-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MiKC2UyzeDsNJz6Yii7fzn30wRTWkskyn1va2Ty7YCDTDddwk/tvohTc1n+1l9KG u6DLoKyVlYTx6S4NPgHt8g== 0001005150-97-000143.txt : 19970314 0001005150-97-000143.hdr.sgml : 19970314 ACCESSION NUMBER: 0001005150-97-000143 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19970313 SROS: NASD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: TEL SAVE HOLDINGS INC CENTRAL INDEX KEY: 0000948545 STANDARD INDUSTRIAL CLASSIFICATION: RADIO TELEPHONE COMMUNICATIONS [4812] IRS NUMBER: 232827736 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-45631 FILM NUMBER: 97555602 BUSINESS ADDRESS: STREET 1: 22 VILLAGE SQUARE CITY: NEW HOPE STATE: PA ZIP: 19838 BUSINESS PHONE: 2158621500 MAIL ADDRESS: STREET 2: 22 VILLAGE SQUARE CITY: NEW HOPE STATE: PA ZIP: 18938 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: BORISLOW DANIEL M CENTRAL INDEX KEY: 0001002057 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 6805 ROUTE 202 CITY: NEW HOPE STATE: PA ZIP: 18938 BUSINESS PHONE: 2158621500 MAIL ADDRESS: STREET 1: 6805 ROUTE 202 CITY: NEW HOPE STATE: PA ZIP: 18938 SC 13D 1 SCHEDULE 13D SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 2) Tel-Save Holdings, Inc. --------------------------------------------------------------- (Name of Issuer) Common Stock, par value $.01 per share (Title of Class of Securities) 879176105 (CUSIP Number) Daniel Borislow 6805 Route 202 New Hope, PA 18938 Tel. (215) 862-1500 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) March 10, 1997 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box: [ ] Check the following box if a fee is being paid with this statement: [ ] SCHEDULE 13D CUSIP No. 879176105 - -------------------------------------------------------------------------------- (1) Names of Reporting Person S.S. or I.R.S. Identification No. of Above Person Mr. Daniel Borislow - -------------------------------------------------------------------------------- (2) Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ] (b) [X] - -------------------------------------------------------------------------------- (3) SEC Use Only - -------------------------------------------------------------------------------- (4) Source of Funds (See Instructions) Not applicable - -------------------------------------------------------------------------------- (5) Check Box if Disclosure of Legal Proceedings is required Pursuant to Items 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- (6) Citizenship or Place of Organization American - -------------------------------------------------------------------------------- Number of (7) Sole Voting Power Shares 15,446,540* Beneficially ------------------------------------------------------- Owned by (8) Shared Voting Power Each Reporting 8,790,000 Person With ------------------------------------------------------- (9) Sole Dispositive Power 14,749,000* ------------------------------------------------------- (10) Shared Dispositive Power 1,200,000 ------------------------------------------------------- *Subject to the restrictions described in Item 5 of Schedule 13D. - -------------------------------------------------------------------------------- (11) Aggregate Amount Beneficially Owned by Each Reporting Person 24,236,540 - -------------------------------------------------------------------------------- (12) Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ] - -------------------------------------------------------------------------------- (13) Percent of Class Represented by Amount in Row (11) 38.53% - -------------------------------------------------------------------------------- (14) Type of Reporting Person (See Instructions) IN - -------------------------------------------------------------------------------- This Amendment No. 2 restates and amends Items 4, 5, 6 and 7 of the Schedule 13D (the "Schedule 13D") of the Reporting Person (as such term is defined therein) dated October 5, 1995 as amended on April 24, 1996. Capitalized terms have the same meanings as in the Schedule 13D. Item 1. Security and Issuer. ------------------- (a) This Statement relates to the common stock, par value $.01 per share (the "Common Stock"), of Tel-Save Holdings, Inc. (the "Company"). (b) The Company's principal executive offices are located at 6805 Route 202, New Hope, Pennsylvania 18938. Item 2. Identity and Background. ----------------------- (a) Name: This Statement is being filed by Daniel M. Borislow (the "Reporting Person"). The filing of this Statement shall not be construed as an admission (i) that the Reporting Person is, for the purpose of Section 13(d) or 13(g) of the Securities Exchange Act of 1934, as amended, the beneficial owner of any of the securities covered by this Schedule, or (ii) that this Schedule is legally required to be filed by the Reporting Person. (b) Residence or Business Address: The business address of Daniel M. Borislow is 6805 Route 202, New Hope, Pennsylvania 18938. (c) Principal Occupation/Business: The principal occupation of Daniel M. Borislow is Chairman and Chief Executive Officer of the Company. (d) Criminal Convictions: The Reporting Person has not during the last five years been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (e) Court or Administrative Proceedings: During the last five years, the Reporting Person has not been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of which such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) Citizenship: The Reporting Person is a citizen of the United States. Item 3. Source and Amount of Funds or Other ----------------------------------- Considerations. --------------- On September 22, 1995, the shares of Tel-Save, Inc., a Pennsylvania corporation (the "Predecessor Corporation"), owned by its existing stockholders (the Reporting Person and Paul Rosenberg) were contributed to the Company pursuant to a Plan of Reorganization dated as of August 28, 1995 (the "Plan"). Under the Plan, the Reporting Person exchanged all of his shares of the Predecessor Corporation for 7,020,000 shares of Common Stock of the Company plus loans of up to $5,000,000. Item 4. Purpose of Transaction. ----------------------- The Reporting Person acquired the shares of Common Stock for investment purposes in connection with the Reorganization described in Item 3. The Reporting Person may dispose of all or a portion of the Company's securities held by him depending upon market prices of such shares, subject to the limitations described in Item 6. Except as described above, the Reporting Person has no present plans or proposals which relate to or would result in any of the following: (a) The acquisition by any person of additional securities of the Company or the disposition of securities of the issuer; (b) An extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries; (c) A sale or transfer of a material amount of assets of the Company or any of its subsidiaries; (d) Any change in the present board of directors or management of the Company, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board; (e) Any material change in the present capitalization or dividend policy of the Company; (f) Any other material change in the Company's business or corporate structure; (g) Any changes in the Company's charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Company by any person; (h) Causing a class of securities of the Company to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; (i) A class of equity securities of the Company becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Exchange Act; or (j) Any action similar to any of those enumerated above. Item 4 was amended on April 24, 1996 as follows: On April 19, 1996, the "Company" completed a public offering of 9,000,000 shares of Common Stock. Of the 9,000,000 shares offered and sold, the Company sold 8,250,000 shares and the Reporting Person sold 750,000 shares. Item 4 is hereby amended as follows: On March 10, 1997, the Reporting Person sold 3,911,000 shares to certain purchasers in a private sale; in addition, the Reporting Person has agreed to place 1,564,400 in escrow for the benefit for such purchaser(s) under the terms and conditions described in Item 5b. Item 5. Interests in Securities of the Issuer. -------------------------------------- (a) Beneficial Ownership and (b) Voting and Dispositive Powers: ----------------------------------------------------------- Items 7, 8, 9, 10, 11, 12 and 13 from page 2 of this Statement are incorporated herein by reference. The Reporting Person and Mr. Rosenberg entered into a voting trust agreement pursuant to which the Reporting Person will retain voting power over Mr. Rosenberg's 2,530,000 shares of Common Stock for ten years; however, the voting trust agreement is terminable by Mr. Rosenberg at any time and Mr. Rosenberg is not required to place his shares in trust until requested by the Reporting Person. The Reporting Person has been advised of the following facts by Mr. Rosenberg. The business address of Mr. Rosenberg is 600 North 4th Street, Philadelphia, Pennsylvania 19123. The principal occupation of Mr. Rosenberg is owner and operator of National Telecoin Corporation. During the last five years, Mr. Rosenberg has not been convicted in a criminal proceeding (excluding traffic violations and similar misdemeanors). During the last five years, Mr. Rosenberg has not been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction, and