closing price for each day shall be the last sale price
regular way or, in case no such reported sale takes place on such day, the
average of the last reported bid and lowest reported asked prices as reported by
NASDAQ, or other similar organization if NASDAQ is no longer reporting such
information, or if not so available, the fair market price as determined by the
Board of Directors.
(e) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least ten cents ($0.10)
in such price; provided, however, that any adjustments which by reason of this
Subparagraph (e) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment
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required to be made hereunder. All calculations under this Paragraph 8 shall be
made to the nearest cent or to the nearest one-hundredth of a share, as the case
may be. Anything in this Paragraph 8 to the contrary notwithstanding, the
Company shall be entitled, but shall not be required, to make such changes in
the Exercise Price, in addition to those required by this Paragraph 8, as it, in
its sole discretion, shall determine to be advisable in order that any dividend
or distribution in shares of Common Stock, subdivision, reclassification or
combination of Common Stock, issuance of Warrants to Purchase Common Stock or
distribution of evidences of indebtedness or other assets (excluding cash
dividends) referred to hereinabove in this Paragraph 8 hereafter made by the
Company to the Holders of its Common Stock shall not result in any tax to the
Holders of its Common Stock or securities convertible into Common Stock.
(f) Whenever the Exercise Price is adjusted, as herein provided, the
Company shall promptly cause a notice setting forth the adjusted Exercise Price
and adjusted number of Exercise Shares issuable upon exercise of each Warrant to
be mailed to the Holders, at their last addresses appearing in the books of the
Company, and shall cause a certified copy thereof to be mailed to its transfer
agent, if any. The Company may retain a firm of independent certified public
accountants selected by the Board of Directors (who may be the regular
accountants employed by the Company) to make any computation required by this
Paragraph 8, and a certificate signed by such firm shall be conclusive evidence
of the correctness of such adjustment.
(g) In the event that at any time, as a result of an adjustment made
pursuant to Subparagraph 8(a) above, the Holder of this Warrant thereafter shall
become entitled to receive any Exercise Shares of the Company, other than Common
Stock, thereafter the number of such other shares so receivable upon exercise of
this Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Subparagraphs (a) to (e) of Paragraph 8, inclusive
above.
(h) Irrespective of any adjustments in the Exercise Price or the number or
kind of Exercise Shares purchasable upon exercise of this Warrant, Warrant
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the similar Warrants initially
issuable pursuant to this Agreement.
(i) Whenever the Exercise Price shall be adjusted as required by the
provisions of the foregoing Section, the Company shall forthwith file in the
custody of its Secretary or an Assistant Secretary at its principal office and
with its stock transfer agent, if any, an officer's certificate showing the
adjusted Exercise Price determined as herein provided, setting forth in
reasonable detail the facts requiring such adjustment, including a statement of
the number of additional shares of Common Stock, if any, and such other facts as
shall be necessary to show the reason for and the manner of computing such
adjustment. Each such officer's certificate shall be made available at all
reasonable times for inspection by the Holder and the
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Company shall, forthwith after each such adjustment, mail a copy by certified
mail of such certificate to the Holder.
9. Restrictions on Transferability; Restrictive Legend. This Warrant may not be
transferred by the Holder without the prior written consent of the Company
except by means of intestacy or testamentary bequest. Any transfer of this
Warrant in violation of this Paragraph 9 is null and void as of the time of such
transfer. In addition, neither this Warrant nor the Exercise Shares shall be
transferable except in accordance with the provisions of this paragraph.
(a) Restrictions on Transfer; Indemnification. Neither this Warrant nor
any Exercise Share may be offered for sale or sold, or otherwise transferred or
sold in any transaction which would constitute a sale thereof within the meaning
of the Securities Act of 1933, as amended (the "1933 Act"), unless (i) such
security has been registered for sale under the 1933 Act and registered or
qualified under applicable state securities laws relating to the offer and sale
of securities, or (ii) exemptions from the registration requirements of the 1933
Act and the registration or qualification requirements of all such state
securities laws are available and the Company shall have received an opinion of
counsel satisfactory to the Company that the proposed sale or other disposition
of such securities may be effected without registration under the 1933 Act and
would not result in any violation of any applicable state securities laws
relating to the registration or qualification of securities for sale, such
counsel and such opinion to be satisfactory to the Company.
The Holder agrees to indemnify and hold harmless the Company, or Assignee
against any loss, damage, claim or liability arising from the disposition of
this Warrant or any Exercise Share held by such Holder or any interest therein
in violation of the provisions of this Paragraph 9.
(b) Restrictive Legends. Unless and until otherwise permitted by this
Paragraph 9 this Warrant Certificate, each Warrant Certificate issued to the
Holder or to any transferee or assignee of this Warrant Certificate, and each
stock certificate representing Exercise Shares issued upon exercise of this
Warrant or to any transferee of the person to whom the Exercise Shares were
issued, shall bear a legend setting forth the requirements of Subparagraph (a)
of this Paragraph 9, together with such other legend or legends as may otherwise
be deemed necessary or appropriate by counsel to the Company.
(c) Notice of Proposed Transfers. In addition to the provisions of Section
6 hereof, prior to any transfer, offer to transfer or attempted transfer of this
Warrant or any Exercise Share, the Holder of such security shall give written
notice to the Company of such Holder's intention to effect such transfer. Each
such notice shall (x) describe the manner and circumstances of the proposed
transfer in sufficient detail, and shall contain an undertaking by the person
giving such notice to furnish such other information as may be required, to
enable counsel to render the opinions referred to below, and shall (y) designate
the counsel for the person giving such notice, such counsel to be satisfactory
to the Company. The
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person giving such notice shall submit a copy thereof to the counsel designated
in such notice and the Company shall submit a copy thereof to its counsel, and
the following provisions shall apply:
(i) If, in the opinion of each such counsel, the proposed transfer
of this Warrant or Exercise Shares, as appropriate, may be effected without
registration of such security under the 1933 Act, the Company shall, as promptly
as practicable, so notify the Holder of such security and such Holder shall
thereupon be entitled to transfer such security in accordance with the terms of
the notice delivered by such Holder to the Company. Each certificate evidencing
the securities thus to be transferred (and each certificate evidencing any
untransferred balance of the securities evidenced by such certificate) shall
bear the restrictive legends referred to in Subparagraph (b) above, unless in
the opinion of such counsel such legend is not required in order to insure
compliance with the 1933 Act.
(ii) If, in the opinion of either of such counsel, the proposed
transfer of securities may not be effected without registration under the 1933
Act, the Company shall, as promptly as practicable, so notify the Holder
thereof. However, the Company shall have no obligation to register such
securities under the 1933 Act, except as otherwise provided herein or in the
Agreement of Sale.
