SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 2)
Tel-Save Holdings, Inc.
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(Name of Issuer)
Common Stock, par value $.01 per share
(Title of Class of Securities)
879176105
(CUSIP Number)
Daniel Borislow
6805 Route 202
New Hope, PA 18938
Tel. (215) 862-1500
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
March 10, 1997
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule
13G to report the acquisition which is the subject of this Schedule 13D and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box: [ ]
Check the following box if a fee is being paid with this statement:
[ ]
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SCHEDULE 13D
CUSIP No. 879176105
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(1) Names of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Mr. Daniel Borislow
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(2) Check the Appropriate Box if a Member of a Group
(See Instructions)
(a) [ ]
(b) [X]
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(3) SEC Use Only
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(4) Source of Funds (See Instructions)
Not applicable
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(5) Check Box if Disclosure of Legal Proceedings
is required Pursuant to Items 2(d) or 2(e) [ ]
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(6) Citizenship or Place of Organization
American
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Number of (7) Sole Voting Power
Shares 15,446,540*
Beneficially -------------------------------------------------------
Owned by (8) Shared Voting Power
Each Reporting 8,790,000
Person With -------------------------------------------------------
(9) Sole Dispositive Power
14,749,000*
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(10) Shared Dispositive Power
1,200,000
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*Subject to the restrictions described in Item 5 of
Schedule 13D.
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(11) Aggregate Amount Beneficially Owned by Each
Reporting Person
24,236,540
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(12) Check Box if the Aggregate Amount in Row (11)
Excludes Certain Shares (See Instructions) [ ]
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(13) Percent of Class Represented by Amount in Row (11)
38.53%
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(14) Type of Reporting Person (See Instructions) IN
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This Amendment No. 2 restates and amends Items 4, 5, 6 and 7 of the
Schedule 13D (the "Schedule 13D") of the Reporting Person (as such term is
defined therein) dated October 5, 1995 as amended on April 24, 1996. Capitalized
terms have the same meanings as in the Schedule 13D.
Item 1. Security and Issuer.
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(a) This Statement relates to the common stock, par value $.01 per
share (the "Common Stock"), of Tel-Save Holdings, Inc. (the "Company").
(b) The Company's principal executive offices
are located at 6805 Route 202, New Hope, Pennsylvania
18938.
Item 2. Identity and Background.
-----------------------
(a) Name: This Statement is being filed by Daniel M. Borislow (the
"Reporting Person"). The filing of this Statement shall not be construed as an
admission (i) that the Reporting Person is, for the purpose of Section 13(d) or
13(g) of the Securities Exchange Act of 1934, as amended, the beneficial owner
of any of the securities covered by this Schedule, or (ii) that this Schedule is
legally required to be filed by the Reporting Person.
(b) Residence or Business Address: The business address of Daniel
M. Borislow is 6805 Route 202, New Hope, Pennsylvania 18938.
(c) Principal Occupation/Business: The principal occupation of
Daniel M. Borislow is Chairman and Chief Executive Officer of the Company.
(d) Criminal Convictions: The Reporting Person has not during the
last five years been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
(e) Court or Administrative Proceedings: During the last five
years, the Reporting Person has not been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
which such proceeding was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation with respect to
such laws.
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(f) Citizenship: The Reporting Person is a citizen of the United
States.
Item 3. Source and Amount of Funds or Other
-----------------------------------
Considerations.
---------------
On September 22, 1995, the shares of Tel-Save, Inc., a Pennsylvania
corporation (the "Predecessor Corporation"), owned by its existing stockholders
(the Reporting Person and Paul Rosenberg) were contributed to the Company
pursuant to a Plan of Reorganization dated as of August 28, 1995 (the "Plan").
Under the Plan, the Reporting Person exchanged all of his shares of the
Predecessor Corporation for 7,020,000 shares of Common Stock of the Company plus
loans of up to $5,000,000.
Item 4. Purpose of Transaction.
-----------------------
The Reporting Person acquired the shares of Common Stock for
investment purposes in connection with the Reorganization described in Item 3.
The Reporting Person may dispose of all or a portion of the
Company's securities held by him depending upon market prices of such shares,
subject to the limitations described in Item 6.
Except as described above, the Reporting Person has no present
plans or proposals which relate to or would result in any of the following:
(a) The acquisition by any person of additional securities of the
Company or the disposition of securities of the issuer;
(b) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company or any of its subsidiaries;
(c) A sale or transfer of a material amount of assets of the
Company or any of its subsidiaries;
(d) Any change in the present board of directors or management of
the Company, including any plans or proposals to change the number or term of
directors or to fill any existing vacancies on the board;
(e) Any material change in the present capitalization or dividend
policy of the Company;
(f) Any other material change in the Company's business or
corporate structure;
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(g) Any changes in the Company's charter, bylaws or instruments
corresponding thereto or other actions which may impede the acquisition of
control of the Company by any person;
(h) Causing a class of securities of the Company to be delisted
from a national securities exchange or to cease to be authorized to be quoted in
an inter-dealer quotation system of a registered national securities
association;
(i) A class of equity securities of the Company becoming eligible
for termination of registration pursuant to Section 12(g)(4) of the Exchange
Act; or
(j) Any action similar to any of those enumerated above.
Item 4 was amended on April 24, 1996 as follows:
On April 19, 1996, the "Company" completed a public offering of
9,000,000 shares of Common Stock. Of the 9,000,000 shares offered and sold, the
Company sold 8,250,000 shares and the Reporting Person sold 750,000 shares.
Item 4 is hereby amended as follows:
On March 10, 1997, the Reporting Person sold 3,911,000 shares to
certain purchasers in a private sale; in addition, the Reporting Person has
agreed to place 1,564,400 in escrow for the benefit for such purchaser(s) under
the terms and conditions described in Item 5b.
Item 5. Interests in Securities of the Issuer.
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(a) Beneficial Ownership and (b) Voting and Dispositive Powers:
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Items 7, 8, 9, 10, 11, 12 and 13 from page 2 of this Statement are
incorporated herein by reference.
The Reporting Person and Mr. Rosenberg entered into a voting trust
agreement pursuant to which the Reporting Person will retain voting power over
Mr. Rosenberg's 2,530,000 shares of Common Stock for ten years; however, the
voting trust agreement is terminable by Mr. Rosenberg at any time and Mr.
Rosenberg is not required to place his shares in trust until requested by the
Reporting Person.
The Reporting Person has been advised of the following facts by Mr.
Rosenberg. The business address of Mr. Rosenberg is 600 North 4th Street,
Philadelphia, Pennsylvania 19123. The principal occupation of Mr.
<PAGE>
Rosenberg is owner and operator of National Telecoin Corporation. During the
last five years, Mr. Rosenberg has not been convicted in a criminal proceeding
(excluding traffic violations and similar misdemeanors). During the last five
years, Mr. Rosenberg has not been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction, and as a result of which such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of or prohibiting or mandating activities subject to federal
or state securities laws or finding any violation with respect to such laws. Mr.
Rosenberg is a citizen of the United States.
The Reporting Person is the voting trustee for two (2) voting
trusts that have substantially similar terms, one which holds 247,540 shares of
Common Stock of the Company owned by Collective Communications Services, Inc.
("CCS), a Pennsylvania corporation ("the CCS Voting Trust") and one which holds
450,000 shares of Common Stock of the Company owned by Network Plus, Inc.
("Network Plus"), a Massachusetts corporation ("Network Plus Voting Trust").
