EXHIBIT 10.1
December 23, 2002
America Online, Inc.
00000 XXX Xxx
Xxxxxx, Xxxxxxxx 20166
Attention: General Counsel
Re: Amendment and Waiver of Rights under Restructuring Agreement
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Ladies and Gentlemen:
This letter agreement sets forth our agreement and understanding regarding
the waiver of certain rights by America Online, Inc. ("AOL") under, and the
amendment of certain provisions of, the Restructuring and Note Agreement, dated
September 19, 2001 (the "Restructuring Agreement"), between AOL and Talk America
Holdings Inc. ("Talk").
A. AMENDMENTS
1. Section 4.8. Section 4.8(a) of the Restructuring Agreement is
amended by deleting the words "on the fifth and seventh anniversaries
of the date of this Agreement, (ii)" and renumbering clause (iii) to
be clause (ii).
2. Notes. It is agreed that the aggregate principal amount of the
Convertible Notes (as defined in the Restructuring Agreement)
outstanding on the date hereof is $30,149,637.91. The terms of each
and every Convertible Note issued pursuant to the Restructuring
Agreement that is now outstanding or may hereafter be issued in
exchange upon transfer or prepayment of any outstanding Convertible
Note shall be amended as follows, and a new Convertible Note in the
foregoing principal amount, dated July 1, 2002 and reflecting such
amendments shall be issued to AOL in exchange for the existing
outstanding Convertible Notes:
(a) to make the maturity date of the Convertible Note September
19, 2006, each reference in the Convertible Note to the year
"2011" shall be replaced with the year "2006";
(b) the proviso and the further proviso in the first paragraph
shall be deleted in their entirety (all language after " on
any overdue installment of interest until paid").
B. WAIVERS
1. Section 5.3. Pursuant to Section 5.3 of the Restructuring
Agreement, AOL has the right to prepayment of the AOL Note in an
amount equal to the principal amount of Subordinated Indebtedness (as
defined in the Restructuring Agreement) redeemed, repurchased or
repaid, unless the cash used to redeem, repurchase or repay the
Subordinated Indebtedness has been raised solely for such purpose
through the issuance of additional Subordinated Indebtedness or equity
of Talk. AOL hereby agrees to waive until September 30, 2003 this
right solely with respect to the Note Buy Back (as defined below),
provided that (i) the cash purchase price for any Existing Notes (as
defined below) purchased shall not exceed 80% of the face (principal)
amount of such Existing Notes, (ii) the aggregate cash payment amounts
made by Talk with respect to both the Note Buy Back and the Stock
Buyback together do not exceed $10,000,000 and (iii) for every dollar
paid by Talk to purchase subordinated debt through the Note Buy Back,
Talk shall promptly, but in no event later than 3 business days
following such Note Buy Back, prepay $.50 of the principal amount of
the outstanding Convertible Notes. For purposes of this Section B of
this letter agreement, the "Existing Notes" means and includes,
collectively, Talk's existing 12% Convertible Subordinated Notes due
2007, 8% Convertible Subordinated Notes due 2007 and 5% Convertible
Subordinated Notes due 2004 (collectively, the "Existing Notes"), the
"Note Buy Back" means the purchase or other acquisition of Existing
Notes by Talk, prior to their respective maturities, in either the
open market or privately, and the "Stock Buy Back" means the purchase
or other acquisition by Talk with cash of shares of the common stock
(the "Common Stock") of Talk, in either the open market or privately.
2. Section 5.11. Pursuant to Section 5.11 of the Restructuring
Agreement, subject to certain exceptions, Talk is prohibited from
declaring or making any payment or distribution of any kind with
respect to any of its equity interests, whether as a dividend, return
of capital, redemption, repurchase or otherwise. AOL hereby agrees to
waive until September 30, 2003 this prohibition solely with respect to
the Stock Buy Back provided that (i) Talk purchases the Common Stock
at or below the market price for such Common Stock, (ii) the aggregate
cash payment amounts made by Talk with respect to both the Note Buy
Back and the Stock Buy Back together do not exceed $10,000,000 and
(iii) for every share of Common Stock purchased by Talk through the
Stock Buy Back, Talk shall promptly, but in no event later than 3
business days following such Stock Buy Back, purchase one share of
Common Stock from AOL at the greater of the price per share paid in
the Stock Buy Back and the closing price on NASDAQ on the previous day
as reported by The Wall Street Journal. AOL shall determine in its
sole discretion which shares of Common Stock shall be purchased from
AOL pursuant to clause (iii) of the previous sentence.
C. OTHER AGREEMENTS.
1. November Waiver. Pursuant to a letter agreement dated November 12,
2002, AOL granted a conditional waiver with respect to certain
subordinated debt repurchases. Talk acknowledges that, from this date
forward, such waiver shall be of no further force or effect, provided
that such waiver shall continue to be effective as to any action taken
by Talk prior to the date hereof pursuant to the terms of such waiver.
2. Limited Effect. Except as expressly set forth herein, the
execution, delivery and effectiveness of this letter agreement shall
not operate as a waiver of any right, power or remedy of AOL under any
Transaction Document (as defined in the Restructuring Agreement), nor
constitute a waiver or amendment of any provisions of any Transaction
Document. Except as expressly modified herein, all of the provisions
and covenants of the Transaction Documents are and shall continue to
remain in full force and effect in accordance with the terms thereof
and are hereby in all respects ratified and confirmed. Any waivers by
AOL are limited to the circumstances described in this letter and will
not be deemed to be a waiver of any other provision of the
Restructuring Agreement, or a waiver of AOL's rights under Section 5.3
or Section 5.11 under any other circumstances. The Company hereby
expressly acknowledges that failure by AOL to enforce its rights under
Section 5.3 or Section 5.11 of the Restructuring Agreement in this
instance or in the past does not entitle the Company to any such
waiver under this or any other section of the Restructuring Agreement
in the future.
3. Representations andWarranties. Talk hereby represents and warrants
that no Default or Event of Default exists as of the date hereof, both
before and after giving effect to the provisions hereof.
If you are in agreement with the foregoing, please so confirm by signing
the enclosed copy of this letter as provided below and returning the signed copy
to us, whereupon this letter agreement shall be a binding agreement between us.
This letter may be executed in counterparts, each of which shall be deemed an
original with the same effect as if the signatures were on the same instrument.
Very truly yours,
TALK AMERICA HOLDINGS, INC.
By: /s/ Xxxxxxxx X. Xxxx XX
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Name: Xxxxxxxx X. Xxxx XX
Title: EVP-General Counsel
The undersigned, America Online, Inc., hereby acknowledges the foregoing
letter and consents and agrees to its terms.
AMERICA ONLINE, INC.
By: /s/ Xxxx Xxxxxxxxxx
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Name: Xxxx Xxxxxxxxxx
Title: Senior Vice President
Date: December 20, 2002