The Holder of the securities giving the notice under this Subparagraph (c)
shall not be entitled to transfer any of the securities until receipt of notice
from the Company under Paragraph (i) of this Subparagraph (c) or registration of
such securities under the 1933 Act has become effective.
(d) Removal of Legend. The Company shall, at the request of any registered
Holder of a Warrant or Exercise Share, exchange the certificate representing
such security for a certificate representing the same security not bearing the
restrictive legend required by Subparagraph (b) if, in the opinion of counsel to
the Company, such restrictive legend is no longer necessary.
10. Registration Rights. The Holder hereof shall be entitled to the registration
rights set forth in a certain Registration Rights Agreement of even date
herewith by and between the Company and such Holder.
11. Notices. All notices or other communications under this Warrant Certificate
shall be in writing and shall be deemed to have been given if delivered by hand
or mailed by certified mail, postage prepaid, return receipt request, addressed
as follows:
If to the Company:
Tel-Save Holdings, Inc.
22 Village Square
New Hope, PA 18939
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with a copy to:
Aloysius T. Lawn, IV, Esquire
General Counsel and Secretary
22 Village Square
New Hope, PA 18939
and to the Holder:
at the address of the Holder appearing on the books of the company
or the Company's transfer agent, if any.
Either of the Company or the Holder may from time to time change the
address to which notices to it are to be mailed hereunder by notice in
accordance with the provisions of this Paragraph 11.
12. Supplements and Amendments. The Company may from time to time supplement or
amend this Warrant Certificate without the approval of any Holders of Warrants
in order to cure any ambiguity or to correct or supplement any provision
contained herein which may be defective or inconsistent with any other
provision, or to make any other provisions in regard to matters or questions
herein arising hereunder which the Company may deem necessary or desirable and
which shall not materially adversely affect the interests of the Holder.
13. Successors and Assigns. This Warrant shall inure to the benefit of and be
binding on the respective successors, assigns and legal representatives of the
Holder and the Company. The Company may assign (the "Assignment") its rights to
deliver the Exercise Shares pursuant to this Warrant to one or more stockholders
of the Company ("Assignee") who would agree to sell the Exercise Shares to the
Holder upon exercise hereof and to otherwise assume with respect to the delivery
of the Exercise Shares only, all obligations of the Company, with respect to the
delivery of the Exercise Shares only, under this Warrant. In addition, the
Company may assign to another party its right, under the Right of First Refusal.
14. Severability. If for any reason any provision, paragraph or terms of this
Warrant Certificate is held to be invalid or unenforceable, all other valid
provisions herein shall remain in full force and effect and all terms,
provisions and paragraphs of this Warrant shall be deemed to be severable.
15. Governing Law. This Warrant shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of said State.
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16. Headings. Paragraph and subparagraph headings, used herein are included
herein for convenience of reference only shall not affect the construction of
this Warrant Certificate nor constitute a part of this Warrant Certificate for
any other purpose.
17. Consent and Acknowledgment of Holder. The terms and conditions of this
Warrant are agreed and consented to by the Holder, as evidenced by Holder's
signature on the line provided below. This Warrant shall bind, benefit and be
enforceable by or against Holder and its heirs, legal and personal
representatives, estate, beneficiaries and assigns, and the Company, Assignee
and its successors and assigns.
IN WITNESS WHEREOF, the Company has caused these presents to be duly executed as
of the day and year written above.
TEL-SAVE HOLDINGS, INC.
By: /s/ Daniel Borislow
-------------------------------
Chief Executive Officer
The terms of this Warrant are
agreed to and accepted by:
HOLDER
/s/ Avrohom Oustatcher, Pres.
- -------------------------------
Signature:
Avrohom Oustatcher
- -------------------------------
Print Name
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APPENDIX A
NOTICE OF WARRANT EXERCISE
Pursuant to a Warrant ("Warrant") by and between the undersigned and
Tel-Save Holdings, Inc., a Delaware corporation (the "Company"), dated as of
January __, 1996, and subject to the vesting periods set forth therein, the
undersigned hereby irrevocably elects to exercise its warrant to the extent of
purchasing _____ shares of Common Stock (the "Warrant Shares"), of the Company
as provided for therein.
The undersigned hereby represents and agrees that the Warrant Shares
purchased pursuant hereto are being purchased for investment and not with a view
to the distribution or resale thereof, and that the undersigned understands that
said Warrant Shares have not been registered under the Securities Act of 1933,
as amended.
The undersigned, on behalf of itself, its past and present subsidiaries,
successors, assigns and any assignee of Holder and its and their officers,
directors, employees, creditors, trustees, agents and successors (collectively
"Holder Releasors"), does hereby release, acquit and forever discharge Company,
"Assignee" (as defined in the Warrant) and any assignor of the Warrant and the
Company's past and present subsidiaries, affiliates, stockholders, successors,
assigns, investment bankers, agents, and its and their officers, directors,
employees, customers, agents, attorneys, and their estates, assigns and
successors (collectively "Company Releasees"), from any and all claims, actions,
causes of action, suits, demands, rights, damages, costs, loss of service,
service, expenses, or compensation of any sort whatsoever, known or unknown,
foreseen or unforeseen, which Holder Releasors ever had, now have or hereafter
can, shall or may have against Company Releasees, by reason of any matter,
cause, event, action, or inaction or thing from whatsoever from the beginning of
time to the date of this Notice.
Payment of the full Exercise Price (as defined in the Warrant) of the
Warrant Shares is enclosed herewith, in the form of a check made payable to the
Company or Assignee, as the case may be.
The undersigned requests that a certificate for the Warrant Shares be
issued in the name of:
________________________________________________
________________________________________________
________________________________________________
(Please print name, address and social security numbers)
Dated: ________________________________________________
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Address: ________________________________________________
________________________________________________
________________________________________________
Signature: ________________________________________________
14
Exhibit 4.9
This Warrant and the securities to be issued upon exercise hereof have been
acquired for investment purposes and not with a view to or for resale in
connection with the distribution hereof. This Warrant and the securities to be
issued upon exercise hereof have not been registered under the Securities Act of
1933, as amended (the "Securities Act"), or the securities laws of any state and
may not be offered, sold, transferred, pledged, hypothecated or otherwise
disposed of except pursuant to (i) an effective registration statement under the
Securities Act and any applicable state securities laws, (ii) to the extent
applicable, Rule 144 under the Securities Act (or any similar rule under the
Securities Act relating to the disposition of securities), (iii) the express
provisions of Section 2.4 of this Warrant, or (iv) an opinion of counsel if such
opinion shall be reasonably satisfactory to counsel to the issuer, that an
exemption from registration under the Securities Act and applicable state law is
available.