Pursuant to the terms of each of the Voting Trusts, each of CCS and Network Plus
may sell the shares of common stock in the respective Voting Trusts at any time,
and each of the Voting Trusts will dissolve whenever CCS or Network Plus sells
all of the shares of common stock contained in the respective Voting Trust. The
Company has a right of first refusal upon sale or transfer of the by Network
Plus and CCS of shares in the respective Voting Trusts.
The aggregate number and percentage of outstanding shares
beneficially owned by the Reporting Person are set forth below. Unless otherwise
indicated, the Reporting Person has sole voting and dispositive power with
respect to the shares listed.
Beneficial Ownership
------------------------------
Name Number of Shares Percentage
---- ---------------- ----------
Daniel Borislow 24,236,540(1) 38.53%(2)
(1) Includes 1,564,400 shares subject to a stock purchase agreement and
an escrow agreement that may be acquired by the purchasers under
certain circumstances described in paragraph (c) below. Also
includes 300,000 shares that may be acquired upon the exercise of
stock options.
(2) Based upon 62,887,998 shares outstanding as of March 10, 1997. In
calculating the beneficial
<PAGE>
ownership percentage for the Reporting Person, shares of Common
Stock subject to options held by the Reporting Person are added to
the total number of shares of Common Stock outstanding.
On March 10, 1997, the Reporting Person sold 3,911,000 shares
pursuant to the terms of a Stock Purchase Agreement dated March 10, 1997 (the
"Stock Purchase Agreement") by and between the Reporting Person and MFS/SUN Life
Series Trust on behalf of Capital Appreciation Series, Sun Life Assurance
Company of Canada (U.S.) on behalf of Capital Appreciation Variable Account, MFS
Growth Opportunities Fund, MFS Series Trust II on behalf of MFS Emerging Growth
Fund, Putnam OTC & Emerging Growth Fund and Conseco Capital Management (the
"Purchasers"). The price per share was $16.50. Pursuant to the Stock Purchase
Agreement, the Reporting Person entered into an escrow agreement (the "Escrow
Agreement") with the Purchasers and an escrow agent. Under the Stock Purchase
Agreement and the Escrow Agreement, the Reporting Person deposited 1,564,400
shares in escrow, to be held for the benefit of the Purchasers and to be
distributed to them (in part or in full) in the event that the average current
market of the shares in the twenty days prior to the fifth business date after
the date on which the Issuer announces its financial results for the third
quarter of 1997 (the "Determination Date") shall be lower than $16.50. The
amount of escrow shares to be distributed to the Purchasers is to be determined
by the percentage of decrease, if any, in the price of the shares. Until the
Determination Date, the Reporting Person shall retain the sole voting powers
with respect to the escrow shares and the right to receive all cash dividends
issued on such shares.
(c) Transactions in Securities of the Company During Past Sixty
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Days:
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See Item 3.
(d) Dividends and Proceeds:
-----------------------
N/A
(e) Date Reporting Person Ceased to be Beneficial Owner of More
than 5% of the Company's Stock:
N/A
<PAGE>
Item 6. Contracts, Arrangements, Understandings
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or Relationships With Respect to
--------------------------------
Securities of the Issuer
------------------------
See Items 2 and 5.
Under the Plan, Mr. Rosenberg exchanged all of his shares of the
Predecessor Corporation of 2,530,000 shares of Common Stock of the Company,
$4,500,000 in cash plus a note in the original principal amount of $6,900,000
(the "Cash Flow Note"). The Cash Flow Note was personally guaranteed by the
Reporting Person and the guarantee collateralized with 539,063 shares of the
Reporting Person's Common Stock.
Until five years from the final closing of the Company's initial
public offering (i) the Reporting Person has granted to Mr. Rosenberg the right
to participate with the Reporting Person in any sales of the Reporting Person's
shares of Common Stock at the same price per share and terms, subject to
exceptions for Rule 144 sales and sales after Mr. Rosenberg's ownership of
Common Stock is less than four percent of the outstanding shares of Common
Stock, and (ii) Mr. Rosenberg has granted to the Reporting Person a right of
first refusal on Mr. Rosenberg's shares of Common Stock, subject to similar
exceptions.
Item 6 was amended on April 24, 1996 as follows:
In accordance with the terms of the Underwriting Agreement, the
Reporting Person has agreed that he will not during a period of 120 days
following April 15, 1996, without the prior written consent of Salomon Brothers
Inc., offer, sell or contract to sell, or otherwise dispose of, directly or
indirectly, or announce the offering of, any other shares of Common Stock
beneficially owned by such person, or any securities convertible into, or
exchangeable for, shares of Common Stock, other than shares of Common Stock
disposed of as bona fide gifts or shares of Common Stock issuable upon the
exercise of certain outstanding warrants pursuant to which the Company has
assigned to the Reporting Person its obligations to deliver the Common Stock
thereunder.
Item 6 is amended as follows:
In accordance with the terms of the Stock Purchase Agreement, the
Reporting Person has agreed that except for the disposition of up to 2,000,000
shares of Common Stock to a charitable foundation, he will not sell, assign,
transfer or otherwise dispose of any
<PAGE>
additional shares of Common Stock for a period of twelve (12) months from March
10, 1997 (the "Lock-up Period"); provided, however, that if the current market
price of the Common Stock shall increase by an amount greater than 20% from
$16.50 per share for a period of twenty (20) consecutive trading days, the
Lock-up Period shall be reduced to ninety (90) days. The Reporting Person shall
be released from the aforesaid restrictions if a third party shall make an offer
to purchase a majority of the Issuer's outstanding Common Stock.
Item 7. Material to be Filed as Exhibits
--------------------------------
10.1 Plan of Reorganization between and among the Company,
Tel-Save, Inc., the Reporting Person and Paul Rosenberg.
(previously filed)0
10.2. Guarantee and Stock Pledge Agreement entered into September
25, 1995 by and among the Reporting Person, Paul Rosenberg
and Midlantic Bank. (previously filed)
10.3. Voting Trust Agreement dated as of September 25, 1995 by and
among Paul Rosenberg, the Reporting Person and the Company
(previously filed)
10.4. Co-Sale/Right of First Refusal Agreement dated as of
September 25, 1995 by and among the Company, the Reporting
Person and Paul Rosenberg. (previously filed)
10.5. Underwriting Agreement dated as of April 15, 1996.
(previously filed)
10.6. Stock Purchase Agreement among the Purchaser listed therein
and the Reporting Person dated March 10, 1997 (filed
herewith)
10.7. Escrow Agreement among Marine Midland Bank as Escrow Agent,
the Purchasers listed there and the Reporting Person dated
March 10, 1997 (filed herewith)
10.8 Registration Rights Agreement between the Issuers and the
Purchasers dated March 10, 1997 (filed herewith)
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*Incorporated by reference to the Registration Statement on Form S-1 of Tel-Save
Holdings, Inc. (File No. 33-94940).
<PAGE>
Signature
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After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
/s/Daniel Borislow
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Daniel Borislow
Dated: March 12, 1997
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT, dated as of March 10, 1997, is
among each of the several Purchasers whose names appear on the signature pages
hereof (referred to collectively as the "Purchasers" and individually as the
"Purchaser") and TEL-SAVE HOLDINGS, INC., a Delaware corporation ("Holdings").
Capitalized terms used herein without definition shall have the meanings
assigned in the Stock Purchase Agreement described in the second recital below.