as a result of which such proceeding was or is subject to a judgment, decree or final order enjoining future violations of or prohibiting or mandating activities subject to federal or state securities laws or finding any violation with respect to such laws. Mr. Rosenberg is a citizen of the United States. The Reporting Person is the voting trustee for two (2) voting trusts that have substantially similar terms, one which holds 247,540 shares of Common Stock of the Company owned by Collective Communications Services, Inc. ("CCS), a Pennsylvania corporation ("the CCS Voting Trust") and one which holds 450,000 shares of Common Stock of the Company owned by Network Plus, Inc. ("Network Plus"), a Massachusetts corporation ("Network Plus Voting Trust"). Pursuant to the terms of each of the Voting Trusts, each of CCS and Network Plus may sell the shares of common stock in the respective Voting Trusts at any time, and each of the Voting Trusts will dissolve whenever CCS or Network Plus sells all of the shares of common stock contained in the respective Voting Trust. The Company has a right of first refusal upon sale or transfer of the by Network Plus and CCS of shares in the respective Voting Trusts. The aggregate number and percentage of outstanding shares beneficially owned by the Reporting Person are set forth below. Unless otherwise indicated, the Reporting Person has sole voting and dispositive power with respect to the shares listed. Beneficial Ownership ------------------------------ Name Number of Shares Percentage ---- ---------------- ---------- Daniel Borislow 24,236,540(1) 38.53%(2) (1) Includes 1,564,400 shares subject to a stock purchase agreement and an escrow agreement that may be acquired by the purchasers under certain circumstances described in paragraph (c) below. Also includes 300,000 shares that may be acquired upon the exercise of stock options. (2) Based upon 62,887,998 shares outstanding as of March 10, 1997. In calculating the beneficial ownership percentage for the Reporting Person, shares of Common Stock subject to options held by the Reporting Person are added to the total number of shares of Common Stock outstanding. On March 10, 1997, the Reporting Person sold 3,911,000 shares pursuant to the terms of a Stock Purchase Agreement dated March 10, 1997 (the "Stock Purchase Agreement") by and between the Reporting Person and MFS/SUN Life Series Trust on behalf of Capital Appreciation Series, Sun Life Assurance Company of Canada (U.S.) on behalf of Capital Appreciation Variable Account, MFS Growth Opportunities Fund, MFS Series Trust II on behalf of MFS Emerging Growth Fund, Putnam OTC & Emerging Growth Fund and Conseco Capital Management (the "Purchasers"). The price per share was $16.50. Pursuant to the Stock Purchase Agreement, the Reporting Person entered into an escrow agreement (the "Escrow Agreement") with the Purchasers and an escrow agent. Under the Stock Purchase Agreement and the Escrow Agreement, the Reporting Person deposited 1,564,400 shares in escrow, to be held for the benefit of the Purchasers and to be distributed to them (in part or in full) in the event that the average current market of the shares in the twenty days prior to the fifth business date after the date on which the Issuer announces its financial results for the third quarter of 1997 (the "Determination Date") shall be lower than $16.50. The amount of escrow shares to be distributed to the Purchasers is to be determined by the percentage of decrease, if any, in the price of the shares. Until the Determination Date, the Reporting Person shall retain the sole voting powers with respect to the escrow shares and the right to receive all cash dividends issued on such shares. (c) Transactions in Securities of the Company During Past Sixty -------------------------------------------------------------- Days: - ----- See Item 3. (d) Dividends and Proceeds: ----------------------- N/A (e) Date Reporting Person Ceased to be Beneficial Owner of More than 5% of the Company's Stock: N/A Item 6. Contracts, Arrangements, Understandings ------- --------------------------------------- or Relationships With Respect to -------------------------------- Securities of the Issuer ------------------------ See Items 2 and 5. Under the Plan, Mr. Rosenberg exchanged all of his shares of the Predecessor Corporation of 2,530,000 shares of Common Stock of the Company, $4,500,000 in cash plus a note in the original principal amount of $6,900,000 (the "Cash Flow Note"). The Cash Flow Note was personally guaranteed by the Reporting Person and the guarantee collateralized with 539,063 shares of the Reporting Person's Common Stock. Until five years from the final closing of the Company's initial public offering (i) the Reporting Person has granted to Mr. Rosenberg the right to participate with the Reporting Person in any sales of the Reporting Person's shares of Common Stock at the same price per share and terms, subject to exceptions for Rule 144 sales and sales after Mr. Rosenberg's ownership of Common Stock is less than four percent of the outstanding shares of Common Stock, and (ii) Mr. Rosenberg has granted to the Reporting Person a right of first refusal on Mr. Rosenberg's shares of Common Stock, subject to similar exceptions. Item 6 was amended on April 24, 1996 as follows: In accordance with the terms of the Underwriting Agreement, the Reporting Person has agreed that he will not during a period of 120 days following April 15, 1996, without the prior written consent of Salomon Brothers Inc., offer, sell or contract to sell, or otherwise dispose of, directly or indirectly, or announce the offering of, any other shares of Common Stock beneficially owned by such person, or any securities convertible into, or exchangeable for, shares of Common Stock, other than shares of Common Stock disposed of as bona fide gifts or shares of Common Stock issuable upon the exercise of certain outstanding warrants pursuant to which the Company has assigned to the Reporting Person its obligations to deliver the Common Stock thereunder. Item 6 is amended as follows: In accordance with the terms of the Stock Purchase Agreement, the Reporting Person has agreed that except for the disposition of up to 2,000,000 shares of Common Stock to a charitable foundation, he will not sell, assign, transfer or otherwise dispose of any additional shares of Common Stock for a period of twelve (12) months from March 10, 1997 (the "Lock-up Period"); provided, however, that if the current market price of the Common Stock shall increase by an amount greater than 20% from $16.50 per share for a period of twenty (20) consecutive trading days, the Lock-up Period shall be reduced to ninety (90) days. The Reporting Person shall be released from the aforesaid restrictions if a third party shall make an offer to purchase a majority of the Issuer's outstanding Common Stock. Item 7. Material to be Filed as Exhibits -------------------------------- 10.1 Plan of Reorganization between and among the Company, Tel-Save, Inc., the Reporting Person and Paul Rosenberg. (previously filed)0 10.2. Guarantee and Stock Pledge Agreement entered into September 25, 1995 by and among the Reporting Person, Paul Rosenberg and Midlantic Bank. (previously filed) 10.3. Voting Trust Agreement dated as of September 25, 1995 by and among Paul Rosenberg, the Reporting Person and the Company (previously filed) 10.4. Co-Sale/Right of First Refusal Agreement dated as of September 25, 1995 by and among the Company, the Reporting Person and Paul Rosenberg. (previously filed) 10.5. Underwriting Agreement dated as of April 15, 1996. (previously filed) 10.6. Stock Purchase Agreement among the Purchaser listed therein and the Reporting Person dated March 10, 1997 (filed herewith) 10.7. Escrow Agreement among Marine Midland Bank as Escrow Agent, the Purchasers listed there and the Reporting Person dated March 10, 1997 (filed herewith) 10.8 Registration Rights Agreement between the Issuers and the Purchasers dated March 10, 1997 (filed herewith) - -------- *Incorporated by reference to the Registration Statement on Form S-1 of Tel-Save Holdings, Inc. (File No. 33-94940). Signature --------- After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. /s/Daniel Borislow ------------------------------ Daniel Borislow Dated: March 12, 1997 EX-10.8 2 EXHIBIT 10.8 REGISTRATION RIGHTS AGREEMENT This REGISTRATION RIGHTS AGREEMENT, dated as of March 10, 1997, is among each of the several Purchasers whose names appear on the signature pages hereof (referred to collectively as the "Purchasers" and individually as the "Purchaser") and TEL-SAVE HOLDINGS, INC., a Delaware corporation ("Holdings"). Capitalized terms used herein without definition shall have the meanings assigned in the Stock Purchase Agreement described in the second recital below. W I T N E S S E T H: WHEREAS, Mr. Daniel Borislow ("Borislow") is the owner beneficially and of record of 19,860,000 shares of common stock, par value $.01 per share (the "Common Stock") of Holdings; WHEREAS, Borislow desires to sell, and the Purchasers desire to purchase, 3,911,000 shares of Common Stock (the "Firm Shares") subject to the terms and conditions of the Stock Purchase Agreement, dated the date hereof, among Borislow and the Purchasers (the "Stock Purchase Agreement") subject to the terms and conditions set forth therein; WHEREAS, Borislow and the Purchasers have, simultaneously herewith, entered into an Escrow Agreement, dated the dated hereof (the "Escrow Agreement"), which Escrow Agreement provides for the deposit by Borislow of 1,564,400 shares of Common Stock (the "Escrow Shares") with an Escrow Agent (as defined therein), subject to the terms and conditions set forth therein and in the Stock Purchase Agreement; and WHEREAS, Holdings desires to grant to the Purchasers certain registration rights in connection with the Firm Shares and the Escrow Shares (referred to herein together as the "Shares"). NOW THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: 1. Definitions "Commission" means the Securities and Exchange Commission. "Common Stock" means common stock, par value $.01 per share, of Hold- ings. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Prospectus" means the prospectus included in any Registration Statement, as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement and by all other amendments and supplements to the prospectus, including post-effective amendments and all material incorporated by reference in such prospectus. "Registrable Securities" means as of any date the Shares and any securities issued or issuable with respect to any of such Shares (x) by way of stock split, stock dividend or other distribution, (y) in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or (z) in any other way. Any Registrable Security will cease to be a Registrable Security when (i) a Registration Statement covering such Registrable Security has been declared effective by the Commission and such Registrable Securities have been disposed of or purchased, as the case may be, pursuant to such effective Registration Statement, (ii) it is sold under circumstances in which all of the applicable conditions of Rule 144 (or any similar provisions then in force) under the Securities Act are met or it may be sold pursuant to Rule 144(k) under the Securities Act or (iii) it has been otherwise transferred, and Holdings has delivered a new certificate or other evidence of ownership for it not bearing a legend and it may be resold without subsequent registration under the Securities Act. "Registration Statement" means any registration statement of Holdings, including the prospectus, amendments and supplements to such Registration Statement, including post-effective amendments, and all exhibits and all material incorporated by reference in such Registration Statement, which relates to Registrable Securities. "Securities Act" means the Securities Act of 1933, as amended. "Selling Shareholder" shall have the meaning set forth in Section 3(a). -2- "Shares" mean the Firm Shares and Escrow Shares. "Underwriter" means a securities dealer that purchases any Registrable Securities as principal and not as part of such dealer's market-making activities. 2. Purchaser Understandings and Agreements (a) Each of the Purchasers acknowledges and agrees that it has acquired the Firm Shares, and will acquire the Escrow Shares, if any, in transactions not involving a public offering and that such Shares are subject to certain restrictions as to resale under the federal and state securities laws. Each of the Purchasers agrees and understands that until satisfaction of the conditions set forth in Section 2(c), stop transfer instructions will be given to the transfer agent for the Shares and each certificate for Shares, and each certificate delivered on transfer of or in substitution for any such certificate, shall bear a legend in substantially the following form: The shares represented by this certificate are subject to restrictions imposed by the Securities Act of 1933, as amended, and applicable state securities law. The shares may not be sold or transferred in the absence of registration or an exemption therefrom under the Securities Act of 1933 and any applicable state securities laws. (b) Each of the Purchasers agrees that it will not sell, pledge, assign, transfer or otherwise dispose (collectively, "Transfer") of any of the Shares unless the Transfer will be made pursuant to an exemption from the registration requirements of the Securities Act or pursuant to an effective registration statement under the Securities Act and pursuant to an exemption from any applicable state securities laws or an effective registration or other qualification under any applicable state securities laws. Exemptions from such registration requirements are limited and Holdings understands that each of the Purchasers has obtained advice from its own counsel as to the nature and conditions of such exemptions. Holdings is under no obligation to register the Shares except as provided in Section 3. Holdings shall not incur any liability for any delay in recognizing any Transfer of Shares by any Shareholder if Holdings reasonably believes that such -3- transfer may have been or would be in violation of the provisions of this Agreement. 3. Registration (a) As soon as practicable after the date hereof, Holdings shall file, at its sole election, either (A) a Registration Statement on Form S-3 to permit resale of all of the Registrable Securities held by the Purchasers or (B) a "shelf" Registration Statement on Form S-3 (or its then equivalent) with respect to the resale of all of the Registrable Securities held by the Purchasers pursuant to Rule 415 (or any similar provision that may be adopted by the Commission) under the Securities Act; provided that Holdings, at its election, may delay such filing or the effectiveness of the Registration Statement, but not beyond the date of filing of its next quarterly or annual report with the Commission under the Exchange Act, whichever is earlier, if the Board of Directors of Holdings shall have determined in good faith that such filing or effectiveness would be detrimental to Holdings' business interests. Holdings shall give twenty (20) days notice to each of the Purchasers of such registration. In its capacity as a holder of Registrable Securities that are to be included in the Registration Statement, each of the Purchasers is sometimes referred to as the "Selling Shareholder". (b) Holdings agrees to use commercially reasonable efforts to have the Registration Statement described in Section 3(a) declared effective as soon as practicable after the date of filing thereof, but in any event, within sixty (60) days, and to keep such Registration Statement effective for a period of not less than two (2) years after effectiveness, except that such Date shall be extended by one day for each day beyond thirty (30) days that the filing of the Registration Statement is delayed pursuant to the provisions of Section 4(b). (c) Nothing in this Section 3 shall require Holdings to file a registration statement for an underwritten offering or to participate therein. 4. Registration In connection with the Registration Statement filed pursuant to Section 3 hereof: -4- (a) Holdings may require the Selling Shareholders to furnish to Holdings such information regarding the distribution of such securities as Holdings may from time to time reasonably request in writing as being necessary or appropriate for completion of the Registration Statement and each Selling Shareholder agrees to cooperate with Holdings in all reasonable respects in connection with the preparation and filing of any Registration Statements hereunder in which such Registrable Securities are included or expected to be included. (b) The Selling Shareholder agrees that, at any time when any Registration Statement is effective, upon receipt of any written notice from Holdings of the happening of any of the following events: (i) any request by the Commission for amendments or supplements to the Registration Statement or the Prospectus or for additional information, (ii) the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose, (iii) the receipt by Holdings of any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, and (iv) the existence of any fact (including, without limitation, any fact the disclosure of which at such time the Board of Directors of Holdings shall have determined in good faith would be detrimental to Holdings' business interests) that results in the Registration Statement, the Prospectus or any document incorporated therein by reference containing an untrue statement of material fact or omitting 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, in the case of the Prospectus) not misleading (provided that Holdings may not exercise this right for more than ninety (90) days in any twelve month period), the Selling Shareholder will forthwith discontinue disposition of Registrable Securities pursuant to the Registration Statement until such Selling Shareholder's receipt of copies of a supplemented or amended Prospectus that does not contain an untrue statement of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading, or until it is advised in writing by Holdings that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are -5- incorporated by reference in the Prospectus, and, if so directed by Holdings, such Selling Shareholder will deliver to Holdings (at Holdings' expense) all copies, other than permanent file copies then in such Selling Shareholder's possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice. (c) Holdings shall pay the costs and expenses of preparation and filing of any Registration Statement