-----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, FTEzdQbBYvU2knTFeINYpw5LeCcC0W0tLZF4JJvN6ALsWVB0POYsCf1zB/eZ+rL6 8Bth4IyCHJDG1MW4olhJRQ== 0001005150-99-000365.txt : 19990503 0001005150-99-000365.hdr.sgml : 19990503 ACCESSION NUMBER: 0001005150-99-000365 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990430 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TEL SAVE COM 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: 10-K/A SEC ACT: SEC FILE NUMBER: 000-26728 FILM NUMBER: 99606936 BUSINESS ADDRESS: STREET 1: 6805 ROUTE 202 CITY: NEW HOPE STATE: PA ZIP: 18938 BUSINESS PHONE: 2158621500 MAIL ADDRESS: STREET 1: 6805 RIYTE 202 CITY: NEW HOPE STATE: PA ZIP: 18938 FORMER COMPANY: FORMER CONFORMED NAME: TEL SAVE HOLDINGS INC DATE OF NAME CHANGE: 19950726 10-K/A 1 FORM 10-K/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A AMENDMENT NO.2 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Year Ended December 31, 1998 Commission File No. 0-26728 TALK.COM INC. FORMERLY, TEL-SAVE.COM, INC. (Exact name of registrant as specified in its charter) DELAWARE 23-2827736 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 12020 SUNRISE VALLEY DRIVE, SUITE 100 RESTON, VIRGINIA 22091 (703) 391-7500 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: Title of each class: Name of each exchange on which registered: None Not applicable SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: COMMON STOCK, PAR VALUE $.01 PER SHARE Indicate by check mark whether the Registrant (1) has filed all documents and reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K. [X] The aggregate market value of voting stock held by non-affiliates of the registrant as of April 26, 1999 was approximately $741,591,301 based on the average of the high and low prices of the Common Stock on April 26, 1999 of $13.56 per share as reported on the Nasdaq National Market. As of April 26, 1999, the Registrant had issued and outstanding 60,141,892 shares of its Common Stock, par value $.01 per share. 2 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT DIRECTORS The following sets forth certain biographical information, present occupation and business experience for the past five years for each of the directors of the Company. CLASS I: TERMS TO EXPIRE IN 2001 GABRIEL BATTISTA, AGE 54. Mr. Battista became a director and the Chairman of the Board, Chief Executive Officer and President of the Company on January 5, 1999. Prior to joining the Company, Mr. Battista served as Chief Executive Officer of Network Solutions Inc., an Internet domain name registration company. Prior to joining Network Solutions, Mr. Battista served from 1995 to 1996 as CEO and from 1991 to 1995 as President and Chief Operating Officer of Cable & Wireless, Inc., the nation's largest telecommunications provider exclusively serving businesses. His career also includes management positions at US Sprint, GTE Telenet and General Electric Information Services. Mr. Battista also serves as a director of Axent Technologies, Inc., Capitol College, Systems & Computer Technology Corporation (SCT) and Online Technologies Group, Inc. (OTG). RONALD R. THOMA, AGE 61. Mr. Thoma currently serves as Executive Vice President of Crown Cork and Seal Company, Inc. where he has been employed since 1955. Mr. Thoma has served as a director of the Company since 1995. CLASS II: TERMS TO EXPIRE IN 2000 GEORGE P. FARLEY, AGE 60. Mr. Farley became Chief Financial Officer and Treasurer of the Company effective October 29, 1997. Mr. Farley is formerly Group Vice President of Finance/Chief Financial Officer of Twin County, a food distribution company. Twin County filed a petition under Federal bankruptcy laws in December 1998. Prior to joining Twin County in September 1995, Mr. Farley was a partner of BDO Seidman, LLP, where he had served as a partner since 1974. Mr. Farley has served as a director of the Company since late 1996. GARY W. MCCULLA, AGE 39. Mr. McCulla joined the Company in March 1994 and previously served as President and Director of Sales and Marketing of the Company until his retirement from those offices on January 5, 1999. Mr. McCulla has served as a director of the Company since 1995. CLASS III: TERMS TO EXPIRE IN 1999 EMANUEL J. DEMAIO, AGE 40. Mr. DeMaio joined the Company in February 1992 and currently serves as Chief Operations Officer. Prior to joining the Company, from 1981 through 1992, Mr. DeMaio held various technical and managerial positions with AT&T. Mr. DeMaio has served as a director of the Company since 1995. 3 HAROLD FIRST, AGE 61. Mr. First is a certified public accountant and currently is a financial consultant. Mr. First served as Chief Financial Officer of Icahn Holdings Company and related entities from December 1990 through December 1992. Mr. First serves as a director of Cadus Pharmaceutical Company, Panaco, Inc. and Phillips Service Corp. Mr. First has served as a director of the Company since 1995. Under Mr. Battista's employment agreement with the Company, he has the right to nominate a majority of the Board of Directors of the Company at the next annual meeting of shareholders. EXECUTIVE OFFICERS The executive officers of the Company as of April 28, 1999 were as follows:
NAME AGE POSITION - ---- --- -------- Gabriel Battista 54 Chairman of the Board, Chief Executive Officer, President and Director Emanuel J. DeMaio 40 Chief Operations Officer and Director George P. Farley 60 Chief Financial Officer, Treasurer and Director Michael Ferzacca 41 Executive Vice President, Sales Norris M. Hall, III 38 Senior Vice President, Network Management Edward B. Meyercord, III 33 Executive Vice President, Marketing and Corporate Development George Vinall 43 Executive Vice President, Business Development Aloysius T. Lawn, IV 40 General Counsel and Secretary Kevin R. Kelly 34 Controller
GABRIEL BATTISTA. Mr. Battista became a director and the Chairman of the Board, Chief Executive Officer and President of the Company on January 5, 1999. Prior to joining the Company, Mr. Battista served as Chief Executive Officer of Network Solutions Inc. Prior to joining Network Solutions, Mr. Battista served as CEO, from 1995 to 1996, and as President and Chief Operating Officer, from 1991 to 1995, of Cable & Wireless, Inc., the nation's largest telecommunications provider exclusively serving businesses. His career also includes management positions at US Sprint, GTE Telenet and General Electric Information Services. Mr. Battista also serves as a director of Axent Technologies, Inc., Capitol College, Systems & Computer Technology Corporation (SCT) and Online Technologies Group, Inc. (OTG). EMANUEL J. DEMAIO. Mr. DeMaio joined the Company in February 1992 and currently serves as a Director and as Chief Operations Officer. Prior to joining the Company, from 1981 through 1992, Mr. DeMaio held various technical and managerial positions with AT&T. As of May 14, 1999, Mr. DeMaio's employment at the Company 4 will terminate, pursuant to the Letter Agreement between Mr. DeMaio and the Company dated April 6, 1999. GEORGE P. FARLEY. Mr. Farley became Chief Financial Officer and Treasurer of the Company effective October 29, 1997. Mr. Farley is formerly Group Vice President of Finance/Chief Financial Officer of Twin County Grocers, Inc. ("Twin County"), a food distribution company. Prior to joining Twin County in September 1995, Mr. Farley was a partner of BDO Seidman, LLP, where he had served as a partner since 1974. MICHAEL FERZACCA. Mr. Ferzacca became Executive Vice President, Sales of the Company in January 1999. Prior to joining the Company, he served in various roles at Cable & Wireless USA, a telecommunications provider, including manager of the Alternate Channels Division and Co-Chief Operating Officer. NORRIS M. HALL, III. Mr. Hall became Senior Vice President, Network Management, of the Company in January 1999. Prior to joining the Company, he served as Senior Vice President, Network Operations of Premiere Technologies, a telecommunications service provider, from August 1998 to December 1998. Prior to joining Premiere Technologies he served as Vice President, Network Operations of Cable and Wireless, an international common carrier. EDWARD B. MEYERCORD, III. Mr. Meyercord joined the Company in September 1996 and currently serves as Executive Vice President, Marketing and Corporate Development. From 1993 until joining the Company, Mr. Meyercord worked in the corporate finance department of Salomon Brothers, where he held various positions, the most recent of which was Vice President. Prior to joining Salomon Brothers, Mr. Meyercord worked in the corporate finance department at Paine Webber Incorporated. GEORGE VINALL. Mr. Vinall became Executive Vice President, Business Development of the Company in January 1999. Prior to joining the Company he served as President of International Protocol LLC, a telecommunication consulting business, as General Manager of Cable & Wireless Internet Exchange, an international internet service provider, and as Vice President, Regulatory & Government Affairs of Cable and Wireless North America, an international common carrier. ALOYSIUS T. LAWN, IV. Mr. Lawn joined the Company in January 1996 and currently serves as General Counsel and Secretary of the Company. Prior to joining the Company, from 1985 through 1995, Mr. Lawn was an attorney in private practice. KEVIN R. KELLY. Mr. Kelly joined the Company in April 1994 and currently serves as Controller. From 1987 to 1994, Mr. Kelly held various managerial positions with a major public accounting firm. Mr. Kelly is a certified public accountant. COMPENSATION OF DIRECTORS The Company currently pays non-employee directors an annual retainer of $10,000. In October, 1998, the Company's employee directors approved the grant to each of the two 5 non-employee directors of an option to purchase 30,000 shares of Common Stock at the then-current market value under the 1998 Long-Term Incentive Plan. In December 1998, the employee directors approved an additional grant to each of the two non-employee directors of an option to purchase 30,000 shares of Common Stock at the then-current market value. The Company's employee directors may, from time to time in the future, grant options to non-employee directors. Non-employee directors also are reimbursed for reasonable expenses incurred in connection with attendance at Board meetings or meetings of committees thereof. ITEM 11. EXECUTIVE COMPENSATION SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION The following table sets forth information for the fiscal years ended December 31, 1998, 1997 and 1996 as to the compensation paid by the Company to the Chief Executive Officer for services rendered and the four other most highly compensated executive officers of the Company whose annual salary and bonus exceeded $100,000 (the "Named Executives"). SUMMARY COMPENSATION TABLE
Name and Principal Position Annual Compensation Long Term Compensation - ----------------------------------------------------- ---------------------------- ---------------- Securities Underlying Options/SARs (#)(3) ------ Year Salary(2) Bonus(2) ---- --------- -------- DANIEL BORISLOW, Chairman and Chief Executive Officer(1) 1998 $325,000 $400,000(6) 750,000 1997 $325,000 $500,000 -- 1996 $325,000 $500,000 -- GARY W. MCCULLA, President and Director of Sales 1998 $300,000 $446,955(4) 350,000 and Marketing(5) 1997 $300,000 $500,000(6) -- 1996 $300,000 $350,000 900,000 EMMANUEL J. DEMAIO, Chief Operations Officer(7) 1998 $185,000 $345,382(4) 350,000 1997 $175,000 $225,000(6) -- 1996 $165,000 $150,000 270,000 EDWARD B. MEYERCORD, III, Executive Vice President 1998 $200,000 $128,338(4) -- - - Marketing and Corporate Development 1997 $210,000 $150,000 -- 1996(8) $52,000 $400,000 800,000 GEORGE P. FARLEY, Chief Financial Officer and Treasurer 1998 $200,000 $100,000(6) 250,000 1997(9) $28,462 $5,000(6) 200,000(9)
- ----------------------------------- (1) Effective January 5, 1999, Mr. Borislow resigned from all offices with the Company and its subsidiaries. 6 (2) The costs of certain benefits are not included because they did not exceed, in the case of each Named Executive, the lesser of $50,000 or 10% of the total annual salary and bonus reported in the above table. (3) As adjusted to reflect a three-for-two stock split in the form of a stock dividend effective as of March 15, 1996 and a two-for-one stock split in the form of a stock dividend effective as of January 31, 1997. (4) Bonus paid in shares of Common Stock and in-kind property valued in each case at the current market value at the date of grant. (5) Effective January 5, 1999, Mr. McCulla resigned from all offices with the Company and its subsidiaries. (6) Bonus paid in shares of Common Stock valued at the current market value at the date of grant. (7) Effective May 14, 1999, Mr. DeMaio will resign from all offices with the Company and its subsidiaries. (8) Mr. Meyercord was hired by the Company effective as of September 5, 1996. In connection therewith, Mr. Meyercord was paid $400,000 and was granted an option to purchase 800,000 shares of the Company`s Common Stock. (9) Mr. Farley became an employee and Chief Financial Officer and Treasurer of the Company on October 29, 1997. In connection with his employment, he purchased 200,000 shares of the Company's Common Stock at a price of $4.25 per share from a former executive officer of the Company. STOCK OPTION GRANTS The following table sets forth further information regarding grants of options to purchase Common Stock made by the Company during the fiscal year ended December 31, 1998 to the Named Executives. OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable Percent of Value at Assumed Number of Total Annual Rates of Stock Securities Options/SARs Exercise Price Appreciation for Underlying Granted to Price per Option Term(1) Options/SARs Employees Share Expiration ----------------------- Name Granted in 1998 ($ share) Date 5%($) 10%($) ---- ------- ------- --------- ----- ------ ------ Daniel Borislow 750,000 13.6 5.75 Oct. 12, 2009 $3,063,338 $7,991,566 Gary W. McCulla 350,000 6.3 5.75 Jan. 5, 2001 $206,281 $422,625 Emanuel J. DeMaio 350,000 6.3 5.75 Jan. 5, 2001 $206,281 $422,625 Edward B. Meyercord, III -- -- -- -- -- -- George P. Farley 250,000 4.5 5.75 Jan. 5, 2001 $147,344 $301,875
- ---------------- (1) Disclosures of the 5% and 10% assumed annual compound rates of stock appreciation are mandated by the rules of the SEC and do not represent the Company's estimate or projection of future common stock prices. The actual value realized may be greater or less than the potential realizable value set forth in the table. 7 The following table sets forth information concerning the 1998 year-end value of unexercised in-the-money options held by each of the Named Executives. AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUES
Number of Securities Underlying Unexercised Value of Unexercised Shares Options/SARs In-the-Money Options/SARs at Acquired Value at Fiscal Year-End(#) Fiscal Year-End($)(1) On Exercise Realized --------------------- --------------------- ----------- -------- ------------------------- Exercisable/Unexercisable Exercisable/ Unexercisable Name - ------------------------------------------------------------------------------------------------------------------------------------ Daniel Borislow 300,000 $1,460,250 750,000/0 $8,250,000/0 Gary W. McCulla 673,900 $1,263,610 0/800,000 0/$9,326,500 Emanuel J. DeMaio 213,978 $446,438 199,200/485,000 $2,424,264/$5,492,950 Edward B. Meyercord, III -- -- 800,000/0 $6,200,000/0 George P. Farley -- -- 0/250,000 0/$2,750,000
- -------------------------------------------------------------------------------- (1) Calculated as the difference between the exercise/base-price of the options/SARs and a year-end fair market value of the underlying securities equal to $16.75. EMPLOYMENT CONTRACTS Gabriel Battista is party to an employment agreement with the Company that expires on December 31, 2001. Under the terms of the agreement, Mr. Battista received a signing bonus of $3,000,000 and is entitled to an annual salary of $500,000, payable in advance, plus a discretionary bonus. Mr. Battista is also entitled to other benefits and perquisites. In addition, Mr. Battista was granted options that vest over three years to purchase 1,000,000 shares of the Company's Common Stock at an exercise price of $10.4375 per share, and options that vested immediately upon execution of the agreement to purchase an additional 650,000 shares at an exercise price of $7.00 per share. In the event of certain transactions (including an acquisition of the Company's assets, a merger into another entity or a transaction that results in the Company's Common Stock no longer being required to be registered under the Securities Exchange Act of 1934), Mr. Battista will receive an additional bonus of $1,000,000 if the price per share for the Company's Common Stock in such transaction was less than or equal to $20.00 per share, or $3,000,000 if the consideration is greater than $20.00 per share. In addition, upon a change in control of the Company, all of Mr. Battista's options immediately vest. Edward B. Meyercord, III entered into a five-year employment agreement with the Company effective as of September 5, 1996. Under the contract, Mr. Meyercord is entitled to a minimum annual base salary of $210,000 for each year. In the event of a "change in control" as defined in Mr. Meyercord's agreement, he will be entitled to receive an amount equal to the positive difference, if any, between $2,000,000 and an amount equal to the product of (a) 800,000 (the number of options held by Mr. Meyercord) and (b) the positive 8 difference, if any, between the market price of the Common Stock on the date of the change in control and the exercise price of Mr. Meyercord's stock options ($9.00). During 1998, George Farley was party to an employment agreement with the Company, which provides for a base annual salary of $200,000 and annual bonuses determined by the Board. The resignation of Mr. Borislow as the Chief Executive Officer of the Company permitted Mr. Farley, under the terms of the agreement, to terminate his agreement and continue receiving payments through the original term of the agreement ending in October 2000. In lieu of exercising these rights, Mr. Farley and the Company modified his employment agreement to provide for, among other things (i) a continuation of his employment until October 31, 1999, (ii) a base annual salary of $240,000, commencing January 1, 1999 and (iii) the continuation of his compensation payments under the agreement for twenty-two consecutive months following the termination of his employment. Mr. Borislow's employment agreement with the Company terminated on January 5, 1999. Under the terms of the agreement, Mr. Borislow was entitled to an annual base salary of $325,000, customary benefits and a cost of living adjustment based upon the Consumer Price Index as published by the Department of Labor. Mr. McCulla's and Mr. DeMaio's employment agreements have or will be terminated in connection with their separation from the Company as executive officers. See "Certain Relationships and Related Party Transactions." The above-described agreements require each of the executives to maintain the confidentiality of Company information and assign inventions to the Company. In addition, each of such executive officers has agreed that such person will not compete with the Company by engaging in any capacity in any business that is competitive with the business of the Company during the term of his respective agreement and thereafter for specified periods. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Mr. Daniel Borislow, the Chief Executive Officer of the Company in 1998, served on the Compensation Committee until March 3, 1998, the date of his resignation from the Committee. Until the termination of his employment agreement on January 5, 1999, Mr. Borislow's compensation was determined by the non-employee director members of the Compensation Committee. CERTAIN TRANSACTIONS See "Certain Relationships and Related Party Transactions." 9 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information known to the Company with respect to beneficial ownership of the Company's Common Stock as of April 28, 1999 (except as otherwise noted) by (i) each stockholder who is known by the Company to own beneficially more than five percent of the outstanding Common Stock, (ii) each of the Company's directors, (iii) each of the executive officers named below and (iv) all current directors and executive officers of the Company as a group. Except as otherwise indicated below, the Company believes that the beneficial owners of the Common Stock listed below have sole investment and voting power with respect to such shares.