W I T N E S S E T H:
WHEREAS, Mr. Daniel Borislow ("Borislow") is the owner beneficially and
of record of 19,860,000 shares of common stock, par value $.01 per share (the
"Common Stock") of Holdings;
WHEREAS, Borislow desires to sell, and the Purchasers desire to
purchase, 3,911,000 shares of Common Stock (the "Firm Shares") subject to the
terms and conditions of the Stock Purchase Agreement, dated the date hereof,
among Borislow and the Purchasers (the "Stock Purchase Agreement") subject to
the terms and conditions set forth therein;
WHEREAS, Borislow and the Purchasers have, simultaneously herewith,
entered into an Escrow Agreement, dated the dated hereof (the "Escrow
Agreement"), which Escrow Agreement provides for the deposit by Borislow of
1,564,400 shares of Common Stock (the "Escrow Shares") with an Escrow Agent (as
defined therein), subject to the terms and conditions set forth therein and in
the Stock Purchase Agreement; and
WHEREAS, Holdings desires to grant to the Purchasers certain
registration rights in connection with the Firm Shares and the Escrow Shares
(referred to herein together as the "Shares").
NOW THEREFORE, for valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties agree as follows:
1. Definitions
"Commission" means the Securities and Exchange Commission.
<PAGE>
"Common Stock" means common stock, par value $.01 per share, of Hold-
ings.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"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 as of any date the Shares and any
securities issued or issuable with respect to any of such 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 such
Registrable Securities have 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, and Holdings 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 Holdings,
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.
"Securities Act" means the Securities Act of 1933, as amended.
"Selling Shareholder" shall have the meaning set forth in Section 3(a).
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<PAGE>
"Shares" mean the Firm Shares and Escrow Shares.
"Underwriter" means a securities dealer that purchases any Registrable
Securities as principal and not as part of such dealer's market-making
activities.
2. Purchaser Understandings and Agreements
(a) Each of the Purchasers acknowledges and agrees that it has acquired
the Firm Shares, and will acquire the Escrow Shares, if any, in transactions not
involving a public offering and that such Shares are subject to certain
restrictions as to resale under the federal and state securities laws. Each of
the Purchasers agrees and understands that until satisfaction of the conditions
set forth in Section 2(c), stop transfer instructions will be given to the
transfer agent for the Shares and each certificate for Shares, and each
certificate delivered on transfer of or in substitution for any such
certificate, shall bear a legend in substantially the following form:
The shares represented by this certificate are subject to
restrictions imposed by the Securities Act of 1933, as amended, and
applicable state securities law. The shares may not be sold or
transferred in the absence of registration or an exemption therefrom
under the Securities Act of 1933 and any applicable state securities
laws.
(b) Each of the Purchasers agrees that it will not sell, pledge,
assign, transfer or otherwise dispose (collectively, "Transfer") of any of the
Shares unless the Transfer will be made pursuant to an exemption from the
registration requirements of the Securities Act or pursuant to an effective
registration statement under the Securities Act and pursuant to an exemption
from any applicable state securities laws or an effective registration or other
qualification under any applicable state securities laws. Exemptions from such
registration requirements are limited and Holdings understands that each of the
Purchasers has obtained advice from its own counsel as to the nature and
conditions of such exemptions. Holdings is under no obligation to register the
Shares except as provided in Section 3. Holdings shall not incur any liability
for any delay in recognizing any Transfer of Shares by any Shareholder if
Holdings reasonably believes that such
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<PAGE>
transfer may have been or would be in violation of the provisions of this
Agreement.
3. Registration
(a) As soon as practicable after the date hereof, Holdings shall file,
at its sole election, either (A) a Registration Statement on Form S-3 to permit
resale of all of the Registrable Securities held by the Purchasers or (B) a
"shelf" Registration Statement on Form S-3 (or its then equivalent) with respect
to the resale of all of the Registrable Securities held by the Purchasers
pursuant to Rule 415 (or any similar provision that may be adopted by the
Commission) under the Securities Act; provided that Holdings, at its election,
may delay such filing or the effectiveness of the Registration Statement, but
not beyond the date of filing of its next quarterly or annual report with the
Commission under the Exchange Act, whichever is earlier, if the Board of
Directors of Holdings shall have determined in good faith that such filing or
effectiveness would be detrimental to Holdings' business interests. Holdings
shall give twenty (20) days notice to each of the Purchasers of such
registration. In its capacity as a holder of Registrable Securities that are to
be included in the Registration Statement, each of the Purchasers is sometimes
referred to as the "Selling Shareholder".
(b) Holdings agrees to use commercially reasonable efforts to have the
Registration Statement described in Section 3(a) declared effective as soon as
practicable after the date of filing thereof, but in any event, within sixty
(60) days, and to keep such Registration Statement effective for a period of not
less than two (2) years after effectiveness, except that such Date shall be
extended by one day for each day beyond thirty (30) days that the filing of the
Registration Statement is delayed pursuant to the provisions of Section 4(b).
(c) Nothing in this Section 3 shall require Holdings to file a
registration statement for an underwritten offering or to participate therein.
4. Registration
In connection with the Registration Statement filed pursuant to Section
3 hereof:
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<PAGE>
(a) Holdings may require the Selling Shareholders to furnish to
Holdings such information regarding the distribution of such securities as
Holdings may from time to time reasonably request in writing as being necessary
or appropriate for completion of the Registration Statement and each Selling
Shareholder agrees to cooperate with Holdings in all reasonable respects in
connection with the preparation and filing of any Registration Statements
hereunder in which such Registrable Securities are included or expected to be
included.
(b) The Selling Shareholder agrees that, at any time when any
Registration Statement is effective, upon receipt of any written notice from
Holdings of the happening of any of the following events: (i) any request by the
Commission for amendments or supplements to the Registration Statement or the
Prospectus or for additional information, (ii) 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, (iii) the receipt by Holdings 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 (iv) the existence of any
fact (including, without limitation, any fact the disclosure of which at such
time the Board of Directors of Holdings shall have determined in good faith
would be detrimental to Holdings' business interests) 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 (provided that Holdings may not exercise this
right for more than ninety (90) days in any twelve month period), the Selling
Shareholder will forthwith discontinue disposition of Registrable Securities
pursuant to the Registration Statement until such Selling Shareholder'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 Holdings that the
use of the Prospectus may be resumed, and has received copies of any additional
or supplemental filings that are
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<PAGE>
incorporated by reference in the Prospectus, and, if so directed by Holdings,
such Selling Shareholder will deliver to Holdings (at Holdings' expense) all
copies, other than permanent file copies then in such Selling Shareholder's
possession, of the Prospectus covering such Registrable Securities current at
the time of receipt of such notice.
(c) Holdings shall pay the costs and expenses of preparation and filing
of any Registration Statement filed in accordance with Section 3(a), including
the costs of printing and distributing the Registration Statement and any
preliminary and final Prospectus, the fees and disbursements of counsel to
Holdings (including fees and disbursements incurred for "blue sky" matters), the
costs and expenses of its accountants, any registration or other fees payable to
the Commission, any stock exchange, the National Association of Securities
Dealers, Inc., and underwriting or brokerage fees, discounts or commissions and
any transfer taxes. All other costs shall be paid by the Selling Shareholder,
including fees and disbursements of its counsel. In connection with any such
Registration Statement, the Selling Shareholder shall furnish Holdings with such
information as may be required for inclusion in the Registration Statement or
for submission to the Commission concerning the Selling Shareholder, the Shares
and any plan of distribution.
