SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
January 5, 1999
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DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
Tel-Save.com, Inc.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
Delaware 0-26728 23-2827736
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(STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
6805 Route 202, New Hope, PA 18938
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
215-862-1500
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
For a discussion of transactions involving the disposition and sale of
certain assets of Tel-Save.com, Inc. and its subsidiaries (the "Company"), see
Item 5 below.
ITEM 5. OTHER EVENTS
On January 5, 1999, Mr. Daniel Borislow, a founder of the Company and its
Chairman of the Board and Chief Executive Officer, resigned as a director and
officer of the Company, and, upon such resignation, Mr. Gabriel Battista became
a director and the Chairman of the Board, Chief Executive Officer and President
of the Company. Mr. Battista's employment agreement with the Company provides,
among other things, for his employment for three years and his right to nominate
a majority of the Board of Directors of the Company at the next annual meeting
of shareholders. Copies of Mr. Battista's employment, indemnification and stock
option agreements are attached as Exhibits 10.1--10.4 to this Form 8-K. The
above summary of the terms of Mr. Battista's employment is qualified in its
entirety by reference to such agreements.
On or about the same time as Mr. Borislow's departure, the Company entered
into various agreements and engaged in various transactions with Mr. Borislow
and certain entities in which he or his family has an interest:
o The Company paid $1,000,000 to Mr. Borislow, assigned certain
automobiles to him, and continued certain of his health and medical benefits and
director and officer insurance. The Company also agreed that, so long as Mr.
Borislow owns beneficially at least two percent (2%) of the Common Stock (on a
fully diluted basis), Mr. Borislow would be entitled to: registration rights
with respect to his shares of Common Stock and the right to require the Company
to use a portion of proceeds from any securities offering by the Company to
repurchase Mr. Borislow's securities of the Company. The Company also agreed
that, so long as Mr. Borislow had such beneficial ownership, the Company would
not, without the prior written consent of Mr. Borislow and subject to certain
exceptions: (a) engage in certain significant corporate transactions, including
the sale or encumbrance of substantially all of its assets, mergers and
consolidations and certain material acquisitions, or, (b) for a period of 18
months from the agreement date, offer or sell any of its Common Stock unless and
until Mr. Borislow has sold or otherwise disposed of all of the shares of Common
Stock held by him on the agreement date. In turn, Mr. Borislow terminated his
employment with the Company and agreed not to compete with the Company for at
least one year. Mr. Borislow also agreed to guarantee up to $20,000,000 of the
Company's obligations in connection with the America Online, Inc. ("AOL")
investment noted below.
o On January 5, 1999, the Company, in exchange for a total of 783,706
shares of Company common stock, (i) sold to Jimlew Capital, L.L.C., a company
owned by Mr. Borislow, (a) all of the capital stock of Emergency Transportation
Corporation (a wholly owned subsidiary of the Company, the primary asset of
which is an interest in a jet airplane), valued at approximately $8.7 million,
and (b) all of the real property constituting the Company's headquarters in New
Hope, Pennsylvania, valued at approximately $2.0 million, and (ii) released Mr.
Borislow from an obligation for approximately $4.7 million borrowed from the
Company. Mr. Borislow agreed to lease to the Company a portion of the
headquarters property at a base monthly rent of $12,500. The
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subsidiary stock and the real property were valued based on the book value of
these assets, which the management of the Company believes approximated the fair
market value of these assets on the date of exchange. The Company common stock
exchanged for the assets was valued at its market value on the date of the
exchanges. The Company had previously determined that it would be desirable to
dispose of these assets and accordingly believes that the ownership of these
assets is not required for the continued operation of the Company's business.
o On January 5, 1999, pursuant to an agreement effective as of December
31, 1998, the Company assigned to a trust for the benefit of Mr. Borislow's
children the Company's interest in $53,700,000 principal amount of subordinated
notes of Communication TeleSystems International d.b.a. WorldxChange
Communications, in exchange for $62,545,000 aggregate principal amount of the
Company's 4 1/2% convertible subordinated notes due 2002 and 5% convertible
subordinated notes due 2004 owned by the trust. Under the terms of the exchange,
the Company is entitled to receive from the trust 32% of all interest payments
under the WorldxChange Notes and has provided the trust with a limited guarantee
of collection under the WorldxChange Notes. The exchange rate was determined
based on the Company's assessment of the fair values of the WorldxChange Notes
(including the Company's limited guarantee and reflecting the interest right)
and of the Company's subordinated notes given in exchange, which assessment was
supported by the opinion of an independent investment banking firm as to the
fairness to the Company of the consideration received.
o As part of its efforts to reduce its outstanding debt through induced
conversions of its outstanding convertible subordinated notes into shares of its
Common Stock and repurchases of such notes, on January 5, 1999, the Company, in
an open market transaction effected through an investment bank, purchased from a
trust for the benefit of Mr. Borislow's children $65,080,000 aggregate principal
amount of the Company's 4 1/2% convertible subordinated notes due 2002 and 5%
convertible subordinated notes due 2004 owned by the trust for $56,246,265 in
cash. With this most recent acquisition, the Company had reduced the principal
amount outstanding of its subordinated convertible notes to $114,582,000
($71,712,000 of 4-1/2% notes; $42,870,000 of 5% notes), of which approximately
$64,000,000 continues to be held by one of such trusts.
The agreements described above are attached as Exhibits 10.5-10.10 to this
Form 8-K. The above summaries of the transactions are qualified in their
entirety by reference to such agreements.
Prior to Mr. Borislow's resignation, the Company also entered into
significant new agreements with AT&T Corp. ("AT&T") and with AOL.
As previously announced, the Company entered into new agreements with AT&T,
effective as of December 29 and 31, 1998. The new agreements give the Company
the right to acquire high speed DS-3 capacity for the Company's OBN Network from
AT&T through an "indefeasible right to use" arrangement. These arrangements are
similar to an ownership interest in the broadband fiber capacity and give the
Company the right to use the capacity at effective rates significantly less than
the Company would pay by buying services from AT&T. The Company's use of this
capacity is expected to reduce significantly its costs of providing services
over its OBN Network. The Company will make in the first quarter 1999 a one-time
payment of approximately $13.2 million for these rights. At the same time, the
Company also entered into an amendment to its Master Carrier
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Agreement with AT&T that improves the pricing structure for services that the
Company buys from AT&T and sets different expiration dates for certain services.
Redacted copies of the Company's new agreements with AT&T are attached as
Exhibits 10.11--10.13 to this Form 8-K. The above summary of terms is qualified
in its entirety by reference to such agreements.
As announced on January 5, 1999, the Company amended its Telecommunications
Marketing Agreement with AOL, and AOL made a further equity investment in the
Company. The amendment of the agreement with AOL, which was effective as of
October 1, 1998, extends the term of the arrangement until 2003 (subject to
AOL's right on or after June 30, 2000 to market non-exclusively the services
previously marketed exclusively for the Company in exchange for the elimination
of the fixed quarterly payments that are otherwise payable by the Company),
enhances for the Company the fee structure to provide for fixed quarterly
payments during the term rather than indefinite profit-sharing, changes certain
terms of the Company's rights to be the exclusive provider of various
telecommunications services to AOL subscribers, alters certain terms of the
online and offline marketing arrangements between the Company and AOL and
provides for the implementation of the offering of wireless telecommunications
services to the AOL subscribers. In connection with the amendments, AOL
purchased a total of 4,121,372 shares of common stock of the Company for
$55,000,000 in cash and the surrender of rights to purchase 5,076,016 shares of
common stock of the Company pursuant to various warrants held by AOL. AOL agreed
to end further vesting under the outstanding performance warrant and retained
warrants exercisable for 2,721,984 shares of Company common stock. In connection
with these exchanges and purchases, the Company agreed to reimburse AOL, during
the period commencing on June 1, 1999 and ending on September 30, 2000, for
realized losses up to a specified amount resulting from a decline in the value
of the Company's common stock from AOL's purchase price. AOL also has the right,
upon the occurrence of certain events (which include the breach by the Company
of certain material agreements), to put back to the Company all of the shares
(at AOL's purchase price) and warrants (at AOL's booked amount therefor) held by
AOL. Tel-Save.com, Inc. agreed to secure its obligations under the investment
agreement with a pledge of all of its assets. Tel-Save.com, Inc. also agreed to
limitations on the incurrence of indebtedness and granted certain registration
rights to AOL.
As of January 11, 1999, there were 58,258,544 issued and outstanding shares
of common stock, 8,676,091 shares held in treasury, 2,721,984 shares reserved
for issuance on exercise of warrants (AOL), 4,596,059 shares reserved for
issuance on conversion of outstanding convertible subordinated notes, 10,230,810
shares reserved for issuance upon exercise of employee stock options and
3,411,026 shares reserved for issuance upon exercise of the stock purchase
rights to be distributed to record holders as of December 31, 1998.
Certain of the statements contained herein may be considered
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such
statements are identified by the use of forward-looking words or phrases,
including, but not limited to, "estimates", "projected", "expects", "expected",
"anticipates" and "anticipated". These forward-looking statements are based on
the Company's current expectations. Although the Company believes that the
expectations reflected in such forward-
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looking statements are reasonable, there can be no assurance that such
expectations will prove to have been correct. Forward-looking statements involve
risks and uncertainties and the Company's actual results could differ materially
from the Company's expectations. Important factors that could cause such actual
results to differ materially include, among others, adverse developments in the
Company's relationship with AT&T or AOL, increased price competition for long
distance service, failure of the marketing of long distance services under the
AOL Agreement or the need to incur greater marketing costs to maintain expected
customer bases, attrition in the number of end users, increased implementation
of PIC freezes by local telephone companies and changes in governmental policy,
regulation and enforcement. The Company undertakes no obligation to update its
forward-looking statements.
For a further list and summary of these and other factors that could cause
actual results to differ materially, see "Risk Factors" attached as Exhibit 99.1
to this Form 8-K.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Tel-Save.com, Inc.
(Registrant)
Date: January 20, 1999 By: /s/ Aloysius T. Lawn, IV
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General Counsel
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EXHIBIT INDEX
3(i) Certificate of Ownership and Merger Merging Tel-Save.com, Inc. into
Tel-Save Holdings, Inc. (Changing the name of the Registrant).
10.1 Employment Agreement, dated as of November 13, 1998, between the Company
and Gabriel Battista.
10.2 Indemnification Agreement, dated as of December 28, 1998, between the
Company and Gabriel Battista.
10.3 Stock Option Agreement, dated as of November 13, 1998, between the
Company and Gabriel Battista.
10.4 Stock Option Agreement, dated as of November 13, 1998, between the
Company and Gabriel Battista.
10.5 Severance Agreement, dated as of December 31, 1998, between the Company
and Daniel Borislow.
10.6 Purchase Agreement regarding the stock of Emergency Transportation
Corporation, dated as of January 5, 1999, between the Company and Jimlew
Capital, L.L.C.
10.7 Exchange Agreement, dated as of December 31, 1998, among the Company,
Tel-Save, Inc. and Mark Pavol, as Trustee of that certain D&K Grantor
Retained Annuity Trust dated June 15, 1998.
10.8 Registration Rights Agreement, dated as of December 31, 1998, among the
Company, Daniel Borislow, Mark Pavol, as Trustee of that certain D&K
Grantor Retained Annuity Trust, dated June 15, 1998 and the Trustee of
that certain D&K Grantor Retained Annuity Trust II.
10.9 Agreement of Purchase and Sale of Real Property, dated as of January 5,
1999, between Tel-Save, Inc. and Jimlew Capital, L.L.C.
10.10 Lease, dated as of January 5, 1999, between Tel-Save, Inc. and Jimlew
Capital, L.L.C.
10.11 IRU Capacity Agreement, dated as of December 29, 1998, between Tel-Save,
Inc. and AT&T Corp.*
10.12 IRU Capacity Agreement, dated as of December 30, 1998, between Tel-Save,
Inc. and AT&T Corp.*
10.13 Amendment, dated as of January 1, 1999, between Tel-Save, Inc. and AT&T
Corp., which amends that certain Master Carrier Agreement, dated April
22, 1998.*
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10.14 1998 Long-Term Incentive Plan of the Company.
99.1 Risk Factors.
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* Portions of this document, including the exhibits thereto, have been
omitted, as noted therein.
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EXHIBIT 3(i)
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
TEL-SAVE.COM, INC.
INTO
TEL-SAVE HOLDINGS, INC.
(to be renamed Tel-Save.com, Inc.)
Tel-Save Holdings, Inc., a corporation organized and existing under and by
virtue of the laws of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That this corporation was incorporated on the 13th day of June,
1995, pursuant to the General Corporation Law of the State of Delaware.
SECOND: That this corporation owns all of the outstanding shares of the
stock of Tel-Save.com, Inc., a corporation incorporated on the 16th day of
November, 1998, pursuant to the General Corporation Law of the State of
Delaware.
THIRD: That this corporation, by the following resolutions of its Board of
Directors, duly adopted at a meeting of the Board held on the 13th day of
November, 1998, determined to and did merge into itself said Tel-Save.com, Inc.:
RESOLVED, that Tel-Save Holdings, Inc. merge, and it hereby does merge
into itself said Tel-Save.com, Inc., and assumes all of its obligations;
and
RESOLVED, that the merger shall be effective upon the date of filing
with the Secretary of State of Delaware; and
RESOLVED, that upon such date of filing, the name of the surviving
corporation (Tel-Save Holdings, Inc.) shall be changed to Tel-Save.com,
Inc.; and
RESOLVED, that the terms and conditions of the merger are as follows:
1. Upon the occurrence of such merger, all shares of
Tel-Save.com, Inc. shall be cancelled, and the shares of Tel-Save
Holdings, Inc. (renamed Tel-Save.com, Inc.) shall thereafter
constitute the shares of the surviving corporation.
2. The Certificate of Incorporation of Tel-Save Holdings, Inc.
shall remain and be the Certificate of Incorporation of the surviving
corporation until the same shall be altered or amended according to
the provisions thereof and in the manner permitted by the statutes of
the State of Delaware.
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3. The Bylaws of Tel-Save Holdings, Inc. shall remain and be the
Bylaws of the surviving corporation until the same shall be altered or
amended according to the provisions thereof and in the manner
permitted by the statutes of the State of Delaware.
4. The first annual meeting of the shareholders of the surviving
corporation to be held after the effective date of the merger shall be
the annual meeting provided, by the Bylaws of the said corporation,
for the fiscal year 1998.
5. All persons who at the date when the merger shall become
effective shall be the executive or administrative officers of
Tel-Save Holdings, Inc. shall be and remain like officers of the
surviving corporation until the board of directors of such corporation
shall elect their respective successors.
6. The surviving corporation shall pay all expenses of carrying
this agreement into effect and of accomplishing this merger.
7. When the merger shall have become effective, all and singular,
the rights, privileges, powers and franchises of each of the
corporations parties to this merger, whether of a public or a private
nature, and all property, real, personal and mixed, and all debts due
to each of said corporations, on whatever account, as well for stock
subscriptions as all other things in action or belonging to either of
the said corporations shall be vested in the surviving corporation;
and all property, rights, privileges, powers and franchises , and all
and every other interest shall be thereafter as effectually the
property of the surviving corporation as they were of the constituent
corporations, and the title to any real or personal property, whether
by deed or otherwise, vested in each of such constituent corporations
shall not revert or be in any way impaired by reason hereof; provided,
however, that all rights of creditors and all liens upon any property
of each of said constituent corporations shall be preserved
unimpaired, limited in lien to the property affected by such liens
immediately prior to the time of the said merger, and all debts,
liabilities and duties of Tel-Save.com, Inc. shall thenceforth attach
to the surviving corporation and may be enforced against it to the
same extent as if said debts, liabilities and duties had been incurred
or contracted by it; and
FURTHER RESOLVED, that the proper officers of this corporation
be, and they hereby are, directed to make and execute a Certificate of
Ownership and Merger setting forth a copy of the resolutions to merge
said Tel-Save.com, Inc. and assume its liabilities and obligations,
and the date of adoption thereof, and to cause the same to be filed
with the Secretary of State and a certified copy recorded in the
office of the Recorder of Deeds of New Castle County and to do all
acts and things whatsoever, whether within or without the State of
Delaware, which may be in anywise necessary or proper to effect said
merger.
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FOURTH: That upon filing of this Certificate, the name of this corporation
shall be changed to Tel-Save.com, Inc. pursuant to Subsection (b) of ss.253 of
the General Corporation Law of the State of Delaware.
FIFTH: Anything herein or elsewhere to the contrary notwithstanding, this
merger may be amended or terminated and abandoned by the Board of Directors of
Tel-Save Holdings, Inc. at any time prior to the date of filing the merger with
the Secretary of State.
IN WITNESS WHEREOF, said Tel-Save Holdings, Inc. has caused this
Certificate to be signed and attested to by its duly authorized officers this
16th day of November, 1998.
TEL-SAVE HOLDINGS, INC.
(to be renamed Tel-Save.com, Inc.)
By:
-------------------------------
Name:
Title:
ATTEST:
By:
-------------------------------
Name:
Title:
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EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
the 13th day of November, 1998 among Tel-Save Holdings, Inc., a Delaware
corporation (the "Company"), Gabriel Battista ("Employee") and Daniel Borislow
("DB").
WHEREAS, Company desires to employ Employee as Chairman of the Board and
Chief Executive Officer of the Company and in certain other capacities, and
Employee desires to be employed by Company;
WHEREAS, DB, the holder of a substantial number of shares of common stock
of Company (the "Common Stock"), desires that Employee enter into this agreement
with Company and is willing to enter into certain arrangements to induce
Employee to execute this Agreement; and
WHEREAS, Company and Employee desire to enter into this Agreement that sets
forth the terms and conditions of said employment.
NOW THEREFORE, in consideration of the foregoing, the mutual covenants set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the undersigned hereby agree as
follows:
1. EMPLOYMENT. Company agrees to employ Employee, and Employee accepts such
employment and agrees to serve Company, on the terms and conditions set forth
herein. Except as otherwise specifically provided herein, Employee's employment
shall be subject to the employment policies and practices of Company in effect
from time to time during the term of Employee's employment hereunder (including,
without limitation, its practices as to tax reporting and withholding).
2. TERM OF AGREEMENT. The term of Employee's employment hereunder shall
commence on or prior to December 31, 1998 (the date when Employee commences
employment hereunder, the "Commencement Date") and shall continue in effect for
a period of three years thereafter, except as hereinafter provided (the "Term").
Notwithstanding the foregoing, Employee shall not assume the Positions (as
defined in Section 3.1 hereof) until January 4, 1998. For purposes of this
Section 2, Employee shall be deemed to have commenced employment hereunder in
accordance with his obligations under this Agreement if an Employment
Presentment (as defined in Section 4.9 hereof) takes place.
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3. POSITIONS AND DUTIES.
3.1 OFFICER POSITIONS. Except as may otherwise be agreed upon between
Company and Employee, Employee shall perform such duties and have such
responsibilities as Chairman of the Board and Chief Executive Officer of the
Company and Chairman of the Board and Chief Executive Officer of Tel-Save, Inc.,
a Pennsylvania corporation which is a wholly-owned subsidiary of Company (the
"Positions), or such other duties and responsibilities consistent with the
foregoing duties and responsibilities as may be reasonably assigned or delegated
to him from time to time by Company's Board of Directors (the "Board"),
including, without limitation, but subject to the next sentence, service as an
employee, officer or director of affiliates (as that term is defined in Rule 405
under the Securities Act of 1933, as amended (the "Act")) (hereinafter,
"Affiliates") of Company, without additional compensation. Notwithstanding the
foregoing, Employee shall not be obligated to assume any position with any
entity other than Company unless Employee is provided with evidence reasonably
satisfactory to Employee that Employee will be covered with respect to his
services in such position by insurance and indemnification arrangements
reasonably acceptable to Employee. References in this Agreement to Employee's
employment with Company shall be deemed to refer to employment with Company
and/or, as the case may be, an Affiliate, as the context requires. Employee
shall perform his duties and responsibilities to the best of his abilities
hereunder in a diligent manner. Employee shall devote substantially all of his
working time and efforts to the business and affairs of Company; provided,
however, that nothing in this Agreement shall preclude Employee from (a)
engaging in charitable activities and community affairs, (b) managing his
personal investments and affairs and (c) serving as a non-employee director (or
similar position) of up to five (5) corporations or other entities, provided
that such entities are not Competitors (as defined in Section 13 hereof).
3.2 DIRECTOR POSITION. Company will use its best efforts to cause Employee
to be elected to the Board as a Class I director of Company effective as of the
Commencement Date.
4. COMPENSATION AND RELATED MATTERS.
4.1 BASE SALARY. During the Term, Company shall pay to Employee a base
salary ("Base Salary") at the rate of five hundred thousand dollars ($500,000)
per year, which Base Salary for the full Term shall be (a) paid to Employee on
the Commencement Date and (b) subject to the other terms of this Agreement.
4.2 PERFORMANCE BONUS. Employee shall be entitled to receive bonuses
appropriate for his position based on periods not less frequent than annual and
based on performance-based criteria consistent with previous practices relating
to bonus compensation for senior executive officers of Company, which criteria
shall be established as soon as practicable after the next meeting of the
stockholders of Company in 1999 at which directors are to be elected (the "Next
Election Meeting").
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4.3 SALE OF COMPANY BONUS. In the event a Bonus Transaction (as defined
below) occurs, Employee shall be entitled to receive from Company on the date of
the closing of such Bonus Transaction (a) one million dollars ($1,000,000), if
the price per share received by holders of the Common Stock, in cash and/or, as
the case may be, securities or other property (the "Stockholder Consideration")
in connection with the Bonus Transaction is equal to, or less than, twenty
dollars ($20.00) per share (the "Per Share Price"), and (b) three million
dollars ($3,000,000) if the Stockholder Consideration is in excess of the Per
Share Price. For purposes of this Section 4.3, (a) the Per Share Price shall be
deemed to be increased or decreased, as the case may be, in the event of any
change in the outstanding Common Stock after the date hereof and prior to the
closing of a Bonus Transaction by reason of any share split, share dividend,
recapitalization, merger, consolidation, combination or exchange of shares or
other similar corporate change (each a "Stock Change") in order to reflect the
economic effect of such Stock Change on the holders of Common Stock, and (b)
"Bonus Transaction" shall mean (i) a merger or consolidation of the Company
which results in an entity of which less than a majority of the voting interests
are held by individuals and entities who were holders of the Common Stock at the
time of commencement of such transaction, (ii) a sale of all or substantially
all of the assets of Company or (iii) a transaction which results in the Common
Stock no longer being required to be registered under the Securities Exchange
Act of 1934, as amended.
4.4 BENEFIT PLANS AND ARRANGEMENTS. Employee shall be entitled to
participate in and to receive benefits under Company's employee benefit plans
and arrangements (including, but not limited to, bonus plans) as are made
available to the Company's senior executive officers during the Term, which
employee benefit plans and arrangements may be altered from time to time at the
discretion of the Board (the "Benefits").
4.5 PERQUISITES. During the Term, Employee shall be entitled to receive
fringe benefits as are made available to Company's senior executive officers;
provided, that Employee shall, in any event, (a) be provided, at the Company's
expense, with the use of an automobile of his choice and full insurance coverage
therefor, (b) so long as the Company shall own or lease a corporate aircraft, be
provided the use thereof for travel on Company business (and for personal use
upon reimbursement of the Company for the use thereof at the Company's cost) and
(c) otherwise be entitled to first class flight accommodations on commercial
aircraft when traveling on Company business.
4.6 EXPENSES. Company shall promptly reimburse Employee for all
out-of-pocket expenses related to Company's business that are actually paid or
incurred by him in the performance of his services under this Agreement and that
are incurred, reported and documented in accordance with Company's policies.
4.7 APARTMENT OF EMPLOYEE. During the Term, the Company shall provide
Employee, at Company's expense, with a furnished rental residence apartment in
the New Hope, Pennsylvania area which is reasonably acceptable to Employee.
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4.8 STOCK OPTIONS.
(a) GRANT OF OPTIONS. Effective on the date hereof, Employee shall be
granted options to purchase 1,000,000 shares of Common Stock (the "First
Option") and 650,000 shares of the Common Stock (the "Second Option") in
accordance with the stock option agreements to be mutually agreed to, and
executed by, Company and Employee prior to the Commencement Date, which stock
option agreements shall contain terms no less favorable to Employee than those
contained in the most favorable of the option agreements currently in effect
between Company and its officers and employees, respectively (the "Option
Agreements"). The First Option and the Second Option shall be referred to
herein, collectively, as the "Options" and, individually, as an "Option." The
First Option shall have an exercise price equal to $10.4375 per share, which is
equal to the fair market value (as defined below) of the Common Stock on the
date hereof. The Second Option shall have an exercise price equal to $7.00. The
First Option expires on the tenth anniversary of the date hereof and shall vest
and become exercisable, subject to accelerated vesting in the event of a Change
in Control (defined as provided below) of Company in installments, as follows:
(i) options with respect to 333,333 shares of Common Stock shall vest and become
exercisable on the first anniversary of the date hereof, (ii) options with
respect to 333,333 shares of Common Stock shall vest and become exercisable on
the second anniversary of the date hereof and (iii) options with respect to
333,334 shares of Common Stock shall vest and become exercisable on the third
anniversary of the date hereof. In the event of a Change in Control of Company,
all of the options issued under the First Option which are not then vested and
exercisable shall immediately become vested and exercisable. The Second Option
expires on the tenth anniversary of the date hereof and is vested and
exercisable in full immediately as of the Commencement Date. The fair market
value of Common Stock for purposes of this Agreement shall mean the last
reported sale price of a share of the Common Stock on the Nasdaq National Market
System preceding the date in question or if no sale took place on such day, such
last reported sale price on the then next preceding date on which such sale took
place. Notwithstanding the foregoing, the Options shall be forfeited by Employee
if an Employment Presentment does not take place on or before December 31, 1998.
For purposes of this Agreement, "Change in Control" shall have the meaning set
forth in the Option Agreements.
(b) REGISTRATION STATEMENT. Company agrees to file with the Securities and
Exchange Commission and any applicable state securities regulatory authorities a
Registration Statement on Form S-8 (or if unavailable, a registration statement
on Form S-3) to register the shares issuable upon exercise of the Options under
the Act and any applicable state securities or "Blue Sky" laws as soon as
practicable after the date hereof. Notwithstanding the foregoing, Company shall
be entitled to postpone for a reasonable period of time the filing or the
effectiveness of such registration statement if the Board shall determine in
good faith that such filing or effectiveness would be materially detrimental to
the Company's business interests.
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4.9 SIGNING BONUS. In consideration of Employee's agreement to become
employed by Company, Company shall pay Employee three million dollars
($3,000,000) (the "Signing Bonus") upon the execution of this Agreement. Except
as provided in the immediately succeeding sentence, the Signing Bonus shall be
immediately and fully vested in Employee as of the date hereof, and no portion
of the Signing Bonus shall be subject to forfeiture by Employee for any reason,
including but not limited to any breach of this Agreement by Employee.
Notwithstanding the foregoing, Employee shall pay to the Company an amount equal
to the Signing Bonus, less amounts deducted from the Signing Bonus by Company
with respect to income tax withholding and other governmental requirements (the
"Repayment") if Employee does not present himself at the offices of Company in
New Hope, Pennsylvania (or such other location as Employee may be directed by
the Board) prepared to commence performing his duties hereunder on or before
December 31, 1998 (an "Employment Presentment"). Employee's obligation with
respect to the Repayment shall be reflected in the promissory note attached
hereto as Exhibit A.
4.10 VACATION. During the term of this Agreement, Employee shall be
entitled to numbers of vacation days and sick days consistent with the policy of
Company with respect to such absences applicable to senior executive officers of
Company.
4.11 CERTAIN TRAVEL. Company shall reimburse Employee for all reasonable
expenses incurred by Employee for travel between the Company's offices and the
Washington, D.C. area on weekends, vacations or other times when Employee is
entitled to be absent from Company.
5. BOARD OF DIRECTORS MATTERS.
5.1 DB RESIGNATION. It is understood and agreed that one of the conditions
to Employee's entering into this Agreement is that DB agree to resign as the
Chairman of the Board and Chief Executive Officer of the Company and resign from
all other officer and director positions with Company and the Affiliates.
Accordingly, DB shall resign from the foregoing offices as of the date Employee
assumes the Positions. DB shall be entitled to remain as a director of Company
after the date hereof.
5.2 BOARD NOMINEES. Upon commencement of Employee's employment hereunder,
Employee shall have the right to designate such numbers of persons as nominees
for election as directors of Company by the stockholders of Company at the Next
Election Meeting as together with Employee shall constitute a majority of the
full Board and the number of directors constituting the full Board shall, if
necessary, be increased so as to permit a majority thereof to have been
nominated by Employee; provided, however, that a majority of the Board shall
have concurrently nominated such persons so as to make each such designee of
Employee a nominee of at least a majority of the directors as of the date hereof
(such persons so nominated, the "Nominees"). All of the Nominees as shall
consent to serve if elected shall be included as nominees for election in the
proxy statement distributed with respect to the Next Election Meeting.
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5.3 VOTING BY DB FOR BOARD. DB shall vote, or cause to be voted, at the
Next Election Meeting all of the shares of the Common Stock that DB is entitled
to vote in favor of the election of the Nominees.
6. TERMINATION. The Term of Employee's employment hereunder may be
terminated under the following circumstances:
6.1 DEATH. The Term of Employee's employment hereunder shall terminate upon
his death.
6.2 DISABILITY. If Employee becomes physically or mentally disabled during
the term hereof so that he is unable to perform services required of him
pursuant to this Agreement for an aggregate of six (6) months in any twelve (12)
month period (a `Disability"), Company, at its option, may terminate Employee's
employment hereunder.
6.3 CAUSE. Upon written notice, Company may terminate Employee's employment
hereunder for Cause (as defined below). For purposes of this Agreement, Company
shall have "Cause" to terminate Employee's employment hereunder upon (a) a
material breach by Employee of any material provision of this Agreement, (b)
willful misconduct by Employee in connection with misappropriating any funds or
property of Company, (c) attempting to obtain any personal profit from any
transaction in which Employee has an interest that is adverse to the interests
of Company without disclosure thereof to the Board or (d) Employee's gross
neglect in the performance of the duties required to be performed by Employee
under this Agreement.
6.4 BY EMPLOYEE. Employee may terminate his employment hereunder:
(a) Upon forty-five (45) days' prior written notice to Company, provided
that, upon the giving of such notice by Employee, Company may establish an
earlier date for such termination under this Section 6.4 (a).
(b) For Good Reason (as defined below) immediately and with notice to
Company. "Good Reason" for termination by Employee shall include, but is not
limited to, the following:
(i) Material breach of any provision of this Agreement by Company,
which breach shall not have been cured by Company within fifteen (15) days
of receipt of written notice of said material breach;
(ii) Failure by Company to maintain Employee in a position
commensurate with that referred to in Section 3 of this Agreement; or
(iii) The assignment to Employee of any duties inconsistent with
Employee's position, authority, duties or responsibilities as contemplated
by Section 3 hereof or any other action by Company that results in a
diminution of such position, authority, duties or responsibilities.
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6.5 WITHOUT CAUSE. Company may otherwise terminate the Term of Employee's
employment at any time upon written notice to Employee.
7. COMPENSATION IN THE EVENT OF TERMINATION. In the event that Employee's
employment hereunder terminates prior to the end of the Term, Company shall make
payments to Employee as set forth below:
7.1 BY EMPLOYEE FOR GOOD REASON; BY COMPANY WITHOUT CAUSE. In the event
that Employee's employment hereunder is terminated by Company without Cause or
by Employee for Good Reason, then the Company shall (a) pay to Employee all
amounts due to Employee pursuant to any bonus which was due to Employee as of
the date of such termination, pursuant to the terms of such bonus (a "Due
Bonus"), (b) continue to pay to Employee the Base Salary and Benefits to which
Employee would be entitled hereunder in the manner provided for herein for the
period of time ending on the earlier of the date when the Term would otherwise
have expired in accordance with Section 2 hereof and the second anniversary of
the date of such termination and (c) reimburse Employee for expenses that may
have been incurred, but which have not been paid as of the date of termination,
subject to the requirements of Section 4.6 hereof.
7.2 BY COMPANY FOR CAUSE; BY EMPLOYEE WITHOUT GOOD REASON. In the event
that Company shall terminate Employee's employment hereunder for Cause pursuant
to Section 6.3 hereof or Employee shall terminate his employment hereunder
without Good Reason, all compensation and Benefits, as specified in Section 4 of
this Agreement, theretofore payable or provided to Employee shall cease to be
payable or provided, except for any Due Bonus and any Benefits that may have
been due and payable but which have not been paid as of the date of termination
and reimbursement of expenses that may have been incurred, but which have not
been paid as of the date of termination, subject to the requirements of Section
4.6 hereof. In addition and notwithstanding any other provision in this
Agreement to the contrary, in the event that Company shall terminate Employee's
employment hereunder for Cause pursuant to Section 6.3 hereof or Employee shall
terminate his employment hereunder without Good Reason, Employee shall owe and
pay to the Company the sum of money ("Employee Payment") determined pursuant to
the following formula:
Employee Payment = (36-Y) x $1,500,000
-------
36
where "Y" is the number of full months that Employee was employed by
Company between the Commencement Date and the date of termination of
Employee's employment for Cause pursuant to Section 6.3 or the date
Employee shall terminate his employment hereunder without Good Reason, as
the case may be.
7.3 DEATH. In the event of Employee's death, Company shall not be obligated
to pay Employee or his estate or beneficiaries any compensation except for (a)
any Due
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Bonus or any Benefits that may have been earned and are due and payable as of
the date of death, but which have not been paid as of such date, (b)
reimbursement of expenses that may have been incurred, but which have not been
paid as of the date of death, subject to the requirements of Section 4.6 hereof,
and (c) all outstanding stock options granted to Employee that are unvested
shall immediately vest and become exercisable and Employee's estate or
beneficiaries, as the case may be, shall have the right to exercise any of such
stock options during the period commencing on the date of death and ending on
the second anniversary of the date of such termination or for the remainder of
the period set forth in the option agreement applicable to the option in
question (the "Exercise Period'), if less.
7.4 DISABILITY. In the event of Employee's Disability, the Company shall
not be obligated to pay Employee or his estate or beneficiaries any additional
compensation except for: (a) any Due Bonus and Benefits for the period of time
ending on the earlier of the date when the Term would otherwise expire in
accordance with Section 2 hereof and the second anniversary of the date of such
Disability, (b) reimbursement for expenses that may have been incurred but which
have not been paid as of the date of Disability, subject to the requirements of
Section 4.6 hereof, and (c) Company will pay Employee, commencing on the day
after the end of the Term (i) _______________ dollars ($_________) per year
until Employee reaches the age of 65 or, at Company's option, (ii) a lump sum
________ thirty (30) days after the date of termination of employment as a
result of Disability equal to the present value of the amount to be paid
pursuant to Section 7.4(c)(i) above. Upon termination due to Disability, _____
of the outstanding stock options granted to Employee that are unvested shall
immediately vest and become exercisable and Employee or his estate or
beneficiaries, as the case may be, shall have the right to exercise any of such
stock options during the period commencing on the date of Disability and ending
on the second anniversary of the date of the Disability or for the remainder of
Exercise Period, if less.
7.5 NO MITIGATION. In the event of any termination of employment under
Section 6 hereof, Employee shall be under no obligation to seek other
employment; provided; however, that to the extent that Employee does obtain
other employment subsequent to the termination of Employee's employment
hereunder, the obligations of Company to pay Benefits under this Agreement from
and after the date of commencement of such other employment shall terminate.
8. INSURANCE. Company shall maintain in effect during the Term policies of
directors and officers' liability, and similar insurance covering Employee in
amounts and with coverage at least as favorable with respect to directors and
executive officers of Company as in effect on the date hereof.
9. INDEMNIFICATION. Prior to the Commencement Date, Company and Employee
shall enter into an indemnification agreement in a form mutually acceptable to
Company and Employee and containing terms no less favorable to Employee than
those contained in any indemnification or similar agreement currently in effect
between Company and any of its officers.
8
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10. UNAUTHORIZED DISCLOSURE. Employee shall not, without the prior written
consent of Company, disclose or use in any way, either during Employee's
employment with Company or thereafter, except as required in the course of such
employment, any confidential business or technical information or trade secret
acquired in the course of such employment, whether or not conceived of or
prepared by him, which is related to any service or business of Company or any
Affiliate; provided, however, that the foregoing shall not apply to (a)
information that is not unique to the Company or that is generally known to the
industry or the public other than as a result of Employee's breach of this
covenant, (b) information known to Employee other than from information provided
by Company or (c) information that Employee is required to disclose to, or by,
any governmental or judicial authority; provided, however, if Employee should be
required in the course of judicial or other governmental proceedings to disclose
any information, Employee shall give Company prompt written notice thereof so
that Company may seek an appropriate protective order and/or waive in writing
compliance with the confidentiality provisions of this Agreement. If, in the
absence of a protective order or the receipt of a waiver by Company, Employee is
compelled to disclose information to, or pursuant to the requirements of, a
court or other governmental authority, Employee may disclose such information to
such court or other governmental authority without liability to any other party
hereto.
11. TANGIBLE ITEMS. All files, records, documents, manuals, books, forms,
reports, memoranda, studies, data, calculations, recordings and correspondence,
in whatever form they may exist, and all copies, abstracts and summaries of the
foregoing and all physical items related to the business of Company and its
affiliates, other than merely personal items, whether of a public nature or not,
and whether prepared by Employee or not, and which are received by Employee
from, or on behalf of Company or an Affiliate in the course of his employment
hereunder are and shall remain the exclusive property of Company and any such
Affiliate and shall not be removed from premises of the Company or such
Affiliate, as the case may be, except as required in the course of Employee's
employment hereunder, without the prior written consent of the Board, and the
same shall be promptly returned by Employee upon the termination of Employee's
employment with Company or at any time prior thereto upon the request of the
Board.