NUMBER OF SHARES BENEFICIALLY PERCENT OF SHARES NAME OF BENEFICIAL OWNER OR IDENTITY OF GROUP OWNED(1) BENEFICIALLY OWNED - ------------------------------------------------- ------------ ------------------- Massachusetts Financial Services Company 7,848,200 (2) 13.0% 500 Boylston Street Boston, Massachusetts 02116 America Online, Inc. 6,843,356 (3) 11.4% 22000 AOL Way Dulles, Virginia 20166 FMR Corp. 6,613,200 (4) 11.0% 82 Devonshire Street Boston, Massachusetts 02109 Paul Rosenberg 5,759,985 (5) 9.6% 600 North 4th Street Philadelphia, PA 19123 Daniel Borislow 1,956,109 3.2% Seth Tobias 4,637,491 (6) 7.7% George P. Farley 1,579,249 (7) 2.6% Gary W. McCulla 1,174,719 1.9% Edward B. Meyercord, III 806,131 1.3% Emanuel J. DeMaio 663,178 1.1% Gabriel Battista 670,000 (8) 1.1% Harold First 84,004 * Ronald R. Thoma 97,934 * All current directors and executive officers as 4,387,689 (9) 7.3% a group (12 persons)
* Less than 1% (1) The securities "beneficially owned" by a person are determined in accordance with the definition of "beneficial ownership" set forth in the regulations of the Commission and, accordingly, may include securities owned by or for, among others, the spouse, children or certain other relatives of such person. The same shares may be beneficially owned by more than one person. Beneficial ownership may be disclaimed as to certain of the securities. Furthermore, the information as to numbers and percentages of shares owned generally does not 10 reflect, and has not been adjusted for, any shares that may be issued upon exercise of the non-transferable share purchase rights that were distributed to holders of shares, options and warrants of record on December 31, 1998. Such holders of record received one such non-transferable right for every 20 shares of Common Stock held or underlying options or warrants on the record date. (2) Massachusetts Financial Services Company ("MFS"), an investment adviser, filed an amendment to a Schedule 13G with the Commission on February 11, 1999 (the "MFS 13G"), in which it reported beneficial ownership of 7,848,200 shares, 6,471,100 of which are also beneficially owned by MFS Series Trust II-MFS Emerging Growth Fund, an investment company, and 1,377,100 of which are also owned by certain non-reporting entities as well as MFS. The foregoing information is derived from the MFS 13G. (3) The foregoing information is derived from the Schedule 13G filed by America Online, Inc. on January 15, 1999. (4) The foregoing information is derived from the Schedule 13G filed by FMR Corp. on March 10, 1999. (5) The foregoing information is derived from the Schedule 13D filed by Paul Rosenberg, the Rosenberg Family Limited Partnership, PBR, Inc. and the New Millennium Charitable Foundation on January 12, 1999. (6) The foregoing information is derived from the Schedule 13G filed by Seth Tobias on February 16, 1999. (7) Includes 1,200,000 shares held by the D&K Charitable Foundation, of which Mr. Farley serves as a director. (8) Does not include 1,000,000 shares of Common Stock that could be acquired upon exercise of options granted to Mr. Battista that have not yet vested. (9) Does not include an aggregate of 830,000 shares of Common Stock that could be acquired upon exercise of options by certain executive officers that have not yet vested. COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT Under Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company's directors and certain officers and persons who are the beneficial owners of more than 10 percent of the Common Stock are required to report their ownership of the Common Stock, options and certain related securities and any changes in that ownership to the SEC. Specific due dates for these reports have been established, and the Company is required to report in this proxy statement any failure to file by such dates in 1998. The Company believes that all of the required filings have been made in a timely manner. In making this statement, the Company has relied on copies of the reporting forms received by it. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS. On January 5, 1999, Mr. Daniel Borislow, a founder of the Company and its Chairman of the Board and Chief Executive Officer, resigned as a director and officer of the Company and its subsidiaries. As outlined below, the Company entered into various agreements and engaged in various transactions with Mr. Borislow and certain entities in which he or his family has an interest. The Company paid $1.0 million to Mr. Borislow, assigned certain automobiles to him, and continued certain of his health and medical benefits and director and officer 11 insurance. The Company also agreed that, so long as Mr. Borislow owns beneficially at least two percent (2%) of the common stock (on a fully diluted basis), Mr. Borislow and trusts for the benefit of his children would be entitled to: registration rights with respect to their shares of Common Stock, the right to require the Company to use a portion of proceeds from any public or private sale of debt securities, excluding borrowings from a commercial bank or other financial institution, by the Company to repurchase debt securities of the Company owned by Mr. Borislow or the trusts for the benefit of his children and the right to require the Company to use the proceeds from the exercise of stock options or rights to repurchase Common Stock owned by Mr. Borislow or the trusts for the benefit of his children. The Company also agreed that, so long as Mr. Borislow had such beneficial ownership, the Company would not, without the prior written consent of Mr. Borislow and subject to certain exceptions: (a) engage in certain significant corporate transactions, including the sale or encumbrance of substantially all of its assets, mergers and consolidations and certain material acquisitions, or, (b) for a period of 18 months from the agreement date, offer or sell any of its Common Stock unless and until Mr. Borislow and the trusts have sold or otherwise disposed of all of the shares of Common Stock held by him on the agreement date. In turn, Mr. Borislow terminated his employment with the Company and agreed not to compete with the Company for at least one year. Mr. Borislow also agreed to guarantee up to $20.0 million of the Company's obligations in connection with the Investment Agreement with AOL described in Item 7 of this report. Effective December 31, 1998, the Company, in exchange for a total of 783,706 shares of Common Stock, (i) sold to Jimlew Capital, L.L.C., a company owned by Mr. Borislow, (a) all of the capital stock of Emergency Transportation Corporation (a wholly owned subsidiary of the Company, the primary asset of which is an interest in a jet airplane), valued at approximately $8.7 million, and (b) all of the real property constituting the Company's headquarters in New Hope, Pennsylvania, valued at approximately $2.0 million, and (ii) released Mr. Borislow from an obligation to the Company for borrowings representing approximately $4.7 million principal amount and interest at the rate of 6% per annum. Mr. Borislow agreed to lease to the Company a portion of the headquarters property at a base monthly rent of $12,500. The subsidiary stock and the real property were valued based on the book value of these assets, which the management of the Company believes approximated the fair market value of these assets on the date of exchange. The Common Stock exchanged for the assets was valued at its market value on the date of the exchanges. The Company had previously determined that it would be desirable to dispose of these assets and accordingly believed that the ownership of these assets was not required for the continued operation of the Company's business. During 1998, the following additional officers and directors had outstanding non-interest-bearing loans from the Company in the amounts indicated: Gary W. McCulla, $3,541,382; George P. Farley, $1,554,532; Aloysius T. Lawn, IV, $1,293,506; Emanuel J. DeMaio, $821,906; Harold First, $236,800; and Ronald Thoma, $236,800. These loans were incurred in connection with the exercise of stock options or the holding of shares of Common Stock. The loans have since been repaid through delivery 12 by the borrower to the Company of shares of Common Stock with a fair market value on date of payment equal to the outstanding amount of such loans. On January 5, 1999, the Company assigned to a trust for the benefit of Mr. Borislow's children the Company's interest in $53,700,000 principal amount of subordinated notes of Communication TeleSystems International d/b/a WorldxChange Communications, in exchange for $62,545,000 aggregate principal amount of the Company's 2002 Convertible Notes and 2004 Convertible Notes owned by the trust. The exchange rate was determined based on the Company's assessment of the fair values of the WorldxChange Notes and of the Company's Convertible Notes given in exchange, which assessment was supported by the opinion of an independent investment banking firm as to the fairness to the Company of the consideration received. In the first quarter of 1999, the Company purchased from Mr. Borislow amd from two trusts for the benefit of Mr. Borislow's children $76,557,000 aggregate principal amount of the Company's 2002 Convertible Notes and 2004 Convertible Notes for $65.4 million in cash. On January 5, 1999, Gary W. McCulla entered into a letter agreement with the Company in connection with his separation from the Company as an officer. Pursuant to this agreement, he is entitled to receive payments aggregating $750,000 per year through January 5, 2001, and is eligible to receive certain health, medical and other benefits. On April 6, 1999, Emanuel J. DeMaio entered into a letter agreement with the Company providing for the termination of his employment with the Company as of May 14, 1999. Under this agreement, he is entitled to receive payments aggregating $400,000 per year for two years, and is eligible to receive certain health, medical and other benefits. The agreement also provides that Mr. DeMaio shall provide consulting services to the Company for a period of 18 months at a rate of two hundred dollars ($200) per hour. 13 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K 3. EXHIBITS: EXHIBIT NUMBER DESCRIPTION - ------------------------------ 2.1 Plan of Reorganization between and among Tel-Save Holdings, Inc., a Delaware corporation, Tel-Save, Inc., a Pennsylvania corporation, Daniel Borislow and Paul Rosenberg, and Exhibits Thereto (incorporated by reference to Exhibit 2.1 to the Company's registration statement on Form S-1 (File No. 33-94940)). 3.1 Amended and Restated Certificate of Incorporation of the Company, as amended (incorporated by reference to Exhibit 4.1 to the Company's registration statement on Form S-4 (File No. 333-38943)). 3.2 Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company's registration statement on Form S-1 (File No. 33-94940)). 3.3 Certificate of Ownership and Merger Merging Tel-Save.com, Inc. into Tel-Save Holdings, Inc. (Changing the name of the Registrant) (incorporated by reference to Exhibit 3(i) to the Company's Current Report on Form 8-K dated January 20, 1999). 10.1 Employment Agreement between the Company and Emanuel J. DeMaio (incorporated by reference to Exhibit 10.2 to the Company's registration statement on Form S-1 (File No. 33-94940)).* 10.2 Employment Agreement between the Company and George P. Farley (incorporated by reference to Exhibit 10 to the Company's report on Form 10-Q for the quarter ended September 30, 1997).* 10.3 Employment Agreement between the Company and Aloysius T. Lawn, IV dated October 13, 1998.* 10.4 Employment Agreement between the Company and Edward B. Meyercord, III (incorporated by reference to Exhibit 10.6 to the Company's Annual Report on Form 10-K for the year ended December 31, 1996).* 10.5 Indemnification Agreement between the Company and Daniel Borislow (incorporated by reference to Exhibit 10.4 to the Company's registration statement on Form S-1 (File No. 33-94940)). 10.6 Indemnification Agreement between the Company and Emanuel J. DeMaio (incorporated by reference to Exhibit 10.5 to the Company's registration statement on Form S-1 (File No. 33-94940)). 14 10.7 Indemnification Agreement between the Company and Gary W. McCulla (incorporated by reference to Exhibit 10.6 to the Company's registration statement on Form S-1 (File No. 33-94940)). 10.9 Indemnification Agreement between the Company and Peter K. Morrison (incorporated by reference to Exhibit 10.8 to the Company's registration statement on Form S-1 (File No. 33-94940)). 10.10 Indemnification Agreement between the Company and Kevin R. Kelly (incorporated by reference to Exhibit 10.9 to the Company's registration statement on Form S-1 (File No. 33-94940)). 10.11 Indemnification Agreement between the Company and Aloysius T. Lawn, IV (incorporated by reference to Exhibit 10.12 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995). 10.12 Indemnification Agreement between the Company and Edward B. Meyercord, III (incorporated by reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996). 10.14 Tel-Save Holdings, Inc. 1995 Employee Stock Option Plan (incorporated by reference to Exhibit 10.15 to the Company's registration statement on Form S-1 (File No. 33-94940)).* 10.15 Tel-Save Holdings, Inc. Employee Bonus Plan (incorporated by reference to page 13 of the Company's Proxy Statement for the Company's 1996 Annual Meeting of Stockholders dated April 3, 1996).* 10.19 Telecommunications Marketing Agreement by and among the Company, Tel-Save, Inc. and America Online, Inc., dated February 22, 1997 (incorporated by reference to Exhibit 10.32 to the Company's Form 10-K for the year ended December 31, 1996).+ 10.20 Amendment No. 1, dated as of January 25, 1998, to the Telecommunications Marketing Agreement dated as of February 22, 1997 by and among the Company, Tel-Save, Inc. and America Online, Inc. (incorporated by reference to Exhibit 10.31 to the Company's Form 10-K for the year ended December 31, 1997). + 10.21 Amendment No. 2, dated May 14, 1998, among the Company, Tel-Save, Inc. and America Online, Inc., which amends that certain Telecommunications Marketing Agreement, dated as of February 22, 1997, as corrected and amended by letter, dated April 23, 1997, and amended by an Amendment No. 1, dated January 25, 1998 (incorporated by reference to Exhibit 10.1 to the Company's quarterly report on Form 10-Q, dated August 14, 1998).+ 10.22 Amendment No. 3, effective as of October 1, 1998, among the Company, Tel-Save, Inc. and America Online, Inc., which amends that certain Telecommunications Marketing Agreement, dated as of February 22, 1997, as corrected and amended by letter, dated April 23, 1997, and amended by an Amendment No. 1, dated January 25, 1998, and an Amendment No. 2, dated May 14, 1998.++ 10.23 Indenture dated as of September 9, 1997 between the Company and First Trust of 15 New York, N.A. (incorporated by reference to Exhibit 4.3 to the Company's registration statement on Form S-3 (File No. 333-39787)). 10.24 Registration Agreement dated as of September 3, 1997 between the Company and Salomon Brothers Inc, Deutsche Morgan Grenfell Inc., Bear, Stearns & Co. Inc., Smith Barney Inc., Robertson Stephens & Company LLC (incorporated by reference to the Company's registration statement on Form S-3 (File No. 333-39787)). 10.25 Indenture dated as of December 10, 1997 between the Company and First Trust of New York, N.A. (incorporated by reference to Exhibit 10.34 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997). 10.26 Registration Agreement dated as of December 10, 1997 between the Company and Smith Barney Inc. (incorporated by reference to Exhibit 10.35 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997). 10.27 Employment Agreement, dated as of November 13, 1998, between the Company and Gabriel Battista (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated January 20, 1999).* 10.28 Indemnification Agreement, dated as of December 28, 1998, between the Company and Gabriel Battista (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K dated January 20, 1999). 10.29 Stock Option Agreement, dated as of November 13, 1998, between the Company and Gabriel Battista (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K dated January 20, 1999).* 10.30 Stock Option Agreement, dated as of November 13, 1998,between the Company and Gabriel Battista (incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K dated January 20, 1999).* 10.31 Severance Agreement, dated as of December 31, 1998, between the Company and Daniel Borislow (incorporated by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K dated January 20, 1999).* 10.32 Purchase Agreement regarding the stock of Emergency Transportation Corporation, dated as of January 5, 1999, between the Company and Jimlew Capital, L.L.C. (incorporated by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K dated January 20, 1999). 10.33 Exchange Agreement, dated as of December 31, 1998, among the Company, Tel-Save,Inc. and Mark Pavol, as Trustee of that certain D&K Grantor Retained Annuity Trust dated June 15, 1998 (incorporated by reference To Exhibit 10.7 to the Company's Current Report on Form 8-K dated January 20, 1999). 10.34 Modification of the Exchange Agreement, dated ___________, 1999, by and among the Company, Tel-Save, Inc. and Mark Pavol. 10.35 Registration Rights Agreement, dated as of December 31, 1998, among the Company, Daniel Borislow, Mark Pavol, as Trustee of that certain D&K Grantor 16 Retained Annuity Trust, dated June 15, 1998 and the Trustee of that certain D&K Grantor Retained Annuity Trust II (incorporated by reference to Exhibit 10.8 to the Company's Current Report on Form 8-K dated January 20, 1999). 10.36 Amendment of Registration Rights Agreement dated as of March 18, 1999, by and among the Company, Daniel M Borislow, and Seth Tobias. 10.37 Amendment of Registration Rights Agreement dated as of March 18, 1999, by and among the Company and Mark Pavol. 10.38 Agreement of Purchase and Sale of Real Property, dated as of January 5, 1999, between Tel-Save, Inc. and Jimlew Capital, L.L.C. (incorporated by reference to Exhibit 10.9 to the Company's Current Report on Form 8-K dated January 20, 1999). 10.39 Lease, dated as of January 5, 1999, between Tel-Save, Inc. and Jimlew Capital, L.L.C. (incorporated by reference to Exhibit 10.10 to the Company's Current Report on Form 8-K dated January 20, 1999). 10.40 1998 Long-Term Incentive Plan of the Company (incorporated by reference to Exhibit 10.14 to the Company's Current Report on Form 8-K dated January 20, 1999).* 10.41 Investment Agreement, dated as of December 31, 1998, as amended on February __, 1999, among the Company, America Online, Inc., and, solely for purposes of Sections 4.5, 4.6 and 7.3(g) thereof, Daniel Borislow, and solely for purposes of Section 4.12 thereof, Tel-Save, Inc. and the D&K Retained Annuity Trust dated June 15, 1998 by Mark Pavol, Trustee . 10.42 Registration Rights Agreement, dated as of January 5, 1999, between the Company and America Online, Inc. 10.43 Sublease Agreement, dated January ____, 1997, by and between Gemini Air Cargo, LLC and RMS International, Inc. 10.44 Sublease Agreement, dated as of January 20, 1999, by and between RMS International and Tel-Save, Inc. 10.45 Lease by and between Aetna Life Insurance Company and Potomac Financial Group, L.L.C . 10.46 Agreement, effective as of February 28, 1999, by and among the Company, Communication Telesystems International, d.b.a. WorldxChange Communications, Tel-Save, Inc., Mark Pavol, Roger B. Abbott and Rosalind Abbott, and Edward Soren. 10.48 Letter Agreement between the Company and Emanuel DeMaio regarding Employment Agreement dated October 13, 1998. 10.49 Letter Agreement, dated as of January 5, 1999, between the Company and Gary R. McCulla amending Employment Agreement with Mr. McCulla. (1) * 17 10.50 Form of Indemnification Agreement, dated as of January 5, 1999, for each of George Vinall, Michael Ferzacca and Norris M. Hall, III. (1) 10.51 Form of Non-Qualified Stock Option Agreement, dated as of December 16, 1998, for each of George Vinall, Michael Ferzacca and Norris M. Hall, III. (1) * 10.60 Employment Agreement, dated as of December 16, 1998, between the Company and Michael Ferzacca. (1) * 10.61 Employment Agreement, dated as of December 16, 1998, between the Company and Norris M. Hall, III. (1) * 10.62 Employment Agreement, dated as of December 16, 1998, between the Company and George Vinall. (1) * 10.63 Letter Agreement, dated as of December 30, 1998, between the Company and George Farley regarding Employment Agreement dated July 3, 1997. (1) * 21.1 Subsidiaries of the Company. 23.1 Consent of BDO Seidman, LLP. 27 Financial Data Schedule. * Management contract or compensatory plan or arrangement. + Confidential treatment previously has been granted for a portion of this exhibit. ++ Confidential treatment has been requested for portions of this exhibit. (1) Filed with this Amendment No. 2 on Form 10-K/A. (b) Reports on Form 8-K. The following Current Reports on Form 8-K were filed by the Company during the three months ended December 31, 1999: 1. Current Report on Form 8-K dated October 29, 1998. 18 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: April 30, 1999 TALK.COM INC. By: /s/ Gabriel Battista ------------------------ Gabriel Battista Chairman of the Board of Directors, Chief Executive Officer, President and Director 19 EX-10.49 2 EXHIBIT 10.49 EXHIBIT 10.49 As of January 5, 1999 Mr. Gary McCulla 3728 Windy Bush New Hope, PA 18938 Dear Gary: We are writing to confirm our agreements and understandings regarding the terms of your continued employment under the Employment Agreement, dated as of October 13, 1998 (the "Employment Agreement"), among you, as "Employee", Tel-Save, Inc., as "Company", and Tel-Save.com, Inc. (formerly, Tel-Save Holdings, Inc.), as "Holdings", from and after January 5, 1999 (the "Change Date") (except as otherwise defined herein, capitalized terms shall be defined as in the Employment Agreement): 1. From and after the Change Date, you, as "Employee" under the Employment Agreement, will continue as an employee of Company, but you shall have no duties or responsibilities, nor shall you have any rights, except as specifically set forth herein and in the Employment Agreement as hereby amended. Each of Sections 3, 4, 5 and 6 of the Employment Agreement is hereby eliminated and shall be of no further force and effect from and after the Change Date, except as and to the extent specifically set forth elsewhere herein. 2. The "Term" of your employment under the Employment Agreement as hereby amended shall commence on the Change Date and shall continue in effect to, but not including, January 5, 2001, except as earlier terminated as herein specifically provided. 3. The sole compensation payable to you pursuant to the Employment Agreement (including, without limitation, Sections 4,6 and 10 thereof) from and after the Change Date is $750,000 per year, payable for the Term and in the same manner (equal periodic payments throughout the year) as your base salary was paid to you pursuant to Section 4.1 before the Change Date. The aggregate amount payable to you pursuant to this paragraph 3 will not exceed $1,500,000. Upon your death or a "Change of Control" (as such term is defined in the Indenture, dated as of December 10, 1997, relating to Company's 5% Convertible Subordinated Notes due 2004), any balance of such compensation for the Term not theretofore paid to you or on your behalf shall be paid to you (or, in the case of your death, to your estate or beneficiaries) in a lump sum and the Term shall thereupon terminate for all purposes of the Employment Agreement as hereby amended. 4. The sole benefits and perquisites to which you will be entitled, and Company will provide, pursuant to the Employment Agreement (including, without limitation, Sections 4 and 6 thereof) from and after the Change Date are: (a) health and medical benefits, during the Term only, equal to the greater of (i) the health and medical benefits provided to you immediately before the Change Date and (ii) the health and medical benefits as are made available generally to the Company's senior executives in effect during the Term; (b) maintenance, during the Term and until the third anniversary of the last day of such Term, by Company of director and officer insurance policies with benefits equal to or greater than Company's director and officer insurance policy in effect as of the Change Date; and (c) the continued use of the 1998 Mercedes SL500 automobile leased by Company and used by you as of the Change Date for the remainder of the term of the existing lease of such automobile and the continued payment by Company of all lease, insurance and other payments with respect to such automobile for the remainder of such lease term ( it being expressly understood, however, that you shall defend and hold Company harmless from all claims, damages, litigation, liabilities and all matters whatsoever regarding such automobile and your use thereof, except such as shall be covered by insurance). In addition, at the end of the Term, Company acknowledges that you will be entitled to such COBRA benefits as are provided by law. 5. Except as specifically provided in paragraphs 4 and 5 of this letter agreement and except for your entitlement, if any, to indemnification and reimbursement by Company or Holdings arising out of your having been an officer or director thereof, provided that you hereby agree to cooperate with Company or Holdings to the extent reasonably requested by Company or Holdings in any proceeding that may give rise to any such indemnification, neither you nor your estate or beneficiaries shall be entitled to any other payments, compensation, perquisites or other benefits, from Company or Holdings or any subsidiary thereof, under or by reason of the Employment Agreement or otherwise and all such other payments, compensation, perquisites or other benefits are hereby expressly waived by you (for yourself and for your estate and your beneficiaries). Company shall withhold any state, federal or other taxes that it may be required to withhold from or with respect to any such payments, compensation, perquisites or other benefits. 