(d) (i) The Selling Shareholder shall indemnify and hold harmless
Holdings, its directors, its officers who sign the Registration Statement and
each person, if any, who controls Holdings within the meaning of Section 15 of
the Securities Act against any and all losses, claims, damages and liabilities
(including any investigation, legal and other expenses incurred in connection
with, and any amount paid in settlement of, any action, suit, proceeding or
asserted claim) insofar as such losses, claims, damages and liabilities arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any amendments thereto
or any Prospectus or preliminary prospectus forming a part thereof or any
supplement thereto or 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, if and to the extent such untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished by such Selling Shareholder
expressly for inclusion in such
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<PAGE>
Registration Statement, Prospectus, preliminary prospectus, amendment or
supplement. In connection with an underwritten offering of the Shares, the
Underwriter will enter into an agreement under which such Underwriter will
indemnify Holdings to the extent that any untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished by such Underwriter specifically
for inclusion in the Registration Statement, Prospectus, preliminary prospectus,
amendment or supplement.
(ii) Holdings shall indemnify and hold harmless the Selling
Shareholder and any of its trustees directors, officers and partners and each
person, if any, who controls the Selling Shareholder within the meaning of
Section 15 of the Securities Act against any and all losses, claims, damages and
liabilities, joint or several (including any investigation, legal and other
expenses incurred in connection with, and any amount paid in settlement of, any
action, suit, proceeding or asserted claim) insofar as such losses, claims,
damages and liabilities arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement and any amendments thereto or any Prospectus or preliminary prospectus
forming a part thereof or any supplement thereto or 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, except any such untrue
statement or alleged untrue statement or omission or alleged omission that is
made in reliance upon and in conformity with information furnished by Selling
Shareholders in writing specifically for inclusion in such Registration
Statement, Prospectus, preliminary prospectus, amendment or supplement;
provided, that Holdings shall not be liable in any such case to or in respect of
the Selling Shareholder 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 Selling Shareholder failed to send or deliver 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
Holdings shall not be liable in any such case to or in respect of the Selling
Shareholder to the extent that any such loss, claim, damage, liability or
expense arises out of or is
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<PAGE>
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 Holdings with copies of the Prospectus as so amended or
supplemented, such Selling Shareholder 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 that is the subject thereof from such
Selling Shareholder. In connection with any underwritten offering of Registrable
Securities, Holdings will enter into an agreement under which Holdings will
agree to indemnify the Underwriters to the same extent as it indemnifies the
Selling Shareholder.
(iii) Any party that proposes to assert the right to be
indemnified under this Section 4(d) will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim is to be made against an indemnifying party under this Section
4(d), notify each such indemnifying party of the commencement of such action,
suit or proceeding, enclosing a copy of all papers served, but the omission so
to notify such indemnifying party or any such action, suit or proceeding shall
not relieve it from any liability that it may have to any indemnified party
otherwise than under this Section 4(d). In case any such action, suit or
proceeding shall be brought against any indemnified party and it shall notify
the indemnifying party of the commencement thereof, the indemnifying party shall
be entitled to participate in, and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses, other than reasonable costs
of investigation subsequently incurred by such indemnified party in connection
with the defense thereof. The indemnified party shall have the right to employ
its counsel in any such action, but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless
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(i) the employment of counsel by such indemnified party has been authorized by
the indemnifying parties, (ii) the indemnified party shall have reasonably
concluded that there may be a conflict of interest between the indemnifying
parties and the indemnified party in the conduct of the defense of such action
(in which case the indemnifying parties shall not have the right to direct the
defense of such action on behalf of the indemnified party) or (iii) the
indemnifying parties shall not in fact have employed counsel to assume the
defense of such action. An indemnifying party shall not be liable for any
settlement of any action or claim effected without its consent.
(e) Holdings' obligation to effect registration of Registrable
Securities hereunder shall include such qualification under applicable blue sky
or other state securities laws as may be necessary to enable the Selling
Shareholder to offer and sell the Registrable Securities.
(f) Holdings shall furnish as soon as available to each Selling
Shareholder covered by such registration statement such number of copies of (i)
preliminary and final versions of such registration statement and of each
amendment, post-effective amendment and supplement thereto (in each case
including exhibits), (ii) preliminary and final versions of the prospectus
contained in such registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the Securities Act,
and (iii) such other documents relating to such registration statement, all as
each Selling Shareholder may reasonably request.
(g) Holdings shall 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 and to comply with the provisions of the Securities Act with respect
to the disposition of all Registrable Securities.
(h) Holdings shall use its best efforts to register or qualify such
Registrable Securities under such securities or blue sky laws of such
jurisdiction as the Purchasers shall reasonably request, and do any and all
other acts and things that may be necessary of advisable to enable each
Purchaser to consummate the disposition in such jurisdictions of its Registrable
Securities
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<PAGE>
covered by such Registration Statement; provided, however, that Holdings shall
not be obligated to file any general consent to service of process or to qualify
as a foreign corporation or subject to taxation in any jurisdiction in which it
is not so qualified.
5. Reporting Requirements
(a) With a view to making available the benefits of certain rules and
regulations of the Commission that may at any time permit the sale of Shares to
the public without registration or a registration on SEC Form S-3, Holdings
agrees to use its best efforts to:
(i) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act;
(ii) file with the Commission in a timely manner all reports
and other documents required of Holdings under the Securities Act and the
Exchange Act; and
(iii) so long as any of the Purchasers own Registrable
Securities, to furnish to the Purchasers forthwith upon request (1) a written
statement by Holdings as to whether it complies with the reporting requirements
of said Rule 144, the Securities Act and the Exchange Act, or whether it
qualifies as a registrant whose securities may be resold pursuant to SEC Form
S-3, (2) a copy of the most recent annual or quarterly report of Holdings and
such other reports and documents so filed by Holdings, and (3) such other
information as may be reasonably requested in availing the Selling Shareholders
of any rule or regulation of the Commission that would permit the selling of the
Registrable Securities without registration.
6. Opinion of Counsel
Notwithstanding the other provisions of this Agreement, the condition
set forth in the first sentence of Section 2(b) as to each of the Purchasers
shall be deemed satisfied upon submission to Holdings of an opinion, in form and
substance satisfactory to Holdings and its counsel, of counsel reasonably
satisfactory to Holdings and its counsel to the effect that a proposed sale,
transfer or other disposition of the Shares held by such Purchaser may be made
without registration under
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<PAGE>
the Act. Upon receipt of such an opinion, Holdings will issue a new certificate
without the foregoing legend in substitution for any such certificate bearing
such legend.
7. Notices
All notices or other communications under this Agreement shall be in
writing and shall be deemed to have been given on the date of delivery if
delivered by hand or on the fifth date after mailing it by certified mail,
postage prepaid, return receipt requested, or on the date of transmission if
delivered by facsimile transmission (which shall be followed by delivery of an
original copy), addressed as follows:
If to Holdings:
Tel-Save Holdings, Inc.
6805 Route 202
New Hope, PA 18938
Facsimile No.: 215-862-1083
with a copy to:
Aloysius T. Lawn, IV, Esquire
General Counsel and Secretary
Tel-Save Holdings, Inc.
6805 Route 202
New Hope, PA 18938
Facsimile No.: 215-862-1085
If to the Purchasers at their respective addresses as set
forth in the Stock Purchase Agreement.
Any of Holdings and the Purchasers 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 Section 7.
8. Amendment
Except as otherwise provided herein, this Agreement 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.
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<PAGE>
9. Severability
If for any reason any provision, paragraph or terms of this Agreement
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
Agreement shall be deemed to be severable.
10. Governing Law
This Agreement shall be deemed to be a contract made under the laws of
the State of New York and for all purposes shall be governed by and construed in
accordance with the laws of said State.
11. Entire Agreement
This Agreement 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.
