Registration Rights Agreement - Talk America Holdings Inc. and America Online Inc.
TALK AMERICA HOLDINGS, INC.
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered
into as of September 19, 2001 by and among TALK AMERICA HOLDINGS, INC., a
Delaware corporation (the "Company"), and AMERICA ONLINE, INC., a
Delaware corporation ("Investor").
RECITALS
WHEREAS, the Company and the Investor have entered into a
Restructuring and Note Agreement of even date herewith (the
"Restructuring Agreement"), pursuant to which the Investor will acquire
3,078,628 shares (the "Newly Acquired Shares") of common stock, par value
$.01 per share, of the Company ("Common Stock"), will retain 4,121,372
shares of Common Stock (the "Existing Shares") and $54,000,000 in face
amount of Secured Convertible Notes of the Company (the "Convertible
Notes"), convertible initially at a rate of $5.00 per share of Common
Stock, upon the terms and conditions set forth therein;
WHEREAS, in order to induce the Investor to enter into the
Restructuring Agreement, the Company has agreed to provide the
registration rights set forth in this Agreement for the benefit of
Investor and its direct and indirect transferees upon the terms and
conditions set forth herein; and
WHEREAS, the execution and delivery of this Agreement is a
condition to the Investor's obligations pursuant to the Restructuring
Agreement.
NOW, THEREFORE, in consideration of the mutual premises,
covenants and conditions set forth herein, the parties hereby agree as
follows:
1. Definitions. For the purposes of this Agreement:
"Affiliate" means any individual or entity directly or
indirectly controlling, controlled by or under common control with, a
party to this Agreement. Without limiting the foregoing, the direct or
indirect ownership of 50% or more of the outstanding voting securities of
an entity, or the right to receive 50% or more of the profits or earnings
of an entity, shall be deemed to constitute control.
"Business Day" means a day other than a Saturday, Sunday or
other day on which commercial banks in New York City are authorized or
required to close.
"Commission" means the U.S. Securities and Exchange Commission
or any other governmental authority from time to time administering the
Securities Act.
"Common Stock" means the common stock, par value $.01 per share,
of the Company.
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"Conversion Shares" means any shares of Common Stock issuable
upon conversion of the Convertible Notes.
"DTC" means the Depository Trust Company.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor federal statute and the rules and the
regulations of the Commission promulgated thereunder, all as the same
shall be in effect from time to time.
"Existing Shares" has the meaning set forth in the first recital
of this Agreement
"Holder" means any Person that is a signatory to this Agreement
or has otherwise agreed to be bound by the terms hereof and that owns or
has the right to acquire Registrable Securities, including an Affiliate
or any successor, assignee or transferee of Investor or a Holder that has
received Registrable Securities in accordance with Section 11 hereof.
"NASD" means the National Association of Securities Dealers, Inc.
"Newly Acquired Shares" has the meaning set forth in the first
recital of this Agreement.
"Old Registration Agreement" means the Registration Rights
Agreement, dated as of January 5, 1999, between the Company and Investor,
pursuant to which the Existing Shares were registered on a "shelf"
registration statement for sale by Investor.
"Person" means any natural person, firm, partnership,
association, corporation, company, trust, business trust, government
entity, limited liability company or other entity.
"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 or any portion of the Registrable
Securities covered by such Registration Statement and all other
amendments and supplements to the prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such prospectus.
"Registrable Securities" means (a) the Newly Acquired Shares,
the Existing Shares and the Conversion Shares and (b) any capital stock
or other securities of the Company issued or issuable with respect to
such shares (i) upon any conversion or exchange thereof, (ii) by way of
stock dividend or other distribution, stock split or reverse stock split,
or (iii) in connection with a combination of shares, recapitalization,
merger, consolidation, exchange offer or other reorganization. As to any
particular Registrable Securities, once issued, such securities shall
cease to be Registrable Securities when (A) a Registration Statement with
respect to the sale of such securities shall have become effective under
the Securities Act and such securities shall have been disposed of in
accordance with such Registration Statement, (B) such securities shall
have been distributed to the public in reliance upon Rule 144 (or any
successor provision) under the Securities Act, provided that at the time
such securities are proposed to be disposed of, they may be sold under
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Rule 144 without any limitation on the amount of such securities which
may be sold or (c) they shall have ceased to be outstanding.
"Registration Expenses" means all fees and expenses incident to
the performance of or compliance with the provisions of this Agreement,
whether or not any Registration Statement is filed or becomes effective,
including, without limitation, all (a) registration and filing fees
(including, without limitation, (i) fees with respect to filings required
to be made and other expenses associated with the NASD and any other
applicable exchange in connection with an underwritten offering, and (ii)
fees and expenses of compliance with state securities or blue sky laws
(including, without limitation, fees and distributions of counsel for the
underwriter or underwriters in connection with blue sky qualifications of
the Registrable Securities and determination of eligibility of the
Registrable Securities for investment under the laws of such
jurisdictions as are provided in Section 4(e)), (b) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities in a form eligible for deposit with DTC and
expenses of printing prospectuses), (c) fees and disbursements of all
independent certified public accountants referred to in Sections 4 and 5
(including, without limitation, the reasonable expenses of any special
audit and "cold comfort" letters required by or incident to such
performance), (d) the fees and expenses of any "qualified independent
underwriter" or other independent appraiser participating in an offering
pursuant to the NASD Rules of Conduct and the corresponding rules of any
other applicable exchange, (e) liability insurance under the Securities
Act or any other securities laws, if the Company desires such insurance,
(f) fees and expenses of all attorneys, advisers, appraisers and other
persons retained by the Company or any Subsidiary of the Company, (g)
internal expenses of the Company and its Subsidiaries (including, without
limitation, all salaries and expenses of officers and employees of the
Company and its Subsidiaries, other general overhead expenses of the
Company and its Subsidiaries, and other expenses for the performance of
legal or accounting duties), (h) the expense of any annual audit and the
preparation of historical and pro forma financial statements or other
data normally prepared by the Company in the ordinary course of business,
(i) the expenses relating to printing, word processing and distributing
all Registration Statements, underwriting agreements, securities sales
agreements, and any other documents necessary in order to comply with
this Agreement, and (j) any fees and disbursements of any other
underwriters and broker-dealers customarily paid by issuers or sellers of
securities; provided, however, that in all cases in which the Company is
required to pay Registration Expenses hereunder, Registration Expenses
shall exclude any underwriting discounts, selling commissions or any
transfer taxes payable in respect of the sale of the Registrable
Securities by the Holders thereof.