6. You will be entitled to no additional compensation for serving as a director of Holdings. While you may, of course, resign as a director of Holdings at any time, you hereby agree to resign as a director of Holdings as and when requested by the Chairman of the Board of Holdings, but not earlier than August 15, 1999. Furthermore, you agree that you will, prior to your resignation as a director, vote in favor of the election or nomination of your successor as a director or such other person as shall have been designated as a nominee for director by Company's Chairman of the Board. 7. The provisions of Section 10 of the Employment Agreement are amended as follows: (a) the provisions thereof shall be for the Term only and the "Restricted Period" therein shall be coterminous with the Term, without regard to any conditions in the existing Section 10; (b) you shall not be entitled to any compensation or other payments under or otherwise by reason of such Section 10; and (c) you may, without violation of the terms of such Section 10, also be employed by Communications TeleSystems International d.b.a. WorldxChange Communications during the Term without violation of the Employment Agreement, as hereby amended, including Section 10 thereof. 8. You will make yourself available and shall cooperate, in each case to the extent reasonably requested by Company or Holdings, in respect of any litigation or other proceedings that arise out of or by reason of the conduct of Company's or Holding's business or operations during any time that you were a director or officer thereof, without further compensation or payment except the payment of your reasonable out-of-pocket costs and expenses in connection therewith. 9. Except as specifically provided herein, the Employment Agreement shall continue in full force and effect. 10. The provisions of Sections 16 through (and including) 21 of the Employment Agreement shall apply to this letter agreement as fully as if set forth in full herein and the references therein to "this Agreement" were a reference to this letter agreement. If the foregoing correctly sets forth our agreements and understandings, please so acknowledge by signing the enclosed copy of this letter agreement in the space provided and returning it to us, whereupon this shall be a valid and binding agreement by and among us. Very truly yours, Tel-Save, Inc. By:___________________________ Name Title Tel-Save.com, Inc. By:___________________________ Name Title Accepted and agreed as of the date first above written: - --------------------------------- Gary McCulla EX-10.50 3 EXHIBIT 10.50 EXHIBIT 10.50 TEL-SAVE.COM, INC. INDEMNIFICATION AGREEMENT This Indemnification Agreement ("Agreement") is made as of January 5, 1999, by and between Tel-Save.com, Inc., a Delaware corporation (the "Company"), and ___________________________ ("Indemnitee"). WHEREAS, pursuant to that certain employment agreement between the Company and Indemnitee dated December 18, 1998 (the "Employment Agreement") Indemnitee will commence service, on or prior to January 4, 1999 Senior Vice President, Network Management of the Company and will perform a valuable service in such capacity for the Company; and WHEREAS, the Company desires to attract and retain the services of highly qualified individuals, such as Indemnitee, to serve the Company and, in order to induce Indemnitee to enter into the Employment Agreement, the Company agreed to enter into an agreement with Indemnitee providing for the indemnification of Indemnitee as provided herein. NOW, THEREFORE, in consideration of the foregoing, the mutual covenants set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned hereby agree as follows: 1. Indemnification. (a) Indemnification of Indemnitee. The Company shall indemnify and hold harmless Indemnitee to the fullest extent permitted by law if Indemnitee was or is or becomes a party to, or witness or other participant in, or is threatened to be made a party to, or witness or other participant in, any threatened, pending or completed action, suit, proceeding or alternative dispute resolution mechanism, or any hearing, inquiry or investigation that Indemnitee in good faith believes might lead to the institution of any such action, suit, proceeding or alternative dispute resolution mechanism, whether civil, criminal, administrative, investigative or other (collectively, hereinafter a "Claim") by reason of, or arising in whole or in part out of, any event or occurrence related to the fact that Indemnitee is or was a director, officer, manager, employee, agent, representative or fiduciary of the Company, a subsidiary of the Company (a "Subsidiary") or an affiliate (as defined in Rule 405 under the Securities Act of 1933, as amended) of the Company (an "Affiliate"), or is or was serving at the request of the Company or any Subsidiary or Affiliate as a director, officer, manager, employee, agent, representative or fiduciary of another corporation, limited liability company, partnership, joint venture, employee benefit plan, trust or other entity or enterprise (collectively, an "Other Entity"), or by reason of any action or inaction on the part of Indemnitee while serving in any of such capacities, whether or not the basis of the Claim is an alleged action in an official capacity as a director, officer, manager, employee, agent, representative or fiduciary of the Company, or any Subsidiary, Affiliate or Other Entity (any of the foregoing capacities referenced in this Section 1(a), an "Indemnified Capacity"), against any and all costs, expenses and other amounts actually and reasonably incurred and/or, as the case may be, paid (including, without limitation, attorneys' fees and all other costs, expenses and obligations actually and reasonably incurred in connection with investigating, defending, being a witness in, or otherwise participating in (including on appeal), or preparing to defend, any Claim), and judgements, fines, penalties and amounts paid in connection with the settlement of any Claim and any federal, state, local or foreign taxes imposed on the Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, including all interest, assessments and other charges paid or payable by the Indemnitee in connection with or in respect of such costs, expenses and other amounts (collectively, hereinafter, the "Expenses"). Without limiting the rights of Indemnitee under Section 2(a) below, the payment of Expenses actually paid by Employee shall be made by the Company as soon as practicable, but in any event no later than thirty (30) days after written demand by Indemnitee therefor is presented to the Company. Any event giving use to the right of Indemnitee to be indemnified hereinafter is referred to herein as an "Indemnifiable Event." (b) Reviewing Party. Notwithstanding the foregoing, (i) the obligations of the Company under Section 1(a) hereof shall be subject to the condition that the Reviewing Party (as defined in Section 10(e) hereof) shall not have determined (in a written opinion, in any case in which the Independent Legal Counsel (as defined in Section 10(d) hereof) is involved) that Indemnitee would not be permitted to be indemnified under applicable law, and (ii) the obligation of the Company to make an advance payment of Expenses to Indemnitee pursuant to Section 2(a) hereof (an "Expense Advance") shall be subject to the condition that, if, when and to the extent that the Reviewing Party determines that Indemnitee would not be permitted to be so indemnified under applicable law, the Company shall be entitled to be reimbursed by Indemnitee (who hereby agrees to so reimburse the Company) for all such amounts theretofore paid; provided, however, that if Indemnitee has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee could be indemnified under applicable law, any determination made by the Reviewing Party that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expense Advance until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed). Indemnitee's obligation to reimburse the Company for any Expense Advance shall be unsecured and no interest shall be charged thereon. If there has not been a Change in Control (as defined in Section 10(c) hereof), the Reviewing Party shall be selected by members of the Board of Directors who are not or were not, as the case may be, a party or parties, as the case may be, to the Claim in respect of which indemnification is sought, and if there has been a Change in Control (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control), the Reviewing Party shall be the Independent Legal Counsel. If, within thirty (30) days after the Company's receipt of written notice from Indemnitee demanding such indemnification (the "30-Day Period") (i) the Reviewing Party determines that Indemnitee substantively would not be permitted to be indemnified in whole or in part under applicable law or makes no determination in that regard or, (ii) Indemnitee shall not have received full indemnification from the Company, Indemnitee shall have the right to commence litigation seeking a determination by a court of competent jurisdiction as to the propriety of indemnification under the circumstances involved or challenging any such determination (or lack thereof) by the Reviewing Party or any aspect thereof, including the legal or factual bases therefor or the failure of the Company to fully indemnify the Indemnitee, and the Company hereby consents to service of process and to appear in any such proceeding and hereby appoints the Secretary of the Company (or, if such office is not filled at a time in question, any Assistant 2 Secretary of the Company or, if such office is not filled at a time in question, any Vice President of the Company - each, a "Service Receiver") as its agent for such service of process. Any determination by the Reviewing Party not otherwise so challenged shall be conclusive and binding on the Company and Indemnitee. (c) Change in Control. The Company agrees that if there is a Change in Control (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control), then, with respect to all matters thereafter arising concerning the rights of Indemnitee to payments of Expenses and Expense Advances under this Agreement or any other agreement or under the Company's Certificate of Incorporation or Bylaws as now or hereafter in effect, the Company shall seek legal advice only from the Independent Legal Counsel. Such counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent Indemnitee would be permitted to be indemnified under applicable law. The Company agrees to pay the reasonable fees of the Independent Legal Counsel referred to above and to fully indemnify such counsel against any and all expenses (including attorneys' fees), claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto. (d) Mandatory Payment of Expenses. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in connection with any Claim, Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by Indemnitee in connection therewith. 2. Expenses; Indemnification Procedure. (a) Advancement of Expenses. The Company shall advance all Expenses incurred by Indemnitee so that the Company, and not Indemnitee, shall be obligated to pay such incurred Expenses. The advances of Expenses to be made hereunder shall be paid by the Company to Indemnitee as soon as practicable, but in any event no later than five (5) days after written demand by Indemnitee therefor to the Company. (b) Notice and Cooperation by Indemnitee. Indemnitee shall, as a condition precedent to Indemnitee's right to be indemnified under this Agreement, give the Company notice in writing as soon as practicable of any Claim made against Indemnitee for which indemnification will or could be sought under this Agreement; but the Indemnitee's failure to so notify the Company shall not relieve the Company from any liability that it may have to Indemnitee under this Agreement, except to the extent that the Company is able to establish that its ability to avoid liability under such Claim was prejudiced in a material respect by such failure. Notice to the Company shall be directed to a Service Receiver at the address of the Company shown on the signature page of this Agreement (or such other address as the Company shall designate in writing to Indemnitee). In addition, Indemnitee shall, at the expense of the Company, provide the Company with such information and cooperation with respect to a Claim, or any matters related to such Claim, as it may reasonably require in connection with the indemnification provided for herein and as shall be within Indemnitee's power. Any costs or expenses (including attorneys' fees and disbursements) actually and reasonably incurred by 3 Indemnitee in so cooperating shall be borne by the Company (irrespective of the determination as to Indemnitee's entitlement to indemnification), which shall pay any such amount within fifteen (15) days after receiving a request therefor from Indemnitee, and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom. (c) No Presumptions; Burden of Proof. For purposes of this Agreement, the termination of any Claim by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law. In addition, neither the failure of the Reviewing Party to have made a determination as to whether Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by the Reviewing Party that Indemnitee has not met such standard of conduct or did not have such belief, prior to the commencement of legal proceedings by Indemnitee to secure a judicial determination that Indemnitee should be indemnified under applicable law, shall be a defense to a claim for indemnification by Indemnitee hereunder or create a presumption that Indemnitee has not met any particular standard of conduct or did not have any particular belief. In connection with any determination by the Reviewing Party or otherwise as to whether Indemnitee is entitled to be indemnified hereunder, the burden of proof shall be on the Company to establish that Indemnitee is not so entitled. (d) Notice to Insurers. If, at the time of the receipt by the Company of a notice of a Claim pursuant to Section 2(b) hereof, the Company has one or more policies of liability insurance in effect which may cover such Claim, the Company shall give prompt notice of the commencement of such Claim to the applicable insurer(s) in accordance with the procedures set forth in the applicable policies. The Company shall thereafter take all action necessary or desirable to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such Claim in accordance with the terms of such policies. (e) Selection of Counsel. In the event that the Company shall be obligated hereunder to pay the Expenses with respect to any Claim, the Company, except as otherwise provided below, shall be entitled to assume the defense of such Claim at its own expense with counsel approved by Indemnitee, upon the delivery to Indemnitee of written notice of its election so to do. Indemnitee's approval of such counsel shall not be unreasonably withheld. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to the Indemnitee under this Agreement for any fees of counsel subsequently incurred by the Indemnitee with respect to such Claim, other than as provided below. Indemnitee shall have the right to employ Indemnitee's own counsel in connection with a Claim, but the fees and expenses of such counsel incurred after written notice from the Company of its assumption of the defense thereof shall be at the expense of Indemnitee, unless (i) the employment of counsel by Indemnitee has been previously authorized by the Company, or, following a Change in Control (other than a Change in Control approved by a majority of the members of the Board of Directors who were directors immediately prior to such Change in Control), the employment of counsel by Indemnitee has been approved by the Independent Legal Counsel, (ii) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense, or (iii) the Company shall not, in fact, have employed or retained or 4 continued to employ or retain counsel to assume the defense of such Claim, in each of which cases the fees and expenses of Indemnitee's counsel shall be at the expense of the Company. The Company shall not be entitled to assume or control the defense of any Claim brought by or on behalf of the Company or as to which the Indemnitee has reached the conclusion that there may be a conflict of interest between the Company and Indemnitee. The Company shall not settle any Claim in any manner which would impose any penalty or limitation on Indemnitee without the Indemnitee's written consent (which approval shall not be unreasonably withheld). (f) Settlement of Claims. The Company shall not be required to indemnify Indemnitee under this Agreement for any amounts paid in settlement of any Claim effected without the Company's written consent; provided, however, that consent by the Company to the settlement of any claim shall not be unreasonably withheld. Notwithstanding the foregoing, however, if a Change in Control has occurred (other than a Change in Control approved by a majority of the members of the Board of Directors who were directors immediately prior to such Change in Control), then the Company shall be required to indemnify Indemnitee for amounts paid in settlement of any Claim if the Independent Legal Counsel has approved such settlement or has not made a determination with respect to such settlement within (30) days after the effective date of such Change in Control. 3. Additional Indemnification Rights; Non-Exclusivity. (a) Scope. The Company hereby agrees to indemnify Indemnitee to the fullest extent permitted by law, notwithstanding that such indemnification is not specifically authorized by the Company's Certificate of Incorporation or Bylaws or by statute. In the event of any change after the date of this Agreement in any applicable law, statute or rule which expands the right of the Company to indemnify Indemnitee, it is the intent of the parties hereto that Indemnitee shall enjoy under this Agreement the greater benefits afforded by such change. In the event of any change in any applicable law, statute or rule which narrows the right of the Company to indemnify the Indemnitee, such change, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement, shall have no effect on this Agreement or the parties' rights and obligations hereunder. (b) Non-Exclusivity. The indemnification provided by this Agreement shall be in addition to any rights to which Indemnitee may be entitled under the Company's Certificate of Incorporation or Bylaws, any agreement, vote of stockholders or directors, the General Corporation Law of the State of Delaware, or otherwise. The indemnification provided under this Agreement shall continue as to Indemnitee for any Indemnifiable Event while serving in an Indemnified Capacity even though Indemnitee may have ceased to serve in such Indemnified Capacity. 4. No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment in connection with any Claim to the extent Indemnitee has otherwise actually received payment (under any insurance policy or otherwise) of the amounts otherwise indemnifiable hereunder. 5. Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for a portion of any of the Expenses in 5 connection with the investigation, appeal or settlement of any Claim, but not for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for such portion of the Expenses. 6. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge that, in certain instances, applicable law or public policy may prohibit the Company from indemnifying Indemnitee under this Agreement or otherwise. Indemnitee understands and acknowledges that the Company has undertaken or may be required in the future to undertake with the Securities and Exchange Commission to submit the question of indemnification to a court in certain circumstances for a determination of the Company's right under public policy to indemnify Indemnitee. 7. Liability Insurance. To the extent the Company or any Subsidiary or Affiliate maintains liability insurance applicable to directors, officers, managers, employees, agents, representatives or fiduciaries of the Company or such Subsidiary or Affiliate (collectively, the "Covered Persons"), Indemnitee shall be covered by such policies in such a manner as to provide Indemnitee the same rights and benefits as are accorded to the most favorably insured of the Covered Persons who is then serving in the same capacity or capacities, as the case may be, as Indemnitee. 8. Exceptions. Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement: (a) Excluded Action or Omissions. To indemnify Indemnitee for any Expenses resulting from acts, omissions or transactions from which Indemnitee may not be indemnified under applicable law, or for any Expenses resulting from Indemnitee's conduct which is finally adjudged to have been willful misconduct or knowingly fraudulent conduct; (b) Claims Initiated by Indemnitee. To indemnify or advance Expenses to Indemnitee with respect to Claims initiated or brought voluntarily by Indemnitee and not by way of defense, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, Expense Advance or insurance recovery, as the case may be, except (i) with respect to proceedings brought to establish or enforce (a) a right to, or for, Expense Advances and/or, as the case may be, (b) any other right of Indemnitee under this Agreement or any other agreement or insurance policy or under the Company's Certificate of Incorporation or Bylaws now or hereafter in effect, (ii) in specific cases, if the Board of Directors has approved the initiation or bringing of such suit or (iii) as otherwise required under applicable law or statute; (c) Lack of Good Faith. To indemnify Indemnitee for any Expenses incurred by Indemnitee with respect to any proceeding instituted by Indemnitee to enforce or interpret this Agreement, if a court of competent jurisdiction determines that each of the material assertions made by the Indemnitee in such proceeding was not made in good faith or was frivolous; or (d) Claims Under Section 16(b). To indemnify Indemnitee for Expenses and the payment of profits arising from the purchase and sale or, sale and purchase, by Indemnitee of securities in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any similar successor statute. 6 9. Period of Limitations. No legal action shall be brought and no cause of action shall be asserted by or in the right of the Company with respect to the matters addressed in this Agreement against Indemnitee, or Indemnitee's estate, spouse, heirs, executors or personal or legal representatives after the expiration of two(2) years from the date of accrual of such cause of action, and any claim or cause of action of the Company shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two-year period; provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action, such shorter period shall govern. 