12. Construction
Section headings used herein are included herein for conveniences of
reference only and shall not affect the construction of this Agreement nor
constitute a part of this Agreement for any other purpose. The words "herein,"
"hereof," "hereby," "hereto," "hereunder" and words of similar import refer to
this Agreement as a whole and not to any particular article, section, paragraph,
subparagraph or other subdivision of this Agreement. Defined terms shall include
the plural and the singular as the context shall require.
13. Successors and Assigns
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, successors and assigns.
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<PAGE>
14. Counterparts
This Agreement may be executed in any number of counterparts, each of
which shall constitute an original, but together shall be deemed to be one and
the same document.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
TEL-SAVE HOLDINGS, INC.
By:
---------------------------------
Name: Daniel Borislow
Title: Chairman & CEO
Purchaser
By:
----------------------------------
Name:
-----------------------------
Title:
---------------------------
Purchaser
By:
----------------------------------
Name:
-----------------------------
Title:
---------------------------
Purchaser
By:
----------------------------------
Name:
-----------------------------
Title:
---------------------------
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of March 10, 1997 (this
"Agreement") by and between Mr. Daniel Borislow (the "Seller") and each of the
several Purchasers whose names appear on the signature pages hereof (each a
"Purchaser").
W I T N E S S E T H:
WHEREAS, the Seller is the owner beneficially and of record of
19,860,000 shares of common stock, par value $.01 per share (the "Common Stock")
of Tel-Save Holdings, Inc., a Delaware corporation (the "Company");
WHEREAS, the Seller desires to (i) sell, in the aggregate,
3,911,000 shares of Common Stock (the "Firm Shares") to the several Purchasers
in accordance with their Purchaser Commitments (as defined herein), and (ii) to
place an additional 1,564,400 of shares of Common Stock in escrow (the "Escrow
Shares") for the benefit of the several Purchasers, in proportion to their
Purchase Commitments, for distribution to the several Purchasers under the terms
of this Agreement and the Escrow Agreement dated the date hereof among the
Company and the Escrow Agent for the benefit of the several Purchasers (in the
form attached hereto as Annex A, the "Escrow Agreement") (the Firm Shares and
the Escrow Shares, together, are referred to herein as the "Shares"); and
WHEREAS, the Company and the several Purchasers have,
simultaneously herewith, entered into a Registration Rights Agreement, dated the
date hereof (in the form attached hereto as Annex B, the "Registration Rights
Agreement"), granting to the Purchaser certain registration rights in connection
with the Shares.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter contained, the parties hereto agree as
follows:
1. Purchase and Sale of the Firm Shares; Deposit of Escrow Shares. At
the Closing hereinafter provided for and subject to all of the terms and
conditions hereinafter contained, the Seller agrees (a) to sell to each of the
several Purchasers the Firm Shares in the amount set forth next to the name of
such Purchasers
<PAGE>
under the column headed "Purchase Commitment" on the signature pages hereto and
the Purchaser agrees to purchase such Firm Shares, and (b) the Seller agrees to
deposit with the Escrow Agent, in accordance with the Escrow Agreement, the
Escrow Shares.
2. Purchase Price. At the Closing, each of the several Purchasers shall
pay to the Seller an amount equal to the product of $16.50 times the number of
Firm Shares representing such Purchaser's Purchase Commitment.
3. Representations and Warranties and Covenants of the Seller
(a) The Seller represents and warrants to the Purchasers:
(i) At the Closing, the Seller shall have the unrestricted
right to sell, assign and deliver the Firm Shares to the Purchasers and
the Escrow Shares to the Escrow Agent and to deliver title to such
Shares free and clear of any liens or encumbrances other than
restrictions on the Escrow Shares arising hereunder and under the
Escrow Agreement.
(ii) The Seller has capacity, power and authority to enter
into this Agreement and consummate the transactions contemplated
hereby.
(iii) The Seller has duly and validly authorized, executed and
delivered this Agreement and the Escrow Agreement and this Agreement
and the Escrow Agreement constitute a valid and binding obligation of
the Seller.
(iv) The Seller has not directly or indirectly sold or
disposed of, or attempted or offered to sell or dispose of, the Shares
or similar securities to, or solicited offers to buy any Shares from,
or otherwise approached or negotiated with respect to the Shares or
similar securities with, any person that might be considered to be an
offeree in connection with the sale of the Shares or similar
securities, except the Purchasers and not more than ten (10) other
institutional investors, each of which was offered all or a portion of
the Shares as a private sale for investment. The Shares were not
offered or sold by any form of general solicitation or general
advertising, including, but not limited to, (a) any
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<PAGE>
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or
radio or (b) any seminar or meeting whose attendees had been invited
by any general solicitation or general advertising.
(v) The Seller is not prompted to sell the Shares due to its
knowledge of any material nonpublic information concerning or affecting
the Company, its business relationships, markets or personnel.
(vi) The Seller has made available to the Purchaser copies of
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1995 and all other filings by Company under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and the filings by Company
under the Securities Act of 1933, as amended (the "Securities Act"), in
each case since January 1, 1996 and as filed with the Securities and
Exchange Commission (the "Commission"). The Company has filed all
reports, registration statements and other documents (the "SEC
Reports") required to be filed under the Exchange Act and the rules and
regulations thereunder, and the SEC Reports complied, in all material
respects, with the requirements of the Exchange Act. As of their
respective dates, the SEC Reports did not contain any untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. The
Seller has made available to each Purchaser a reasonable opportunity to
discuss with the Seller any questions such Purchaser may have in
connection with such Purchaser's acquisition of the Shares or with
respect to the Company. Since December 31, 1996, there has not been any
change in the business, property, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole, that
would have a material adverse effect on the business of the Company.
(vii) Based on the Purchaser's representations and warranties,
the offer, issue and sale of the Firm Shares are exempt from
registration under the Securities Act.
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<PAGE>
(viii) Neither the execution and delivery by the Seller, nor the
consummation by the Seller of the transactions contemplated hereby in accordance
with the terms hereof will violate, or conflict with, or result in a breach of
any provision of, or constitute a default under, any material agreement to which
the Seller is a party.
(b) Except for the disposition of up to 1,564,400 shares of
Common Stock by the Seller to a charitable foundation and the subsequent
disposition of such shares by such foundation, the Seller shall not sell,
assign, transfer or otherwise dispose of any additional shares of Common Stock
for a period of twelve (12) months from the date hereof (the "Lock-up Period");
provided, however, that if the current market price of the Common Stock shall
increase by an amount greater than 20% from the Initial Price (as defined in
Section 8(d)) for a period of twenty (20) consecutive trading days, the Lock-up
Period shall be reduced to ninety (90) days. Notwithstanding the previous
sentence, the Seller shall be released from the restrictions of this paragraph
(b) in the event that a third party makes an offer to purchase a majority of the
outstanding shares of Common Stock of the Company.
4. Representations and Warranties and Covenants of the Purchaser
(a) Each of the several Purchasers represents and covenants
and warrants, with respect to itself:
(i) Such Purchaser has full power and authority to enter into
this Agreement and consummate the transactions contemplated hereby.
(ii) Such Purchaser has duly and validly authorized, executed
and delivered this Agreement and this Agreement constitutes a valid and
binding obligation of such Purchaser.
(iii) The transactions contemplated under this Agreement do
not require any filings under the Hart-Scott-Rodino Antitrust
Improvements Act of
1976, as amended.
(iv) Such Purchaser is an "accredited investor" as such term
is defined under Rule 501 of Regulation D of the Securities Act of
1933, as amended, and such Purchaser has such knowledge and experience
in financial and business matters that
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<PAGE>
it is capable of evaluating the merits and risks of its purchase of
the Shares.