"Registration Statement" means any registration statement of the
Company that covers any of the Registrable Securities pursuant to the
provisions of this Agreement, and all amendments and supplements to any
such registration statement, including post-effective amendments, in each
case including the Prospectus, all exhibits and all material incorporated
by reference or deemed to be incorporated by reference in such
registration statement.
"Requisite Percentage of Outstanding Holders" means the Holders
of Registrable Securities who, assuming conversion of all of the then
outstanding Convertible Notes held by the Holders into
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Conversion Shares, would hold 20% or more of the total Registrable Securities
(other than the Existing Shares) that would then be outstanding.
"Requisite Percentage of Participating Holders" means Holders of
Registrable Securities participating in the registration who, assuming
conversion of all then outstanding Convertible Notes held by such Holders
into Conversion Shares, would hold a majority of the total Registrable
Securities that would then be held by all Holders participating in the
registration.
"Restructuring Agreement" has the meaning set forth in the first
recital of this Agreement
"Rule 144" means Rule 144 (or any successor provision) under the
Securities Act.
"Securities Act" means the Securities Act of 1933, as amended,
or any successor federal statute, and the rules and regulations of the
Commission promulgated thereunder, all as the same shall be in effect
from time to time.
"Underwritten registration" or "underwritten offering" means a
registration in which Registrable Securities are sold to an underwriter
for reoffering to the public.
2. Registration.
2.1. Demand Registrations.
(a) Request for Registration. Subject to Section
2.1(d), at any time and from time to time commencing after March 19,
2002, one or more Holders of Registrable Securities representing the
Requisite Percentage of Outstanding Holders shall have the right to
require the Company to file a registration statement under the Securities
Act covering all or any part of their respective Registrable Securities,
by delivering a written request therefor to the Company specifying the
number of Registrable Securities to be included in such registration by
such Holder(s) and the intended method of distribution thereof, including
an underwritten offering. All such requests pursuant to this Section
2.1(a) are referred to herein as "Demand Registration Requests", and the
registrations so requested are referred to herein as "Demand
Registrations" (with respect to any Demand Registration, the Holder(s)
making such demand for registration being referred to as the "Initiating
Holders"). As promptly as practicable, but no later than 15 days after
receipt of a Demand Registration Request, the Company shall give written
notice (the "Demand Exercise Notice") of such Demand Registration Request
to all Holders of Registrable Securities.
(b) Registration of Other Securities. The Company shall
include in a Demand Registration (i) the Registrable Securities requested
to be included therein by the Initiating Holders and (ii) the Registrable
Securities of any other Holder which shall have made a written request to
the Company for inclusion thereof in such registration (which request
shall specify the maximum number of Registrable Securities intended to be
disposed of by such Holder(s)) within 30 days after their receipt of the
Demand Exercise Notice.
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(c) Registration. The Company shall, as expeditiously
as possible following a Demand Registration Request, use its best efforts
to effect such registration under the Securities Act (including, without
limitation, by means of a shelf registration pursuant to Rule 415 under
the Securities Act if so requested and if the Company is then eligible to
use such a registration) of the Registrable Securities that the Company
has been so requested to register, for distribution in accordance with
such intended method of distribution.
(d) Limitations on Requested Registrations. The rights
of Holders of Registrable Securities to request Demand Registrations
pursuant to Section 2.1(a) are subject to the following limitations: (i)
the Company shall not be obligated to effect a Demand Registration within
a period, not to exceed 135 days, after the effective date of any other
registration of securities of the Company (other than pursuant to a
registration on Form S-4 or Form S-8 or any successor or similar form(s)
which is then in effect) but only if and to the extent the underwriter(s)
of such other registration of securities requires that such Demand
Registration not be effected during such period and (ii) in no event
shall the Company be required to effect a Demand Registration after the
Company has effected two Demand Registrations and such Demand
Registrations have been declared or ordered effective by the SEC;
provided that as to (ii) above if the underwriter in a Demand
Registration restricts the number of Registrable Securities for inclusion
in what would otherwise be the final Demand Registration under this
Section 2.1, such Demand Registration shall not be deemed to be a Demand
Registration for purposes of the limitation to two (2) Demand
Registrations under this Section 2.1(d)(ii).