10. Construction of Certain Phrases. (a) Company. For purposes of this Agreement, references to the "Company" shall include, in addition to the resulting entity, any constituent entity (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, managers, employees, agents, representation or fiduciaries, so that if Indemnitee is or was a director, officer, employee, agent or fiduciary of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, manager, employee, agent or fiduciary of an Other Entity, Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving entity as Indemnitee would have stood with respect to such constituent entity if its separate existence had continued. The consummation of any transaction described in this Section 10(a) shall be subject to the requirements of Section 12, below. (b) Miscellaneous Terms. For purposes of this Agreement, references to "fines" shall include any excise taxes assessed on Indemnitee with respect to an employee benefit plan; and references to "serving at the request of the Company or any Subsidiary or Affiliate" or words of similar import shall include any service as a director, officer, manager, employee, agent, representative or fiduciary of the Company which imposes duties on, or involves services by, such director, officer, manager, employee, representative, agent or fiduciary with respect to an employee benefit plan, or its participants or its beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have acted in a manner "not opposed to the best interests of the Company" as referred to in this Agreement or under any applicable law or statute. (c) Change in Control. For purposes of this Agreement, a "Change in Control" shall be deemed to have occurred if (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of Voting Securities (as defined below) of the Company representing more than twenty percent (20%) of the total voting power represented by the Company's then outstanding Voting Securities, (ii) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director (other than a director designated by a person who has entered 7 into an agreement with the Company to effect a transaction described in clauses (i), (iii) and (iv) of this Section 10(c)) whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 80% of the total voting power of the resulting or surviving entity outstanding immediately after such merger or consolidation, or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all of the Company's assets. For purposes of this Agreement, "Voting Securities" shall mean any securities the holders of which vote generally in the election of directors. (d) Independent Legal Counsel. For purposes of this Agreement, "Independent Legal Counsel" shall mean an attorney or firm of attorneys, who shall not have otherwise performed services for the Company or Indemnitee within the then prior three years (other than with respect to matters concerning the rights of Indemnitee under this Agreement, or of other indemnitees under similar indemnity agreements) selected by the Company and approved by Indemnitee in writing, which approval shall not be unreasonably withheld. Notwithstanding the foregoing, the term "Independent Legal Counsel" shall not include any firm or person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee's right to indemnification under this Agreement. (e) Reviewing Party. For purposes of this Agreement, a "Reviewing Party" shall mean (i) any person or group of persons consisting of a member or members of the Company's Board of Directors and/or, as the case may be, or any other person appointed by the Board of Directors who is not a party to the particular Claim for which Indemnitee is seeking indemnification, or (ii) Independent Legal Counsel. 11. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute an original and all of which, together, shall constitute one and the same document. 12. Binding Effect; Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors and permitted assigns, heirs and personal and legal representatives. The Company may not assign its obligations under this Agreement to any individual or entity except by operation of law to an entity acquiring all or substantially all of the business and/or, as the case may be, assets of the Company (a "Successor") and, in any such case, the Company shall continue to be obligated hereunder. The Company shall require and cause any Successor by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. This Agreement shall 8 continue in effect regardless of whether Indemnitee continues to serve in an Indemnified Capacity. 13. Attorneys' Fees. In the event that any action is instituted by Indemnitee in a court of competent jurisdiction under this Agreement or under any liability insurance policies maintained by the Company to enforce, or interpret any of the terms hereof or thereof, Indemnitee shall be entitled to be paid all Expenses actually and reasonably incurred by Indemnitee with respect to such action, regardless of whether Indemnitee is ultimately successful in such action, and shall be entitled to an advance of such Expenses in the manner provided in Section 2 (a), above, with respect to such action, unless, as a part of such action, the court in which such action is brought determines that each of the material assertions made by Indemnitee as a basis for such action was not made in good faith or was frivolous. In the event of an action instituted by or in the name of the Company under this Agreement to enforce or interpret any of the terms of this Agreement, Indemnitee shall be entitled to be paid all Expenses actually and reasonably incurred by Indemnitee in defense of such action (including costs and expenses incurred with respect to Indemnitee's counterclaims and cross-claims made in such action), and shall be entitled to an advance of such Expenses in the manner provided in Section 2 (a), above, with respect to such action, unless as a part of such action such court determines that each of Indemnitee's material defenses to such action were made in bad faith or were frivolous. 14. Notice. Any notices or demands given in connection herewith shall be in writing and deemed given when (a) personally delivered, (b) sent by facsimile transmission to a number provided in writing by the addressee and a confirmation of the transmission is received by the sender or (c) two (2) days after being deposited for delivery with a recognized overnight courier, such as Fed Ex, and addressed or sent, as the case may be, to the address or facsimile number set forth below or to such other address or facsimile number as such party may in writing designate: If to Indemnitee: If to Company: Tel-Save.com, Inc. 6805 Route 202 New Hope, Pennsylvania 18938 Attn: Secretary Fax No.: (215) 862-1515 15. Consent to Jurisdiction. The Company and Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the Commonwealth of Pennsylvania for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement and agree that any action instituted under this Agreement shall be commenced, prosecuted and continued only in the courts of the Commonwealth of Pennsylvania in and for the County of Philadelphia, which shall be the exclusive and only proper forum for adjudicating such a claim. 9 16. Severability. The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law. Furthermore, to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of this Agreement containing any provision held to be invalid, void or otherwise unenforceable, that is not itself held to be invalid, void or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. 17. Choice of Law. This Agreement shall be governed by and its provisions construed and enforced in accordance with the laws of the State of Delaware, without regard to the conflict of laws principles thereof. 18. Subrogation. In the event of payment to, or on behalf of Indemnitee under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall, at Company's expense, execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights. 19. Amendment and Termination. No amendment, modification, termination or cancellation of this Agreement shall be effective unless it is in writing signed by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed to, or shall constitute a waiver of, any other provisions hereof (whether or not similar thereto), nor shall such waiver constitute a continuing waiver. Except as specifically set forth herein, no failure to exercise, or any delay in exercising, any right or remedy hereunder shall constitute a waiver thereof. 20. Integration and Entire Agreement. This Agreement sets forth the entire understanding between the parties hereto and supersedes all previous written and oral negotiations, commitments, understandings and agreements relating to the subject matter hereof between the parties hereto. 21. No Construction as Employment Agreement. Nothing contained in this Agreement shall be construed as giving Indemnitee any right to be retained in the employ of the Company or any Subsidiaries. 22. Certain Words. As used in this Agreement, the words "herein," "hereunder," "hereof" and similar words shall be deemed to refer to this Agreement in its entirety, and not to any particular provision of this Agreement unless the context clearly requires otherwise. 10 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. TEL-SAVE.COM, INC. By: --------------------------------- Title: ------------------------------ AGREED TO AND ACCEPTED INDEMNITEE: - --------------------------------- ________________________ 11 EX-10.51 4 EXHIBIT 10.51 EXHIBIT 10.51 NON-QUALIFIED STOCK OPTION AGREEMENT To: _____________________________:("Employee") ---------------------------------------------------------------------- Name _______________________________________________ ---------------------------------------------------------------------- Address Date of Grant: December 16, 1998 Exercise Price: $8 9/16 per share Employee is hereby granted the option described below, effective as of the above date of grant, to purchase shares of common stock, $.01 par value per share ("Stock"), of Tel-Save.com, Inc. (the "Company") at the exercise price shown above. Capitalized terms used herein without definition have the meanings assigned in the employment agreement dated as of the above date of grant between the Company and Employee (the "Employment Agreement"). 1. Employee is hereby granted options to purchase 240,000 shares of Stock (the "Option"). The Option shall have an exercise price equal to eight dollars and 5625/10,000 cents ($8.5625) per share (the "Exercise Price") and, subject to Section 2, below, shall vest with respect to the indicated number of shares of Stock according to the following schedule: (a) eighty thousand (80,000) shares of Stock shall vest and become exercisable upon the first anniversary of the date of grant. (b) eighty thousand (80,000) shares of Stock shall vest and become exercisable upon the second anniversary of the date of grant. (c) eighty thousand (80,000) shares of Stock shall vest and become exercisable upon the third anniversary of the date of grant. (d) Notwithstanding the foregoing, (i) any portion of the Option that was not previously vested and exercisable shall become fully vested and exercisable on the effective date of any termination of the employment of Employee under the Employment Agreement by the Company without Cause (as defined in Section 6.3 of the Employment Agreement) or by Employee for Good Reason (as defined in Section 6.4(b) of the Employment Agreement) and (ii) the Board of Directors of the Company (the "Board") or its designees may accelerate or waive the aforesaid scheduled vesting dates with respect to any or all of the shares of Stock covered by the Option. 2. In the event of a "Change in Control" (as hereafter defined) of the Company, any portion of the Option that was not previously vested and exercisable on the effective date of the Change in Control, shall become fully vested and exercisable on such effective date of such Change in Control. A "Change in Control" shall be deemed to have occurred upon the happening of any of the following events: (a) any Person (as defined in Section 3(a)(9) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than the Company, becomes the Beneficial Owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company or any Significant Subsidiary (as defined below) representing fifty percent (50%) or more of the combined voting power of the Company's, or such Significant Subsidiary's, as the case may be, then outstanding securities; provided, that a Person shall be deemed to be the Beneficial Owner of all shares that any such Person has the right to acquire pursuant to any agreement or arrangement or upon exercise of conversion rights, warrants, options or otherwise, without regard to the sixty (60)-day period referred to in Rule 13d-3 under the Exchange Act); (b) during any period of two years, individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clauses (a), (b) or (d) of this Section 2) whose election by the Board or nomination for election by stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, but excluding for this purpose any such new director whose initial assumption of office occurs as a result of either an actual or threatened election contest or other actual or threatened solicitation of proxies or consents by or on behalf of an individual, corporation, partnership, group, association or other entity other than the Board, cease for any reason to constitute at least a majority of the Board of either or the Company or a Significant Subsidiary; (c) the consummation of a merger or consolidation of the Company or any subsidiary of the Company owning directly or indirectly all or substantially all of the consolidated assets of the Company (a "Significant Subsidiary") with any other entity, other than a merger or consolidation which would result in the voting securities of the Company or a Significant Subsidiary outstanding immediately prior thereto continuing to represent more than fifty percent (50%) of the combined voting power of the surviving or resulting entity outstanding immediately after such merger or consolidation; 2 (d) the shareholders of the Company approve a plan or agreement for the sale or disposition of fifty percent (50%) or more of the consolidated assets of the Company in which case the Board shall determine the effective date of the Change of Control resulting therefrom; (e) any other event occurs which the Board determines, in its discretion, would materially alter, the structure of the Company or its ownership; and (f) a person other than Gabriel Battista is elected by the Board of Directors to serve as the Company's principal executive officer. 3. Employee may exercise the Option by giving written notice to the Secretary of the Company on forms supplied by the Company at its then principal executive office, accompanied by payment of the Exercise Price for the total number of shares specified to be purchased by Employee. The payment may be in any of the following forms: (a) cash, which may be evidenced by a check and includes cash received from a so-called "cashless exercise" of the Option; (b) certificates representing shares of Stock, which will be valued at the fair market value (as defined in the Employment Agreement) per share of the Stock on the date of the Option exercise in question, accompanied by an assignment of such Stock to the Company; or (c) any combination of cash and Stock valued as provided in clause (b), immediately above. Any assignment of Stock shall be in a form and substance satisfactory to the Secretary of the Company, including guarantees of signature(s) and payment of all transfer taxes, if the Secretary of the Company deems such guarantees necessary or desirable. 4. The Option will, to the extent not previously exercised by Employee, expire on December 16, 2008. 5. In the event of any change in the outstanding shares of the Stock by reason of a stock dividend, stock split, consolidation, transfer of assets, reorganization, conversion or what the Board deems in its reasonable discretion to be similar circumstances, the number and kind of shares of Stock subject to the Option and the Exercise Price shall be appropriately adjusted in a manner to be determined in the reasonable discretion of the Board. 6. The Option is not transferable otherwise than by will or the laws of descent and distribution, and is exercisable during Employee's lifetime only by Employee, including, for this purpose, Employee's legal guardian or custodian in the event of the disability of Employee. Until the Exercise Price has been paid in full pursuant to due exercise of this Option and certificate(s) representing Employee's ownership of the purchased shares are issued to Employee, Employee does not have any rights as a shareholder of the Company. The Company reserves the right not to deliver to Employee the certificate(s) representing shares purchased by virtue of the exercise of the Option during any period of time in which the Company deems, based on the written opinion of its counsel, that such delivery would violate a federal, state, local or securities exchange rule, regulation or law. 7. Notwithstanding anything to the contrary contained herein, the Option is not exercisable: 3 (a) During any period of time in which the Company deems, based on the written opinion of its counsel, that the exercisability of the Option, the offer to sell the shares underlying the Option, or the sale thereof, would violate a federal, state, local or securities exchange rule, regulation or law; or (b) Until Employee has paid or made suitable arrangements to pay all federal, state and local income tax withholding required to be withheld by the Company in connection with the Option exercise. 8. The following two paragraphs shall be applicable if, on a date of exercise of the Option, the Stock to be purchased pursuant to such exercise has not been registered under the Securities Act of 1933, as amended (the "Act"), and under applicable state securities laws, and shall continue to be applicable for so long as such registration has not occurred: (a) Employee hereby agrees, warrants and represents that he will acquire the Stock to be issued hereunder for his own account for investment purposes only, and not with a view to, or in connection with, any resale or other distribution of any shares of such Stock, except as hereafter permitted. Employee further agrees that he will not at any time make any offer, sale, transfer, pledge or other disposition of such Stock to be issued hereunder without an effective registration statement under the Act, and under any applicable state securities laws or an opinion of counsel acceptable to the Company to the effect that the proposed transaction will be exempt from such registration. Employee shall execute such instruments, representations, acknowledgments and agreements as the Company may, in its sole discretion, deem advisable to avoid any violation of federal, state, local or securities exchange rule, regulation or law. (b) The certificates for Stock to be issued to Employee hereunder shall bear the following legend: "The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended, or under applicable state securities laws. The shares have been acquired for investment and may not be offered, sold, transferred, pledged or otherwise disposed of without an effective registration statement under the Securities Act of 1933, as amended, and under any applicable state securities laws or an opinion of counsel acceptable to the Company that the proposed transaction will be exempt from such registration." The foregoing legend shall be removed upon registration of the legended shares under the Act and under any applicable state laws or upon receipt of an opinion of counsel acceptable to the Company that said registration is no longer required. 4 9. The sole purpose of the agreements, warranties, representations and legend set forth in the two immediately preceding paragraphs is to prevent violations of the Act, and any applicable state securities laws. 10. It is the intention of the Company and Employee that the Option shall not be an "Incentive Stock Option" as that term is used in Section 422 of the Internal Revenue Code of 1986, as amended, and the regulations thereunder. The Option is not granted pursuant to any stock option plan. 11. This agreement and the Employment Agreement constitute the entire understanding between the Company and Employee with respect to the subject matter hereof and no amendment, modification or waiver of this agreement, in whole or in part, shall be binding upon the Company or Employee unless in writing and signed by the Executive Vice President of the Company and Employee. This agreement and the performances of the parties hereunder shall be construed in accordance with, and governed by the laws of, the Commonwealth of Pennsylvania. Employee shall sign a copy of this agreement and return it to the Company's Secretary, thereby indicating Employee's understanding of, and agreement with its terms and conditions. TEL-SAVE.COM, INC, By:___________________________ 5 I hereby acknowledge receipt of a copy of the foregoing stock option agreement and, having read it, hereby signify my understanding of, and my agreement with, its terms and conditions. January , 1999 - ------------------------------------ ------------------------------- (Date) _____________________________ 6 EX-10.60 5 EXHIBIT 10.60 EXHIBIT 10.60 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of the 16th day of December, 1998 between Tel-Save.com, Inc., a Delaware corporation (the "Company"), and Michael Ferzacca ("Employee"). WHEREAS, Company desires to employ Employee and Employee desires to be employed by Company; and WHEREAS, Company and Employee desire to enter into this Agreement that sets forth the terms and conditions of said employment. NOW THEREFORE, in consideration of the foregoing, the mutual covenants set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned hereby agree as follows: 1. Employment. Company agrees to employ Employee, and Employee accepts such employment and agrees to serve Company, on the terms and conditions set forth herein. Except as otherwise specifically provided herein, Employee's employment shall be subject to the employment policies and practices of Company in effect from time to time during the term of Employee's employment hereunder (including, without limitation, its practices as to tax reporting and withholding). 2. Term of Agreement. The term of Employee's employment hereunder shall commence on December 28, 1998 (the "Commencement Date") and shall continue in effect for a period of three years thereafter, except as hereinafter provided (the "Term"). Notwithstanding the foregoing, Employee shall not assume the Positions (as defined in Section 3.1 hereof) until January 4, 1998. For purposes of this Section 2, Employee shall be deemed to have commenced employment hereunder in accordance with his obligations under this Agreement if an Employment Presentment (as defined below) takes place. For purposes of this Agreement, an "Employee Presentment" shall be deemed to have occurred if Employee does present himself at the offices of Company in New Hope, Pennsylvania (or such other location as Employee may be directed by the Gabriel Battista) prepared to commence performing his duties hereunder on or before December 31, 1998. 3. Positions and Duties. 3.1 Officer Positions. Except as may otherwise be agreed upon between Company and Employee, Employee shall perform such duties and have such responsibilities as Executive Vice President, Sales and such other duties and responsibilities consistent with the foregoing duties and responsibilities as may be reasonably assigned or delegated to him from time to time by Company's Chief Executive Officer or Company's Board of Directors (the "Board"), including, without limitation, service as an employee, officer or director of affiliates (as that term is defined in Rule 405 under the Securities Act of 1933, as amended (the "Act")) (hereinafter, "Affiliates") of Company, without additional compensation. References in this Agreement to Employee's employment with Company shall be deemed to refer to employment with Company and/or, as the case may be, an Affiliate, as the context requires. Employee shall perform his duties and responsibilities to the best of his abilities hereunder in a diligent, trustworthy, businesslike and efficient manner. Employee shall devote substantially all of his working time and efforts to the business and affairs of Company; provided, however, that nothing in this Agreement shall preclude Employee from (a) engaging in charitable activities and community affairs, and (b) managing his personal investments and affairs (subject to the limitations in Section 10 hereof. 4. Compensation and Related Matters. 4.1 Base Salary. During the Term, Company shall pay to Employee a base salary ("Base Salary") at the rate of Three Hundred Thousand Dollars ($300,000) per year, which Base Salary shall be paid to Employee in accordance with Company's usual and customary payroll practices. 4.2 Benefit Plans and Arrangements. Employee shall be entitled to participate in and to receive benefits under Company's employee benefit plans and arrangements (including, but not limited to, bonus plans) as are made available to the Company's senior executive officers during the Term, which employee benefit plans and arrangements may be altered from time to time at the discretion of the Board (the "Benefits"). Annual bonuses to Employee may be up to one hundred percent (100%) of Base Salary. Notwithstanding the foregoing, Employee acknowledges and agrees that bonuses, annual or otherwise, are performance based and discretionary with the Board of Directors or a Committee thereof. 4.3 Perquisites. During the Term, Employee shall be entitled to receive fringe benefits as are made available to Company's senior executive officers. 4.4 Expenses. Company shall promptly reimburse Employee for all out-of-pocket expenses related to Company's business that are actually paid or incurred by him in the performance of his services under this Agreement and that are incurred, reported and documented in accordance with Company's policies. In addition, during the Term, Company will provide Employee with an automobile, as Company shall determine, and Company shall keep such automobile fully insured in accordance with Company's practices for similarly situated employees. 