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As filed with the Securities and Exchange Commission on January 9, 1998
Registration No. 333-_____
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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FAXSAV INCORPORATED
(Exact name of Registrant as specified in its charter)
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DELAWARE 11-3025769
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
399 Thornall Street, Edison, New Jersey 08837
(732) 906-2000
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
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Thomas F. Murawski
President and Chief Executive Officer
FaxSav Incorporated
399 Thornall Street
Edison, New Jersey 08837
(732) 906-2000
(Name, address, including zip code, and telephone number,
including area code, of agent for service of process)
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Copies to:
Richard R. Plumridge, Esq.
Brian B. Margolis, Esq.
Brobeck, Phleger & Harrison LLP
1633 Broadway, 47th Floor
New York, New York 10019
(212) 581-1600
Approximate date of commencement of proposed sale to the public: As soon as
practicable on or after this Registration Statement is declared effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
maximum maximum
Amount aggregate aggregate Amount of
Title of shares to be price per offering registration
to be registered registered unit(1) price(2) fee
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Common Stock,
$.01 par value 1,000,000 $2.41 $2,410,000.00 $710.95
Shares
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(1) Based on the average high and low trading prices of the Common Stock,
as reported on the Nasdaq National Market, on January 7, 1998.
(2) Estimated pursuant to Rule 457(c) solely for the purpose of computing
the registration fee.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
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PROSPECTUS
1,000,000 Shares
FaxSav Incorporated
Common Stock
This Prospectus relates to the public offering, which is not being
underwritten, of up to 1,000,000 shares (the "Shares") of Common Stock, par
value $.01 per share, of FaxSav Incorporated ("FaxSav" or the "Company"). All
of these shares have been issued to certain Selling Stockholders (the "Selling
Stockholders") under an exemption from registration under the Securities Act of
1933, as amended (the "Securities Act").
The Shares may be offered by the Selling Stockholders from time to time in
transactions on the Nasdaq National Market, in negotiated transactions, or a
combination of such methods of sale, at fixed prices which may be changed, at
market prices prevailing at the time of sale, at prices related to prevailing
market prices or at negotiated prices. The Selling Stockholders may effect such
transactions by selling the Shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Stockholders and/or the purchasers of the Shares
for whom such broker-dealers may act as agents or to whom they sell as
principals, or both (which compensation as to a particular broker-dealer might
be in excess of customary commissions). In order to comply with the securities
laws of certain states, if applicable, the Shares will be sold in such
jurisdictions only through registered or licensed brokers or dealers. The
Selling Stockholders may transfer their Shares under certain circumstances to
other persons who may, in turn, resell Shares in the manner described above. In
addition, the Selling Stockholders may pledge or make gifts of their Shares and
such Shares may also be sold by the pledgees or transferees. To the extent
required, the specific Shares to be sold, the names of the Selling Stockholders,
the public offering price, the names of any such agent, dealer or underwriter,
and any applicable commission or discount with respect to any particular offer
will be set forth in an accompanying Prospectus Supplement. See "Selling
Stockholders" and "Plan of Distribution."
None of the proceeds from the sale of the Shares by the Selling
Stockholders will be received by the Company. The Company has agreed to bear
certain expenses (other than underwriting discounts and selling commissions and
fees and disbursements of counsel and other advisors to the Selling
Stockholders) in connection with the registration of the Shares. The Company
has agreed to indemnify the Selling Stockholders and their affiliates against
certain liabilities, including liabilities under the Securities Act. The
Selling Stockholders have agreed to indemnify the Company and its affiliates
against certain liabilities, including liabilities under the Securities Act
under certain circumstances.
The Selling Stockholders and any broker-dealers, agents or underwriters
that participate with the Selling Stockholders in the distribution of the
Shares may be deemed to be "underwriters" within the meaning of Section 2(11) of
the Securities Act, and any commissions received by them and any profit on the
resale of the Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. See "Plan of Distribution"
herein for a description of indemnification arrangements.
The Common Stock of the Company is traded on the Nasdaq National Market
under the symbol "FAXX." On January 8, 1998, the last reported sales price of
the Company's Common Stock on the Nasdaq National Market was $3.00 per share.