(e) Cutbacks. If the managing underwriter of any
underwritten offering shall advise the Holders participating in a Demand
Registration that the Registrable Securities covered by the registration
statement cannot be sold in such offering within a price range acceptable
to the Requisite Percentage of Participating Holders, then the Holders
representing the Requisite Percentage of Participating Holders shall have
the right to notify the Company in writing that they have determined that
the registration statement be abandoned or withdrawn, in which event the
Company shall abandon or withdraw such registration statement. If the
managing underwriter of any underwritten offering shall advise the
Company in writing that, in its opinion, the number of securities
requested to be included in a Demand Registration exceeds the number
which can be sold in such offering within a price range acceptable to the
Requisite Percentage of Participating Holders and Holders representing
the Requisite Percentage of Participating Holders do not elect to abandon
or withdraw the registration, the Company will include in such
registration, to the extent of the number which the Company is so advised
can be sold in such offering, Registrable Securities requested to be
included in such registration, pro rata among the Holders requesting such
registration in accordance with the number of Registrable Securities so
requested to be registered.
(f) Postponements; Suspensions.
(i) If at the time of any request to register
Registrable Securities pursuant to this Section 2 the Company is engaged
or has fixed plans to engage within ninety (90) days of the time of the
request in a registered public offering as to which the Holders may
include Registrable Securities pursuant to Section 2.2, then the Company
may at its option direct that such request be delayed for a period not in
excess of ninety (90) days from the earlier of the effective date of such
offering or the
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date of commencement of such other material activity, provided that in no
event shall such right to delay a request to be exercised by the Company
more than once in any one-year period.
(ii) If the Board of Directors of the Company, in its
good faith judgment, determines that any registration under the
Securities Act of Registrable Securities should not be made or continued
because it would materially interfere with any material financing,
acquisition, corporation reorganization, merger, or other transaction
involving the Company or any of its subsidiaries (a "Valid Business
Reason"), (i) the Company may postpone filing a Registration Statement
until such Valid Business Reason no longer exists, but in no event for
more than sixty (60) days, and (ii) in case a Registration Statement has
been filed, if the Valid Business Reason has not resulted from actions
taken by the Company, the Company may postpone amending or supplementing
such Registration Statement until such Valid Business Reason no longer
exists, but in no event for more than sixty (60) days (the "Postponement
Period"); provided, however, that in no event shall the Company be
permitted to postpone filing, amending or supplementing a Registration
Statement within one hundred twenty (120) days after the expiration of
any Postponement Period.
2.2. Piggyback Registrations.
(a) Piggyback Registrations. If, at any time, the
Company proposes or is required to register any of its equity securities
under the Securities Act (other than pursuant to (i) registrations on
Form S-4 or Form S-8 or such form or similar form(s) solely for
registration of securities in connection with an employee benefit plan or
dividend reinvestment plan or a merger, consolidation or acquisition or
(ii) a Demand Registration under Section 2.1) on a registration statement
on Form S-1, Form S-2 or Form S-3 (or an equivalent general registration
form then in effect), whether for its own account or the account of other
security holders, the Company shall give prompt written notice of its
intention to do so to each of the Holders of Registrable Securities. Upon
the written request of any Holder, made within 15 days following the
receipt of any such written notice (which request shall specify the
maximum number of Registrable Securities intended to be disposed of by
such Holder and the intended method of distribution thereof), the Company
shall use, subject to Sections 2.2(b) and 2.2(d) hereof, its best efforts
to cause all such Registrable Securities, the Holders of which have so
requested the registration thereof, to be registered under the Securities
Act (with the securities which the Company at the time proposes to
register) to permit the sale or other disposition by the Holders (in
accordance with the intended method of distribution thereof) of the
Registrable Securities to be so registered. There is no limitation on the
number of such piggyback registrations pursuant to the preceding sentence
which the Company is obligated to effect.
(b) Abandonment or Delay. If, at any time after giving
written notice of its intention to register any equity securities and
prior to the effective date of the registration statement filed in
connection with such registration, the Company shall determine for any
reason not to register or to delay registration of such equity
securities, the Company may, at its election, give written notice of such
determination to all Holders of record of Registrable Securities and (i)
in the case of a determination not to register, shall be relieved of its
obligation to register any Registrable Securities in connection with such
abandoned registration, without prejudice, however, to the rights of
Holders under Section 2.1, and (ii) in the case of a determination to
delay such registration of its equity securities,
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shall be permitted to delay the registration of such Registrable
Securities for the same period as the delay in registering such other
equity securities.
(c) Holder's Right to Withdraw. Any Holder shall have
the right to withdraw its request for inclusion of its Registrable
Securities in any registration statement pursuant to this Section 2.2 by
giving written notice to the Company of its request to withdraw;
provided, however, that (i) such request must be made in writing prior to
the earlier of the execution of the underwriting agreement or the
execution of the custody agreement with respect to such registration and
(ii) such withdrawal shall be irrevocable and, after making such
withdrawal, a Holder shall no longer have any right to include
Registrable Securities in the registration as to which such withdrawal
was made.
(d) Cutbacks. If the managing underwriter of any
underwritten offering shall inform the Company by letter of its belief
that the number of Registrable Securities requested to be included in a
registration under this Section 2.2 would materially adversely affect
such offering, then the Company will include in such registration, first,
the securities being included in such registration by the holder(s) of
securities initiating such registration pursuant to the terms of any
contractual demand registration rights that may be granted to any Person
other than pursuant to this Agreement (or, if the Company initiates the
registration, the securities being included in such registration by the
Company), and second, the Registrable Securities to be included in such
registration to the extent of the number and type, if any, which the
Company is so advised can be sold in (or during the time of) such
offering, pro rata among the Holders requesting to participate in such
offering pursuant to this Section 2.2 in accordance with the number of
Registrable Shares held by, or issuable upon conversion of Convertible
Notes held by, each such Holder.