12. INVENTIONS AND PATENTS. Employee agrees that all inventions,
innovations, improvements, developments, methods, designs, analyses, drawings,
reports, and all similar or related information that relates to Company's actual
or anticipated business, research and development or existing or future products
or services and that are conceived, developed or made by or at the direction of
Employee while Employee is employed by Company will be owned by Company.
Employee also agrees to promptly perform, at the expense of Company, all
reasonable actions (whether before, during or after the Term) necessary to
establish and confirm such ownership.
13. CERTAIN RESTRICTIVE COVENANTS. During the Term, and for a period ending
eighteen (18) months after the earlier of Employee's termination of employment
9
<PAGE>
hereunder and the end of the Term, Employee agrees that he will not act, either
directly or indirectly, as a partner, officer, director, substantial stockholder
or employee of, or render advisory or other services for, or in connection with,
or become interested in, or make any substantial financial investment in any
firm, corporation, business entity or business enterprise that competes with the
business of Company (each, a "Competitor"), except with the express written
consent of the Board. Employee further agrees that in the event of the
termination of his employment under Section 5 hereof, for a period of twelve
(12) months thereafter, he will not employ or offer to employ, actively
interfere with the relationship of Company or an Affiliate with, any employee of
Company or any employee of any Affiliate. Notwithstanding the foregoing, the
terms of this Section 13 shall not apply if this Agreement is terminated by (a)
Employee pursuant to Section 6.4(a) hereof after (i) any of the individuals
designated as nominees to the Board by Employee pursuant to Section 5.2 hereof
is not elected to the Board at the Next Election Meeting (including as a result
of the failure of the Board to nominate such designees) or (ii) DB breaches his
obligations hereunder and (b) Company pursuant to Section 6.5 hereof prior to
the end of eighteen (18) months after the Commencement Date.
14. EMPLOYEE REPRESENTATIONS. Employee hereby represents and warrants to
Company that (a) the execution, delivery and performance of this Agreement by
Employee does not and will not conflict with, breach, violate or cause a default
under any employment, noncompetition or confidentiality contract or agreement;
instrument; order, judgment or decree to which Employee is a party or by which
he is bound and (b) upon the execution and delivery of this Agreement by
Company, this Agreement shall be the valid and binding obligation of Employee,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting the rights of creditor generally.
15. COMPANY REPRESENTATIONS. Company represents and warrants (a) that it is
duly authorized and empowered to enter into this Agreement, (b) the execution,
delivery and performance of this Agreement by Company does not and will not
conflict with, breach, violate or cause a default under any contract, agreement,
instrument, order, judgment or decree to which Company is a party or by which it
is bound, and (c) upon the execution and delivery of this Agreement by Employee,
this Agreement shall be the valid and binding obligation of Company, enforceable
in accordance with its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting the rights of creditor generally.
16. REMEDIES. Employee acknowledges that the restrictions and agreements
contained in this Agreement are reasonable and necessary to protect the
legitimate interests of Company, and that any violation of this Agreement will
cause substantial and irreparable injury to Company that would not be
quantifiable and for which no adequate remedy would exist at law and agrees that
injunctive relief, in addition to all other remedies, shall be available
therefor.
17. EFFECT OF AGREEMENT ON OTHER BENEFITS. Except as specifically provided
in this Agreement, the existence of this Agreement shall not be interpreted to
preclude,
10
<PAGE>
prohibit or restrict Employee's participation in any other employee benefit plan
or other plans or programs provided to officers, directors or employees of
Company.
18. RIGHTS OF EMPLOYEE'S ESTATE. If Employee dies prior to the payment of
all amounts due and owing to him under the terms of this Agreement, such amounts
shall be paid to such beneficiary or beneficiaries as Employee may have last
designated in writing filed with the Secretary of Company or, if Employee has
made no beneficiary designation, to Employee's estate. Such designated
beneficiary or the executor of Employee's estate, as the case my be, may
exercise all of Employee's rights hereunder. If any beneficiary designated by
Employee shall predecease Employee, the designation of such beneficiary shall be
deemed revoked, and any amounts which would have been payable to such
beneficiary shall be paid to Employee's estate. If any designated beneficiary
survives Employee, but dies before payment of all amounts due hereunder, such
payments shall, unless Employee has designated otherwise, be made to such
beneficiary's estate. In the event of Employee's death or judicial determination
of his incompetence, reference in this Agreement to Employee shall be deemed
where appropriate, to refer to his beneficiary, estate or other legal
representative.
19. RIGHTS OF DB. DB is a party to this agreement solely for the purposes
set forth in Section 5 hereof and DB shall not be deemed to have any right to
enforce any of the obligations of Employee hereunder.
20. SEVERABILITY. It is the intent and understanding of the parties hereto
that if, in any action before any court or other tribunal of competent
jurisdiction legally empowered to enforce this Agreement, any term, restriction,
covenant, or promise is held to be unenforceable as a result of being
unreasonable or for any other reason, then such term, restriction, covenant, or
promise shall not thereby be terminated, but, that it shall be deemed modified
to the extent necessary to make it enforceable by such court or other tribunal
and, if it cannot be so modified, that it shall be deemed amended to delete
therefrom such provision or portion adjudicated to be invalid or unenforceable,
and this agreement shall be deemed to be in full force and effect as so modified
and such modification or amendment in any event shall apply only with respect to
the operation of this Agreement in the particular jurisdiction in which such
adjudication is made.
21. NOTICES. Any notices or demands given in connection herewith shall be
in writing and deemed given when (a) personally delivered, (b) sent by facsimile
transmission to a number provided in writing by the addressee and a confirmation
of the transmission is received by the sender or (c) two (2) days after being
deposited for delivery with a recognized overnight courier, such as Federal
Express, and addressed or sent, as the case may be, to the address or facsimile
number set forth below or to such other address or facsimile number as such
party may in writing designate:
If to Employee: Gabriel Battista
12428 BaCall Lane
Potomac, MD 20854
Fax No.: (301) 963-2062
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If to Company: Tel-Save Holding, Inc.
6805 Route 202
New Hope, Pennsylvania 18938
Attn: President
Fax No.: (215) 862-1515
Either party may change its address for notices by written notice to the other
party in accordance with this Section 21.
22. WAIVER. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in a
writing executed by Employee, Company and DB. No waiver by any party hereto at
any time of any breach by another party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time.
23. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of Pennsylvania
relating to contracts made and to be performed entirely therein.
24. HEADINGS. The headings in this Agreement are inserted for convenience
only and shall have no significance in the interpretation of this Agreement.
25. SUCCESSORS. Company may not assign any of its rights or obligations
under this Agreement hereunder. Employee may assign his rights, but not his
obligations, hereunder and all of Employee's rights hereunder shall inure to the
benefit of his estate, personal representatives, designees or other legal
representatives. All of the rights of Company hereunder shall inure to the
benefit of, and be enforceable by the successors of Company. Any person, firm or
corporation succeeding to the business of Company by merger, purchase,
consolidation or otherwise shall be deemed to have assumed the obligations of
Company hereunder; provided, however, that Company shall, notwithstanding such
assumption by a successor, remain primarily liable and responsible for the
fulfillment of its obligations under this Agreement.
26. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
27. CERTAIN WORDS. As used in this Agreement, the words "herein,"
"hereunder," "hereof" and similar words shall be deemed to refer to this
Agreement in its entirety, and not to any particular provision of this Agreement
unless the context clearly requires otherwise.
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IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the day and year first written above.
Tel-Save Holdings, Inc.
By:
---------------------------------
Daniel Borislow
Chairman of the Board and Chief Executive Officer
- ---------------------------------
Gabriel Battista
- ---------------------------------
Daniel Borislow
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EXHIBIT A
PROMISSORY NOTE
$1,962,259.20 Dated as of November 13, 1998
FOR VALUE RECEIVED, the undersigned, GABRIEL BATTISTA ("Maker"), promises
to pay to the order of TEL-SAVE HOLDINGS, INC., a Delaware corporation
("Payee"), at the address of the Holder located at 6805 Route 202, New Hope,
Pennsylvania 18938, or at such other place as the Payee may designate in writing
to the undersigned, in lawful money of the United States of America, and in
immediately available funds, the principal sum of ONE MILLION NINE HUNDRED SIXTY
TWO THOUSAND TWO HUNDRED FIFTY NINE DOLLARS and TWENTY CENTS ($1,962,259.20)
within ten (10) days (the "Ten Day Period") after the occurrence of the
Triggering Event (as such term is defined herein).
This Note is delivered pursuant to Section 4.9 of that certain employment
agreement of even date herewith among Maker, Payee and Daniel Borislow (the
"Employment Agreement"). Capitalized terms used in this Note and not otherwise
defined herein, shall have the same meaning as in the Employment Agreement.
This Note shall be payable if, and only if, an Employment Presentation
fails to occur on or before December 31, 1998 (the "Triggering Event").
Interest shall accrue on any amount past due hereunder at a rate equal to
five percent (5%) per annum, commencing thirty (30) days after the end of the
Ten Day Period.
This Note may not be assigned or transferred by Payee.
The failure of the undersigned to pay the principal amount due hereunder
within ten (10) business days from the Triggering Event shall result in this
Note being deemed to be past due.
All amendments to this Note must be in writing and signed by Payee.
The undersigned hereby waives presentment, demand, notice of dishonor,
protests and all other notices whatever.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF PENNSYLVANIA.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Promissory Note as of the date and year first written above.
--------------------------------
GABRIEL BATTISTA
EXHIBIT 10.2
TEL-SAVE.COM, INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of December 28,
1998, by and between Tel-Save.com, Inc., a Delaware corporation (the "Company"),
and Gabriel Battista ("Indemnitee").
WHEREAS, pursuant to that certain employment agreement between the Company
and Indemnitee dated November 13, 1998 (the "Employment Agreement") Indemnitee
will commence service, on or prior to December 31, 1998, as Chairman of the
Board and Chief Executive Officer of the Company and will perform a valuable
service in such capacity for the Company; and
WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve the Company and, in order to
induce Indemnitee to enter into the Employment Agreement, the Company agreed to
enter into an agreement with Indemnitee providing for the indemnification of
Indemnitee as provided herein.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the undersigned hereby agree as
follows:
1. Indemnification.
(a) Indemnification of Indemnitee. The Company shall indemnify and
hold harmless Indemnitee to the fullest extent permitted by law if Indemnitee
was or is or becomes a party to, or witness or other participant in, or is
threatened to be made a party to, or witness or other participant in, any
threatened, pending or completed action, suit, proceeding or alternative dispute
resolution mechanism, or any hearing, inquiry or investigation that Indemnitee
in good faith believes might lead to the institution of any such action, suit,
proceeding or alternative dispute resolution mechanism, whether civil, criminal,
administrative, investigative or other (collectively, hereinafter a "Claim") by
reason of, or arising in whole or in part out of, any event or occurrence
related to the fact that Indemnitee is or was a director, officer, manager,
employee, agent, representative or fiduciary of the Company, a subsidiary of the
Company (a "Subsidiary") or an affiliate (as defined in Rule 405 under the
Securities Act of 1933, as amended) of the Company (an "Affiliate"), or is or
was serving at the request of the Company or any Subsidiary or Affiliate as a
director, officer, manager, employee, agent, representative or fiduciary of
another corporation, limited liability company, partnership, joint venture,
employee benefit plan, trust or other entity or enterprise (collectively, an
"Other Entity"), or by reason of any action or inaction on the part of
Indemnitee while serving in any of such capacities, whether or not the basis of
the Claim is an alleged action in an official capacity as a director, officer,
manager, employee, agent, representative or fiduciary of the Company, or any
Subsidiary, Affiliate or Other Entity (any of the foregoing capacities
referenced in this Section 1(a), an "Indemnified Capacity"), against any and all
costs, expenses and other amounts actually and reasonably incurred and/or, as
the case may be, paid (including, without limitation, attorneys' fees and all
other costs, expenses and obligations actually and reasonably incurred in
connection with
<PAGE>
investigating, defending, being a witness in, or otherwise participating in
(including on appeal), or preparing to defend, any Claim), and judgements,
fines, penalties and amounts paid in connection with the settlement of any Claim
and any federal, state, local or foreign taxes imposed on the Indemnitee as a
result of the actual or deemed receipt of any payments under this Agreement,
including all interest, assessments and other charges paid or payable by the
Indemnitee in connection with or in respect of such costs, expenses and other
amounts (collectively, hereinafter, the "Expenses"). Without limiting the rights
of Indemnitee under Section 2(a) below, the payment of Expenses actually paid by
Employee shall be made by the Company as soon as practicable, but in any event
no later than thirty (30) days after written demand by Indemnitee therefor is
presented to the Company. Any event giving use to the right of Indemnitee to be
indemnified hereinafter is referred to herein as an "Indemnifiable Event."
(b) Reviewing Party. Notwithstanding the foregoing, (i) the
obligations of the Company under Section 1(a) hereof shall be subject to the
condition that the Reviewing Party (as defined in Section 10(e) hereof) shall
not have determined (in a written opinion, in any case in which the Independent
Legal Counsel (as defined in Section 10(d) hereof) is involved) that Indemnitee
would not be permitted to be indemnified under applicable law, and (ii) the
obligation of the Company to make an advance payment of Expenses to Indemnitee
pursuant to Section 2(a) hereof (an "Expense Advance") shall be subject to the
condition that, if, when and to the extent that the Reviewing Party determines
that Indemnitee would not be permitted to be so indemnified under applicable
law, the Company shall be entitled to be reimbursed by Indemnitee (who hereby
agrees to so reimburse the Company) for all such amounts theretofore paid;
provided, however, that if Indemnitee has commenced or thereafter commences
legal proceedings in a court of competent jurisdiction to secure a determination
that Indemnitee could be indemnified under applicable law, any determination
made by the Reviewing Party that Indemnitee would not be permitted to be
indemnified under applicable law shall not be binding and Indemnitee shall not
be required to reimburse the Company for any Expense Advance until a final
judicial determination is made with respect thereto (as to which all rights of
appeal therefrom have been exhausted or lapsed). Indemnitee's obligation to
reimburse the Company for any Expense Advance shall be unsecured and no interest
shall be charged thereon. If there has not been a Change in Control (as defined
in Section 10(c) hereof), the Reviewing Party shall be selected by members of
the Board of Directors who are not or were not, as the case may be, a party or
parties, as the case may be, to the Claim in respect of which indemnification is
sought, and if there has been a Change in Control (other than a Change in
Control which has been approved by a majority of the Company's Board of
Directors who were directors immediately prior to such Change in Control), the
Reviewing Party shall be the Independent Legal Counsel. If, within thirty (30)
days after the Company's receipt of written notice from Indemnitee demanding
such indemnification (the "30-Day Period") (i) the Reviewing Party determines
that Indemnitee substantively would not be permitted to be indemnified in whole
or in part under applicable law or makes no determination in that regard or,
(ii) Indemnitee shall not have received full indemnification from the Company,
Indemnitee shall have the right to commence litigation seeking a determination
by a court of competent jurisdiction as to the propriety of indemnification
under the circumstances involved or challenging any such determination (or lack
thereof) by the Reviewing Party or any aspect thereof, including the legal or
factual bases therefor or the failure of the Company to fully indemnify the
Indemnitee, and the Company hereby consents to service of process and to appear
in any such proceeding and hereby appoints the Secretary of the Company (or, if
such office is not filled at a time in question, any Assistant
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Secretary of the Company or, if such office is not filled at a time in question,
any Vice President of the Company - each, a "Service Receiver") as its agent for
such service of process. Any determination by the Reviewing Party not otherwise
so challenged shall be conclusive and binding on the Company and Indemnitee.
(c) Change in Control. The Company agrees that if there is a Change in
Control (other than a Change in Control which has been approved by a majority of
the Company's Board of Directors who were directors immediately prior to such
Change in Control), then, with respect to all matters thereafter arising
concerning the rights of Indemnitee to payments of Expenses and Expense Advances
under this Agreement or any other agreement or under the Company's Certificate
of Incorporation or Bylaws as now or hereafter in effect, the Company shall seek
legal advice only from the Independent Legal Counsel. Such counsel, among other
things, shall render its written opinion to the Company and Indemnitee as to
whether and to what extent Indemnitee would be permitted to be indemnified under
applicable law. The Company agrees to pay the reasonable fees of the Independent
Legal Counsel referred to above and to fully indemnify such counsel against any
and all expenses (including attorneys' fees), claims, liabilities and damages
arising out of or relating to this Agreement or its engagement pursuant hereto.
(d) Mandatory Payment of Expenses. Notwithstanding any other provision
of this Agreement, to the extent that Indemnitee has been successful on the
merits or otherwise, including, without limitation, the dismissal of an action
without prejudice, in connection with any Claim, Indemnitee shall be indemnified
against all Expenses actually and reasonably incurred by Indemnitee in
connection therewith.
2. Expenses; Indemnification Procedure.
(a) Advancement of Expenses. The Company shall advance all Expenses
incurred by Indemnitee so that the Company, and not Indemnitee, shall be
obligated to pay such incurred Expenses. The advances of Expenses to be made
hereunder shall be paid by the Company to Indemnitee as soon as practicable, but
in any event no later than five (5) days after written demand by Indemnitee
therefor to the Company.
(b) Notice and Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to Indemnitee's right to be indemnified under this
Agreement, give the Company notice in writing as soon as practicable of any
Claim made against Indemnitee for which indemnification will or could be sought
under this Agreement; but the Indemnitee's failure to so notify the Company
shall not relieve the Company from any liability that it may have to Indemnitee
under this Agreement, except to the extent that the Company is able to establish
that its ability to avoid liability under such Claim was prejudiced in a
material respect by such failure. Notice to the Company shall be directed to a
Service Receiver at the address of the Company shown on the signature page of
this Agreement (or such other address as the Company shall designate in writing
to Indemnitee). In addition, Indemnitee shall, at the expense of the Company,
provide the Company with such information and cooperation with respect to a
Claim, or any matters related to such Claim, as it may reasonably require in
connection with the indemnification provided for herein and as shall be within
Indemnitee's power. Any costs or expenses (including attorneys' fees and
disbursements) actually and reasonably incurred by
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Indemnitee in so cooperating shall be borne by the Company (irrespective of the
determination as to Indemnitee's entitlement to indemnification), which shall
pay any such amount within fifteen (15) days after receiving a request therefor
from Indemnitee, and the Company hereby indemnifies and agrees to hold
Indemnitee harmless therefrom.
(c) No Presumptions; Burden of Proof. For purposes of this Agreement,
the termination of any Claim by judgment, order, settlement (whether with or
without court approval) or conviction, or upon a plea of nolo contendere, or its
equivalent, shall not create a presumption that Indemnitee did not meet any
particular standard of conduct or have any particular belief or that a court has
determined that indemnification is not permitted by applicable law. In addition,
neither the failure of the Reviewing Party to have made a determination as to
whether Indemnitee has met any particular standard of conduct or had any
particular belief, nor an actual determination by the Reviewing Party that
Indemnitee has not met such standard of conduct or did not have such belief,
prior to the commencement of legal proceedings by Indemnitee to secure a
judicial determination that Indemnitee should be indemnified under applicable
law, shall be a defense to a claim for indemnification by Indemnitee hereunder
or create a presumption that Indemnitee has not met any particular standard of
conduct or did not have any particular belief. In connection with any
determination by the Reviewing Party or otherwise as to whether Indemnitee is
entitled to be indemnified hereunder, the burden of proof shall be on the
Company to establish that Indemnitee is not so entitled.
(d) Notice to Insurers. If, at the time of the receipt by the Company
of a notice of a Claim pursuant to Section 2(b) hereof, the Company has one or
more policies of liability insurance in effect which may cover such Claim, the
Company shall give prompt notice of the commencement of such Claim to the
applicable insurer(s) in accordance with the procedures set forth in the
applicable policies. The Company shall thereafter take all action necessary or
desirable to cause such insurers to pay, on behalf of Indemnitee, all amounts
payable as a result of such Claim in accordance with the terms of such policies.
(e) Selection of Counsel. In the event that the Company shall be
obligated hereunder to pay the Expenses with respect to any Claim, the Company,
except as otherwise provided below, shall be entitled to assume the defense of
such Claim at its own expense with counsel approved by Indemnitee, upon the
delivery to Indemnitee of written notice of its election so to do. Indemnitee's
approval of such counsel shall not be unreasonably withheld. After delivery of
such notice, approval of such counsel by Indemnitee and the retention of such
counsel by the Company, the Company will not be liable to the Indemnitee under
this Agreement for any fees of counsel subsequently incurred by the Indemnitee
with respect to such Claim, other than as provided below. Indemnitee shall have
the right to employ Indemnitee's own counsel in connection with a Claim, but the
fees and expenses of such counsel incurred after written notice from the Company
of its assumption of the defense thereof shall be at the expense of Indemnitee,
unless (i) the employment of counsel by Indemnitee has been previously
authorized by the Company, or, following a Change in Control (other than a
Change in Control approved by a majority of the members of the Board of
Directors who were directors immediately prior to such Change in Control), the
employment of counsel by Indemnitee has been approved by the Independent Legal
Counsel, (ii) Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Company and Indemnitee in the conduct of any
such defense, or (iii) the Company shall not, in fact, have employed or retained
or
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continued to employ or retain counsel to assume the defense of such Claim, in
each of which cases the fees and expenses of Indemnitee's counsel shall be at
the expense of the Company. The Company shall not be entitled to assume or
control the defense of any Claim brought by or on behalf of the Company or as to
which the Indemnitee has reached the conclusion that there may be a conflict of
interest between the Company and Indemnitee. The Company shall not settle any
Claim in any manner which would impose any penalty or limitation on Indemnitee
without the Indemnitee's written consent (which approval shall not be
unreasonably withheld).
(f) Settlement of Claims. The Company shall not be required to
indemnify Indemnitee under this Agreement for any amounts paid in settlement of
any Claim effected without the Company's written consent; provided, however,
that consent by the Company to the settlement of any claim shall not be
unreasonably withheld. Notwithstanding the foregoing, however, if a Change in
Control has occurred (other than a Change in Control approved by a majority of
the members of the Board of Directors who were directors immediately prior to
such Change in Control), then the Company shall be required to indemnify
Indemnitee for amounts paid in settlement of any Claim if the Independent Legal
Counsel has approved such settlement or has not made a determination with
respect to such settlement within (30) days after the effective date of such
Change in Control.
3. Additional Indemnification Rights; Non-Exclusivity.
(a) Scope. The Company hereby agrees to indemnify Indemnitee to the
fullest extent permitted by law, notwithstanding that such indemnification is
not specifically authorized by the Company's Certificate of Incorporation or
Bylaws or by statute. In the event of any change after the date of this
Agreement in any applicable law, statute or rule which expands the right of the
Company to indemnify Indemnitee, it is the intent of the parties hereto that
Indemnitee shall enjoy under this Agreement the greater benefits afforded by
such change. In the event of any change in any applicable law, statute or rule
which narrows the right of the Company to indemnify the Indemnitee, such change,
to the extent not otherwise required by such law, statute or rule to be applied
to this Agreement, shall have no effect on this Agreement or the parties' rights
and obligations hereunder.
(b) Non-Exclusivity. The indemnification provided by this Agreement
shall be in addition to any rights to which Indemnitee may be entitled under the
Company's Certificate of Incorporation or Bylaws, any agreement, vote of
stockholders or directors, the General Corporation Law of the State of Delaware,
or otherwise. The indemnification provided under this Agreement shall continue
as to Indemnitee for any Indemnifiable Event while serving in an Indemnified
Capacity even though Indemnitee may have ceased to serve in such Indemnified
Capacity.
4. No Duplication of Payments. The Company shall not be liable under this
Agreement to make any payment in connection with any Claim to the extent
Indemnitee has otherwise actually received payment (under any insurance policy
or otherwise) of the amounts otherwise indemnifiable hereunder.
5. Partial Indemnification. If Indemnitee is entitled under any provision
of this Agreement to indemnification by the Company for a portion of any of the
Expenses in
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connection with the investigation, appeal or settlement of any Claim, but not
for the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for such portion of the Expenses.
6. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge
that, in certain instances, applicable law or public policy may prohibit the
Company from indemnifying Indemnitee under this Agreement or otherwise.
Indemnitee understands and acknowledges that the Company has undertaken or may
be required in the future to undertake with the Securities and Exchange
Commission to submit the question of indemnification to a court in certain
circumstances for a determination of the Company's right under public policy to
indemnify Indemnitee.
7. Liability Insurance. To the extent the Company or any Subsidiary or
Affiliate maintains liability insurance applicable to directors, officers,
managers, employees, agents, representatives or fiduciaries of the Company or
such Subsidiary or Affiliate (collectively, the "Covered Persons"), Indemnitee
shall be covered by such policies in such a manner as to provide Indemnitee the
same rights and benefits as are accorded to the most favorably insured of the
Covered Persons who is then serving in the same capacity or capacities, as the
case may be, as Indemnitee.
8. Exceptions. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) Excluded Action or Omissions. To indemnify Indemnitee for any
Expenses resulting from acts, omissions or transactions from which Indemnitee
may not be indemnified under applicable law, or for any Expenses resulting from
Indemnitee's conduct which is finally adjudged to have been willful misconduct
or knowingly fraudulent conduct;
(b) Claims Initiated by Indemnitee. To indemnify or advance Expenses
to Indemnitee with respect to Claims initiated or brought voluntarily by
Indemnitee and not by way of defense, regardless of whether Indemnitee
ultimately is determined to be entitled to such indemnification, Expense Advance
or insurance recovery, as the case may be, except (i) with respect to
proceedings brought to establish or enforce (a) a right to, or for, Expense
Advances and/or, as the case may be, (b) any other right of Indemnitee under
this Agreement or any other agreement or insurance policy or under the Company's
Certificate of Incorporation or Bylaws now or hereafter in effect, (ii) in
specific cases, if the Board of Directors has approved the initiation or
bringing of such suit or (iii) as otherwise required under applicable law or
statute;
(c) Lack of Good Faith. To indemnify Indemnitee for any Expenses
incurred by Indemnitee with respect to any proceeding instituted by Indemnitee
to enforce or interpret this Agreement, if a court of competent jurisdiction
determines that each of the material assertions made by the Indemnitee in such
proceeding was not made in good faith or was frivolous; or
(d) Claims Under Section 16(b). To indemnify Indemnitee for Expenses
and the payment of profits arising from the purchase and sale or, sale and
purchase, by Indemnitee of securities in violation of Section 16(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any similar
successor statute.
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9. Period of Limitations. No legal action shall be brought and no cause
of action shall be asserted by or in the right of the Company with respect to
the matters addressed in this Agreement against Indemnitee, or Indemnitee's
estate, spouse, heirs, executors or personal or legal representatives after the
expiration of two(2) years from the date of accrual of such cause of action, and
any claim or cause of action of the Company shall be extinguished and deemed
released unless asserted by the timely filing of a legal action within such
two-year period; provided, however, that if any shorter period of limitations is
otherwise applicable to any such cause of action, such shorter period shall
govern.
10. Construction of Certain Phrases.
(a) Company. For purposes of this Agreement, references to the
"Company" shall include, in addition to the resulting entity, any constituent
entity (including any constituent of a constituent) absorbed in a consolidation
or merger which, if its separate existence had continued, would have had power
and authority to indemnify its directors, officers, managers, employees, agents,
representation or fiduciaries, so that if Indemnitee is or was a director,
officer, employee, agent or fiduciary of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, manager, employee, agent or fiduciary of an Other Entity, Indemnitee
shall stand in the same position under the provisions of this Agreement with
respect to the resulting or surviving entity as Indemnitee would have stood with
respect to such constituent entity if its separate existence had continued. The
consummation of any transaction described in this Section 10(a) shall be subject
to the requirements of Section 12, below.
(b) Miscellaneous Terms. For purposes of this Agreement, references to
"fines" shall include any excise taxes assessed on Indemnitee with respect to an
employee benefit plan; and references to "serving at the request of the Company
or any Subsidiary or Affiliate" or words of similar import shall include any
service as a director, officer, manager, employee, agent, representative or
fiduciary of the Company which imposes duties on, or involves services by, such
director, officer, manager, employee, representative, agent or fiduciary with
respect to an employee benefit plan, or its participants or its beneficiaries;
and if Indemnitee acted in good faith and in a manner Indemnitee reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan, Indemnitee shall be deemed to have acted in a manner "not
opposed to the best interests of the Company" as referred to in this Agreement
or under any applicable law or statute.
(c) Change in Control. For purposes of this Agreement, a "Change in
Control" shall be deemed to have occurred if (i) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or
other fiduciary holding securities under an employee benefit plan of the Company
or a corporation owned directly or indirectly by the stockholders of the Company
in substantially the same proportions as their ownership of stock of the
Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of Voting Securities (as defined
below) of the Company representing more than twenty percent (20%) of the total
voting power represented by the Company's then outstanding Voting Securities,
(ii) during any period of two (2) consecutive years, individuals who at the
beginning of such period constitute the Board of Directors of the Company and
any new director (other than a director designated by a person who has entered
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into an agreement with the Company to effect a transaction described in clauses
(i), (iii) and (iv) of this Section 10(c)) whose election by the Board of
Directors or nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof, or (iii) the stockholders of the Company approve
a merger or consolidation of the Company with any other corporation other than a
merger or consolidation which would result in the Voting Securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 80% of the total voting power of the resulting or
surviving entity outstanding immediately after such merger or consolidation, or
(iv) the stockholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company (in one
transaction or a series of transactions) of all or substantially all of the
Company's assets. For purposes of this Agreement, "Voting Securities" shall mean
any securities the holders of which vote generally in the election of directors.
(d) Independent Legal Counsel. For purposes of this Agreement,
"Independent Legal Counsel" shall mean an attorney or firm of attorneys, who
shall not have otherwise performed services for the Company or Indemnitee within
the then prior three years (other than with respect to matters concerning the
rights of Indemnitee under this Agreement, or of other indemnitees under similar
indemnity agreements) selected by the Company and approved by Indemnitee in
writing, which approval shall not be unreasonably withheld. Notwithstanding the
foregoing, the term "Independent Legal Counsel" shall not include any firm or
person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the Company
or Indemnitee in an action to determine Indemnitee's right to indemnification
under this Agreement.
(e) Reviewing Party. For purposes of this Agreement, a "Reviewing
Party" shall mean (i) any person or group of persons consisting of a member or
members of the Company's Board of Directors and/or, as the case may be, or any
other person appointed by the Board of Directors who is not a party to the
particular Claim for which Indemnitee is seeking indemnification, or (ii)
Independent Legal Counsel.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original and all of which,
together, shall constitute one and the same document.
12. Binding Effect; Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors and permitted assigns, heirs and personal
and legal representatives. The Company may not assign its obligations under this
Agreement to any individual or entity except by operation of law to an entity
acquiring all or substantially all of the business and/or, as the case may be,
assets of the Company (a "Successor") and, in any such case, the Company shall
continue to be obligated hereunder. The Company shall require and cause any
Successor by written agreement in form and substance satisfactory to Indemnitee,
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform if no such
succession had taken place. This Agreement shall
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continue in effect regardless of whether Indemnitee continues to serve in an
Indemnified Capacity.
13. Attorneys' Fees. In the event that any action is instituted by
Indemnitee in a court of competent jurisdiction under this Agreement or under
any liability insurance policies maintained by the Company to enforce, or
interpret any of the terms hereof or thereof, Indemnitee shall be entitled to be
paid all Expenses actually and reasonably incurred by Indemnitee with respect to
such action, regardless of whether Indemnitee is ultimately successful in such
action, and shall be entitled to an advance of such Expenses in the manner
provided in Section 2 (a), above, with respect to such action, unless, as a part
of such action, the court in which such action is brought determines that each
of the material assertions made by Indemnitee as a basis for such action was not
made in good faith or was frivolous. In the event of an action instituted by or
in the name of the Company under this Agreement to enforce or interpret any of
the terms of this Agreement, Indemnitee shall be entitled to be paid all
Expenses actually and reasonably incurred by Indemnitee in defense of such
action (including costs and expenses incurred with respect to Indemnitee's
counterclaims and cross-claims made in such action), and shall be entitled to an
advance of such Expenses in the manner provided in Section 2 (a), above, with
respect to such action, unless as a part of such action such court determines
that each of Indemnitee's material defenses to such action were made in bad
faith or were frivolous.
14. Notice. Any notices or demands given in connection herewith shall be
in writing and deemed given when (a) personally delivered, (b) sent by facsimile
transmission to a number provided in writing by the addressee and a confirmation
of the transmission is received by the sender or (c) two (2) days after being
deposited for delivery with a recognized overnight courier, such as Fed Ex, and
addressed or sent, as the case may be, to the address or facsimile number set
forth below or to such other address or facsimile number as such party may in
writing designate:
If to Indemnitee: Gabriel Battista
12428 Bacall Lane
Potomac, MD 20854
Fax No.: (301) 963-2062
If to Company: Tel-Save.com, Inc.
6805 Route 202
New Hope, Pennsylvania 18938
Attn: Secretary
Fax No.: (215) 862-1515
15. Consent to Jurisdiction. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the Commonwealth of
Pennsylvania for all purposes in connection with any action or proceeding which
arises out of or relates to this Agreement and agree that any action instituted
under this Agreement shall be commenced, prosecuted and continued only in the
courts of the Commonwealth of Pennsylvania in and for the County of
Philadelphia, which shall be the exclusive and only proper forum for
adjudicating such a claim.
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16. Severability. The provisions of this Agreement shall be severable in
the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
Furthermore, to the fullest extent possible, the provisions of this Agreement
(including, without limitation, each portion of this Agreement containing any
provision held to be invalid, void or otherwise unenforceable, that is not
itself held to be invalid, void or unenforceable) shall be construed so as to
give effect to the intent manifested by the provision held invalid, illegal or
unenforceable.
17. Choice of Law. This Agreement shall be governed by and its provisions
construed and enforced in accordance with the laws of the State of Delaware,
without regard to the conflict of laws principles thereof.
18. Subrogation. In the event of payment to, or on behalf of Indemnitee
under this Agreement, the Company shall be subrogated to the extent of such
payment to all of the rights of recovery of Indemnitee, who shall, at Company's
expense, execute all documents required and shall do all acts that may be
necessary to secure such rights and to enable the Company effectively to bring
suit to enforce such rights.
19. Amendment and Termination. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless it is in writing signed
by both of the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed to, or shall constitute a waiver of, any other
provisions hereof (whether or not similar thereto), nor shall such waiver
constitute a continuing waiver. Except as specifically set forth herein, no
failure to exercise, or any delay in exercising, any right or remedy hereunder
shall constitute a waiver thereof.
20. Integration and Entire Agreement. This Agreement sets forth the entire
understanding between the parties hereto and supersedes all previous written and
oral negotiations, commitments, understandings and agreements relating to the
subject matter hereof between the parties hereto.
21. No Construction as Employment Agreement. Nothing contained in this
Agreement shall be construed as giving Indemnitee any right to be retained in
the employ of the Company or any Subsidiaries.
22. Certain Words. As used in this Agreement, the words "herein,"
"hereunder," "hereof" and similar words shall be deemed to refer to this
Agreement in its entirety, and not to any particular provision of this Agreement
unless the context clearly requires otherwise.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
TEL-SAVE.COM, INC.
By:
-------------------------------
Title:
----------------------------
AGREED TO AND ACCEPTED
INDEMNITEE:
- ----------------------------
Gabriel Battista
11
EXHIBIT 10.3
NON-QUALIFIED STOCK OPTION AGREEMENT
To: Gabriel Battista ("Employee")
------------------------------------------------------------
Name
12428 Bacall Lane, Potomac, MD 20854
------------------------------------------------------------
Address
Date of Grant: November 13, 1998
Exercise Price: $10.4375 per share
Employee is hereby granted the option described below, effective as of the
above date of grant, to purchase shares of common stock, $.01 par value per
share ("Stock"), of Tel-Save.com, Inc. (the "Company") at the exercise price
shown above. Capitalized terms used herein without definition have the meanings
assigned in the employment agreement dated as of the above date of grant between
the Company and Employee (the "Employment Agreement").
1. Employee is hereby granted options to purchase one million (1,000,000)
shares of Stock (the "Option"). The Option shall have an exercise price equal to
ten dollars and 4,375/10,000 cents ($10.4375) per share (the "Exercise Price")
and, subject to Section 2, below, shall vest with respect to the indicated
number of shares of Stock according to the following schedule:
(a) three hundred thirty three thousand three hundred thirty-three
(333,333) shares of Stock shall vest and become exercisable upon the first
anniversary of the date of grant.
(b) three hundred thirty three thousand three hundred thirty-three
(333,333) shares of Stock shall vest and become exercisable upon the second
anniversary of the date of grant.
(c) three hundred thirty three thousand three hundred thirty-four
(333,334) shares of Stock shall vest and become exercisable upon the third
anniversary of the date of grant.
(d) Notwithstanding the foregoing, (i) any portion of the Option that
was not previously vested and exercisable shall become fully vested and
exercisable on the effective date of any termination of the employment of
Employee under the Employment Agreement by the Company without Cause (as defined
in Section 6.3 of the Employment Agreement) or by Employee for Good Reason (as
defined in Section 6.4(b) of the Employment Agreement) and (ii) the Board of
Directors of the Company (the "Board") or its designees may accelerate or waive
the aforesaid scheduled vesting dates with respect to any or all of the shares
of Stock covered by the Option.