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AN INVESTMENT IN THE SHARES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.SEE
"RISK FACTORS" BEGINNING ON PAGE 3.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection with
the offering made hereby, and if given or made, such information or
representations must not be relied upon as having been authorized by the
Company, any Selling Stockholder or by any other person. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy the Shares
to any person or by anyone in any jurisdiction in which such offer or
solicitation may not lawfully be made. Neither the delivery of this Prospectus
nor any sale made hereunder shall, under any circumstances, create any
implication that the information herein is correct as of any time subsequent to
the date hereof.
The date of this Prospectus is January 9, 1998
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Table of Contents
Page
Available Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Incorporation of Certain Documents by Reference . . . . . . . . . . . . . . .2
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Selling Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 under the Securities Act with
respect to the Common Stock offered hereby. This Prospectus does not contain
all of the information set forth in the Registration Statement and the exhibits
and the schedules thereto. For further information with respect to the Company
and such Common Stock, reference is made to the Registration Statement and
exhibits and schedules thereto. Statements contained in this Prospectus as to
the contents of any contract or other document referred to are not necessarily
complete, and, with respect to any contract or other document filed as an
exhibit to the Registration Statement, each such statement is qualified in all
respects by reference to such exhibit. Copies of the Registration Statement and
the exhibits thereto are on file at the offices of the Commission and may be
obtained upon payment of the prescribed fee or may be examined without charge at
the public reference facilities of the Commission described below.
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files annual and quarterly reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information may be inspected, and copies of such material may be obtained upon
payment of the prescribed fees, at the Commission's Public Reference Section,
Room 1024, 450 Fifth Street, N.W., Washington D.C. 20549, as well as at the
Commission's Regional Offices at Seven World Trade Center, New York, New York
10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511, or may be obtained from the Commission's Internet site on
the world wide web at http://www.sec.gov. Copies of such material can be
obtained in person from the Public Reference Section of the Commission at its
principal office located at 450 Fifth Street, N.W., Washington, D.C. 20549, upon
payment of the prescribed fees.
The Common Stock of the Company is traded on the NASDAQ National Market,
and in accordance therewith, annual and quarterly reports, proxy statements and
other information concerning the Company may be inspected at the NASDAQ National
Market's offices located in Washington, D.C.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed with the Commission are hereby incorporated
by reference in this Prospectus: (1) the Annual Report of the Company on Form
10-K for the fiscal year ended December 31, 1996 (the "1996 Form 10-K"); (2) the
Quarterly Reports of the Company on Form 10-Q for the quarters ended March 31,
1997, June 30, 1997 and September 30, 1997; and (3) the Proxy Statement of the
Company in connection with the Annual Meeting of the Stockholders held on May
20, 1997.
All reports and other documents subsequently filed by the Company pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of this Offering shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
of such reports and documents. Any statement incorporated herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any or all of the foregoing documents incorporated herein by reference (other
than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such document). Requests for such documents
should be submitted in writing to Mr. Peter S. Macaluso, Vice President and
Chief Financial Officer, FaxSav Incorporated, 399 Thornall Street, Edison, New
Jersey 08837.
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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
THIS PROSPECTUS INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE SECURITIES EXCHANGE ACT
OF 1934, AS AMENDED (THE "EXCHANGE ACT"). ALL STATEMENTS OTHER THAN STATEMENTS
OF HISTORICAL FACTS INCLUDED IN THIS PROSPECTUS OR INCORPORATED HEREIN BY
REFERENCE REGARDING THE COMPANY'S FINANCIAL POSITION AND BUSINESS STRATEGY MAY
CONSTITUTE FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY BELIEVES THAT THE
EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, IT CAN
GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO HAVE BEEN CORRECT.
IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE
COMPANY'S EXPECTATIONS ("CAUTIONARY STATEMENTS") ARE DISCLOSED IN THIS
PROSPECTUS, INCLUDING WITHOUT LIMITATION, IN CONJUNCTION WITH THE
FORWARD-LOOKING STATEMENTS UNDER "RISK FACTORS." ALL SUBSEQUENT WRITTEN AND
ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY OR PERSONS ACTING ON
ITS BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY
STATEMENTS.
THE COMPANY
The Company was incorporated in Delaware in November 1989 under the name
Digitran Corporation and changed its name to FaxSav Incorporated in February
1996. The Company's executive offices are located at 399 Thornall Street,
Edison, New Jersey 08837, and its telephone number is (732) 906-2000.