2.3. Existing Shares Registration.
(a) Subject to its suspension rights under Section 2.1(f)(ii)
hereof, the Company shall use its best efforts to maintain the effectiveness of
the "shelf" Registration Statement (SEC File No. 333-72357) (the "Existing
Shelf") filed pursuant to the Old Registration Agreement with respect to the
Existing Shares and to comply with the obligations set forth in Section 4 hereof
with respect to such Existing Shelf.
(b) So long as such Existing Shelf continues to be effective,
the Holders of the Existing Shares may not request a further registration
with respect to the Existing Shares pursuant to this Agreement, provided,
however, that such Holders may request the Company to take such action as
may be necessary to permit sales of the Existing Shares together with
other Registrable Securities pursuant to an underwritten offering. To
effect such an underwritten offering, if an underwriting is not available
with respect to the Existing Shelf, then the Company shall take such
action as may be necessary to allow the Existing Shares to be sold
pursuant to an underwritten offering, including, but not limited to
terminating the Existing Shelf and filing a new registration statement or
combining the Existing Shelf with a new registration statement pursuant
to Rule 429 of the Securities Act.
3. Allocation of Expenses. The Company will pay all reasonable
Registration Expenses of all registrations under this Agreement;
provided, however, that in an underwritten offering in which the Holders
receive net proceeds of such offering in excess of $5.00 per share, the
Holders
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participating in such offering will pay the following fees and expenses:
(a) fees with respect to filings to be made and other expenses associated
with the NASD and any other applicable exchange, (b) fees and expenses of
compliance with state securities or blue sky laws, (c) fees and expenses
of any "qualified independent underwriter" or other independent appraiser
participating in an offering pursuant to the NASD Rules of Conduct and
the corresponding rules of any other applicable exchange; (d) the
expenses relating to printing, word processing and distributing
underwriting agreements and securities sales agreements; and (e) any fees
and disbursements of underwriters and broker-dealers customarily paid by
sellers of securities.
4. Obligations of the Company. If and whenever the Company is
required to use best efforts to effect the registration under the
Securities Act of any Registrable Securities pursuant to this Agreement,
the Company shall:
(a) file with the Commission, as promptly as practicable, a
Registration Statement with respect to such Registrable Securities and make all
required filings with the NASD and any other applicable exchange;
(b) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the Prospectus used in connection
therewith and such other documents as may be necessary to keep the Registration
Statement continuously effective until (i) the consummation of the disposition
by the Holders of all the Registrable Securities covered by such Registration
Statement or (ii) the date all Registrable Securities are freely salable by the
Holders pursuant to Rule 144(k);
(c) furnish to counsel (if any) selected by the Holders of a
majority of the Registrable Securities covered by such Registration Statement
and to counsel for the underwriters in any underwritten offering copies of all
documents proposed to be filed with the Commission in connection with such
registration (other than documents to be incorporated by reference) a reasonable
time prior to the proposed filing thereof and give reasonable consideration in
good faith to any comments of such Holders, counsel and underwriters;
(d) furnish to each Holder of such securities, without charge, such
number of conformed copies of such Registration Statement and of each such
amendment and supplement thereto (in each case, including all exhibits
(including all exhibits incorporated by reference), financial statements,
schedules, and all documents incorporated therein, deemed to be incorporated
therein by reference or filed therewith, except that the Company shall not be
obligated to furnish any Holder of securities with more than two copies of such
exhibits and documents), such numbers of copies of the Prospectus included in
such Registration Statement (including each preliminary prospectus) in
conformity with the requirements of the Securities Act, and such other
documents, as such Holder may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such Holder;
(e) use its best efforts to register or qualify and cooperate with
the Holders of Registrable Securities, the underwriters and their respective
counsels in connection with the
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registration or qualification (or exemption from such registration or
qualification) of the securities covered by such Registration Statement under
such other securities or blue sky laws of such jurisdictions as each Holder
shall request; provided, however, that where Registrable Securities are offered
other than through an underwritten offering, the Company agrees to cause its
counsel to perform blue sky investigations and file registrations and
qualification required to be filed pursuant to this Section 4(e); keep each such
registration or qualification (or exemption therefrom) effective during the
period such Registration Statement is required to be effective hereunder and do
any and all other acts and things which may be necessary or advisable to enable
such Holder to consummate the disposition in such jurisdictions of the
securities owned by such Holder, except that the Company shall not for any such
purpose be required to qualify generally to do business as a foreign corporation
in any jurisdiction wherein it is not so qualified, subject itself to taxation
in any jurisdiction wherein it is not so subject, or take any action which would
subject it to general service of process in any jurisdiction wherein it is not
so subject;
(f) notify each Holder of Registrable Securities subject to such
Registration Statement if a Prospectus included in such Registration Statement,
as then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading upon discovery by the Company of such material misstatement or
omission or upon the discovery by the Company of the happening of any event as a
result of which the Company believes that there would be a material misstatement
or omission, and, as promptly as is practicable, prepare and furnish to such
Holder a reasonable number of copies of a supplement to or an amendment of such
Prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such Prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(g) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement of the Company
complying with the provisions of Section 11(a) of the Securities Act and Rule
158 under the Securities Act (or any similar rule promulgated under the
Securities Act);