<PAGE>
2. In the event of a "Change in Control" (as hereafter defined) of the
Company, any portion of the Option that was not previously vested and
exercisable on the effective date of the Change in Control, shall become fully
vested and exercisable on such effective date of such Change in Control. A
"Change in Control" shall be deemed to have occurred upon the happening of any
of the following events:
(a) any Person (as defined in Section 3(a)(9) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), other
than the Company, becomes the Beneficial Owner (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company or any Significant Subsidiary (as
defined below) representing fifty percent (50%) or more of the
combined voting power of the Company's, or such Significant
Subsidiary's, as the case may be, then outstanding securities;
provided, that a Person shall be deemed to be the Beneficial
Owner of all shares that any such Person has the right to acquire
pursuant to any agreement or arrangement or upon exercise of
conversion rights, warrants, options or otherwise, without regard
to the sixty (60)-day period referred to in Rule 13d-3 under the
Exchange Act);
(b) during any period of two years, individuals who at the beginning
of such period constitute the Board and any new director (other
than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in
clauses (a), (b) or (d) of this Section 2) whose election by the
Board or nomination for election by stockholders was approved by
a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors at the beginning of the
two-year period or whose election or nomination for election was
previously so approved, but excluding for this purpose any such
new director whose initial assumption of office occurs as a
result of either an actual or threatened election contest or
other actual or threatened solicitation of proxies or consents by
or on behalf of an individual, corporation, partnership, group,
association or other entity other than the Board, cease for any
reason to constitute at least a majority of the Board of either
or the Company or a Significant Subsidiary;
(c) the consummation of a merger or consolidation of the Company or
any subsidiary of the Company owning directly or indirectly all
or substantially all of the consolidated assets of the Company (
a "Significant Subsidiary") with any other entity, other than a
merger or consolidation which would result in the voting
securities of the Company or a Significant Subsidiary outstanding
immediately prior thereto continuing to represent more than fifty
percent (50%) of the combined voting power of the surviving or
resulting entity outstanding immediately after such merger or
consolidation;
(d) the shareholders of the Company approve a plan or agreement for
the sale or
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disposition of fifty percent (50%) or more of the consolidated
assets of the Company in which case the Board shall determine the
effective date of the Change of Control resulting therefrom; and
(e) any other event occurs which the Board determines, in its
discretion, would materially alter, the structure of the Company
or its ownership.
3. Employee may exercise the Option by giving written notice to the
Secretary of the Company on forms supplied by the Company at its then principal
executive office, accompanied by payment of the Exercise Price for the total
number of shares specified to be purchased by Employee. The payment may be in
any of the following forms: (a) cash, which may be evidenced by a check and
includes cash received from a so-called "cashless exercise" of the Option; (b)
certificates representing shares of Stock, which will be valued at the fair
market value (as defined in the Employment Agreement) per share of the Stock on
the date of the Option exercise in question, accompanied by an assignment of
such Stock to the Company; or (c) any combination of cash and Stock valued as
provided in clause (b), immediately above. Any assignment of Stock shall be in a
form and substance satisfactory to the Secretary of the Company, including
guarantees of signature(s) and payment of all transfer taxes, if the Secretary
of the Company deems such guarantees necessary or desirable.
4. The Option will, to the extent not previously exercised by Employee,
expire on November 13, 2008.
5. In the event of any change in the outstanding shares of the Stock by
reason of a stock dividend, stock split, consolidation, transfer of assets,
reorganization, conversion or what the Board deems in its reasonable discretion
to be similar circumstances, the number and kind of shares of Stock subject to
the Option and the Exercise Price shall be appropriately adjusted in a manner to
be determined in the reasonable discretion of the Board.
6. The Option is not transferable otherwise than by will or the laws of
descent and distribution, and is exercisable during Employee's lifetime only by
Employee, including, for this purpose, Employee's legal guardian or custodian in
the event of the disability of Employee. Until the Exercise Price has been paid
in full pursuant to due exercise of this Option and certificate(s) representing
Employee's ownership of the purchased shares are issued to Employee, Employee
does not have any rights as a shareholder of the Company. The Company reserves
the right not to deliver to Employee the certificate(s) representing shares
purchased by virtue of the exercise of the Option during any period of time in
which the Company deems, based on the written opinion of its counsel, that such
delivery would violate a federal, state, local or securities exchange rule,
regulation or law.
7. Notwithstanding anything to the contrary contained herein, the Option
is not exercisable:
(a) During any period of time in which the Company deems, based on the
written opinion of its counsel, that the exercisability of the Option, the offer
to sell the shares underlying the Option, or the sale thereof, would violate a
federal, state, local or securities exchange rule, regulation or law; or
3
<PAGE>
(b) Until Employee has paid or made suitable arrangements to pay all
federal, state and local income tax withholding required to be withheld by the
Company in connection with the Option exercise.
8. The following two paragraphs shall be applicable if, on a date of
exercise of the Option, the Stock to be purchased pursuant to such exercise has
not been registered under the Securities Act of 1933, as amended (the "Act"),
and under applicable state securities laws, and shall continue to be applicable
for so long as such registration has not occurred:
(a) Employee hereby agrees, warrants and represents that he will
acquire the Stock to be issued hereunder for his own account for investment
purposes only, and not with a view to, or in connection with, any resale or
other distribution of any shares of such Stock, except as hereafter permitted.
Employee further agrees that he will not at any time make any offer, sale,
transfer, pledge or other disposition of such Stock to be issued hereunder
without an effective registration statement under the Act, and under any
applicable state securities laws or an opinion of counsel acceptable to the
Company to the effect that the proposed transaction will be exempt from such
registration. Employee shall execute such instruments, representations,
acknowledgments and agreements as the Company may, in its sole discretion, deem
advisable to avoid any violation of federal, state, local or securities exchange
rule, regulation or law.
(b) The certificates for Stock to be issued to Employee hereunder
shall bear the following legend:
"The shares represented by this certificate have not
been registered under the Securities Act of 1933, as
amended, or under applicable state securities laws. The
shares have been acquired for investment and may not be
offered, sold, transferred, pledged or otherwise disposed of
without an effective registration statement under the
Securities Act of 1933, as amended, and under any applicable
state securities laws or an opinion of counsel acceptable to
the Company that the proposed transaction will be exempt
from such registration."
The foregoing legend shall be removed upon registration of the legended shares
under the Act and under any applicable state laws or upon receipt of an opinion
of counsel acceptable to the Company that said registration is no longer
required.
9. The sole purpose of the agreements, warranties, representations and
legend set forth in the two immediately preceding paragraphs is to prevent
violations of the Act, and any applicable state securities laws.
10. It is the intention of the Company and Employee that the Option shall
not be an "Incentive Stock Option" as that term is used in Section 422 of the
Internal Revenue Code of 1986,
4
<PAGE>
as amended, and the regulations thereunder. The Option is not granted pursuant
to any stock option plan.
11. This agreement and the Employment Agreement constitute the entire
understanding between the Company and Employee with respect to the subject
matter hereof and no amendment, modification or waiver of this agreement, in
whole or in part, shall be binding upon the Company or Employee unless in
writing and signed by the Executive Vice President of the Company and Employee.
This agreement and the performances of the parties hereunder shall be construed
in accordance with, and governed by the laws of, the Commonwealth of
Pennsylvania.
Employee shall sign a copy of this agreement and return it to the Company's
Secretary, thereby indicating Employee's understanding of, and agreement with
its terms and conditions.
TEL-SAVE.COM, INC,
By:
---------------------
5
<PAGE>
I hereby acknowledge receipt of a copy of the foregoing stock option agreement
and, having read it, hereby signify my understanding of, and my agreement with,
its terms and conditions.
December , 1998
- ----------------------------- -----------------------------
Gabriel Battista (Date)
6
EXHIBIT 10.4
NON-QUALIFIED STOCK OPTION AGREEMENT
To: Gabriel Battista ("Employee")
------------------------------------------------------------
Name
12428 Bacall Lane, Potomac, MD 20854
------------------------------------------------------------
Address
Date of Grant: November 13, 1998
Exercise Price: $7.00 per share
Employee is hereby granted the option described below, effective as of the
above date of grant, to purchase shares of common stock, $.01 par value per
share ("Stock"), of Tel-Save.com, Inc. (the "Company") at the exercise price
shown above. Capitalized terms used herein without definition have the meanings
assigned in the employment agreement dated as of the above date of grant between
the Company and Employee (the "Employment Agreement").
1. Employee is hereby granted options to purchase six hundred fifty
thousand (650,000) shares of Stock (the "Option"). The Option shall have an
exercise price equal to seven dollars ($7.00) per share (the "Exercise Price")
and shall vest and become fully exercisable on the Commencement Date.
2. Employee may exercise the Option by giving written notice to the
Secretary of the Company on forms supplied by the Company at its then principal
executive office, accompanied by payment of the Exercise Price for the total
number of shares specified to be purchased by Employee. The payment may be in
any of the following forms: (a) cash, which may be evidenced by a check and
includes cash received from a so-called "cashless exercise" of the Option; (b)
certificates representing shares of Stock, which will be valued at the fair
market value (as defined in the Employment Agreement) per share of the Stock on
the date of the Option exercise in question, accompanied by an assignment of
such Stock to the Company; or (c) any combination of cash and Stock valued as
provided in clause (b), immediately above. Any assignment of Stock shall be in a
form and substance satisfactory to the Secretary of the Company, including
guarantees of signature(s) and payment of all transfer taxes, if the Secretary
of the Company deems such guarantees necessary or desirable.
3. The Option will, to the extent not previously exercised by Employee,
expire on November 13, 2008.
<PAGE>
4. In the event of any change in the outstanding shares of the Stock by
reason of a stock dividend, stock split, consolidation, transfer of assets,
reorganization, conversion or what the Board deems in its reasonable discretion
to be similar circumstances, the number and kind of shares of Stock subject to
the Option and the Exercise Price shall be appropriately adjusted in a manner to
be determined in the reasonable discretion of the Board.
5. The Option is not transferable otherwise than by will or the laws of
descent and distribution, and is exercisable during Employee's lifetime only by
Employee, including, for this purpose, Employee's legal guardian or custodian in
the event of the disability of Employee. Until the Exercise Price has been paid
in full pursuant to due exercise of this Option and certificate(s) representing
Employee's ownership of the purchased shares are issued to Employee, Employee
does not have any rights as a shareholder of the Company. The Company reserves
the right not to deliver to Employee the certificate(s) representing shares
purchased by virtue of the exercise of the Option during any period of time in
which the Company deems, based on the written opinion of its counsel, that such
delivery would violate a federal, state, local or securities exchange rule,
regulation or law.
6. Notwithstanding anything to the contrary contained herein, the Option
is not exercisable:
(a) During any period of time in which the Company deems, based on the
written opinion of its counsel, that the exercisability of the Option, the offer
to sell the shares underlying the Option, or the sale thereof, would violate a
federal, state, local or securities exchange rule, regulation or law; or
(b) Until Employee has paid or made suitable arrangements to pay all
federal, state and local income tax withholding required to be withheld by the
Company in connection with the Option exercise.
7. The following two paragraphs shall be applicable if, on a date of
exercise of the Option, the Stock to be purchased pursuant to such exercise has
not been registered under the Securities Act of 1933, as amended (the "Act"),
and under applicable state securities laws, and shall continue to be applicable
for so long as such registration has not occurred:
(a) Employee hereby agrees, warrants and represents that he will
acquire the Stock to be issued hereunder for his own account for investment
purposes only, and not with a view to, or in connection with, any resale or
other distribution of any shares of such Stock, except as hereafter permitted.
Employee further agrees that he will not at any time make any offer, sale,
transfer, pledge or other disposition of such Stock to be issued hereunder
without an effective registration statement under the Act, and under any
applicable state securities laws or an opinion of counsel acceptable to the
Company to the effect that the proposed transaction will be exempt from such
registration. Employee shall execute such instruments, representations,
acknowledgments and agreements as the Company may, in its sole discretion, deem
advisable to avoid any violation of federal, state, local or securities exchange
rule, regulation or law.
2
<PAGE>
(b) The certificates for Stock to be issued to Employee hereunder
shall bear the following legend:
"The shares represented by this certificate have not
been registered under the Securities Act of 1933, as
amended, or under applicable state securities laws. The
shares have been acquired for investment and may not be
offered, sold, transferred, pledged or otherwise disposed of
without an effective registration statement under the
Securities Act of 1933, as amended, and under any applicable
state securities laws or an opinion of counsel acceptable to
the Company that the proposed transaction will be exempt
from such registration."
The foregoing legend shall be removed upon registration of the legended shares
under the Act and under any applicable state laws or upon receipt of an opinion
of counsel acceptable to the Company that said registration is no longer
required.
8. The sole purpose of the agreements, warranties, representations and
legend set forth in the two immediately preceding paragraphs is to prevent
violations of the Act, and any applicable state securities laws.
9. It is the intention of the Company and Employee that the Option shall
not be an "Incentive Stock Option" as that term is used in Section 422 of the
Internal Revenue Code of 1986, as amended, and the regulations thereunder. The
Option is not granted pursuant to any stock option plan.
10. This agreement and the Employment Agreement constitute the entire
understanding between the Company and Employee with respect to the subject
matter hereof and no amendment, modification or waiver of this agreement, in
whole or in part, shall be binding upon the Company or Employee unless in
writing and signed by the Executive Vice President of the Company and Employee.
This agreement and the performances of the parties hereunder shall be construed
in accordance with, and governed by the laws of, the Commonwealth of
Pennsylvania.
Employee shall sign a copy of this agreement and return it to the Company's
Secretary, thereby indicating Employee's understanding of, and agreement with
its terms and conditions.
TEL-SAVE.COM, INC,
By:
---------------------------
3
<PAGE>
I hereby acknowledge receipt of a copy of the foregoing stock option agreement
and, having read it, hereby signify my understanding of, and my agreement with,
its terms and conditions.
December , 1998
- ----------------------------- -----------------------------
Gabriel Battista (Date)
4
EXHIBIT 10.5
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT (this "Agreement") is entered into as of the
__ day of December, 1998, by and among Tel-Save.com, Inc., a Delaware
corporation (the "Company"), and Daniel M. Borislow, Chairman of the Board and
Chief Executive Officer of the Company ("Borislow"). The Company and Borislow
shall sometimes be referred to herein individually as a "Party" and collectively
as the "Parties."
RECITALS
A. Borislow is presently the Chairman of the Board and the Chief
Executive Officer of the Company.
B. Concurrently herewith, the Company and Borislow are entering into
certain other agreements referred to in Section 8 hereof
(collectively, the "Other Agreements").
C. In connection with the Other Agreements, Borislow and the Company
desire to enter into several agreements with each other, including
agreements related to the resignation by Borislow of his positions as
a director and an officer of the Company and each of its subsidiaries.
NOW, THEREFORE, in consideration of entering into the Other Agreements
and the covenants and agreements hereinafter set forth, and for other good and
valuable consideration the receipt and adequacy of which are hereby
acknowledged, the Parties hereby agree as follows.
1. Employment by Borislow; Resignation of Positions with the
Company.
1.1 That certain Employment Agreement dated September __, 1995,
by and between the Company and Borislow (the "Employment
Agreement") is hereby terminated, effective as of the date
hereof, except to the extent hereinafter expressly provided.
Borislow shall be entitled to no further compensation or
benefits under the Employment Agreement after the date
hereof.
1.2 Borislow acknowledges and agrees that: (a) the Company has
not committed any default under the Employment Agreement;
Borislow has no claim of any nature whatsoever against the
Company or any of its affiliates under the Employment
Agreement or otherwise (a "Claim," except that the term
Claim shall not include any rights or claims arising under
this Agreement or the
1
<PAGE>
agreements entered into between the Company and Borislow
concurrently herewith); and Borislow hereby waives and
relinquishes any and all Claims.
1.3 Section 7 of the Employment Agreement shall remain in full
force and effect, except that
1.3.1 The first paragraph of Section 7(a) of the
Employment Agreement is hereby amended to read in
full as follows:
"(a) The Employee acknowledges and agrees that he has had
and might continue to have access to secret and confidential
information of the Company and that the following
restrictive covenant is necessary to protect the interests
and continued success of the Company. Except as otherwise
expressly consented to in writing by the Company, for a
period of eighteen (18) months after the date hereof (the
"Restricted Period"), the Employee shall not, directly or
indirectly, acting as an employee, owner, shareholder,
partner, joint venturer, officer, director, agent,
salesperson, consultant, adivsor, investor, or principal of
a corporation or other business entity:"
1.3.2 Sections 7(a)(i)-(iii) are hereby deleted in favor
of Section 3 hereof.
1.3.3 The remainder of Section 7 of the Employment
Agreement, including without limitation Sections
7(b)through (g) thereof, shall remain in full force
and effect.
1.4 The Employee's Invention Assignment and Confidential
Information Agreement attached to the employment Agreement
as Exhibit A shall remain in full force and effect.
1.5 Any and all rights and claims of the Company against
Borislow shall be unaffected by such termination and by this
Agreement.
1.6 Borislow hereby agrees to resign, not later than January 7,
1999, and effective as of the date of such resignation, as a
director of the Company, as the Chairman of the Board of
Directors of the Company, as the Chief Executive Officer of
the Company and as a director and an officer of each of the
subsidiaries of the Company.
2
<PAGE>
2. Severance Payment.
2.1 The Company shall pay Borislow one million dollars
($1,000,000) as a severance payment (the "Severance
Payment").
2.2 The Severance Payment, net of withholding and similar
requirements imposed by applicable law, shall be offset
against amounts owed by Borislow to the Company as of
January 4, 1999.
2.3 The Company shall have the right to offset against its
obligations to make any installment of the Severance Payment
any amount that the Company alleges is owed to it by
Borislow at the time that such installment is due.
3. Non-Competition and Non-Solicitation.
3.1 During the one (1) year period commencing on the date
hereof, which period shall be automatically extended by an
amount of time equal to any amount of time during which
Borislow is in violation of this Section (the
Non-Competition Period), Borislow shall not, without the
prior written consent of the Company, engage in any
Competitive Activity anywhere in the world.
3.2 The term Competitive Activity shall mean any participation
in, assistance of, employment by, ownership of any interest
in, acceptance of business from, engagement in business
with, or assistance, promotion, or organization of, any
person, partnership, corporation, firm, association, or
other business organization, entity, or enterprise (i) that,
directly or indirectly, is engaged in, or hereinafter
engages in, research on, or development, production,
marketing, leasing, or selling of, any product, process, or
service that is the same as, similar to, or in competition
with, any line of business or research in which the Company
is engaged at the date hereof; provided, however, that
Competitive Activity shall not include the employment of Mr.
Borislow by Communications TeleSystems International d.b.a.
WorldxChange Communications; and provided further, that
Competitive Activity shall not include the holding by
Borislow for investment of less than 1% of the outstanding
securities of any corporation if such securities are
regularly traded on a recognized stock exchange.
3.3 During the Non-Competition Period, Borislow shall not,
directly or indirectly, either for his own benefit or
purposes or for the benefit or purposes of any other person
or entity, solicit, call on, interfere with, accept any
business from, attempt to divert or entice away any person
or entity who is a customer or client of the Company or who
was a client or customer of the Company within the 24 months
preceding the date hereof.
3
<PAGE>
3.4 During the Non-Competition Period, Borislow shall not,
directly or indirectly, employ or offer to employ, call on,
solicit, interfere with, attempt to divert or entice away
any employee or independent contractor of the Company (or
any person whose employment or status as an independent
contractor with the Company has terminated within the 24
months preceding the date hereof) in any capacity.
4. Consulting.
4.1 Borislow agrees that for a period of two (2) years
commencing on the date hereof (the "Consulting Period"), he
will provide consulting services to the Company (the
"Services").
4.2 Borislow shall provide up to two hundred (200) hours of the
Services per year at times reasonably requested by the
Company and reasonably convenient to Borislow.
4.3 Borislow shall be compensated for the Services at the rate
of five hundred dollars ($500) per hour. Borislow shall
provide the Company with an invoice for Services rendered
not more frequently than each calendar month. If the Company
does not dispute such invoice, the Company shall pay the
amount of such invoice promptly after receipt of such
invoice by the Company.
4.4 Borislow agrees that during the Consulting Period he will
not enter into any agreement, understanding, or relationship
that would prohibit the performance of the Services by him
or that would create a conflict of interest with regard to
the performance of the Services.
5. Health and Medical Benefits.
5.1 For the two (2) year period commencing on the date hereof
(the "Benefits Period"), the Company shall provide Borislow
with the health and medical benefits described in Section
5.2 hereof (the "Benefits").
5.2 The Benefits shall be equal to the greater of: (a) the
health and medical benefits provided to Borislow by the
Company immediately prior to the execution and delivery of
this Agreement; or (b) the health and medical benefits
provided by the Company from time to time during the
Benefits Period to any other employee of the Company.
4
<PAGE>
6. Director and Officer Insurance.
6.1 For the five (5) year period commencing on the date hereof
(the "Insurance Period"), the Company shall maintain its
director and officer insurance policy with benefits as
described in Section 6.2 hereof (the "Benefits").
6.2 The Benefits shall be equal to or greater than the benefits
currently provided under the Company's present director and
officer insurance policy.
7. Automobiles.
7.1 Borislow currently is using certain automobiles owned by the
Company and identified on Exhibit A attached hereto and by
this reference incorporated herein (the "Automobiles").
7.2 Promptly after the execution and delivery hereof, the
Company shall transfer title to the Automobiles to Borislow
and shall deliver possession to the Automobiles to Borislow
at the headquarters offices of the Company.
7.3 Title to and possession of the Automobiles shall be
transferred to Borislow "as is" and "where is" without any
representation or warranty of any kind by the Company.
Borislow shall defend and hold the Company harmless from all
claims, damages, litigation, liabilities and all matters
whatsoever regarding the Automobiles.
8. Other Agreements.
8.1 Concurrently with the execution and delivery of this
Agreement, the Company and Borislow are entering into each
of the following agreements, and certain agreements
pertaining thereto:
8.1.1 Purchase Agreement Regarding the Stock of
Emergency Transportation Corporation
8.1.2 Agreement for Purchase and Sale of Real Property
8.1.3 Lease of Real Property
8.1.4 Registration Rights Agreement
8.2 The effectiveness of this Agreement and of each Agreement
set forth in Section 8.1 is conditioned upon the execution
and delivery of each of such agreements.
5
<PAGE>
9. Miscellaneous.
9.1 Effectiveness. The effectiveness of this Agreement is
conditioned upon the effectiveness of each of the Other
Agreements.
9.2 Costs and Expenses. Each party hereto shall pay its or his
own costs and expenses in connection with this Agreement and
the transactions contemplated hereby, including without
limitation the costs and expenses of its or his attorneys,
accountants, advisors, finders, brokers, and other agents
and representatives.
9.3 Notices. All notices which are required or permitted to be
given pursuant to the terms of this Agreement shall be in
writing and shall be sufficient in all respects if given in
writing and delivered personally or by telegraph or by
registered or certified mail, postage prepaid, as follows:
If to the Company:
Tel-Save.com, Inc.
6805 Route 202
New Hope, PA 18938
Attention: General Counsel
With a copy to:
Arnold & Porter
777 S. Figueroa Street, 44th Floor
Los Angeles, CA 90017
Attention: Theodore G. Johnsen
If to Borislow:
Daniel M. Borislow
8234 Horseshoe Bay Road
Boynton Beach, FL 33437
Notice shall be deemed to have been given upon receipt
thereof as to communications that are personally delivered
or telegraphed and five (5) days after deposit of the same
in any United States mail post office box in the state to
which the notice is addressed, or seven (7) days after
deposit of same in any such post office box other than in
the state to which the notice is addressed, postage prepaid,
addressed as set forth above. Notice shall not be deemed
given under the preceding sentence unless and until notice
shall be given to all addressees above other than the
sender. The addresses
6
<PAGE>
and addressees for the purpose of this Section may be
changed by giving written notice of such change in the
manner provided herein for giving notice. Unless and until
such written notice is given, the addresses and addressees
as stated by prior written notice, or as provided herein if
no written notice of change has been given, shall be deemed
to continue in effect for all purposes hereunder.
9.4 Survival of Representations and Warranties. Notwithstanding
any investigation made by any party hereto, all
representations and warranties made herein shall survive the
execution and delivery of this Agreement.
9.5 Applicable Law. This Agreement and all documents executed
and delivered in connection herewith and the rights and
obligations of the parties hereto and thereto shall be
governed by and construed in accordance with the laws of the
State of New York other than and without giving effect to
the laws of the State of New York relating to choice of law.
9.6 Applicable Jurisdiction. The parties hereby agree that any
action, at law or in equity, arising under this Agreement or
any of the other documents executed and delivered in
connection herewith, shall be filed in and only in the state
courts of the State of New York for the County of New York
or a United States District Court in the State of New York.
The parties hereby consent and submit to the in personam
jurisdiction of such courts for purposes of litigating any
such action.
9.7 Assignments. This Agreement and the other documents executed
and delivered in connection herewith shall be binding upon
and inure to the benefit of the parties hereto and their
respective personal and legal representatives, heirs,
successors, and assigns; provided, however, that no party
hereto may assign or transfer its or his rights in and to
this Agreement or any other document executed and delivered
in connection herewith, without the prior written consent of
the other parties hereto, except that Borislow may assign
his rights under the Purchase Agreement Regarding the Stock
of Emergency Transportation Corporation and his rights under
the Agreement for Purchase and Sale of Real Property and his
rights under the Lease of Real Property, all such agreements
being referred to in Section 8 hereof, but Borislow shall
remain obligated to perform his duties and obligations under
those agreements unless the Company shall otherwise
expressly provide in writing.
9.8 Entire Agreement. Except as otherwise expressly set forth
herein, this Agreement and the Other Agreements embody the
complete
7
<PAGE>
agreement and understanding among the Parties with respect
to the subject matter hereof and supersede and preempt any
prior understandings, agreements, or representations by or
among the Parties, written or oral, which may have related
to the subject matter hereof in any way.
9.9 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any
provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of this
Agreement.
9.10 Counterparts. This Agreement may be executed in two or more
counterparts, any one of which need not contain the
signatures of more than one Party, but all such counterparts
taken together will constitute one and the same Agreement.
9.11 Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
9.12 Terminology. As used in this Agreement, the masculine,
feminine, or neuter gender, and the singular or plural
number, shall be deemed to include the others whenever the
context so indicates or requires.
9.13 Legal Fees. If any legal action or any arbitration or other
proceeding is brought for the enforcement or interpretation
of this Agreement, or because of an alleged dispute,
default, misrepresentation, or breach in connection with any
of the provisions of this Agreement, the successful or
prevailing party or parties shall be entitled to recover
reasonably attorneys' fees, expenses, and other costs
incurred in that action or proceeding in addition to any
other relief to which it or he may be entitled. The right to
such attorneys' fees, expenses, and costs shall be deemed to
have accrued upon the commencement of such action and shall
be enforceable whether or not such action is prosecuted to
judgment.
9.14 Broker's or Finder's Fees. Each of the Parties represents to
each of the others that it or he does not have any liability
to any broker or any representative, nor owe any fee or
compensation to any agent, finder, or broker, in connection
with the subject matter of this Agreement, and each of them
hereby agrees to indemnify and hold harmless the other Party
against any liability, damage, cost, or
8
<PAGE>
expense (including reasonable attorneys' fees) incurred by
reason of the breach of the foregoing representation.
9.15 Advice of Counsel. Each Party has carefully reviewed this
Agreement, is familiar with the terms and conditions herein,
and was advised by legal counsel with respect thereto. Each
Party agrees that the terms and conditions set forth herein
are fair and not unconscionable.
9.16 Relationship of the Parties. Nothing in this Agreement shall
create a partnership, joint venture, employment
relationship, or any other relationship between the Parties
other than the relationship of independent contractors.
9.17 Further Cooperation. Each Party covenants and agrees to
prepare, execute, acknowledge, file, record, publish, and
deliver to the other Party such other instruments,
documents, and statements including, without limitation,
instruments and documents of assignment, transfer, and
conveyance, and take such other action as may be reasonably
necessary or convenient in the discretion of the requesting
Party to carry out more effectively the purposes of this
Agreement.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
9
<PAGE>
9.18 Modifications. This Agreement may not be altered, amended,
changed, waived, terminated, or modified in any manner
unless the same shall be in writing and signed by or on
behalf of the Party to be bound.
Tel-Save.com, Inc.
By________________________
Name
Title
Daniel M. Borislow
---------------------------
10
EXHIBIT 10.6
PURCHASE AGREEMENT REGARDING THE STOCK
OF
EMERGENCY TRANSPORTATION CORPORATION
THIS PURCHASE AGREEMENT REGARDING THE STOCK OF EMERGENCY TRANSPORTATION
CORPORATION (this "Agreement") is entered into as of the 5th day of January,
1999, by and between Tel-Save.com, Inc., a Delaware corporation ("Tel-Save"),
and Jimlew Capital, L.L.C., a Delaware limited liability company ("Jimlew").
Tel-Save and Jimlew may sometimes be referred to herein individually as a
"Party" and collectively as the "Parties."
RECITALS
A. Tel-Save is the owner, of record and beneficially, of all of the
shares of the capital stock (the "ETC Shares") of Emergency
Transportation Corporation ("ETC").
B. Jimlew is the owner, of record and beneficially, of an aggregate of
12,050,000 shares of Common Stock of Tel-Save (the "Tel-Save Shares").
C. Tel-Save desires to sell the ETC Shares to Jimlew, and Jimlew desires
to purchase the ETC Shares from Tel-Save, on the terms and subject to
the conditions set forth herein.
NOW, THEREFORE, in consideration of the covenants and agreements set forth
herein, and other good and valuable consideration the receipt and adequacy
of which are hereby acknowledged, the Parties hereby agree as follows:
1. Purchase and Sale of the ETC Shares.
1.1 Tel-Save hereby sells, transfers, and assigns the ETC Shares to
Jimlew.
1.2 Concurrently herewith, Tel-Save is delivering to Jimlew stock
certificates evidencing the ETC Shares. Jimlew acknowledges
receipt of such stock certificates.
2. Purchase Price and Payment.
2.1 The aggregate purchase price for the Shares (the "Purchase
Price") is $8,654,000, payable by delivery by Jimlew to Tel-Save
of Tel-Save Common Stock valued as provided in Section 2.2
hereof.
2.2 The value of each of the Tel-Save Shares is hereby determined to
be the greater of the most recent closing price per share of the
Tel-Save Shares on the NASDAQ national market system on the date
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of the closing of the transactions contemplated hereby, or the
closing price per share of the Tel-Save Shares on the NASDAQ
national market system on December 31, 1998.
2.3 The closing of the transactions contemplated hereby will occur
not later than January 7, 1999.
3. Representations and Warranties of Tel-Save. Tel-Save hereby represents
and warrants to Jimlew as follows:
3.1 The statements in Recital A are true and correct.
3.2 ETC is a limited liability company duly organized and validly
existing under the laws of the State of Delaware.
3.3 The Shares are not subject to any lien, claim, or encumbrance of
any nature, except for restrictions on transfer imposed by
applicable securities laws.
4. Representations and Warranties of Jimlew. Jimlew hereby represents and
warrants to Tel-Save as follows:
4.1 The statements in Recital B are true and correct.
4.2 The Tel-Save Shares are not subject to any lien, claim, or
encumbrance of any nature, except for restrictions on transfer
imposed by applicable securities laws.
4.3 Jimlew is intimately familiar with ETC, the ETC Shares, and the
financial condition, results of operations, liabilities, risks,
and prospects of ETC. Except for the representations and
warranties set forth in Section 3 hereof, Jimlew is purchasing
the Shares "as is" and without any other representation or
warranty.
4.4 The ETC Shares are being acquired by Jimlew for investment for
his own account, not as an agent or nominee, and not with a view
to the resale or distribution thereof. Jimlew understands that
none of the ETC Shares has been registered or qualified under any
applicable securities laws and that the transfer thereof is
restricted by such laws and that the stock certificates
representing the ETC Shares and being delivered to Jimlew
concurrently herewith bear a legend to that effect.
4.5 Jimlew represents that he is experienced in evaluating and
investing in companies such as ETC and has such knowledge and
experience in financial and business matters
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as to be capable of evaluating the merits and risks of such
investment, and that he has the ability to bear the economic
risks of such investment.
5. Management Agreement.
5.1 ETC is a party to those certain Management Agreements dated
January 28, 1997, and August 12, 1997, with Jet Solutions L.L.C.,
a Delaware limited liability company, those certain related
Exhibits A to Management Agreement, those certain related
Addendums to Management Agreement, and those certain related
Sideletter Agreements, all dated January 28, 1997, and August 12,
1997, respectively (collectively, the "Management Agreement").
5.2 Jimlew agrees that neither it nor any entity that succeeds him as
controller of ETC shall permit ETC to modify the Management
Agreement in any fashion that affects Tel-Save without the
express prior written consent of Tel-Save.
5.3 At the discretion of Jimlew, and upon at least 24 hours' advance
notice, Tel-Save shall have the right to charter the aircraft
that is the subject of the Management Agreement at a rate of
$5,000 per hour (as calculated in the Management Agreement) and
on the terms set forth in the Management Agreement.
6. Miscellaneous.
6.1 Representations and Warranties. The representations and
warranties set forth in this Agreement shall survive the closing
of the transactions contemplated hereby.
6.2 Costs and Expenses. Each Party shall pay its or his own costs and
expenses in connection with this Agreement and the transactions
contemplated hereby, including without limitation the costs and
expenses of its or his attorneys, accountants, advisors, finders,
brokers, and other agents and representatives.
6.3 Notices. All notices which are required or permitted to be given
pursuant to the terms of this Agreement shall be in writing and
shall be sufficient in all respects if given in writing and
delivered personally or by telegraph or by registered or
certified mail, postage prepaid, as follows:
If to Tel-Save:
Tel-Save.com, Inc.
6805 Route 202
New Hope, Pennsylvania 18938
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Attention: General Counsel
With a copy to:
Arnold & Porter
777 South Figueroa, 44th Floor
Los Angeles, California 90017
Attention: Theodore G. Johnsen
If to Jimlew:
Jimlew Capital
6805 Route 202
New Hope, PA 18938
With a copy to:
Daniel M. Borislow
8234 Horseshoe Bay Road
Boynton Beach, FL 33437
Notice shall be deemed to have been given upon receipt thereof as
to communications that are personally delivered or telegraphed
and five (5) days after deposit of the same in any United States
mail post office box in the state to which the notice is
addressed, or seven (7) days after deposit of same in any such
post office box other than in the state to which the notice is
addressed, postage prepaid, addressed as set forth above. Notice
shall not be deemed given under the preceding sentence unless and
until notice shall be given to all addressees above other than
the sender. The addresses and addressees for the purpose of this
Section may be changed by giving written notice of such change in
the manner provided herein for giving notice. Unless and until
such written notice is given, the addresses and addressees as
stated by prior written notice, or as provided herein if no
written notice of change has been given, shall be deemed to
continue in effect for all purposes hereunder.
6.4 Survival of Representations and Warranties. Notwithstanding any
investigation made by any Party, all representations and
warranties made herein shall survive the execution and delivery
of this Agreement.
6.5 Applicable Law. This Agreement and all documents executed and
delivered in connection herewith and the rights and obligations
of the parties hereto and thereto shall be governed by and
construed in accordance with the laws of the State of New York
other than
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and without giving effect to the laws of the State of New York
relating to choice of law.
6.6 Applicable Jurisdiction. The parties hereby agree that any
action, at law or in equity, arising under this Agreement or any
of the other documents executed and delivered in connection
herewith, shall be filed in and only in the state courts of the
State of New York or a United States District Court in the State
of New York. The parties hereby consent and submit to the in
personam jurisdiction of such courts for purposes of litigating
any such action.
6.7 Assignments. This Agreement and the other documents executed and
delivered in connection herewith shall be binding upon and inure
to the benefit of the parties hereto and their respective
personal and legal representatives, heirs, successors, and
assigns; provided, however, that no party hereto may assign or
transfer its or his rights in and to this Agreement or any other
document executed and delivered in connection herewith, without
the prior written consent of the other parties hereto.
6.8 Entire Agreement. Except as otherwise expressly set forth herein,
this Agreement and the other agreements referred to in Section 7
hereof embody the complete agreement and understanding among the
Parties with respect to the subject matter hereof and supersede
and preempt any prior understandings, agreements, or
representations by or among the Parties, written or oral, which
may have related to the subject matter hereof in any way.
6.9 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is
held to be prohibited by or invalid under applicable law, such
provision will be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of
this Agreement.
6.10 Counterparts. This Agreement may be executed in two or more
counterparts, any one of which need not contain the signatures of
more than one Party, but all such counterparts taken together
will constitute one and the same Agreement.
6.11 Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of
this Agreement.
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6.12 Terminology. As used in this Agreement, the masculine, feminine,
or neuter gender, and the singular or plural number, shall be
deemed to include the others whenever the context so indicates or
requires.
6.13 Legal Fees. If any legal action or any arbitration or other
proceeding is brought for the enforcement or interpretation of
this Agreement, or because of an alleged dispute, default,
misrepresentation, or breach in connection with any of the
provisions of this Agreement, the successful or prevailing party
or parties shall be entitled to recover reasonably attorneys'
fees, expenses, and other costs incurred in that action or
proceeding in addition to any other relief to which it or he may
be entitled. The right to such attorneys' fees, expenses, and
costs shall be deemed to have accrued upon the commencement of
such action and shall be enforceable whether or not such action
is prosecuted to judgment.
6.14 Broker's or Finder's Fees. Each of the Parties represents to each
of the others that it or he does not have any liability to any
broker or any representative, nor owe any fee or compensation to
any agent, finder, or broker, in connection with the subject
matter of this Agreement, and each of them hereby agrees to
indemnify and hold harmless the other Party against any
liability, damage, cost, or expense (including reasonable
attorneys' fees) incurred by reason of the breach of the
foregoing representation.
6.15 Advice of Counsel. Each Party has carefully reviewed this
Agreement, is familiar with the terms and conditions herein, and
was advised by legal counsel with respect thereto. Each Party
agrees that the terms and conditions set forth herein are fair
and not unconscionable.
6.16 Relationship of the Parties. Nothing in this Agreement shall
create a partnership, joint venture, employment relationship, or
any other relationship between the Parties other than the
relationship of independent contractors.
6.17 Further Cooperation. Each Party covenants and agrees to prepare,
execute, acknowledge, file, record, publish, and deliver to the
other Party such other instruments, documents, and statements
including, without limitation, instruments and documents of
assignment, transfer, and conveyance, and take such other action
as may be reasonably necessary or convenient in the discretion of
the requesting Party to carry out more effectively the purposes
of this Agreement.