filed in accordance with Section 3(a), including the costs of printing and distributing the Registration Statement and any preliminary and final Prospectus, the fees and disbursements of counsel to Holdings (including fees and disbursements incurred for "blue sky" matters), the costs and expenses of its accountants, any registration or other fees payable to the Commission, any stock exchange, the National Association of Securities Dealers, Inc., and underwriting or brokerage fees, discounts or commissions and any transfer taxes. All other costs shall be paid by the Selling Shareholder, including fees and disbursements of its counsel. In connection with any such Registration Statement, the Selling Shareholder shall furnish Holdings with such information as may be required for inclusion in the Registration Statement or for submission to the Commission concerning the Selling Shareholder, the Shares and any plan of distribution. (d) (i) The Selling Shareholder shall indemnify and hold harmless Holdings, its directors, its officers who sign the Registration Statement and each person, if any, who controls Holdings within the meaning of Section 15 of the Securities Act against any and all losses, claims, damages and liabilities (including any investigation, legal and other expenses incurred in connection with, and any amount paid in settlement of, any action, suit, proceeding or asserted claim) insofar as such losses, claims, damages and liabilities arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendments thereto or any Prospectus or preliminary prospectus forming a part thereof or any supplement thereto or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, if and to the extent such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished by such Selling Shareholder expressly for inclusion in such -6- Registration Statement, Prospectus, preliminary prospectus, amendment or supplement. In connection with an underwritten offering of the Shares, the Underwriter will enter into an agreement under which such Underwriter will indemnify Holdings to the extent that any untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished by such Underwriter specifically for inclusion in the Registration Statement, Prospectus, preliminary prospectus, amendment or supplement. (ii) Holdings shall indemnify and hold harmless the Selling Shareholder and any of its trustees directors, officers and partners and each person, if any, who controls the Selling Shareholder within the meaning of Section 15 of the Securities Act against any and all losses, claims, damages and liabilities, joint or several (including any investigation, legal and other expenses incurred in connection with, and any amount paid in settlement of, any action, suit, proceeding or asserted claim) insofar as such losses, claims, damages and liabilities arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement and any amendments thereto or any Prospectus or preliminary prospectus forming a part thereof or any supplement thereto or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except any such untrue statement or alleged untrue statement or omission or alleged omission that is made in reliance upon and in conformity with information furnished by Selling Shareholders in writing specifically for inclusion in such Registration Statement, Prospectus, preliminary prospectus, amendment or supplement; provided, that Holdings shall not be liable in any such case to or in respect of the Selling Shareholder to the extent that any such loss, claim, damage, liability or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any preliminary prospectus if (i) such Selling Shareholder failed to send or deliver a copy of the Prospectus with or prior to the delivery of written confirmation of the sale of Registrable Securities and (ii) the Prospectus would have completely corrected such untrue statement or omission; and provided, further, that Holdings shall not be liable in any such case to or in respect of the Selling Shareholder to the extent that any such loss, claim, damage, liability or expense arises out of or is -7- based upon an untrue statement or alleged untrue statement or omission or alleged omission in the Prospectus, if such untrue statement or alleged untrue statement, omission or alleged omission is completely corrected in an amendment or supplement to the Prospectus and if, having previously been furnished by or on behalf of Holdings with copies of the Prospectus as so amended or supplemented, such Selling Shareholder thereafter fails to deliver (if and to the extent required by the Securities Act) such Prospectus as so amended or supplemented, prior to or concurrently with the sale of a Registrable Security to the person asserting such loss, claim, damage, liability or expense who purchased such Registrable Security that is the subject thereof from such Selling Shareholder. In connection with any underwritten offering of Registrable Securities, Holdings will enter into an agreement under which Holdings will agree to indemnify the Underwriters to the same extent as it indemnifies the Selling Shareholder. (iii) Any party that proposes to assert the right to be indemnified under this Section 4(d) will, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim is to be made against an indemnifying party under this Section 4(d), notify each such indemnifying party of the commencement of such action, suit or proceeding, enclosing a copy of all papers served, but the omission so to notify such indemnifying party or any such action, suit or proceeding shall not relieve it from any liability that it may have to any indemnified party otherwise than under this Section 4(d). In case any such action, suit or proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in, and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof the indemnifying party shall not be liable to such indemnified party for any legal or other expenses, other than reasonable costs of investigation subsequently incurred by such indemnified party in connection with the defense thereof. The indemnified party shall have the right to employ its counsel in any such action, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless -8- (i) the employment of counsel by such indemnified party has been authorized by the indemnifying parties, (ii) the indemnified party shall have reasonably concluded that there may be a conflict of interest between the indemnifying parties and the indemnified party in the conduct of the defense of such action (in which case the indemnifying parties shall not have the right to direct the defense of such action on behalf of the indemnified party) or (iii) the indemnifying parties shall not in fact have employed counsel to assume the defense of such action. An indemnifying party shall not be liable for any settlement of any action or claim effected without its consent. (e) Holdings' obligation to effect registration of Registrable Securities hereunder shall include such qualification under applicable blue sky or other state securities laws as may be necessary to enable the Selling Shareholder to offer and sell the Registrable Securities. (f) Holdings shall furnish as soon as available to each Selling Shareholder covered by such registration statement such number of copies of (i) preliminary and final versions of such registration statement and of each amendment, post-effective amendment and supplement thereto (in each case including exhibits), (ii) preliminary and final versions of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and (iii) such other documents relating to such registration statement, all as each Selling Shareholder may reasonably request. (g) Holdings shall prepare and file with the Commission such amendments and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities. (h) Holdings shall use its best efforts to register or qualify such Registrable Securities under such securities or blue sky laws of such jurisdiction as the Purchasers shall reasonably request, and do any and all other acts and things that may be necessary of advisable to enable each Purchaser to consummate the disposition in such jurisdictions of its Registrable Securities -9- covered by such Registration Statement; provided, however, that Holdings shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or subject to taxation in any jurisdiction in which it is not so qualified. 5. Reporting Requirements (a) With a view to making available the benefits of certain rules and regulations of the Commission that may at any time permit the sale of Shares to the public without registration or a registration on SEC Form S-3, Holdings agrees to use its best efforts to: (i) make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act; (ii) file with the Commission in a timely manner all reports and other documents required of Holdings under the Securities Act and the Exchange Act; and (iii) so long as any of the Purchasers own Registrable Securities, to furnish to the Purchasers forthwith upon request (1) a written statement by Holdings as to whether it complies with the reporting requirements of said Rule 144, the Securities Act and the Exchange Act, or whether it qualifies as a registrant whose securities may be resold pursuant to SEC Form S-3, (2) a copy of the most recent annual or quarterly report of Holdings and such other reports and documents so filed by Holdings, and (3) such other information as may be reasonably requested in availing the Selling Shareholders of any rule or regulation of the Commission that would permit the selling of the Registrable Securities without registration. 