(h) promptly notify each Holder of Registrable Securities covered by
such Registration Statement, their counsel and the underwriters (i) when such
Registration Statement, or any post-effective amendment to such Registration
Statement, shall have become effective, or any amendment of or supplement to the
Prospectus used in connection therewith shall be filed, (ii) of any request by
the Commission to amend such Registration Statement or to amend or supplement
such Prospectus or for additional information, (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of such Registration
Statement or of any order preventing or suspending the use of any preliminary
prospectus or the initiation or threatening of any proceedings for any of such
purposes, (iv) of the suspension of the qualification of such securities for
offering or sale in any jurisdiction, or of the institution of any proceedings
for any of such purposes and (v) if, at any time when a Prospectus is to be
required by the Securities Act to be delivered in connection with the sale
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of the Registrable Securities, the representations and warranties of the Company
contained in any the underwriting agreement contemplated in Section 5(b) below,
to the knowledge of the Company, cease to be true and correct in any material
respect;
(i) use its best efforts to prevent the issuance of any order
suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the qualification
(or exemption from qualification) of any of the Registrable Securities covered
thereby for sale in any jurisdiction, and, if any such order is issued, to
obtain the withdrawal of any such order at the earliest possible moment;
(j) if requested by the managing underwriter, if any, or the Holders
of a majority of the Registrable Securities being sold in connection with an
underwritten offering, (i) promptly incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriter, if any,
or such Holders reasonably request to be included therein to comply with
applicable law, and (ii) make all required filings of such prospectus supplement
or such post-effective amendment as soon as practicable after the Company has
received notification of the matters to be incorporated in such prospectus
supplement or post-effective amendment;
(k) use its best efforts to cause the Registrable Securities covered
by a Registration Statement to be registered with, and to obtain the consent or
approval of, each governmental agency or authority, whether federal, state,
local or foreign, which may be required to effect such registration or the
offering or sale in connection therewith or to enable the Holders to offer, or
to consummate the disposition of, the Registrable Securities subject to such
Registration Statement, except as may be required solely as a consequence of the
nature of such Holder's business, in which case the Company will cooperate with
all reasonable respects with the filing of the Registration Statement and the
granting of such approvals;
(l) cooperate with the Holders to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be sold
pursuant to the Registration Statement and not bearing any Securities Act
legend, and cause certificates for such Registrable Securities to be issued for
such numbers of shares and registered in such names as the Holders may
reasonably request at least two (2) Business Days prior to any sale of
Registrable Securities;
(m) agree not to file or make any amendment to any Registration
Statement with respect to any Registrable Securities, or any amendment of or
supplement to the Prospectus used in connection therewith, which refers to any
Holder of any securities covered thereby by name, or otherwise identifies such
Holder as the holder of any securities of the Company, without the consent of
such Holder, such consent not to be unreasonably withheld, except that no such
consent shall be required for (i) any disclosure that is necessary to comply
with federal and state securities laws, (ii) any disclosure that is necessary to
avoid or correct a misstatement or omission in any Registration Statement or
Prospectus, (iii) the release of information that is ordered pursuant to a
subpoena or other order from a court or governmental body of competent
jurisdiction, or (iv) such other information as has been made generally
available to the public other than by violation of this agreement;
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(n) upon reasonable notice, make its officers available to
participate in a standard securities offering "road show" of not longer than 7
days' duration (or such other period as may be agreed to by the Company and the
Requisite Percentage of Participating Holders) in connection with an
underwriter's efforts to offer the Registrable Securities as part of an
underwritten offering under this Agreement, provided that the Company may delay
such participation for up to 30 days if the Board of Directors of the Company
determines that the requested time of such participation would cause undue
hardship on the Company.
5. Underwritten Offerings. The provisions of this Section 5 do
not establish additional registration rights or give the Holders any
right to participate in any Company-initiated offering, underwritten or
otherwise, but instead set forth procedures applicable, in addition to
those set forth in Sections 2 and 4, to any registration that is an
underwritten offering.
(a) Underwriting Agreement. If requested by the underwriters
for any underwritten offering by Holders, the Company shall enter into an
underwriting agreement with such underwriters for such offering, such
agreement to be reasonably satisfactory in substance and form to the
Holders of a majority of the Registrable Securities to be covered by such
registration and to the underwriters and to contain such representations
and warranties by the Company and such other terms and provisions as are
customarily contained in agreements of this type, including, but not
limited to, indemnities to the effect and to the extent provided in
Section 8, provisions for the delivery of officers' certificates,
opinions of counsel and accountants' "cold comfort" letters, and
hold-back arrangements. The Holders of Registrable Securities to be
distributed by such underwriters shall be parties to such underwriting
agreement and may, at their option, require that any or all of the
representations and warranties by, and the agreements on the part of, the
Company to and for the benefit of such underwriters be made to and for
the benefit of such Holders and that any or all of the conditions
precedent to the obligations of such underwriters under such underwriting
agreements shall also be conditions precedent to the obligations of such
Holders. No such Holders shall be required by the Company to make any
representations or warranties to, or agreements with, the Company or the
underwriters other than representations, warranties or agreements
regarding such Holder and such Holder's intended method of distribution.