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RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a
high degree of risk and should not be made by any investor who cannot afford
the loss of his entire investment. Accordingly, prospective investors should
carefully consider the following factors, in addition to all of the other
information presented in this Prospectus, before purchasing any of the shares
of Common Stock offered hereby.
History of Operating Losses; Accumulated Deficit
From its inception in 1989 through the nine-month period ended
September 30, 1997, the Company has experienced significant operating losses.
The Company incurred operating losses of $3.6 million, $4.1 million and $7.5
million during the years ended December 31, 1994, 1995 and 1996,
respectively, and $5.6 million during the nine months ended September 30,
1997. The Company currently anticipates incurring further operating losses as
it attempts to expand its business and there can be no assurance that its
future operations will generate positive operating income. As of
September 30, 1997, the Company had an accumulated deficit of $30.7 million.
The Company has generated net operating loss ("NOL") carryforwards for
income tax purposes of approximately $23.0 million through December 31, 1996.
These NOL carryforwards have been recorded as a deferred tax asset of
approximately $8.3 million. Based upon the Company's history of operating
losses and presently known factors, management has determined that it is more
likely than not that the Company will be unable to generate sufficient
taxable income prior to the expiration of these NOL carryforwards and has
accordingly reduced its deferred tax assets to zero with a full valuation
allowance.
Quarterly Fluctuations; Possible Volatility of Stock Price
The Company may in the future experience significant quarter to quarter
fluctuations in its results of operations, which may result in volatility in
the price of the Company's Common Stock. Quarterly results of operations may
fluctuate as a result of a variety of factors, including demand for the
Company's services, the introduction of new services and service enhancements
by the Company or its competitors, market acceptance of new services, the mix
of revenues between Internet-based versus telephony-based deliveries, the
timing of significant marketing programs, the number and timing of the hiring
of additional personnel, competitive conditions in the industry and general
economic conditions. The Company's revenues are difficult to forecast.
Shortfalls in revenues may adversely and disproportionately affect the
Company's results of operations because a high percentage of the Company's
operating expenses are relatively fixed, and planned expenditures, such as
the anticipated expansion of the Company's Internet infrastructure, are based
primarily on sales forecasts. In addition, the stock market in general has
experienced extreme price and volume fluctuations, which have affected the
market price of securities of many companies in the telecommunications and
technology industries and which may have been unrelated to the operating
performance of such companies. These market fluctuations may adversely affect
the market price of the Company's Common Stock. Accordingly, the Company
believes that period to period comparisons of results of operations are not
necessarily meaningful and should not be relied upon as an indication of
future results of operations. There can be no assurance that the Company will
be profitable in any future quarter. Due to the foregoing factors, it is
likely that in one or more future quarters the Company's operating results
will be below the expectations of public market analysts and investors. Such
an event would have a material adverse effect on the price of the Company's
Common Stock.
Future Capital Needs; Uncertainty of Additional Financing; Dilution
The Company currently believes that its current cash and cash
equivalents will be sufficient to meet its presently anticipated cash needs
for working capital and capital expenditure requirements through at least the
end of 1998. However, the Company's cash requirements may vary materially
from those now planned as a result of unforeseen changes that could consume a
significant portion of the available resources before such time. To the
extent that funds expected to be generated from the Company's operations are
insufficient to meet current or planned operating requirements, the Company
will seek to obtain additional funds through bank facilities, equity or debt
financing, collaborative or other arrangements with corporate partners and
others and from other sources. Additional funding may not be available when
needed or on terms acceptable to the Company, which could have a material
adverse effect on the Company's business, financial condition and results of
operations. If adequate funds are not available, the Company may be required
to delay or to eliminate certain expenditures or to license to third parties
the rights to commercialize technologies that the Company would otherwise
seek to develop itself. In addition, in the event that the Company obtains
any additional funding, such financings may have a dilutive effect on the
holders of the Company's securities.
