Nontransferable Warrant to Purchase Common Stock - Tel-Save Holdings Inc. and America Online Inc.
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN
THE ABSENCE OF SUCH REGISTRATION OR UNLESS TEL-SAVE HOLDINGS,
INC. RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT
THAT SUCH SALE, TRANSFER OR ASSIGNMENT IS EXEMPT FROM ANY
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THIS
WARRANT AND ANY SECURITIES ACQUIRED UPON EXERCISE OF THE WARRANT
ARE SUBJECT TO THE TERMS AND CONDITIONS OF THE WARRANTHOLDER AND
STOCKHOLDERS AGREEMENT AND THE VOTING TRUST AGREEMENT, EACH
DATED AS OF FEBRUARY 22, 1997.
NONTRANSFERABLE WARRANT TO PURCHASE
COMMON STOCK OF
TEL-SAVE HOLDINGS, INC.
Date of Grant: As of February 22, 1997.
Void after 5:00 PM. Eastern Standard Time on
February 22, 2002
No. W-AOL-1
FOR VALUE RECEIVED, Tel-Save Holdings, Inc., a Delaware corporation
(together with its successors and assigns, the "Company") hereby certifies and
agrees that America Online, Inc., a Delaware corporation ("AOL" and, in its
capacity as the holder of this Warrant ("this Warrant"), together with its
permitted successors and assigns, the "Holder"), with its principal address at
22000 AOL Way, Dulles, Virginia 20166-9323, is entitled, subject to the terms,
conditions and adjustments hereof, to receive, in one or more exercises of this
Warrant, from time to time, from the Company such number of shares of Common
Stock, par value $.01 per share, of the Company (the "Common Stock") as is
determined under Paragraph 1 hereof, during the period commencing at 9:00 AM,
Eastern Standard Time on the date hereof (the "Commencement Date") and ending at
5:00 PM. Eastern Standard Time on the fifth anniversary of the date hereof (such
time on such date, the
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"Termination Date") and at such respective times and for such numbers of Warrant
Shares (as defined below) as are set forth in Paragraph 1 at an exercise price
per share (the "Exercise Price") of U.S. $15.50. The number of shares of Common
Stock issuable upon exercise of this Warrant, the number of shares vested and
the exercise price per share shall be subject to further adjustment from time to
time upon the occurrence of certain events as set forth below. This Warrant is
one of the "Warrants" referenced in, and issued in conjunction with, the
Telecommunications Marketing Agreement, dated as of the date hereof (the
"Marketing Agreement"), among the Company, Tel-Save, Inc. ("TS"), a Pennsylvania
corporation and wholly owned subsidiary of the Company and AOL.
The shares of Common Stock or any other shares or other units of
stock or other securities or property or any combination thereof receivable upon
exercise of this Warrant, as adjusted from time to time, are sometimes referred
to herein as the "Exercise Shares."
Anything else herein to the contrary notwithstanding, if the
"Effective Date" (as such term is defined in the Marketing Agreement) shall not
have occurred by March 6, 1997, this Warrant shall automatically expire and
shall be of no further force or effect.
1. Exercise of Warrant; Issuance of Exercise Shares.
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(a) Exercise of Warrant. This Warrant may be exercised as to the then
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remaining Warrant Shares that have vested as provided herein by the Holder in
whole or in part from time to time on or after the Commencement Date and until
and including the Termination Date as provided below. For purposes of this
Warrant, "Warrant Shares" shall mean 5,000,000 shares of Common Stock (subject
to adjustment as provided in Paragraph 6 hereof and to successive reduction upon
any exercise of this Warrant as provided below in this clause (a)), (i)
2,500,000 of which Warrant Shares are deemed for all purposes hereof to have
vested on the earlier of (a) the Commercial Launch Date (as such term is defined
in the Marketing Agreement) and (b) the first anniversary of the date hereof and
(ii) the remaining 2,500,000 of which Warrant Shares will be deemed for all
purposes hereof to have vested as of the first anniversary of the date hereof if
the Marketing Agreement shall not have been terminated on or before such date.