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6.18 Modifications. This Agreement may not be altered, amended,
changed, waived, terminated, or modified in any manner unless the
same shall be in writing and signed by or on behalf of the Party
to be bound.
TEL-SAVE.COM, INC.
By:
-------------------------------
Its:
-------------------------------
JIMLEW CAPITAL
By:
-------------------------------
Its:
-------------------------------
7
EXHIBIT 10.7
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (this "Agreement") is entered into as of this 31st
day of December, 1998, by and between Tel-Save.com, Inc., a Delaware corporation
(the "Company"), Tel-Save, Inc., a Pennsylvania corporation and a subsidiary of
the Company (the "Subsidiary"), and Mark Pavol as Trustee of that certain D&K
Grantor Retained Annuity Trust dated June 15, 1998 (the "Participant"). The
Company, the Subsidiary, and the Participant shall sometimes be referred to
individually as a "Party" and two or more of them shall sometimes be referred to
collectively as the "Parties."
RECITALS
A. The Company owns and holds four Subordinated Promissory Notes, each
dated August 25, 1998, each made by Communication Telesystems
International, d.b.a. WorldxChange Communications ("WorldxChange"),
and each originally made payable to Gerard Klauer Mattison & Co., Inc.
("GKM") (except that the Subordinated Promissory Note in the initial
principal amount of $1,200,000 was originally made payable to the
Company). These notes are in the initial principal amounts of
$20,000,000, $20,000,000, $15,000,000, and $1,200,000, respectively.
Copies of these notes are attached hereto as Exhibits A-1 through A-4,
respectively. These notes shall be referred to sometimes individually
as a "WorldxChange Note" and collectively as the "WorldxChange Notes."
B. The WorldxChange Notes are secured as provided in that certain
Security Agreement dated as of August 25, 1998, by and between
WorldxChange and GKM (the "Security Agreement"), and by those two
certain Stock Pledge Agreements, each dated as of August 25, 1998, by
and between GKM and Roger B. Abbott and Rosalind M. Abbott and Edward
S. Soren, respectively (collectively, the "Pledge Agreements"). A copy
of the Security Agreement is attached hereto as Exhibit B. Copies of
the Pledge Agreements are attached hereto as Exhibits C-1 and C-2,
respectively. The WorldxChange Notes are subordinated as provided in
that certain Intercreditor Agreement dated as of August 25, 1998,
between Foothill Capital Corporation, a California corporation, the
Company, and GKM (the "Intercreditor Agreement"). A copy of the
Intercreditor Agreement is attached hereto as Exhibit D. The
WorldxChange Notes, the Security Agreement, the Pledge Agreements, and
the Subordination Agreement may sometimes be referred to herein
collectively as the "WorldxChange Loan Documents."
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C. GKM has assigned to the Company all of its rights, title, and interest
in and to: each of the WorldxChange Notes, the Security Agreement, and
the two Pledge Agreements.
D. The Participant owns and holds those certain 4-1/2% Convertible
Subordinated Promissory Notes due 2002 in the aggregate principal
amount of $16,070,000, and those certain 5% Convertible Subordinated
Promissory Notes due 2004 in the aggregate principal amount of
$46,475,000, each made by the Company. These notes shall be referred
to sometimes individually as a "Company Note" and collectively as the
"Company Notes."
E. The Parties desire that the Company grant to the Participant an
approximately ninety-nine percent (99%) participation in the
WorldxChange Notes, that the Participant assign the Company Notes to
the Company, that the Subsidiary act as collateral and collection
agent with regard to the WorldxChange Notes, and that the Parties
enter into certain related transactions, all as set forth herein.
NOW, THEREFORE, in consideration of the covenants and agreements set
forth below, and for other consideration the receipt and adequacy of which is
hereby acknowledged, the Parties hereby agree as follows:
1. Recitals. The Parties acknowledge and agree that the Recitals to this
Agreement are true and correct.
2. The Company Notes.
2.1 The Participant represents and warrants to the Company that the
Participant is the owner and holder of the Company Notes, free
and clear of any and all liens, claims, and encumbrances, except
for restrictions imposed by applicable securities laws.
2.2 This Agreement has been duly authorized, executed, and delivered
by the Trustee and, when executed and delivered by the Company
and the Subsidiary, shall constitute the valid and binding
agreement of the Trust, enforceable against the Trust in
accordance with its terms. This Agreement does not violate any
charter document of the Trust nor any agreement by which the
Trust or any of its property is bound.
2.3 The Participant's Interest is being acquired by the Trustee for
investment for the Trust's account, not as an agent or nominee,
and not with a view to the resale or distribution thereof. The
Trustee understands that the Participant's Interest has not been
registered or qualified under any applicable securities laws and
that the
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transfer thereof is restricted by such laws. The Trustee
represents that he is experienced in evaluating and investing in
interests similar to the Participant's Interest and has such
knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of such investment,
and that the Trust has the ability to bear the economic risks of
such investment.
2.4 The Participant acknowledges that it has entered into this
Agreement in reliance upon its own independent investigation of
all relevant facts and circumstances, and not in reliance on any
information, representation, or advice provided by the Company or
the Subsidiary. The Participant further acknowledges that the
Participant shall, independently and without reliance on the
Company or the Subsidiary and based on such documents and
information as the Participant deems appropriate at the time,
continue to make its own independent credit and other decisions
in taking or not taking any action under this Agreement.
2.5 The Participant hereby absolutely and irrevocably sells, assigns,
and transfers to the Company all of the Participant's rights,
title, and interest in and to each of the Company Notes. Such
rights are evidenced only by a book entry and not by a promissory
note.
2.6 Concurrently with the execution and delivery hereof, the
Participant is delivering to the Company an appropriate letter of
authorization transferring the Company Notes to an account to be
designated by the Company.
3. The WorldxChange Notes.
3.1 The Company represents and warrants to the Participant that the
Company is the owner and holder of the WorldxChange Notes, free
and clear of any and all liens, claims, and encumbrances, except
for restrictions imposed by applicable securities laws, and that
the Company is the sole Secured Party under the Security
Agreement and under the Pledge Agreements.
3.2 This Agreement has been duly authorized, executed, and delivered
by the Company and the Subsidiary and, when executed and
delivered by the Trustee, shall constitute the valid and binding
agreement of the Company and the Subsidiary, enforceable against
the Company and the Subsidiary in accordance with its terms. This
Agreement does not violate the Certificate of Incorporation or
By-Laws of the Company or the Subsidiary, nor any agreement by
which the Company or the Subsidiary or any of their property is
bound. Neither the Company nor the Subsidiary has any actual
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knowledge of: (a) any claim or offset by WorldxChange against
either the Company or the Subsidiary; nor (b) any defense by
WorldxChange to the enforcement of the WorldxChange Notes.
3.3 Subject to the terms of this Agreement, the Company hereby grants
and sells to the Participant, and the Participant hereby
purchases from the Company (without recourse to the Company or
the Subsidiary except to the extent expressly provided in Section
5 hereof) a ninety-nine percent (99%) undivided interest in the
WorldxChange Notes subject to the provisions of this Agreement
regarding allocation of costs and payment of fees (the
"Participant's Interest" or the "Participant's Pro Rata Share").
The Company's remaining one percent (1%) interest in the
WorldxChange Notes subject to the provisions of this Agreement
regarding allocation of costs and payment of fees shall be
referred to herein as the "Company's Interest" or the "Company's
Pro Rata Share."
3.4 Participant shall be the legal owner of the Participant's
Interest, and the holder of an equitable interest in the
WorldxChange Notes. This Agreement constitutes a sale of the
Participant's Interest and shall in no fashion be construed as a
loan from the Participant to the Company.
3.5 The Subsidiary agrees to be responsible, subject to the terms of
this Agreement, for taking reasonable action for the collection
of the WorldxChange Notes and the disbursement to the Participant
of the Participant's Interest in the proceeds of any and all such
collections. The Company or the Subsidiary shall establish and
maintain a separate account for all such proceeds and shall not
commingle such proceeds with its other funds. Both the Company
and the Trustee agree to cooperate with the Subsidiary in such
collection efforts including, without limitation, giving prompt
notice to the Subsidiary of any event or circumstance that might
affect such collection, giving appropriate notices to
WorldxChange upon request by the Subsidiary, and cooperating in
action under or in connection with the WorldxChange Loan
Documents.
3.6 Not less frequently than quarterly shortly following the 25th day
of each November, February, May, and August during the term of
this Agreement, the Subsidiary shall submit to the Participant a
written report that shall identify all payments made since the
Subsidiary's preceding report to the Participant regarding the
Worldxchange Notes, any costs incurred by the Company or the
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Subsidiary hereunder in that period, any fees owed to the Company
or the Subsidiary hereunder, the nature of any default under the
WorldxChange Notes, and any action being taken by the Company or
the Subsidiary in connection with any such default (each a
"Report"). If a Report reflects that sums are due from the
Company or the Subsidiary to the Participant, payment of such
sums shall accompany the Report. If a Report reflects that sums
are due from the Participant to the Company or the Subsidiary,
the Participant shall wire transfer to the Company or the
Subsidiary, as appropriate, the amount of such sums immediately
upon receipt of the Report.
3.7 The Subsidiary agrees to service the WorldxChange Notes, and
shall take or refrain from taking action with respect thereto as
the Subsidiary would normally do with respect to loans of a
comparable nature in which participation has not been granted.
The Subsidiary may deal with the WorldxChange Loan Documents as
an absolute owner thereof, except that the Subsidiary agrees not
to make any material amendment of the WorldxChange Loan Documents
or to take any material action regarding the WorldxChange Loan
Documents, including without limitation any of the following
amendments to any of the WorldxChange Loan Documents, without the
Participant's prior written consent: (a) reduction in the
interest rate or forgiveness of an interest on, or principal of,
any of the WorldxChange Notes; or (b) voluntary termination of
the security interest in any material portion of the collateral
granted under the Security Agreement or either of the Pledge
Agreements. If the Subsidiary requests the consent of the
Participant to any action in connection with any of the
WorldxChange Loan Documents, the Trustee shall respond in writing
either to: (a) grant such request; or (b) suggest a practical
alternative action. If the Subsidiary shall not receive such a
response from the Trustee within ten (10) business days after the
Subsidiary's request therefor, the Subsidiary shall have the
right, in its sole discretion, and without further notice to the
Participant, to take action regarding any modification, waiver,
or release of any of the terms of the WorldxChange Loan
Documents, or regarding the modification, waiver, or release of
any collateral or to regarding the substitution or exchange of
any collateral, to consent to any action or failure to act by an
entity liable on any portion of the WorldxChange Notes, and to
exercise or refrain from exercising any powers or rights under or
in respect of the WorldxChange Loan Documents or any collateral
therefor including, without limitation, the right to enforce or
refrain from enforcing the obligations of any entity liable for
the payment of the WorldxChange Notes or the performance of any
of the
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WorldxChange Loan Documents. Any person may deal with the Company
or the Subsidiary as if no participation interest in the
WorldxChange Notes had been granted.
3.8 The Company or the Subsidiary shall hold possession of and title
to all of the WorldxChange Loan Documents and related collateral
in its name. The Participant shall have the right to examine and
make copies of all original WorldxChange Loan Documents and of
the Company's or the Subsidiary's records with respect thereto at
any reasonable time during the Company's or the Subsidiary's
normal business hours, upon reasonable notice to the Company or
the Subsidiary, as appropriate.
3.9 Upon learning of the existence of any event or condition that
would constitute an Event of Default under any of the
WorldxChange Loan Documents, the Subsidiary shall take action, or
shall refrain from taking action, as it shall determine it its
good faith business judgment, subject to the terms of this
Agreement. If the Participant shall pay, in advance, all costs
associated therewith, the Company shall exercise its Limited
Purchase Option under Section 17 of the Intercreditor Agreement.
3.10 If, as a result of any Event of Default under any of the
WorldxChange Loan Documents, related collateral is acquired by
foreclosure sale or otherwise, title shall be taken in the
Subsidiary's name or in the name of an entity affiliated with the
Subsidiary or in the name of another nominee designated by the
Subsidiary, all in the sole discretion of the Subsidiary.
3.11 In the event of the failure to pay taxes, assessments, insurance
premiums, claims against any of the collateral, or any other
amount required to be paid by any entity obligation under any of
the WorldxChange Loan Documents, the Subsidiary may (but shall
not be obligated to) advance amounts necessary to pay the same,
and the Participant shall reimburse the Subsidiary for the
Participant's Pro Rata Share of the amount thereof immediately
upon demand therefor. The Participant shall also pay to the
Subsidiary, upon request by the Subsidiary, the Participant's Pro
Rata Share of all costs and expenses (including without
limitation court costs and attorneys'fees and expenses)
reasonably incurred by the Company or the Subsidiary in
connection with the enforcement of any of the WorldxChange Loan
Documents or the protection or preservation of any related
collateral or the protection of the Company's rights, including
without limitation any of the foregoing incurred in any
litigation with any entity obligated under any of the
WorldxChange Loan Documents or any shareholder, officer,
director, affiliate, receiver, or trustee thereof, or any other
creditor of such obligor,
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and including without limitation any of the foregoing incurred in
connection with any claim of invalidity, preferential transfer,
fraudulent conveyance, negligence, or lender liability. The
Participant shall also reimburse the Company or the Subsidiary,
immediately upon demand therefor, for the Participant's Pro Rata
Share of any amounts paid by the Company or the Subsidiary in
settlement or compromise of any claim or action referred to
generally or specifically in this Section.
3.12 Any and all costs reasonably incurred by the Company or the
Subsidiary hereunder or in connection with any of the
WorldxChange Loan Documents, including without limitation any
costs incurred under the immediately preceding Section hereof and
the costs of any collection actions, shall be borne by the
Company and by the Participant in accordance with their
respective Pro Rata Shares. The Subsidiary may reimburse such
costs from the Participant's Interest and, if the Participant's
Interest is not sufficient at any time to pay such costs, the
Participant agrees to reimburse the Company for the amount of
such unreimbursed costs promptly upon demand therefor. Proceeds
of the collection of any and all amounts under the WorldxChange
Loan Documents shall be applied in the following order: first, to
the fee referred to in Section 4 hereof; second, to costs
incurred hereunder or under the WorldxChange Loan Documents; and
third, to the Participant's Interest and the Company's Interest.
3.13 The Trustee acknowledges and agrees that: (a) any and all
collections on the WorldxChange Notes are subject to the
Subordination Agreement; (b) it will hold the Company and the
Subsidiary harmless for any collection action or omission
undertaken by the Company or the Subsidiary with regard to the
WorldxChange Notes at the request or with the consent of the
Trustee; (c) it will assert no claim or liability against the
Company or the Subsidiary for any collection action or omission
undertaken by the Company or the Subsidiary in good faith; and
(d) the Participation Interest is only an interest to participate
in receipts by the Company or the Subsidiary under the
WorldxChange Notes, to pay for costs incurred by the Company or
the Subsidiary hereunder, and to pay fees earned by the
Subsidiary hereunder, and the Trustee shall have no right to take
any direct action, and will not take any direct action, with
regard to any of the WorldxChange Loan Documents.
3.14 The sole responsibility of the Subsidiary shall be to administer
the WorldxChange Loan Documents with the same care that the
Subsidiary exercises on its own behalf, as though this Agreement
had not been executed. Neither the Company nor the Subsidiary
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shall be liable to the Participant or to any other person for any
error of judgment or for any action or failure to act, except
that each of the Company and the Subsidiary shall be severally
liable for its own bad faith or willful misconduct. Without
limiting the generality of the foregoing: (a) the Subsidiary may
consult with legal counsel (including without limitation counsel
for WorldxChange), independent public accountants, and other
experts selected by the Subsidiary and neither the Company nor
the Subsidiary shall not be liable for any action taken or
omitted in good faith by the Company or the Subsidiary in
accordance with the advice of such counsel, accountants, or
experts; (b) except as expressly set forth herein, neither the
Company nor the Subsidiary makes any warranty or representation,
express or implied, with respect toWorldxChange, its financial
condition, any collateral, or any similar matter, and neither the
Company nor the Subsidiary shall be responsible for any
statement, warranty, or representation made in, or in connection
with, the WorldxChange Loan Documents or for the financial
condition or business affairs of any entity obligated under any
of the WorldxChange Loan Documents, or for performance of any of
the WorldxChange Loan Documents, or for the existence or value of
any collateral; (c) neither the Company nor the Subsidiary shall
be responsible for the performance or observance of any term,
covenant, or condition in any of the WorldxChange Loan Documents
on the part of any entity other than the Company, and shall not
have any duty to inspect any collateral, property, or books and
records associated with any of the WorldxChange Loan Documents;
(d) neither the Company nor the Subsidiary makes any warranty or
representation as to, and shall not be responsible for, the due
execution, legality, validity, enforceability, genuineness,
sufficiency, or collectability of any of the WorldxChange Loan
Documents or any related collateral; and (e) neither the Company
nor the Subsidiary shall incur any liability under or in respect
of any of the WorldxChange Loan Documents or any collateral by
acting on any notice, consent, certificate, or other document,
instrument, or writing, believed by the Company or the Subsidiary
to be genuine or signed or sent by the proper person.
3.15 If either the Company, the Subsidiary, or the Participant
receives any payment or prepayment on the WorldxChange Notes in
excess of the portion of such payment to which the Company or the
Participant is entitled under this Agreement, whether such
amounts are paid or received or applied voluntarily,
involuntarily, or by operation of law, by application of offset
or otherwise, the Party receiving such excess payment shall make
such payment to the other Parties as shall result in the Company,
the Subsidiary, and the Participant receiving the amount that
each is entitled to receive
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under this Agreement; provided, however, that if thereafter any
such excess payment or any part thereof is returned by the Party
receiving it, the appropriate portion of such payment by the
receiving Party to the other Party shall be rescinded, so that
the Company, the Subsidiary, and the Participant each shall have
received the amount that each of them is entitled to receive
under this Agreement.
3.16 In the event that the Company or the Subsidiary is required, for
any reason, to repay to any person all or any portion of any
payment received by the Company or the Subsidiary and with
respect to which the Company or the Subsidiary made a payment to
the Participant, then the Participant shall immediately remit to
the Subsidary the Participant's Pro Rata Share of the payment
required to be repaid by the Company or the Subsidiary.
3.17 The Participant shall promptly disclose to the Company any
material information received or obtained by it that reflects
upon the financial condition of any entity obligated under any of
the WorldxChange Loan Documents (other than the Company), or that
reflects upon the ability of any such obligor to perform its
obligations under any of the WorldxChange Loan Documents.
3.18 Except for the obligations evidenced by the WorldxChange Loan
Documents, none the Company, the Subsidiary, or the Participant
has made any loans to, or has any financial interest in,
WorldxChange or any principal or affiliate thereof. Any such
loans made or interest acquired hereafter by the Company, the
Subsidiary, or the Participant shall be reported promptly in
writing to the other Parties.
4. Limited Guaranty Fee.
4.1 For a fee in connection with the Subsidiary's obligations under
this Agreement, the Participant agrees to pay to the Subsidiary
thirty-two percent (32%) of each interest payment made on account
of the WorldxChange Notes.
4.2 The Subsidiary may collect such fee by deducting the amount of
such fee from the Participant's Interest. The Participant agrees
to pay any unpaid fee to the Subsidiary promptly upon demand
therefor.
5. Limited Guaranty.
5.1 Subject to the limitations and conditions set forth below, the
Subsidiary makes the guaranty set forth in Section 5.2 hereof:
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5.1.1 The Participant hereby agrees that the Subsidiary may
make reasonable efforts to collect all amounts owing on
the WorldxChange Notes, including without limitation
that the Subsidiary may seek a judgment from a court of
competent jurisdiction that money is then due and owing
by WorldxChange under the WorldxChange Notes and
identifying the amount of such money (the "Judgment").
The costs of such collection efforts shall be
reimbursed to the Company or the Subsidiary as provided
herein.
5.1.2 There must not be in existence any material default by
the Participant under this Agreement.
5.1.3 The limited guaranty set forth in this Section 5 does
not cover amounts owed or paid by the Participant to
the Subsidiary pursuant to Section 4 hereof.
5.2 Provided that the limitations and conditions of Section 5.1
hereof have been met, the Subsidiary guarantees the payment to
the Participant of the Participant's Interest in the amount set
forth in the principal and interest due and owing under the
WorldxChange Notes, less any and all amounts paid, owing, or to
be owing under this Agreement, including without limitation
Section 4 hereof, and less any such amounts that are not then
payable as a result of any action or inaction by the Trustee.
6. Miscellaneous.
6.1 Costs and Expenses. Except as herein provided, each Party hereto
shall pay its or his own costs and expenses in connection with
this Agreement and the transactions contemplated hereby,
including without limitation the costs and expenses of its or his
attorneys, accountants, advisors, finders, brokers, and other
agents and representatives.
6.2 Notices. All notices which are required or permitted to be given
pursuant to the terms of this Agreement shall be in writing and
shall be sufficient in all respects if given in writing and
delivered personally or by telegraph or by registered or
certified mail, postage prepaid, as follows:
If to the Company:
Tel-Save.com, Inc.
6805 Route 202
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New Hope, PA 18938
Attention: General Counsel
With a copy to:
Arnold & Porter
777 S. Figueroa Street, Suite 4400
Los Angeles, California 90017-2513
Attention: Theodore G. Johnsen, Esq.
If to the Subsidiary:
Tel-Save, Inc.
6805 Route 202
New Hope, PA 18938
Attention: Aloysius T. Lawn, Esq.
With a copy to:
Arnold & Porter
777 S. Figueroa Street, Suite 4400
Los Angeles, California 90017-2513
Attention: Theodore G. Johnsen, Esq.
If to the Trustee:
Mark Pavol
One Cavalier Court
Ringoes, New Jersey
With a copy to:
Joseph Galda, Esq.
Buchanan Ingersoll, P.C.
11 Penn Center
14th Floor
1835 Market Street
Philadelphia, PA 19103
Notice shall be deemed to have been given upon receipt thereof as
to communications that are personally delivered or telegraphed
and five (5) days after deposit of the same in any United States
mail post office box in the state to which the notice is
addressed, or seven (7) days after deposit of same in any such
post office box other than in the state to which the notice is
addressed, postage prepaid, addressed as set forth above. Notice
shall not be deemed given under the preceding sentence unless and
until notice shall be given to all addressees above other than
the sender. The addresses
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and addressees for the purpose of this Section may be changed by
giving written notice of such change in the manner provided
herein for giving notice. Unless and until such written notice is
given, the addresses and addressees as stated by prior written
notice, or as provided herein if no written notice of change has
been given, shall be deemed to continue in effect for all
purposes hereunder.
6.3 Survival of Representations and Warranties. Notwithstanding any
investigation made by any party hereto, all representations and
warranties made herein shall survive the execution and delivery
of this Agreement.
6.4 Applicable Law. This Agreement and all documents executed and
delivered in connection herewith and the rights and obligations
of the parties hereto and thereto shall be governed by and
construed in accordance with the laws of the State of New York
other than and without giving effect to the laws of the State of
New York relating to choice of law.
6.5 Applicable Jurisdiction. The Parties hereby agree that any
action, at law or in equity, arising under this Agreement or any
of the other documents executed and delivered in connection
herewith, shall be filed in and only in the state courts of the
State of New York or a United States District Court in the State
of New York. The Parties hereby consent and submit to the in
personam jurisdiction of such courts for purposes of litigating
any such action.
6.6 Assignments. This Agreement, the Exhibits hereto, and the other
documents executed and delivered in connection herewith shall be
binding upon and inure to the benefit of the Parties hereto and
their respective personal and legal representatives, heirs,
successors, and assigns; provided, however, that no Party hereto
may assign or transfer its or his rights in and to this Agreement
or any other document executed and delivered in connection
herewith, without the prior written consent of the other Parties
hereto.
6.7 Entire Agreement. This Agreement and the Exhibits hereto and the
related documents being entered into in connection herewith
embody the complete agreement and understanding among the Parties
with respect to the subject matter hereof and supersede and
preempt any prior understandings, agreements, or representations
by or among the Parties, written or oral, which may have related
to the subject matter hereof in any way.
6.8 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective
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<PAGE>
and valid under applicable law, but if any provision of this
Agreement is held to be prohibited by or invalid under applicable
law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the
remainder of this Agreement.
6.9 Counterparts. This Agreement may be executed in two or more
counterparts, any one of which need not contain the signatures of
more than one Party, but all such counterparts taken together
will constitute one and the same Agreement.
6.10 Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of
this Agreement.
6.11 Terminology. As used in this Agreement, the masculine, feminine,
or neuter gender, and the singular or plural number, shall be
deemed to include the others whenever the context so indicates or
requires.
6.12 Legal Fees. If any legal action or any arbitration or other
proceeding is brought for the enforcement or ----------
interpretation of this Agreement, or because of an alleged
dispute, default, misrepresentation, or breach in connection with
any of the provisions of this Agreement, the successful or
prevailing Party shall be entitled to recover reasonable
attorneys' fees, expenses, and other costs incurred in that
action or proceeding in addition to any other relief to which it
or he may be entitled. The right to such attorneys' fees,
expenses, and costs shall be deemed to have accrued upon the
commencement of such action and shall be enforceable whether or
not such action is prosecuted to judgment.
6.13 Broker's or Finder's Fees. Each of the Parties represents to each
of the others that it or he does not have any liability to any
broker or any representative, nor owe any fee or compensation to
any agent, finder, or broker, in connection with the subject
matter of this Agreement, and each of them hereby agrees to
indemnify and hold harmless the other Party against any
liability, damage, cost, or expense (including reasonable
attorneys' fees) incurred by reason of the breach of the
foregoing representation.
6.14 Advice of Counsel. Each Party has carefully reviewed this
Agreement, is familiar with the terms and conditions herein, and
was advised by legal counsel with respect thereto. Each Party
agrees that the terms and conditions set forth herein are fair
and not unconscionable.
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6.15 Relationship of the Parties. Nothing in this Agreement shall
create a partnership, joint venture, employment relationship, or
any other relationship between the Parties other than the
relationship of independent contractors.
6.16 Further Cooperation. Each Party covenants and agrees to prepare,
execute, acknowledge, file, record, publish, and deliver to the
other Party such other instruments, documents, and statements
including, without limitation, instruments and documents of
assignment, transfer, and conveyance, and take such other action
as may be reasonably necessary or convenient in the discretion of
the requesting Party to carry out more effectively the purposes
of this Agreement.
6.17 Modifications. This Agreement may not be altered, amended,
changed, waived, terminated, or modified in any manner unless the
same shall be in writing and signed by or on behalf of the Party
to be bound.
6.18 Offsets. No Party shall offset against any amount that such Party
is obligated to pay under this Agreement any amount owed or
alleged by such Party to be owed to it for any reason other than
this Agreement; a Party may offset against an amount it is
obligated to pay under this Agreement any amount owed or alleged
by such Party to be owed to it under this Agreement.
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6.19 Exhibits. Exhibits A-1 through A-3, Exhibit B., Exhibits C-1
through C-2, and Exhibit D are hereby incorporated herein by this
reference.
Tel-Save.com, Inc.
By
-----------------------------
Name
Title
The Subsidiary
By
-----------------------------
Name
Title
The Trustee
-----------------------------
Mark Pavol, as Trustee of the
D&K Grantor Retained Annuity
Trust dated June 15, 1998
15
EXHIBIT 10.8
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT, dated as of December 31, 1998, is among
TEL-SAVE.com, INC., a Delaware corporation (the "Company"), Daniel M. Borislow,
a director, officer, and shareholder of the Company ("Borislow"), Mark Pavol, as
Trustee of that certain D&K Grantor Retained Annuity Trust dated June 15, 1998
(the "Trust"), and _______, as Trustee of that certain D&K Grantor Retained
Annuity Trust II dated ______, 1998 ("Trust II"). Borislow, the Trust, Trust II,
and Affiliates of Borislow may sometimes be referred to herein individually as a
"Purchaser" and two or more of them may sometimes be referred to herein as the
"Purchasers."
RECITALS:
A. Borislow is the owner beneficially and of record of certain
securities;
B. Contemporaneously herewith, Borislow and the Company are entering into
that certain Severance Agreement and related agreements, and desire to
enter into this Registration Rights Agreement in connection therewith.
NOW THEREFORE, for valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties agree as follows:
1. Definitions
"Affiliate" shall have the meaning defined for that term in the rules and
regulations promulgated under the Exchange Act.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means Common Stock, par value $.01 per share, of Holdings.
"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 of Common Stock of
the Company owned of record and beneficially by Borislow or the Trust or Trust
II or any Affiliate of Borislow at the date hereof and any Common Stock issued
or issuable with respect to any other securities held on the date hereof by any
such parties (w) by conversion, (x) by way of stock split, stock dividend or
other distribution, (y) in connection with a combination of shares,
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recapitalization, merger, consolidation or other reorganization or (z) in any
other way. Any Registrable Security will cease to be a Registrable Security when
a Registration Statement covering such Registrable Security has been declared
effective by the Commission and such Registrable Securities have been disposed
of 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 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.
"Securities Act" means the Securities Act of 1933, as amended.
"Selling Shareholder" shall have the meaning set forth in Section 3(a).
"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
Each of the Purchasers agrees that it will not sell, pledge, assign,
transfer or otherwise dispose (collectively, "Transfer") of any of such
restricted Registrable Securities 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
the Company understands that each of the Purchasers has obtained advice from its
own counsel as to the nature and conditions of such exemptions. The Company is
under no obligation to register the Registrable Securities except as provided in
Section 3. The Company shall not incur any liability for any delay in
recognizing any Transfer of any restricted Registrable Security if the Company
reasonably believes that such Transfer may have been or would be in violation of
the provisions of applicable law or of this Agreement.
3. Registration Procedures
(a) As soon as practicable after the date hereof, the Company shall file,
at its sole election, either (A) a Registration Statement on Form S-3 (or its
then equivalent) 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 the Company,
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 the Company shall have determined in good faith that such
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<PAGE>
filing or effectiveness would be detrimental to the Company's business
interests. The Company 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) The Company 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 after such filing, 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 the Company 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:
(a) The Company may require the Selling Shareholders 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, and each Selling
Shareholder agrees to cooperate with the Company 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 Shareholders agree 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: (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 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 (iv) the existence of any
fact (including, without limitation, any fact the disclosure of which at such
time the Board of Directors of the Company shall have determined in good faith
would be detrimental to the Company's 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
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<PAGE>
statements therein (in light of the circumstances under which they were made, in
the case of the Prospectus) not misleading (provided that the Company may not
exercise this right for more than ninety (90) days in any twelve month period),
the Selling Shareholders 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 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 , such Selling
Shareholder will deliver to the Company (at the Company's 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) The Company 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 the
Company (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 the Company 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 Shareholders shall indemnify and hold harmless the
Company, its directors, its officers who sign the Registration Statement and
each person, if any, who controls the Company 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 Registration Statement,
Prospectus, preliminary prospectus, amendment or supplement. In connection with
an underwritten offering of the Registrable Securities, the Underwriter will
enter into an agreement under which such Underwriter will indemnify the Company
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) The Company shall indemnify and hold harmless and 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,
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<PAGE>
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 any Selling
Shareholder in writing specifically for inclusion in such Registration
Statement, Prospectus, preliminary prospectus, amendment or supplement;
provided, that the Company shall not be liable in any such case to or in respect
of a 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 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 the Company 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 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 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, the Company will enter into an agreement under which the Company
will agree to indemnify the Underwriters to the same extent as it indemnifies
the Selling Shareholders.
(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 (i) the
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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) The Company, 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
Shareholders to offer and sell the Registrable Securities.
(f) The Company shall furnish as soon as available to each Purchaser 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 Purchaser may reasonably request
(g) The Company 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) The Company shall use its best efforts to register or qualify such
Registrable Securities under such securities or blue sky laws of such
jurisdictions as the Purchasers shall reasonably request, and do any and all
other acts and things that may be necessary or advisable to enable each
Purchaser to consummate the disposition in such jurisdictions of its Registrable
Securities 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 itself 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, the Company
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 the
Company as to whether it
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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 the Company and such other reports and documents so filed by
the Company, 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 the Company of an opinion, in form and
substance satisfactory to the Company and its counsel, of counsel reasonably
satisfactory to the Company 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 the Act. Upon receipt of such an opinion, the Company
will issue a new certificate without the foregoing legend in substitution for
any such certificate bearing such legend.
7. Other Covenants of the Company.
(a) The Company agrees that in the event that it makes a public or private
offering of its debt securities in exchange for cash, to the extent
permitted by law the Company will, at the option of Borislow, utilize:
(i) up to twenty percent (20%) of the net cash proceeds of that
offering to the Company after payment of the expenses relating to the
offering that are to be borne by the Company (the "Net Cash Proceeds")
to repurchase at their then fair market value any convertible
subordinated notes of the Company then owned of record and
beneficially by Borislow, Trust II, or the Trust; and (ii) up to forty
percent (40%) of the Net Cash Proceeds to repurchase at their then
fair market value any convertible subordinated notes of the Company
then owned of record and beneficially by Borislow, Trust II, or the
Trust. Any repurchase under this Section 7(a) shall be made in the
following order: first, from Borislow; second, from Trust II; and
third, from the Trust. Notwithstanding the foregoing, this Section
7(a) shall not apply to any debt offering by the Company to a bank or
financial institution or in a commercial context.
(b) Without the prior written consent of Borislow, which consent shall not
be unreasonably withheld, the Company will not sell or agree to sell
all or substantially all its assets or, except in the ordinary course
of its business in a financing transaction, encumber all or
substantially all of its assets, in one transaction or in a series of
related transactions.
(c) Without the prior written consent of Borislow, which consent shall not
be unreasonably withheld, the Company will not merge or consolidate
with any other corporation, or agree to do so, will not acquire or
agree to acquire any corporation or other business entity, or
substantially all of the capital securities of any entity, or
substantially all of the assets of any entity, in each case if the
consideration
7
<PAGE>
paid therefor by the Company is material in nature. For this purpose,
materiality shall be determined as provided in the rules and
regulations promulgated under the Securities Act of 1933, as amended.
(d) For a period of eighteen (18) months commencing on the date hereof,
the Company shall not make any offer or sale of its Common Stock
unless and until Borislow has sold or otherwise disposed of all shares
of Common Stock now held by him; provided, however, that this Section
8(d) shall not prohibit the Company from offering or selling shares of
its Common Stock in connection with any employee benefit plans or
stockholder rights distribution; and, provided further, that up to the
entire net proceeds from the sale of shares in connection with such
employee benefit plans or stockholder rights distributions during the
eighteen (18) month period referred to above in this Section shall be
used, at Borislow's option and if permitted by applicable law, to
purchase Common Stock then owned by Borislow.
(e) The Company agrees to make available to Borislow upon reasonable
notice from Borislow, in connection with one (1) securities offering
to be made by Borislow within the next eighteen (18) months, the
following Company employees to participate in a standard securities
offering "road show" of not longer than five days' duration regarding
that offering: the Chief Executive Officer of the Company; and certain
other appropriate employees of the Company as designated by such Chief
Executive Officer. The Company may delay such participation if the
time of such participation requested by Borislow would cause undue
hardship on the Company.
8. Representation and Warranty by the Company. The Company represents and
warrants to the Purchasers that the execution, delivery, and performance of this
Agreement have been duly authorized by the Board of Directors of the Company.
9. Conditions to the Obligations of the Company. Each of the obligations of
the Company hereunder is subject to the fulfillment of the following conditions:
(a) Borislow holds and owns, of record and beneficially, not less than two
percent (2%) of the outstanding Common Stock, calculated on a
fully-diluted basis.
(b) There shall not exist a material default or breach by any party other
than the Company under this Agreement or any of the following
agreements, each of which is being entered into contemporaneously
herewith: (a) Severance Agreement between Borislow and the Company;
(b) Purchase Agreement Regarding the Stock of Emergency Transportation
Corporation between Jimlew Capital, L.L.C. and the Company; (c)
Exchange Agreement between the Trust and the Company; (d) Agreement of
Purchase and Sale of Real Property between Borislow and the Company;
and (e) Lease between Borislow and the Company.
<PAGE>
10. Notices
8
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 the Company:
Tel-Save.com, 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 opposite their respective signatures
below.
Any of the Company 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.
11. 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.
12. Severability
If for any reason any provision, paragraph or term 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.
13. 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.
9
<PAGE>
14. 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.
15. 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 a paragraph, subparagraph or other
subdivision of this Agreement. Defined terms shall include the plural and the
singular as the context shall require.
16. 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.
17. 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.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.
Tel-Save.com, Inc.
Witness
- -------
- ------------------------------ By:
Aloysius T. Lawn, Secretary --------------------------------------
Name:
Title:
Address: Borislow
- ------------------------------
- ------------------------------
- ------------------------------ ------------------------------------------
10
<PAGE>
Address: The Trust
- ------------------------------
- ------------------------------
- ------------------------------ ------------------------------------------
Mark Pavol, as Trustee of that certain D&K
Grantor Retained Annuity Trust dated June
15, 1998
Address: Trust II
- ------------------------------
- ------------------------------
- ------------------------------ ------------------------------------------
__________________, as Trustee of that
certain D&K Grantor Retained Annuity Trust
II dated ____________, 1998
Tel-Save.com, Inc.
Witness
- -------
By
- ------------------------------ ----------------------------------------
Aloysius T. Lawn, Secretary Name:
Title:
11
EXHIBIT 10.9
FINAL
AGREEMENT OF PURCHASE AND SALE OF REAL PROPERTY
THIS AGREEMENT OF PURCHASE AND SALE OF REAL PROPERTY (this
"AGREEMENT") is made as of this 5th day of January, 1999, by and between
TEL-SAVE, INC., a Pennsylvania corporation (the "SELLER"), and JIMLEW CAPITAL
LLC, a Delaware limited liability company (the "PURCHASER").
