Stock Option Agreement - Tel-Save Holdings Inc. and Shared Technologies Fairchild Inc.
AGREEMENT
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.
WITNESSETH
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
Agreement).
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
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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
Agreement.
(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
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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
Agreement.
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
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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
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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
hereto.
(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
agreement.
(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
applicable.
(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.
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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
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Name: Edward B. Meyercord, III
Title: Executive Vice President
SHARED TECHNOLOGIES FAIRCHILD, INC.
By: /s/ Kenneth M. Dorros
-------------------------------
Name: Kenneth M. Dorros
Title:
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