Sample Business Contracts

Stock Option Agreement - Tel-Save Holdings Inc. and Shared Technologies Fairchild Inc.

Sponsored Links


         THIS AGREEMENT (this "Agreement"), dated as of July 16, 1997, is by and
between TEL-SAVE HOLDINGS, INC. ("Acquiror"), a Delaware corporation, and SHARED
TECHNOLOGIES FAIRCHILD, INC. (the "Company"), a Delaware corporation.


         WHEREAS,  the  respective  Boards of  Directors of the Acquiror and the
Company have approved the Agreement and Plan of Merger (the "Merger Agreement"),
and  certain  other  agreements   contemplated  by  the  Merger  Agreement  (the
"Transaction  Documents"),  providing for certain transactions pursuant to which
the Company would be merged with and into TSHCo, Inc., a wholly-owned subsidiary
of the Acquiror (collectively, the "Transactions");

         WHEREAS,  as a  condition  to  Acquiror's  entry  into the  Transaction
Documents and the Transactions, and to induce such entry, the Company has agreed
to grant  Acquiror  the  option  set forth  herein to  purchase  authorized  but
unissued  shares of the common  stock of the  Company,  par value .004 per share
("Company Common Stock");

         NOW, THEREFORE, in consideration of the premises herein contained,  the
parties agree as follows:

         1.       Certain Definitions.

                  (a)  Capitalized  terms used but not defined herein shall have
the same meanings as in the Transaction Documents.

                  (b) The term "Effective Date" shall have the meaning specified
in the Merger Agreement.

                  (c) The term "Purchase  Event" shall mean any event,  pursuant
to Section  10.2(b) of the Merger  Agreement,  which would, by the terms of such
section,  require the Company to pay a Termination Fee (as defined in the Merger

         2.  Grant  of  Option.  Effective  on the date of any  Purchase  Event,
Acquiror shall have,  and the Company  hereby grants to Acquiror,  the right and
option to purchase  (the  "Option")  from the Company,  at a price of $11.25 per
share of  Company  Common  Stock (the  "Exercise  Price"),  3,000,000  shares of
Company Common Stock (the "Option  Shares").  The Option shall be exercisable by
Acquiror,  in whole at any time and in part  from time to time,  within  one (1)
year after the  effective  date of such  grant,  by tender to the Company of the
cash in payment of the exercise  price  therefor,  whereupon  the Company  shall
promptly  issue to  Acquiror  the number of shares of Company  Common  Stock for
which  the  Option is being  exercised  and the  exercise  price for which is so
tendered, such shares to be deemed for all purposes to be


issued and  outstanding  as of and after such  tender of cash to the  Company in
payment of such exercise price.

         3.       Exercise of Option.

                  In the event Acquiror wishes to exercise the Option,  it shall
send to the Company a written notice (the date of which being herein referred to
as the "Notice Date") specifying (i) the total number of shares it will purchase
pursuant  to such  exercise,  and (ii) a place and date not  earlier  than three
business  days nor later  than 30  business  days from the  Notice  Date for the
closing  of  such  purchase  (the  "Closing  Date");  provided  that,  if  prior
notification  to or  approval  of any  federal  or state  regulatory  agency  is
required in connection with such purchase,  the Acquiror shall promptly file the
required notice or application for approval and shall expeditiously  process the
same and the period of time that  otherwise  would run pursuant to this sentence
shall run instead  from the date on which any required  notification  period has
expired or been  terminated or such approval has been obtained and any requisite
waiting period shall have passed.

         4.       Payment and Delivery of Certificates.

                  (a) At the closing  referred to in Section 3 hereof,  Acquiror
shall pay to the  Company  the  aggregate  purchase  price for the shares of the
Company  Common  Stock  purchased  pursuant  to the  exercise  of the  Option in
immediately  available funds by a wire transfer to a bank account  designated by
the Company.