WITNESSETH:
WHEREAS, Seller is the fee simple owner of all of that certain
parcel of real property containing approximately ten (10) acres and located in
the Solebury Township, Bucks County, Pennsylvania, which for tax purposes is
known as Tax Parcel 41-28-67, as more particularly described on Exhibit "A"
attached hereto and incorporated herein, together with all buildings and
improvements thereon, including without limitation office building improvements
and known by street address as 6805 Route 202 in Solebury Township, Pennsylvania
18963, all right, title and interest of Seller in and to any land lying in the
bed of any existing dedicated street, road or alley adjoining thereto, all
strips and gores adjoining thereto, and all rights, ways, easements, privileges
and appurtenances thereunto belonging (the "PROPERTY"); and
WHEREAS, Seller desires to sell, and Purchaser desires to
purchase, the Property on the terms and conditions set forth herein; and
WHEREAS, this Agreement is executed in conjunction with a
Severance Agreement dated on or about the date hereof, and shall constitute the
agreement described at Section 7.1.3 of the Severance Agreement; and
WHEREAS, as a condition to closing on this Agreement, Seller and
Purchaser shall execute a lease under which Seller will lease back a portion of
the Property from Purchaser ("LEASE").
NOW, THEREFORE, in consideration of the foregoing premises, the
mutual covenants set forth herein, and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, Seller and
Purchaser hereby agree as follows:
1. AGREEMENT TO SELL AND PURCHASE. Seller agrees to sell and
Purchaser agrees to purchase the Property on the terms and conditions
hereinafter set forth.
2. PURCHASE PRICE AND TERMS. The purchase price of the Property
shall be one million nine hundred eighty-one thousand four hundred fifty-four
dollars ($1,981,454). The purchase price shall be paid in full at closing in the
form of cash or, at Purchaser's election, shares of Tel-Save.com, Inc. stock.
The Tel-Save.com, Inc. stock shall be valued as of the close of business on the
day immediately prior to the date of
<PAGE>
-2- FINAL
closing hereunder, or the close of business on December 31, 1998, whichever
value is higher.
3. INVESTIGATION OF PROPERTY.
(a) DELIVERY OF DOCUMENTS. Seller shall upon request of
Purchaser provide copies of any of the following documents or any other
documents and information relating to the Property as Purchaser may reasonably
request and which are in Seller's possession or under Seller's control: all
existing leases, rent rolls, insurance policies, agreements, surveys, site
plans, permits, certificates of occupancy, plans and specifications,
environmental, hazardous waste, radon, engineering, architectural or zoning
documents, tests, or reports, and title insurance policies or reports, if any,
relating to the Property which are in Seller's possession or under Seller's
control.
(b) INSPECTION OF PROPERTY. Purchaser, its agents and
representatives shall have the right to enter on to the Property prior to
closing hereunder for purposes of conducting surveys, soil tests, market
studies, engineering tests and such other tests, investigations, studies and/or
inspections as Purchaser deems necessary or desirable to evaluate the Property,
provided that (i) all such tests, investigations, studies and inspections shall
be conducted at Purchaser's sole risk and expense, (ii) Purchaser shall give
Seller reasonable prior notice of its entry onto the Property, (iii) Purchaser
shall use reasonable efforts to minimize any interference with the activities of
occupants on the Property, and (iv) Purchaser shall indemnify and hold Seller
harmless from and against any losses, liabilities, costs or expenses (including
reasonable attorneys' fees) arising out of Purchaser's entry onto the Property.
4. TITLE.
(a) CONDITION AT CLOSING. At closing hereunder, Seller shall
convey fee simple title to the Property, marketable and good of record and in
fact, free and clear of any and all liens, defects, encumbrances, leases,
easements, covenants, restrictions or other matters whatsoever, whether recorded
or unrecorded, except for (i) the lien of real estate taxes, water rents and
sewer charges not yet due and payable and (ii) Title Objections approved by
Purchaser pursuant to Section 4(b) hereof.
(b) TITLE OBJECTIONS. Seller and Purchaser acknowledge that a
title insurance policy was obtained by Seller on June 6, 1996 in conjunction
with Seller's purchase of the Property in 1996. Said title policy was written by
American Land Title Association and is known as Policy Number SV 2621277, dated
June 6, 1996 (the "TITLE POLICY"). Seller warrants that there have been no
material encumbrances recorded against the Property since the date of the Title
Policy dated June 6, 1996 of which Seller is aware. Purchaser has had an
adequate opportunity to review the Title Policy, and accepts that the Title
Policy and the additional warranty of Seller constitute sufficient assurance of
Seller's ability to convey good title to the Property. If Purchaser desires
further title investigation, insurance or survey of the Property, Purchaser may
obtain such at his own expense. If Purchaser shall determine that any matter or
matters affecting the Property, described in
<PAGE>
-3- FINAL
such investigation, insurance or survey and not shown on the Title Policy or
Exhibit "B" are unacceptable ("TITLE OBJECTIONS"), Purchaser shall notify Seller
in writing of such matter or matters prior to closing, and Seller shall have the
option to either correct the Title Objections at its own expense and proceed
with the closing, or to terminate this Agreement. Notwithstanding the provisions
of this Section 4(b), Seller shall release at or prior to closing all monetary
liens and encumbrances encumbering the Property. Notwithstanding the foregoing,
Purchaser hereby approves the title exceptions listed on Exhibit "B" attached
hereto and hereby incorporated, subject to the review of a survey if ordered by
Purchaser as set forth above.
5. CLOSING.
(a) TIME AND PLACE. Closing under this Agreement shall be held
on January 5, 1999. Closing shall be held at the offices of Seller, Seller's
counsel or such other place as is acceptable to both Seller and Purchaser.
(b) CLOSING DOCUMENTS.
(1) BY SELLER. At closing hereunder, Seller shall:
(i) Execute, acknowledge and deliver a special
warranty deed in the name of the person or entity designated by Purchaser.
(ii) Execute, acknowledge and deliver a Non-Foreign
Affidavit as required under Section 9(b) hereof.
(iii) Cause the cancellation and termination of any
lease affecting the Property, the vacation of any tenant in the Property except
as provided in the Lease, and deliver evidence thereof to Purchaser.
(iv) Execute and deliver to Purchaser a settlement
statement.
(v) Execute and deliver the Lease.
(vi) Execute, acknowledge as appropriate and deliver
such additional documents as may be necessary or customary to consummate the
transactions contemplated herein.
(2) BY PURCHASER. At closing hereunder, Purchaser shall:
(i) Pay the purchase price in accordance with Section
2 hereof.
(ii) Execute and deliver to Seller a settlement
statement.
<PAGE>
-4- FINAL
(iii) Execute and deliver the Lease.
(iv) Execute, acknowledge and deliver such additional
documents as may be necessary or customary to consummate the transactions
contemplated herein.
(c) CLOSING ADJUSTMENTS. Real estate taxes, water rents, sewer
charges, other utilities and similar charges shall be prorated and adjusted to
the date of closing hereunder. Any special assessments imposed by any
governmental agency or authority which are pending, noted or levied, or which
may be levied, noted or ordered prior to closing, shall be satisfied by Seller
at or prior to closing hereunder. If such taxes, rents or other charges are not
able to be determined on the date of closing, then the parties will prorate and
adjust such taxes, rents or other charges as soon as reasonably possible after
the closing contemplated hereunder, the parties agreeing that the terms of this
sentence shall survive the closing hereunder.
(d) CLOSING COSTS. The transfer and recordation tax shall be
divided equally between Seller and Purchaser. Seller and Purchaser shall each
pay their respective attorneys' fees. Purchaser shall pay the premium of any
title insurance policy purchased by Purchaser, and any survey costs. All other
closing costs and charges shall be paid according to custom in Pennsylvania.
(e) POSSESSION. Subject to the terms of the Lease, Seller
shall give possession and occupancy of the Property to Purchaser at closing
hereunder and no person or entity shall be occupying or possessing the Property.
In the event Seller shall fail to do so, Purchaser shall have the following
options:
(1) to continue to acquire the Property in which event
Seller, and any person or entity occupying the Property through Seller, shall
become and thereafter be a tenant at sufferance of Purchaser and Seller hereby
waives all notices to quit provided by the laws of the Commonwealth of
Pennsylvania or otherwise; or
(2) to exercise any rights and remedies Purchaser may have
under this Agreement or law or at equity.
(f) NOTICE OF VIOLATIONS. All notices of violations of orders
or requirements issued by any governmental agency or authority, or actions in
any court on account thereof, against or affecting the Property at the date of
closing hereunder, shall be complied with by Seller and the Property conveyed
free thereof.
6. CONDITIONS TO CLOSING. The obligation of Purchaser to close
hereunder is subject to the satisfaction, at or prior to closing, of each of the
following conditions, any of which may be waived, in whole or in part, in
writing by Purchaser at or prior to closing:
<PAGE>
-5- FINAL
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller set forth herein shall be true and correct in all material
respects.
(b) TITLE. Title to the Property shall be in the condition
required by Section 4 hereof.
(c) COMPLIANCE BY SELLER. Seller shall have performed and
complied with all of the covenants and conditions required by this Agreement to
be performed or complied with at or prior to closing.
(d) NO ADVERSE MATTERS. No material portion of the Property
shall have been adversely affected as a result of earthquake, disaster, any
action by governmental authority, flood, riot, civil disturbance, or act of God
or public enemy.
(e) LEASES. Other than the Lease, all leases affecting the
Property shall be cancelled and terminated and the terms and conditions of
Section 5(e) above are satisfied.
7. CONDITION OF PROPERTY. At closing hereunder, Purchaser shall
take the Property in "as is" condition as of the date of this Agreement,
reasonable wear and tear excepted. Seller assumes all risk of loss or damage to
the Property by fire or other casualty until the deed of conveyance to Purchaser
is delivered to Purchaser. In the event that all or any portion of the Property
is damaged or destroyed by fire or other casualty prior to closing hereunder,
Seller shall promptly notify Purchaser of the same. In the event the cost of
repair thereof is less than One Hundred Thousand Dollars ($100,000.00), Seller
shall promptly undertake such repair and complete the same prior to closing
hereunder. In the event the cost of repair thereof is equal to or greater than
One Hundred Thousand Dollars ($100,000.00), and such damage or destruction is
not fully repaired by Seller prior to closing hereunder, Purchaser, in its sole
discretion, shall either (i) proceed to closing hereunder with no reduction in
the purchase price, in which event all insurance proceeds attributable to such
damage or destruction shall be delivered or assigned to Purchaser at closing and
the amount of any deductible with respect to such damage or destruction paid by
Seller to Purchaser, or (ii) terminate this Agreement, in which event the
parties hereto shall be released from any further liabilities or obligations
hereunder.
8. OBLIGATIONS PENDING CLOSING.
(a) TITLE TO PROPERTY. Except as may be necessary to cure
Title Objections, Seller shall not cause or permit any change in the status of
title to the Property prior to closing hereunder.
(b) CONDITION OF PROPERTY. Seller shall continue to operate
and maintain the Property in the ordinary course of business, and shall not
cause or permit any adverse change in the condition of the Property, reasonable
wear and tear and damage by fire or the elements excepted.
<PAGE>
-6- FINAL
(c) CONTRACTS. Seller shall not enter into any contracts and
agreements relating to the management and operation of the Property.
(d) INSURANCE. Prior to closing hereunder, Seller shall
maintain in full force and effect insurance against loss or damage by fire and
such other hazards as are customarily covered by extended coverage endorsements
in an amount sufficient to prevent Seller from becoming a co-insurer of any loss
or damage.
(e) CONDEMNATION. In the event any governmental agency should
notify Seller, or Seller should become aware, of any permanent or temporary
actual or threatened taking or condemnation of any portion of the Property,
Seller shall promptly notify Purchaser of the same. Purchaser shall thereupon be
entitled, at its sole option, (i) to proceed to closing hereunder with no
reduction in the purchase price in which event any and all proceeds of such
taking or condemnation shall be delivered or assigned to Purchaser at closing
hereunder, or (ii) to terminate this Agreement, in which event all parties shall
be relieved from any further liabilities or obligations hereunder.
9. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and
warrants to Purchaser as follows, all of which representations and warranties
are true and correct as of the date hereof and shall be true and correct as of
closing hereunder:
(a) Seller (i) is a corporation duly formed, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania, (ii)
has full power and authority to sell the Property to Purchaser without the
consent of any other person or entity, (iii) has authorized the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby, and (iv) is the sole legal and equitable owner
of record and in fact of good and marketable fee simple title to the Property.
(b) Seller is not a "foreign person" as that term is defined
in Section 1445 of the Internal Revenue Code, and Seller shall execute an
affidavit to such effect in the form to be provided by Purchaser. Seller shall
indemnify Purchaser and its agents against any liability or cost, including
reasonable attorneys' fees, in the event that this representation is false or
Seller fails to execute such affidavit at closing hereunder.
(c) No taking by power of eminent domain or condemnation
proceedings have been instituted or, to the best of Seller's knowledge,
threatened for the permanent or temporary taking or condemnation of all or any
portion of the Property.
(d) There is not pending or, to the best of Seller's
knowledge, threatened, any litigation, proceeding or investigation relating to
the Property or Seller's title thereto, nor does Seller have reasonable grounds
to know of any basis for such litigation, proceedings or investigations.
(e) To the best of Seller's knowledge, there exists no
violation of any law, regulation, orders or requirements issued by any
governmental agency or authority, or action in any court on account thereof,
against or affecting the Property.
<PAGE>
-7- FINAL
(f) Seller has not made, and prior to closing hereunder will
not make, any commitments to any governmental authority or agency, utility
company, school board, church or other religious body, or to any other
organization, group or individual, relating to the Property which would impose
on Purchaser the obligation to make any contributions of money, dedication of
land or grants of easements or rights-of-way, or to construct, install or
maintain any improvements, public or private, on or off the Property.
(g) All services performed or materials provided in connection
with the construction of improvements on the Property have been paid.
(h) No commission or other fee will be due or payable to any
real estate agent, broker or finder after closing hereunder in connection with
any lease existing on the date of full execution of this Agreement.
(i) There are no contracts and agreements relating to the
management and operation of the Property.
(j) To the best of Seller's knowledge, the buildings and
improvements constituting the Property are structurally sound, no portion of the
improvements is subject to penetration by rain or surface water, and the
heating, air conditioning, ventilating and other mechanical, electrical and
plumbing systems and equipment included in the Property are in good working
order, repair and condition, reasonable wear and tear excepted.
(k) To the best of Seller's knowledge, the Property is zoned
light industrial under the zoning ordinances and regulations of Solebury
Township, and such classification permits, as a matter of right and without any
special exception, special use permit, or variance (except for a variance
required by the Department of Environmental Resources concerning the
installation of a bridge over a stream on the Property and a sewer variance),
the use of the Property as the same is currently used, subject to the
restrictions described in the Solebury Township Zoning Hearing Board Application
of William Terry Doan dated September 17, 1984.
(l) Seller has not received any notice from the state, county
or federal governments, or any governmental agency or authority thereof that the
buildings and improvements at the Property do not comply with the Americans With
Disabilities Act and/or the regulations promulgated thereunder. It is
specifically understood that the Seller makes no other representations or
warranties regarding the compliance or noncompliance of the Property and the
buildings and improvements thereon with the Americans With Disabilities Act
and/or the regulations promulgated thereunder. To the best of Seller's
knowledge, the buildings and improvements at the Property comply with all other
applicable subdivision ordinances, building codes, certificates of occupancy and
other applicable Federal, Pennsylvania and Bucks County ordinances, orders and
regulations.
<PAGE>
-8- FINAL
(m) To the best of Seller's knowledge, there are in existence
at the Property no "hazardous wastes" as that term is defined in the Resource
Conservation and Recovery Act, the Comprehensive Environmental Resources,
Compensation and Liability Act, the regulations issued pursuant thereto by the
Federal Environmental Protection Agency and/or in the applicable law of the
Commonwealth of Pennsylvania or any subdivision thereof, including without
limitation radon levels in excess of applicable regulations ("HAZARDOUS
WASTES"). Seller is not a generator of any such Hazardous Wastes, and to the
best of Seller's knowledge, is in full compliance with all Hazardous Waste
emission, reporting, storage and removal requirements imposed by applicable law.
(n) To the best of Seller's knowledge, there is in existence
at the Property no "asbestos" as that term is defined in regulations promulgated
by the Federal Environmental Protection Agency and/or the Occupational Safety
and Health Administration ("ASBESTOS").
(o) To the best of Seller's knowledge, the Property is not
located within an area designated as a flood hazard area under the Federal Flood
Protection Act of 1973, on the applicable U.S. Department of Housing and Urban
Development Flood Hazard Boundary Map, or any special flood hazard map published
by the Federal Emergency Management Agency, although the parties recognize that
there is a small stream on the Property.
(p) All documents and other information provided by Seller to
Purchaser pursuant to this Agreement shall be true and complete in all material
respects.
(q) The person executing this Agreement on behalf of Seller is
an officer of Seller and is duly authorized by Seller to execute this Agreement
and has full power and authority to execute the same on behalf of Seller.
(r) Seller is the owner of the Property.
(s) There is no personal property owned by Seller which is
being transferred to Purchaser under the terms of this Agreement.
10. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser
represents and warrants to Seller as follows, all of which representations and
warranties are true and correct as of the date hereof and shall be true and
correct as of closing hereunder:
(a) Purchaser (i) is a limited liability company duly formed,
validly existing and in good standing under the laws of the State of Delaware,
(ii) has full power to and authority to purchase the property from Seller
without the consent of any person or entity (or such consent has already been
obtained therefor), and (iii) has authorized the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby.
<PAGE>
-9- FINAL
11. INDEMNITY. Seller hereby agrees to indemnify, defend and hold
Purchaser harmless from and against any and all damages, claims, expenses and
liabilities (including without limitation reasonable attorneys' fees and the
cost of remediating or implementing corrective action with respect thereto)
("LOSS") arising from or in connection with any Hazardous Waste or Asbestos at,
on, in, under, affecting or otherwise related to any portion of the Property,
any surrounding property or the surrounding environment. The foregoing indemnity
shall not apply to any Loss on and after the date the Property is sold to
Purchaser to the extent the Seller establishes that such Loss is not the result
of a release of, or other action with respect to, Hazardous Waste or Asbestos
before the date of such acquisition.
12. DEFAULT. If Purchaser shall fail to complete settlement as
herein provided, Seller, may undertake any and all legal and equitable actions,
including, without limitation, a suit for specific performance.. If Seller shall
fail to complete settlement as herein provided, or default in any manner under
this Agreement, Purchaser, may undertake any and all legal and equitable
actions, including, without limitation, a suit for specific performance.
13. BROKERS. Seller and Purchaser each represents and warrants to
the other that no real estate agent, broker or finder has acted for it in
connection with this Agreement and the transactions contemplated hereby, and
each shall indemnify and save the other harmless from the claim of any such
persons claiming by or through it for commissions or fees by reason of this
Agreement or the transaction contemplated hereby.
14. NOTICES. Any notice required or permitted to be given
hereunder shall be in writing and shall be hand-delivered, delivered by
overnight courier or mailed by certified mail, postage prepaid, return receipt
requested, to the parties hereto at their respective addresses set forth below,
or at such other addresses of which either party shall notify the other party in
accordance with the provisions hereof, and shall be deemed given as of the date
delivered (if given by hand-delivery), one (1) business day after the sending
thereof (if given by overnight courier) and as of three (3) business days after
the mailing thereof (if given by certified mail):
If to the Seller:
Tel-Save.com, Inc.
6805 Route 202
New Hope, PA 18963
Attention: Legal Dept.
with a copy to:
<PAGE>
-10- FINAL
Arnold & Porter
777 South Figueroa Street
44th Floor
Los Angeles, CA 90017-2513
Attention: Ted Johnsen, Esq.
If to the Purchaser:
Jimlew Capital LLC
6805 Route 202
New Hope, PA 18963
Attention: Daniel Borislow
15. BINDING EFFECT AND ASSIGNMENT. Seller and Purchaser agree that
the terms and conditions of this Agreement shall be binding upon, and shall
inure to the benefit of, their respective heirs, legal representatives and
assigns.
16. OTHER AGREEMENTS. This Agreement is being executed in
conjunction with a Severance Agreement dated on or about the date hereof and
shall constitute the agreement described at Section 7.1.3 of the Severance
Agreement. The effectiveness of this Agreement and of each agreement set forth
in Section 7.1 of the Severance Agreement is conditioned upon the execution and
delivery of each of such agreements. Seller and Purchaser are also executing the
Lease. Other than the Lease and other agreements referenced in this paragraph
16, this Agreement contains the entire understanding between the parties hereto
with respect to the Property and is intended to be an integration of all prior
or contemporaneous agreements, conditions or undertakings between the parties
hereto; there are no promises, agreements, conditions, undertakings, warranties
or representations, oral or written, express or implied, between and among the
parties hereto with respect to the Property other then as set forth herein and
subject to the other agreements referenced in this paragraph.
17. MODIFICATION. No change or modification of this Agreement
shall be valid unless the same is in writing and signed by Seller and Purchaser.
No purported or alleged waiver of any of the provisions of this Agreement shall
be valid or effective unless in writing signed by the party against whom it is
sought to be enforced. All representations, warranties, covenants and
indemnities herein shall survive closing hereunder for one (1) year after the
date of the closing and shall not be merged in the deed of conveyance during
such one (1) year period. It is agreed that time is of the essence in the
performance of the terms of this Agreement. Seller and Purchaser shall, at
Purchaser's option, record a short form memorandum of this Agreement giving
notice of the terms hereof, and the costs thereof shall be allocated among
Purchaser and Seller in accordance with Section 5(d) hereof.
18. INTERPRETATION. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania.
Captions herein are for convenience of reference only and in no way define,
limit or expand the scope or intent of
<PAGE>
-11- FINAL
this Agreement. Whenever the context hereof shall so require, the singular shall
include the plural, the male gender shall include the female, and vice versa.
This Agreement may be executed in two (2) or more counterparts, all of which
together shall constitute but one and the same Agreement. In the event that one
(1) or more of the provisions hereof shall be held to be illegal, invalid or
unenforceable, such provisions shall be deemed severable and the remaining
provisions hereof shall continue in full force and effect. Reference in this
Agreement to the date of full execution hereof shall mean the date on which this
Agreement is fully executed and ratified by both Purchaser and Seller.
[Signatures follow on the next page]
<PAGE>
-12- FINAL
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed under seal on the date first above written.
SELLER:
WITNESS: TEL-SAVE, INC.,
a Pennsylvania corporation
____________________ By: _____________________[SEAL]
Name
Title
Date: _________________________
PURCHASER:
WITNESS: Jimlew Capital LLC,
a Delaware limited liability company
____________________ By: ____________________[SEAL]
Name
Title
Date: _________________________
<PAGE>
-13- FINAL
LIST OF EXHIBITS
Exhibit "A": Description of Property
Exhibit "B": Approved Title Exceptions
<PAGE>
FINAL
EXHIBIT "A"
DESCRIPTION OF PROPERTY
ALL THAT CERTAIN parcel of land, Situate in the Township of Solebury, County of
Bucks and Commonwealth of Pennsylvania, bounded and described according to Plan
of Survey made for Magill Brothers, by George Rice, Registered Surveyor of
Solebury, Pennsylvania, dated December 31, 1974, and revised December 19, 1977,
as follows:
BEGINNING at a point on the Westerly side of L.R. 1086 Spur, said point being a
corner in line of lands now or late of J.D. Materials Co., Inc., on the Solebury
Township - New Hope Borough line; thence along said lands now or late of J.D.
Materials Co., Inc., on the Solebury Township - New Hope Borough line, South
eighty-one degrees thirty minutes thirty-eight seconds West, three hundred
ninety-three and twenty-one one-hundredths feet to a point, a corner in line of
lands of The Delaware River Joint Toll Bridge Commission; thence along said
lands of The Delaware River Joint Toll Bridge Commission, the four following
courses and distances: (1) North seventeen degrees sixteen minutes eleven
seconds West, four hundred seventy-seven and fifty one-hundredths feet to a
point, a corner; thence (2) North thirty-nine degrees two minutes twenty-five
seconds East, ninety and fourteen one-hundredths feet to a point, a corner (3)
North seventeen degrees sixteen minutes eleven seconds West fifty and no
one-hundredths feet to a point, a corner; and (4) North fifty-one degrees
thirty-three minutes ten seconds West, two hundred twenty-one and ninety-three
one hundredths feet to a point, a corner of lands now or late of Bernard and
Betty J. Rozansky; thence along said lands now or late of Bernard and Betty J.
Rozansky, North eighty-two degrees twenty minutes nineteen seconds East, eight
hundred sixty-two and thirty-three one-hundredths feet to a point, a corner on
the Westerly side of the aforesaid L.R. 1086 Spur; thence along the said
Westerly side of L.R. 1086 Spur; along a curve to the left, having a radius of
one thousand, two hundred five and ninety-two one-hundredths feet, for the arc
length of forty and four one-hundredths feet, to a point of tangency, thence
still along the same, South thirteen degrees, thirty-nine minutes thirty-nine
seconds West, six hundred fifty-four and ten one-hundredths feet to a point of
curvature; thence along a curve to the right, having a radius of one-thousand,
eighty-five and ninety-two one-hundredths feet, for the arc length of
ninety-eight and eighty-one one-hundredths feet, to the point and place of
beginning.
CONTAINING 10.06 ACRES OF LAND
COUNTY TAX PARCEL NO.: 41-28-67
BEING THE SAME PREMISES which The Fidelity Bank, Beverley W. Magill and
Frederick B. Williamson, III, trustees for Marital Trust under the Will of
Winfield A. Magill, deceased and Thomas H. Magill and Joyce W. Magill, husband
and wife by Deed dated October 9, 1984, and recorded October 31, 1984, in Land
Record Book 2582 Page
<PAGE>
-2- FINAL
653, Bucks County records, granted and conveyed unto Omni Contractors a
Pennsylvania General Partnership, in fee.
TOGETHER with all and singular the buildings and improvements, ways, streets,
alleys, driveways, passages, waters, water-courses, rights, liberties,
privileges, hereditaments and appurtenances, whatsoever unto the hereby granted
premises belonging, or in anywise appertaining, and the reversions and
remainders, rents, issues, and profits thereof; and all the estate, right,
title, interest, property, claim and demand whatsoever of the said grantor, as
well at law as in equity, of, in and to the same.
<PAGE>
FINAL
EXHIBIT "B"
APPROVED TITLE EXCEPTIONS
1. Discrepancies, conflicts in boundary lines, shortage in area,
encroachments, or any other facts which a correct survey would
disclose, and which are shown by the public records.
2. Possible additional tax assessment for new construction and/or major
improvements not yet due and payable.
3. Stream of water flows through premises hereon, subject to rights of
other riparian owners abutting stream.
EXHIBIT 10.10
FINAL
LEASE
BY AND BETWEEN
JIMLEW CAPITAL, LLC
("LANDLORD")
AND
TEL-SAVE.COM, INC.
("TENANT")
January 5, 1999
Property Address:
6805 Route 202
Solebury Township, Pennsylvania 18963
Arnold & Porter
<PAGE>
FINAL
LEASE
THIS LEASE is made as of this 5th day of January, 1999, by and
between JIMLEW CAPITAL, LLC, a Delaware limited liability company ("Landlord"),
and TEL-SAVE.COM, INC., a Delaware corporation ("Tenant").
WITNESSETH:
1. PREMISES AND IMPROVEMENTS.
A. Landlord does hereby lease and demise unto Tenant, and
Tenant does hereby lease from Landlord, that certain space (the "Premises") that
Tel-Save.com, Inc. is currently occupying in the building (the "Building")
located at 6802 Route 202, Solebury Township, Bucks County, Pennsylvania, on
certain land (the "Land") described in Exhibit A attached hereto and
incorporated herein (which Premises include all of the second, mezzanine and
third floors of the Building as well as a portion of the first floor of the
Building), along with the right to non-exclusive access and use of all common
areas of the Building, and the exclusive right to use or permit the use of all
or any portion of the roof of the Building for any purpose, all upon the terms
and conditions hereinafter set forth. Tenant accepts the Premises in "as is"
condition and Tenant's (or its permitted subtenant's) continued occupancy of the
Premises shall be deemed an acknowledgment that the Premises are in good and
tenantable order. Landlord warrants that it has the right to enter this Lease
for the term hereinafter provided. Landlord covenants that if Tenant pays the
Monthly Base Rent, Additional Rent and all other charges provided for herein,
performs all of its obligations provided for hereunder and observes all of the
other provisions hereof, subject to all applicable notice and cure periods,
Tenant shall at all times during the Term peaceably and quietly have, hold and
enjoy the Premises, without interruption or disturbance from Landlord, or anyone
claiming through or under Landlord, subject to the terms of this Lease.
B. On or before January 1, 2000, the Premises shall be
adjusted to total approximately 10,000 square feet, in a location which shall be
designated by Tenant and approved by Landlord in its reasonable discretion. All
other terms of this Lease shall remain in full force and effect unless otherwise
noted.
2. TERM AND COMMENCEMENT OF TERM. This Lease shall be in full
force and effect from the date first written above. The term of this Lease (the
"Term") shall commence on the Commencement Date (as hereinafter defined) and
shall expire sixty (60) months thereafter unless otherwise extended or
terminated in accordance with the terms hereof. The Commencement Date shall be
the date the Property is deeded from Tel-Save, Inc. to Landlord ("closing
date"). In the event the Commencement Date is a date other than the first day of
a calendar month, the Term shall run for the number of months set forth above
from the first day of the calendar month following the Commencement Date.
Landlord and Tenant hereby agree to execute a Declaration, substantially in the
form
<PAGE>
-2- FINAL
attached hereto and incorporated herein as Exhibit B, to confirm the
Commencement Date, the Term and the other matters listed thereon. Failure to
execute said Declaration shall not affect the commencement or expiration of the
Term.
3. ANNUAL BASE RENT.
A. Tenant shall pay to Landlord, at such place or to such
agent as Landlord may from time to time designate in writing, by good check or
other good funds approved by Landlord from time to time, as a minimum annual
rent for the Premises for each Lease Year, one hundred fifty thousand dollars
($150,000) (the "Annual Base Rent"), provided however if the first Lease Year
exceeds twelve (12) calendar months, then Annual Base Rent for such Lease Year
shall be increased on a proportionate basis. The Annual Base Rent shall be
payable in equal monthly installments ("Monthly Base Rent") of twelve thousand
five hundred dollars ($12,500). All installments of Monthly Base Rent shall be
payable monthly in advance, without previous notice or demand therefor, with the
first monthly installment of Annual Base Rent due and payable upon the execution
hereof and each subsequent monthly installment to be due and payable on the
first day of each and every month following the Commencement Date during the
Term. If the Commencement Date is a date other than the first day of a month,
rent for the period commencing with and including the Commencement Date and
ending on and including the day prior to the first day of the following month
shall be prorated at the rate of one-thirtieth (1/30th) of the Monthly Base Rent
per day and shall be due and payable on the Commencement Date.
B. As of January 1, 2000, the amount of the Annual Base
Rent and Monthly Base Rent shall be adjusted on a pro rata basis to reflect the
reduction in square footage of the Premises at that time. All other provisions
of Section 3(A) above shall remain in full force and effect.
4. RIGHT TO TERMINATE. Tenant shall have the right to
terminate this Lease at any time during the Term by providing to Landlord a
written notice of termination of the Lease, which notice shall set forth the
date on which the Lease shall terminate (the "Tenant Termination Date"). The
Tenant Termination Date shall be no earlier than six (6) months after the date
Tenant delivers to Landlord such notice of termination. Upon such termination,
the Lease and the liabilities and obligations of the parties shall terminate as
of the Tenant Termination Date and the Monthly Base Rent and Additional Rent
will be apportioned as of the Tenant Termination Date.
5. USE OF PREMISES.
A. The Premises shall be used and occupied by Tenant for
any purpose permitted by law, including without limitation for the purpose of
general offices and/or telecommunication services and activities which are
incidental thereto (but all subject to the restrictions described in the
Solebury Township Zoning Hearing Board
<PAGE>
-3- FINAL
Application of William Terry Doan dated September 17, 1984) and for no other
purpose whatsoever. The Premises shall not be used for any illegal purpose or in
violation of any regulation of any governmental body or the regulations or
directives of Landlord's insurance carriers, or in any manner to unreasonably
interfere with the quiet enjoyment of any other tenant of the Building. Tenant
will not conduct or permit to be conducted any activity, or place any equipment
in or about the Premises, which will in any way increase the rate (above the
rate as of the date of this Lease) or cause the cancellation of fire insurance
or other insurance on the Building. Tenant shall, at its expense, procure all
governmental licenses and permits required for the conduct of Tenant's business
in the Premises and shall at all times comply with the requirements of each such
license or permit.
B. Tenant agrees to maintain the Premises, the leasehold
improvements, Alterations and any electrical, heating, ventilating, air
conditioning, plumbing, mechanical or other equipment which serve exclusively
the Premises ("Equipment") in good order, repair and condition during the Term
at its sole cost and expense, and will, at the expiration or other termination
of the Term, surrender and deliver the same and all keys, locks and other
fixtures connected therewith (except only Tenant's Personal Property) in like
good order, repair and condition, as the same is now or shall be at the
Commencement Date, except as repaired, rebuilt, restored, altered or added to
pursuant to this Lease, and except for ordinary wear and tear, casualty and
condemnation. Landlord shall have no obligation to Tenant to make any repairs in
or to the Premises, the leasehold improvements or Alterations, including without
limitation any Equipment, but Landlord shall be obligated to maintain and make
all repairs or replacements to the structure of the base building, the roof and
any electrical, heating, ventilating, air conditioning, plumbing, mechanical or
other equipment which do not serve exclusively the Premises.
C. Tenant will, at its own cost, promptly comply with and
carry out all orders, requirements or conditions now or hereafter imposed upon
it by the ordinances, laws, rules, orders and/or regulations of the United
States of America, the Commonwealth of Pennsylvania, Bucks County or other
governmental entities, whether required of Landlord or otherwise, relating
directly to the Premises or the conduct of Tenant's business therein, including
without limitation the Americans With Disabilities Act ("ADA"). Notwithstanding
the foregoing, in the event construction by the Landlord of leasehold
improvements to the Premises creates a requirement (pursuant to this Lease or
applicable law) that Tenant make certain alterations to the Premises in order to
comply with the ADA ("ADA Alterations"), then, at Landlord's option, exercised
by notice from Landlord to Tenant (which notice shall include a description of
the ADA Alterations and an estimated cost thereof), (1) Landlord may elect, at
its expense, to install such ADA Alterations, in which event Landlord shall do
so with due diligence or (2) if Landlord notifies Tenant that Landlord does not
elect to pursue the foregoing option, then Tenant shall have the right to
terminate this Lease on a date which is on or before sixty (60) days after
Tenant's receipt of Landlord's notice, which right to terminate shall be
exercised by
<PAGE>
-4- FINAL
sending notice to Landlord of such election to terminate the Lease within thirty
(30) days after Tenant's receipt of Landlord's notice; provided, however, time
being of the essence, if Tenant does not so terminate the Lease, then Tenant
shall be deemed to have agreed, at Tenant's expense, to install such ADA
Alterations and shall do so with due diligence in accordance with the terms of
this Lease.
D. Tenant shall not place a load upon any floor of the
Premises exceeding the load per square foot which the applicable floor of the
Premises can accommodate without Landlord's prior written consent. Business
machines, mechanical equipment and materials belonging to Tenant which cause
vibration, noise, cold, heat or fumes that may be transmitted to the Building or
to any other leased space therein to such a degree as to be unreasonably
objectionable to Landlord or to any other tenant in the Building shall be
placed, maintained, isolated, stored and/or vented by Tenant at its sole expense
so as to absorb and prevent such vibration, noise, cold, heat or fumes.
E. Any and all damage or injury to the Premises (including,
but not limited to, the leasehold improvements and Alterations), the Building or
the Land caused by the Tenant, or by any employee, agent, contractor, assignee,
subtenant, invitee or customer of Tenant shall be promptly reported to Landlord
and repaired by Tenant at Tenant's sole cost to the extent the same is not
covered by insurance; provided, however, that Landlord shall have the option of
repairing any such damage, in which case Tenant shall reimburse Landlord for all
reasonable costs incurred by Landlord in respect thereof as Additional Rent
within fifteen (15) days after Tenant receives Landlord's notice of such costs.
F. Tenant agrees not to permit any offending odors, exhaust
fumes or noises to emanate outside the Premises. In the event such odors,
exhaust fumes or noises do so emanate, Landlord may take reasonable action to
prevent such emanation of odors, exhaust fumes or noises after five (5) days'
prior written notice to Tenant thereof, during which time Tenant does not cure
the same, and Tenant shall be liable for any expenses incurred by Landlord for
preventing the emanating odors, exhaust fumes or noises, as Additional Rent.
Landlord's prevention of such emanation of odors, exhaust fumes or noises shall
not operate to cure such default or to estop Landlord from pursuing any of the
remedies to which Landlord would otherwise be entitled.
G. Tenant shall not use or permit the use of any apparatus
or instrument for sound production, reproduction or transmission in such manner
that the sounds so produced, reproduced or transmitted shall be materially
audible beyond the interior of the Premises, nor shall Tenant utilize any
advertising mechanism within the Building that can be seen, heard or experienced
outside of the Premises, nor display, paint, distribute or cause to be
displayed, painted or distributed any handbill, bumper sticker or other
advertising device in any part of the common areas or the Building, including
immediately adjacent public streets and alleys. In no event shall Tenant conduct
or permit any activity that constitutes a nuisance.
<PAGE>
-5- FINAL
H. Tenant shall not load or permit the loading or unloading
of merchandise, supplies or other property nor ship or receive outside the
shipping and unloading doors and areas which exist as of the date of this Lease,
nor permit the parking or standing outside of said area of trucks, trailers, or
other vehicles or equipment engaged in such loading or unloading in a manner to
interfere with the use of any area of the Building, the common areas or any
streets.