4.5 Stock Options. (a) Grant of Options. Effective on the date hereof, Employee shall be granted an award of 130,000 shares of Common Stock ("Award") and an option to purchase 350,000 shares of the Common Stock (the "Option") in accordance with the stock option agreement to be mutually agreed to, and executed by, Company and Employee prior to the Commencement Date, which stock option agreement shall be in 2 substantially in the form thereof attached hereto as Exhibit A upon execution of the option. The Option shall have an exercise price equal to $8 9/16, which is equal to the fair market value (as defined below) of the Common Stock on the date hereof. The Option expires on the tenth anniversary of the date hereof and shall vest and become exercisable, subject to accelerated vesting in the event of a Change in Control (defined as provided below) of Company in installments, as follows: (i) options with respect to 116,666 shares of Common Stock shall vest and become exercisable on the first anniversary of the date hereof, (ii) options with respect to 116,666 shares of Common Stock shall vest and become exercisable on the second anniversary of the date hereof and (iii) options with respect to 116,668 shares of Common Stock shall vest and become exercisable on the third anniversary of the date hereof. In the event of a Change in Control of Company, all of the options issued under the Option which are not then vested and exercisable shall immediately become vested and exercisable. The fair market value of Common Stock for purposes of this Agreement shall mean the last reported sale price of a share of the Common Stock on the Nasdaq National Market System preceding the date in question or if no sale took place on such day, such last reported sale price on the then next preceding date on which such sale took place. The Company agrees to make a loan or an advance ("Loan") to Employee sufficient to enable Employee to pay or satisfy withholding and tax obligations associated with the grant of the Award. The Loan shall be made to Employee pursuant to a Promissory Note the form of which is attached hereto as Exhibit A. Notwithstanding the foregoing, the Option and Award shall be forfeited by Employee if an Employment Presentment does not take place on or before December 31, 1998. For the purposes of this Agreement, a "Change of Control" shall be deemed to have occurred if: (i) any Person (as defined in Section 3(a)(9) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than the Company, becomes the Beneficial Owner (as defined in Rule 13d-3 under the Exchange Act; provided, that a Person shall be deemed to be the Beneficial Owner of all shares that any such Person has the right to acquire pursuant to any agreement or arrangement or upon exercise of conversion rights, warrants, options or otherwise, without regard to the 60 day period referred to in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company or any Significant Subsidiary (as defined below) representing 50% or more of the combined voting power of the Company's, or such subsidiary's, as the case may be, then outstanding securities; (ii) during any period of two years, individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clauses (i), (iii), or (iv) of this 3 Section 2(a)) whose election by the Board or nomination for election by stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, but excluding for this purpose any such new director whose initial assumption of office occurs as a result of either an actual or threatened election contest or other actual or threatened solicitation of proxies or consents by or on behalf of an individual, corporation, partnership, group, association or other entity other than the Board, cease for any reason to constitute at least a majority of the Board of either or the Company or a Significant Subsidiary; (iii)the consummation of a merger or consolidation of the Company or any subsidiary of the Company owning directly or indirectly all or substantially all of the consolidated assets of the Company ( a "Significant Subsidiary") with any other entity, other than a merger or consolidation which would result in the voting securities of the Company or a Significant Subsidiary outstanding immediately prior thereto continuing to represent more than fifty percent (50%) of the combined voting power of the surviving or resulting entity outstanding immediately after such merger or consolidation; (iv) the shareholders of the Company approve a plan or agreement for the sale or disposition of fifty percent (50%) or more of the consolidated assets of the Company in which case the Board shall determine the effective date of the Change of Control resulting therefrom; (v) any other event occurs which the Board determines, in its discretion, would materially alter, the structure of the Company or its ownership; and (vi) a person other than Gabriel Battista is elected by the Board of Directors to serve as the Company's principal executive officer. (b) Registration Statement. Company will file with the Securities and Exchange Commission and any applicable state securities regulatory authorities a Registration Statement on the applicable form to register the resale of the Award and Form S-8 (or if unavailable, a registration statement on Form S-3) to register the shares 4 issuable upon exercise of the Option under the Act and any applicable state securities or "Blue Sky" laws as soon as practicable after the date hereof. Notwithstanding the foregoing, Company shall be entitled to postpone for a reasonable period of time the filing or the effectiveness of such registration statement if the Board shall determine in good faith that such filing or effectiveness would be materially detrimental to the Company's business interests. 4.6 Signing Bonus. In consideration of Employee's agreement to become employed by Company, Company shall pay Employee Two Hundred Thousand Dollars ($200,000) (the "Signing Bonus") by means of a wire transfer on earlier of the Commencement Date, upon Employee's commencement of employment with Company as herein provided and the date and time in which this contract is executed. 5. Termination. The Term of Employee's employment hereunder may be terminated under the following circumstances: 5.1 Death. The Term of Employee's employment hereunder shall terminate upon his death. 5.2 Disability. If Employee becomes physically or mentally disabled during the term hereof so that he is unable to perform services required of him pursuant to this Agreement for an aggregate of six (6) months in any twelve (12) month period (a `Disability"), Company, at its option, may terminate Employee's employment hereunder. 5.3 Cause. Upon written notice, Company may terminate Employee's employment hereunder for Cause (as defined below). For purposes of this Agreement, Company shall have "Cause" to terminate Employee's employment hereunder upon (a) a material breach by Employee of any material provision of this Agreement, (b) willful misconduct by Employee in connection with misappropriating any funds or property of Company, (c) attempting to obtain any personal profit from any transaction in which Employee has an interest that is adverse to the interests of Company without prior written disclosure thereof to the Board or (d) Employee's gross neglect in the performance of the duties required to be performed by Employee under this Agreement. 5.4 By Employee. Employee may terminate his employment hereunder: (a) Upon sixty (60) days' prior written notice to Company, provided that, upon the giving of such notice by Employee, Company may establish an earlier date for such termination under this Section 5.4 (a). (b) For Good Reason (as defined below) immediately and with notice to Company. "Good Reason" for termination by Employee shall include, but is not limited to, the following: 5 (i) Material breach of any provision of this Agreement by Company, which breach shall not have been cured by Company within thirty (30) days of receipt of written notice of said material breach; (ii) Failure by Company to maintain Employee in a position commensurate with that referred to in Section 3 of this Agreement; or (iii)The assignment to Employee of any duties inconsistent with Employee's position, authority, duties or responsibilities as contemplated by Section 3 hereof or any other action by Company that results in a diminution of such position, authority, duties or responsibilities. 5.5 Without Cause. Company may otherwise terminate the Term of Employee's employment at any time upon written notice to Employee. 6. Compensation In the Event of Termination. In the event that Employee's employment hereunder terminates prior to the end of the Term, Company shall make payments to Employee as set forth below: 6.1 By Employee for Good Reason; By Company Without Cause. In the event that Employee's employment hereunder is terminated by Company without Cause or by Employee for Good Reason, then the Company shall (a) pay to Employee all amounts due to Employee pursuant to any bonus that was due to Employee as of the date of such termination, pursuant to the terms of such bonus (a "Due Bonus"), (b) continue to pay to Employee the Base Salary and Benefits to which Employee would be entitled hereunder in the manner provided for herein for the period of time ending on the earlier of the date when the Term would otherwise have expired in accordance with Section 2 hereof and the second anniversary of the date of such termination, (c) reimburse Employee for expenses that may have been incurred, but which have not been paid as of the date of termination, subject to the requirements of Section 4.4 hereof and (d) one hundred percent (100%) of the outstanding stock options granted to the Employee that are unvested shall immediately vest and become exercisable. 6.2 By Company for Cause; By Employee Without Good Reason. In the event that Company shall terminate Employee's employment hereunder for Cause pursuant to Section 5.3 hereof or Employee shall terminate his employment hereunder without Good Reason, all compensation and Benefits, as specified in Section 4 of this Agreement, theretofore payable or provided to Employee shall cease to be payable or provided, except for any Due Bonus and any Benefits that may have been due and payable but that have not been paid as of the date of termination and reimbursement of expenses that may have been incurred, but which have not been paid as of the date of termination, subject to the requirements of Section 4.4 hereof. 6 6.3 Death. In the event of Employee's death, Company shall not be obligated to pay Employee or his estate or beneficiaries any compensation except for (a) any Due Bonus or any Benefits that may have been earned and are due and payable as of the date of death, but which have not been paid as of such date, (b) reimbursement of expenses that may have been incurred, but which have not been paid as of the date of death, subject to the requirements of Section 4.4 hereof, and (c) all outstanding stock options granted to Employee that are unvested shall immediately vest and become exercisable and Employee's estate or beneficiaries, as the case may be, shall have the right to exercise any of such stock options during the period commencing on the date of death and ending on the second anniversary of the date of such termination or for the remainder of the period set forth in the option agreement applicable to the option in question (the "Exercise Period'), if less. 6.4 Disability. In the event of Employee's Disability, Company shall not be obligated to pay Employee or his estate or beneficiaries any additional compensation except for: (a) any Due Bonus and Benefits that may have been earned and are due and payable as of the date of such Disability, but which have not been paid as of such date, and (b) reimbursement for expenses that may have been incurred but which have not been paid as of the date of Disability, subject to the requirements of Section 4.4 hereof. Upon termination due to Disability, fifty percent (50%) of the outstanding stock options granted to Employee that are unvested shall immediately vest and become exercisable and Employee or his estate or beneficiaries, as the case may be, shall have the right to exercise any of such stock options during the period commencing on the date of Disability and ending on the second anniversary of the date of the Disability or for the remainder of Exercise Period, if less. 6.5 No Mitigation. In the event of any termination of employment under Section 5 hereof, Employee shall be under no obligation to seek other employment; provided; however, that to the extent that Employee does obtain other employment subsequent to the termination of Employee's employment hereunder, the obligations of Company to pay Benefits under this Agreement from and after the date of commencement of such other employment shall terminate. 7. Unauthorized Disclosure. Employee shall not, without the prior written consent of Company, disclose or use in any way, either during Employee's employment with Company or thereafter, except as required in the course of such employment, any confidential business or technical information or trade secret acquired in the course of such employment, whether or not conceived of or prepared by him, which is related to any service or business of Company or any Affiliate; provided, however, that the foregoing shall not apply to (a) information that is not unique to the Company or that is generally known to the industry or the public other than as a result of Employee's breach of this covenant, (b) information known to Employee other than from information provided by Company or (c) information that Employee is required to disclose to, or by, any governmental or judicial authority; provided, however, if Employee should be required in the course of judicial or other governmental proceedings to disclose any information, Employee shall give Company prompt written notice thereof so that 7 Company may seek an appropriate protective order and/or waive in writing compliance with the confidentiality provisions of this Agreement. If, in the absence of a protective order or the receipt of a waiver by Company, Employee is compelled to disclose information to, or pursuant to the requirements of, a court or other governmental authority, Employee may disclose such information to such court or other governmental authority without liability to any other party hereto. 8. Tangible Items. All files, records, documents, manuals, books, forms, reports, memoranda, studies, data, calculations, recordings and correspondence, in whatever form they may exist, and all copies, abstracts and summaries of the foregoing and all physical items related to the business of Company and its affiliates, other than merely personal items, whether of a public nature or not, and whether prepared by Employee or not, and which are received by Employee from, or on behalf of Company or an Affiliate in the course of his employment hereunder are and shall remain the exclusive property of Company and any such Affiliate and shall not be removed from the premises of the Company or such Affiliate, as the case may be, except as required in the course of Employee's employment hereunder, without the prior written consent of the Company's Chief Executive Officer or the Board, and the same shall be promptly returned by Employee upon the termination of Employee's employment with Company or at any time prior thereto upon the request of the Company's Chief Executive Officer or the Board. 9. Inventions and Patents. Employee agrees that all inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports, and all similar or related information that relates to Company's actual or anticipated business, research and development or existing or future products or services and that are conceived, developed or made by or at the direction of Employee while Employee is employed by Company will be owned by Company. Employee also agrees to promptly perform, at the expense of Company, all reasonable actions (whether before, during or after the Term) necessary to establish and confirm such ownership. 10. Certain Restrictive Covenants. During the Term, and for a period ending six (6) months after the earlier of Employee's termination of employment hereunder and the end of the Term for which the Employee is being compensated at an annual rate equal to the Base Salary, Employee agrees that he will not act, either directly or indirectly, as a partner, officer, director, substantial stockholder (an equity interest of 5% or more) or employee of, or render advisory or other services for, or in connection with, or become interested in, or make any substantial financial investment in any firm, corporation, business entity or business enterprise that competes with the business of Company (each, a "Competitor"), except with the express written consent of the Board. Employee further agrees that in the event of the termination of his employment under Section 5 hereof, for a period of twelve (12) months thereafter, he will not, directly or indirectly, employ, offer to employ, or actively interfere with the relationship of Company or an Affiliate with, any employee of Company or any employee of any Affiliate. 8 11. Employee Representations and Covenants. Employee hereby represents, warrants and covenants to Company that (a) the execution, delivery and performance of this Agreement by Employee does not and will not conflict with, breach, violate or cause a default under any employment, non-competition or confidentiality contract or agreement, instrument; order, judgment or decree to which Employee is a party or by which he is bound; (b) Employee, in performing this Agreement and the duties of Employee's employment with Company, will not disclose or utilize any trade secrets of a former employer, unless Employee has first obtained express written authorization from any such former employer for their disclosure or use; (c) Employee has not brought, and will not bring to Company, any documents, records, information or other materials of a former employer that are not generally available to the public, unless Employee has first obtained express written authorization from any such former employer for their possession and use; and (d) upon the execution and delivery of this Agreement by Company, this Agreement shall be the valid and binding obligation of Employee, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting the rights of creditors generally. 12. Company Representations. Company represents and warrants (a) that it is duly authorized and empowered to enter into this Agreement, (b) the execution, delivery and performance of this Agreement by Company does not and will not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Company is a party or by which it is bound, and (c) upon the execution and delivery of this Agreement by Employee, this Agreement shall be the valid and binding obligation of Company, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting the rights of creditor generally. 13. Indemnification. Prior to the Commencement Date, Company and Employee shall enter into an indemnification agreement in a form mutually acceptable to Company and Employee and containing terms no less favorable to Employee than those contained in any indemnification or similar agreement currently in effect between Company and any of its officers. 14. Remedies. Employee acknowledges that the restrictions and agreements contained in this Agreement are reasonable and necessary to protect the legitimate interests of Company, and that any violation of this Agreement will cause substantial and irreparable injury to Company that would not be quantifiable and for which no adequate remedy would exist at law and agrees that injunctive relief, in addition to all other remedies, shall be available therefor. 15. Effect of Agreement on Other Benefits. Except as specifically provided in this Agreement, the existence of this Agreement shall not be interpreted to preclude, prohibit or restrict Employee's participation in any other employee benefit plan or other plans or programs provided to officers, directors or employees of Company. 9 16. Rights of Employee's Estate. If Employee dies prior to the payment of all amounts due and owing to him under the terms of this Agreement, such amounts shall be paid to such beneficiary or beneficiaries as Employee may have last designated in writing filed with the Secretary of Company or, if Employee has made no beneficiary designation, to Employee's estate. Such designated beneficiary or the executor of Employee's estate, as the case may be, may exercise all of Employee's rights hereunder. If any beneficiary designated by Employee shall predecease Employee, the designation of such beneficiary shall be deemed revoked, and any amounts which would have been payable to such beneficiary shall be paid to Employee's estate. If any designated beneficiary survives Employee, but dies before payment of all amounts due hereunder, such payments shall, unless Employee has designated otherwise, be made to such beneficiary's estate. In the event of Employee's death or judicial determination of his incompetence, reference in this Agreement to Employee shall be deemed where appropriate, to refer to his beneficiary, estate or other legal representative. 17. Severability. It is the intent and understanding of the parties hereto that if, in any action before any court or other tribunal of competent jurisdiction legally empowered to enforce this Agreement, any term, restriction, covenant, or promise is held to be unenforceable as a result of being unreasonable or for any other reason, then such term, restriction, covenant, or promise shall not thereby be terminated, but, that it shall be deemed modified to the extent necessary to make it enforceable by such court or other tribunal and, if it cannot be so modified, that it shall be deemed amended to delete therefrom such provision or portion adjudicated to be invalid or unenforceable, and this agreement shall be deemed to be in full force and effect as so modified and such modification or amendment in any event shall apply only with respect to the operation of this Agreement in the particular jurisdiction in which such adjudication is made. 18. Notices. Any notices or demands given in connection herewith shall be in writing and deemed given when (a) personally delivered, (b) sent by facsimile transmission to a number provided in writing by the addressee and a confirmation of the transmission is received by the sender or (c) two (2) days after being deposited for delivery with a recognized overnight courier, such as Federal Express, and addressed or sent, as the case may be, to the address or facsimile number set forth below or to such other address or facsimile number as such party may in writing designate: If to Employee: Michael Ferzacca 13561 Stoneband Lane Gaithersburg, MD 20878 Fax No.: (301) 947-8349 If to Company: Tel-Save.com, Inc. 6805 Route 202 New Hope, Pennsylvania 18938 Attn: President Fax No.: (215) 862-1515 10 Either party may change its address for notices by written notice to the other party in accordance with this Section 17. 19. Waiver. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in a writing executed by Employee and Company. No waiver by any party hereto at any time of any breach by another party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. 20. Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of Pennsylvania relating to contracts made and to be performed entirely therein. 21. Headings. The headings in this Agreement are inserted for convenience only and shall have no significance in the interpretation of this Agreement. 22. Successors. Company may not assign any of its rights or obligations under this Agreement hereunder. Employee may assign his rights, but not his obligations, hereunder and all of Employee's rights hereunder shall inure to the benefit of his estate, personal representatives, designees or other legal representatives. All of the rights of Company hereunder shall inure to the benefit of, and be enforceable by the successors of Company. Any person, firm or corporation succeeding to the business of Company by merger, purchase, consolidation or otherwise shall be deemed to have assumed the obligations of Company hereunder; provided, however, that Company shall, notwithstanding such assumption by a successor, remain primarily liable and responsible for the fulfillment of its obligations under this Agreement. 23. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 24. Certain Words. As used in this Agreement, the words "herein," "hereunder," "hereof" and similar words shall be deemed to refer to this Agreement in its entirety, and not to any particular provision of this Agreement unless the context clearly requires otherwise. 