Dated: September 25, 1995
No: A-1
WARRANT
To Purchase up to an aggregate of 300,000 shares of Common Stock, $.01 par
value, of
TEL-SAVE HOLDINGS, INC.
Expiring September 20, 2000
THIS IS TO CERTIFY THAT, for value received, Gerard Klauer
Mattison & Co., LLC, a New York limited liability company or its registered
assigns (hereinafter referred to as the "Holder" or the "Underwriter") is
entitled to purchase from Tel-Save Holdings, Inc., a Delaware corporation (the
"Company"), at any time commencing September 20, 1996 (12 months from the
Effective Date, as such term is defined in the Underwriting Agreement) until
5:30 P.M., New York time, on September 20, 2000 (60 months from the Effective
Date) (the "Exercise Term"), at the place where the Warrant Agency (as
hereinafter defined) is located, at the Exercise Price (as hereinafter defined),
up to an aggregate of 300,000 shares of the Company's common stock, $.O1 par
value (the "Common Stock") shown above, subject to adjustment and upon the terms
and conditions as hereinafter provided, and is also entitled to exercise the
other appurtenant rights, powers and privileges hereinafter described.
This Warrant is being issued in connection with the underwriting
agreement (the "Underwriting Agreement") dated as of September 20, 1995 between
the Underwriter
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and the Company, to underwrite the Company's proposed public offering of
3,000,000 shares of Common Stock and up to 450,000 shares of common stock, at
the option of the underwriters named in the Underwriting Agreement to cover
over-allotments, at a public offering price as set forth in the prospectus
relating thereto (the "Public Offering").
Certain terms used in this Warrant are defined in Article VI.
ARTICLE I
EXERCISE OF WARRANTS
1.1. Method of Exercise. To exercise this Warrant in whole or in
part, the Holder shall deliver to the Company, at the Warrant Agency, (a) this
Warrant, (b) a written notice, in substantially the form of the Subscription
Notice attached hereto, of such Holder's election to exercise this Warrant,
which notice shall specify the number of shares of Common Stock to be purchased
(in lots of not less than 100 shares), the denominations of the share
certificate or certificates desired and the name or names in which such
certificates are to be registered and (c) payment of the Exercise Price with
respect to such shares. Such payment may be made, at the option of the Holder,
by cash, money order, certified or bank cashier's check or wire transfer.
The Company shall, as promptly as practicable and in any event
within two Business Days thereafter, execute and deliver or cause to be executed
and delivered, in accordance with such notice, a certificate or certificates
representing the aggregate number of shares of Common Stock specified in said
notice. The share certificate or certificates so delivered shall be in such
denominations as may be specified in such notice or, if such notice shall not
specify denominations, in denominations of 100 shares each, and shall be issued
in the name of the Holder or such other name or names as shall be designated in
such notice. Such certificate or certificates shall be deemed to have been
issued, and the Holder or any other person so designated to be named therein
shall be deemed for all purposes to have become holders of record of such
shares, as of the date the afore-mentioned notice is received by the Company. If
this Warrant shall have been exercised only in part, the Company shall, at the
time of delivery of the certificate or certificates, deliver to the Holder a new
Warrant evidencing the rights to purchase the remaining shares of Common Stock
called for by this Warrant, which new Warrant shall in all other respects be
identical with this Warrant, or, at the request of the Holder, appropriate
notation may be made on this Warrant which shall then be returned to the Holder.
The Company shall pay all expenses, taxes and other charges payable in
connection with the preparation, issuance and delivery of share certificates and
new Warrants contemplated by Section 2.7 below, except that, if share
certificates or new Warrants shall be registered in a name or names other than
the name of the Holder, funds sufficient to pay all transfer taxes payable as a
result of such transfer shall be paid by the Holder at the time of delivering
the aforementioned notice of exercise or promptly upon receipt of a Written
request of the Company for payment.
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1.2. Shares To Be Fully Paid and Nonassessable; Reservation and
Listing. All shares of Common Stock issued upon the exercise of this Warrant
shall be validly issued, fully paid and nonassessable and the Company shall at
all times reserve and keep available out of its authorized shares of Common
Stock, solely for the purpose of issuance upon the exercise of this Warrant,
such number of shares of Common Stock as shall be exercisable hereof. If the
Common Stock of any class is then listed on any national securities exchange (as
such term is used in the Exchange Act (as defined herein)) or quoted on Nasdaq,
the Company shall cause the shares of Common Stock issuable upon exercise of
this Warrant to be duly listed or quoted thereon, as the case may be.
1.3. No Fractional Shares To Be Issued. The Company shall not be
required to issue fractions of shares of Common Stock upon exercise of this
Warrant. If any fraction of a share would, but for this Section, be issuable
upon any exercise of this Warrant, in lieu of such fractional share the Company
shall pay to the Holder or Holders, as the case may be, in cash, an amount equal
to the same fraction of the current market price per share of outstanding Common
Stock on the Business Day immediately prior to the date of such exercise.
1.4. Share Legend. Each certificate for shares of Common Stock
issued upon exercise of this Warrant, unless at the time of exercise such shares
are registered under the Securities Act, shall bear the following legend:
This security has not been registered under the Securities Act of
1933, as amended (the "Securities Act"), or the securities laws
of any state and may not be offered, sold, transferred, pledged,
hypothecated or otherwise disposed of except pursuant to (i) an
effective registration statement under the Securities Act and any
applicable state securities laws, (ii) to the extent applicable,
Rule 144 under the Securities Act (or any similar rule under the
Securities Act relating to the disposition of securities), or
(iii) an opinion of counsel, if such opinion shall be reasonably
satisfactory to counsel to the issuer, that an exemption from
registration under the Securities Act and applicable state law is
available.
Any certificate issued at any time in exchange or substitution
for any certificate bearing such legend (except a new certificate issued upon
completion of a public distribution pursuant to a registration statement under
the Securities Act) shall also bear such legend unless, in the opinion of
counsel selected by the holder of such certificate and reasonably acceptable to
the Company, the securities represented thereby need no longer be subject to
restrictions on resale under the Securities Act.
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ARTICLE II
WARRANT AGENCY; TRANSFER, EXCHANGE AND
REPLACEMENT OF WARRANTS
2.1. Warrant Agency. Until such time, if any, as an independent
agency shall be appointed by the Company to perform services with respect to the
Warrants described herein (the "Warrant Agency"), the Company shall perform the
obligations of the Warrant Agency provided herein at its principal office
address or such other address in the United States as the Company shall specify
by prior written notice to all Holders.
