Rights Agreement [Amendment No. 1] - Talk America Holdings Inc. and First City Transfer Co.
FIRST AMENDMENT TO RIGHTS AGREEMENT
FIRST AMENDMENT, dated as of September 19, 2001 (this
"Amendment"), to the Rights Agreement dated as of August 19, 1999 (the
"Agreement"), by and between Talk America Holdings, Inc. (formerly, Talk.com
Inc.), a Delaware corporation (the "Company"), and First City Transfer Company,
a Delaware corporation (the "Rights Agent").
WHEREAS, the parties hereto previously executed and delivered the
Agreement;
WHEREAS, pursuant to the terms of the Agreement, the Company and the
Rights Agent shall, prior to the Distribution Date (as defined in the
Agreement), if the Company so directs, supplement or amend any provision of the
Agreement without the approval of any holders of certificates representing
shares of Common Stock of the Company.
WHEREAS, the Distribution Date has not yet occurred, and the Company
and the Rights Agent have agreed to amend the Agreement as set forth in this
Amendment.
NOW, THEREFORE, for good and valuable consideration, the sufficiency
and receipt of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. CERTAIN DEFINITIONS. Capitalized terms used but not
defined in this Amendment shall have the meanings given to such terms in the
Agreement.
SECTION 2. DEFINITION OF ACQUIRING PERSON. Section 1(a) of the
Agreement is hereby amended to read in its entirety as follows:
"Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 20% or more of the shares of Common Stock then outstanding,
but shall not include (i) the Company, (ii) any Subsidiary of the Company, (iii)
any employee benefit plan of the Company or of any Subsidiary of the Company, or
(iv) any Person organized, appointed or established by the Company for or
pursuant to the terms of any such plan; provided that America Online, Inc.
("AOL") shall not be deemed to be an Acquiring Person so long as AOL (together
with all Affiliates and Associates of AOL) Beneficially Owns not more than
18,250,000 shares of Common Stock, as such number may be adjusted as provided
below (such number of shares, as so adjusted from time to time, the "Permitted
Number"). The Permitted Number shall be adjusted as follows: (i) if, at any time
on or after the date (the "AOL Effective Date") of issuance by the Company to
AOL of shares of Common Stock and the Company's convertible promissory notes
(the "AOL Convertible Notes") pursuant to the terms of a Restructuring and Note
Agreement between AOL and the Company dated in September, 2001 (the
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"Restructuring Agreement"), the Company shall declare a dividend on the
outstanding shares of Common Stock payable in shares of Common Stock, subdivide
the outstanding shares of Common Stock or combine the outstanding shares of
Common Stock into a smaller number of shares, the Permitted Number in effect
immediately prior to such action shall be proportionately adjusted to reflect
such dividend, subdivision or combination, and (ii) if, at any time on or after
the AOL Effective Date, AOL (or its Affiliates or Associates) shall transfer or
otherwise dispose of Beneficial Ownership of any shares of Common Stock (other
than to AOL or any of its Affiliates or Associates), the Permitted Number in
effect immediately prior to such action shall be reduced by the number of shares
of Common Stock the Beneficial Ownership of which was so transferred or
otherwise disposed of, and (iii) if, at any time on or after the AOL Effective
Date, AOL (or its Affiliates or Associates) shall transfer or otherwise dispose
of all or part of the AOL Convertible Notes (other than to AOL or any of its
Affiliates or Associates, but including any transfer to the Company for
cancellation) or the number of shares of Common Stock into which the AOL
Convertible Notes shall be convertible shall be reduced (by payment of the AOL
Convertible Notes or otherwise, but not including conversion into shares of
Common Stock Beneficially Owned by AOL (or its Affiliates or Associates)), the
Permitted Number in effect immediately prior to such action shall be reduced by
the number of shares of Common Stock by which the Beneficial Ownership of shares
of Common Stock by AOL (or its Affiliates or Associates) was reduced by reason
of such transfer or other disposition of AOL Convertible Notes or reduction in
the number of shares into which the AOL Notes are convertible.
SECTION 3. EFFECTIVENESS OF AMENDMENT. This Amendment shall be
effective only upon, but simultaneously with, the AOL Effective Date.
SECTION 4. COUNTERPARTS. This Amendment may be executed in one
or more counterparts each of which shall for all purposes be deemed to be an
original and all of which shall constitute the same instrument.
SECTION 5. GOVERNING LAW. This Amendment shall be governed by
and construed and enforced in accordance with the laws of the State of Delaware
without reference to its conflicts of laws principles.
SECTION 6. MISCELLANEOUS. The Agreement is amended to provide
that references in the Agreement to "this Agreement" or "the Agreement"
(including indirect references such as "hereunder," "hereby," "herein" and
"hereof") shall be deemed to be references to the Agreement as amended hereby.
This Amendment does not, and shall not be construed to, modify any term or
condition of the Agreement except as expressly provided in this Amendment.
Except as herein provided, the Agreement shall remain unchanged and in full
force and effect. In the event of any inconsistency or discrepancy between the
Agreement and this Amendment, the terms and conditions set forth in this
Amendment shall control.
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IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the day and year above first written.
TALK AMERICA HOLDINGS, INC.
By: /s/ Aloysius T. Lawn, IV
--------------------------------
Name: Aloysius T. Lawn, IV.
Title: Executive Vice President,
General Counsel and
Secretary
FIRST CITY TRANSFER COMPANY
By: /s/ Monica A. Tobey
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Name: Monica A. Tobey
Title: Vice President
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