                  (b) At such closing,  simultaneously with the delivery of cash
as  provided  in  subsection  (a),  the  Company  shall  deliver  to  Acquiror a
certificate  or  certificates  representing  the number of shares of the Company
Common Stock purchased by Acquiror,  and Acquiror shall deliver to the Company a
letter  agreeing  that  Acquiror  will not offer to sell,  pledge  or  otherwise
dispose of such shares in violation of applicable  law or the provisions of this

                  (c)  Certificates  for the Company Common Stock delivered at a
closing  hereunder may be endorsed  with a  restrictive  legend which shall read
substantially as follows:

         "The shares  represented by this  certificate  have not been registered
         under the  Securities Act of 1933, as amended (the  "Securities  Act"),
         and the regulations  promulgated thereunder and may not be sold without
         registration  under the Securities Act or pursuant to an exemption from
         registration thereunder."

It is  understood  and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such

                                      - 2 -


legend if Acquiror  shall have  delivered to the Company a copy of a letter from
the  staff  of the  SEC,  or an  opinion  of  counsel,  in  form  and  substance
satisfactory to the Company,  to the effect that such legend is not required for
purposes of the Securities Act and any applicable state securities laws and this

         5.  Representations.   The  Company  hereby  represents,  warrants  and
covenants to the Acquiror as follows:

                  (a)  The  Company  shall  at  all  times  maintain  sufficient
authorized but unissued  shares of the Acquiror  Common Stock so that the Option
may be  exercised  without  authorization  of  additional  shares of the Company
Common Stock.

                  (b) The shares to be issued upon due exercise,  in whole or in
part, of the Option,  when paid for as provided herein, will be duly authorized,
validly issued, fully paid and nonassessable.

         6.  Adjustment  Upon  Changes  in  Capitalization.  In the event of any
change in the  Company  Common  Stock by reason of stock  dividends,  split-ups,
recapitalizations,  combinations,  exchanges of shares or the like, the type and
number of shares subject to the Option, and the purchase price per share, as the
case may be, shall be adjusted appropriately.  Nothing contained in this Section
6 shall be deemed to  authorize  the  Company  to breach  any  provision  of the
Transaction Documents.

         7.  Registration  Rights.  The  Company  shall,  if  requested  by  the
Acquiror,  as expeditiously as possible file a registration  statement on a form
of general use and available for use by the Company under the  Securities Act if
necessary  in order to  permit or assist  the sale or other  disposition  of the
shares of the Company  Common Stock that have been acquired upon exercise of the
Option in  accordance  with the  intended  method  of sale or other  disposition
requested by the Acquiror. The Acquiror shall provide all information reasonably
requested by the Company for inclusion in any registration statement to be filed
hereunder.  The  Company  will use its best  efforts to cause such  registration
statement first to become effective and then to remain effective for such period
not in excess of 270 days from the day such registration statement first becomes
effective  as  may be  reasonably  necessary  to  effect  such  sales  or  other
dispositions.  The  obligations of the Company  hereunder to file a registration
statement  and to maintain its  effectiveness  may be suspended  for one or more
periods of time not exceeding 60 days in the aggregate if the Board of Directors
of the  Company  shall  have  determined  that the  filing of such  registration
statement or the maintenance of its  effectiveness  would require  disclosure of
non-public  information  that would materially and adversely affect the Company.
The first  registration  statement prepared under this Section 7 shall be at the
Company's expense except for

                                      - 3 -


underwriting  commissions  and the  fees  and  disbursements  of the  Acquiror's
counsel  attributable  to  the  offering  of the  Company  Common  Stock  by the
Acquiror.  The preparation of a second  registration  statement may be requested
and effected  hereunder at the  Acquiror's  sole expense.  In no event shall the
Company be required to effect more than two registrations  hereunder. The filing
of any registration  statement  hereunder may be delayed for such period of time
as may  reasonably  be required to  facilitate  any public  distribution  by the
Company of the Company Common Stock.  If requested by the Acquiror in connection
with any  registration,  the  Company  will  become a party to any  underwriting
agreement  relating  to the  sale of such  shares,  but  only to the  extent  of
obligating  itself in respect of  representations,  warranties,  indemnities and
other  agreements  customarily  included  in such  underwriting  agreements  for
parties similarly situated. In any such transaction the Company and the Acquiror
will also agree to indemnify  each other on customary  terms with respect to any
information provided by such party.