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Notwithstanding the previous sentence, all such Warrant Shares shall rest upon a
"change in control" of Holdings. For purposes of this paragraph (a), "change of
control" shall be deemed to have occurred upon the happening of any of the
following events:
(1) A person other than Dan Borislow or Gary McCulla is
elected by the Board of Directors of the Company to serve as the Company's
principal executive officer;
(2) During any period of twelve consecutive months,
individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new or replacement directors whose
election by the Board of Directors or whose nomination for election by the
Company's stockholders was approved by a vote of at least 66-2/3% of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the directors then in
office;
(3) Within any period of twelve consecutive months, any
"person" or "group" (each as defined in Section 13(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")), who or which was not an
"Affiliate" (as defined in the Exchange Act) of the Company at the beginning of
such period, becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of more than 50% of the total voting power of all classes of
voting stock of the Company; or
(4) Any merger, consolidation, sale of all or substantially
all of the assets of the Company or stock acquisition.
Following the Termination Date, in the absence of the exercise
hereof, the Holder shall have no rights herein to acquire any Exercise Shares
and this Warrant shall lapse as to such rights. This Warrant may be exercised on
any business day by delivering to the Company at its principal office, presently
located at the address of the Company set forth in Paragraph 9 hereof (or such
other office of the Company as shall theretofore have been designated by the
Company by written notice to the Holder), together with: (i) a completed and
executed irrevocable Notice of Warrant Exercise in the form set forth in
Appendix A hereto and made a part hereof, specifying therein the number of
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Warrant Shares (which shall not exceed the number thereof then remaining as to
which this Warrant is then exercisable and as to which no Notice of Warrant
Exercise has previously been given) with respect to which the Holder is then
exercising its rights hereunder, and (ii) subject, as indicated below, to the
consent or election of the Company, within two (2) business days after receipt
by the Company of such Notice of Warrant, delivery to the Company of the full
Exercise Price as follows:
(A) if the Company shall not have elected that such exercise shall be
a "net issuance exercise" as provided in clause (C) of this Paragraph, payment
of the full Exercise Price therefor in immediately available funds, in which
case the Company, pursuant to such Notice of Warrant Exercise from Holder (duly
completed, and in accordance with Subparagraph 1(c)), shall, upon receipt of
this Warrant and the original executed copy of such Notice of Warrant Exercise
and payment of such Exercise Price, issue, and deliver a certificate evidencing,
such number of Exercise Shares as to which this Warrant shall have been
exercised; or
(B) if the Company shall not have elected that such exercise shall be
a "net issuance exercise" as provided in clause (C) of this Paragraph, through
arrangements with a brokerage firm under which such brokerage firm, on behalf of
the Holder, shall pay the Company the Exercise Price and the Company, pursuant
to an irrevocable notice from the Holder (the form of which shall be
satisfactory to the Company), shall promptly deliver the Exercise Shares being
purchased to such firm; and
(C) if the Company shall, upon receipt of a Notice of Warrant
Exercise from the Holder as to Warrant Shares and in its sole discretion, so
elect, the Company may deliver a certificate evidencing such number of Exercise
Shares as shall equal the quotient of (x) the product of (1) the difference
between the Current Market Price (as defined in Subparagraph 6(e)) on the date
of delivery of such Notice of Warrant Exercise and the then Exercise Price,
multiplied by (2) the number of Warrant Shares specified in such Notice of
Warrant Exercise as to which this warrant is to be exercised, divided by (y) the
Current Market Price on the date of delivery of such Notice of Warrant Exercise
(a "net issuance exercise"), in which event no payment in cash of the Exercise
Price in respect
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of the Warrant Shares as to which such "net issuance exercise" applies need be
made.
Upon such exercise pursuant to a Notice of Warrant Exercise and
issuance of such Exercise Shares, the number of Warrant Shares automatically
shall be reduced by the number of Warrant Shares as to which this Warrant is to
be exercised specified in such Notice of Warrant Exercise.