(b) Selection of Underwriters. The Holders of a majority of
the Registrable Securities to be registered pursuant to such offering
shall have the right to select one or more underwriters to administer the
offering, subject to the consent of the Company, which shall not be
unreasonably withheld.
(c) Inclusion of Securities in an Underwritten Offering. No
securities of any selling stockholder (other than a Holder) shall be
included in an underwritten offering initiated by a Holder without the
prior written consent of Holders of not less than 75% of the Registrable
Securities proposed to be sold in such underwritten offering.
6. Preparation, Reasonable Investigation. In connection with the
preparation and filing of each Registration Statement registering
Registrable Securities under the Securities Act, upon
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receipt of reasonable assurances of confidentiality, the Company shall give the
Holders of Registrable Securities to be so registered and their underwriters, if
any, and their respective counsel and accountants, the opportunity to
participate in the preparation of such Registration Statement, each Prospectus
included therein (other than documents to be incorporated by reference) or filed
with the Commission, and each amendment thereof or supplement thereto, and shall
give each of them such access to all pertinent financial, corporate, and other
documents and properties of the Company and its Subsidiaries, and such
opportunities to discuss the business of the Company with its officers,
directors, employees and the independent public accountants who have issued
audit reports on its financial statements as shall be necessary, in the opinion
of such Holders' and such underwriters' respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act.
7. Certain Obligations of Holders.
(a) The Company may require each Holder of any Registrable
Securities as to which any registration is being effected to furnish to
the Company such information regarding such Holder and the intended
method of disposition of such securities as the Company may from time to
time reasonably request in writing and as shall be required to effect the
registration of such Holder's Registrable Securities. Each such Holder
agrees to furnish promptly to the Company all information required to be
disclosed in order to make the information previously furnished to the
Company by such Holder not materially misleading.
(b) Each Holder of Registrable Securities covered by a
Registration Statement agrees that, upon receipt of any notice from the
Company pursuant to Section 4(f), such Holder will promptly discontinue
the disposition of Registrable Securities pursuant to such Registration
Statement until such Holder shall have received either notice from the
Company that (i) such Registration Statement has been amended and has
received copies of the supplemented or amended Prospectus or (ii) use of
the Prospectus or Prospectus Supplement may be resumed. If so directed by
the Company, each Holder will deliver to the Company (at the Company's
expense) all copies, other than permanent file copies, in such Holder's
possession of the Prospectus covering such Registrable Securities at the
time of receipt of such notice.
8. Indemnification and Contribution.
(a) In the event of any registration of any of the Registrable
Securities under the Securities Act pursuant to this Agreement (including for
these purposes the Existing Shelf), the Company will indemnify and hold harmless
the Holder of such securities, its directors, officers, and employees, each
other Person who participates as an underwriter, broker or dealer in the
offering or sale of such securities, and each other Person, if any, who controls
such Holder, underwriter, broker, dealer or any such participating Person within
the meaning of the Securities Act or the Exchange Act, against any losses,
claims, damages, or liabilities, joint or several, to which such Holder or any
such director, officer, employee, underwriter, broker, dealer, participating
Person, or controlling Person may become subject, insofar as such losses,
claims, damages, or liabilities (or actions or proceedings in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any Registration Statement under which such
Registrable
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<PAGE>
Securities were registered under the Securities Act or Prospectus contained in
the Registration Statement, or any amendment or supplement to such Registration
Statement, or arise out of or are based upon the omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; and the Company shall reimburse such Holder
and each such director, officer, employee, underwriter, broker, dealer,
participating Person, and controlling Person in connection with investigating or
defending any such loss, claim, damage, liability, action or proceeding as such
expenses are incurred; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage, liability or
expense arises out of or is based upon any untrue statement or omission made in
such Registration Statement or Prospectus, or any such amendment or supplement,
in reliance upon and in conformity with information furnished to the Company, in
writing, by or on behalf of such Holder, underwriter, participating Person or
controlling Person specifically for use in the preparation thereof; provided,
further, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or expense arises out of or is
based upon an untrue statement or alleged untrue statement of a material fact
contained in such Registration Statement or Prospectus contained therein or any
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if (i) such untrue
statement or omission is corrected in an amendment or supplement to the
Prospectus or Prospectus supplement and the seller of the Registrable Securities
thereafter fails to deliver the Prospectus or Prospectus supplement as so
amended or supplemented prior to or concurrently with the sale of the
Registrable Securities to the person asserting such loss, claim, damage or
liability after the Company has furnished such seller with a sufficient number
of copies of the same or (ii) if the seller received written notice from the
Company of the existence of such an untrue statement or an omission and the
seller continued to dispose of Registrable Securities prior to the time of the
receipt of either (A) an amended or supplemented Prospectus or Prospectus
supplement or (B) a notice from the Company that the use of the existing
Prospectus or Prospectus supplement may be resumed.
(b) In the event of any registration of any of the Registrable
Securities under the Securities Act pursuant to this Agreement, each Holder of
such securities, severally and not jointly, will indemnify and hold harmless the
Company, each of its directors and officers and each underwriter (if any) and
each person, if any, who controls the Company or any such underwriter within the
meaning of the Securities Act or the Exchange Act, against any losses, claims,
damages, or liabilities, joint or several, to which the Company, such directors
and officers, underwriters, or controlling Persons may become subject, insofar
as such losses, claims, damages, or liabilities (or actions or proceedings in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement
under which such securities were registered under the Securities Act or
Prospectus contained in the Registration Statement, or any amendment or
supplement to the Registration Statement, or arise out of or are based upon any
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, if the
statement or omission was made in reliance upon and in conformity with
information relating to such Holder furnished in writing to the Company by or on
behalf of such Holder expressly for use in connection with the preparation of
such Registration Statement, Prospectus, amendment, or supplement; provided,
however, that the liability of each such Holder hereunder shall be in proportion
to and limited to the net amount received by
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<PAGE>
such Holder (after deducting any underwriting discount and expenses) from the
sale of Registrable Securities sold in connection with such registration.