2.2. Ownership of Warrant. The Company may deem and treat the
person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by any person
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for registration of transfer
as provided in this Article II.
2.3. Transfer of Warrant. The Company agrees to maintain at the
Warrant Agency books for the registration of transfers of Warrants, and transfer
of this Warrant and all rights hereunder shall be registered, in whole or in
part, on such books, upon surrender of this Warrant at the Warrant Agency,
together with a written assignment of this Warrant duly executed by the Holder
wishing to transfer this Warrant or his duly authorized agent or attorney, and
funds sufficient to pay any transfer taxes payable upon such transfer. Upon
surrender the Company shall execute and deliver a new Warrant or Warrants in the
name of the assignee or assignees and in the denominations specified in the end
of assignment, and this Warrant shall promptly be canceled. Notwithstanding the
foregoing, a Warrant may be exercised by a new holder without having a new
Warrant issued.
2.4. Restrictions on Transfer. The Holder of a Warrant, by its
acceptance thereof, covenants and agrees that the Warrants are being acquired as
an investment and not with a view to the distribution thereof, and that the
Warrants may not be transferred, sold, assigned, hypothecated or otherwise
disposed of, in whole or in part, except as provided in the legend on the first
page hereof or to employees, officers, partners or other equity holders of the
Underwriter or to any of the several Underwriters, as contemplated by the
Underwriting Agreement, or members of the selling group and/or their respective
employees, officers, partners or other equity holders.
2.5. Division or Combination of Warrants. This Warrant may be
divided (in lots exercisable for not less than 100 shares of Common Stock) or
combined with other Warrants upon surrender hereof and of any Warrant or
Warrants with which this Warrant is to be combined at the Warrant Agency,
together with a written notice specify the names and denominations in which the
new Warrant or Warrants are to be issued, signed by the holders hereof and
thereof or their respective duly authorized agents or attorneys. Subject to
compliance with Section 2.3 as to any transfer, which may be
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<PAGE>
involved in the division or combination, the Company shall execute and deliver a
new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or
combined in accordance with such notice.
2.6. Loss, Theft, Destruction of Warrant Certificates. Upon
receipt of evidence satisfactory to the Company of the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Company,
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Company will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same aggregate number of shares of Common Stock.
2.7. Expenses of Delivery of Warrants. The Company shall pay all
expenses, taxes (other than transfer taxes) and other charges payable in
connection with the preparation, issuance and delivery of Warrants and the
shares of Common Stock underlying the Warrants hereunder.
ARTICLE III
CERTAIN AGREEMENTS OF THE COMPANY
3.1. Notice of Certain Events. In addition to the provisions of
Section 4.9 below, in case at any time the Company shall (a) declare any
dividend on its Common Stock, whether payable in cash, stock or other property,
(b) offer to all the holders of its Common Stock any additional shares of
capital stock of the Company, or any option, right or warrant to subscribe
therefor; or (c) declare a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or propose a sale of
all or substantially all of its property, assets and business as an entirety,
then the Company shall give written notice to each Holder of the date on which
the books of the Company shall close or a record shall be taken for such action.
Such notice shall also specify the date as of which the holders of Common Stock
of record shall participate in such action. Such written notice shall be given
at least 15 days prior to the relevant record date or the date fixed for
determining stockholders entitled to participate therein, as the case may be.
Notwithstanding the foregoing, in no event shall the failure by the Company to
provide notice pursuant to this Section 3.1 limit in any way the Company's
ability to effectuate any of the transactions referred to in (a), (b) or (c)
hereof.
3.2. Informational Requirements. The Company shall furnish the
Holder with copies of all reports, proxy statements and similar materials that
it furnishes to holders of its Common Stock. In addition, it shall furnish the
Holder copies of all reports filed by it with the Securities and Exchange
Commission (the "Commission").
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ARTICLE IV
ANTIDILUTION PROVISIONS
4.1. Adjustments Generally. The Exercise Price and the number of
shares of Common Stock (or other securities or property) issuable upon exercise
of this Warrant shall be subject to adjustment from time to time upon the
occurrence of certain events, as provided in this Article IV.
4.2. Common Stock Reorganizations and Distributions. If the
Company shall (i) subdivide its outstanding shares of Common Stock into a
greater number of shares or consolidate its outstanding shares of Common Stock
into a smaller number of shares (any such event being called a "Common Stock
Reorganization") or (ii) pay a dividend in shares of Common Stock or make a
distribution in shares of Common Stock on its outstanding shares of Common
Stock, other than pursuant to a Common Stock Reorganization (any such event
being herein called a "Common Stock Distribution"), then (A) the Exercise Price
shall be adjusted, effective immediately after the record date at which the
holders of Common Stock are determined for purposes of such Common Stock
Reorganization or Common Stock Distribution, to a price determined by
multiplying the Exercise Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding on such record date before giving effect to such Common Stock
Reorganization or Common Stock Distribution and the denominator of which shall
be the number of shares of Common Stock outstanding after giving effect to such
Common Stock Reorganization or Common Stock Distribution, and (B) the number of
shares of Common Stock subject to purchase upon exercise of this Warrant shall
be adjusted, effective at such time, to a number determined by multiplying the
number of shares of Common Stock subject to purchase immediately before such
Common Stock Reorganization or Common Stock Distribution by a fraction, the
numerator of which shall be the number of shares outstanding after giving effect
to such Common Stock Reorganization or Common Stock Distribution and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately before such Common Stock Reorganization or Common Stock
Distribution.
4.3. Special Dividends. If the Company shall issue or distribute
to any holders of Common Stock, evidences of indebtedness, any other securities
of the Company or any cash, property or other assets, and if such issuance or
distribution does not constitute (a) a cash dividend or distribution out of
surplus or net profits legally available therefor, (b) a Common Stock
Reorganization or (c) a Common Stock Distribution (any such nonexcluded event
being herein called a "Special Dividend"), then (i) the Exercise Price shall be
decreased, effective immediately after the record date at which the holders of
Common Stock are determined for purposes of such Special Dividend, to a price
determined by multiplying the Exercise Price then in effect by a fraction, the
numerator of which shall be the Fair Market Value per share of outstanding
Common Stock on such record date less the then Fair Market Value of the
evidences of indebtedness, securities or property or other assets issued or
distributed in such Special
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Dividend with respect to one share of Common Stock, and the denominator of which
shall be the Fair Market Value per share of Common Stock on such record date,
and (ii) the number of shares of Common Stock subject to purchase upon exercise
of this Warrant shall be increased to a number determined by multiplying the
number of shares of Common Stock subject to purchase immediately before such
Special Dividend by a fraction, the numerator of which shall be the Exercise
Price in effect immediately before such Special Dividend and the denominator of
which shall be the Exercise Price in effect immediately after such Special
Dividend.