(v) Such Purchaser is acquiring the Shares to be purchased or
received by it hereunder for its own account for the purpose of
investment and not with a view to or for sale in connection with any
distribution thereof.
(b) Each of the several Purchasers agrees with the Seller that
from date of the Closing to the Escrow Settlement Date (as defined herein), that
such Purchaser shall not engage in any short selling activities with respect to
the Company's Common Stock.
5. Conditions to Obligations of the Seller. The obligation of the
Seller to deliver to each of the several Purchasers the certificate or
certificates representing the number of Firm Shares reflected in such
Purchaser's Purchase Commitment shall be subject to the fulfillment of the
following conditions by such Purchaser:
(a) The representations and warranties of such Purchaser
contained in this Agreement shall be true and correct as if made at and as of
the time of the Closing and all of the covenants and agreements under this
Agreement to be complied with and performed by such Purchaser on or before the
Closing shall have been complied with and performed.
(b) No order shall have been issued by any court or regulatory
body enjoining or delaying the consummation of the transactions contemplated
hereby.
6. Conditions to Obligations of the Purchaser. The obligations of each
of the several Purchasers under this Agreement shall be subject to the
fulfillment of the following conditions:
(a) All of the representations and warranties of the Seller
contained in this Agreement shall be true and correct as if made at and as of
the time of the Closing and all of the covenants and agreements under this
Agreement to be complied with and performed by the Seller on or before the
Closing shall have been complied with and performed.
(b) No order shall have been issued by any court or regulatory
body enjoining or delaying the consummation of the transactions contemplated
hereby.
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<PAGE>
(c) Simultaneously with the execution of this Agreement, the
Seller shall have executed and delivered the Escrow Agreement and the Company
shall have executed and delivered the Registration Rights Agreement, each
substantially in the form attached hereto as Annex A and B, respectively.
7. The Closing
(a) The Closing shall take place at 9:00 a.m. local time on
March 10, 1997 at the offices of Arnold & Porter, 399 Park Avenue, New York,
N.Y. 10022, or at such other time and place as the Seller and the Purchasers may
mutually agree.
(b) At the Closing, the Seller shall deliver to each Purchaser
one or more certificates in transferable form representing that number of Firm
Shares equal to such Purchaser's Purchase Commitment; each such certificate
shall be duly endorsed in blank with signatures guaranteed or accompanied by
stock powers duly endorsed in blank with signatures guaranteed and with all
necessary documentary stamps duly affixed and cancelled. Each Purchaser shall
deliver to the Seller a bank cashier's or certified check, or shall cause the
wire transfer of funds to an account or accounts designated by the Seller, in
the amount determined with respect to such Purchaser in accordance with Section
2.
(c) At the Closing, the Seller shall deliver to the Escrow
Agent a certificate or certificates representing an aggregate of 1,564,400
shares of Common Stock, for deposit with the Escrow Agent pursuant to the terms
of the Escrow Agreement. Each such certificate shall be endorsed in blank with
signatures guaranteed or accompanied by stock powers duly endorsed in blank with
signatures guaranteed and with all necessary documentary stamps duly affixed and
cancelled. The Seller shall be deemed to be the beneficial owner of the Escrow
Shares until the Determination Date, as of which date the beneficial ownership
of the Shares shall be determined by the Escrow Agent in accordance with the
provisions of Section 8 hereof.
8. Purchaser's Rights with Respect to Escrow Shares
(a) On the third business day after the Determination Date
(the "Escrow Settlement Date"), each of the several Purchasers shall be entitled
to receive from
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<PAGE>
the Escrow Agent, the number of Escrow Shares (which shall mean the Escrow
Shares and any Registrable Securities as defined in the Registration Rights
Agreement issued with respect thereto) calculated as provided below:
(i) If the percentage decrease, if any, in the Determination
Price from the Initial Price is less than forty percent (40%), then
each Purchaser shall receive that number of Escrowed Shares equal to
the product of (x) the number of Firm Shares purchased by such
Purchaser pursuant to Section 1 and (y) the percentage difference
between the Determination Price and the Initial Price. For example, if
the Initial Price is $16.50 and the Determination Price is $14.50 (a
12% decrease) and the Purchaser has purchased 1,000 Firm Shares, the
Purchaser would receive 120 Escrow Shares.
(ii) If the percentage decrease, if any, in the Determination
Price from the Initial Price is forty percent (40%) or greater, then
the Purchaser shall receive that number of Escrowed Shares equal to the
product of (x) the Firm Shares purchased by such Purchaser pursuant to
Section 1 and (y) forty percent (40%). For example, if the Initial
Price is $16.50 and the Determination Price is $8.00 (51% decrease),
and the Purchaser has purchased 1,000 Firm Shares, the Purchaser would
receive 400 Escrow Shares.
(iii) The Seller shall be entitled to receive any Escrow
Shares not allocated to the several Purchasers under the terms of
clauses (i) and (ii) above and the Seller shall be entitled to receive
all of the Escrow Shares if the Determination Price is higher than or
equal to the Initial Price. For example, if the Initial Price is $16.50
and the Determination Price is $22.00, all of the Escrow Shares shall
be delivered to the Seller and the Purchasers shall receive no Escrow
Shares.
(b) If the amount of the Escrow Shares calculated in
accordance with paragraph (a) for any Purchaser includes fractional shares, such
fractional shares shall be rounded to zero and no Shares or cash compensation
will be distributed to the Purchasers on account of such fractional amounts.
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<PAGE>
(c) The right to receive the Escrow Shares as set forth in
paragraph (a) above shall only be available to the several Purchasers in
accordance with their respective Purchase Commitments. A Purchaser's right to
receive the Escrow Shares may not be assigned or transferred to any other person
by such Purchaser.
(d) For purposes of this Section 8, the following terms have
the following meanings.
"Determination Date" shall mean the fifth business day after
the date on which the Company publicly announces its
financial results for the third quarter of 1997.
"Determination Price" shall mean the Price per share of
Common Stock at the Determination Date and shall be deemed
to be the average of the daily closing price for 20
consecutive NASDAQ trading days before the Determination
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 in good faith by the Board of Directors of the
Company.
"Initial Price" shall mean $16.50.
(e) At any time before the Determination Date, the Seller
shall have the right to substitute for the Escrow Shares an amount in cash equal
to the Initial Price times the number of Escrow Shares on deposit. In the event
that cash is substituted for the Escrow Shares, any person's right to receive a
specified number of Escrow Shares hereunder shall be deemed to be converted into
the right to receive cash in an amount equivalent to the number of Escrow Shares
allocated to such person times the Initial Price.
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<PAGE>
9. Registration Rights and the Purchaser Put
(a) The Seller shall use all reasonable efforts to cause
the Company to register the Shares on an appropriate registration statement to
be filed under the Securities Act relating to the subsequent sale by each of the
several Purchasers of the Shares acquired by them hereunder, in accordance with
the terms of the Registration Rights Agreement. If for any reason a registration
statement with respect to the Shares beneficially owned by the Purchasers fails
to become effective on or before the 90th calendar day after the date of the
Closing (the "Final Registration Date"), the Seller agrees with each Purchaser
to repurchase, at the option of each Purchaser, in the manner and upon the
conditions set forth herein, the Firm Shares acquired by such Purchaser
hereunder for a repurchase price (the "Repurchase Price") equal to (A) the
product of Initial Price and the number of Firm Shares tendered for repurchase
to the Seller by such Purchaser (the "Base Resale Price"), plus (B) an amount
equal to the product of 7.0% and the Base Resale Price.