(c) Promptly after receipt by a person entitled to indemnification
pursuant to this Section 8 ("Indemnitee") of notice of the commencement of any
action or the written assertion of any claim subject to indemnification under
this Section 8, the Indemnitee shall notify the Person obligated to provide
indemnification pursuant to this Agreement (the "Indemnifying Person"), in
writing of the commencement or the written assertion thereof. Failure by an
Indemnitee to so notify the Indemnifying Person shall relieve the Indemnifying
Person from the obligation to indemnify such Indemnitee only to the extent that
the Indemnifying Person suffers actual and material prejudice as a result of
such failure but in no event shall such failure to notify the Indemnifying
Person (i) constitute prejudice suffered by the Indemnifying Person if it has
otherwise received notice of the actions giving rise to such obligation to
indemnify or (ii) relieve it from any liability or obligation that it may
otherwise have to such Indemnitee. In case any such action or claim shall be
brought or asserted against any Indemnitee and it shall notify the Indemnifying
Person of the commencement or assertion thereof, the Indemnifying Person shall
assume the defense of such action or claim, including employment of counsel to
be chosen by the Indemnifying Party (which counsel shall be reasonably
satisfactory to the Indemnitee) and payment of expenses. The Indemnitee shall be
entitled to employ its own counsel in any such case, but the legal fees and
expenses of such counsel shall be at the expense of the Indemnitee, unless the
employment of such counsel shall have been authorized in writing by the
Indemnifying Party in connection with the defense of such action, or the
Indemnifying Party shall not have employed counsel to take charge of the defense
of such action or the Indemnitee shall have reasonably concluded that there may
be defenses available to it or them which are different from or in addition to
those available to the Indemnifying Party, in any of which events such fees and
expenses shall be borne by the Indemnifying Party. Without the prior consent of
the Indemnitee, no Indemnifying Party shall enter into any settlement of any
such action or claim that does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnitee of a release from all
liability in respect to such claim or litigation.
(d) If for any reason the foregoing indemnity is unavailable, or is
insufficient to hold harmless an Indemnitee, other than by reason of the
exceptions provided in this Section 8, then the Indemnifying Person shall
contribute to the amount paid or payable by the Indemnifying Person as a result
of such losses, claims, damages liabilities or expenses in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Person on the one
hand and the Indemnitee on the other in connection with the statements or
omissions which resulted in such losses, claims, damages, or liabilities, as
well as any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the Holders of
Registrable Securities covered by the Registration Statement in question and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
(e) The Company and the Holders agree that it would not be just and
equitable if contribution pursuant to this Section 8 were determined by pro rata
allocation or by any other method
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<PAGE>
of allocation which does not take account of the equitable considerations
referred to in Section 8(d). The amount paid or payable by an Indemnitee as a
result of the losses, claims, damages and liabilities referred to in Section
8(d) shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such Indemnitee in connection
with investigating or defending any such claim or litigation. Notwithstanding
anything to the contrary in this Section 8, (A) no such Holder will be required
to contribute any amount in excess of the proceeds it received from the sale of
its Registrable Securities pursuant to such Registration Statement, (B) no
Person guilty of fraudulent misrepresentation, within the meaning of Section
11(f) of the Securities Act, shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation and (c) no party shall
be liable for contribution under this Section 8 except to the extent and under
such circumstances as such party would have been liable to indemnify under this
Section 8 if such indemnification were enforceable under applicable law.
9. [Reserved]
10. Reports Under Securities Exchange Act of 1934. With a view
to making available to the Holders the benefits of Rule 144 promulgated
under the Securities Act and any other rule or regulation of the
Commission that may at any time permit a Holder to sell Registrable
Securities of the Company to the public without registration and to
making Form S-3 under the Securities Act available for the registration
of Registrable Securities, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act; and
(c) furnish to any Holder, so long as such Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144 under
the Securities Act, any other such applicable reporting requirements under the
Securities Act and all applicable reporting requirements under the Exchange Act,
(ii) 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 (iii) such other
information as may be reasonably requested in availing any Holder of any rule or
regulation of the Commission which permits the selling of any such securities
without Registration or pursuant to such form.
11. Successors, Assigns and Transferees. This Agreement shall be
binding upon and shall inure to the benefit of each party hereto, and
their respective successors, assigns and transferees. The Investor or any
other Holder under this Agreement may assign its rights under this
Agreement to any Affiliate or to other successors, assigns and
transferees of the Investor or any such Holder; provided, however, that
the Company is given written notice from the Investor or any such Holder
at the time of such transfer stating the name and address of the
transferee or assign and identifying the securities with respect to which
the rights hereunder are being transferred. As a condition to the
effectiveness of any transfer permitted hereunder (i) the transferee or
assignee shall agree, in writing, upon request
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<PAGE>
of the Company, to be bound by the provisions of this Agreement, and (ii) the
Company shall be given written notice at the time of or within a reasonable time
after said transfer or assignment, stating the name and address of said
transferee or assign and identifying the securities with respect to which such
registration rights are being assigned. This Agreement shall survive any
transfer of Registrable Securities to and shall inure to the benefit of an
Affiliate or such other successors, assigns and transferees of the Investor or
any such Holder. In addition, and whether or not any express transfer or
assignment shall have been made, the provisions of this Agreement which are for
the benefits of the parties hereto other than the Company shall also be for the
benefit of and enforceable by any subsequent Holder or Registrable Securities.