4.4. Capital Reorganization. If there shall be: (i) any
consolidation or merger to which the Company is a party (other than a
consolidation or a merger in which the Company is a continuing corporation and
which does not result in any reclassification of, or change (other than a Common
Stock Reorganization or a change in par value) in, outstanding shares of Common
Stock) or (ii) any sale or conveyance of the property of the Company as an
entirety or substantially as an entirety (any such event being called a "Capital
Reorganization"), then, effective upon the effective date of such Capital
Reorganization, the Holder shall have the right to purchase, upon exercise of
this Warrant, the kind and amount of shares of stock and other securities and
property (including cash) which the Holder would have owned or have been
entitled to receive after such Capital Reorganization if this Warrant had been
exercised immediately prior to such Capital Reorganization. In such event, the
provisions set forth herein with respect to the rights and interest of the
Holder shall be appropriately adjusted so as to be applicable, as nearly as may
reasonably be, to any shares of stock or other securities or property thereafter
receivable upon the exercise of this Warrant. The above provisions of this
Section 4.5 shall apply to successive consolidations, mergers, sales and
conveyances.
4.5. Certain Other Events. If any event occurs as to which the
foregoing provisions of this Article IV are not strictly applicable or, if
strictly applicable, would not, in the good faith judgment of the Board of
Directors of the Company, fairly protect the purchase rights of the Warrants in
accordance with the essential intent and principles of such provisions or would
violate applicable law, then such Board shall make such adjustments in the
application of such provisions in accordance with such essential intent and
principles, as shall be reasonably necessary, in the good faith opinion of such
Board to protect such purchase rights as aforesaid.
4.6. Adjustment Rules. (a) Any adjustments pursuant to this
Article IV shall be made successively whenever an event referred to herein shall
occur.
(b) No adjustment shall be made pursuant to this Article IV in
respect of the issuance from time to time of Common Stock upon the exercise of
Warrants.
(c) If the Company shall set a record date to determine the
holders of Common Stock for purposes of a Common Stock Reorganization, Common
Stock Distribution, Special Dividend or Capital Reorganization and shall legally
abandon such
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action prior to effecting such action, then no adjustment shall be made pursuant
to this Article IV in respect of such action.
(d) No adjustment shall be made under this Article IV with
respect to the issuance or exercise of any employee or director stock options of
the Company pursuant to any plan adopted by the stockholders of the Company.
(e) The number shares of Common Stock issuable upon exercise of
this Warrant may be increased as provided herein.
4.7. Proceeding Prior to Any Action Requiring Adjustment. As a
condition precedent to the taking of any action which would require an
adjustment pursuant to this Article IV, the Company shall take any action which
may be necessary, including obtaining regulatory approvals or exemptions, in
order that the Company may thereafter validly and legally issue as fully paid
and nonassessable all shares of Common Stock which the holders of Warrants are
entitled to receive upon exercise thereof.
4.8. Notice of Adjustment. Not less than 15 business days prior
to the record date of any action which requires or might require an adjustment
or readjustment pursuant to this Article IV, the Company shall give notice to
the Holder of such event, describing such event in reasonable detail and
specifying the record date or effective date, as the case may be, and, if
determinable, the required adjustment and the computation thereof. If the
required adjustment is not determinable at the time of such notice, the Company
shall give notice to the Holder of such adjustment and computation promptly
after such adjustment becomes determinable.
ARTICLE V
REGISTRATION RIGHTS
5.1. Incidental Registration. If the Company at any time during
the Exercise Term and for a period of eighteen months thereafter proposes to
register any of its Common Stock, or securities convertible into Common Stock,
under the Securities Act for sale to the public, whether for its own account or
for the account of other securityholders or both (except with respect to
registration statements on Forms S-4, S-8 or such other for which is not
available for registering Common Stock for sale to the public), each such time
it will give written notice to the Holder of Registrable Securities of its
intention so to do. Upon the written request of the Holder of Registrable
Securities, received by the Company within 30 days after the giving of any such
notice by the Company, to register any of its Registrable Securities (which
request shall state the intended method of disposition thereof), the Company
will use its best efforts to cause the Registrable Securities as to which
registration shall have been so requested to be included in the securities to be
covered by the registration statement proposed to be filed by the Company, all
to the extent requisite to permit the sale or other disposition by the Holder
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(in accordance with its written request) of such Registrable Securities so
registered. Alternatively, the Company may include such Registrable Securities
in a separate registration statement to be filed concurrently with the
registration statement for the securities to be filed by the Company. In the
event that any registration pursuant to this Section 5.1 shall be, in whole or
in part, an underwritten public offering of Registrable Securities, the number
of Registrable Securities to be included in such an underwriting may be reduced
(pro rata among the requesting Holders, and any other persons who may have
incidental registration rights, based upon the number of securities owned by
such Holders which have incidental registration rights) if and to the extent
that the managing underwriter advises the Company in writing that in its opinion
such inclusion would materially adversely affect the marketing of the securities
to be sold by the Corporation therein.