         8.  Severability.  If any  term,  provision,  covenant  or  restriction
contained in this Agreement is held by a court or a federal or state  regulatory
agency of  competent  jurisdiction  to be invalid,  void or  unenforceable,  the
remainder of the terms,  provisions and covenants and restrictions  contained in
this  Agreement  shall  remain in full force and effect,  and shall in no way be
affected,  impaired or  invalidated.  If for any reason such court or regulatory
agency determines that the Option will not permit the holder to acquire the full
number of shares of the Company  Common  Stock  provided in Section 2 hereof (as
adjusted  pursuant  to Section 6 hereof),  it is the  express  intention  of the
Company to allow the holder to acquire  such  lesser  number of shares as may be
permissible, without any amendment or modification hereof.

         9.       Miscellaneous.

                  (a) Expenses. Except as otherwise provided herein, each of the
parties  hereto shall bear and pay all costs and  expenses  incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
fees  and  expenses  of  its  own  financial  consultants,  investment  bankers,
accountants and counsel.

                  (b) Entire Agreement.  Except as otherwise  expressly provided
herein,  this  Agreement  and  the  Transaction  Documents  contain  the  entire
agreement  between the parties  with  respect to the  transactions  contemplated
hereunder and supersedes all prior  arrangements or understandings  with respect
thereto, written or oral. The terms and conditions of this Agreement shall inure
to the benefit of and be binding  upon the parties  hereto and their  respective
successors  and  permitted  assigns.  Nothing in this  Agreement,  expressed  or
implied, is intended to confer upon any

                                      - 4 -


party,  other than the  parties  hereto,  and their  respective  successors  and
assigns, any rights, remedies,  obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.

                  (c)  Assignment.  Other than as  provided in Section 7 hereof,
neither of the parties hereto may assign any of its rights or obligations  under
this Agreement or the Option created hereunder to any other person,  without the
express written consent of the other party.

                  (d)  Notices.  All notices or other  communications  which are
required or permitted  hereunder shall be in writing and sufficient if delivered
personally  or sent by overnight  express or by  registered  or certified  mail,
postage  prepaid,  addressed  as provided in the Merger  Agreement.  A party may
change its  address  for notice  purposes  by written  notice to the other party

                  (e) Counterparts. This Agreement may be executed in any number
of  counterparts,  and each such  counterpart  shall be deemed to be an original
instrument,  but  all  such  counterparts  together  shall  constitute  but  one

                  (f) Specific Performance. The parties agree that damages would
be an  inadequate  remedy for a breach of the  provisions  of this  Agreement by
either  party  hereto and that this  Agreement  may be enforced by either  party
hereto through injunctive or other equitable relief.

                  (g)  Governing  Law. This  Agreement  shall be governed by and
construed in accordance with the laws of Delaware  applicable to agreements made
and entirely to be  performed  within such state and such federal laws as may be

                  (h)   Termination.   This   Agreement,   and  all  rights  and
obligations of the parties hereunder, shall terminate upon the first to occur of
(a) the  consummation  of the Merger,  (b) January 15, 1998,  or (c) the date of
termination  of the Merger  Agreement by any of the parties  thereto  other than
pursuant to a Purchase Event.

                                      - 5 -


         IN  WITNESS  WHEREOF,  each of the  parties  hereto has  executed  this
Agreement as of the day and year first written above.

                                   TEL-SAVE HOLDINGS, INC.

                                   By: /s/ Edward B. Meyercord, III
                                      Name:  Edward B. Meyercord, III
                                      Title: Executive Vice President

                                   SHARED TECHNOLOGIES FAIRCHILD, INC.

                                   By: /s/ Kenneth M. Dorros
                                      Name:  Kenneth M. Dorros

                                      - 6 -