6. Opinion of Counsel Notwithstanding the other provisions of this Agreement, the condition set forth in the first sentence of Section 2(b) as to each of the Purchasers shall be deemed satisfied upon submission to Holdings of an opinion, in form and substance satisfactory to Holdings and its counsel, of counsel reasonably satisfactory to Holdings and its counsel to the effect that a proposed sale, transfer or other disposition of the Shares held by such Purchaser may be made without registration under -10- the Act. Upon receipt of such an opinion, Holdings will issue a new certificate without the foregoing legend in substitution for any such certificate bearing such legend. 7. Notices All notices or other communications under this Agreement shall be in writing and shall be deemed to have been given on the date of delivery if delivered by hand or on the fifth date after mailing it by certified mail, postage prepaid, return receipt requested, or on the date of transmission if delivered by facsimile transmission (which shall be followed by delivery of an original copy), addressed as follows: If to Holdings: 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 If to the Purchasers at their respective addresses as set forth in the Stock Purchase Agreement. Any of Holdings and the Purchasers 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 Section 7. 8. Amendment Except as otherwise provided herein, this Agreement 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- 9. Severability If for any reason any provision, paragraph or terms of this Agreement 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 Agreement shall be deemed to be severable. 10. Governing Law This Agreement shall be deemed to be a contract made under the laws of the State of New York and for all purposes shall be governed by and construed in accordance with the laws of said State. 11. Entire Agreement This Agreement 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. 12. Construction Section headings used herein are included herein for conveniences of reference only and shall not affect the construction of this Agreement nor constitute a part of this Agreement for any other purpose. The words "herein," "hereof," "hereby," "hereto," "hereunder" and words of similar import refer to this Agreement as a whole and not to any particular article, section, paragraph, subparagraph or other subdivision of this Agreement. Defined terms shall include the plural and the singular as the context shall require. 13. Successors and Assigns This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, successors and assigns. -12- 14. Counterparts This Agreement may be executed in any number of counterparts, each of which shall constitute an original, but together shall be deemed to be one and the same document. -13- IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day and year first above written. TEL-SAVE HOLDINGS, INC. By: --------------------------------- Name: Daniel Borislow Title: Chairman & CEO Purchaser By: ---------------------------------- Name: ----------------------------- Title: --------------------------- Purchaser By: ---------------------------------- Name: ----------------------------- Title: --------------------------- Purchaser By: ---------------------------------- Name: ----------------------------- Title: --------------------------- -14- EX-10.6 3 EXHIBIT 10.6 STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT dated as of March 10, 1997 (this "Agreement") by and between Mr. Daniel Borislow (the "Seller") and each of the several Purchasers whose names appear on the signature pages hereof (each a "Purchaser"). W I T N E S S E T H: WHEREAS, the Seller is the owner beneficially and of record of 19,860,000 shares of common stock, par value $.01 per share (the "Common Stock") of Tel-Save Holdings, Inc., a Delaware corporation (the "Company"); WHEREAS, the Seller desires to (i) sell, in the aggregate, 3,911,000 shares of Common Stock (the "Firm Shares") to the several Purchasers in accordance with their Purchaser Commitments (as defined herein), and (ii) to place an additional 1,564,400 of shares of Common Stock in escrow (the "Escrow Shares") for the benefit of the several Purchasers, in proportion to their Purchase Commitments, for distribution to the several Purchasers under the terms of this Agreement and the Escrow Agreement dated the date hereof among the Company and the Escrow Agent for the benefit of the several Purchasers (in the form attached hereto as Annex A, the "Escrow Agreement") (the Firm Shares and the Escrow Shares, together, are referred to herein as the "Shares"); and WHEREAS, the Company and the several Purchasers have, simultaneously herewith, entered into a Registration Rights Agreement, dated the date hereof (in the form attached hereto as Annex B, the "Registration Rights Agreement"), granting to the Purchaser certain registration rights in connection with the Shares. NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements hereinafter contained, the parties hereto agree as follows: 1. Purchase and Sale of the Firm Shares; Deposit of Escrow Shares. At the Closing hereinafter provided for and subject to all of the terms and conditions hereinafter contained, the Seller agrees (a) to sell to each of the several Purchasers the Firm Shares in the amount set forth next to the name of such Purchasers under the column headed "Purchase Commitment" on the signature pages hereto and the Purchaser agrees to purchase such Firm Shares, and (b) the Seller agrees to deposit with the Escrow Agent, in accordance with the Escrow Agreement, the Escrow Shares. 2. Purchase Price. At the Closing, each of the several Purchasers shall pay to the Seller an amount equal to the product of $16.50 times the number of Firm Shares representing such Purchaser's Purchase Commitment. 3. Representations and Warranties and Covenants of the Seller (a) The Seller represents and warrants to the Purchasers: (i) At the Closing, the Seller shall have the unrestricted right to sell, assign and deliver the Firm Shares to the Purchasers and the Escrow Shares to the Escrow Agent and to deliver title to such Shares free and clear of any liens or encumbrances other than restrictions on the Escrow Shares arising hereunder and under the Escrow Agreement. (ii) The Seller has capacity, power and authority to enter into this Agreement and consummate the transactions contemplated hereby. (iii) The Seller has duly and validly authorized, executed and delivered this Agreement and the Escrow Agreement and this Agreement and the Escrow Agreement constitute a valid and binding obligation of the Seller. (iv) The Seller has not directly or indirectly sold or disposed of, or attempted or offered to sell or dispose of, the Shares or similar securities to, or solicited offers to buy any Shares from, or otherwise approached or negotiated with respect to the Shares or similar securities with, any person that might be considered to be an offeree in connection with the sale of the Shares or similar securities, except the Purchasers and not more than ten (10) other institutional investors, each of which was offered all or a portion of the Shares as a private sale for investment. The Shares were not offered or sold by any form of general solicitation or general advertising, including, but not limited to, (a) any -2- advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio or (b) any seminar or meeting whose attendees had been invited by any general solicitation or general advertising. (v) The Seller is not prompted to sell the Shares due to its knowledge of any material nonpublic information concerning or affecting the Company, its business relationships, markets or personnel. (vi) The Seller has made available to the Purchaser copies of Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995 and all other filings by Company under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the filings by Company under the Securities Act of 1933, as amended (the "Securities Act"), in each case since January 1, 1996 and as filed with the Securities and Exchange Commission (the "Commission"). The 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 the SEC Reports complied, in all material respects, with the requirements of the Exchange Act. 