(b) Any Purchaser who wishes to exercise its rights under
Section 9(a) hereof must notify the Seller in writing within five (5) business
days after the Final Registration Date of the number of Firm Shares such
Purchaser intends to tender for repurchase (the "Repurchase Notice"). The Seller
and such Purchaser shall agree upon a date to close the repurchase (a
"Repurchase Settlement Date"), which date shall be a business day not later than
10 business days after the Repurchase Notice was delivered to the Purchaser. On
the Repurchase Settlement Date and on receipt of the funds as provided in the
next sentence, the Purchaser shall deliver to the Seller certificates in
transferable form representing the Firm Shares to be repurchased by the Seller,
each duly endorsed in blank with signatures guaranteed or accompanied by stock
powers duly endorsed in blank with signatures guaranteed and with all necessary
documentary stamps duly affixed and cancelled. The Seller shall deliver to the
Purchaser a bank cashier's or certified check, or shall cause the wire transfer
of funds to an account or accounts designated by the Purchaser, in the amount of
the Repurchase Price due to such Purchaser in accordance with Section 9(a).
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Each Purchaser delivering Firm Shares for repurchase represents and
warrants thereby that the Purchaser has the unrestricted right to sell, assign
and deliver to the Seller title to the Firm Shares tendered, free and clear of
any liens or encumbrances.
10. Expenses. Other than as set forth with respect to the Seller and
the Company in the Registration Rights Agreement and the Escrow Agreement, each
party hereto will pay its own expenses in connection with the transactions
contemplated hereby, whether or not such transactions shall be consummated.
11. Survival. All covenants, agreements, representations and warranties
made herein shall survive the execution and delivery of this Agreement and the
sale of the Shares pursuant hereto.
12. Brokerage. Each party hereto will indemnify and hold harmless the
others against and in respect of any claim for brokerage or other commissions
relative to this Agreement or to the transactions contemplated hereby, based in
any way on agreements, arrangements or understandings made or claimed to have
been made by such party with any third party.
13. Notices. All notices or communications shall be in writing and
sufficient if sent first class certified mail, return receipt requested, postage
prepaid or hand delivered, addressed as specified herein (i) if to any
Purchaser, to the address set forth below under such Purchaser's name on the
signature pages hereof; and (ii), if to the Seller:
Mr. Daniel Borislow
Chairman of the Board and
Chief Executive Officer
Tel-Save, Inc.
6805 Route 202
New Hope, PA 18938
Facsimile No.: 215-862-1083
The parties may change the address to which notices or
communications are to be sent to it by giving written notice of any such change
in the manner provided for herein.
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<PAGE>
14. Assignment. Neither this Agreement nor any right hereunder shall be
assigned by the Seller or by any Purchaser.
15. Successors. This Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the Seller and each of the several
Purchasers.
16. Entire Agreement. This Agreement, together with the Registration
Rights Agreement and the Escrow Agreement, constitutes the entire agreement and
understanding among the parties hereto in respect of the transactions
contemplated hereby, and supersedes all prior agreements, arrangements and
understandings relating to the subject matter hereof.
17. Amendment; Waiver. This Agreement may not be amended or modified
except by a writing or writings signed by the party against whom the
modification or amendment is sought to be enforced. Each party may, at its
option, waive in writing any and all conditions herein contained to which its
obligations hereunder are subject.
18. Miscellaneous; Descriptive Headings. (a) The rights and obligations
of each of the Purchasers herein with respect to the Seller shall be several and
not joint. Nothing in this Agreement shall constitute an agreement between a
Purchaser, on the one hand, and any other Purchaser or Purchasers, on the other.
(b) The descriptive headings contained in this Agreement
are for convenience of reference and shall not affect in any way the meaning or
interpretation of this Agreement.
19. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same instrument.
20. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the date first above written.
DANIEL BORISLOW
-----------------------------
MASSACHUSETTS FINANCIAL SERVICES
500 Boyleston Street
Boston, MA 02116
(617) 954-6603 (Fax)
By:
------------------------------
Name:
-------------------------
Title:
------------------------
Purchase Commitment:
------------------------------
PUTNAM OTC EMERGING GROWTH FUND
One Post Office Square
Boston, MA 02109
(617) 292-1784 (Fax)
By:
------------------------------
Name:
-------------------------
Title:
------------------------
Purchase Commitment:
------------------------------
CONSECO CAPITAL MANAGEMENT
11825 N. Pennsylvania Street
Carmel, IN 46032-4555
(317) 817-6247 (Fax)
By:
------------------------------
Name:
-------------------------
Title:
------------------------
Purchase Commitment:
------------------------------
-12-
<PAGE>
MFS/SUN LIFE SERIES TRUST on behalf of
CAPITAL APPRECIATION SERIES
500 Boyleston Street
Boston, MA 02116
(617) 954-6603 (Fax)
By:
------------------------------
Name:
-------------------------
Title:
------------------------
Purchase Commitment:
------------------------------
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
on behalf of CAPITAL APPRECIATION VARIABLE
ACCOUNT, a separate account
500 Boyleston Street
Boston, MA 02116
(617) 954-6603 (Fax)
By:
------------------------------
Name:
-------------------------
Title:
------------------------
Purchase Commitment:
------------------------------
MFS GROWTH OPPORTUNITIES FUND
500 Boyleston Street
Boston, MA 02116
(617) 954-6603 (Fax)
By:
------------------------------
Name:
-------------------------
Title:
------------------------
Purchase Commitment:
------------------------------
-13-
<PAGE>
MFS SERIES TRUST II on behalf of
MFS EMERGING GROWTH FUND
500 Boyleston Street
Boston, MA 02116
(617) 954-6603 (Fax)
By:
------------------------------
Name:
-------------------------
Title:
------------------------
Purchase Commitment:
------------------------------
- 14 -
ESCROW AGREEMENT
AGREEMENT, dated as of March 10, 1997, among each of the several
purchasers whose names appear on the signature pages hereof (each a "Purchaser"
and collectively, the "Purchasers"), Mr. Daniel Borislow ("Borislow") and Marine
Midland Bank, as Escrow Agent (the "Escrow Agent"). Capitalized terms used
herein without definition shall have the meaning set forth in the Stock Purchase
Agreement described in the recitals below.
W I T N E S S E T H:
WHEREAS, Borislow is the owner beneficially and of record of
19,860,000 shares of common stock, par value $.01 per share (the "Common Stock")
of Tel-Save Holdings, Inc., a Delaware corporation ("Holdings");
WHEREAS, Borislow desires to (i) sell, in the aggregate, 3,911,000
shares of Common Stock (the "Firm Shares") to the several Purchasers in
accordance with their respective Purchase Commitments and (ii) to place an
additional 1,564,400 of shares of Common Stock in escrow (the "Escrow Shares")
for the benefit of the several Purchasers, in proportion to their Purchase
Commitments, for distribution to the several Purchasers under the terms of the
Stock Purchase Agreement, dated the date hereof, among Borislow and the
Purchasers (the "Stock Purchase Agreement") and this Agreement; and
WHEREAS, the Escrow Agent has agreed to hold in escrow the Escrow
Shares pursuant to the terms of this Agreement.
NOW THEREFORE, in consideration of the material covenants and
agreements herein contained, the parties hereto agree as follows:
1. Escrow Agent. Borislow and Purchasers hereby appoint and
designate the Escrow Agent as escrow agent for the purposes set forth herein,
and the Escrow Agent hereby accepts such appointment under the terms and
conditions set forth herein.