I. Tenant shall not burn trash or store or permit
accumulations of any trash, garbage, rubbish or other refuse inside or outside
of the Premises except in compactors or other receptacles approved by Landlord.
Tenant shall dispose of all waste in accordance with (i) industry standards for
the various types of waste generated by Tenant's business and (ii) all
reasonable rules and regulations adopted by Landlord.
6. ALTERATIONS BY TENANT.
A. Tenant will not make or permit any improvements,
additions, alterations, fixed decorations, substitutions, replacements or
modifications, structural or otherwise, to the Premises or to the Building
("Alterations") without obtaining the prior written consent of Landlord, which
consent shall not be unreasonably withheld or delayed by Landlord.
B. Alterations shall be made at Tenant's sole expense.
Tenant shall obtain any necessary permits and furnish copies of the permits to
Landlord prior to commencement of any such work. All Alterations must conform to
all governmental rules and regulations (including without limitation building
codes and the Americans With Disabilities Act), insurance requirements and the
provisions of this Lease. If any mechanic's or materialman's lien is filed
against the Premises, the Building or the Land for work done or materials
furnished to Tenant, or claimed to have been done for or furnished to Tenant,
the lien shall be released and discharged by Tenant within ten (10) days
thereafter, solely at Tenant's expense, by paying off or bonding the lien.
7. TENANT'S PERSONAL PROPERTY. "Tenant's Personal Property"
shall mean all equipment, machinery, furniture, furnishings and other personal
property now or hereafter installed or placed in or on the Premises by and at
the sole expense of Tenant that can be removed without damage to the Premises or
the Building. Tenant shall remove all of Tenant's Personal Property from the
Premises at the expiration or termination of the Term of this Lease and shall
repair any damage to the Premises or the Building caused by the removal of such
Personal Property. If any taxes on Tenant's Personal Property are levied against
Landlord, or if the assessed value of the Land or the Building is increased by
the inclusion of a value placed on Tenant's Personal Property, the leasehold
improvements or any Alterations, and if Landlord pays the taxes based on any of
these items, Tenant, on demand, shall immediately reimburse Landlord therefor as
Additional Rent.
<PAGE>
-6- FINAL
8. UTILITIES, TAXES AND SERVICES.
A. Tenant covenants and agrees that it will furnish on a
schedule reasonably determined by Landlord all maintenance and repairs for all
common areas of the Building and the Land, which shall include, without
limitation, general upkeep, maintenance, snow removal, lawn mowing, landscaping
and parking lot maintenance. Landlord agrees to provide water, sewer,
electricity and heat (collectively, the "Utilities") to the Premises in
reasonably adequate quantities. Landlord shall pay any real estate taxes on or
prior to the due date thereof.
B. Tenant shall be responsible for the costs of all
Utilities for the Building and the Land. Except as specifically set forth herein
to the contrary, the costs of all maintenance and repairs to the Building and
the Land (including without limitation with respect to the common areas and the
parking lot), the cost of Landlord's insurance required by this Lease and any
real estate taxes shall be divided between the parties, with Tenant responsible
for eighty percent (80%) of all such costs and Landlord responsible for twenty
percent (20%) of all such costs and taxes.
C. Landlord shall exercise reasonable diligence to remedy
any interruption, curtailment, stoppage or suspension of any service or system.
If any public utility or governmental body shall require Landlord or Tenant to
restrict the consumption of any utility or reduce any service to the Premises or
the Building, Landlord and Tenant shall comply with such requirements, whether
or not the utilities and services referred to in this section are thereby
reduced or otherwise affected, without any abatement or reduction of the Monthly
Base Rent, Additional Rent or other sums payable by Tenant hereunder.
D. Tenant shall comply, at its expense, with all orders,
requirements and conditions now or hereafter imposed by any ordinances, laws,
orders and/or regulations of any governmental body having jurisdiction over the
Premises or the Building, whether required of Landlord or otherwise, regarding
the collection, sorting, separation and recycling of waste products, garbage,
refuse and trash.
E. Tenant will furnish a tractor with mowing and snow
blowing attachments and an operator for use by Landlord in the New Hope area
(without cost to Landlord) for up to 40 hours per year.
9. SIGNS. No sign, advertisement or notice shall be inscribed,
painted, affixed or displayed on the windows or exterior walls of the Premises
or on any public area of the Building or the Land without the consent of
Landlord, and then only in such places, numbers, sizes, colors and styles as are
approved by Landlord in his reasonable discretion and which conform to all
applicable laws and ordinances. Landlord agrees that Tenant, who is an affiliate
of the prior owner of the Premises and transferring ownership to Landlord in
conjunction with this Lease, may maintain the signage that Tenant currently has
in place on the Premises. Any additional permitted signs shall be installed and
<PAGE>
-7- FINAL
maintained by Landlord, at Tenant's expense. Notwithstanding the foregoing,
Landlord hereby provides Tenant with a license for the electrified sign by the
road adjacent to the Building which sets forth Tel-Save.com, Inc.'s name ("Road
Sign").
10. ASSIGNMENT AND SUBLETTING.
A. Tenant shall not, without the prior written consent of
Landlord, which consent shall not be unreasonably withheld or delayed by
Landlord, (a) assign or otherwise transfer this Lease or any of its rights
hereunder, (b) sublet the Premises or any part thereof, or permit the use of the
Premises or any part thereof by any persons other than Tenant or its employees,
agent and invitees, or (c) permit the assignment or other transfer of this Lease
or any of Tenant's rights hereunder by operation of law. Tenant shall furnish
Landlord with such information about any proposed assignee or subtenant, its
business and its financial condition as Landlord may reasonably request. The
consent by Landlord to any assignment, transfer, or subletting to any person or
entity shall not be construed as a waiver or release of Tenant from any
provision of this Lease, unless expressly agreed to in writing by Landlord (it
being understood that Tenant shall remain primarily liable as a principal and
not as a guarantor or surety). No consent by Landlord to any such assignment,
transfer or subletting in any one instance shall constitute a waiver of the
necessity for such consent in a subsequent instance. In no event shall any
consent by Landlord be construed to permit reassignment or resubletting by a
permitted assignee or sublessee.
B. In the event that Tenant assigns or sublets all or any
portion of the remises, Tenant shall be entitled to receive any amount paid as
Monthly Base Rent and Additional Rent paid by its subtenant and shall be liable
to Landlord only for the amounts due to Landlord under this Lease.
C. Any assignment or subletting not in conformance with the
terms of this Lease shall be void. Tenant shall not collaterally assign,
mortgage, pledge, hypothecate or otherwise encumber this Lease or any of
Tenant's rights hereunder without the prior written consent of Landlord, which
consent Landlord may withhold in its reasonable discretion.
11. INSURANCE.
A. Tenant shall carry and keep in full force and effect
from and after the date hereof and at all times during the Term broad-form
commercial general liability insurance with limits of at least Three Million
Dollars ($3,000,000.00) for each occurrence. Landlord shall also maintain a
broad-form general liability policy in a comparable amount.
B. Tenant shall carry an all-risk insurance policy covering
all of Tenant's Personal Property, the leasehold improvements and the
Alterations in the
<PAGE>
-8- FINAL
Premises for not less than the full insurable value and replacement cost thereof
without reduction for depreciation. Landlord shall carry an all-risk insurance
policy covering all other parts of the Building and the Land for not less than
the full insurable value and replacement cost thereof without reduction for
depreciation.
C. All commercial general liability and property damage
insurance policies and any other insurance policies carried by Tenant shall (i)
be issued by insurance companies authorized to do business in the Commonwealth
of Pennsylvania reasonably satisfactory to Landlord; (ii) designate, as
additional insured, Landlord (with respect to liability insurance only); (iii)
be written as primary policy coverage and not contributing with or in excess of
any coverage which Landlord may carry; (iv) provide for thirty (30) days' prior
written notice to Landlord of any cancellation or other expiration of such
policy; and (v) contain contractual liability coverage insuring performance by
Tenant of the indemnity provisions of this Lease. Tenant shall deliver to
Landlord either a copy of each such policy of insurance or a certificate
evidencing the coverages required hereunder prior to occupancy. Renewal
certificates shall be provided by Tenant on an annual basis. Neither the
issuance of any insurance policy required hereunder nor the minimum limits
specified herein with respect to Tenant's insurance coverage shall be deemed to
limit or restrict in any way Tenant's liability under this Lease.
D. Each party hereby waives any and every right or cause of
action for any and all loss of, or damage to, any of its property (whether or
not such loss or damage is caused by the fault or negligence of the other party
or anyone for whom said other party may be responsible), which loss or damage is
or would have been covered by valid and collectible fire, extended coverage,
"All Risk" or similar policies, maintained by such party or required to be
maintained by such party under this Lease, to the extent that such loss or
damage is or could have been recovered under said insurance policies. Written
notice of the terms of said mutual waivers shall be given to each insurance
carrier and said insurance policies shall be properly endorsed, if necessary, to
prevent the invalidation of said insurance coverages by reason of said waivers.
12. DAMAGE OR DESTRUCTION. If the Premises or any part thereof
shall be damaged by fire or any other cause, Tenant shall give prompt notice
thereof to Landlord. If, in the judgment of Landlord's architect, restoration of
the Premises within a period of six (6) months from the date of the damage is
possible, Landlord shall restore the Premises to the extent of leasehold
improvements, and Tenant shall make such insurance proceeds available to
Landlord in accordance with Tenant's insurance obligations set forth in Section
11. In addition, Tenant shall repair and restore, at Tenant's sole expense, all
Alterations in the Premises. If the Premises are unusable, in whole or in part,
during such restoration, the Monthly Base Rent and Additional Rent hereunder
shall be proportionately abated to the extent and for the period that the
Premises are unusable. If such damage or destruction shall result from the fault
of Tenant, its agents, servants or subtenants, Tenant shall not be entitled to
any abatement of Monthly Base Rent or Additional Rent. If restoration is not
possible, in the judgment of Landlord's architect, within the aforesaid six (6)
month period,
<PAGE>
-9- FINAL
Landlord shall so notify Tenant, and Landlord and Tenant shall each have the
right to terminate this Lease by giving written notice thereof to the other
party within sixty (60) days after the occurrence of such damage, in which event
this Lease and the tenancy hereunder shall terminate as of the date of such
damage or destruction and the Monthly Base Rent and Additional Rent will be
apportioned as of the date of such damage or destruction. If neither party
exercises its right of termination, the Premises shall be restored as provided
above.
13. CONDEMNATION. If the Premises or any part thereof shall be
taken or threatened to be taken by any governmental or quasi-governmental
authority pursuant to the power of eminent domain, or by deed in lieu thereof,
Tenant agrees to make no claim for compensation in the proceedings, and hereby
assigns to Landlord any rights which Tenant may have to any portion of any award
made as a result of any such taking. This Lease shall terminate as to the
portion of the Premises actually taken by the condemning authority as of the
date when title vests in such governmental or quasi-governmental authority, and
Monthly Base Rent and Additional Rent shall be ratably reduced as of such date.
The foregoing notwithstanding, as long as Landlord's award is not thereby
reduced, Tenant shall be entitled to claim, prove and receive in the
condemnation proceedings, such awards as may be allowed for its relocation
expenses and for Tenant's Personal Property, but only if such awards shall be
made by the condemning authority in addition to, and stated separately from, the
award made by it for the Land and the Building or part thereof so taken. In no
event shall Tenant be entitled to any award for the unexpired portion of the
Term. If the nature, location or extent of any proposed condemnation affecting
the Building or the Land is such that Landlord elects to demolish all or a
portion of the Building, then Landlord may terminate this Lease by giving at
least sixty (60) days written notice of termination to Tenant at any time after
such condemnation. This Lease shall terminate on the date specified in such
notice, and Monthly Base Rent and Additional Rent shall be adjusted to such
date.
14. DEFAULT.
A. Any of the following occurrences or acts shall
constitute an event of default ("Event of Default") under this Lease:
(i) If Tenant shall fail to pay any Monthly Base
Rent, any Additional Rent or any other sums under this Lease
within five (5) days after written notice thereof that the
same is due and payable.
(ii) If Tenant shall fail to observe or perform any
of the covenants, conditions and agreements of this Lease and
such failure shall continue for a period of thirty (30) days
after notice to Tenant of such failure; provided, however,
that if such failure is not reasonably capable of being cured
within such thirty (30) day period, then the period in which
Tenant may cure such failure shall be extended to a total of
up to one
<PAGE>
-10- FINAL
hundred twenty (120) days, provided Tenant promptly commences
and diligently pursues the cure of such failure.
(iii) If Tenant shall (i) make an assignment for the
benefit of creditors, (ii) acquiesce in a petition in any
court in any bankruptcy, reorganization, composition,
extension or insolvency proceedings, (iii) seek, consent to or
acquiesce in the appointment of any trustee, receiver or
liquidator of Tenant and of all or any part of Tenant's
property, (iv) file a petition seeking an order for relief
under the Bankruptcy Code, as now or hereafter amended or
supplemented, or by filing any petition under any other
present or future federal, state or other statute or law for
the same or similar relief, or (v) fail to win the dismissal,
discontinuation or vacating of any involuntary bankruptcy
proceeding within thirty (30) days after such proceeding is
initiated.
B. If an Event of Default shall have occurred and be
continuing with regard to the making of any payment or the doing of any act
herein required to be made or done by Tenant, then Landlord may, but shall not
be required to, make such payment or do such act, and the making of such payment
or the doing of such act by Landlord shall not operate to cure such Event of
Default or to estop Landlord from the pursuit of any remedy to which Landlord
would otherwise be entitled. Any installment of Monthly Base Rent or Additional
Rent remaining unpaid for five (5) days after written notice thereof that the
same is due shall be subject to a late charge equal to five percent (5%) of such
installment. Any installment of Monthly Base Rent or Additional Rent not paid
within five (5) days after written notice thereof that the same is due and any
payments made by Landlord on Tenant's behalf shall bear interest until paid at
the rate that is two (2) percentage points above the prime rate published or
announced from time to time by a federally-insured financial institution
selected by Landlord (but in no event greater than the highest non-usurious rate
permitted under the laws of the Commonwealth of Pennsylvania), and such interest
shall constitute Additional Rent hereunder due and payable with the next
installment of Monthly Base Rent.
C. If an Event of Default shall have occurred, Landlord, at
its option, may terminate this Lease by written notice to Tenant, whereupon this
Lease shall end and all rights of Tenant hereunder shall expire and terminate
and everything herein required on the part of Landlord to be done and performed
shall cease, but Tenant shall remain liable as provided by law.
D. Tenant hereby consents to the exercise of personal
jurisdiction over it by any federal court with jurisdiction over cases arising
or local court located in the Commonwealth of Pennsylvania.
15. RULES AND REGULATIONS. Tenant shall at all times comply
with the rules and regulations set forth in Exhibit C attached hereto and
incorporated herein, and
<PAGE>
-11- FINAL
with any reasonable additions thereto and modifications thereof adopted from
time to time by Landlord of which Tenant has been given five (5) days written
notice, and each such rule or regulation shall be deemed to be a covenant of
this Lease to be performed and observed by Tenant.
16. ESTOPPEL CERTIFICATES. Tenant shall, without charge, at any
time and from time to time, within ten (10) days of request therefor by
Landlord, execute, acknowledge and deliver a written estoppel certificate
certifying, as of the date of such estoppel certificate, the following: (a)
whether or not this Lease is unmodified and in full force and effect (or if
there has been a modification, that the Lease is in full force and effect as
modified and setting forth such modifications); (b) whether or not the Term has
commenced and the full rental is now accruing; (c) the amounts of Monthly Base
Rent and Additional Rent currently due and payable by Tenant; (d) that no
Monthly Base Rent has been paid more than thirty (30) days in advance of its due
date; (e) whether or not Tenant has accepted possession of the Premises and is
currently operating its business therein; (f) that Tenant has no knowledge of
any then uncured defaults by Landlord of its obligations under this Lease (or,
if Tenant has such knowledge, specifying the same in detail); (g) the address to
which notices to Tenant should be sent; and (h) any other information reasonably
requested by Landlord.
17. HOLD-OVER. If Tenant shall not immediately surrender the
Premises on the day after the end of the Term, then Tenant shall, by virtue of
this Lease, become a tenant at sufferance at a monthly rental equal to the
Monthly Base Rent and any Additional Rent due under the terms of this Lease,
commencing said monthly tenancy with the first day next after the end of the
Term. Tenant, as a tenant at sufferance, shall be subject to all of the
conditions and covenants of this Lease (including payment of Additional Rent) as
though the tenancy had originally been a monthly tenancy. During the holdover
period, each party hereto shall give to the other at least thirty (30) days
written notice to quit the Premises, except in the event of nonpayment of
Monthly Base Rent or of Additional Rent when due, or of the breach of any other
covenant by Tenant, in which event Tenant shall not be entitled to any notice to
quit, the usual thirty (30) days notice to quit being expressly waived.
Notwithstanding the foregoing, if Landlord shall desire to regain possession of
the Premises promptly at the expiration of the Term or any extension thereof,
Landlord may re-enter and take possession of the Premises by any legal action or
process in force in the Commonwealth of Pennsylvania, and Landlord shall have
the right to recover direct or indirect damages suffered by Landlord as a result
of Tenant's failure to vacate upon such expiration.
18. RIGHTS RESERVED BY LANDLORD.
A. Landlord, its affiliate or Daniel Borislow may use the
remainder of the first floor of the Building, other than the Premises and common
areas, for its or his business purposes, with the understanding that such space
shall not be physically separated from the Premises.
<PAGE>
-12- FINAL
B. Provided Landlord does not unreasonably interfere with
the operation of Tenant's business, Landlord may enter the Premises, upon
reasonable advance notice to Tenant, to exhibit the same to prospective
purchasers, mortgagees or tenants, to inspect the Premises to verify that Tenant
is complying with all its obligations hereunder, to make repairs, alterations or
improvements to the Premises or to other space in or on the Building, to install
or service Building systems, to perform maintenance services, and to post such
notices as Landlord may reasonably desire in order to protect its rights.
Landlord and its representatives shall have the authority to take such materials
and equipment onto the Premises as may be necessary for accomplishing the
purposes set forth in this section. In the event of an emergency, Landlord shall
have access to the Premises at any time without notice.
19. MISCELLANEOUS.
A. Landlord may freely sell, assign or otherwise transfer
all or any portion of its interest under this Lease or in the Premises or the
Building or the Land, and in the event of any such transfer and assumption of
the Landlord's obligations under this Lease, the party originally executing this
Lease as Landlord, and any successor or affiliate of such party, shall be
relieved of any and all of its obligations under this Lease from and after the
date of such transfer. Tenant shall thereafter be bound to the transferee with
the same effect as though the latter had been the original Landlord hereunder,
provided that the transferee assumes and agrees to carry out all the obligations
of Landlord hereunder.
B. All notices required or desired to be given by either
party to the other shall be personally delivered or sent by recognized overnight
courier or by certified mail, return receipt requested, postage prepaid, and
shall be effective upon actual receipt as verified by written acknowledgement of
delivery in the case of personal or overnight delivery and by the return receipt
in the case of certified mail. All notices to the respective parties shall be
addressed and sent as follows:
If to Landlord: At the Building
Attention: Daniel Borislow
If to Tenant: At the Premises
Attn: Legal Dept.
and a copy to: Arnold & Porter
777 South Figueroa Street
44th Floor
Los Angeles, CA 90017-2513
Attention: Ted Johnsen, Esq.
<PAGE>
-13- FINAL
Either party may, by like written notice, designate a new address or recipient
to which such notices shall be directed.
C. All rights and remedies given herein and/or by law or in
equity to Landlord are separate, distinct and cumulative, and no one of them,
whether exercised by Landlord or not, shall be deemed to be in exclusion of any
of the others. No failure of Landlord to exercise any power given Landlord
hereunder, and no custom or practice of the parties at variance with the terms
hereof shall constitute a waiver of Landlord's right to demand exact compliance
with the terms hereof. Receipt by Landlord of any Monthly Base Rent, Additional
Rent or other sums payable hereunder with knowledge of the breach of any
provision hereof, or acceptance by Landlord of partial payments or partial
performance, shall not constitute a waiver of any such breach. No waiver by
Landlord of any provision hereof shall be deemed to have been made unless made
in writing, and a waiver so given on one occasion shall not be deemed a waiver
on any subsequent occasion.
D. LANDLORD AND TENANT HEREBY WAIVE ALL RIGHTS TO A TRIAL
BY JURY IN ANY CLAIM, ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN
ANY WAY CONNECTED WITH THIS LEASE OR TENANT'S USE OR OCCUPANCY OF THE PREMISES.
THIS WAIVER OF RIGHT TO JURY TRIAL IS GIVEN KNOWINGLY AND VOLUNTARILY BY THE
FOREGOING PARTIES.
E. The submission of an unsigned copy of this Lease does
not constitute a reservation of or option for the Premises, and this Lease
becomes effective only upon execution and delivery thereof by Landlord and
Tenant and approval thereof by any current mortgagee of the Land and the
Building and any other owner, investor or lender of Landlord having the right to
approve this Lease.
F. All of the covenants, agreements, terms, conditions,
provisions and undertakings in this Lease shall inure to the benefit of, and
shall extend to and be binding upon, the parties hereto and their respective
heirs, executors, legal representatives, successors and assigns, subject to the
restrictions contained in this Lease with respect to assignment and subletting.
G. If any term, covenant or condition of this Lease or the
application thereof to any person or circumstance shall to any extent be held
invalid or unenforceable, the remainder of this Lease, or the application of
such term, covenant or condition to persons or circumstances other than those as
to which it is held invalid or unenforceable, shall not be affected thereby and
each term, covenant or condition of this Lease shall be valid and enforced to
the fullest extent permitted by law.
<PAGE>
-14- FINAL
H. Time is of the essence of this Lease. Neither this Lease
nor a memorandum thereof shall be recorded. This Lease shall be construed under
the laws of the Commonwealth of Pennsylvania.
I. Landlord and Tenant each represent that they had no
dealings with any real estate broker, finder or other person, with respect to
this Lease in any manner. Tenant agrees to indemnify and hold harmless Landlord
against and from any claim or demand for any brokerage commission or other fees,
and all costs, claims, expenses and liabilities in connection therewith
(including, without limitation, attorneys' fees, disbursements and actual
costs), arising out of any purported or actual dealings by Tenant and any
broker.
J. Any sum owed or reimbursable by Tenant to Landlord under
this Lease (excluding Monthly Base Rent) shall be considered "Additional Rent"
payable, without diminution, set-off or deduction. Except as otherwise provided
in this Lease, all payments of Additional Rent shall be paid no later than
thirty (30) days after the date Landlord notifies Tenant of the amount thereof.
K. In the event suit shall be brought by either party
hereto against the other to enforce any of the provisions of this Lease, the
prevailing party in any such action shall be entitled to recover from the other
party all of its expenses incurred in connection with such action, including
reasonable attorneys' fees, disbursements and actual costs.
L. This Lease is being executed in conjunction with an
Agreement of Purchase and Sale of Real Property dated as of the ___ of January,
1999, under which Tenant conveys to Landlord real property that includes the
Premises that are the subject of this Lease. The effectiveness of this Lease is
conditioned upon the execution, delivery and effectiveness of and closing
pursuant to the Agreement of Purchase and Sale of Real Property. Other than the
Agreement of Purchase and Sale of Real Property, this Lease, including the
exhibits hereto, is intended by the parties as the final expression of their
agreement and as a complete and exclusive statement of the terms thereof, all
negotiations, considerations and representations between the parties having been
incorporated herein. No course of prior dealings between the parties or their
affiliates shall be relevant or admissible to determine the meaning of any of
the terms of this Lease. No representations, understandings or agreements have
been made or relied upon in the making of this Lease other than those
specifically set forth herein. This Lease can only be modified by a writing
signed by all of the parties hereto or their duly authorized agents.
M. Landlord and Tenant shall share the use of the outdoor
parking lot adjacent to the building, based on each of their proportionate
occupancy of the Building.
<PAGE>
-15- FINAL
N. In the event Landlord does not fulfill its obligations
under this Lease, then Tenant may, but shall not be required to, take such
actions so as to satisfy such obligations, and the satisfaction of such
obligations by Tenant shall not operate to cure such default or to estop Tenant
from the pursuit of any remedy to which Tenant would otherwise be entitled.
Landlord shall, upon demand, repay Tenant such funds expended, plus interest
thereon at two (2) percentage points above the prime rate published or announced
from time to time by a federally-insured financial institution selected by
Tenant (but in no event greater than the highest non-usurious rate permitted
under the laws of the Commonwealth of Pennsylvania). In the event Landlord does
not repay Tenant such funds and interest within ten (10) days of demand
therefor, Tenant shall have the right to offset such funds and interest against
rent due hereunder.
[Signatures follow on the next page]
<PAGE>
-16- FINAL
IN WITNESS WHEREOF, the parties hereto have executed this
Lease as of the day and year first above written.
WITNESS: LANDLORD:
JIMLEW CAPITAL, LLC,
a Delaware limited liability company
____________________ By: _____________________[SEAL]
Name
Title
WITNESS: TENANT:
TEL-SAVE.COM, INC.,
a Delaware corporation
____________________ By: _____________________[SEAL]
Name
Title
<PAGE>
FINAL
EXHIBITS
Exhibit A: Legal Description of the Land
Exhibit B: Declaration
Exhibit C: Rules and Regulations
<PAGE>
FINAL
EXHIBIT A
LEGAL DESCRIPTION OF THE LAND
ALL THAT CERTAIN parcel of land, Situate in the Township of Solebury, County of
Bucks and Commonwealth of Pennsylvania, bounded and described according to Plan
of Survey made for Magill Brothers, by George Rice, Registered Surveyor of
Solebury, Pennsylvania, dated December 31, 1974, and revised December 19, 1977,
as follows:
BEGINNING at a point on the Westerly side of L.R. 1086 Spur, said point being a
corner in line of lands now or late of J.D. Materials Co., Inc., on the Solebury
Township - New Hope Borough line; thence along said lands now or late of J.D.
Materials Co., Inc., on the Solebury Township - New Hope Borough line, South
eighty-one degrees thirty minutes thirty-eight seconds West, three hundred
ninety-three and twenty-one one-hundredths feet to a point, a corner in line of
lands of The Delaware River Joint Toll Bridge Commission; thence along said
lands of The Delaware River Joint Toll Bridge Commission, the four following
courses and distances: (1) North seventeen degrees sixteen minutes eleven
seconds West, four hundred seventy-seven and fifty one-hundredths feet to a
point, a corner; thence (2) North thirty-nine degrees two minutes twenty-five
seconds East, ninety and fourteen one-hundredths feet to a point, a corner (3)
North seventeen degrees sixteen minutes eleven seconds West fifty and no
one-hundredths feet to a point, a corner; and (4) North fifty-one degrees
thirty-three minutes ten seconds West, two hundred twenty-one and ninety-three
one hundredths feet to a point, a corner of lands now or late of Bernard and
Betty J. Rozansky; thence along said lands now or late of Bernard and Betty J.
Rozansky, North eighty-two degrees twenty minutes nineteen seconds East, eight
hundred sixty-two and thirty-three one-hundredths feet to a point, a corner on
the Westerly side of the aforesaid L.R. 1086 Spur; thence along the said
Westerly side of L.R. 1086 Spur; along a curve to the left, having a radius of
one thousand, two hundred five and ninety-two one-hundredths feet, for the arc
length of forty and four one-hundredths feet, to a point of tangency, thence
still along the same, South thirteen degrees, thirty-nine minutes thirty-nine
seconds West, six hundred fifty-four and ten one-hundredths feet to a point of
curvature; thence along a curve to the right, having a radius of one-thousand,
eighty-five and ninety-two one-hundredths feet, for the arc length of
ninety-eight and eighty-one one-hundredths feet, to the point and place of
beginning.
CONTAINING 10.06 ACRES OF LAND
COUNTY TAX PARCEL NO.: 41-28-67
BEING THE SAME PREMISES which The Fidelity Bank, Beverley W. Magill and
Frederick B. Williamson, III, trustees for Marital Trust under the Will of
Winfield A. Magill, deceased and Thomas H. Magill and Joyce W. Magill, husband
and wife by Deed dated October 9, 1984, and recorded October 31, 1984, in Land
Record Book 2582 Page
<PAGE>
FINAL
653, Bucks County records, granted and conveyed unto Omni Contractors a
Pennsylvania General Partnership, in fee.
TOGETHER with all and singular the buildings and improvements, ways, streets,
alleys, driveways, passages, waters, water-courses, rights, liberties,
privileges, hereditaments and appurtenances, whatsoever unto the hereby granted
premises belonging, or in anywise appertaining, and the reversions and
remainders, rents, issues, and profits thereof; and all the estate, right,
title, interest, property, claim and demand whatsoever of the said grantor, as
well at law as in equity, of, in and to the same.
<PAGE>
FINAL
EXHIBIT B
DECLARATION
Attached to and made part of the Lease dated the ___ day of
January, 1999, entered into by and between JIMLEW CAPITAL, LLC, a Delaware
limited liability company, as Landlord, and TEL-SAVE.COM, INC., a Delaware
corporation, as Tenant.
Landlord and Tenant do hereby declare that (a) the
Commencement Date is hereby established to be _________________________, 199__
and (b) the Term of the Lease shall terminate on _______________________, 200__
unless terminated earlier as provided therein. The Lease is in full force and
effect as of the date hereof, Landlord has fulfilled all of its obligations
under the Lease required to be fulfilled by Landlord on or prior to such date,
and Tenant has no right of set-off against any rentals as of the date hereof.
WITNESS: LANDLORD:
JIMLEW CAPITAL, LLC,
a Delaware limited liability company
____________________ _____________________ [SEAL]
Name
Title
WITNESS: TENANT:
TEL-SAVE.COM, INC.,
a Delaware corporation
____________________ By: _____________________[SEAL]
Name
Title
DATED: ____________________, 199__.
<PAGE>
FINAL
EXHIBIT C
RULES AND REGULATIONS
The following rules and regulations have been formulated for the
safety and well-being of all the tenants of the Building.
Subject to the terms of the Lease, Landlord reserves the right to
rescind, amend, alter or waive any of the following rules and regulations at any
time when, in its sole judgment, it deems it necessary, desirable or proper for
the best interests of the Building and for the best interests of the tenants.
1. The common areas in the Building shall not be obstructed by any
tenant or used for any purpose other than ingress and egress to and from the
tenant's demised premises. Landlord shall have the right to control and operate
the common areas, and the facilities furnished for the common use of the tenants
in such manner as Landlord, in its sole discretion, deems best for the benefit
of the tenants generally. No tenant shall permit the visit to its demised
premises of persons in such number or under such conditions as to interfere with
the use and enjoyment by other tenants of the common areas. No tenant shall
place any mats, trash or other objects in the common areas.
2. No awnings or other projections shall be attached to the
outside walls of the Building. No drapes, blinds, shades or screens shall be
attached to or hung in, or used in connection with, any window or door of a
tenant's demised premises, without Landlord's consent. The Landlord hereby
consents to any drapes, blinds, shades or screens in the Premises as of the date
of this Lease.
3. The water and wash closets and other plumbing fixtures shall
not be used for any purposes other than those for which they were constructed,
and no sweepings, rubbish, rags or other substances shall be thrown or placed
therein.
4. There shall be no marking, painting, drilling into or other
form of defacing or damage of any part of the shell or core of the Building.
5. No bicycles, vehicles or animals, birds or pets of any kind
(other than seeing-eye dogs assisting disabled persons) shall be brought into or
kept in or about a tenant's demised premises. No cooking shall be done or
permitted by any tenant on its demised premises, except that, with Landlord's
prior written approval, a tenant may install and operate for the convenience of
its employees a lounge or coffee room with stove, sink, refrigerator, microwave
oven and/or coffee makers. No tenant shall cause or permit any unusual or
objectionable odors to originate from its demised premises. Each tenant shall be
<PAGE>
FINAL
obligated to maintain sanitary conditions in any area approved by the Landlord
for food and beverage preparation and consumption.
6. Except as permitted by this Lease, no space in or about the
building shall be used by any tenant for the manufacture of merchandise, goods
or property of any kind nor, in the case of non-retail tenants, for the storage
or sale or auction of the same.
7. No flammable, combustible, explosive, hazardous or toxic fluid,
chemical or substance or firearms shall be brought into or generated or kept
upon a tenant's demised premises, except for those fluids, chemicals or
substances which are used in Tenant's business pursuant to the permitted uses of
the Lease so long as such fluids, chemicals and substances are stored, used and
disposed of in accordance with all applicable laws.
8. Landlord reserves the right to exclude from the Building at all
times, any person who is not known or does not properly identify himself to the
Landlord or its agents. Each tenant shall be responsible for all persons for
whom it authorizes entry into the Building, and shall be liable to Landlord for
all acts of such persons.
9. Canvassing, soliciting and peddling in the Building are
prohibited and each tenant shall cooperate to prevent the same.
10. No space leased to any tenant shall be used, or permitted to be
used, for lodging or sleeping or for any immoral or illegal purpose.
11. Employees of Landlord other than those expressly authorized are
prohibited from receiving any packages or other articles delivered to the
Building for any tenant and, should any such employee receive any such package
or article, he or she in so doing shall be the agent of such tenant and not
Landlord.
12. Tenant shall not affix any floor covering to any floor of the
demised premises or Building with adhesive or glue of any kind without obtaining
Landlord's prior written consent.
EXHIBIT 10.11
Page 1
"***" indicates that material has been deleted to maintain the
confidentiality of business terms.
IRU CAPACITY AGREEMENT
This IRU Capacity Agreement (the "Agreement") is entered into as
of December 29, 1998 (the "Effective Date") between AT&T Corp. ("AT&T"), a New
York corporation with offices at 295 North Maple Avenue, Basking Ridge, New
Jersey 07920, and Tel-Save, Inc. ("Tel-Save"), a Pennsylvania corporation with
offices at 6805 Route 202, New Hope, Pennsylvania 18938.
BACKGROUND
This Agreement is made with reference to the following facts:
A. AT&T operates a fiber optic communications system (as such system
exists now, and as it is modified from time to time, the "AT&T Network").
B. AT&T desires to provide, and Tel-Save desires to obtain, an
indefeasible right to use optical fibers and dedicated circuit capacity derived
with network electronics and circuit electronics on the AT&T Network.
TERMS OF AGREEMENT
1 Definitions
1.1 "Tel-Save Backbone Network" shall mean, at any date, the
Tel-Save Routes as of that date.
1.2 "Capacity" shall mean the DS-3 Capacity on the Tel-Save
Backbone Network, including both (a) the circuit capacity, as measured in terms
of transmission and (b) a portion of the relevant fiber strands necessary to
transport such capacity.
1.3 "DS-3 Capacity" shall mean DS-3 transmission capacity
between AT&T Central Offices, meeting the specifications set forth in AT&T's
Technical Reference 54014 and its addenda, as revised from time to time.
1.4 "DS-3 Electronics" shall mean the technology and components
that enable DS-3 testing, multiplexing, and transmission, meeting the
specifications set forth in AT&T's Technical Reference 54014 and its addenda, as
revised from time to time.
1.5 "Indefeasible Right to Use" or "IRU" shall mean the
exclusive, unrestricted, and indefeasible right to use the relevant Capacity for
any legal purpose. The granting of such IRU does not convey title or legal
ownership of any fibers or equipment on the AT&T Network. Notwithstanding the
occurrence of a breach by the receiving party of any legal duty or obligation
imposed by any contract, by the law of torts (including simple or gross
negligence, strict liability or willful misconduct), or by federal or state
laws, rules, regulations, orders, standards or ordinances, during the Term, the
granting party shall have no right to revoke or restrict in any manner or to any
degree whatsoever, through injunctive relief or otherwise, the use of the IRU
granted to the receiving party. The parties mutually understand and agree that
any such breach shall be compensable, if at all, by a remedy at law and not at
equity.
AT&T/Tel-Save Proprietary
Subject to non-disclosure obligations
<PAGE>
Page 2
1.6 "Specifications" shall mean, the service specifications set
forth in AT&T Technical Reference 54014, as revised from time to time.
1.7 "Tel-Save Routes" shall mean the routes between AT&T Central
Offices over which Tel-Save obtains rights to use capacity under this Agreement,
including the routes listed in Attachment A.
1.8 "Total Interruption" means any situation in which Tel-Save
suffers a total loss of connectivity in one or more Tel-Save Routes, lasting two
or more hours, which loss is not caused by Tel-Save, and that does not occur
within or as a result of equipment connections that Tel-Save provides.
2. Indefeasible Right to Use. AT&T hereby grants to Tel-Save for the
Term of this Agreement an IRU in the Capacity, contingent upon timely receipt of
payment as specified in Section 5 of this Agreement.
3. Term. This Agreement is binding on the parties as of the
Effective Date and, subject to the termination provisions of this Agreement,
shall remain in effect until December 31, 2023 (such period is referred to as
the "Term").
4. Implementation. AT&T and Tel-Save shall work together, in good
faith, to develop a mutually agreeable implementation schedule for furnishing
the Capacity and associated DS-3 Electronics, and the parties agree to work
together, in good faith, in the future to develop necessary implementation
schedules, as appropriate.
5. Payment. In consideration for the IRU granted hereunder in the
Capacity, Tel-Save shall pay an IRU Fee to AT&T of $11,652,512.26, to be paid on
or before March 1, 1999.
6. Testing. Prior to making any Capacity available to Tel-Save under
this Agreement, AT&T shall test the Capacity on a route-specific basis to ensure
that the Capacity is in conformity with the Specifications. If any testing
establishes that the Capacity does not conform to the Specifications, AT&T
promptly shall correct such nonconformity and conduct additional testing prior
to making the Capacity available to Tel-Save.