5.2. Registration Procedures. If and whenever the Company is
required by the provisions of Section 5.1 to use its best efforts 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
(which shall be filed as soon as practical after receipt of requisite requests
from Holders of Registrable Securities for registration, but not more than 60
days) with respect to the Registrable Securities and use its best efforts to
cause such registration statement to become and remain effective for the period
of the distribution contemplated thereby (determined as hereinafter provided);
(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 keep such registration statement effective for
the period specified in paragraph (a) above and comply with the provisions of
the Securities Act with respect to the disposition of all Registrable Securities
covered by such registration statement in accordance with the Holders' intended
method of disposition set forth in such registration statement for such period;
(c) furnish to each seller of Registrable Securities and to each
underwriter such number of copies of the registration statement and the
prospectus included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the public sale or other
disposition of the Registrable Securities covered by such registration
statement;
(d) use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under such securities or blue
sky laws of such jurisdictions as each seller shall request, and do any and all
other acts and things which may be necessary under such securities or blue sky
laws to enable such seller to consummate the public sale or other disposition in
such jurisdictions of the securities to be sold by such seller, except that the
Company shall not for any such purpose be
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required to qualify to do business as a foreign corporation in any jurisdiction
wherein it is not qualified or to file any general consent to service of
process;
(e) use its best efforts to list the Registrable Securities
covered by such registration statement with any securities exchange or automated
quotation system on which the Registrable Securities of the Company is then
listed;
(f) immediately notify each seller of Registrable Securities and
each underwriter under such registration statement, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event of which the Company has knowledge 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 in light of the circumstances then existing;
(g) enter into such agreements (including an underwriting
agreement, if applicable) and take all such other actions in connection
therewith in order to expedite and facilitate the disposition of the Registrable
Securities to be registered;
(h) whether or not the offering is underwritten and at the
request of Any seller of Registrable Securities, furnish: (1) such
representations and warranties to such seller and the underwriters, if any, as
are customary in primary underwritten offerings, (ii) an opinion of counsel
representing the Company for the purposes of such registration, addressed to the
underwriters, if any, and to such seller of Registrable Securities in form and
substance as is customarily given to underwriters in an underwritten public
offering and to such other effects as reasonably may be requested by counsel for
the underwriters or by such seller of Registrable Securities or its counsel and
(iii) a letter dated such date from the independent public accountants retained
by the Company, addressed to the underwriters, if any, and to such seller of
Registrable Securities, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering, and such letter shall additionally cover such other financial
matters (including information as to the period ending no more than five
business days prior to the date of such letter) with respect to such
registration as such underwriters reasonably may request;
(i) make available upon reasonable notice for inspection by each
seller of Registrable Securities, any underwriter participating in any
distribution pursuant to such registration statement, and any attorney,
accountant or other agent retained by such seller of Registrable Securities or
underwriter, all financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such registration
statement; and
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(j) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its
securityholders, as soon as reasonably practicable, but not later than 18 months
after the effective date of the registration statement, an earnings statement
covering the period of at least 12 months beginning with the first full month
after the effective date of such registration statement, which earnings
statements shall satisfy the provisions of Section II(a) of the Securities Act.
For purposes of paragraphs (a) and (b) above, the period of
distribution of Registrable Securities in a firm commitment underwritten public
offering shall be deemed to extend until each underwriter has completed the
distribution of all securities purchased by it, and the period of distribution
of Registrable Securities in any other registration shall be deemed to extend
until the earlier of the sale of all Registrable Securities covered thereby and
120 days after the effective date thereof.
In connection with each registration hereunder the sellers of
Registrable Securities will furnish to the Company in writing such information
with respect to themselves and the proposed distribution by them as reasonably
shall be necessary and shall be requested by the Company in order to comply with
federal and applicable state securities laws.
In connection with each registration pursuant to Section 5.1
covering an underwritten public offering, the Company and each seller of
Registrable Securities agree to enter into a written agreement with the managing
underwriter (unless the Holder is the managing underwriter) in such form and
containing, such provisions as are customary in the securities business for such
an arrangement between such underwriter and companies of the Company's size and
investment stature.
5.3. Expenses. All expenses incurred by the Company in complying
with Sections 5.1 and 5.2, including, without limitation, all registration and
filing fees, 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 National Association of Securities Dealers, Inc.,
transfer taxes, fees of transfer agents and registrars, costs of insurance and
reasonable fees and disbursements of one counsel for the sellers of Registrable
Securities, but excluding any Selling Expenses, are herein referred to as
"Registration Expenses." "Selling Expenses" as used herein mean all underwriting
discounts and selling commissions applicable to the sale of Registrable
Securities.
The Company will pay all Registration Expenses in connection with
each registration statement under Section 5.1. All Selling Expenses in
connection with each registration statement under Sections 5.1 shall be done by
the participating sellers of Registrable Securities in proportion to the number
of shares sold by each, or by such participating sellers of Registrable
Securities other than the Company (except to the extent the Company shall be a
seller of Common Stock) as they may agree.
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5.4. Benefits Clause. If the Company grants incidental
registration rights to any person or entity on terms which Holder reasonably
considers preferential to the terms herein contained, then the Holder shall be
entitled to exercise the registration rights provided herein with such
preferential terms.
5.5. Indemnification and Contribution. (a) In the event of a
registration of any Registrable Securities under the Securities Act pursuant to
this Article V, the Company will indemnify and hold harmless, to the fullest
extent permitted by law, each Holder selling Registrable Securities hereunder,
each underwriter of such Common Stock thereunder and each other person, if any,
who controls such selling Holder of Registrable Securities or underwriter within
the meaning of 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
was registered under the Securities Act pursuant to Article V, 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 pay or reimburse each such
selling Holder, each such underwriter and each such controlling person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company (i) will not be liable in any 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 any such
selling Holder, any such underwriter or any such controlling person, as the case
may be, in writing specifically for use in such registration statement,
prospectus, amendment or supplement and (ii) will not be liable for amounts paid
in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company, such consent not to
be unreasonably withheld or delayed.
(b) In the event of a registration of any Registrable Securities
under the Securities Act pursuant to this Article V, each Holder selling
Registrable Securities thereunder, severally and not jointly will indemnify and
hold harmless the Company, each person, if any, who controls the Company within
the meaning of the Securities Act, each officer of the Company who signs the
registration statement, each director of the Company, each underwriter and each
person who controls any underwriter within the meaning of the Securities Act,
against all losses, claims, damages or liabilities, joint or several, to which
the Company or such officer, director, underwriter or controlling person may
become subject under the Securities Act or otherwise, but only insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement or omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements
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therein not misleading, made in reliance upon and in conformity with information
pertaining to such selling Holder, as such, furnished in writing to the Company
by such selling Holder specifically for use in such registration statement under
which such selling Holder specifically for use in such registration statement
under which such Registrable Securities was registered under the Securities Act
pursuant to this Article V, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, and will pay or
reimburse the Company and each such officer, director, underwriter and
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that (i) the liability of each selling
Holder hereunder shall be limited to the proportion of any such loss, claim,
damage, liability or expenses which is equal to the proportion that the public
offering price of the shares of Registrable Securities sold by such selling
Holder under such registration statement bears to the total public offering
price of all securities sold thereunder, but not in any event to exceed the net
proceeds received by such selling Holder from the sale of Registrable Securities
covered by such registration statement and (ii) no selling Holder shall be
liable for amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of such selling
Holder, such consent not to be unreasonably withheld or delayed.