In the event that this Warrant shall be duly exercised in part prior
to the Termination Date, the Company shall issue a new Warrant of like tenor
evidencing the rights of the Holder thereof with respect to the balance of the
Warrant Shares under the Warrant so surrendered.
No adjustments shall be made for any cash dividends on Exercise
Shares issuable upon exercise of this Warrant.
(b) Issuance of Exercise Shares; Delivery of Warrant Certificates.
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The Company at its expense shall, as soon as practicable and in any event within
three (3) business days, after the exercise of this Warrant, issue in the name
of the Holder (or such other person or persons, if any, as specifically
permitted under the terms hereof and as the Holder shall have designated in the
Notice of Warrant Exercise) one or more certificates representing the Exercise
Shares to which the Holder (or such other persons or persons) shall be entitled
upon such exercise under the terms hereof. Such certificate or certificates
shall be deemed to have been issued and the Holder (or such other person or
persons so permitted and designated) shall be deemed to have become the record
holder of the Exercise Shares as of the date of the due exercise of this Warrant
(including payment of the Exercise Price therefor).
(c) Exercise Shares Fully Paid and Non-assessable. The Company agrees
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and covenants that all Exercise Shares issued or delivered upon the due exercise
(including payment of the Exercise Price therefor) of this Warrant will, upon
issuance in accordance with the terms hereof, be duly authorized, validly
issued, fully paid and non-assessable and free and clear of all taxes (other
than those taxes that, pursuant to Paragraph 2 hereof, the Company shall not be
obligated to pay), liens, charges and security interests created by or in favor
of the Company with respect to the issuance thereof (other than the limitations
on such Exercise Shares imposed by applicable
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securities laws and limitations expressly included in this Warrant).
(d) Fractional Shares. The Company shall not be required to issue
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fractional shares of capital stock upon the exercise of this Warrant or to
deliver certificates that evidence fractional shares of capital stock. In the
event that any fraction of an Exercise Share would, except for the provisions of
this Subparagraph (d), be issuable upon the exercise of this Warrant, the
Company shall pay to the Holder exercising the Warrant an amount in cash equal
to such fraction multiplied by the Current Market Price of the Exercise Share.
2. Payment of Taxes. The Company will pay all documentary stamp taxes,
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original issue or similar taxes if any, attributable to the issuance of Exercise
Shares upon the exercise of this Warrant; provided, however, that the Company
shall not be required to pay any tax or taxes that may be payable in respect of
any transfer of this Warrant or any transfer involved in the issue of any
Warrant Certificates or any certificates for Exercise Shares in a name other
than that of the Holder of this Warrant, and the Company shall not be required
to issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax required to be withheld or shall have established to the reasonable
satisfaction of the Company that such tax has been paid.
3. Mutilated or Missing Warrant. In case this Warrant shall be
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mutilated, lost, stolen or destroyed, the Company may in its discretion issue,
in exchange and substitution for and upon cancellation of, this Warrant, if
mutilated, or in lieu of and in substitution for this Warrant if lost, stolen or
destroyed, a new Warrant of like tenor and in the same aggregate denomination
(but reflecting the number of Warrant Shares as to which this Warrant was then
exercisable), but only (i) in the case of loss, theft or destruction, upon
receipt of evidence reasonably satisfactory to the Company of such loss, theft
or destruction of this Warrant and, in the case of AOL as the Holder, AOL's
indemnity, and, in the case of any other Person as the holder, indemnity or
bond, if requested, in each case also reasonably satisfactory to the Company,
and (ii) in the case of mutilation, upon surrender of this
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Warrant. The applicant for such substitute Warrant shall also comply with such
other reasonable regulations and pay such other reasonable charges as the
Company or its counsel may prescribe.