7. Outage Credits. In the event of a Total Interruption in a
specific Tel-Save Route that is due to circumstances within AT&T's reasonable
control (fiber cuts shall not be deemed to be within AT&T's reasonable control),
Tel-Save shall be entitled to an outage credit. For each two hour period of such
a Total Interruption, Tel-Save shall receive an outage credit at a rate of
$20.00 for each such period of a Total Interruption for each Tel-Save Route
where the Total Interruption occurs. The duration of such a Total Interruption
will be measured from the time of notice to AT&T's network control center that a
Total Interruption has occurred to the time of restoration of the Service. No
credit will be provided for any scheduled interruption. An outage credit will be
applied against other amounts due to AT&T from Tel-Save, or, to the extent such
sums are not due to AT&T, provided as a refund.
8. Chronic Failure. If there shall occur, within any period of 12
consecutive months, more than four Total Interruptions caused by factors within
AT&T's reasonable control,
AT&T/Tel-Save Proprietary
Subject to non-disclosure obligations
<PAGE>
Page 3
AT&T will demonstrate to Tel-Save actions taken by AT&T to reduce such
Interruptions. If there shall occur more than two additional Total Interruptions
due to factors within AT&T's reasonable control within the subsequent three
month period, this shall be deemed a Chronic Failure for purposes of this
Agreement.
9. Interference. In the event that AT&T believes in good faith that
Tel-Save's use of the Tel-Save Backbone Network is interfering unreasonably with
the use of AT&T service by others or the operation of the AT&T Network, AT&T may
immediately restrict or suspend the Capacity, without liability on the part of
AT&T, and then notify Tel-Save of the action that AT&T has taken and the reason
for such action. For purposes of the foregoing sentence, the normal usage by
Tel-Save of all or any part of the Capacity shall be deemed to be reasonable. To
the extent doing so does not interfere with its ability to prevent such
interference, AT&T will attempt to limit any restriction or suspension under
this Section to the Capacity that are causing such interference.
10. Relocation. Unless the circumstances make such notice
impracticable, AT&T shall give Tel-Save at least 90 days prior written notice of
any scheduled relocation of any portion of the Tel-Save Backbone Network, and as
much advance notice as possible of any unscheduled relocation. AT&T shall have
the right to direct any relocation of any portion of the Tel-Save Backbone
Network, including but not limited to the right to determine the extent and
timing of, and the methods to be used for, such relocation; provided, however,
that unless otherwise agreed, any such relocation: (i) shall be constructed and
tested in accordance with the Specifications, and (ii) shall not result in any
Interruption in excess of two hours or degradation of the Capacity. In the event
an AT&T Central Office is relocated or replaced by a new site, AT&T shall
relocate the applicable Tel-Save Capacity. Any such relocation shall be
undertaken at no cost to Tel-Save, except in cases where relocation is
accompanied by additions or other work to benefit Tel-Save and for which
Tel-Save agrees in writing to pay.
11. Use of the Capacity and Restriction on Resale. Tel-Save may use
the Capacity for any lawful purpose and Tel-Save represents and warrants that
its use of the Capacity and its offering of services using the Tel-Save Backbone
Network will comply with all applicable government codes, ordinances, laws,
rules, regulations and/or restrictions. Tel-Save may sell, trade, exchange or
otherwise make available to any person or entity any service provided over the
Tel-Save Backbone Network.
AT&T/Tel-Save Proprietary
Subject to non-disclosure obligations
<PAGE>
Page 4
12. Limitation of Liability. AT&T'S LIABILITY, IF ANY, FOR ANY CLAIM
OR SUIT BY TEL-SAVE OR ITS AFFILIATES, FOR DAMAGES ASSOCIATED WITH THE
INSTALLATION, PROVISION, TERMINATION, MAINTENANCE, REPAIR OR RESTORATION OF ANY
OF THE CAPACITY SHALL NOT EXCEED AN AMOUNT EQUAL TO THE PRORATED PORTION OF
CHARGES FOR THE AFFECTED CAPACITY FOR THE PERIOD DURING WHICH THAT CAPACITY WAS
AFFECTED. IN NO EVENT SHALL AT&T OR TEL-SAVE BE LIABLE IN CONNECTION WITH THE
PROVISION, USE OR RESALE OF THE CAPACITY FOR INDIRECT, INCIDENTAL,
CONSEQUENTIAL, RELIANCE OR SPECIAL DAMAGES, INCLUDING WITHOUT LIMITATION DAMAGES
FOR LOST PROFITS OR DIMINISHED BUSINESS VALUE, REGARDLESS OF THE FORM OF ACTION
WHETHER IN CONTRACT, INDEMNITY WARRANTY, STRICT LIABILITY OR TORT, INCLUDING
WITHOUT LIMITATION NEGLIGENCE OF ANY KIND WHETHER ACTIVE OR PASSIVE, PROVIDED
THAT: (A) NOTHING IN THIS SECTION SHALL LIMIT THE PARTIES' RESPECTIVE RIGHTS AND
OBLIGATIONS UNDER SECTION 7.2 ("INDEMNIFICATION") OF THE MASTER CARRIER
AGREEMENT ENTERED INTO BETWEEN TEL-SAVE AND AT&T ON APRIL 22,. 1998 (THE "MCA");
(B) THE LIMITATIONS OF LIABILITY DESCRIBED IN THIS SECTION SHALL NOT RENDER
INAPPLICABLE ANY CHARGES OR OTHER LIABILITIES FOR WHICH A PARTICULAR AMOUNT,
FORMULA OR OTHER METHOD OF CALCULATION IS SPECIFICALLY PROVIDED IN THIS
AGREEMENT; AND (C) NOTHING IN THIS AGREEMENT SHALL LIMIT EITHER PARTY'S
LIABILITY IN TORT FOR (1) THAT PARTY'S WILLFUL OR INTENTIONAL MISCONDUCT OR (2)
DAMAGES TO INDIVIDUALS OR THEIR ESTATES FOR BODILY INJURY OR DEATH PROXIMATELY
CAUSED BY THAT PARTY'S NEGLIGENCE.
13. Termination.
13.1 Upon the expiration of the Term of this Agreement, use of
the Capacity shall terminate and Tel-Save shall owe AT&T no additional
consideration.
13.2 In the event Tel-Save abandons or otherwise relinquishes use
of any of the Capacity subsequent to the start of the term ("Abandonment") and
notifies AT&T of that Abandonment, Tel-Save shall be entitled to a reuse credit
dependent on the time of Notice as follows: (1) Abandonment during years one
through three of the Term, an amount equal to 1/10th of 1% of the pro-rata IRU
fee regarding the abandoned facilities for each remaining month of the of the
Term of the Commitment; (2) Abandonment during years four through six of the
Term, an amount equal to 1/12th of 1% of the pro-rata IRU fee regarding the
abandoned facilities for each remaining month of the of the Term of the
Commitment; (3) Abandonment during years seven through ten of the Term, an
amount equal to 1/15th of 1% of the pro-rata IRU fee regarding the abandoned
facilities for each remaining month of the of the Term of the Commitment; (4)
Abandonment during years eleven through fifteen of the Term, an amount equal to
1/18th of 1% of the pro-rata IRU fee regarding the abandoned facilities for each
remaining month of the of the Term of the Commitment; (5) Abandonment during
years sixteen through twenty of the Term, an amount equal to 1/36th of 1% of the
pro-rata IRU fee regarding the abandoned facilities for each remaining month of
the of the Term of the Commitment; and (6) Abandonment during years twenty-one
through twenty-five of the Term, an amount equal to 1/72nd of 1% of the pro-rata
IRU fee regarding the abandoned facilities for each remaining month of the of
the Term of the Commitment. Upon notice of Abandonment, AT&T shall be entitled
to reuse the facilities for its own use or in the provision of capacity or
services the others.
AT&T/Tel-Save Proprietary
Subject to non-disclosure obligations
<PAGE>
Page 5
14. Default.
14.1 AT&T has the right to terminate this Agreement upon thirty
days' prior written Notice of Default in the event Tel-Save fails to make full
and timely payment of the IRU Fee as specified in Section 5. In the event of
such termination, AT&T shall be entitled not only to revoke the IRU granted,
which is contingent upon timely payment of the IRU Fee, but also to collect the
sum of $500,000 as liquidated damages for the failure to pay the IRU Fee. In the
event that AT&T is required to institute collection procedures, AT&T will also
be entitled to the reasonable attorneys' fees necessary to effect collection of
that amount.
14.2 Tel-Save has the right to terminate this Agreement with
regard to a specific Tel-Save Route upon thirty days' prior written Notice of
Default in the event of a Chronic Failure (as defined in Section 8 of this
Agreement) on that route. In the event of such termination, the IRU with respect
to such Route shall be terminated and Tel-Save shall be entitled (in addition to
any outage credits specified in Section 7 above) to liquidated damages in the
amount of the pro-rata share of the IRU that the remaining term of the specific
Tel-Save Route represents. In the event that Tel-Save is required to institute
collection procedures, Tel-Save will also be entitled to the reasonable
attorneys' fees necessary to effect collection of that amount.
15. Incorporation of Terms by Reference. The following provisions of
the MCA are incorporated by reference and made part of this Agreement as if
fully set forth. As used in these provisions as incorporated, the term
"Agreement" shall be read as a reference to this Agreement, the term "Services"
shall be read as a reference to Capacity under this Agreement, and the
capitalized terms used shall have the meanings set forth in the MCA.
Indemnification. (ss.7.2.)
Force Majeure. (ss.7.3.)
Limitation of Actions. (ss.7.4.)
Disclaimer of Warranties. (ss.7.5.)
Exclusive Remedies (ss.7.6.)
Restrictions Against Use of Name and Brand Identification. (ss.8.1.)
Inconsistent Use (ss.8.2.)
No Patent or Software License. (ss.8.3.)
Taxes to be Billed by AT&T. (ss.9.1.)
Taxes Not To be Billed by AT&T. (ss.9.2.)
Gross Receipts Tax. (ss.9.3.)
Confidential Information. (ss.11.1.)
Protection of Confidentiality. (ss.11.2.)
Disclosure to or by Affiliates or Subcontractors. (ss.11.3.)
Return or Destruction of Confidential Information. (ss.11.4.)
Disclosure to Consultants. (ss.11.5.)
Required Disclosure. (ss.11.6.)
Injunctive Remedy. (ss.11.7.)
Assignment. (ss.13.3.)
Third-Party Beneficiaries; Affiliates. (ss.13.4.)
Relationship of the Parties. (ss.13.5.)
Acknowledgment of Right to Compete. (ss.13.6.)
AT&T/Tel-Save Proprietary
Subject to non-disclosure obligations
<PAGE>
Page 6
Network Equipment. (ss.13.7.)
Removal of Property. (ss.13.8.)
Notices. (ss.13.9.)
Compliance with Laws. (ss.13.11.)
Export Regulation Compliance. (ss.13.12.)
Choice of Law. (ss.13.13.)
Severability. (ss.13.14.)
Construction. (ss.13.16.)
Descriptive Headings. (ss.13.17.)
Survival of Terms. (ss.13.18.)
Modification And Waiver. (ss.13.19.)
Execution in Counterparts (ss.13.21.)
16. Entire Agreement; Amendment. This Agreement constitutes the
entire and final agreement and understanding between the parties with respect to
the subject matter hereof, the granting of IRU Capacity, and supersedes all
prior agreements relating to the subject matter hereof, which are of no further
force or effect. The Exhibits referred to herein are integral parts hereof and
are hereby made a part of this Agreement. This Agreement may only be modified or
supplemented by an instrument in writing executed by a duly authorized
representative of each party.
IN WITNESS WHEREOF, in confirmation of their consent to the terms and
conditions contained in this Agreement and intending to be legally bound
thereby, the parties have executed this IRU Capacity Agreement on the dates
shown below but effective for all purposes as of the Effective Date.
AT&T Corp. Tel-Save, Inc.
By: By:
------------------------ ------------------------
Title: Title:
--------------------- ---------------------
Date: Date:
---------------------- ----------------------
AT&T/Tel-Save Proprietary
Subject to non-disclosure obligations
<PAGE>
PAGE 1
EXHIBIT A
DS-3 CAPACITY CIRCUIT IDENTIFICATION
***
AT&T/Tel-Save Proprietary
Subject to non-disclosure obligations
Page 1
EXHIBIT 10.12
"***" indicates that material has been deleted to maintain the
confidentiality of business terms.
IRU CAPACITY AGREEMENT
This IRU Capacity Agreement (the "Agreement") is entered into as of
December 31, 1998 (the "Effective Date") between AT&T Corp. ("AT&T"), a New York
corporation with offices at 295 North Maple Avenue, Basking Ridge, New Jersey
07920, and Tel-Save, Inc. ("Tel-Save"), a Pennsylvania corporation with offices
at 8805 Route 202, New Hope, Pennsylvania 18938.
BACKGROUND
This Agreement is made with reference to the following facts:
A. AT&T operates a fiber optic communications system (as such system
exists now, and as it is modified from time to time, the "AT&T Network").
B. AT&T desires to provide, and Tel-Save desires to obtain, an
indefeasible right to use optical fibers and dedicated circuit capacity derived
with network electronics and circuit electronics on the AT&T Network.
TERMS OF AGREEMENT
1. Definitions
1.1 "Tel-Save Backbone Network" shall mean, at any date, the Tel-Save
Routes as of that date.
1.2 "Capacity" shall mean the DS-3 Capacity on the Tel-Save Backbone
Network including both (a) the circuit capacity, as measured in terms of
transmission and (b) a portion of the relevant fiber strands necessary to
transport such capacity.
1.3 "DS-3 Capacity" shall mean DS-3 transmission capacity between AT&T
Central Offices, meeting the specifications set forth in AT&T's Technical
Reference 54014 and its addenda, as revised from time to time.
1.4 "DS-3 Electronics" shall mean the technology and components that
enable DS-3 testing, multiplexing, and transmission, meeting the specifications
set forth in AT&T's Technical Reference 54014 and its addenda, as revised from
time to time.
1.5 "Indefeasible Right to Use" or "IRU" shall mean the exclusive,
unrestricted, and indefeasible right to use the relevant Capacity for any legal
purpose. The granting of such IRU does not convey title or legal ownership of
any fibers or equipment on the AT&T Network. Notwithstanding the occurrence of a
breach by the receiving party of any legal duty or obligation imposed by any
contract, by the law of torts (including simple or gross negligence, strict
liability or willful misconduct), or by federal or state laws, rules,
regulations, orders, standards or ordinances, during the Term, the granting
party shall have no right to revoke or restrict in any manner or to any degree
whatsoever, through injunctive relief or otherwise, the use of the IRU granted
to the receiving party. The parties mutually understand and agree that any such
breach shall be compensable, if at all, by a remedy at law and not at equity.
<PAGE>
Page 2
1.6 "Specifications" shall mean, the service specifications set forth in
AT&T Technical Reference 54014, as revised from time to time.
1.7 "Tel-Save Routes" shall mean the routes between AT&T Central Offices
over which Tel-Save obtains rights to use capacity under this Agreement,
including the routes listed in Attachment A.
1.8 "Total interruption" means any situation in which Tel-Save suffers a
total loss of connectivity in one or more Tel-Save Routes, lasting two or more
hours, which loss is not caused by Tel-Save, and that does not occur within or
as a result of equipment connections that Tel-Save provides.
2. Indefeasible Right to Use. AT&T hereby grants to Tel-Save for the Term
of this Agreement an IRU in the Capacity, contingent upon timely receipt of
payment as specified in Section 5 of this Agreement.
3. Term. This Agreement is binding on the parties as of the Effective Date
and, subject to the termination provisions of this Agreement, shall remain in
effect until December 31, 2023 (such period is referred to as the "Term").
4. Implementation. AT&T and Tel-Save shall work together, in good faith,
to develop a mutually agreeable implementation schedule for furnishing the
Capacity and associated DS-3 Electronics, and the parties agree to work
together, in good faith, in the future to develop necessary implementation
schedules, as appropriate.
5. Payment. In consideration for the IRU granted hereunder in the
Capacity, Tel-Save shall pay an IRU Fee to AT&T of $1,500,000.00, to be paid on
or before March 1, 1999.
6. Testing. Prior to making any Capacity available to Tel-Save under this
Agreement, AT&T shall test the Capacity on a route-specific basis to ensure
that the Capacity is in conformity with the Specifications. If any testing
establishes that the Capacity does not conform to the Specifications, AT&T
promptly shall correct such nonconformity and conduct additional testing prior
to making the Capacity available to Tel-Save.
7. Outage Credits. In the event of a Total interruption in a specific
Tel-Save Route that is due to circumstances within AT&T's reasonable control
(fiber cuts shall not be deemed to be within AT&T's reasonable control),
Tel-Save shall be entitled to an outage credit. For each two hour period of
such Total Interruption. Tel-Save shall receive an outage credit at a rate of
$20.00 for each such period of a Total Interruption for each Tel-Save Route
where the Total Interruption occurs. The duration of such a Total Interruption
will be measured from the time of notice to AT&T's network control center that
a Total Interruption has occurred to the time of restoration of the Service. No
credit will be provided for any scheduled Interruption. An outage credit will
be applied against other amounts due to AT&T from Tel-Save, or, to the extent
such sums are not due to AT&T, provided as a refund.
8. Chronic Failure. If there shall occur, within any period of 12
consecutive months, more than four Total Interruptions caused by factors within
AT&T's reasonable control, AT&T will demonstrate to Tel-Save actions taken by
AT&T to reduce such Interruptions. If there shall occur more than two
additional Total Interruptions due to factors within AT&T's
<PAGE>
Page 3
reasonable control within the subsequent three month period. This shall be
deemed a Chronic Failure for purposes of this Agreement.
9. Interference. In the event that AT&T believes in good faith that
Tel-Save's use of the Tel-Save Backbone Network is interfering unreasonably with
the use of AT&T service by others or the operation of the AT&T Network, AT&T may
immediately restrict or suspend the Capacity, without liability on the part of
AT&T, and then notify Tel-Save of the action that AT&T has taken and the reason
for such action. For purposes of the foregoing sentence, the normal usage by
Tel-Save of all or any part of the Capacity shall be deemed to be reasonable. To
the extent doing so does not interfere with its ability to prevent such
interference. AT&T will attempt to limit any restriction or suspension under
this Section to the Capacity that are causing such interference.
10. Relocation. Unless the circumstances make such notice impracticable,
AT&T shall give Tel-Save at least 90 days prior written notice of any scheduled
relocation of any portion of the Tel-Save Backbone Network and as much advance
notice as possible of any unscheduled relocation. AT&T shall have the right to
direct any relocation of any portion of the Tel-Save Backbone Network, including
but not limited to the right to determine the extent and timing of, and the
methods to be used for such relocation; provided, however, that unless otherwise
agreed, any such relocation, (i) shall be constructed and tested in accordance
with the Specifications, and (ii) shall not result in any interruption in excess
of two hours or degradation of the Capacity. In the event an AT&T Central Office
is relocated or replaced by a new site, AT&T shall relocate the applicable
Tel-Save Capacity. Any such relocation shall be undertaken at no cost to
Tel-Save, except in cases where relocation is accompanied by additions or other
work to benefit Tel-Save and for which Tel-Save agrees in writing to pay.
11. Use of the Capacity and Restriction on Resale. Tel-Save may use the
Capacity for any lawful purpose and Tel-Save represents and warrants that its
use of the Capacity and its offering of services using the Tel-Save Backbone
Network will comply with all applicable government codes, ordinances, laws,
rules, regulations and/or restrictions. Tel-Save may sell, trade, exchange or
otherwise make available to any person or entity any service provided over the
Tel-Save Backbone Network.
<PAGE>
Page 4
12. Limitation of Liability. AT&T'S LIABILITY, IF ANY, FOR ANY CLAIM OR
SUIT BY TEL-SAVE OR ITS AFFILIATES, FOR DAMAGES ASSOCIATED WITH THE
INSTALLATION, PROVISION, TERMINATION, MAINTENANCE, REPAIR OR RESTORATION OF ANY
OF THE CAPACITY SHALL NOT EXCEED AN AMOUNT EQUAL TO THE PRORATED PORTION OF
CHARGES FOR THE AFFECTED CAPACITY FOR THE PERIOD DURING WHICH THAT CAPACITY WAS
AFFECTED. IN NO EVENT SHALL AT&T OR TEL-SAVE BE LIABLE IN CONNECTION WITH THE
PROVISION, USE OR RESALE OF THE CAPACITY FOR INDIRECT, INCIDENTAL,
CONSEQUENTIAL, RELIANCE OR SPECIAL DAMAGES, INCLUDING WITHOUT LIMITATION DAMAGES
FOR LOST PROFITS OR DIMINISHED BUSINESS VALUE, REGARDLESS OF THE FORM OF ACTION
WHETHER IN CONTRACT, INDEMNITY WARRANTY, STRICT LIABILITY OR TORT, INCLUDING
WITHOUT LIMITATION NEGLIGENCE OF ANY KIND WHETHER ACTIVE OR PASSIVE, PROVIDED
THAT (A) NOTHING IN THIS SECTION SHALL LIMIT THE PARTIES' RESPECTIVE RIGHTS AND
OBLIGATIONS UNDER SECTION 7.2 ("INDEMNIFICATION") OF THE MASTER CARRIER
AGREEMENT ENTERED INTO BETWEEN TEL-SAVE AND AT&T ON APRIL 22, 1998 (THE "MCA");
(B) THE LIMITATIONS OF LIABILITY DESCRIBED IN THIS SECTION SHALL NOT RENDER
INAPPLICABLE ANY CHARGES OR OTHER LIABILITIES FOR WHICH A PARTICULAR AMOUNT,
FORMULA OR OTHER METHOD OF CALCULATION IS SPECIFICALLY PROVIDED IN THIS
AGREEMENT; AND (C) NOTHING IN THIS AGREEMENT SHALL LIMIT EITHER PARTY'S
LIABILITY IN TORT FOR (1) THAT PARTY'S WILLFUL OR INTENTIONAL MISCONDUCT OR (2)
DAMAGES TO INDIVIDUALS OR THEIR ESTATES FOR BODILY INJURY OR DEATH PROXIMATELY
CAUSED BY THAT PARTY'S NEGLIGENCE.
13. Termination.
13.1 Upon the expiration of the Term of this Agreement, use of the
Capacity shall terminate and Tel-Save shall owe AT&T no additional
consideration.
13.2 In the event Tel-Save abandons or otherwise relinquishes use of
any of the Capacity subsequent to the start of the term ("Abandonment") and
notifies AT&T of that Abandonment, Tel-Save shall be entitled to a reuse credit
dependent on the time of Notice as follows: (1) Abandonment during years one
through three of the Term, an amount equal to 1/10th of 1% of the pro-rata IRU
fee regarding the abandoned facilities for each remaining month of the Term of
the Commitment; (2) Abandonment during years four through six of the Term, an
amount equal to 1/12th of 1% of the pro-rata IRU fee regarding the abandoned
facilities for each remaining month of the of the Term of the Commitment; (3)
Abandonment during years seven through ten of the Term, an amount equal to
1/15th of 1% of the pro-rata IRU fee regarding the abandoned facilities for each
remaining month of the of the Term Commitment; (4) Abandonment during years
eleven through fifteen of the Term, an amount equal to 1/18th of 1% of the
pro-rata IRU fee regarding the abandoned facilities for each remaining month of
the Term of the Commitment; (5) Abandonment during years sixteen through twenty
of the Term, an amount equal to 1/36th of 1% of the pro-rata IRU fee regarding
the abandoned facilities for each remaining month of the Term of the Commitment;
and (6) Abandonment during years twenty-one through twenty-five of the Term, an
amount equal to 1/72nd of 1% of the pro-rata IRU fee regarding the abandoned
facilities for each remaining month of the Term of the Commitment. Upon notice
of Abandonment, AT&T shall be entitled to reuse the facilities for its own use
or in the provision of capacity or services the others.
14. Default.
<PAGE>
Page 5
14.1 AT&T has the right to terminate this Agreement upon thirty days'
prior written Notice of Default in the event Tel-Save fails to make full and
timely payment of the IRU Fee as specified in Section 5. In the event of such
termination, AT&T shall be entitled not only to revoke the IRU granted, which is
contingent upon timely payment of the IRU Fee, but also to collect the sum of
$500,000 as liquidated damages for the failure to pay the IRU Fee. In the event
that AT&T is required to institute collection procedures, AT&T will also be
entitled to the reasonable attorneys' fees necessary to effect collection of
that amount.
14.2 Tel-Save has the right to terminate this Agreement with regard to
a specific Tel-Save Route upon thirty days' prior written Notice of Default in
the event of a Chronic Failure (as defined in Section 8 of this Agreement) on
that route. In the event of such termination, the IRU with respect to such Route
shall be terminated and Tel-Save shall be entitled (in addition to any outage
credits specified in Section 7 above) to liquidated damages in the amount of the
pro-rata share of the IRU that the remaining term of the specific Tel-Save Route
represents. In the event that Tel-Save is required to institute collection
procedures, Tel-Save will also be entitled to the reasonable attorneys' fees
necessary to effect collection of that amount.
15. Incorporation of Terms by Reference. The following provisions of the MCA
are incorporated by reference and made part of this Agreement as if fully set
forth. As used in these provisions as incorporated, the term "Agreement" shall
be read as a reference to this Agreement, the term "Services" shall be read as a
reference to Capacity under this Agreement, and the capitalized terms used shall
have the meanings set forth in the MCA.
Indemnification. ((Section)7.2)
Force Majeure. ((Section)7.3.)
Limitation of Actions. ((Section)7.4.)
Disclaimer of Warranties. ((Section)7.5.)
Exclusive Remedies. ((Section)7.6).
Restrictions Against Use of Name and Brand Identification.
((Section)8.1.)
Inconsistent Use. ((Section)8.2.)
No Patent or Software License. ((Section)8.3.)
Taxes to be Billed by AT&T. ((Section)9.1.)
Taxes Not To be Billed by AT&T. ((Section)9.2.)
Gross Receipts Tax. ((Section)9.3.)
Confidential Information. ((Section)11.1.)
Protection of Confidentiality. ((Section)11.2.)
Disclosure to or by Affiliates or Subcontractors. ((Section)11.3.)
Return or Destruction of Confidential Information. ((Section)11.4.)
Disclosure to Consultants. ((Section)11.5.)
Required Disclosure. ((Section)11.6.)
Injunctive Remedy. ((Section)11.7.)
Assignment. ((Section)13.3.)
Third-Party Beneficiaries; Affiliates. ((Section)13.4.)
Relationship of the Parties. ((Section)13.5.)
Acknowledgment of Right to Compete. ((Section)13.6.)
Network Equipment. ((Section)13.7.)
Removal of Property. ((Section)13.8.)
Notices. ((Section)13.9.)
Compliance with Laws. ((Section)13.11.)
<PAGE>
Page 6
Export Regulation Compliance. ((Section)13.12.)
Choice of Law. ((Section)13.13.)
Severability. ((Section)13.14.)
Construction. ((Section)13.16.)
Descriptive Headings. ((Section)13.17.)
Survival of Terms. ((Section)13.18.)
Modification And Waiver. ((Section)13.19.)
Execution in Counterparts. ((Section)13.21.)
16. Entire Agreement Amendment. This Agreement constitutes the entire and
final agreement and understanding between the parties with respect to the
subject matter hereof, the granting of IRU Capacity, and supersedes all prior
agreements relating to the subject matter hereof, which are of no further force
or effect. The Exhibits referred to herein are integral parts hereof and are
hereby made a part of this Agreement. This Agreement may only be modified or
supplemented by an instrument in writing executed by a duly authorized
representative of each party.
IN WITNESS WHEREOF, in confirmation of their consent to the terms and
conditions contained in this Agreement and intending to be legally bound
thereby, the parties have executed this IRU Capacity Agreement on the dates
shown below but effective for all purposes as of the Effective Date.
<TABLE>
<S> <C>
AT&T Corp. Tel-Save Inc.
By: [SIG] By: /s/ EDWARD DEMAO
--------------------------- -------------------------
Title: President Title: COO
--------------------------- -------------------------
Date: Dec. 11, 1998 Date: 12/31/98
--------------------------- -------------------------
</TABLE>
REVIEWED AND APPROVED AS TO FORM
AT&T LAW DIVISION
BY: [SIG]
---------------------------
<PAGE>
Page 1
EXHIBIT A
DS-3 CAPACITY CIRCUIT IDENTIFICATION
***
EXHIBIT 10.13
"***" indicates that material has been deleted to maintain the
confidentiality of business terms.
AMENDMENT TO MASTER CARRIER AGREEMENT
This amendment, dated as of January 1, 1999, modifies the terms of the
Master Carrier Agreement entered into by and among AT&T Corp. ("AT&T") and
Tel-Save, Inc. ("Tel-Save") on April 22, 1998, as follows:.
1. Section 1.1(e) of the Master Carrier Agreement is amended by
replacing the current page 6 (bearing the legend "dated 04/22/98 9:48 PM") with
revised page 6 (bearing the legend "Added by Amendment dated as of 01/01/99"),
as attached to this Amendment.
2. Sections 2.2, 3.1(a), 3.1(b), 3.2(c), and 3.2(d) of the Master
Carrier Agreement are amended by replacing the current pages 10-13 (bearing the
legend "dated 04/22/98 9:48 PM") with revised pages 10-13.1 (bearing the legend
"Added by Amendment dated as of 01/01/99"), as attached to this Amendment.
3. The introductory paragraph of Section 1 of Attachment A of the
Master Carrier Agreement is revised by replacing the current page 1 (bearing the
legend dated 04/22/98 9:48 PM) with revised page 1 (bearing the legend "Added by
Amendment dated as of 01/01/99"), as attached to this Amendment.
4. Section 1.2 of Attachment A of the Master Carrier Agreement is
revised by replacing the current page 5 (bearing the legend dated 04/22/98 9:48
PM) with revised page 5 (bearing the legend "Added by Amendment dated as of
01/01/99"), as attached to this Amendment.
5. A new Section 1.5 is added to Attachment A of the Master Carrier
Agreement by replacing the current page 7 (bearing the legend dated 04/22/98
9:48 PM) with revised page 7 and new pages 7.1-7.20 (each bearing the legend
"Added by Amendment dated as of 01/01/99"), as attached to this Amendment.
<PAGE>
6. Attachment D of the Master Carrier Agreement is revised by
replacing the current Attachment D with the revised Attachment D (bearing the
legend "Added by Amendment dated as of 01/01/99"), as attached to this
Amendment.
* * *
AT&T and Tel-Save, acting through their duly authorized
representatives, hereby agree to the terms set forth in this Amendment, and
warrant that their respective signatories whose signatures appear below have
been and are of the date of this Amendment duly authorized by all necessary and
appropriate corporate action to execute this Amendment.
TEL-SAVE, INC. AT&T CORP.
By: By:
------------------------ ------------------------
- --------------------------- ---------------------------
(Typed or printed name) (Typed or printed name)
- --------------------------- ---------------------------
(Title) (Title)
- --------------------------- ---------------------------
(Date) (Date)
<PAGE>
REVISED PAGE 6, 10-13.1 OF THE MASTER CARRIER AGREEMENT,
REVISED PAGES 1, 5 AND 7-7.20 OF ATTACHMENT A,
AND REVISED ATTACHMENT D
AT&T/Tel-Save Confidential and Proprietary
<PAGE>
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(d) AT&T MEGACOM(R) Service, as described and defined in AT&T Tariff
F.C.C. No. 1, as amended from time to time.
(e) AT&T 800 Services, as described and defined in AT&T Tariff F.C.C.
Nos. 2 and 14, as amended from time to time, consisting of: basic AT&T 800
Service-Domestic; basic AT&T 800 Service-Canada; basic AT&T 800 Service-Mexico;
basic AT&T 800 Service-Overseas; AT&T 800 Plan K; AT&T MEGACOM 800
Service-Domestic; AT&T MEGACOM 800 Service-Canada; AT&T MEGACOM 800
Service-Mexico; AT&T MEGACOM 800 Service-Overseas; AT&T 800 READYLINE(R)
Service-Domestic; AT&T 800 READYLINE Service-Canada; AT&T 800 READYLINE
Service-Mexico; AT&T 800 READYLINE Service-Overseas; and AT&T 800 READYLINE
Service-Puerto Rico and the U.S. Virgin Islands.
(f) AT&T Private Line Services (AT&T ACCUNET T1.5 Service and AT&T
ACCUNET T45 Service), as defined and described in AT&T Tariff F.C.C. No. 9, as
amended from time to time.
(g) AT&T 1.544 Mbps Echo Cancellation. AT&T 1.544 Mbps Echo
Cancellation is an Office Function providing non-frequency selective echo
cancellation in AT&T's central office to improve the quality of an AT&T T1.5
Inter Office Channel used for voice transmissions. Echo cancellation is
disruptive to data transmissions at speeds of 64 kbps and higher, and is only
available on an AT&T T1.5 Inter Office Channel that is designated by Tel-Save
for use for voice transmissions, provided that the Local Channel associated with
the IOC terminates at a Tel-Save designated location. If data transmissions at
speeds below 64 kbps over an IOC conditioned with Echo Cancellation are
disrupted, AT&T will work with Tel-Save in an effort to determine the cause of
the disruption. No [The next page of this Agreement is page 7, dated 04/22/98
9:48 PM]
Added by Amendment dated
as of 01/01/99
<PAGE>
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1.6 DISCONTINUANCE OF CONTRACT TARIFF 1715
(a) Effective as of the Commencement Date, Tel-Save discontinues its
subscription to AT&T Contract Tariff 1715 ("CT 1715"), pursuant to CT 1715,
Se4ction 6.E. A Termination Charge will apply as provided in that Section. AT&T
will provide a limited-purpose credit under this Agreement in an amount equal
to the amount of such Termination Charge. The credit will be applied to offset
the amount of such Termination Charge, and cannot be applied against any other
charges.
(b) Except as specified in this Section 1.6, Tel-Save shall not seek to
discontinue without liability any AT&T term plans. Contract Tariffs, or other
serving arrangements in connection with its order for service under this
Agreement.
2. TERM OF AGREEMENT AND RELATED PROVISIONS
2.1 EFFECTIVE DATE: COMMENCEMENT DATE.
The "Effective Date" of this Agreement shall be the date on which it is
executed by each party. The "Commencement Date" shall be May 1, 1998. The
rates, terms and conditions provided under this Agreement will not apply the
Commencement Date.
2.2 TERM OF AGREEMENT.
The "Term" of this Agreement begins on the Commencement Date and ends on
the date before the third-year anniversary of the Commencement Date. However,
with respect to the Services specified in Section 6 of Attachment D, the Term
is as follows: for Section 6.1(a) the Term for Private Line Services shall
begin on 1/1/1999 and end on 12/31/2004; for Section 6.1(b) the Term for
Private Line Services shall begin on 1/1/1999 and end on 12/31/1999; and
Added by Amendment dated
as of 01/01/99
<PAGE>
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for Section 6.1(c) the Term for Private Line Services shall begin on 1/1/1999
and end on 12/31/2002.
3. COMMITMENTS
3.1 MINIMUM ANNUAL REVENUE COMMITMENT.
(a) The Minimum Annual Revenue Commitment ("MARC") is fifty million dollars
($50,000,000) for the first and second years of the Term, and thirty-five
million dollars ($35,000,000) for the third year of the Term. Each such year is
sometimes referred to as a "MARC Period." The total charges for the Services set
forth in 1.1 and 1.2(a), together with the total charges incurred by Tel-Save
for service under AT&T Contract Tariff No. 2039, net of all discounts and
credits other than credit allowances for interruptions and outages, ("Total
Qualified Charges") shall be applied to satisfy the MARC for the year in which
the charges are incurred. Notwithstanding any other provision of this Agreement,
5 separate Private Line Services MARC of four million eight hundred thousand
dollars ($4,800,000) shall apply from 1/1/99 to 12/31/04 for AT&T ACCUNET T1.5
Service IOCs, as specified in Section 6.1(a) of Attachment D. If, at the end of
any Private Line Services MARC period, the total Charges incurred by Tel-Save
for AT&T ACCUNET T1.5 Service IOCs for that Private Line Services MARC period
has not exceeded the Private Line Services MARC for that period, Tel-Save shall
pay a Shortfall Charge equal to sixty-five (65%) of the difference between the
Private Line Services MARC and the amount of the total charges for AT&T ACCUNET
T1.5 Service IOCs incurred by Tel-Save for that Private Line Services MARC
period.
(b) If, at the end of any month in the second or third years of the Term,
the Total Qualified Charges incurred by Tel-Save during the Term is least one
hundred and ten million
Added by Amendment dated
as of 01/01/99
<PAGE>
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dollars ($110,000,000) and Tel-Save is current in payments to AT&T for all
telecommunications services, Tel-Save may, for the remainder of the Term,
continue to purchase Services under this Agreement, without any MARC or MAP
obligations. Tel-Save will be considered current in payment to AT&T under this
Agreement if all billed and outstanding charges are paid, except for any amount
for which the date for timely payment under Section 6.1(e) has not yet occurred.
This section shall not apply to the separate Private Line Services MARC.
(c) In the event that Tel-Save exercises its right to terminate affected
service components under Section 5.2(b), the MARC will be reduced (for the
then-current MARC Period) by the average monthly charges associated with such
service components during the three full billing months prior to the event
giving rise to the right to terminate, times the number of full or partial
months remaining in the MARC Period during which the service components were
terminated, and (for each remaining full MARC Period) by the average monthly
charges associated with such service components during the three full billing
months prior to the event giving rist to the right to terminate, times twelve.