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. The Seller has made available to each Purchaser a reasonable opportunity to discuss with the Seller any questions such Purchaser may have in connection with such Purchaser's acquisition of the Shares or with respect to the Company. Since December 31, 1996, there has not been any change in the business, property, financial condition or results of operations of the Company and its subsidiaries, taken as a whole, that would have a material adverse effect on the business of the Company. (vii) Based on the Purchaser's representations and warranties, the offer, issue and sale of the Firm Shares are exempt from registration under the Securities Act. -3- (viii) Neither the execution and delivery by the Seller, nor the consummation by the Seller of the transactions contemplated hereby in accordance with the terms hereof will violate, or conflict with, or result in a breach of any provision of, or constitute a default under, any material agreement to which the Seller is a party. (b) Except for the disposition of up to 1,564,400 shares of Common Stock by the Seller to a charitable foundation and the subsequent disposition of such shares by such foundation, the Seller shall not sell, assign, transfer or otherwise dispose of any additional shares of Common Stock for a period of twelve (12) months from the date hereof (the "Lock-up Period"); provided, however, that if the current market price of the Common Stock shall increase by an amount greater than 20% from the Initial Price (as defined in Section 8(d)) for a period of twenty (20) consecutive trading days, the Lock-up Period shall be reduced to ninety (90) days. Notwithstanding the previous sentence, the Seller shall be released from the restrictions of this paragraph (b) in the event that a third party makes an offer to purchase a majority of the outstanding shares of Common Stock of the Company. 4. Representations and Warranties and Covenants of the Purchaser (a) Each of the several Purchasers represents and covenants and warrants, with respect to itself: (i) Such Purchaser has full power and authority to enter into this Agreement and consummate the transactions contemplated hereby. (ii) Such Purchaser has duly and validly authorized, executed and delivered this Agreement and this Agreement constitutes a valid and binding obligation of such Purchaser. (iii) The transactions contemplated under this Agreement do not require any filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. (iv) Such Purchaser is an "accredited investor" as such term is defined under Rule 501 of Regulation D of the Securities Act of 1933, as amended, and such Purchaser has such knowledge and experience in financial and business matters that -4- it is capable of evaluating the merits and risks of its purchase of the Shares. (v) Such Purchaser is acquiring the Shares to be purchased or received by it hereunder for its own account for the purpose of investment and not with a view to or for sale in connection with any distribution thereof. (b) Each of the several Purchasers agrees with the Seller that from date of the Closing to the Escrow Settlement Date (as defined herein), that such Purchaser shall not engage in any short selling activities with respect to the Company's Common Stock. 5. Conditions to Obligations of the Seller. The obligation of the Seller to deliver to each of the several Purchasers the certificate or certificates representing the number of Firm Shares reflected in such Purchaser's Purchase Commitment shall be subject to the fulfillment of the following conditions by such Purchaser: (a) The representations and warranties of such Purchaser contained in this Agreement shall be true and correct as if made at and as of the time of the Closing and all of the covenants and agreements under this Agreement to be complied with and performed by such Purchaser on or before the Closing shall have been complied with and performed. (b) No order shall have been issued by any court or regulatory body enjoining or delaying the consummation of the transactions contemplated hereby. 6. Conditions to Obligations of the Purchaser. The obligations of each of the several Purchasers under this Agreement shall be subject to the fulfillment of the following conditions: (a) All of the representations and warranties of the Seller contained in this Agreement shall be true and correct as if made at and as of the time of the Closing and all of the covenants and agreements under this Agreement to be complied with and performed by the Seller on or before the Closing shall have been complied with and performed. (b) No order shall have been issued by any court or regulatory body enjoining or delaying the consummation of the transactions contemplated hereby. -5- (c) Simultaneously with the execution of this Agreement, the Seller shall have executed and delivered the Escrow Agreement and the Company shall have executed and delivered the Registration Rights Agreement, each substantially in the form attached hereto as Annex A and B, respectively. 7. The Closing (a) The Closing shall take place at 9:00 a.m. local time on March 10, 1997 at the offices of Arnold & Porter, 399 Park Avenue, New York, N.Y. 10022, or at such other time and place as the Seller and the Purchasers may mutually agree. (b) At the Closing, the Seller shall deliver to each Purchaser one or more certificates in transferable form representing that number of Firm Shares equal to such Purchaser's Purchase Commitment; each such certificate shall be duly endorsed in blank with signatures guaranteed or accompanied by stock powers duly endorsed in blank with signatures guaranteed and with all necessary documentary stamps duly affixed and cancelled. Each Purchaser shall deliver to the Seller a bank cashier's or certified check, or shall cause the wire transfer of funds to an account or accounts designated by the Seller, in the amount determined with respect to such Purchaser in accordance with Section 2. (c) At the Closing, the Seller shall deliver to the Escrow Agent a certificate or certificates representing an aggregate of 1,564,400 shares of Common Stock, for deposit with the Escrow Agent pursuant to the terms of the Escrow Agreement. Each such certificate shall be endorsed in blank with signatures guaranteed or accompanied by stock powers duly endorsed in blank with signatures guaranteed and with all necessary documentary stamps duly affixed and cancelled. The Seller shall be deemed to be the beneficial owner of the Escrow Shares until the Determination Date, as of which date the beneficial ownership of the Shares shall be determined by the Escrow Agent in accordance with the provisions of Section 8 hereof. 8. Purchaser's Rights with Respect to Escrow Shares (a) On the third business day after the Determination Date (the "Escrow Settlement Date"), each of the several Purchasers shall be entitled to receive from -6- the Escrow Agent, the number of Escrow Shares (which shall mean the Escrow Shares and any Registrable Securities as defined in the Registration Rights Agreement issued with respect thereto) calculated as provided below: (i) If the percentage decrease, if any, in the Determination Price from the Initial Price is less than forty percent (40%), then each Purchaser shall receive that number of Escrowed Shares equal to the product of (x) the number of Firm Shares purchased by such Purchaser pursuant to Section 1 and (y) the percentage difference between the Determination Price and the Initial Price. For example, if the Initial Price is $16.50 and the Determination Price is $14.50 (a 12% decrease) and the Purchaser has purchased 1,000 Firm Shares, the Purchaser would receive 120 Escrow Shares. (ii) If the percentage decrease, if any, in the Determination Price from the Initial Price is forty percent (40%) or greater, then the Purchaser shall receive that number of Escrowed Shares equal to the product of (x) the Firm Shares purchased by such Purchaser pursuant to Section 1 and (y) forty percent (40%). For example, if the Initial Price is $16.50 and the Determination Price is $8.00 (51% decrease), and the Purchaser has purchased 1,000 Firm Shares, the Purchaser would receive 400 Escrow Shares. (iii) The Seller shall be entitled to receive any Escrow Shares not allocated to the several Purchasers under the terms of clauses (i) and (ii) above and the Seller shall be entitled to receive all of the Escrow Shares if the Determination Price is higher than or equal to the Initial Price. For example, if the Initial Price is $16.50 and the Determination Price is $22.00, all of the Escrow Shares shall be delivered to the Seller and the Purchasers shall receive no Escrow Shares. (b) If the amount of the Escrow Shares calculated in accordance with paragraph (a) for any Purchaser includes fractional shares, such fractional shares shall be rounded to zero and no Shares or cash compensation will be distributed to the Purchasers on account of such fractional amounts. -7- (c) The right to receive the Escrow Shares as set forth in paragraph (a) above shall only be available to the several Purchasers in accordance with their respective Purchase Commitments. A Purchaser's right to receive the Escrow Shares may not be assigned or transferred to any other person by such Purchaser. (d) For purposes of this Section 8, the following terms have the following meanings. "Determination Date" shall mean the fifth business day after the date on which the Company publicly announces its financial results for the third quarter of 1997. "Determination Price" shall mean the Price per share of Common Stock at the Determination Date and shall be deemed to be the average of the daily closing price for 20 consecutive NASDAQ trading days before the Determination 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 organization 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 of the Company. "Initial Price" shall mean $16.50. (e) At any time before the Determination Date, the Seller shall have the right to substitute for the Escrow Shares an amount in cash equal to the Initial Price times the number of Escrow Shares on deposit. In the event that cash is substituted for the Escrow Shares, any person's right to receive a specified number