12. Transfer Restrictions.
Investor understands that:
(a) The offer and sale of the Newly Acquired Shares, the Convertible
Note and the Conversion Shares (together, the "Securities") have not been
registered under the Securities Act, or under the securities laws of any state
of the United States or of any foreign jurisdiction;
(b) No resales of the Securities may be effected unless the resale
of any such shares is registered under the Securities Act or an exemption
therefrom is available and all applicable state and foreign securities laws are
complied with;
(c) The following restrictive legend shall be placed on the certificates
representing the Securities (other than the Convertible Note):
THE SHARES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY
OTHER SECURITIES LAWS. SUCH SHARES MAY NOT BE
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION FROM SAID ACT OR SUCH OTHER LAWS
AND, IF REQUESTED BY THE ISSUER, AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE ISSUER
THAT SUCH REGISTRATION IS NOT REQUIRED, OR IS
EXEMPT FROM SAID ACT OR SUCH OTHER LAWS.
Appropriate stop-transfer instructions will be issued
to the Company's transfer agent with respect to the
Newly Acquired Shares and the Conversion Shares until
such time as the foregoing legend is removed from the
Newly Acquired Shares and the Conversion Shares
pursuant to the next paragraph.
(d) The Company covenants and agrees that, with respect to the Newly
Acquired Shares and any Conversion Shares issued, stop-transfer instructions and
the restrictive legend shall be promptly removed by delivery of substitute
certificates without such legend for such shares upon (i)
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<PAGE>
delivery to the Company of evidence of the transfer of such shares represented
by such certificate pursuant to a registration statement under the Securities
Act or in accordance with the applicable provisions of Rule 144 under the
Securities Act, or (ii) the delivery by Investor to the Company of a letter from
the staff of the SEC, or an opinion of counsel in form and substance reasonably
satisfactory to the Company, to the effect that such shares do not require
further registration under the Securities Act for subsequent transfer by the
holders thereof.
13. Miscellaneous.
(a) Adjustments Affecting Registrable Securities. The Company will not
take any action, or permit any change to occur, with respect to its securities
that would adversely affect the ability of the Holders to include such
Registrable Securities in a registration undertaken pursuant to this Agreement.
(b) No Waivers. No failure or delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law.
(c) Amendments. Any provision of this Agreement may be amended or waived
if, but only if, such amendment or waiver is in writing and is signed by the
Company and the Investor.
(d) Severability. If any term or provision of this Agreement is held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms and provisions shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.
(e) Notices. All notices, requests and other communications to any party
hereunder shall be given in writing (including on telecopier or similar writing)
and shall be given to such party at its address, or telecopier number set forth
on the signature pages hereof, or such other address, or telecopier number as
such party may hereafter specify for such purpose. Each such notice, request or
other communication shall be effective (i) if given by telecopy, when such
telecopy is transmitted to the telecopy number specified on the signature page
hereto and the appropriate answer back (i.e., machine confirmation or telephone
confirmation) is received, (ii) if given by mail, by registered mail only 72
hours after such communication is deposited in the mail with first class postage
prepaid, addressed as aforesaid, or (iii) if given by any other means, when
received at the address specified on the signature page hereto.
(f) Entire Agreement. This Agreement and the Transaction Documents (as
defined in the Restructuring Agreement) constitute the entire agreement and
understanding among the parties hereto with respect to the transactions
contemplated hereby and supersedes any and all prior agreements and
understandings, written or oral, relating to the subject matter hereof.
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<PAGE>
(g) Governing Law. The laws of the State of New York shall govern the
interpretation, validity and performance of the terms of this Agreement,
regardless of the law that might be applied under applicable principles of
conflicts of laws.
(h) Counterparts. This Agreement may be executed in counterparts, each
of which shall be an original with the same effect as if the signatures thereto
and hereto were upon the same instrument.
(i) No Third Party Beneficiaries. Except as provided by Sections 8 and
11, nothing in this Agreement shall confer any rights upon any Person other than
the parties hereto, each such party's respective successors and permitted
assigns and transferees.
[Signature page follows]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers or
representatives, as of the date first above written.
TALK AMERICA HOLDINGS, INC.
By: /s/ Aloysius T. Lawn, IV Address:
--------------------------------- -------
Name: Aloysius T. Lawn, IV Talk America Holdings, Inc.
Title: Executive Vice President, 6805 Route 202
GeneralCounsel and Secretary New Hope, Pennsylvania 18938
Fax: 215-862-1515
Attention: Chief Financial Officer
AMERICA ONLINE, INC.
By: /s/ Lynda Clarizio Address:
-------------------------------- -------
Name: Lynda Clarizio America Online, Inc.
Title: Senior Vice President 22000 AOL Way
Dulles, Virginia 20166
Fax: (703) 265-2208
Attention: General Counsel
with a copy to:
America Online, Inc
22000 AOL Way
Dulles, Virginia 20166
Fax: (703) 265-1202
Attention: Senior Vice President,
Head of Business Affairs
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