(d) If, at the end of any MARC Period, the Total Qualified Charges incurred
by Tel-Save for that period have not exceeded the MARC, Tel-Save shall pay a
MARC Shortfall Charge. The MARC Shortfall Charge will vary as follows:
Added by Amendment dated
as of 01/01/99
<PAGE>
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<TABLE>
<CAPTION>
IF THE TOTAL QUALIFIED CHARGE ARE THE MARC SHORTFALL CHARGE IS
<S> <C>
More than 80% of the MARC .................. 3% of the Total Qualified Charges
More than 60%, but not more than 80%, of the
MARC ...................................... 5% of the Total Qualified Charges
More than 40%, but not more than 60%, of the
MARC ...................................... 8% of the Total Qualified Charges
More than 20%, but not more than 40%, of the
MARC ...................................... 10% of the Total Qualified Charges
10% or less of the MARC .................... Two million five hundred thousand dollars
</TABLE>
(e) In the event that this Agreement is terminated during MARC Period for
any reason for which a Termination Charge does not apply, the MARC for that
partial period will be adjusted by multiplying that full MARC by the number of
full months of service in the MARC Period prior to the date of termination, and
dividing by 12. For purposes of determining the amount of any MARC Shortfall
Charge, the adjusted MARC will apply for an adjusted MARC Period, consisting of
the same months counted in calculating the adjusted MARC. For example, if this
Agreement is terminated during month ten of the second year of the Term, the
adjusted MARC would be $50 million x 9/12, or $37.5 million. If the Total
Qualified Charges incurred by Tel-Save during the first nine full months of the
MARC Period were only $28 million (75% of the adjusted MARC), the MARC Shortfall
Charge would be 5% of $28 million, or $1.4 million.
3.2 MINIMUM ANNUAL PERCENTAGE.
(a) Except as provided in Section 3.1(b), the Minimum Annual Percentage
("MAP")
Added by Amendment dated
as of 01/01/99
<PAGE>
-13.1-
shall apply for each year of the Term, each of which is sometimes referred to as
a "MAP Period."
(b) In the event that this Agreement is terminated for any reason in the
middle of a MAP Period, the MAP shall apply for the portion of that period
ending as of the date of such termination.
(c) The MAP and Private Line Services MAP apply to Tel-Save and its
Affiliates, collectively. (An entity is an "Affiliate" of a party of the entity
owns a controlling interest in the party or an Affiliate of Tel-Save will
continue to be subject to the MAP requirements of this Agreement until AT&T
received notice from Tel-Save advising that such entity is no longer a Tel-Save
Affiliate.
(d) The MAP shall be ninety percent (90%) for all domestic outbound and
inbound voice InterLATA services ("MAP Services"). Notwithstanding and
otherprovision of this Agreement, a separate Private Line Services MAP of ninety
percent (90%) shall apply from 1/1/99 to 12/31/04 for all Private Line Service
and capacity needs, including T.1, T.45, OC3, OC12, and OC48 IOCs. All
references to MAP in Section 3.2 of this Agreement shall be deemed to be both
references to both MAP and Private Line Services MAP.
(e) Within sixty (60) days after the end of any period for which the MAP
applies, Tel-Sve shall certify to AT&T in writing:
[The next page of this Agreement is page 14, dated 04/22/98 9:48 PM]
Added by Amendment dated
as of 01/01/99
<PAGE>
AT&T NETWORK CONNECTION PLATFORM ATTACHMENT A
Page 1 of 14
AT&T NETWORK CONNECTION PLATFORM
--------------------------------
1. SERVICE DESCRIPTIONS
--------------------
* * *
<PAGE>
PRICING ATTACHMENT D
Page 1 of 50
PRICING
-------
* * *
EXHIBIT 10.14
TEL-SAVE.COM, INC.
1998 LONG-TERM INCENTIVE PLAN
1. Definitions. In this Plan, except where the context otherwise
indicates, the following definitions shall apply:
1.1. "Agreement" means a written agreement implementing an Award.
1.2. "Award" means a grant of an Option or Right or an award of
Restricted Stock or Incentive Shares.
1.3. "Board" means the Board of Directors of the Company.
1.4. "Code" means the Internal Revenue Code of 1986, as amended.
1.5. "Committee" means a committee or subcommittee of the Board
appointed by the Board to administer this Plan and programs hereunder. The
Committee may, in its discretion, appoint a subcommittee to administer the Plan
with respect to specific Awards hereunder.
1.6. "Common Stock" means the common stock, par value $.01 per share,
of the Company.
1.7. "Company" means Tel-Save.com, Inc.
1.8. "Date of Exercise" means the date on which the Company receives
notice of the exercise of an Option in accordance with the terms of Section 8.1.
1.9. "Date of Grant" means the date on which an Option or Right is
granted or Restricted Stock or Incentive Shares are awarded under this Plan.
1.10. "Director" means a member of the Board of Directors of the
Company or any Subsidiary.
1.11. "Employee" means any person determined by the Committee to be an
employee of the Company or a Subsidiary, including an Employee Director,
consultant or any person who has been hired to be an employee of the Company or
a Subsidiary.
<PAGE>
1.12. "Employee Director" means a Director who is also an Employee.
1.13. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
1.14. "Fair Market Value" means an amount equal to the last sale price
for a Share on the Nasdaq National Market as reported by such source as the
Committee may select, or, if such price quotations of the Common Stock are not
then reported, then the fair market value of a Share as determined by the
Committee pursuant to a reasonable method adopted in good faith for such
purpose.
1.15. "Grantee" means an Employee or Director to whom Restricted Stock
has been awarded pursuant to Section 9 or Incentive Shares have been awarded
pursuant to Section 10.
1.16. "Incentive Shares" means an award providing for the contingent
grant of Shares pursuant to the provisions of Section 10.
1.17. "Incentive Stock Option" means an Option granted under this Plan
that the Company designates as an incentive stock option under Section 422 of
the Code in the Agreement granting the Option.
1.18. "Nonstatutory Stock Option" means an Option granted under this
Plan that is not an Incentive Stock Option.
1.19. "Option" means an option to purchase Shares granted under this
Plan in accordance with the terms of Section 6.
1.20. "Option Period" means the period during which an Option may be
exercised.
1.21. "Option Price" means the price per Share at which an Option may
be exercised. Subject to the terms of the Plan, the Option Price shall be
determined by the Committee; provided, however, that in no event shall the
Option Price be less than the greater of 25% of the Fair Market Value as of the
Date of Grant or the par value of the Common Stock.
1.22. "Optionee" means a Director, Employee, or Employee Director to
whom an Option or Right has been granted.
1.23. "Performance Goals" means performance goals established by the
Committee which may be based on earnings or earnings growth, sales, return on
assets, equity or investment, regulatory compliance, satisfactory internal or
external audits, improvement of financial ratings, achievement of balance sheet
or income statement objectives, or any other objective goals established by the
Committee, and may be absolute in their terms or measured
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<PAGE>
against or in relationship to other companies comparably, similarly or otherwise
situated. Such performance standards may be particular to an employee or the
department, branch, Subsidiary or other division in which he or she works, or
may be based on the performance of the Company generally, and may cover such
period as may be specified by the Committee.
1.24. "Plan" means the Tel-Save.com, Inc. 1998 Long-Term Incentive
Plan, as amended from time to time.
1.25. "Related Option" means the Option in connection with which, or
by amendment to which, a specified Right is granted.
1.26. "Related Right" means the Right granted in connection with, or
by amendment to, a specified Option.
1.27. "Restricted Stock" means Shares awarded under the Plan pursuant
to the provisions of Section 9.
1.28. "Right" means a stock appreciation right granted under the Plan
in accordance with the terms of Section 7.
1.29. "Right Period" means the period during which a Right may be
exercised.
1.30. "Share" means a share of Common Stock.
1.31. "Subsidiary" means a corporation at least 50% of the total
combined voting power of all classes of stock of which is owned by the Company,
either directly or through one or more other Subsidiaries.
1.32. "Ten-Percent Stockholder" means an Optionee who (applying the
rules of Section 424(d) of the Code) owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or a
Subsidiary.
2. Purpose. This Plan is intended to assist the Company and its
Subsidiaries in attracting and retaining Directors, Employees and Employee
Directors of outstanding ability and to promote the identification of their
interests with those of the stockholders of the Company.
3. Administration. The Committee shall administer this Plan and shall
have plenary authority, in its discretion, to award Options, Rights, Restricted
Stock and Incentive Shares to Directors, Employees and Employee Directors,
subject to the provisions of this Plan. The Committee shall have plenary
authority and discretion, subject to the provisions of this Plan, to determine
the Directors, Employees or Employee Directors to whom Options or Rights shall
be granted and to whom Restricted Stock or Incentive Shares shall be awarded,
the terms (which
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<PAGE>
terms need not be identical) of all Awards to Directors, Employees and Employee
Directors, including without limitation the Option Price of Options, the time or
times at which Awards are made, the number of Shares covered by Awards, whether
an Option shall be an Incentive Stock Option or a Nonstatutory Stock Option, any
exceptions to non-transferability, any Performance Goals applicable to Awards,
any provisions relating to vesting, any circumstances in which the Options would
terminate, the period during which Options and Rights may be exercised, and the
period during which Restricted Stock shall be subject to restrictions. In making
these determinations, the Committee may take into account the nature of the
services rendered or to be rendered by the Award recipients, their present and
potential contributions to the success of the Company and its Subsidiaries, and
such other factors as the Committee in its discretion shall deem relevant.
Subject to the provisions of this Plan, the Committee shall have plenary
authority to interpret this Plan, prescribe, amend and rescind rules and
regulations relating to it, and make all other determinations deemed necessary
or advisable for the administration of this Plan. The determinations of the
Committee on the matters referred to in this Section 3 shall be binding and
final. Notwithstanding the provisions of this Section 3, the Chief Executive
Officer of the Company shall have the power to administer this Plan and have the
full authority of the Committee hereunder with respect to Awards to Employees
who are not subject to the requirements of Section 16(a) of the Exchange Act.
4. Eligibility. Options, Rights, Restricted Stock and Incentive Shares
may be granted or awarded only to Employees and Directors, provided, however,
that Directors, other than Employee Directors, may not be granted Incentive
Stock Options. A Director, Employee or Employee Director who has been granted an
Option or Right or awarded Restricted Stock or Incentive Shares may be granted
additional Options and Rights or awarded additional shares of Restricted Stock
or Incentive Shares.
5. Stock Subject to Plan.
5.1. Subject to adjustment as provided in Section 11, (a) the maximum
number of Shares that may be issued under this Plan is 5,000,000 Shares, and (b)
the maximum number of Shares with respect to which an Employee may receive
Awards under this Plan during its term is 750,000.
5.2. If an Option or Right expires or terminates for any reason (other
than termination by virtue of the exercise of a Related Option or Related Right,
as the case may be) without having been fully exercised, if Shares of Restricted
Stock are forfeited or if Shares covered by an Incentive Share Award are not
issued or are forfeited, the unissued or forfeited Shares which had been subject
to the Award shall become available for the grant of additional Awards.
5.3. Upon exercise of a Right (regardless of whether the Right is
settled in cash or Shares), the number of Shares with respect to which the Right
is exercised shall be charged
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<PAGE>
against the number of Shares issuable under the Plan and shall not become
available for the grant of other Awards.
6. Options.
6.1. Options granted under this Plan to Employees shall be either
Incentive Stock Options or Nonstatutory Stock Options, as designated by the
Committee. Each Option granted under this Plan shall be clearly identified
either as a Nonstatutory Stock Option or an Incentive Stock Option and shall be
evidenced by an Agreement that specifies the terms and conditions of the grant.
Options shall be subject to the terms and conditions set forth in this Section 6
and such other terms and conditions not inconsistent with this Plan as the
Committee may specify.
6.2. The Option Period shall be determined by the Committee and
specifically set forth in the Agreement; provided, however, that an Option shall
not be exercisable after ten years (five years in the case of an Incentive Stock
Option granted to a Ten-Percent Stockholder) from its Date of Grant.
6.3. The Committee, in its discretion, may provide in an Agreement
for the right of the Optionee to surrender to the Company an Option (or a
portion thereof) that has become exercisable and to receive upon such surrender,
without any payment to the Company (other than required tax withholding amounts)
that number of Shares (equal to the highest whole number of Shares) having an
aggregate fair market value as of the date of surrender equal to that number of
Shares subject to the Option (or portion thereof) being surrendered multiplied
by an amount equal to the excess of (i) the Fair Market Value on the date of
surrender over (ii) the Option Price, plus an amount of cash equal to the fair
market value of any fractional Share to which the Optionee would be entitled but
for the parenthetical above relating to whole number of Shares. Any such
surrender shall be treated as the exercise of the Option (or portion thereof).
7. Rights.
7.1. Rights granted under the Plan shall be evidenced by an Agreement
specifying the terms and conditions of the grant.
7.2. A Right may be granted under the Plan:
(a) in connection with, and at the same time as, the grant of an
Option under the Plan;
(b) by amendment of an outstanding Option granted under the Plan;
or
(c) independently of any Option granted under the Plan.
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<PAGE>
7.3. A Right granted under Section 7.2(a) or Section 7.2(b) of this
Plan is a Related Right. A Related Right may, in the Board's or Committee's
discretion, apply to all or any portion of the Shares subject to the Related
Option.
7.4. A Right may be exercised in whole or in part as provided in the
applicable Agreement, and, subject to the terms of the Agreement, entitles an
Optionee to receive, without payment to the Company (but subject to required tax
withholding), either cash or that number of Shares (equal to the highest whole
number of Shares), or a combination thereof, in an amount or having a fair
market value determined as of the Date of Exercise not to exceed the number of
Shares subject to the portion of the Right exercised multiplied by an amount
equal to the excess of (i) the Fair Market Value on the Date of Exercise of the
Right over (ii) either (A) the Fair Market Value on the Date of Grant of the
Right if it is not a Related Right, or (B) the Option Price as provided in the
Related Option if the Right is a Related Right.
7.5. The Right Period shall be determined by the Committee and
specifically set forth in the Agreement, subject to the following conditions:
(a) a Right will expire no later than the earlier of (1) ten
years from the Date of Grant, or (2) in the case of a Related Right, the
expiration of the Related Option;
(b) a Right may be exercised only when the Fair Market Value on
the Date of Exercise exceeds either (1) the Fair Market Value on the Date of
Grant of the Right if it is not a Related Right, or (2) the Option Price of the
Related Option if the Right is a Related Right; and
(c) a Right that is a Related Right to an Incentive Stock Option
may be exercised only when and to the extent the Related Option is exercisable.
7.6. The exercise, in whole or in part, of a Related Right shall cause
a reduction in the number of Shares subject to the Related Option equal to the
number of Shares with respect to which the Related Right is exercised.
Similarly, the exercise, in whole or in part, of a Related Option shall cause a
reduction in the number of Shares subject to the Related Right equal to the
number of Shares with respect to which the Related Option is exercised.
8. Exercise of Options and Rights.
8.1. An Option or Right may, subject to the terms of the applicable
Agreement under which it was granted, be exercised in whole or in part by the
delivery to the Company of written notice of the exercise, in such form as the
Committee may prescribe, accompanied, in the case of an Option, by (a) a full
payment for the Shares with respect to which the Option is
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<PAGE>
exercised or (b) irrevocable instructions to a broker to deliver promptly to the
Company cash equal to the exercise price of the option. To the extent provided
in the applicable Option Agreement, payment may be made in whole or in part by
delivery (including constructive delivery) of Shares valued at Fair Market Value
on the Date of Exercise or by delivery of a promissory note as provided in
Section 8.2 hereof.
8.2. To the extent provided in an Agreement and permitted by
applicable law, the Committee may accept as partial payment of the Option Price
a promissory note executed by the Optionee evidencing his or her obligation to
make future cash payment thereof. Promissory notes made pursuant to this Section
8.2 shall be payable upon such terms as may be determined by the Committee,
shall be secured by a pledge of the Shares received upon exercise of the Option,
or other securities the Committee may deem to be acceptable for such purposes,
and shall bear interest at a rate fixed by the Committee.
8.3. Options and Rights made under this Plan shall not be transferable
except by will, the laws of descent and distribution, or as provided by the
Committee in an Agreement.
9. Restricted Stock Awards.
9.1. Restricted Stock awards under this Plan shall consist of Shares
that are restricted against transfer, subject to forfeiture, and subject to such
other terms and conditions as may be determined by the Committee. Such terms and
conditions may provide, in the discretion of the Committee, for the lapse of
forfeiture and transfer restrictions to be contingent upon the achievement of
one or more specified Performance Goals.
9.2. Restricted Stock awards under this Plan shall be evidenced by
Agreements specifying the terms and conditions of the Award. Each Agreement
evidencing an Award of Restricted Stock shall contain the following:
(a) prohibitions against the sale, assignment, transfer,
exchange, pledge, hypothecation, or other encumbrance of (i) the Shares awarded
as Restricted Stock under this Plan, (ii) the right to vote the Shares, and
(iii) the right to receive dividends thereon, in each case during the
restriction period applicable to the Shares; provided, however, that the Grantee
shall have all the other rights of a stockholder including without limitation
the right to receive dividends and the right to vote the Shares;
(b) a requirement that each certificate representing Shares of
Restricted Stock shall be deposited with the Company, or its designee, and shall
bear the following legend:
"This certificate and the shares of stock represented hereby are
subject to the terms and conditions (including the risks of
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<PAGE>
forfeiture and restrictions against transfer) contained in the
Tel-Save.com, Inc. 1998 Long-Term Incentive Plan, and an
Agreement entered into between the registered owner and
Tel-Save.com, Inc. Release from such terms and conditions shall
be made only in accordance with the provisions of this Plan and
the Agreement, a copy of each of which is on file in the office
of the Secretary of Tel-Save.com, Inc."; and
(c) the terms and conditions upon which any restrictions
applicable to Shares of Restricted Stock shall lapse and new certificates free
of the foregoing legend shall be issued to the Grantee or his or her legal
representative.
9.3. The Committee may include in any Agreement awarding Restricted
Stock a requirement that, in the event of a Grantee's termination of employment
for any reason prior to the lapse of restrictions, all Shares of Restricted
Stock shall be forfeited by the Grantee to the Company without payment of any
consideration by the Company and neither the Grantee nor any successors, heirs,
assigns or personal representatives of the Grantee shall thereafter have any
further rights or interest in the Shares or certificates.
10. Incentive Share Awards. Incentive Shares awarded under this Plan shall
be evidenced by an Agreement specifying the terms and conditions of such Award.
Incentive Share Awards shall provide for the issuance of Shares to a Grantee at
such times and subject to such terms and conditions as the Committee shall deem
appropriate, including without limitation terms that condition the issuance of
Shares upon the achievement of Performance Goals.
11. Capital Adjustments. In the event of any change in the outstanding
Common Stock by reason of any stock dividend, split-up, recapitalization,
reclassification, combination or exchange of shares, merger, consolidation or
liquidation and the like, the Committee may, in its discretion, provide for a
substitution for or adjustment in (i) the number and class of Shares subject to
outstanding Options, Rights and Awards of Restricted Stock or Incentive Shares,
(ii) the Option Price of Options and the base price upon which payments under
Rights that are not Related Rights are determined, and (iii) the aggregate
number and class of Shares for which Awards thereafter may be made under this
Plan and to individual Award recipients.
12. Termination or Amendment. The Board may amend, alter or terminate this
Plan in any respect at any time; provided, however, that, after this Plan has
been approved by the stockholders of the Company, no amendment, alteration or
termination of this Plan shall be made by the Board without approval of (i) the
Company's stockholders to the extent stockholder approval of the amendment is
required by applicable law or regulations or the requirements of the principal
exchange or interdealer quotation system on which the Common Stock is listed or
quoted, and (ii) each affected Optionee and Grantee if such amendment,
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alteration or termination would adversely affect his or her rights or
obligations under any Award made prior to the date of such amendment, alteration
or termination.
13. Modification, Extension, Renewal, Substitution.
13.1. Subject to the terms and conditions of this Plan, the Committee
may modify, extend or renew outstanding Options and Rights, or accept the
surrender of outstanding Options and Rights granted under this Plan or options
and stock appreciation rights granted under any other plan of the Company or a
Subsidiary (to the extent not theretofore exercised), and authorize the granting
of new Options and Rights pursuant to this Plan in substitution therefor. Any
substituted Options or Rights may specify a lower exercise price than the
surrendered options and stock appreciation rights, a longer term than the
surrendered options and stock appreciation rights, or have any other provisions
that are authorized by this Plan. Subject to the terms and conditions of this
Plan, the Committee may modify the terms of any outstanding Awards of Restricted
Stock or Incentive Shares. Notwithstanding the foregoing, however, no
modification of an Award shall, without the consent of the Optionee or Grantee,
alter or impair any of the Optionee's or Grantee's rights or obligations under
such Award.
13.2. Anything contained herein to the contrary notwithstanding,
Options and Rights, Restricted Stock and Incentive Shares may, at the discretion
of the Committee, be granted under this Plan in substitution for options to
purchase shares of capital stock of another corporation which is merged into,
consolidated with, or all or a substantial portion of the property or stock of
which is acquired by, the Company or one of its Subsidiaries. The terms and
conditions of the substitute Options, Rights, Restricted Stock and Incentive
Shares so granted may vary from the terms and conditions set forth in this Plan
to such extent as the Committee may deem appropriate in order to conform, in
whole or part, to the provisions of the Awards in substitution for which they
are granted. Such substitute Awards granted hereunder shall not be counted
toward the 750,000 Share limit imposed by the second sentence of Section 5.1,
except to the extent it is determined by the Committee that counting such Awards
is required in order for Awards hereunder to be eligible to qualify as
"performance-based compensation" within the meaning of Section 162(m) of the
Code.
14. Effectiveness of this Plan. This Plan and any amendments hereto
requiring stockholder approval pursuant to Section 12 are subject to approval by
vote of the stockholders of the Company at the next annual or special meeting of
stockholders following adoption by the Board. Subject to such stockholder
approval, this Plan and any amendments hereto are effective on the date on which
they are adopted by the Board, except as otherwise specified by the Board.
Options, Rights, Restricted Stock and Incentive Shares may be granted or awarded
prior to stockholder approval of this Plan or any amendments, but each such
Award after the effective date of this Plan shall be subject to the approval by
the stockholders of this Plan. The date on which any Option,
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Right, Restricted Stock or Incentive Shares granted or awarded prior to
stockholder approval of this Plan shall be the Date of Grant for all purposes as
if the Option, Right, Restricted Stock or Incentive Shares had not been subject
to approval; no such Option, Right, Restricted Stock or Incentive Shares may be
exercised prior to such stockholder approval, and any such Option shall be void
ab initio if such stockholder approval is not obtained.
15. Withholding. The Company's obligation to deliver Shares or pay any
amount pursuant to the terms of any Award hereunder shall be subject to
satisfaction of applicable federal, state and local tax withholding
requirements. To the extent provided in the applicable Agreement and in
accordance with rules prescribed by the Committee, an Optionee or Grantee may
satisfy any such withholding tax obligation by any of the following means or by
a combination of such means: (i) tendering a cash payment, (ii) authorizing the
Company to withhold Shares otherwise issuable to the Optionee or Grantee, or
(iii) delivering to the Company already-owned and unencumbered Shares.
16. Term of this Plan. Unless sooner terminated by the Board pursuant to
Section 11, this Plan shall terminate on December 30, 2008, and no Awards may be
made after such date. The termination of this Plan shall not affect the validity
of any Award outstanding on the date of termination.
17. Indemnification of Committee. In addition to such other rights of
indemnification as they may have as Directors or as members of the Committee,
the members of the Committee shall be indemnified by the Company against all
reasonable expenses, including attorneys' fees, actually and reasonably incurred
in connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with this
Plan or any Option, Right, Restricted Stock or Incentive Shares granted or
awarded hereunder, and against all amounts reasonably paid by them in settlement
thereof or paid by them in satisfaction of a judgment in any such action, suit
or proceeding, if such members acted in good faith and in a manner which they
believed to be in, and not opposed to, the best interests of the Company.
18. General Provisions.
18.1. The establishment of this Plan shall not confer upon any
Director, Employee or Employee Director any legal or equitable right against the
Company, any Subsidiary or the Committee, except as expressly provided in this
Plan.
18.2. This Plan does not constitute inducement or consideration for
the employment of any Employee or the service of any Director or Employee
Director, nor is it a contract between the Company or any Subsidiary and any
Director, Employee or Employee Director. Participation in this Plan shall not
give a Director, Employee or Employee Director any right to be retained in the
service of the Company or any Subsidiary.
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18.3. Neither the adoption of this Plan nor its submission to the
stockholders, shall be taken to impose any limitations on the powers of the
Company or its Subsidiaries to issue, grant, or assume options, warrants,
rights, or restricted stock, otherwise than under this Plan, or to adopt other
stock option or restricted stock plans or to impose any requirement of
stockholder approval upon the same.
18.4. The interests of any Director, Employee or Employee Director
under this Plan are not subject to the claims of creditors and may not, in any
way, be assigned, alienated or encumbered except as provided in an Agreement.
18.5. This Plan shall be governed, construed and administered in
accordance with the laws of the State of Delaware.
18.6. The Committee may require each person acquiring Shares pursuant
to Awards hereunder to represent to and agree with the Company in writing that
such person is acquiring the Shares without a view to distribution thereof. The
certificates for such Shares may include any legend which the Committee deems
appropriate to reflect any restrictions on transfer. All certificates for Shares
issued pursuant to this Plan shall be subject to such stock transfer orders and
other restrictions as the Committee may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Common Stock is then listed or interdealer
quotation system upon which the Common Stock is then quoted, and any applicable
federal or state securities laws. The Committee may place a legend or legends on
any such certificates to make appropriate reference to such restrictions.
18.7. The Company shall not be required to issue any certificate or
certificates for Shares with respect to Awards under this Plan, or record any
person as a holder of record of such Shares, without obtaining, to the complete
satisfaction of the Committee, the approval of all regulatory bodies deemed
necessary by the Committee, and without complying to the Board's or Committee's
complete satisfaction, with all rules and regulations, under federal, state or
local law deemed applicable by the Committee.
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EXHIBIT 99.1
RISK FACTORS
You should consider carefully the following risk factors before making an
investment in us and in reading any forward-looking statements, including, but
not limited to, beliefs, estimates, projections, expectations or anticipations
that we discuss or make.
DEPENDENCY ON AOL AGREEMENT AND ELECTRONIC COMMERCE
At the beginning of 1997, we launched a major initiative for marketing and
selling our telecommunication services online. At that time, we entered into an
innovative telecommunications marketing agreement with America Online, Inc.
("AOL"). With the continued focus of our business on the sale and support of our
telecommunications services online and through e-commerce channels, we believe
that our business is currently dependent to a material extent upon our
agreements and relationship with AOL.
In January 1999, we completed substantial amendments to our agreement and
relationship with AOL, including an extension of the term of our AOL marketing
period and a restructuring of our marketing fee payments to AOL. From and after
June 2000, AOL has the right to market on a non-exclusive basis the
telecommunications services previously marketed on an exclusive basis in
exchange for the elimination of the fixed quarterly payments that would
otherwise continue to be payable by us. We cannot currently predict what impact
the elimination of our exclusivity period would have on our AOL business or
whether the minimum exclusivity period is of sufficient length to give us an
enduring competitive advantage in maintaining our AOL customer base. We believe
that the success or failure of our telecommunications agreement with AOL and
similar online initiatives will have a material effect on our business,
financial condition and results of operations. There can be no assurance that
our arrangement with AOL will be profitable for the Company on a quarter to
quarter basis or that our current experience with our AOL Long Distance business
is a fair indication of future results under the AOL Agreement or generally in
our e-commerce business.
Although we have expended substantial sums on marketing our AOL service
offerings, and under the new agreement will continue to expend substantial sums
related to marketing, there can be no assurance that these expenditures will
prove adequate to attract substantial additional customers to our service, or
that any such subscribers will remain our customers for a period of time
sufficient to recoup the costs of such marketing expenditures. See
"--Maintenance of End User Base."
The success of our online telecommunications sales and marketing business
depends in part on our ability quickly to establish telephone service following
an AOL subscriber's order. The provisioning of new customers has been adversely
affected by "PIC freezes" established by local telephone companies. These "PIC
freezes," though perhaps designed to avoid unauthorized transfers of telephone
service, have the effect, we believe, of interfering with a customer's choice to
switch service to a better priced product, such as our AOL Long Distance
service, by requiring the customer to contact his
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or her local phone company directly to change long distance carriers. This
requirement deprives new customers of the ability to take full advantage of our
online provisioning service, where a customer can sign-up and authorize a change
to AOL Long Distance entirely online through our innovative online customer care
and billing systems. The Federal Communications Commission is currently engaged
in rule-making proceedings that could modify the rules governing the offering,
implementation and lifting of PIC freezes. There can be no assurance, however,
that any such rules that are finally adopted will effectively limit the harmful
effects of PIC freezes that impede authorized transfers of service.
The success of our online initiatives depends on our ability to develop and
maintain complex systems to support our online subscription and billing
services. We have developed, and will seek to continue to develop and to
improve, our systems for customer care and billing services, including online
sign-up, call detail and billing reports and credit card payment in connection
with the AOL Agreement and other online initiatives. We will be required to
find, employ and retain skilled programmers to develop and maintain these
complex systems. Unanticipated delays or difficulties in developing these
systems or in hiring personnel could materially adversely affect our online
business, including our AOL telecommunications business.
DEPENDENCE ON AT&T
We have recently entered into long term agreements with AT&T, which, among
other things, significantly lower the overall costs of the services we acquire
from AT&T. There can be no assurances, however, that we would be able to
negotiate further amendments in the future to our agreements with AT&T should it
become necessary to maintain the profitability of our business. Circumstances
also may arise that could give rise to the termination of any of our agreements
with AT&T or otherwise result in the loss of our ability to obtain services from
AT&T. Any termination of our contracts with AT&T, the loss or reduction of
telecommunication services from AT&T, or the inability to negotiate cost
reductions with AT&T to meet competitive prices, could have a material adverse
effect on our financial condition and results of operations.
RECENT RAPID GROWTH
Since the inception of our business in 1989, as a reseller of AT&T
telecommunications services, we have grown dramatically in terms of revenues and
number of employees and have expanded rapidly the nature and scope of our
business. Although we have experienced significant growth in a relatively short
period of time and regularly consider growth opportunities through acquisitions,
joint ventures and partnerships as well as other business expansion
opportunities, there can be no assurance that the growth we have experienced
will continue or we will be able to achieve the growth contemplated by our
business strategy.
Continued growth of our current business will continue to place significant
demands on our management (many of whom, including the new President, Chief
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Executive Officer, and Chairman of the Board of Directors, have recently joined
the Company), operational, financial and other resources and will require us to
enhance further our operations, management, financial and information systems
and controls and to expand, train and manage our employee base in certain areas
including customer service support and financial, marketing and administrative
resources. Success in this regard depends, among other things, on our ability to
fund or finance significant investments of resources and to manage, attract and
retain qualified personnel, competition for whom is intense. Our strategy also
has resulted in significantly increased financial management requirements.
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. Changes in the regulation of the telecommunications
industry may affect our competitive position, as may consolidation and alliances
across geographic regions and across industry segments. Competition in the long
distance business is based upon pricing, customer service, billing services and
perceived quality. We compete against numerous long distance carriers that offer
essentially the same services as we do. Several of our competitors are
substantially larger and have greater financial, technical and marketing
resources than we do.
Although we believe that we have the human and technical resources to
pursue our strategy and compete effectively in this competitive environment, our
success will depend upon our continued ability to provide high quality, high
value services at prices generally competitive with, or lower than, those
charged by our competitors. While OBN makes us more price competitive,
reductions in long distance prices charged by competitors still may have a
material adverse impact on our profitability. We also from time to time consider
providing telecommunications services we have not previously provided, which new
services, if offered, would face the same competitive pressures that affect our
existing 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 us or through "partitions," independent carriers and marketing companies
that purchase services from us. If a significant portion of our end users were
to decide to purchase long distance service from other long distance service
providers, there can be no assurance that we would be able to replace them.
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A high level of customer attrition is inherent in the long distance
industry, and our financial results are affected by such attrition. Attrition is
attributable to a variety of factors, including the initiatives of existing and
new competitors as they engage in, among other things, national advertising
campaigns, telemarketing programs and cash payments and other forms of
incentives, as well as our termination of customers for non-payment.
DIRECT MARKETING RISKS
Both federal and state officials are tightening and increasing enforcement
of the rules governing the direct marketing, including the telemarketing of
telecommunications services and the requirements imposed on carriers seeking to
acquire customers in that manner. Customer complaints of unauthorized conversion
or "slamming" are widespread in the long distance industry and are beginning to
occur with respect to newly competitive local services. The Company has
discontinued its internal telemarketing operations, which may reduce our
exposure to customer complaints and federal, state or local enforcement actions
with respect to such direct telemarketing practices. However, certain government
officials have made inquiries with respect to the marketing of our services and
there remains a risk that we could be held accountable under applicable federal
and state laws for the direct marketing activities of third parties carried out
for our benefit. There is also the risk of enforcement actions by virtue of our
prior telemarketing and other marketing efforts, our ongoing support of our
customer/partitions and telemarketing and other marketing done in connection
with our online marketing agreements.
RELIANCE ON INDEPENDENT CARRIER AND MARKETING COMPANIES; LACK OF CONTROL OVER
MARKETING ACTIVITIES
Historically, we have marketed a significant portion of our services
through partitions, which generally have entered into non-exclusive agreements
with us. Most partitions to date have made no minimum use or revenue commitments
to us under these agreements. If we were to lose access to services on the AT&T
network or billing services or experience difficulties with OBN, our agreements
with partitions could be adversely affected.
Provisions in our agreements with the partitions mandate that they comply
with state and federal statutes and regulations, including those regulating
telemarketing. See "--Government Regulation" and "--Direct Marketing Risks."
Because our partitions are independent carriers and marketing companies,
however, we are unable to control their activities. We are also unable to
predict the extent of their compliance with applicable regulations or the effect
of increased regulatory review. Increased regulatory review could also affect
possible future acquisitions of new business from new partitions or other
resellers.
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GOVERNMENT REGULATION
The Federal Communications Commission (the "FCC") and various state public
service and public utility commissions regulate us as a non-dominant provider of
long distance services. There can be no assurance that the FCC, state regulators
or other government entities will not take action having an adverse effect on
our business, financial condition or results of operations. FCC or state
regulatory or enforcement action also could affect the partitions adversely. We
also are subject to applicable regulatory standards for marketing activities,
and the increased FCC and state attention to certain marketing practices could
be significant to us. See "--Direct Marketing Risks."
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. We believe that our future success will depend on our ability to
anticipate such changes and to offer on a timely basis services that meet or
compete with these evolving standards. There can be no assurance that we 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.
RISKS RELATED TO OBN
In 1997, we deployed our own nationwide telecommunications network, One
Better Net, or OBN. At December 31, 1998, we provided services over OBN to
approximately 80% of the lines using our services. Operation as a switch-based
provider subjects us to risk of significant interruption in the provision of
services on OBN in the event of damage to our facilities (switching equipment or
connections to transmission facilities) such as fire or natural disaster could
cause. To the extent that we, rather than AT&T or another carrier, are
principally responsible for providing end users with telecommunications
services, interruption or failure to provide such services may subject us to
claims from end users who suffer damages as a result of such interruption or
failure. Thus, interruptions or other difficulties in operating OBN could have a
material adverse effect on our financial condition and results of operations.
ABSENCE OF DIVIDENDS
We have not paid cash dividends since inception and do not anticipate
paying any cash dividends in the foreseeable future.
ANTI-TAKEOVER CONSIDERATIONS
We have an authorized class of 5,000,000 shares of preferred stock that may
be issued by our board of directors on such terms and with such rights,
preferences and designations as our board may determine. Issuance of such
preferred stock, depending upon its rights, preferences and designations, may
have the effect of delaying, deterring
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or preventing a change in control. A change of control also may be delayed or
prevented by provisions of the Delaware General Corporation Law and our bylaws,
as well as our charter, which divides our board of directors into three classes,
each of which is elected for three year terms. Such anti-takeover effects may
deter a third party from acquiring us or engaging in a similar transaction
affecting control in which our 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 our common stock could adversely
affect the market price of our common stock. Although the Company believes that,
as of January 11, 1999, each of Mr. Borislow and Mr. Paul Rosenberg beneficially
owned less than 10% of the outstanding common stock of the Company, a decision
by either of Mr. Borislow or Mr. Rosenberg to sell his shares could adversely
affect the market price of the common stock. Each of Mr. Borislow and Mr.
Rosenberg has a registration rights agreement with the Company covering the
shares of common stock owned by him.
As of January 11, 1999 our employees and directors had outstanding options
to purchase 10,230,810 shares of common stock. In addition, as of such date,
there were warrants outstanding to purchase up to 2,721,984 shares of common
stock and 4,596,698 shares reserved for issuance upon the conversion of our
outstanding 4-1/2% Convertible Subordinated Notes due 2002 and our 5%
Convertible Subordinated Notes due 2004. Holders of warrants also have
registration rights under certain conditions.
Sales of substantial amounts of our common stock in the public market, or
the perception that such sales could occur, may adversely affect the market
price of our common stock.
YEAR 2000 RISKS
The "Year 2000" issue refers to the potential harm from computer programs
that identify dates by the last two digits of the year rather than using the
full four digits. As such, dates after January 1, 2000 could be misidentified
and such programs could fail.
If such a failure occurs to our internal computer-based systems or if the
computer-based systems, on which our business depends, that are operated by
others were to malfunction, we could be unable to continue to provide
telecommunications services, to sign up new customers or to bill existing
customers for services. Such failures, if they occur, would have a material
adverse effect on our business and financial condition. However, because of the
complexity of the issues and the number of parties involved whose actions could
affect us and the fact that many of the issues are outside our control, it is
difficult for us to predict the nature or likelihood of such effects.
We are dependent upon computer systems operated by third parties, such as
local exchange carriers, AT&T, AOL and other vendors. Other parties whose
ability to deal with Year 2000 issues could affect us include our partitions and
the credit card companies
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through which most of our and AOL's customers are billed. We are generally not
in a position to require either that these other companies give assurances to
the Company as to their continued provision of services or that such companies
take the necessary actions to assure that they will be ready for the Year 2000.
Accordingly, while none of these other companies on which we depend have told us
that they do not expect to be ready for Year 2000 issues, we do not believe we
can project the likelihood of such parties' abilities to provide uninterrupted
services to us. Given the nature of our relationships with most of these
significant suppliers, it may be impracticable for us to replace them should
they be unable to continue to provide these services. The failure of any of
these companies to provide uninterrupted service to us likely would have a
material adverse effect on our business and results of operations and financial
condition.
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