of Escrow Shares hereunder shall be deemed to be converted into the right to receive cash in an amount equivalent to the number of Escrow Shares allocated to such person times the Initial Price. -8- 9. Registration Rights and the Purchaser Put (a) The Seller shall use all reasonable efforts to cause the Company to register the Shares on an appropriate registration statement to be filed under the Securities Act relating to the subsequent sale by each of the several Purchasers of the Shares acquired by them hereunder, in accordance with the terms of the Registration Rights Agreement. If for any reason a registration statement with respect to the Shares beneficially owned by the Purchasers fails to become effective on or before the 90th calendar day after the date of the Closing (the "Final Registration Date"), the Seller agrees with each Purchaser to repurchase, at the option of each Purchaser, in the manner and upon the conditions set forth herein, the Firm Shares acquired by such Purchaser hereunder for a repurchase price (the "Repurchase Price") equal to (A) the product of Initial Price and the number of Firm Shares tendered for repurchase to the Seller by such Purchaser (the "Base Resale Price"), plus (B) an amount equal to the product of 7.0% and the Base Resale Price. (b) Any Purchaser who wishes to exercise its rights under Section 9(a) hereof must notify the Seller in writing within five (5) business days after the Final Registration Date of the number of Firm Shares such Purchaser intends to tender for repurchase (the "Repurchase Notice"). The Seller and such Purchaser shall agree upon a date to close the repurchase (a "Repurchase Settlement Date"), which date shall be a business day not later than 10 business days after the Repurchase Notice was delivered to the Purchaser. On the Repurchase Settlement Date and on receipt of the funds as provided in the next sentence, the Purchaser shall deliver to the Seller certificates in transferable form representing the Firm Shares to be repurchased by the Seller, each duly endorsed in blank with signatures guaranteed or accompanied by stock powers duly endorsed in blank with signatures guaranteed and with all necessary documentary stamps duly affixed and cancelled. The Seller shall deliver to the Purchaser a bank cashier's or certified check, or shall cause the wire transfer of funds to an account or accounts designated by the Purchaser, in the amount of the Repurchase Price due to such Purchaser in accordance with Section 9(a). -9- Each Purchaser delivering Firm Shares for repurchase represents and warrants thereby that the Purchaser has the unrestricted right to sell, assign and deliver to the Seller title to the Firm Shares tendered, free and clear of any liens or encumbrances. 10. Expenses. Other than as set forth with respect to the Seller and the Company in the Registration Rights Agreement and the Escrow Agreement, each party hereto will pay its own expenses in connection with the transactions contemplated hereby, whether or not such transactions shall be consummated. 11. Survival. All covenants, agreements, representations and warranties made herein shall survive the execution and delivery of this Agreement and the sale of the Shares pursuant hereto. 12. Brokerage. Each party hereto will indemnify and hold harmless the others against and in respect of any claim for brokerage or other commissions relative to this Agreement or to the transactions contemplated hereby, based in any way on agreements, arrangements or understandings made or claimed to have been made by such party with any third party. 13. Notices. All notices or communications shall be in writing and sufficient if sent first class certified mail, return receipt requested, postage prepaid or hand delivered, addressed as specified herein (i) if to any Purchaser, to the address set forth below under such Purchaser's name on the signature pages hereof; and (ii), if to the Seller: Mr. Daniel Borislow Chairman of the Board and Chief Executive Officer Tel-Save, Inc. 6805 Route 202 New Hope, PA 18938 Facsimile No.: 215-862-1083 The parties may change the address to which notices or communications are to be sent to it by giving written notice of any such change in the manner provided for herein. -10- 14. Assignment. Neither this Agreement nor any right hereunder shall be assigned by the Seller or by any Purchaser. 15. Successors. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Seller and each of the several Purchasers. 16. Entire Agreement. This Agreement, together with the Registration Rights Agreement and the Escrow Agreement, constitutes the entire agreement and understanding among the parties hereto in respect of the transactions contemplated hereby, and supersedes all prior agreements, arrangements and understandings relating to the subject matter hereof. 17. Amendment; Waiver. This Agreement may not be amended or modified except by a writing or writings signed by the party against whom the modification or amendment is sought to be enforced. Each party may, at its option, waive in writing any and all conditions herein contained to which its obligations hereunder are subject. 18. Miscellaneous; Descriptive Headings. (a) The rights and obligations of each of the Purchasers herein with respect to the Seller shall be several and not joint. Nothing in this Agreement shall constitute an agreement between a Purchaser, on the one hand, and any other Purchaser or Purchasers, on the other. (b) The descriptive headings contained in this Agreement are for convenience of reference and shall not affect in any way the meaning or interpretation of this Agreement. 19. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but which together shall constitute one and the same instrument. 20. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. -11- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. DANIEL BORISLOW ----------------------------- MASSACHUSETTS FINANCIAL SERVICES 500 Boyleston Street Boston, MA 02116 (617) 954-6603 (Fax) By: ------------------------------ Name: ------------------------- Title: ------------------------ Purchase Commitment: ------------------------------ PUTNAM OTC EMERGING GROWTH FUND One Post Office Square Boston, MA 02109 (617) 292-1784 (Fax) By: ------------------------------ Name: ------------------------- Title: ------------------------ Purchase Commitment: ------------------------------ CONSECO CAPITAL MANAGEMENT 11825 N. Pennsylvania Street Carmel, IN 46032-4555 (317) 817-6247 (Fax) By: ------------------------------ Name: ------------------------- Title: ------------------------ Purchase Commitment: ------------------------------ -12- MFS/SUN LIFE SERIES TRUST on behalf of CAPITAL APPRECIATION SERIES 500 Boyleston Street Boston, MA 02116 (617) 954-6603 (Fax) By: ------------------------------ Name: ------------------------- Title: ------------------------ Purchase Commitment: ------------------------------ SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) on behalf of CAPITAL APPRECIATION VARIABLE ACCOUNT, a separate account 500 Boyleston Street Boston, MA 02116 (617) 954-6603 (Fax) By: ------------------------------ Name: ------------------------- Title: ------------------------ Purchase Commitment: ------------------------------ MFS GROWTH OPPORTUNITIES FUND 500 Boyleston Street Boston, MA 02116 (617) 954-6603 (Fax) By: ------------------------------ Name: ------------------------- Title: ------------------------ Purchase Commitment: ------------------------------ -13- MFS SERIES TRUST II on behalf of MFS EMERGING GROWTH FUND 500 Boyleston Street Boston, MA 02116 (617) 954-6603 (Fax) By: ------------------------------ Name: ------------------------- Title: ------------------------ Purchase Commitment: ------------------------------ - 14 - EX-10.7 4 EXHIBIT 10.7 ESCROW AGREEMENT AGREEMENT, dated as of March 10, 1997, among each of the several purchasers whose names appear on the signature pages hereof (each a "Purchaser" and collectively, the "Purchasers"), Mr. Daniel Borislow ("Borislow") and Marine Midland Bank, as Escrow Agent (the "Escrow Agent"). Capitalized terms used herein without definition shall have the meaning set forth in the Stock Purchase Agreement described in the recitals below. W I T N E S S E T H: WHEREAS, Borislow is the owner beneficially and of record of 19,860,000 shares of common stock, par value $.01 per share (the "Common Stock") of Tel-Save Holdings, Inc., a Delaware corporation ("Holdings"); WHEREAS, Borislow desires to (i) sell, in the aggregate, 3,911,000 shares of Common Stock (the "Firm Shares") to the several Purchasers in accordance with their respective Purchase Commitments and (ii) to place an additional 1,564,400 of shares of Common Stock in escrow (the "Escrow Shares") for the benefit of the several Purchasers, in proportion to their Purchase Commitments, for distribution to the several Purchasers under the terms of the Stock Purchase Agreement, dated the date hereof, among Borislow and the Purchasers (the "Stock Purchase Agreement") and this Agreement; and WHEREAS, the Escrow Agent has agreed to hold in escrow the Escrow Shares pursuant to the terms of this Agreement. NOW THEREFORE, in consideration of the material covenants and agreements herein contained, the parties hereto agree as follows: 1. Escrow Agent. Borislow and Purchasers hereby appoint and designate the Escrow Agent as escrow agent for the purposes set forth herein, and the Escrow Agent hereby accepts such appointment under the terms and conditions set forth herein. 