4. Rights of Holder. The Holder shall not, by virtue of anything
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contained in this Warrant or otherwise, be entitled to any right whatsoever,
either in law or equity, of a stockholder of the Company, including, without
limitation, the right to receive dividends or to vote or to consent or to
receive notice as a shareholder in respect of the meetings of shareholders or
the election of directors of the Company or any other matter.
5. Notices of Corporate Action. In the event of a proposal by the
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Company (or of which the Company shall have knowledge) for:
(a) any taking by the Company of a record of the holders of
any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend (other than a
regular periodic dividend payable in cash) or other distribution, or
any right to subscribe for, purchase or otherwise acquire any shares
of stock of any class or any other securities or property, or to
receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company, any statutory exchange, consolidation or merger involving
the Company and any other Person or any transfer of all or
substantially all the assets of the Company to any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
the Company will deliver to the Holder a notice specifying (i) the date or
expected date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and the amount and character of such dividend,
distribution or right, or (ii) the date or expected date on which any such
reorganization, reclassification, recapitalization, statutory exchange,
consolidation, merger, transfer, dissolution, liquidation or winding-up is
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to take place and the time, if any such time is to be fixed, as of which the
holders of record of Common Stock shall be entitled to exchange their shares of
Common Stock for the securities or other property deliverable upon such
reorganization, reclassification, recapitalization, statutory exchange,
consolidation, merger, transfer, dissolution, liquidation or winding-up. Such
notice shall with respect to Subparagraphs (a) and (b) hereof, be furnished at
least 20 days prior to the date therein specified and, with respect to
Subparagraph (c) hereof, be furnished promptly upon the commencement of any
event described therein.
6. Adjustment of Exercise Price, Warrant Shares and Exercise Shares. The
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Exercise Price, the number of Warrant Shares and the kind of Exercise Shares
issuable upon the exercise of this Warrant shall be subject to adjustment from
time to time upon the happening of certain events after the date hereof as
hereinafter provided. The Exercise Price in effect at any time, the number of
Warrant Shares and the kind of securities issuable upon exercise of this Warrant
shall be subject to adjustment as follows:
(a) If the Company shall after the date hereof pay a dividend or make
a distribution on its shares of Common Stock in shares of Common Stock, (ii)
subdivide or classify its outstanding Common Stock into a greater number of
shares, or (iii) combine or reclassify its outstanding Common Stock into a
smaller number of shares, the Exercise Price in effect at the time of the record
date for such dividend or distribution or of the effective date of such
subdivision, combination or reclassification shall be proportionally adjusted so
that the Holder of this Warrant exercised after such date shall be entitled to
receive the aggregate number and kind of shares that, if this Warrant had been
exercised by such Holder immediately prior to such date, such Holder would have
owned upon such exercise and been entitled to receive upon such dividend,
subdivision, combination or reclassification. For example, if the Company
declares a 2-for-1 stock dividend or stock split and the Exercise Price
immediately prior to such event was $5.00 per share, the adjusted Exercise Price
immediately after such event would be $2.50 per share. Such adjustment shall be
made successively whenever any event listed above shall occur.
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(b) In case the Company shall after the date hereof issue rights or
warrants to all holders of its Common Stock entitling them to subscribe for or
purchase shares of Common Stock (or securities convertible into Common Stock) at
a price (or having a conversion price per share) less than the Current Market
Price of the Common Stock (as defined in Subparagraph (e) of this Paragraph
below) on the record date mentioned below, the Exercise Price shall be adjusted
so that the same shall equal the price determined by multiplying the Exercise
Price in effect immediately prior to the date of such issuance by a fraction,
the numerator of which shall be the sum of the number of shares of Common Stock
outstanding on the record date mentioned below and the number of additional
shares of Common Stock that the aggregate offering price of the total number of
shares of Common Stock so offered (or the aggregate conversion price of the
convertible securities so offered) would purchase at the Current Market Price
per share of the Common Stock, and the denominator of which shall be the sum of
the number of shares of Common Stock outstanding on such record date and the
number of additional shares of Common Stock offered for subscription or
purchases (or into which the convertible securities so offered are convertible).