(c) Promptly after receipt by an indemnified party hereunder of
written notice of any claim or the commencement of any action or proceeding,
such indemnified party shall, if any claim in respect thereof is to be made
against the indemnifying party hereunder, 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,
except to the extent the indemnifying party is materially prejudiced by such
omission. In case any such action shall be brought against any indemnified party
and the indemnified party 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 reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party shall not be liable to
such indemnified party under this paragraph (c) for any legal or other
professional expenses subsequently incurred by such indemnified party in
connection with the defense thereof. No indemnifying party, in the defense of
any such claim or litigation against an indemnified party, shall consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or
litigation, unless such indemnified party shall otherwise consent in writing. An
indemnifying party who elects not to assume the defense of a claim shall not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless any
indemnified party reasonably concludes that there may be legal defenses
available to such indemnified party with respect to such claim which are
different from or additional to those available to any other of such indemnified
parties or that a conflict of interest may exist between such indemnified party
and any other of such indemnified
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parties with respect to such claim, in which event the indemnifying party shall
be obligated to pay the reasonable fees and expenses of such additional counsel
or counsels.
(d) In order to provide for just and equitable contribution in
any case in which either (i) any Holder exercising registration rights under
this Article V, or any controlling person of any such Holder, makes a claim for
indemnification pursuant to this Section 5.5, but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and following 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 5.5 provides for indemnification in
such case, or (ii) contribution under the Securities Act may be required on the
part of any such Holder or any such controlling person in circumstances for
which indemnification is proved under this Section 5.5, then, and in each such
case, the Company and such Holder shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after contribution
from others) in such proportion as is appropriate to reflect both the relative
benefit received by such Holder and the relative fault of the company and such
Holder; provided, however, that, in any such case, (A) no Holder will be
required to contribute any amount in excess of the public offering price of all
such Registrable Securities offered by it pursuant to such registration
statement; and (B) no person or entity guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person or entity who was not guilty of such fraudulent
misrepresentation. For purposes of the preceding sentence, the relative benefit
received by the Holder of Registrable Securities shall be deemed to be in the
same proportion as the public offering price of tis Registrable Securities
offered by the registration statement bears to the public offering price of all
securities offered by such registration statement; and the relative fault of the
Company and such Holder shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission of
a material fact relates to information supplied by the Company or by the Holder
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
5.6. Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the shares of Common Stock underlying the Warrants to
the public without registration, the Company agrees to (a) make and keep public
information available, as those terms are understood and defined in Rule 144
under the Securities Act; and (b) use all reasonable efforts to file with the
Commission in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act.
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ARTICLE VI
DEFINITIONS
The following terms, as used in this Warrant, have the following
respective meanings:
"Business Days" means each day in which banking institutions in
New York are not required or authorized by law or executive order to close.
"Capital Reorganization" shall have the meaning set forth in
Section 4.4.
"Company" shall have the meaning set forth in the first paragraph
of this Warrant.
"Common Stock" shall have the meaning set forth in the first
paragraph of this Warrant.
"Common Stock Distribution" shall have the meaning set forth in
Section 4.2.
"Common Stock Reorganization" shall have the meaning set forth in
Section 4.2.
"Exercise Price" shall mean $17.1875 per share of Common Stock
(125% of the public offering price), subject to adjustment pursuant to Article
IV.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and any successor Federal statute, and the rules and regulations of the
Commission (or its successor) thereunder, all as the same shall be in effect at
the time.
"Fair Market Value" means the fair market value of the business,
property or assets in question as determined in good faith by the Board of
Directors of the Company; provided that with respect to Common Stock, Fair
Market Value means the average of the daily closing prices for the Common Stock
on the thirty (30) consecutive trading days before the day in question. The
closing price for each day shall be the last reported sales price regular way
or, in case no such reported sale takes place on such date, the average of the
reported closing bid and asked prices regular way, in either case on Nasdaq, or
if the Common Stock is not listed or admitted to trading on Nasdaq, on the
principal securities exchange on which the Common Stock is listed or admitted to
trading or, if not listed or admitted to trading on any securities exchange, the
closing sale price of the Common Stock, or in case no reported sale takes place,
the average of the closing bid and asked prices, on any interdealer quotation
system or any comparable system, or if the Common Stock is not so quoted, the
parties hereto agree for the purposes of this
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Warrant that the current market price shall be as determined in good faith by
the Board of Directors.
"Holder" shall have the meaning set forth in the first paragraph
of this Warrant.
"Majority", when used in reference to the holders of Warrants
and/or shares of Common Stock underlying the Warrants, shall mean in excess of
fifty percent (50%) of the then outstanding Warrants (assuming full exercise for
purposes of calculation) or shares of Common Stock underlying the Warrants on
the date hereof that are not held by the Company, an affiliate, officer,
creditor, employee or agent thereof or any of their respective affiliates,
members of their family, persons acting as nominees on in conjunction therewith.
"Nasdaq" means The Nasdaq Stock Market.
"Registrable Securities" means the 300,000 shares of Common Stock
issuable to the Holder upon exercise of the Warrants. For the purposes of this
Warrant, such securities will cease to be Registrable Securities when (i) a
registration statement covering such securities has been declared effective and
such securities have been disposed of pursuant to such effective registration
statement, (ii) such securities have been distributed to the public pursuant to
Rule 144 (or any similar provisions then in force) under the Securities Act, or
(iii) such securities have been otherwise transferred and the Company has
delivered new certificates or other evidences of ownership for them not subject
to any legal or other restriction on transfer.
"Securities Act" means the Securities Act of 1933, as amended,
and any successor Federal statute, and the rules and regulations of the
Securities and Exchange Commission (or its successor) thereunder, all as the
same shall be in effect from time to time.
"Special Dividend" shall have the meaning set forth in Section
4.3.
"Underwriting" shall have the meaning set forth in the second
paragraph of this Warrant.
"Warrantholder" means a holder of a Warrant.
"Warrant Agency" shall have the meaning set forth in Section 2.1.
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ARTICLE VII
MISCELLANEOUS
7.1. Notices. Any notice or other communication to be given
hereunder shall be in writing and shall be delivered by recognized courier,
telecopy or certified mail, return receipt requested, and shall be conclusively
deemed to have been received by a party hereto and to be effective on the day on
which delivered or telecopied to such party at its address set forth below (or
at such other address as such party shall specify to the other parties hereto in
writing), or, if sent by certified mail, on the third business day after the day
on which mailed addressed to such party at such addresses.