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Dependence on Network Infrastructure; No Assurance of Successful
Internet-Capable Node Deployment
The Company's future success will depend in part upon the capacity,
reliability and security of its network infrastructure and in particular upon
its ability to successfully deploy an international network of
Internet-capable facsimile nodes. The Company must continue to expand and
adapt its network infrastructure as the number of customers and the volume of
traffic they wish to transmit increases. The expansion and adaptation of the
Company's network infrastructure will require substantial financial,
operational and management resources. There can be no assurance that the
Company will be able to expand or adapt its network infrastructure to meet
any additional demand on a timely basis, at a commercially reasonable cost,
or at all. In addition, there can be no assurance that the Company will be
able to deploy the contemplated Internet-capable facsimile node expansion on
a timely basis, at a commercially reasonable cost, or at all. Any failure of
the Company to expand its network infrastructure on a timely basis, to adapt
it to changing customer requirements or evolving industry standards or to
deploy the contemplated Internet-capable facsimile node infrastructure on a
timely basis, or at all, would have a material adverse effect on the
Company's business, financial condition and results of operations. Further,
there can be no assurance that the Company will be able to satisfy the
regulatory requirements in each of the countries currently targeted for node
deployment, which may prevent the Company from installing Internet-capable
facsimile nodes in such countries and may have a material adverse effect on
the Company's business, operating results and financial condition.
Dependence on the Internet as a Facsimile Transmission Medium
The Company believes that its future success will depend in part upon
its ability to significantly expand its base of Internet-capable nodes and
route more of its customers' traffic through the Internet. The Company's
success is therefore largely dependent upon the viability of the Internet as
a medium for the transmission of documents. There can be no assurance that
document transmission over the Internet will continue to be reliable or that
Internet capacity constraints will not develop which inhibit efficient
document transmission. The Company accesses the Internet from its
Internet-capable nodes by dedicated connection to third party internet
service providers. The Company pays fixed monthly fees for such Internet
access, regardless of the Company's usage or the volume of its customers'
traffic. There can be no assurance that the current pricing structure for
access to and use of the Internet will not change unfavorably. If material
capacity constraints develop on the Internet or the current Internet pricing
structure changes unfavorably, the Company's business, financial condition
and results of operations would be materially and adversely affected.
No Assurance of Market Acceptance
The Company's ability to route existing customers' traffic through the
Internet and to sell its faxSAV PLUS service to new customers may be
inhibited by, among other factors, the reluctance of some customers to switch
from real-time fax delivery to "virtual real-time" delivery and by widespread
concerns over the adequacy of security in the exchange of information over
the Internet. The Company currently relies on encryption technology to enable
the secure transfer of customer documents over the Internet. There can be no
assurance that advances in computer capabilities, new discoveries in the
field of cryptography or other events or developments will not result in a
compromise or breach of the encryption technology or other algorithms used by
the Company to protect customer data. If the Company's existing customers do
not continue to accept "virtual real-time" delivery through the Internet as a
means of sending and receiving documents via fax, or if any compromise of the
Company's security were to occur, the Company's business, financial condition
and results of operations would be materially and adversely affected.
Intense Competition
The market for facsimile transmission services is intensely competitive
and there are limited barriers to entry. The Company expects that competition
will intensify in the future. The Company believes that its ability to
compete successfully will depend upon a number of factors, including market
presence; the capacity, reliability and security of its network
infrastructure; the pricing policies of its competitors and suppliers; the
timing of introductions of new services and service enhancements by the
Company and its competitors; and industry and general economic trends.
The Company's current and prospective competitors generally fall into
the following groups: (i) telecommunication companies, such as AT&T Corp.
("AT&T"), MCI Telecommunications Corporation ("MCI"), Sprint Corp.
("Sprint"), WorldCom Inc. ("WorldCom") and the regional Bell operating
companies; (ii) telecommunications resellers, such as Frontier Corporation,
Biztel Corporation and Eastern Telecom Corporation; (iii) Internet service
providers, such as Uunet Technologies, Inc. and NETCOM On-Line Communications
Services, Inc., (iv) on-line services providers, such as Microsoft
Corporation, America Online, Inc. and CompuServe Incorporated and (v) direct
fax delivery competitors, including Xpedite Systems, Inc. and UNIFI
Communications, Inc. Many of these competitors have greater market presence,
engineering and marketing capabilities, and financial,
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technological and personnel resources than those available to the Company. As
a result, they may be able to develop and expand their communications and
network infrastructures more quickly, adapt more swiftly to new or emerging
technologies and changes in customer requirements, take advantage of
acquisition and other opportunities more readily, and devote greater
resources to the marketing and sale of their products and services than can
the Company. Further, the foundation of the Company's telephony network
infrastructure consists of the right to use the telecommunications lines of
several of the above-mentioned long distance carriers, including WorldCom and
MCI. There can be no assurance that these companies will not discontinue or
otherwise alter their relationships with the Company in a manner that would
have a material adverse effect upon the Company's business, financial
condition and results of operations. In addition, current and potential
competitors have established or may establish cooperative relationships among
themselves or with third parties to increase the ability of their services to
address the needs of the Company's current and prospective customers.