Such adjustment shall be made successively whenever such rights or warrants are
issued and shall become effective immediately after the record date for the
determination of shareholders entitled to receive such rights or warrants; and,
to the extent that shares of Common Stock are not delivered (or securities
convertible into Common Stock are not delivered) after the expiration of such
rights or warrants, the Exercise Price for Warrant Shares as to which no
exercise has been made shall be readjusted to the Exercise Price that would then
be in effect had the adjustment made upon the issuance of such rights or
warrants been made upon the basis of delivery of only the number of shares of
Common Stock (or securities convertible into Common Stock) actually delivered.
(c) If, after the date hereof, there shall be any reclassification,
capital reorganization or change of the Common Stock (other than as a result of
a subdivision, combination or stock dividend provided for in Subparagraphs (a)
and (b) above), or any consolidation of the Company with, or merger of the
Company into, another corporation or other business organization (other than a
consolidation or merger in which the Company is the continuing corporation and
that does not result in any reclassification or change of the outstanding Common
Stock), or any sale or conveyance
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to another corporation or other business organization of all or substantially
all of the assets of the Company (referred to in this Subparagraph (c) as a
"Reclassification"), then, as a condition of such Reclassification, lawful
provisions shall be made, and duly executed documents evidencing the same from
the Company or its successor shall be delivered to the Holder, so that the
Holder shall thereafter have the right to purchase, at a total price not to
exceed that payable upon the exercise of this Warrant in full, the kind and
amount of shares of stock and other securities and property receivable upon such
Reclassification by a holder of the number of shares of Common Stock that might
have been purchased by the Holder immediately prior to such Reclassification,
and in any such case appropriate provisions shall be made with respect to the
rights and interest of the Holder to the end that the provisions hereof
(including, without limitation, provisions for the adjustment of the Exercise
Price and the number of shares issuable hereunder) shall thereafter be
applicable in relation to any shares of stock or other securities and property
thereafter deliverable upon exercise hereof.
(d) Whenever the Exercise Price payable upon exercise of this Warrant
is adjusted pursuant to Subparagraphs (a), (b) and (c) above, the number of
Warrant Shares that have vested as of such time and the maximum number of
Warrant Shares that may then be issuable pursuant to this Warrant shall each
simultaneously be adjusted by multiplying (x) each such number by (y) a
fraction, the numerator of which is the Exercise Price in effect just prior to
such adjustment and the denominator of which is the Exercise Price, as adjusted.
(e) For the purpose of any computation in this Warrant, the Current
Market Price per share of Common Stock at any date shall be deemed to be the
average of the daily closing prices for 10 consecutive business days before such
date. The closing price for each day shall be the last sale price regular way
or, in case no such reported sale takes place on such day, the average of the
last reported bid and lowest reported asked prices as reported by NASDAQ, or
other similar organizations if NASDAQ is no longer reporting such information,
or if not so available, the fair market price as determined in good faith by the
Board of Directors.
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(f) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least ten cents ($0.10)
in such price; provided, however, that any adjustments that by reason of this
Subparagraph (f) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment required to be made hereunder. All
calculations under this Paragraph 6 shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the case may be. Anything in this Paragraph
6 to the contrary notwithstanding, the Company shall be entitled, but shall not
be required, to make such additional reductions in the Exercise Price, in
addition to those required by this Paragraph 6, as it, in its sole discretion,
shall determine to be advisable in order that any dividend or distribution in
shares of Common Stock, subdivision, reclassification or combination of Common
Stock, issuance of warrants to purchase Common Stock or distribution of
evidences of indebtedness or other assets (excluding cash dividends) referred to
hereinabove in this Paragraph 6 hereafter made by the Company to the Holders of
its Common Stock shall not result in any tax to the Holders of its Common Stock
or securities convertible into Common Stock.