11 IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement as of the day and year first written above. Tel-Save.com, Inc. By: ------------------------------------- Name: Title: - ---------------------------------------- Michael Ferzacca 12 EXHIBIT A PROMISSORY NOTE $______ New Hope, Pennsylvania December __, 1998 1. FOR VALUE RECEIVED, Michael Ferzacca (hereinafter referred to as "Maker"), residing at 13561 Stoneband Lane, Gaithersburg, MD 20878, hereby promises to pay to Tel-Save.com, Inc. (hereinafter referred to as "Payee"), at its offices at 6805 Route 202, New Hope, Pennsylvania 18938, or at such other place as the holder hereof may from time to time designate in writing, or to order, the principal sum of ___________ AND 00/100 DOLLARS ($________) (or such lesser amount thereof as has been disbursed by Payee to Maker hereunder, as evidenced on the books and records of Payee), which, together with interest as hereinafter provided, shall be payable as follows: (a) A payment of interest on the principal sum of this Promissory Note outstanding from time to time, at the Interest Rate, from the date hereof, to and including the date that all principal amounts outstanding hereunder shall be repaid in full, on the ____ day of each month after the date of this Promissory Note or otherwise on the date that all principal amounts outstanding hereunder shall be due and payable. (b) On the earlier of December __, 1999 or the date that the shares held by Maker are sold (the "Maturity Date") the entire unpaid principal balance of this Promissory Note, together with all accrued fees and interest at the Interest Rate, shall become immediately due and payable after demand by the Payee. For purposes of this Promissory Note the term "Interest Rate" shall mean the rate of interest to be paid by Maker on any principal amount outstanding under this Promissory Note and shall be a rate per annum equal to the prime rate reported in the Money Rates column or section of The Wall Street Journal, as the rate in effect for corporate loans at large United States money center commercial banks with respect to the date (or nearest practicable date) of the first advance made under this Promissory Note. 2. (a) Notwithstanding any other provision of this Promissory Note, all payments made hereunder, including all amounts received by Payee pursuant to the exercise of its security interests granted hereby, shall be applied first to sums payable hereunder other than interest and principal, secondly, to payment of interest on the principal balance outstanding hereunder from time to time, and the balance, if any, to principal. (b) The interest payable on this Promissory Note will be computed on the basis of a 360 day year for the actual number of elapsed days, in each case including the date of any advance by Payee to Maker and the date of any payment. Principal, interest and all other sums payable under this Promissory Note shall be paid in lawful money of the United States in immediately available funds, free and clear of, and without deduction or offset for, any present or future taxes, levies, imposts, charges, withholdings, or liabilities with respect thereto, or any other defenses, offsets, set-offs, claims, counterclaims, credits or deductions of any kind. (c) This Promissory Note may be prepaid in whole or in part, at any time before it becomes due, without penalty or premium. Any prepayment shall be applied first to any late charges or sums payable hereunder other than interest and principal, and then to accrued interest, and then to principal. 3. (a) It is hereby expressly agreed that the entire unpaid principal balance of this Promissory Note, together with interest and all other sums payable to the holder hereof, shall immediately become due and payable at the option of Payee in the event that (i) Maker shall default in making any payment hereunder when due, and such default continues for fifteen (15) days; (ii) Maker fails to observe or perform any other term, covenant, undertaking or agreement contained in this Promissory Note or Maker's Employment Agreement with Payee, and such failure or default continues unremedied for a period of ten (10) days after written notice thereof has been given to Maker by Payee specifying such failure and requiring it to be remedied; or (iii) Maker shall, or shall permit another to, sell, assign, lease, convey, mortgage, pledge, encumber, or in any manner whatsoever transfer all or part of the Collateral (as herein after defined), or any interest therein, whether by operation of law or otherwise, except as permitted herein. (b) In addition, in any such event specified in subparagraph (a) of this paragraph 3, Payee shall have and may exercise all rights and remedies provided in this Promissory Note, in law or in equity. The Payee's failure to accelerate for any cause shall not be deemed a waiver nor shall it prevent Payee from doing so for a later or another cause. 4. As collateral security for the payment when due (whether at stated maturity, by acceleration or otherwise) of all amounts owing to Payee from time to time under this Promissory Note (collectively, the "Secured Obligations"), Maker does hereby grant to Payee a security interest in all of Maker's right, title and interest in those certain shares of common stock of Tel-Save.com, Inc. owned by Maker ("Stock") and all proceeds and products of, and the proceeds of any insurance covering, the foregoing property, including, without limitation, the stock of the Payee issuable upon exercise of the aforementioned stock options and any cash or other proceeds paid upon the sale or other disposition of such stock. 2 5. This Promissory Note shall constitute a security agreement between Maker and Payee for purposes of the Uniform Commercial Code in effect in the Commonwealth of Pennsylvania. In addition, at Maker's expense, Maker shall execute and deliver to Payee, at such times and in such places as may be required or permitted by applicable law, such UCC-1 Financing Statements, and any other document or instrument reasonably required by Payee, and shall take such other actions as are reasonably required by Payee, to better assure, convey, assign, transfer and confirm unto Payee the property and rights hereby or hereafter conveyed or assigned, and create preserve and perfect the security interests granted herein, or to enable Payee to exercise its rights and remedies with respect thereto. Further to the foregoing, Maker hereby expressly authorizes Payee to retain possession of any stock issued by Payee pursuant to paragraph 4. 6. Payee shall have all the rights with respect to the Collateral of a secured creditor under the laws of the Commonwealth of Pennsylvania. Such rights shall be in addition to, but not in limitation of, the other rights afforded to Lender by this Promissory Note, any document described herein, or at law or in equity. 7. When the Secured Obligations have been paid in full, the security interest granted by this Promissory Note shall terminate and be released, and any Collateral then in the possession or control of Payee shall be returned or relinquished. Payee shall execute and deliver to the Maker upon such termination such Uniform Commercial Code termination statements and such other documentation as shall be reasonably requested by Maker to effect the termination and release of the security interest in the Collateral. 8. If this Promissory Note is declared by Payee, or otherwise becomes, immediately due and payable prior to the Maturity Date in accordance with the terms of this Promissory Note, or is not paid in full on the Maturity Date, Maker agrees that interest hereunder shall be calculated at a rate equal to the Interest Rate plus one percent (1%) per annum from the date of said default or defaults, until the date of payment, provided that in no event shall such interest rate exceed the maximum interest rate which Maker may pay by law. 9. If any payment under this Promissory Note is not made when due (beyond any applicable grace period), Maker agrees to pay all reasonable out-of-pocket costs, fees, charges and expenses of collection by Payee, including, without limitation, attorneys' fees and disbursements (which costs shall be added to the amount due under this Promissory Note and shall be receivable therewith). Maker agrees to perform and comply with each of the terms, covenants and provisions contained in this Promissory Note on the part of Maker to be observed or performed. 3 10. No extension of time for payment of this Promissory Note, or any installment hereof, and no alteration, amendment or waiver of any provision of this Promissory Note made by agreement between Payee and any other person or party shall release, discharge, modify, change or affect the liability of Maker under this Promissory Note. Maker and any endorsers and guarantors hereof, and all others who may become liable for all or any part of this obligation, consent to any number of renewals or extensions of time for payment hereof. 11. Payee shall not be deemed to waive any of its rights or remedies hereunder unless such waiver be in writing and signed by Payee and then only to the extent specifically set forth therein; a waiver on one occasion shall not be construed as continuing or as a bar to or waiver of such right or remedy on any other occasion. All remedies conferred upon Payee by this Promissory Note shall be cumulative and none shall be exclusive, and such remedies may be exercised concurrently or consecutively at Payee's option. 12. Maker agrees during the period of time that this Note is outstanding that Maker will not purchase or own any securities of any company except for the Stock and shares of common stock of Tel-Save.com, Inc. In addition, Maker acknowledges that this Promissory Note and Maker's obligations hereunder are and shall at all times continue to be absolute and unconditional in all respects. This Promissory Note sets forth the entire agreement and understanding of Payee and Maker with respect to the subject matter hereof. MAKER ABSOLUTELY, UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO ASSERT ANY DEFENSE, SETOFF, COUNTERCLAIM OR CROSSCLAIM OF ANY NATURE OR KIND WHATSOEVER (EXCEPT MANDATORY COUNTERCLAIMS AND THE DEFENSES OF PAYMENT AND ACTUAL PERFORMANCE) WITH RESPECT TO THIS PROMISSORY NOTE OR THE OBLIGATIONS OF MAKER HEREUNDER. 13. All notices hereunder shall be in writing and shall be sufficiently given for all purposes when delivered personally or sent by ordinary mail, to any party hereto at its address on the first page hereof or at such other address of which it shall have notified the party giving such notice in writing in accordance with the foregoing requirements. Any such notice shall be deemed effective upon the fifth (5th) day following the date it is mailed. 14. This Promissory Note and the rights of the parties hereunder shall be governed by and construed and interpreted in accordance with the laws of the Commonwealth of Pennsylvania. If any provision hereof is held to be illegal, invalid or unenforceable in any jurisdiction, the other provisions hereof shall remain in full force and effect in such jurisdiction and the remaining provisions 4 hereof shall be liberally construed in favor of the holder hereof in order to effectuate the provisions hereof; and the invalidity of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provisions in any other jurisdiction, including the Commonwealth of Pennsylvania. 15. Notwithstanding anything to the contrary contained in this Promissory Note, in no event shall the total of all charges payable hereunder that are or could be held to be in the nature of interest exceed the maximum rate permitted to be charged by applicable law. Should Payee receive any payment that is or would be in excess of that permitted to be charged under such applicable law, then such payment shall be deemed to have been made in error and shall automatically be applied to reduce the principal sum outstanding under this Promissory Note. 16. This Promissory Note may not be changed, altered, modified or terminated in any way except by a written instrument duly executed by the holder hereof. 17. The rights of Maker to receive advances under this Promissory Note shall not be assignable, whether by operation of law or otherwise, and does not create or confer, and shall not be deemed to create or confer, any beneficial rights or interests in favor of third parties, including, without limitation, any right to obtain the proceeds in respect of an advance made hereunder. -------------------------------- Michael Ferzacca 5 COMMONWEALTH OF _________________) : ss.: COUNTY OF _________________) On the ____ day of December, 1998, before me personally came Michael Ferzacca to me known to be the individual described in and who executed the foregoing instrument, and acknowledged that he executed the same. -------------------------------- Notary Public 6 EX-10.61 6 EXHIBIT 10.61 EXHIBIT 10.61 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of the 16th day of December, 1998 between Tel-Save.com, Inc., a Delaware corporation (the "Company"), and Norris M. Hall, III ("Employee"). WHEREAS, Company desires to employ Employee and Employee desires to be employed by Company; and WHEREAS, Company and Employee desire to enter into this Agreement that sets forth the terms and conditions of said employment. NOW THEREFORE, in consideration of the foregoing, the mutual covenants set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned hereby agree as follows: 1. Employment. Company agrees to employ Employee, and Employee accepts such employment and agrees to serve Company, on the terms and conditions set forth herein. Except as otherwise specifically provided herein, Employee's employment shall be subject to the employment policies and practices of Company in effect from time to time during the term of Employee's employment hereunder (including, without limitation, its practices as to tax reporting and withholding). 2. Term of Agreement. The term of Employee's employment hereunder shall commence on December 28, 1998 (the "Commencement Date") and shall continue in effect for a period of three years thereafter, except as hereinafter provided (the "Term"). Notwithstanding the foregoing, Employee shall not assume the Positions (as defined in Section 3.1 hereof) until January 4, 1998. For purposes of this Section 2, Employee shall be deemed to have commenced employment hereunder in accordance with his obligations under this Agreement if an Employment Presentment (as defined below) takes place. For purposes of this Agreement, an "Employee Presentment" shall be deemed to have occurred if Employee does present himself at the offices of Company in New Hope, Pennsylvania (or such other location as Employee may be directed by the Gabriel Battista) prepared to commence performing his duties hereunder on or before December 31, 1998. 3. Positions and Duties. 3.1 Officer Positions. Except as may otherwise be agreed upon between Company and Employee, Employee shall perform such duties and have such responsibilities as Senior Vice President, Network Management and such other duties and responsibilities consistent with the foregoing duties and responsibilities as may be reasonably assigned or delegated to him from time to time by Company's Chief Executive Officer or Company's Board of Directors (the "Board") and as set forth in Exhibit A hereto, including, without limitation, service as an employee, officer or director of affiliates (as that term is defined in Rule 405 under the Securities Act of 1933, as amended (the "Act")) (hereinafter, "Affiliates") of Company, without additional compensation. References in this Agreement to Employee's employment with Company shall be deemed to refer to employment with Company and/or, as the case may be, an Affiliate, as the context requires. Employee shall perform his duties and responsibilities to the best of his abilities hereunder in a diligent, trustworthy, businesslike and efficient manner. Employee shall devote substantially all of his working time and efforts to the business and affairs of Company; provided, however, that nothing in this Agreement shall preclude Employee from (a) engaging in charitable activities and community affairs, and (b) managing his personal investments and affairs (subject to the limitations in Section 10 hereof. 4. Compensation and Related Matters. 4.1 Base Salary. During the Term, Company shall pay to Employee a base salary ("Base Salary") at the rate of Two Hundred Twenty-Five Thousand Dollars ($225,000) per year, which Base Salary shall be paid to Employee in accordance with Company's usual and customary payroll practices. 4.2 Benefit Plans and Arrangements. Employee shall be entitled to participate in and to receive benefits under Company's employee benefit plans and arrangements (including, but not limited to, bonus plans) as are made available to the Company's senior executive officers during the Term, which employee benefit plans and arrangements may be altered from time to time at the discretion of the Board (the "Benefits"). Annual bonuses to Employee may be up to fifty percent (50%) of Base Salary. Notwithstanding the foregoing, Employee acknowledges and agrees that bonuses, annual or otherwise, are performance based and discretionary with the Board of Directors or a Committee thereof. 4.3 Perquisites. During the Term, Employee shall be entitled to receive fringe benefits as are made available to Company's senior executive officers. 4.4 Expenses. Company shall promptly reimburse Employee for all out-of-pocket expenses related to Company's business that are actually paid or incurred by him in the performance of his services under this Agreement and that are incurred, reported and documented in accordance with Company's policies. In addition, during the Term, Company will provide Employee with an automobile, as Company shall determine, and Company shall keep such automobile fully insured in accordance with Company's practices for similarly situated employees. 4.5 Stock Options. (a) Grant of Options. Effective on the date hereof, Employee shall be granted an option (the "Option") to purchase 240,000 shares of Common Stock in accordance with a stock option agreement to be mutually agreed to, and executed by, Company and Employee prior to the Commencement Date, which stock option 2 agreement shall be in substantially the form thereof attached hereto as Exhibit A. The Option shall have an exercise price equal to $8 9/16 per share and shall expire on the tenth anniversary of the date hereof and shall vest and become exercisable, subject to accelerated vesting in the event of a Change in Control (defined as provided below) of Company in installments, as follows: (i) options with respect to 80,000 shares of Common Stock shall vest and become exercisable on the first anniversary of the date hereof, (ii) options with respect to 80,000 shares of Common Stock shall vest and become exercisable on the second anniversary of the date hereof and (iii) options with respect to 80,000 shares of Common Stock shall vest and become exercisable on the third anniversary of the date hereof. In the event of a Change in Control of Company, the Option shall vest and become exercisable as to all shares then subject thereto that are not then vested and exercisable. For purposes of this Agreement, "Change in Control" shall be deemed to have occurred if: (i) any Person (as defined in Section 3(a)(9) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than the Company, becomes the Beneficial Owner (as defined in Rule 13d-3 under the Exchange Act; provided, that a Person shall be deemed to be the Beneficial Owner of all shares that any such Person has the right to acquire pursuant to any agreement or arrangement or upon exercise of conversion rights, warrants, options or otherwise, without regard to the 60 day period referred to in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company or any Significant Subsidiary (as defined below) representing 50% or more of the combined voting power of the Company's, or such subsidiary's, as the case may be, then outstanding securities; (ii) during any period of two years, individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clauses (i), (iii), or (iv) of this Section 2(a)) whose election by the Board or nomination for election by stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, but excluding for this purpose any such new director whose initial assumption of office occurs as a result of either an actual or threatened election contest or other actual or threatened solicitation of proxies or consents by or on behalf of an individual, corporation, partnership, group, association or other entity other than the 3 Board, cease for any reason to constitute at least a majority of the Board of either or the Company or a Significant Subsidiary; (iii)the consummation of a merger or consolidation of the Company or any subsidiary of the Company owning directly or indirectly all or substantially all of the consolidated assets of the Company ( a "Significant Subsidiary") with any other entity, other than a merger or consolidation which would result in the voting securities of the Company or a Significant Subsidiary outstanding immediately prior thereto continuing to represent more than fifty percent (50%) of the combined voting power of the surviving or resulting entity outstanding immediately after such merger or consolidation; (iv) the shareholders of the Company approve a plan or agreement for the sale or disposition of fifty percent (50%) or more of the consolidated assets of the Company in which case the Board shall determine the effective date of the Change of Control resulting therefrom; (v) any other event occurs which the Board determines, in its discretion, would materially alter, the structure of the Company or its ownership; and (vi) a person other than Gabriel Battista is elected by the Board of Directors to serve as the Company's principal executive officer. The fair market value of Common Stock for purposes of this Agreement shall mean the last reported sale price of a share of the Common Stock on the Nasdaq National Market System preceding the date in question or if no sale took place on such day, such last reported sale price on the then next preceding date on which such sale took place. Notwithstanding the foregoing, the Options shall be forfeited by Employee if an Employment Presentment does not take place on or before December 31, 1998. (b) Registration Statement. Company will file with the Securities and Exchange Commission and any applicable state securities regulatory authorities a Registration Statement on Form S-8 (or if unavailable, a registration statement on Form S-3) to register the shares issuable upon exercise of the Option under the Act and any applicable state securities or "Blue Sky" laws as soon as practicable after the date hereof. Notwithstanding the foregoing, Company shall be entitled to postpone for a reasonable period of time the filing or the effectiveness of such registration statement if the Board shall determine in good faith that such filing or effectiveness would be materially detrimental to the Company's business interests. 4 4.6 Signing Bonus. In consideration of Employee's agreement to become employed by Company, Company shall pay Employee One Hundred Fifty Thousand Dollars ($150,000) (the "Signing Bonus") by means of a wire transfer on earlier of the Commencement Date, upon Employee's commencement of employment with Company as herein provided and the date and time in which this contract is executed. 4.7 Relocation of Employee. (a) Subject to the terms and conditions and limitations in Section 4.7(b)(iv) the Company shall pay Employee's reasonable moving expenses incurred in connection with Employee's move from his current residence in Atlanta, Georgia ("Old Residence") to a new residence in the greater metropolitan Washington D. C. area ("New Residence"). (b) (i) Subject to the limitations in Section 4.7(b)(iv), upon the consummation of the sale of Employee's Old Residence, the Company agrees to pay Employee the amount of money equal to the difference between the purchase price that Employee paid for such residence and the sale price that Employee received in connection with the sale of such residence. If the Employees existing residence fails to sell at or above his previous sales price, the Company will pay the Employee an amount equal to the difference, but not to exceed two (2) percentage points of the existing mortgage. (ii) Subject to the limitations in Section 4.7(b)(iv), in the event that and so long as the Employee owns both a New Residence and his Old Residence during the period commencing on the date hereof and terminating nine months thereafter ("Transition Period"), the Company shall reimburse the Employee for the greater of (i) his monthly mortgage for his New Residence and (ii) his monthly mortgage payment for his Old Residence, provided, however, that the Company shall reimburse the Employee only for one such mortgage payment each month during the Transition Period. (iii) Subject to the limitations of Section 4.7(b)(iv), to the extent that Employee has not purchased the New Residence, the Company shall provide the Employee with a two-bedroom rental residence, as the Company shall determine during the Transition Period. The Company will also pay reasonable expenses for family travel associated with finding a new residence and relocation. (iv) Notwithstanding the foregoing, (i) Employee shall obtain the Company's prior approval for any single moving expenditure in excess of $1,000; (ii) the Company, prior to the Company paying any amounts to Employee pursuant to this Section 4.7, has the right to review, examine and confirm Employee's bills and invoices with respect to these matters and (iii) the Company's aggregate liability to Employee pursuant to this Section 4.7(b) shall not exceed seventy-five thousand dollars ($75,000.00). 