In the case of a Holder, such notices and communications shall be
addressed to his or her address as shown on the books maintained by the Warrant
Agency, unless the Holder shall notify the Company and the Warrant Agency that
notices and communications should be sent to a different address, in which case
such notices and communications shall be sent to the address specified by the
Holder, with a copy to Dewey Ballantine, 1301 Avenue of the Americas, New York,
NY 10019, Attention: Douglas L. Getter, Esq. In the case of the Company, such
notices and communications shall be addressed as follows (until notice of a
change is given as provided herein): Tel-Save Holdings, Inc., 22 Village Square,
New Hope, PA 18938, Attention: Daniel M. Borislow, Chairman and Chief Executive
Officer, Fax No. (215) 862-1083, Telephone: (215) 862-1503, with a copy to:
Blank, Rome, Comisky & McCauley, Four Penn Center Plaza, Philadelphia,
Pennsylvania 19103, Fax No. (215) 569-5555, Telephone: (215) 569-5500,
Attention: Frederick D. Lipman, Esquire.
7.2. Waivers; Amendments. No failure or delay of the Holder in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of such right or power, or any abandonment
or discontinuance of steps to enforce such a right or power, preclude any other
or further exercise thereof or the exercise of any other night or power. The
rights and remedies of the Holder are cumulative and not exclusive of any rights
or remedies which the Holder would otherwise have. The provisions of this
Warrant may be amended, modified or waived with (and only with) the written
consent of the Company and a Majority of Holders (including any permitted
Transferee holding a Warrant); provided, however, that no such amendment,
modification or waiver shall, without the written consent of the Holder, (a)
change the number of shares of Common Stock subject to purchase upon exercise of
this Warrant, the Exercise Price or provisions for payment thereof or (b) amend,
modify or waive the provisions of this Section or Articles III, IV or V with
respect to the Holder.
Any such amendment, modification or waiver effected pursuant to
this Section shall be binding upon the Holder, upon each future holder of the
Warrants and shares of Common Stock underlying the Warrants issuable hereunder
and upon the Company. In the event of any such amendment, modification or waiver
the Company shall give prompt notice thereof to all Warrantholders and, if
appropriate, notation thereof
17
<PAGE>
shall be made on all Warrants thereafter surrendered for registration of
transfer or exchange.
No notice or demand on the Company in any case shall entitle the
Company to any other or further notice or demand in similar or other
circumstances.
7.3. Governing Law. This Warrant shall be construed in accordance
with and governed by the laws of the State of New York without regard to choice
of law doctrine.
7.4. Survival of Agreements. All covenants and agreements made by
the Company herein shall be considered to have been relied upon by the Holder
and shall survive the issuance and delivery of the Warrant, and shall continue
in full force and effect so long as this Warrant is outstanding.
7.5. Covenants To Bind Successor and Assigns. All covenants,
stipulations, promises and agreements in this Warrant contained by or on behalf
of the Company shall bind its successors and assigns, whether so expressed or
not.
7.6. Severability. In case any one or more of the provisions
contained in this Warrant shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein and therein shall not in any way be affected or impaired
thereby. The parties shall endeavor in good faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
7.7. Section Headings. The section headings used herein are for
convenience of reference only, are not part of this Warrant and are not to
affect the construction of or be taken into consideration in interpreting this
Warrant.
7.8. No Rights as Stockholder. This Warrant shall not entitle any
Holder to any rights as a stockholder of the Company and no dividends shall be
payable or accrue in respect of this Warrant or the interest represented hereby
or the shares of Common Stock underlying the Warrants exercisable hereunder
unless and until and only to the extent this Warrant shall be exercised.
7.9. No Requirement to Exercise. Nothing contained in this
Warrant shall be construed as requiring the Holder to exercise this Warrant.
18
<PAGE>
IN WITNESS WHEREOF, Tel-Save Holdings, Inc. has caused this
Warrant to be executed in its corporate name by one of its officers thereunto
duly authorized.
Tel-Save Holdings, Inc.
By:/s/ Daniel M. Borislow
____________________________
Daniel M. Borislow
Chairman and Chief Executive
Officer
<PAGE>
SUBSCRIPTION NOTICE
(To be executed upon exercise of Warrant)
To TEL-SAVE HOLDINGS, INC.
The undersigned hereby irrevocably elects to exercise the right
of purchase represented by the attached Warrant for, and to purchase thereunder,
shares of Common Stock, as provided for therein, and tenders herewith payment of
the Exercise Price in full in the form of certified or bank cashier's check or
wire transfer.
Please issue a certificate or certificates for such shares of
Common Stock in the following name or names and denominations:
If said number of shares shall not be all the shares issuable
upon exercise of the attached Warrant, a new Warrant is to be issued in the name
of the undersigned for the balance remaining of such shares less any fraction of
a share paid in cash.
Dated:
--------------------------------------
NOTE: The above signature should
correspond exactly with the
name on the face of the
attached Warrant or with the
name of the assignee appearing
in the assignment form below.
Exhibit 5.1
November 5, 1996
Board of Directors
Tel-Save Holdings, Inc.
6805 Route 202
New Hope, Pennsylvania 18938
Re: Issuance of Shares of Common Stock by Tel-Save
Holdings, Inc. upon the Exercise of Certain Warrants
----------------------------------------------------
Dear Sir or Madam:
I have acted as general counsel to Tel-Save Holdings, Inc. (the
"Company") in connection with the Company's filing pursuant to the Securities
Act of 1933, as amended, of a registration statement on Form S-3 (No. 333-14549)
(the "Registration Statement") relating to the offering for resale of up to
2,308,446 shares of the Company's common stock, par value $.01 per shares (the
"Common Stock") by certain persons named in the Registration Statement, who have
acquired or may acquire Common Stock upon the exercise of warrants (the
"Warrants") granted by the Company to those persons and entities named therein.
You have requested my opinion as to certain matters with respect to the Common
Stock.
I have examined such corporate records of the Company, including its
Amended and Restated Certificate of Incorporation, its Bylaws, and resolutions
of the Company's board of directors (the "Board of Directors"), as well as such
other documents as I deemed necessary for rendering the opinion hereinafter
expressed.
On the basis of the foregoing, I am of the opinion that the Common Stock
has been duly authorized by the Board of Directors and, upon exercise of the
Warrants in accordance with their terms, the Common Stock will be validly
issued, fully paid, and nonassessable.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of my named therein.
Sincerely yours,
/s/Aloysius T. Lawn, IV
Aloysius T. Lawn, IV
General Counsel and Secretary
ATL:ma
Exhibit 23.1
CONSENT OF BDO SEIDMAN, LLP
Tel-Save Holdings, Inc.
New Hope, Pennsylvania
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement of our report dated February
7, 1996 (except for Notes 4, 6(c) and 10 which are as of March 25, 1996),
relating to the consolidated financial statements of Tel-Save Holdings, Inc. and
subsidiaries appearing in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
BDO Seidman, LLP
New York, New York
November 1, 1996