(g) Whenever the Exercise Price is adjusted as herein provided, the
Company shall promptly cause a notice, setting forth the adjusted Exercise Price
and adjusted number of Warrant Shares as to which a Notice of Warrant Exercise
may be given under this Warrant, to be mailed to the Holders, at their last
addresses appearing in the books of the Company, and shall cause a certified
copy thereof to be mailed to its transfer agent, if any. The Company may retain
a firm of independent certified public accountants selected by the Board of
Directors (who may be the regular accountants employed by the Company) to make
any computation required by this Paragraph 6, and a certificate signed by such
firm shall be conclusive evidence of the correctness of such adjustment.
(h) In the event that at any time, as a result of an adjustment made
pursuant to Subparagraph 6(a) above, the Holder of this Warrant thereafter shall
become entitled to receive any Exercise Shares of the Company, other than Common
Stock, thereafter the number of such other shares so receivable upon exercise of
this Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with
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respect to the Common Stock contained in Subparagraphs (a) to (f), inclusive, of
Paragraph 6 above.
(i) Irrespective of any adjustments in the Exercise Price, the number
of Warrant Shares or kind of Exercise Shares purchasable upon exercise of this
Warrant, Warrants theretofore or thereafter issued in exchange or substitution
for this Warrant or any part thereof may continue to express the same price and
number and kind of shares as are stated in this Warrant.
(j) Whenever the Exercise Price shall be adjusted as required by the
provisions hereof, the Company shall forthwith file in the custody of its
Secretary or an Assistant Secretary at its principal office and with its stock
transfer agent, if any, an officer's certificate showing the adjusted Exercise
Price determined as herein provided and, in the case of an Exercise Price
adjustment, setting forth in reasonable detail the facts requiring such
adjustment, including a statement of the number of additional shares of Common
Stock, if any, and such other facts as shall be necessary to show the reason for
and the manner of computing such adjustment. Each such officer's certificate
shall be made available at all reasonable times for inspection by the Holder and
the Company shall, forthwith after each such adjustment, mail a copy by
certified mail or such certificate to the Holder.
7. Restrictions on Transferability; Restrictive Legends;
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Indemnification.
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(a) Neither this Warrant nor the right to exercise this Warrant or to
receive Exercise Shares upon any such exercise may be sold, assigned or
transferred by the Holder, except that this Warrant and such rights may be
transferred, upon compliance with the other Subparagraphs of this Paragraph 7,
by AOL, as the Holder, to (i) any successor to AOL by reason of a merger,
consolidation or statutory exchange of AOL or any successor to all or
substantially all of AOL's assets if such successor assumes in writing this
Warrant and all of AOL's liabilities and obligations under the Marketing
Agreement; or (ii) any subsidiary or affiliate of AOL; provided that AOL owns
voting stock of such subsidiary or affiliate entitling AOL to at least 80% of
the voting power thereof in the election of directors. Any sale, assignment or
transfer of this
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Warrant in violation of this Paragraph 7 is null and void as of the time of such
transfer.
(b) No Exercise Share may be offered for sale or sold, or otherwise
transferred or sold in any transaction that would constitute a sale thereof
within the meaning of the Securities Act, unless (i) such security has been
registered for sale under the Securities Act and registered or qualified under
applicable state securities laws relating to the offer and sale of securities,
or (ii) an exemption from the registration requirements of the Securities Act
and the registration or qualifications requirements of all such state securities
laws are available and the Company shall have received an opinion of counsel
(which may be an opinion that covers multiple or all subsequent sales)
satisfactory to the Company that the proposed sale or other disposition of such
securities may be effected without registration under the Securities Act, such
counsel and such opinion to be reasonably satisfactory to the Company.
(c) Except as otherwise permitted by this Paragraph 7, this Warrant
and any Warrant issued upon direct or indirect transfer of or in substitution
for this Warrant or any part thereof shall be stamped or otherwise imprinted
with a legend substantially in the form of the legend with respect to transfer
limitation and securities acts at the head of this Warrant.
