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Nontransferable Warrant to Purchase Common Stock - Tel-Save Holdings Inc. and America Online Inc.

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                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, 2004


No. W-AOL-2

           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 seventh  anniversary  of the date hereof
(such time on such date, the


<PAGE>


"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. $14.00.  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.,  a  Pennsylvania
corporation and wholly owned subsidiary of the Company ("TS"), 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  automatically  shall expire and
shall be of no further force or effect.


1.         Exercise of Warrant; Issuance of Exercise Shares.
           ------------------------------------------------

           (a) Exercise of Warrant. This Warrant may be exercised as to the then
               -------------------
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 at any time such number of shares of Common
Stock as shall have vested as of such time as follows:

                    (i) such number of shares of Common Stock as shall equal the
           product of the Vesting Multiplier (as defined below) times the number
           (the "First Quarter Number") of End Users (as such term is defined in
           the Marketing  Agreement) for whom TS is providing  Services (as such
           term is defined in the  Marketing  Agreement) as of December 31, 1997
           (the "First  Vesting  Date"),  shall vest and shall be Warrant Shares
           hereunder as of such First Vesting Date; and


                                       2
<PAGE>


                    (ii) such  number of  additional  shares of Common  Stock as
           shall equal the product of the Vesting Multiplier times the amount by
           which (x) the  number  of End  Users  (each,  a  "Subsequent  Quarter
           Number") for whom TS is providing Services as of the last day of each
           full calendar  quarter (each, a "Subsequent  Vesting Date") after the
           First  Vesting  Date and on or before the earlier of (x) the last day
           of the Term (as defined in the Marketing  Agreement) or any Extension
           Period (as defined in the Marketing  Agreement)  and (y) the last day
           of the full  calendar  quarter in which the  Marketing  Agreement  is
           terminated prior to the end of such Term or Extension Period, exceeds
           (y) the greater of the First Quarter Number and any prior  Subsequent
           Quarter Number,  shall vest and shall be Warrant Shares  hereunder as
           of such Subsequent Vesting Date;

provided  that in no event will the  aggregate  number of Warrant  Shares exceed
7,000,000,  subject to further  adjustment as provided in Paragraph 6 hereof and
to successive  reduction  upon any exercise of this Warrant as provided below in
this clause (a). For purposes hereof, the "Vesting Multiplier" shall be two (2),
provided that,  from and after the "Multiplier  Adjustment  Date" (as defined in
the Marketing  Agreement),  the Vesting  Multiplier as in effect as of such Date
shall be doubled for purposes of subsequent vestings.

           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:  (1) 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
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 (2),  subject,  as indicated below, to the
consent or election of the Company,  within two (2) business  days after receipt
by the Company


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<PAGE>


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
in full of the 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) hereof, 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;

           (B) if the Company shall not have elected that such exercise shall be
a  "net  issuance  exercise"  as  provided  in  clause  (3) of  this  Paragraph,
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 is  satisfactory to
the Company),  shall, upon receipt of this Warrant,  such irrevocable notice and
payment of such  Exercise  Price,  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 (i) the  difference
between the Current Market Price (as defined in Subparagraph 6(e) hereof) on the
date of delivery of such Notice of Warrant Exercise and the then Exercise Price,
multiplied  by (ii) 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 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


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<PAGE>


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.
               ----------------------------------------------------------------
The Company  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
               ---------------------------------------------
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  securities  laws and limitations
expressly included in this Warrant).

           (d)  Fractional  Shares.  The Company  shall not be required to issue
                ------------------
fractional  shares of capital  stock  upon the  exercise  of this  Warrant or to
deliver  certificates 


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<PAGE>


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
           ----------------
and 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
           -------------------------------
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  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.


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<PAGE>


4.        Rights of  Holder.  The  Holder  shall  not,  by  virtue of  anything
           -----------------
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
           ------------------------------
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 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


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<PAGE>


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
           ----------------------------------------------------------------
Exercise  Price,  the number of Warrant Shares,  the Vesting  Multiplier 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 (i) 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.

           (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


                                       8
<PAGE>


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 Subparagraph  (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  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


                                       9
<PAGE>


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,  the maximum number of Warrant
Shares that may then be issuable  pursuant to this  Warrant and the then Vesting
Multiplier applicable to the calculation of the number of shares of Common Stock
that will vest after the date of such adjustment  shall each  simultaneously  be
adjusted by multiplying (x) each such number and the Vesting Multiplier 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.

           (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


                                       10
<PAGE>


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 respect to the
Common Stock contained in Subparagraphs  (a) to (e),  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 


                                       11
<PAGE>


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; Indemnification
           ---------------------------------------------------------------------

           (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  (ii) to 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 powers thereof at the election of directors.  Any sale, assignment or
transfer of this 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


                                       12
<PAGE>


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 of the same  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 


                                       13
<PAGE>


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 paragraph 7.

           (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
           --------------------------------------
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
               -------------
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
               -----------
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 restriction to which the Company is a
party or by which it of any of its assets is bound.

           (d)  Enforceability.  This  Warrant is the legal,  valid and  binding
                --------------
obligation of Company, enforceable against Company in accordance with its terms,
except  as


                                       14
<PAGE>


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
                --------------
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 of first refusal.

           (f) Commission  Filings.  Company has made available to AOL copies of
               -------------------
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,  and all
SEC Reports  complied,  in all material  respects,  with the requirements of the
Exchange Act, such  compliance to be 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


                                       15
<PAGE>


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.


10.        Supplements and Amendments. Except as otherwise provided herein, this
Warrant and any term hereof may be


                                       16
<PAGE>


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
           --------------
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
by and  against  the  Holder  and  such  Holder's  successors, 


                                       17
<PAGE>


heirs,  estates,  representatives and assigns and the Company and its successors
and assigns.





                                       18
<PAGE>



           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:____________________________
   Name: David M. Colburn
   Title: Senior Vice-President





                                       19
<PAGE>




                                   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:

____________________________________

____________________________________


             -------------------------------------------------------
             (Please print name, address and social security number)


Dated:       ____________________________________

Address:     ____________________________________

             ____________________________________

             ____________________________________

Signature:   ____________________________________