5 5. Termination. The Term of Employee's employment hereunder may be terminated under the following circumstances: 5.1 Death. The Term of Employee's employment hereunder shall terminate upon his death. 5.2 Disability. If Employee becomes physically or mentally disabled during the term hereof so that he is unable to perform services required of him pursuant to this Agreement for an aggregate of six (6) months in any twelve (12) month period (a `Disability"), Company, at its option, may terminate Employee's employment hereunder. 5.3 Cause. Upon written notice, Company may terminate Employee's employment hereunder for Cause (as defined below). For purposes of this Agreement, Company shall have "Cause" to terminate Employee's employment hereunder upon (a) a material breach by Employee of any material provision of this Agreement, (b) willful misconduct by Employee in connection with misappropriating any funds or property of Company, (c) attempting to obtain any personal profit from any transaction in which Employee has an interest that is adverse to the interests of Company without prior written disclosure thereof to the Board or (d) Employee's gross neglect in the performance of the duties required to be performed by Employee under this Agreement. 5.4 By Employee. Employee may terminate his employment hereunder: (a) Upon sixty (60) days' prior written notice to Company, provided that, upon the giving of such notice by Employee, Company may establish an earlier date for such termination under this Section 5.4 (a). (b) For Good Reason (as defined below) immediately and with notice to Company. "Good Reason" for termination by Employee shall include, but is not limited to, the following: (i) Material breach of any provision of this Agreement by Company, which breach shall not have been cured by Company within thirty (30) days of receipt of written notice of said material breach; (ii) Failure by Company to maintain Employee in a position commensurate with that referred to in Section 3 of this Agreement; or (iii)The assignment to Employee of any duties inconsistent with Employee's position, authority, duties or responsibilities as contemplated by Section 3 hereof or any other action by Company that results in a diminution of such position, authority, duties or responsibilities. 6 5.5 Without Cause. Company may otherwise terminate the Term of Employee's employment at any time upon written notice to Employee. 6. Compensation In the Event of Termination. In the event that Employee's employment hereunder terminates prior to the end of the Term, Company shall make payments to Employee as set forth below: 6.1 By Employee for Good Reason; By Company Without Cause. In the event that Employee's employment hereunder is terminated by Company without Cause or by Employee for Good Reason, then the Company shall (a) pay to Employee all amounts due to Employee pursuant to any bonus that was due to Employee as of the date of such termination, pursuant to the terms of such bonus (a "Due Bonus"), (b) continue to pay to Employee the Base Salary and Benefits to which Employee would be entitled hereunder in the manner provided for herein for the period of time ending on the earlier of the date when the Term would otherwise have expired in accordance with Section 2 hereof and the second anniversary of the date of such termination, (c) reimburse Employee for expenses that may have been incurred, but which have not been paid as of the date of termination, subject to the requirements of Section 4.4 hereof and (d) one hundred percent (100%) of the outstanding stock options granted to the Employee that are unvested shall immediately vest and become exercisable. 6.2 By Company for Cause; By Employee Without Good Reason. In the event that Company shall terminate Employee's employment hereunder for Cause pursuant to Section 5.3 hereof or Employee shall terminate his employment hereunder without Good Reason, all compensation and Benefits, as specified in Section 4 of this Agreement, theretofore payable or provided to Employee shall cease to be payable or provided, except for any Due Bonus and any Benefits that may have been due and payable but that have not been paid as of the date of termination and reimbursement of expenses that may have been incurred, but which have not been paid as of the date of termination, subject to the requirements of Section 4.4 hereof. 6.3 Death. In the event of Employee's death, Company shall not be obligated to pay Employee or his estate or beneficiaries any compensation except for (a) any Due Bonus or any Benefits that may have been earned and are due and payable as of the date of death, but which have not been paid as of such date, (b) reimbursement of expenses that may have been incurred, but which have not been paid as of the date of death, subject to the requirements of Section 4.4 hereof, and (c) all outstanding stock options granted to Employee that are unvested shall immediately vest and become exercisable and Employee's estate or beneficiaries, as the case may be, shall have the right to exercise any of such stock options during the period commencing on the date of death and ending on the second anniversary of the date of such termination or for the remainder of the period set forth in the option agreement applicable to the option in question (the "Exercise Period'), if less. 7 6.4 Disability. In the event of Employee's Disability, Company shall not be obligated to pay Employee or his estate or beneficiaries any additional compensation except for: (a) any Due Bonus and Benefits that may have been earned and are due and payable as of the date of such Disability, but which have not been paid as of such date, and (b) reimbursement for expenses that may have been incurred but which have not been paid as of the date of Disability, subject to the requirements of Section 4.4 hereof. Upon termination due to Disability, fifty percent (50%) of the outstanding stock options granted to Employee that are unvested shall immediately vest and become exercisable and Employee or his estate or beneficiaries, as the case may be, shall have the right to exercise any of such stock options during the period commencing on the date of Disability and ending on the second anniversary of the date of the Disability or for the remainder of Exercise Period, if less. 6.5 No Mitigation. In the event of any termination of employment under Section 5 hereof, Employee shall be under no obligation to seek other employment; provided; however, that to the extent that Employee does obtain other employment subsequent to the termination of Employee's employment hereunder, the obligations of Company to pay Benefits under this Agreement from and after the date of commencement of such other employment shall terminate. 7. Unauthorized Disclosure. Employee shall not, without the prior written consent of Company, disclose or use in any way, either during Employee's employment with Company or thereafter, except as required in the course of such employment, any confidential business or technical information or trade secret acquired in the course of such employment, whether or not conceived of or prepared by him, which is related to any service or business of Company or any Affiliate; provided, however, that the foregoing shall not apply to (a) information that is not unique to the Company or that is generally known to the industry or the public other than as a result of Employee's breach of this covenant, (b) information known to Employee other than from information provided by Company or (c) information that Employee is required to disclose to, or by, any governmental or judicial authority; provided, however, if Employee should be required in the course of judicial or other governmental proceedings to disclose any information, Employee shall give Company prompt written notice thereof so that Company may seek an appropriate protective order and/or waive in writing compliance with the confidentiality provisions of this Agreement. If, in the absence of a protective order or the receipt of a waiver by Company, Employee is compelled to disclose information to, or pursuant to the requirements of, a court or other governmental authority, Employee may disclose such information to such court or other governmental authority without liability to any other party hereto. 8. Tangible Items. All files, records, documents, manuals, books, forms, reports, memoranda, studies, data, calculations, recordings and correspondence, in whatever form they may exist, and all copies, abstracts and summaries of the foregoing and all physical items related to the business of Company and its affiliates, other than merely personal items, whether of a public nature or not, and whether prepared by Employee or not, and which are received by Employee from, or on behalf of Company or 8 an Affiliate in the course of his employment hereunder are and shall remain the exclusive property of Company and any such Affiliate and shall not be removed from the premises of the Company or such Affiliate, as the case may be, except as required in the course of Employee's employment hereunder, without the prior written consent of the Company's Chief Executive Officer or the Board, and the same shall be promptly returned by Employee upon the termination of Employee's employment with Company or at any time prior thereto upon the request of the Company's Chief Executive Officer or the Board. 9. Inventions and Patents. Employee agrees that all inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports, and all similar or related information that relates to Company's actual or anticipated business, research and development or existing or future products or services and that are conceived, developed or made by or at the direction of Employee while Employee is employed by Company will be owned by Company. Employee also agrees to promptly perform, at the expense of Company, all reasonable actions (whether before, during or after the Term) necessary to establish and confirm such ownership. 10. Certain Restrictive Covenants. During the Term, and for a period ending six (6) months after the earlier of Employee's termination of employment hereunder and the end of the Term for which the Employee is being compensated at an annual rate equal to the Base Salary, Employee agrees that he will not act, either directly or indirectly, as a partner, officer, director, substantial stockholder (an equity interest of 5% or more) or employee of, or render advisory or other services for, or in connection with, or become interested in, or make any substantial financial investment in any firm, corporation, business entity or business enterprise that competes with the business of Company (each, a "Competitor"), except with the express written consent of the Board. Employee further agrees that in the event of the termination of his employment under Section 5 hereof, for a period of twelve (12) months thereafter, he will not, directly or indirectly, employ, offer to employ, or actively interfere with the relationship of Company or an Affiliate with, any employee of Company or any employee of any Affiliate. 11. Employee Representations and Covenants. Employee hereby represents, warrants and covenants to Company that (a) the execution, delivery and performance of this Agreement by Employee does not and will not conflict with, breach, violate or cause a default under any employment, non-competition or confidentiality contract or agreement, instrument; order, judgment or decree to which Employee is a party or by which he is bound; (b) Employee, in performing this Agreement and the duties of Employee's employment with Company, will not disclose or utilize any trade secrets of a former employer, unless Employee has first obtained express written authorization from any such former employer for their disclosure or use; (c) Employee has not brought, and will not bring to Company, any documents, records, information or 9 other materials of a former employer that are not generally available to the public, unless Employee has first obtained express written authorization from any such former employer for their possession and use; and (d) upon the execution and delivery of this Agreement by Company, this Agreement shall be the valid and binding obligation of Employee, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting the rights of creditors generally. 12. Company Representations. Company represents and warrants (a) that it is duly authorized and empowered to enter into this Agreement, (b) the execution, delivery and performance of this Agreement by Company does not and will not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Company is a party or by which it is bound, and (c) upon the execution and delivery of this Agreement by Employee, this Agreement shall be the valid and binding obligation of Company, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting the rights of creditor generally. 13. Indemnification. Prior to the Commencement Date, Company and Employee shall enter into an indemnification agreement in a form mutually acceptable to Company and Employee and containing terms no less favorable to Employee than those contained in any indemnification or similar agreement currently in effect between Company and any of its officers. 14. Remedies. Employee acknowledges that the restrictions and agreements contained in this Agreement are reasonable and necessary to protect the legitimate interests of Company, and that any violation of this Agreement will cause substantial and irreparable injury to Company that would not be quantifiable and for which no adequate remedy would exist at law and agrees that injunctive relief, in addition to all other remedies, shall be available therefor. 15. Effect of Agreement on Other Benefits. Except as specifically provided in this Agreement, the existence of this Agreement shall not be interpreted to preclude, prohibit or restrict Employee's participation in any other employee benefit plan or other plans or programs provided to officers, directors or employees of Company. 16. Rights of Employee's Estate. If Employee dies prior to the payment of all amounts due and owing to him under the terms of this Agreement, such amounts shall be paid to such beneficiary or beneficiaries as Employee may have last designated in writing filed with the Secretary of Company or, if Employee has made no beneficiary designation, to Employee's estate. Such designated beneficiary or the executor of Employee's estate, as the case may be, may exercise all of Employee's rights hereunder. If any beneficiary designated by Employee shall predecease Employee, the designation of such beneficiary shall be deemed revoked, and any amounts which would have been payable to such beneficiary shall be paid to Employee's estate. If any designated 10 beneficiary survives Employee, but dies before payment of all amounts due hereunder, such payments shall, unless Employee has designated otherwise, be made to such beneficiary's estate. In the event of Employee's death or judicial determination of his incompetence, reference in this Agreement to Employee shall be deemed where appropriate, to refer to his beneficiary, estate or other legal representative. 17. Severability. It is the intent and understanding of the parties hereto that if, in any action before any court or other tribunal of competent jurisdiction legally empowered to enforce this Agreement, any term, restriction, covenant, or promise is held to be unenforceable as a result of being unreasonable or for any other reason, then such term, restriction, covenant, or promise shall not thereby be terminated, but, that it shall be deemed modified to the extent necessary to make it enforceable by such court or other tribunal and, if it cannot be so modified, that it shall be deemed amended to delete therefrom such provision or portion adjudicated to be invalid or unenforceable, and this agreement shall be deemed to be in full force and effect as so modified and such modification or amendment in any event shall apply only with respect to the operation of this Agreement in the particular jurisdiction in which such adjudication is made. 18. Notices. Any notices or demands given in connection herewith shall be in writing and deemed given when (a) personally delivered, (b) sent by facsimile transmission to a number provided in writing by the addressee and a confirmation of the transmission is received by the sender or (c) two (2) days after being deposited for delivery with a recognized overnight courier, such as Federal Express, and addressed or sent, as the case may be, to the address or facsimile number set forth below or to such other address or facsimile number as such party may in writing designate: If to Employee: Norris M. Hall, III 16740 Queen Anne Road Upper Marlboro, MD 20774 Fax No.: If to Company: Tel-Save.com, Inc. 6805 Route 202 New Hope, Pennsylvania 18938 Attn: President Fax No.: (215) 862-1515 Either party may change its address for notices by written notice to the other party in accordance with this Section 17. 19. Waiver. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in a writing executed by Employee and Company. No waiver by any party hereto at any time of any breach by another party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. 11 20. Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of Pennsylvania relating to contracts made and to be performed entirely therein. 21. Headings. The headings in this Agreement are inserted for convenience only and shall have no significance in the interpretation of this Agreement. 22. Successors. Company may not assign any of its rights or obligations under this Agreement hereunder. Employee may assign his rights, but not his obligations, hereunder and all of Employee's rights hereunder shall inure to the benefit of his estate, personal representatives, designees or other legal representatives. All of the rights of Company hereunder shall inure to the benefit of, and be enforceable by the successors of Company. Any person, firm or corporation succeeding to the business of Company by merger, purchase, consolidation or otherwise shall be deemed to have assumed the obligations of Company hereunder; provided, however, that Company shall, notwithstanding such assumption by a successor, remain primarily liable and responsible for the fulfillment of its obligations under this Agreement. 23. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 24. Certain Words. As used in this Agreement, the words "herein," "hereunder," "hereof" and similar words shall be deemed to refer to this Agreement in its entirety, and not to any particular provision of this Agreement unless the context clearly requires otherwise. IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement as of the day and year first written above. Tel-Save.com, Inc. By: ----------------------------------- Name: Title: - -------------------------------------- Norris M. Hall, III 12 EX-10.62 7 EXHIBIT 10.62 EXHIBIT 10.62 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of the 16th day of December, 1998 between Tel-Save.com, Inc., a Delaware corporation (the "Company"), and George Vinall ("Employee"). WHEREAS, Company desires to employ Employee and Employee desires to be employed by Company; and WHEREAS, Company and Employee desire to enter into this Agreement that sets forth the terms and conditions of said employment. NOW THEREFORE, in consideration of the foregoing, the mutual covenants set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned hereby agree as follows: 1. Employment. Company agrees to employ Employee, and Employee accepts such employment and agrees to serve Company, on the terms and conditions set forth herein. Except as otherwise specifically provided herein, Employee's employment shall be subject to the employment policies and practices of Company in effect from time to time during the term of Employee's employment hereunder (including, without limitation, its practices as to tax reporting and withholding). 2. Term of Agreement. The term of Employee's employment hereunder shall commence on December 28, 1998 (the "Commencement Date") and shall continue in effect for a period of three years thereafter, except as hereinafter provided (the "Term"). Notwithstanding the foregoing, Employee shall not assume the Positions (as defined in Section 3.1 hereof) until January 4, 1998. For purposes of this Section 2, Employee shall be deemed to have commenced employment hereunder in accordance with his obligations under this Agreement if an Employment Presentment (as defined below) takes place. For purposes of this Agreement, an "Employee Presentment" shall be deemed to have occurred if Employee does present himself at the offices of Company in New Hope, Pennsylvania (or such other location as Employee may be directed by the Gabriel Battista) prepared to commence performing his duties hereunder on or before December 31, 1998. 3. Positions and Duties. 3.1 Officer Positions. Except as may otherwise be agreed upon between Company and Employee, Employee shall perform such duties and have such responsibilities as Senior Vice President, Business Development and such other duties and responsibilities consistent with the foregoing duties and responsibilities as may be reasonably assigned or delegated to him from time to time by Company's Chief Executive Officer or Company's Board of Directors (the "Board"), including, without limitation, service as an employee, officer or director of affiliates (as that term is defined in Rule 405 under the Securities Act of 1933, as amended (the "Act")) (hereinafter, "Affiliates") of Company, without additional compensation. References in this Agreement to Employee's employment with Company shall be deemed to refer to employment with Company and/or, as the case may be, an Affiliate, as the context requires. Employee shall perform his duties and responsibilities to the best of his abilities hereunder in a diligent, trustworthy, businesslike and efficient manner. Employee shall devote substantially all of his working time and efforts to the business and affairs of Company; provided, however, that nothing in this Agreement shall preclude Employee from (a) engaging in charitable activities and community affairs, and (b) managing his personal investments and affairs (subject to the limitations in Section 10 hereof. 4. Compensation and Related Matters. 4.1 Base Salary. During the Term, Company shall pay to Employee a base salary ("Base Salary") at the rate of Two Hundred Thousand ($200,000) Dollars per year, which Base Salary shall be paid to Employee in accordance with Company's usual and customary payroll practices. 4.2 Benefit Plans and Arrangements. Employee shall be entitled to participate in and to receive benefits under Company's employee benefit plans and arrangements (including, but not limited to, bonus plans) as are made available to the Company's senior executive officers during the Term, which employee benefit plans and arrangements may be altered from time to time at the discretion of the Board (the "Benefits"). Annual bonuses to Employee may be up to fifty percent (50%) of Base Salary. Notwithstanding the foregoing, Employee acknowledges and agrees that bonuses, annual or otherwise, are performance based and discretionary with the Board of Directors or a Committee thereof. 4.3 Perquisites. During the Term, Employee shall be entitled to receive fringe benefits as are made available to Company's senior executive officers. 4.4 Expenses. Company shall promptly reimburse Employee for all out-of-pocket expenses related to Company's business that are actually paid or incurred by him in the performance of his services under this Agreement and that are incurred, reported and documented in accordance with Company's policies. In addition, during the Term, Company will provide Employee with an automobile, as Company shall determine, and Company shall keep such automobile fully insured in accordance with Company's practices for similarly situated employees. 