2. Escrow Deposit. (a) At the Closing, Borislow shall deliver to
the Escrow Agent certificates for the Escrow Shares, together with stock powers
executed by Borislow in blank. For purposes of this
<PAGE>
Agreement, the term "Escrow Shares" includes any securities issued with respect
to such Shares and constituting Registrable Securities under the Registration
Rights Agreement. At any time securities that constitute Registrable Securities
are received by Borislow, Borislow shall deliver such additional Escrow Shares
to the Escrow Agent.
(b) The Escrow Agent shall hold and dispose of all of the Shares in
the Escrow Deposit (as defined below) in accordance with Section 3 of this
Agreement, and shall act as Escrow Agent in accordance with the terms and
provisions of this Agreement.
(c) Subject to the provisions hereof, the Escrow Agent agrees to
hold such amount (including any dividends or other distributions issued on such
Escrow Shares during such period, which dividends and other distributions shall
be distributed to the Escrow Agent for further distribution in accordance with
this Agreement) in a separate and distinct account (the "Escrow Deposit").
Neither Borislow nor any of the Purchasers shall permit the Escrow Deposit to be
subject to any Lien or attachment of any creditor of any party hereto and shall
take all action to ensure that it be used solely for the purposes and subject to
the conditions set forth in this Agreement and the Stock Purchase Agreement.
(d) Borislow shall remain the beneficial owner of the Escrow Shares
until the Determination Date and shall be entitled to all of the benefits of
beneficial ownership including any cash dividends or similar distributions
(other than securities constituting Registrable Securities). Borislow shall have
the right to vote the Escrow Shares during the period of time in which such
Shares are held by the Escrow Agent.
3. Release of the Escrow Deposit
3.1. Notice of Claim. On the Determination Date, the Purchasers and
Borislow shall calculate the number of Escrow Shares that each of the Purchasers
is entitled to receive, if any, in accordance with Section 8 of the Stock
Purchase Agreement. Such amount and the calculation used in determining such
amount shall be set forth in a Notice of Claim, which Notice shall be delivered
to the Escrow Agent by the Purchasers and Borislow prior to the Escrow
Settlement Date.
-2-
<PAGE>
3.2. Dispute of Escrow Shares. (a) Subject to paragraph (b) below,
on the Escrow Settlement Date, the Escrow Agent shall deliver the amount of the
Escrow Shares, if any, as set forth in such Notice of Claim to each of the
Purchasers.
(b) If the Escrow Agent shall have received a written objection
from any of the Purchasers or Borislow to the amount of Escrow Shares set forth
in any of the Notices of Claim, the Escrow Agent shall not make such delivery of
Escrow Shares until otherwise directed pursuant to either: (i) a written
instruction signed by Borislow and the relevant Purchaser; or (ii) a
nonappealable final order, decree or judgment by a court of competent
jurisdiction determining whether and to what extent such Purchaser is entitled
to the amount set forth in the Notice of Claim.
3.3. Borislow Entitled to Escrow Shares. The Escrow Agent shall
deliver to Borislow any of the Escrow Shares remaining after distribution of the
Escrow Shares to the Purchasers under clauses (i) and (ii) of Section 8(a) of
the Stock Purchase Agreement. If the Escrow Agent determines that the Purchasers
are not entitled to receive any of the Escrow Shares pursuant to clause (iii) of
Section 8(a) of the Stock Purchase Agreement, the Escrow Agent shall deliver to
Borislow the total number of Escrow Shares in the Escrow Deposit.
4. Responsibilities of the Escrow Agent. The Escrow Agent's
acceptance of its duties under this Agreement is subject to the following terms
and conditions, which the parties hereto agree shall govern and control with
respect to its rights, duties, liabilities and immunities:
(a) except as to the due execution and delivery by the
Escrow Agent of this Agreement, it makes no representation and has
no responsibility as to the validity of this Agreement or of any
other instrument referred to herein, or as to the correctness of
any statement contained herein, and it shall not be required to
inquire as to the performance of any obligation under the Stock
Purchase Agreement;
(b) the Escrow Agent shall be protected in acting upon any
written notice, request, waiver, consent, receipt or other paper or
document, not only as to its due execution and the validity and
effectiveness of its provisions, but also as to
-3-
<PAGE>
the truth of any information therein contained, which it in good
faith believes to be genuine and what it purports to be;
(c) the Escrow Agent shall not be liable for any error of
judgment, or for any act done or step taken or omitted by it in
good faith, or for any mistake of fact or law, or for anything
which it may do or refrain from doing in connection therewith,
except its own negligence or misconduct;
(d) the Escrow Agent may consult with competent and
responsible legal counsel selected by it and it shall not be liable
for any action taken or omitted by it in good faith in accordance
with the advice of such counsel;
(e) the Escrow Agent shall have no duties or
responsibilities except those expressly set forth herein, and it
shall not be bound by any modification of this Agreement unless
such modification is in writing and signed by the other parties
hereto and, if its duties as Escrow Agent hereunder are affected,
unless it shall have given written consent thereto.
5. Amendment and Termination. This Agreement may be amended or
terminated only by the written agreement of the parties hereto.
6. Fees of Escrow Agent. Borislow agrees to pay the Escrow Agent
its agreed upon compensation, as set forth in a separate agreement, for its
services as Escrow Agent hereunder promptly upon request therefor, and to
reimburse the Escrow Agent for all expenses incurred by it in connection with
its duties hereunder (including reasonable fees, expenses and disbursements of
counsel to the Escrow Agent) and Borislow shall indemnify it against and hold it
harmless from any and all claims, liabilities, costs, payments and expenses,
including fees of counsel (who may be selected by the Escrow Agent), for
anything done or omitted by it in the performance of this Agreement, except as a
result of its own negligence or misconduct.
7. Notices. All notices and other communications hereunder shall be
delivered or mailed by first-class registered or certified mail, postage
prepaid, or by facsimile with telephonic confirmation at the address specified
for each as follows:
-4-
<PAGE>
(a) If to Borislow or the Purchasers, at
their respective addresses as set forth
in the Stock Purchase Agreement.
(b) If to the Escrow Agent:
Marine Midland Bank
140 Broadway
New York, New York 10005
Attention: Corporate Trust Department
Telephone No.: 212-658-6041
Facsimile No.: 212-658-6425
(c) If to Borislow:
Tel-Save Holdings, Inc.
6805 Route 202
New Hope, PA 18938
Facsimile No.: 215-862-1083
Telephone No.: 215-862-1092
8. Governing Law. This Agreement shall be construed, performed and
enforced in accordance with the laws of the State of New York, without reference
to or application of rules or principles of conflicts of law.
9. Third Parties. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted assigns.
10. Headings. The headings in this Agreement are for convenience of
reference only and shall not define or limit the provisions hereof.
11. Counterparts. This Agreement may be executed in several
counterparts, each of which is an original but all of which together shall
constitute one instrument.
- 5 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as of the date first above written.
DANIEL BORISLOW
MARINE MIDLAND BANK
By:
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
CONSECO CAPITAL MANAGEMENT
By:
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
PUTNAM OTC EMERGING GROWTH
FUND
By:
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
MASSACHUSETTS FINANCIAL
SERVICES
By:
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
-6-
<PAGE>
MFS/SUN LIFE SERIES TRUST on
behalf of CAPITAL APPRECIATION
SERIES
By:
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
SUN LIFE ASSURANCE COMPANY OF
CANADA (U.S.) on behalf of
CAPITAL APPRECIATION VARIABLE
ACCOUNT, a separate account
By:
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
MFS GROWTH OPPORTUNITES FUND
By:
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
MFS SERIES TRUST II on behalf
of MFS EMERGING GROWTH FUND
By:
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
- 7 -