Accordingly, it is possible that new competitors or alliances among
competitors may emerge and rapidly acquire significant market share. In
addition to direct competitors, many of the Company's larger potential
customers may seek to internally fulfill their fax communication needs
through the deployment of their own computerized fax communications systems
or network infrastructures for intra-company faxing. Increased competition
is likely to result in price reductions and could result in reduced gross
margins and erosion of the Company's market share, any of which would have a
material adverse effect on the Company's business, financial condition and
results of operations. There can be no assurance that the Company will be
able to compete successfully against current or future competitors or that
competitive pressures will not have a material adverse effect on the
Company's business, financial condition and results of operations.
On August 7, 1997, the Federal Communications Commission (the "FCC")
issued new rules which may significantly reduce the cost of international
calls originating in the United States. Such rules are scheduled to be phased
in over a five-year period starting on January 1, 1998. To the extent that
these new regulations are implemented and result in reductions in the cost of
international calls originating in the United States, the Company will face
increased competition for its international fax services which may have a
material adverse effect on the Company's business, financial condition or
results of operations.
No Assurance of Successful Management of Growth
The Company has rapidly and significantly expanded its operations and
anticipates that significant expansion will continue to be required in order
to address potential market opportunities. There can be no assurance that
such expansion will be successfully completed or that it will generate
sufficient revenues to cover the Company's expenses. The inability of the
Company to promptly address and respond to these circumstances could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Rapid Industry Change
The telecommunications industry in general, and the facsimile
transmission business in particular, are characterized by rapid and
continuous technological change. Future technological advances in the
telecommunications industry may result in the availability of new services or
products that could compete with the facsimile transmission services provided
by the Company or reduce the cost of existing products or services, any of
which could enable the Company's existing or potential customers to fulfill
their fax communications needs more cost efficiently. There can be no
assurance that the Company will be successful in developing and introducing
new services that meet changing customer needs and respond to technological
changes or evolving industry standards in a timely manner, if at all, or that
services or technologies developed by others will not render the Company's
services noncompetitive. The inability of the Company to respond to changing
market conditions, technological developments, evolving industry standards or
changing customer requirements, or the development of competing technology or
products that render the Company's services noncompetitive would have a
material adverse effect on the Company's business, financial condition and
results of operations.
Risk of System Failure; Security Risks
The Company's operations are dependent on its ability to protect its
network from interruption by damage from fire, earthquake, power loss,
telecommunications failure, unauthorized entry, computer viruses or other
events beyond the Company's control. Most of the Company's current computer
hardware and switching equipment, including its processing equipment, is
currently located at three sites. There can be no assurance that the
Company's existing and planned precautions of backup systems, regular data
backups and other procedures will be adequate to prevent significant damage,
system failure or data loss. Despite the implementation of security measures,
the Company's infrastructure may also be vulnerable to computer viruses,
hackers or similar disruptive problems caused by its customers or other
Internet users. Persistent problems continue to affect public and private
data networks, including computer break-ins and the misappropriation of
confidential information. Such computer break-ins and other disruptions may
jeopardize the security of information stored in and transmitted through the
computer systems of the individuals, businesses and financial institutions
utilizing the Company's services, which may result in significant liability
to the Company and also may deter potential customers from using the
Company's services. Any
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damage, failure or security breach that causes interruptions or data loss in
the Company's operations or in the computer systems of its customers could
have a material adverse effect on the Company's business, financial condition
and results of operations.
Dependence Upon Suppliers; Sole and Limited Sources of Supply
The Company relies on third parties to supply key components of its
network infrastructure, including long distance telecommunications services
and telecommunications node equipment, many of which are available only from
sole or limited sources. WorldCom, MCI and Telstra are the primary providers
of long distance telecommunications services to the Company. The Company has
from time-to-time experienced partial interruptions of service from its
telecommunications carriers which have temporarily prevented customers in
limited geographical areas from reaching the FaxSav network. There can be no
assurance that the Company will not experience partial or complete service
interruptions in the future. The fixed term of the Company's contract with
WorldCom expired on November 30, 1997, after which the contract will continue
on a month-to-month basis until renegotiated by the parties or terminated by
either party. There can be no assurance that WorldCom and the Company's other
telecommunications providers will continue to provide long distance services
to the Company at attractive rates, or at all, or that the Company will be
able to obtain such services in the future from these or other long distance
providers on the scale and within the time frames required by the Company.