(d) Except as otherwise permitted by this Paragraph 7, each
certificate for an Exercise Share issued upon exercise of this Warrant or any
Warrant issued upon direct or indirect transfer of or in substitution for this
Warrant or any part thereof shall be stamped or otherwise imprinted with a
legend in substantially the following form:
The shares represented by this certificate are subject to
restrictions imposed by the federal Securities Act of 1933, as
amended, and applicable state securities laws. The shares may not be
sold or transferred in the absence of registration or an exemption
therefrom under such Securities Act of 1933 and such applicable state
securities laws. All shares represented by this Certificate are
subject to the terms and conditions of a Warrantholder and
Stockholders Agreement, dated as of February 22, 1997, and a Voting
Trust Agreement, dated as the same
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date both of which may be examined at the offices of Tel-Save
Holdings, Inc., New Hope, Pennsylvania.
(e) The Company shall, at the request of any registered holder of an
Exercise Share, exchange the certificate representing such security for a
certificate representing the same security not bearing the restrictive legend
required by Subparagraph 7(d) if the Exercise Shares may be sold or transferred
pursuant to the provisions of Rule 144(k) and, in the reasonable opinion of
counsel to the Company, such restrictive legend is no longer necessary.
(f) The Holder agrees to indemnify and hold harmless the Company
against any loss, damage, claim or liability arising solely from the disposition
of this Warrant or any Exercise Share held by such Holder or any interest
therein in violation of the provisions of this Subparagraph 7(b).
(g) The Holder of this Warrant is entitled to the benefit of such
registration rights in respect of the Shares of Common Stock issuable to such
Holder upon exercise of the Warrants as are set forth in the Warrantholder and
Stockholders Agreement, dated as of February 22, 1997, among the Company,
Tel-Save, Inc., a Pennsylvania corporation and wholly owned subsidiary of the
Company and the Holder.
8. Company Representations and Warranties. Company hereby represents and
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warrants to AOL as follows:
(a) Due Organization; Good Standing. Company is a corporation duly
---------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware; and has the corporate power and authority to own its properties and
assets and to carry on its business as now conducted.
(b) Authorization. The execution, delivery and performance by Company
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of this Warrant are within its corporate powers and have been duly authorized by
all necessary corporate action.
(c) No Conflict. The execution, delivery and performance by Company
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of this Warrant do not contravene any provision of its charter or by-laws, and
do not conflict with, result in a breach of, or constitute a default under, any
agreement, instrument, covenant or other
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restriction to which the Company is a party or by which it or any of its assets
is bound.
(d) Enforceability. This Warrant is the legal, valid and binding
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obligation of Company, enforceable against Company in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium, reorganization, or other laws affecting creditors'
rights generally or by the availability of equitable remedies.
(e) Capitalization. As of February 13, 1997, the authorized equity
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capitalization of Company consists of 100,000,000 shares of Common Stock, par
value $.01 per share, of which 62,887,998 shares were issued and outstanding,
10,503,800 shares were reserved for issuance upon the exercise of outstanding
options or warrants and no shares were held in treasury and 5,000,000 shares of
undesignated Preferred Stock, par value $.01 per share, of which no shares were
issued and outstanding. The Company agrees that, prior to the expiration of this
Warrant, the Company will at all times have authorized and in reserve, and will
keep available, solely for issuance or delivery upon the exercise of this
Warrant, the shares of the Common Stock and other securities and properties as
from time to time shall be receivable upon the exercise of this Warrant, the
shares of the Common Stock and other securities and properties as from time to
time shall be receivable upon the exercise of this Warrant. Upon issuance of the
shares of Common Stock upon exercise of this Warrant, such shares will have been
duly authorized and validly issued and will be fully paid and nonassessable
shares of Common Stock of the Company, and not subject to preemptive rights or
rights to first refusal.