2. Escrow Deposit. (a) At the Closing, Borislow shall deliver to the Escrow Agent certificates for the Escrow Shares, together with stock powers executed by Borislow in blank. For purposes of this Agreement, the term "Escrow Shares" includes any securities issued with respect to such Shares and constituting Registrable Securities under the Registration Rights Agreement. At any time securities that constitute Registrable Securities are received by Borislow, Borislow shall deliver such additional Escrow Shares to the Escrow Agent. (b) The Escrow Agent shall hold and dispose of all of the Shares in the Escrow Deposit (as defined below) in accordance with Section 3 of this Agreement, and shall act as Escrow Agent in accordance with the terms and provisions of this Agreement. (c) Subject to the provisions hereof, the Escrow Agent agrees to hold such amount (including any dividends or other distributions issued on such Escrow Shares during such period, which dividends and other distributions shall be distributed to the Escrow Agent for further distribution in accordance with this Agreement) in a separate and distinct account (the "Escrow Deposit"). Neither Borislow nor any of the Purchasers shall permit the Escrow Deposit to be subject to any Lien or attachment of any creditor of any party hereto and shall take all action to ensure that it be used solely for the purposes and subject to the conditions set forth in this Agreement and the Stock Purchase Agreement. (d) Borislow shall remain the beneficial owner of the Escrow Shares until the Determination Date and shall be entitled to all of the benefits of beneficial ownership including any cash dividends or similar distributions (other than securities constituting Registrable Securities). Borislow shall have the right to vote the Escrow Shares during the period of time in which such Shares are held by the Escrow Agent. 3. Release of the Escrow Deposit 3.1. Notice of Claim. On the Determination Date, the Purchasers and Borislow shall calculate the number of Escrow Shares that each of the Purchasers is entitled to receive, if any, in accordance with Section 8 of the Stock Purchase Agreement. Such amount and the calculation used in determining such amount shall be set forth in a Notice of Claim, which Notice shall be delivered to the Escrow Agent by the Purchasers and Borislow prior to the Escrow Settlement Date. -2- 3.2. Dispute of Escrow Shares. (a) Subject to paragraph (b) below, on the Escrow Settlement Date, the Escrow Agent shall deliver the amount of the Escrow Shares, if any, as set forth in such Notice of Claim to each of the Purchasers. (b) If the Escrow Agent shall have received a written objection from any of the Purchasers or Borislow to the amount of Escrow Shares set forth in any of the Notices of Claim, the Escrow Agent shall not make such delivery of Escrow Shares until otherwise directed pursuant to either: (i) a written instruction signed by Borislow and the relevant Purchaser; or (ii) a nonappealable final order, decree or judgment by a court of competent jurisdiction determining whether and to what extent such Purchaser is entitled to the amount set forth in the Notice of Claim. 3.3. Borislow Entitled to Escrow Shares. The Escrow Agent shall deliver to Borislow any of the Escrow Shares remaining after distribution of the Escrow Shares to the Purchasers under clauses (i) and (ii) of Section 8(a) of the Stock Purchase Agreement. If the Escrow Agent determines that the Purchasers are not entitled to receive any of the Escrow Shares pursuant to clause (iii) of Section 8(a) of the Stock Purchase Agreement, the Escrow Agent shall deliver to Borislow the total number of Escrow Shares in the Escrow Deposit. 4. Responsibilities of the Escrow Agent. The Escrow Agent's acceptance of its duties under this Agreement is subject to the following terms and conditions, which the parties hereto agree shall govern and control with respect to its rights, duties, liabilities and immunities: (a) except as to the due execution and delivery by the Escrow Agent of this Agreement, it makes no representation and has no responsibility as to the validity of this Agreement or of any other instrument referred to herein, or as to the correctness of any statement contained herein, and it shall not be required to inquire as to the performance of any obligation under the Stock Purchase Agreement; (b) the Escrow Agent shall be protected in acting upon any written notice, request, waiver, consent, receipt or other paper or document, not only as to its due execution and the validity and effectiveness of its provisions, but also as to -3- the truth of any information therein contained, which it in good faith believes to be genuine and what it purports to be; (c) the Escrow Agent shall not be liable for any error of judgment, or for any act done or step taken or omitted by it in good faith, or for any mistake of fact or law, or for anything which it may do or refrain from doing in connection therewith, except its own negligence or misconduct; (d) the Escrow Agent may consult with competent and responsible legal counsel selected by it and it shall not be liable for any action taken or omitted by it in good faith in accordance with the advice of such counsel; (e) the Escrow Agent shall have no duties or responsibilities except those expressly set forth herein, and it shall not be bound by any modification of this Agreement unless such modification is in writing and signed by the other parties hereto and, if its duties as Escrow Agent hereunder are affected, unless it shall have given written consent thereto. 5. Amendment and Termination. This Agreement may be amended or terminated only by the written agreement of the parties hereto. 6. Fees of Escrow Agent. Borislow agrees to pay the Escrow Agent its agreed upon compensation, as set forth in a separate agreement, for its services as Escrow Agent hereunder promptly upon request therefor, and to reimburse the Escrow Agent for all expenses incurred by it in connection with its duties hereunder (including reasonable fees, expenses and disbursements of counsel to the Escrow Agent) and Borislow shall indemnify it against and hold it harmless from any and all claims, liabilities, costs, payments and expenses, including fees of counsel (who may be selected by the Escrow Agent), for anything done or omitted by it in the performance of this Agreement, except as a result of its own negligence or misconduct. 7. Notices. All notices and other communications hereunder shall be delivered or mailed by first-class registered or certified mail, postage prepaid, or by facsimile with telephonic confirmation at the address specified for each as follows: -4- (a) If to Borislow or the Purchasers, at their respective addresses as set forth in the Stock Purchase Agreement. (b) If to the Escrow Agent: Marine Midland Bank 140 Broadway New York, New York 10005 Attention: Corporate Trust Department Telephone No.: 212-658-6041 Facsimile No.: 212-658-6425 (c) If to Borislow: Tel-Save Holdings, Inc. 6805 Route 202 New Hope, PA 18938 Facsimile No.: 215-862-1083 Telephone No.: 215-862-1092 8. Governing Law. This Agreement shall be construed, performed and enforced in accordance with the laws of the State of New York, without reference to or application of rules or principles of conflicts of law. 9. Third Parties. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. 10. Headings. The headings in this Agreement are for convenience of reference only and shall not define or limit the provisions hereof. 11. Counterparts. This Agreement may be executed in several counterparts, each of which is an original but all of which together shall constitute one instrument. - 5 - IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written. DANIEL BORISLOW MARINE MIDLAND BANK By: ---------------------------------------- Name: ----------------------------------- Title: ---------------------------------- CONSECO CAPITAL MANAGEMENT By: ---------------------------------------- Name: ----------------------------------- Title: ---------------------------------- PUTNAM OTC EMERGING GROWTH FUND By: ---------------------------------------- Name: ----------------------------------- Title: ---------------------------------- MASSACHUSETTS FINANCIAL SERVICES By: ---------------------------------------- Name: ----------------------------------- Title: ---------------------------------- -6- MFS/SUN LIFE SERIES TRUST on behalf of CAPITAL APPRECIATION SERIES By: ---------------------------------------- Name: ----------------------------------- Title: ---------------------------------- SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) on behalf of CAPITAL APPRECIATION VARIABLE ACCOUNT, a separate account By: ---------------------------------------- Name: ----------------------------------- Title: ---------------------------------- MFS GROWTH OPPORTUNITES FUND By: ---------------------------------------- Name: ----------------------------------- Title: ---------------------------------- MFS SERIES TRUST II on behalf of MFS EMERGING GROWTH FUND By: ---------------------------------------- Name: ----------------------------------- Title: ---------------------------------- - 7 - -----END PRIVACY-ENHANCED MESSAGE-----