4.5 Stock Options. (a) Grant of Options. Effective on the date hereof, Employee shall be granted an option (the "Option") to purchase 240,000 shares of Common Stock in accordance with a stock option agreement to be mutually agreed to, and executed by, Company and Employee prior to the Commencement Date, which stock option agreement shall be in substantially the form thereof attached hereto as Exhibit A upon 2 execution of the option. The Option shall have an exercise price equal to $8 9/16 per share, expire on the tenth anniversary of the date hereof and shall vest and become exercisable, subject to accelerated vesting in the event of a Change in Control (defined as provided below) of Company in installments, as follows: (i) options with respect to 80,000 shares of Common Stock shall vest and become exercisable on the first anniversary of the date hereof, (ii) options with respect to 80,000 shares of Common Stock shall vest and become exercisable on the second anniversary of the date hereof and (iii) options with respect to 80,000 shares of Common Stock shall vest and become exercisable on the third anniversary of the date hereof. In the event of a Change in Control of Company, the Option shall vest and become exercisable as to all shares then subject thereto that are not then vested and exercisable. For purposes of this Agreement, "Change in Control" shall be deemed to have occurred if: (i) any Person (as defined in Section 3(a)(9) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than the Company, becomes the Beneficial Owner (as defined in Rule 13d-3 under the Exchange Act; provided, that a Person shall be deemed to be the Beneficial Owner of all shares that any such Person has the right to acquire pursuant to any agreement or arrangement or upon exercise of conversion rights, warrants, options or otherwise, without regard to the 60 day period referred to in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company or any Significant Subsidiary (as defined below) representing 50% or more of the combined voting power of the Company's, or such subsidiary's, as the case may be, then outstanding securities; (ii) during any period of two years, individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clauses (i), (iii), or (iv) of this Section 2(a)) whose election by the Board or nomination for election by stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, but excluding for this purpose any such new director whose initial assumption of office occurs as a result of either an actual or threatened election contest 3 or other actual or threatened solicitation of proxies or consents by or on behalf of an individual, corporation, partnership, group, association or other entity other than the Board, cease for any reason to constitute at least a majority of the Board of either or the Company or a Significant Subsidiary; (iii)the consummation of a merger or consolidation of the Company or any subsidiary of the Company owning directly or indirectly all or substantially all of the consolidated assets of the Company ( a "Significant Subsidiary") with any other entity, other than a merger or consolidation which would result in the voting securities of the Company or a Significant Subsidiary outstanding immediately prior thereto continuing to represent more than fifty percent (50%) of the combined voting power of the surviving or resulting entity outstanding immediately after such merger or consolidation; (iv) the shareholders of the Company approve a plan or agreement for the sale or disposition of fifty percent (50%) or more of the consolidated assets of the Company in which case the Board shall determine the effective date of the Change of Control resulting therefrom; (v) any other event occurs which the Board determines, in its discretion, would materially alter, the structure of the Company or its ownership; and (vi) a person other than Gabriel Battista is elected by the Board of Directors to serve as the Company's principal executive officer. The fair market value of Common Stock for purposes of this Agreement shall mean the last reported sale price of a share of the Common Stock on the Nasdaq National Market System preceding the date in question or if no sale took place on such day, such last reported sale price on the then next preceding date on which such sale took place. Notwithstanding the foregoing, the Options shall be forfeited by Employee if an Employment Presentment does not take place on or before December 31, 1998. (b) Registration Statement. Company will file with the Securities and Exchange Commission and any applicable state securities regulatory authorities a Registration Statement on Form S-8 (or if unavailable, a registration statement on Form S-3) to register the shares issuable upon exercise of the Option under the Act and any applicable state securities or "Blue Sky" laws as soon as practicable after the date hereof. 4 Notwithstanding the foregoing, Company shall be entitled to postpone for a reasonable period of time the filing or the effectiveness of such registration statement if the Board shall determine in good faith that such filing or effectiveness would be materially detrimental to the Company's business interests. 4.6 Signing Bonus. In consideration of Employee's agreement to become employed by Company, Company shall pay Employee One Hundred Seventy-Five Thousand Dollars ($175,000) (the "Signing Bonus") by means of a wire transfer on earlier of the Commencement Date, upon Employee's commencement of employment with Company as herein provided and the date and time in which this contract is executed. 5 Termination. The Term of Employee's employment hereunder may be terminated under the following circumstances: 5.1 Death. The Term of Employee's employment hereunder shall terminate upon his death. 5.2 Disability. If Employee becomes physically or mentally disabled during the term hereof so that he is unable to perform services required of him pursuant to this Agreement for an aggregate of six (6) months in any twelve (12) month period (a `Disability"), Company, at its option, may terminate Employee's employment hereunder. 5.3 Cause. Upon written notice, Company may terminate Employee's employment hereunder for Cause (as defined below). For purposes of this Agreement, Company shall have "Cause" to terminate Employee's employment hereunder upon (a) a material breach by Employee of any material provision of this Agreement, (b) willful misconduct by Employee in connection with misappropriating any funds or property of Company, (c) attempting to obtain any personal profit from any transaction in which Employee has an interest that is adverse to the interests of Company without prior written disclosure thereof to the Board or (d) Employee's gross neglect in the performance of the duties required to be performed by Employee under this Agreement. 5.4 By Employee. Employee may terminate his employment hereunder: (a) Upon sixty (60) days' prior written notice to Company, provided that, upon the giving of such notice by Employee, Company may establish an earlier date for such termination under this Section 5.4 (a). (b) For Good Reason (as defined below) immediately and with notice to Company. "Good Reason" for termination by Employee shall include, but is not limited to, the following: 5 (i) Material breach of any provision of this Agreement by Company, which breach shall not have been cured by Company within thirty (30) days of receipt of written notice of said material breach; (ii) Failure by Company to maintain Employee in a position commensurate with that referred to in Section 3 of this Agreement; or (iii)The assignment to Employee of any duties inconsistent with Employee's position, authority, duties or responsibilities as contemplated by Section 3 hereof or any other action by Company that results in a diminution of such position, authority, duties or responsibilities. 5.5 Without Cause. Company may otherwise terminate the Term of Employee's employment at any time upon written notice to Employee. 6. Compensation In the Event of Termination. In the event that Employee's employment hereunder terminates prior to the end of the Term, Company shall make payments to Employee as set forth below: 6.1 By Employee for Good Reason; By Company Without Cause. In the event that Employee's employment hereunder is terminated by Company without Cause or by Employee for Good Reason, then the Company shall (a) pay to Employee all amounts due to Employee pursuant to any bonus that was due to Employee as of the date of such termination, pursuant to the terms of such bonus (a "Due Bonus"), (b) continue to pay to Employee the Base Salary and Benefits to which Employee would be entitled hereunder in the manner provided for herein for the period of time ending on the earlier of the date when the Term would otherwise have expired in accordance with Section 2 hereof and the second anniversary of the date of such termination, (c) reimburse Employee for expenses that may have been incurred, but which have not been paid as of the date of termination, subject to the requirements of Section 4.4 hereof and (d) one hundred percent (100%) of the outstanding stock options granted to the Employee that are unvested shall immediately vest and become exercisable. 6.2 By Company for Cause; By Employee Without Good Reason. In the event that Company shall terminate Employee's employment hereunder for Cause pursuant to Section 5.3 hereof or Employee shall terminate his employment hereunder without Good Reason, all compensation and Benefits, as specified in Section 4 of this Agreement, theretofore payable or provided to Employee shall cease to be payable or provided, except for any Due Bonus and any Benefits that may have been due and payable but that have not been paid as of the date of termination and reimbursement of expenses that may have been incurred, but which have not been paid as of the date of termination, subject to the requirements of Section 4.4 hereof. 6 6.3 Death. In the event of Employee's death, Company shall not be obligated to pay Employee or his estate or beneficiaries any compensation except for (a) any Due Bonus or any Benefits that may have been earned and are due and payable as of the date of death, but which have not been paid as of such date, (b) reimbursement of expenses that may have been incurred, but which have not been paid as of the date of death, subject to the requirements of Section 4.4 hereof, and (c) all outstanding stock options granted to Employee that are unvested shall immediately vest and become exercisable and Employee's estate or beneficiaries, as the case may be, shall have the right to exercise any of such stock options during the period commencing on the date of death and ending on the second anniversary of the date of such termination or for the remainder of the period set forth in the option agreement applicable to the option in question (the "Exercise Period'), if less. 6.4 Disability. In the event of Employee's Disability, Company shall not be obligated to pay Employee or his estate or beneficiaries any additional compensation except for: (a) any Due Bonus and Benefits that may have been earned and are due and payable as of the date of such Disability, but which have not been paid as of such date, and (b) reimbursement for expenses that may have been incurred but which have not been paid as of the date of Disability, subject to the requirements of Section 4.4 hereof. Upon termination due to Disability, fifty percent (50%) of the outstanding stock options granted to Employee that are unvested shall immediately vest and become exercisable and Employee or his estate or beneficiaries, as the case may be, shall have the right to exercise any of such stock options during the period commencing on the date of Disability and ending on the second anniversary of the date of the Disability or for the remainder of Exercise Period, if less. 6.5 No Mitigation. In the event of any termination of employment under Section 5 hereof, Employee shall be under no obligation to seek other employment; provided; however, that to the extent that Employee does obtain other employment subsequent to the termination of Employee's employment hereunder, the obligations of Company to pay Benefits under this Agreement from and after the date of commencement of such other employment shall terminate. 7. Unauthorized Disclosure. Employee shall not, without the prior written consent of Company, disclose or use in any way, either during Employee's employment with Company or thereafter, except as required in the course of such employment, any confidential business or technical information or trade secret acquired in the course of such employment, whether or not conceived of or prepared by him, which is related to any service or business of Company or any Affiliate; provided, however, that the foregoing shall not apply to (a) information that is not unique to the Company or that is generally known to the industry or the public other than as a result of Employee's breach of this covenant, (b) information known to Employee other than from information provided by Company or (c) information that Employee is required to disclose to, or by, any governmental or judicial authority; provided, however, if Employee should be required in the course of judicial or other governmental proceedings to disclose any information, Employee shall give Company prompt written notice thereof so that 7 Company may seek an appropriate protective order and/or waive in writing compliance with the confidentiality provisions of this Agreement. If, in the absence of a protective order or the receipt of a waiver by Company, Employee is compelled to disclose information to, or pursuant to the requirements of, a court or other governmental authority, Employee may disclose such information to such court or other governmental authority without liability to any other party hereto. 8. Tangible Items. All files, records, documents, manuals, books, forms, reports, memoranda, studies, data, calculations, recordings and correspondence, in whatever form they may exist, and all copies, abstracts and summaries of the foregoing and all physical items related to the business of Company and its affiliates, other than merely personal items, whether of a public nature or not, and whether prepared by Employee or not, and which are received by Employee from, or on behalf of Company or an Affiliate in the course of his employment hereunder are and shall remain the exclusive property of Company and any such Affiliate and shall not be removed from the premises of the Company or such Affiliate, as the case may be, except as required in the course of Employee's employment hereunder, without the prior written consent of the Company's Chief Executive Officer or the Board, and the same shall be promptly returned by Employee upon the termination of Employee's employment with Company or at any time prior thereto upon the request of the Company's Chief Executive Officer or the Board. 9. Inventions and Patents. Employee agrees that all inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports, and all similar or related information that relates to Company's actual or anticipated business, research and development or existing or future products or services and that are conceived, developed or made by or at the direction of Employee while Employee is employed by Company will be owned by Company. Employee also agrees to promptly perform, at the expense of Company, all reasonable actions (whether before, during or after the Term) necessary to establish and confirm such ownership. 10. Certain Restrictive Covenants. During the Term, and for a period ending six (6) months after the earlier of Employee's termination of employment hereunder and the end of the Term for which the Employee is being compensated at an annual rate equal to the Base Salary, Employee agrees that he will not act, either directly or indirectly, as a partner, officer, director, substantial stockholder (an equity interest of 5% or more) or employee of, or render advisory or other services for, or in connection with, or become interested in, or make any substantial financial investment in any firm, corporation, business entity or business enterprise that competes with the business of Company (each, a "Competitor"), except with the express written consent of the Board. Employee further agrees that in the event of the termination of his employment under Section 5 hereof, for a period of twelve (12) months thereafter, he will not, directly or indirectly, employ, offer to employ, or actively interfere with the relationship of Company or an Affiliate with, any employee of Company or any employee of any Affiliate. 8 11. Employee Representations and Covenants. Employee hereby represents, warrants and covenants to Company that (a) the execution, delivery and performance of this Agreement by Employee does not and will not conflict with, breach, violate or cause a default under any employment, non-competition or confidentiality contract or agreement, instrument; order, judgment or decree to which Employee is a party or by which he is bound; (b) Employee, in performing this Agreement and the duties of Employee's employment with Company, will not disclose or utilize any trade secrets of a former employer, unless Employee has first obtained express written authorization from any such former employer for their disclosure or use; (c) Employee has not brought, and will not bring to Company, any documents, records, information or other materials of a former employer that are not generally available to the public, unless Employee has first obtained express written authorization from any such former employer for their possession and use; and (d) upon the execution and delivery of this Agreement by Company, this Agreement shall be the valid and binding obligation of Employee, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting the rights of creditors generally. 12. Company Representations. Company represents and warrants (a) that it is duly authorized and empowered to enter into this Agreement, (b) the execution, delivery and performance of this Agreement by Company does not and will not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Company is a party or by which it is bound, and (c) upon the execution and delivery of this Agreement by Employee, this Agreement shall be the valid and binding obligation of Company, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting the rights of creditor generally. 13. Indemnification. Prior to the Commencement Date, Company and Employee shall enter into an indemnification agreement in a form mutually acceptable to Company and Employee and containing terms no less favorable to Employee than those contained in any indemnification or similar agreement currently in effect between Company and any of its officers. 14. Remedies. Employee acknowledges that the restrictions and agreements contained in this Agreement are reasonable and necessary to protect the legitimate interests of Company, and that any violation of this Agreement will cause substantial and irreparable injury to Company that would not be quantifiable and for which no adequate remedy would exist at law and agrees that injunctive relief, in addition to all other remedies, shall be available therefor. 15. Effect of Agreement on Other Benefits. Except as specifically provided in this Agreement, the existence of this Agreement shall not be interpreted to preclude, prohibit or restrict Employee's participation in any other employee benefit plan or other plans or programs provided to officers, directors or employees of Company. 9 16. Rights of Employee's Estate. If Employee dies prior to the payment of all amounts due and owing to him under the terms of this Agreement, such amounts shall be paid to such beneficiary or beneficiaries as Employee may have last designated in writing filed with the Secretary of Company or, if Employee has made no beneficiary designation, to Employee's estate. Such designated beneficiary or the executor of Employee's estate, as the case may be, may exercise all of Employee's rights hereunder. If any beneficiary designated by Employee shall predecease Employee, the designation of such beneficiary shall be deemed revoked, and any amounts which would have been payable to such beneficiary shall be paid to Employee's estate. If any designated beneficiary survives Employee, but dies before payment of all amounts due hereunder, such payments shall, unless Employee has designated otherwise, be made to such beneficiary's estate. In the event of Employee's death or judicial determination of his incompetence, reference in this Agreement to Employee shall be deemed where appropriate, to refer to his beneficiary, estate or other legal representative. 17. Severability. It is the intent and understanding of the parties hereto that if, in any action before any court or other tribunal of competent jurisdiction legally empowered to enforce this Agreement, any term, restriction, covenant, or promise is held to be unenforceable as a result of being unreasonable or for any other reason, then such term, restriction, covenant, or promise shall not thereby be terminated, but, that it shall be deemed modified to the extent necessary to make it enforceable by such court or other tribunal and, if it cannot be so modified, that it shall be deemed amended to delete therefrom such provision or portion adjudicated to be invalid or unenforceable, and this agreement shall be deemed to be in full force and effect as so modified and such modification or amendment in any event shall apply only with respect to the operation of this Agreement in the particular jurisdiction in which such adjudication is made. 18. Notices. Any notices or demands given in connection herewith shall be in writing and deemed given when (a) personally delivered, (b) sent by facsimile transmission to a number provided in writing by the addressee and a confirmation of the transmission is received by the sender or (c) two (2) days after being deposited for delivery with a recognized overnight courier, such as Federal Express, and addressed or sent, as the case may be, to the address or facsimile number set forth below or to such other address or facsimile number as such party may in writing designate: If to Employee: Mr. George Vinall 8622 Ordinary Way Annandale, VA 22003 Fax No.: (703) 764-8011 If to Company: Tel-Save.com, Inc. 6805 Route 202 New Hope, Pennsylvania 18938 Attn: President Fax No.: (215) 862-1515 10 Either party may change its address for notices by written notice to the other party in accordance with this Section 17. 19. Waiver. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in a writing executed by Employee and Company. No waiver by any party hereto at any time of any breach by another party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. 20. Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of Pennsylvania relating to contracts made and to be performed entirely therein. 21. Headings. The headings in this Agreement are inserted for convenience only and shall have no significance in the interpretation of this Agreement. 22. Successors. Company may not assign any of its rights or obligations under this Agreement hereunder. Employee may assign his rights, but not his obligations, hereunder and all of Employee's rights hereunder shall inure to the benefit of his estate, personal representatives, designees or other legal representatives. All of the rights of Company hereunder shall inure to the benefit of, and be enforceable by the successors of Company. Any person, firm or corporation succeeding to the business of Company by merger, purchase, consolidation or otherwise shall be deemed to have assumed the obligations of Company hereunder; provided, however, that Company shall, notwithstanding such assumption by a successor, remain primarily liable and responsible for the fulfillment of its obligations under this Agreement. 23. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 24. Certain Words. As used in this Agreement, the words "herein," "hereunder," "hereof" and similar words shall be deemed to refer to this Agreement in its entirety, and not to any particular provision of this Agreement unless the context clearly requires otherwise. 11 IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement as of the day and year first written above. Tel-Save.com, Inc. By: -------------------------------------- Name: Title: - ----------------------------------------- George Vinall 12 EX-10.63 8 EXHIBIT 10.63 EXHIBIT 10.63 December 30, 1998 Mr. Daniel Borislow Chief Executive Officer Tel-Save.com, Inc. 6802 Rte. 202 New Hope, PA 18938 Dear Dan: A "Change in Control" as defined in my Employment Agreement dated July 3, 1997 and as defined in my Stock Option Agreement dated October 13, 1998 will occur on your resignation as Chief Executive Officer. As a result I may terminate my employment and receive Compensation for the remaining term of the Employment Agreement (approximately 22 months) without mitigation. You have requested that I continue in my current capacity rather than elect immediate termination of my employment and payment of the Compensation required under the Employment Agreement. 1. I will continue as Chief Financial Officer of Tel-Save.com, Inc. until a replacement is found but no later than October 31, 1999. 2. My compensation will continue without any requirement for mitigation for 22 months after a replacement is found or October 31, 1999. 3. I will continue as a Director of Tel-Save.com, Inc. until expiration of my current Term (year 2000). 4. I will consult on a limited basis after cessation of employment until December 31, 2000. 5. I will be paid $20,000.00 per month for commencing January 1999. 6. The 250 000 stock options which I have are fully vested and exercisable as of December 30,1998. 7. All other terms of my Employment Contract will continue to be in effect until October 31, 1999. Any other arrangements for services will be separately negotiated with the then appropriate executives of the Company. Please indicate your acceptance and agreement in the space provided below. Yours truly; Accepted and Agreed Tel-Save.com, Inc. George P. Farley By: --------------------- Daniel Borislow, CEO -----END PRIVACY-ENHANCED MESSAGE-----