(f) Commission Filings. Company has made available to AOL copies of
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Company's (i) Annual Report on Form 10-K for the fiscal year ended December 31,
1995, (ii) the Quarterly Reports on Form 10-Q for the quarters ended March 31,
June 30 and September 30, 1996, and (iii) filings by Company under the
Securities Act and other filings by Company under the Exchange Act, in each case
since January 1, 1996 and as filed with the SEC. Company has filed all reports,
registration statements and other documents (the "SEC Reports") required to be
filed under the Exchange Act and the rules and regulations thereunder, the SEC
Reports complied, in all material respects, with the requirements of the
Exchange Act, such compliance to be
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determined, to the extent applicable, in accordance with the standards applied
to the reports in the following two sentences. As of their respective dates, the
SEC Reports did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
9. Notices. All notices or other communications under this Warrant shall
be in writing and shall be deemed to have been given if delivered by hand or
mailed by certified mail, postage prepaid, return receipt requested, or
delivered by facsimile transmission (which shall be followed by delivery of an
original copy), addressed as follows:
If to the Company:
Tel-Save Holdings, Inc.
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
and to the Holder:
American Online, Inc.
22000 AOL Way
Dulles, VA 20166
Attn: General Counsel
with a copy to: Head of Business Affairs
Facsimile No. 703-265-2208_________________________
Either of the Company or the Holder may from time to time change the
address or facsimile number to which notices to it are to be mailed hereunder by
notice in accordance with the provisions of this Paragraph 9.
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10. Supplements and Amendments. Except as otherwise provided herein, this
--------------------------
Warrant and any term hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such change, waiver, discharge or termination is sought.
11. Severability. If for any reason any provision, paragraph or term of
------------
this Warrant is held to be invalid or unenforceable, all other valid provisions
herein shall remain in full force and effect and all terms, provisions and
paragraphs of this Warrant shall be deemed to be severable.
12. Governing Law. This Warrant shall be deemed to be a contract made
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under the laws of the State of Delaware and for all purposes shall be governed
by and construed in accordance with the laws of said State.
13. Entire Agreement. This Warrant consists of all the terms and
-----------------
conditions contained herein and all documents incorporated herein specifically
by reference and constitutes the complete and exclusive statement of the
understandings between the parties and supersedes all proposals and prior
agreements (oral or written) between the parties relating to the rights and
obligations provided hereunder.
14. Headings; Construction. Paragraph and Subparagraph headings used
-----------------------
herein are included herein for conveniences of reference only and shall not
affect the construction of this Warrant nor constitute a part of this Warrant
for any other purpose. The words "herein," "hereof," "hereby," "hereto,"
"hereunder" and words of similar import refer to this Warrant as a whole and not
to any particular article, section, paragraph, subparagraph or other subdivision
of this Warrant. Defined terms shall include the plural and the singular as the
context shall require.
15. Consent and Acknowledgment of Holder. The terms and conditions of
--------------------------------------
this Warrant are agreed and consented to by the Holder, as evidenced by Holder's
signature on the line provided below. This Warrant shall bind and be enforceable
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by and against the Holder and such Holder's successors, heirs, estates,
representatives and assigns and the Company and its successors and assigns.
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IN WITNESS WHEREOF, the Company and the Holder have caused these
presents to be duly executed as of the day and year written above.
TEL-SAVE HOLDINGS, INC.
By:________________________
Name: Daniel Borislow
Title: Chairman & CEO
Accepted by:
AMERICA ONLINE, INC.
By: /s/ David M. Colburn
-----------------------------
Name: David M. Colburn
Title: Senior Vice-President
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APPENDIX A
NOTICE OF WARRANT EXERCISE
Pursuant to the attached Warrant ("Warrant"), by and between the
undersigned and Tel-Save Holdings, Inc., a Delaware corporation (the "Company"),
dated as of February 22, 1997, the undersigned hereby irrevocably elects to
exercise the Warrant with respect to ________________ Warrant Shares (as such
term is defined in the Warrant) as provided for therein.
The undersigned requests that a certificate for the Exercise Shares
be issued in the name of:
____________________________________
____________________________________
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(Please print name, address and social security number)
Dated: ____________________________________
Address: ____________________________________
____________________________________
____________________________________
Signature: ____________________________________