Any failure to obtain such services on a timely basis at an affordable cost,
or any significant delays or interruptions of service from such carriers,
would have a material adverse effect on the Company's business, financial
condition and results of operations.
All of the faxboards used in the Company's telecommunications nodes are
supplied by Brooktrout Technology, Inc. ("Brooktrout"). The Company purchases
Brooktrout faxboards on a non-exclusive basis pursuant to purchase orders
placed from time-to-time, carries a limited inventory of faxboards and has no
guaranteed supply arrangement with Brooktrout. In addition to faxboards, many
of the routers, switches and other hardware components used in the Company's
network infrastructure are supplied by sole or limited sources on a
non-exclusive, purchase order basis. There can be no assurance that
Brooktrout or the Company's other suppliers will not enter into exclusive
arrangements with the Company's competitors, or cease selling these
components to the Company at commercially reasonable prices, or at all. The
anticipated expansion of the Company's network infrastructure is expected to
place a significant demand on the Company's suppliers, some of which have
limited resources and production capacity. In addition, certain of the
Company's suppliers, in turn, rely on sole or limited sources of supply for
components included in their products. Failure of the Company's suppliers to
adjust to meet such increasing demand may prevent them from continuing to
supply components and products in the quantities and quality and at the times
required by the Company, or at all. The Company's inability to obtain
sufficient quantities of sole or limited source components or to develop
alternative sources if required could result in delays and increased costs in
the expansion of the Company's network infrastructure or in the inability of
the Company to properly maintain the existing network infrastructure, which
would have a material adverse effect on the Company's business, financial
condition and results of operations.
Limited Protection of Intellectual Property Rights; Risk of Third Party
Claims of Infringement
The Company's success is dependent upon its proprietary technology. The
Company relies primarily on a combination of contract, copyright and
trademark law, trade secrets, confidentiality agreements and contractual
provisions to protect its proprietary rights. The Company has been granted a
patent related to its faxSAV Connector and has a patent application pending
for its "e-mail Stamps" security technology incorporated into its faxMailer
service. There can be no assurance that a patent will issue from such
application or that present or future patents will provide sufficient
protection to the Company's present or future technologies, services and
processes. In addition, there can be no assurance that others will not
independently develop substantially equivalent proprietary information or
obtain access to the Company's know-how. Despite the Company's efforts to
protect its proprietary rights, unauthorized parties may attempt to copy
aspects of the Company's services or to obtain and use information that the
Company regards as proprietary. In addition, the laws of some foreign
countries do not protect the Company's proprietary rights to the same extent
as do the laws of the United States. There can be no assurance that the steps
taken by the Company to protect its proprietary rights will be adequate or
that the Company's competitors will not independently develop technologies
that are substantially equivalent or superior to the Company's technologies.
On September 5, 1997, the Company filed a complaint for declaratory
judgment against AudioFAX IP, LLP ("AudioFAX") in the United States District
Court for the District of New Jersey. The Company is seeking declaratory
relief that current FaxSav service offerings do not infringe any valid claims
in AudioFAX's patents and that certain claims of AudioFAX's patents are
invalid. On September 8, 1997, AudioFAX filed a complaint against the Company
in the United States District Court for the Northern District of Georgia
alleging patent infringement, seeking a preliminary and permanent injunction
against the Company's alleged infringement and damages. Various motions by
the parties in the New Jersey and Georgia actions are pending. The Company
has been advised and
7
<PAGE>
believes that its service offerings do not infringe any valid patents of
AudioFax and intends to vigorously pursue these actions. There can be no
assurance that the Company will prevail or that AudioFAX will not prevail on
its claims. No assurance can be given that this litigation will not have a
material adverse effect on the Company.
Risk of Software Defects or Development Delays
Software-based services and equipment, such as the Company's faxSAV for
Internet suite of services and the faxSAV Connector, may contain undetected
errors or failures when introduced or when new versions are released. There
can be no assurance that, despite testing by the Company and by current and
potential customers, errors will not be found in such software or other
releases after commencement of commercial shipments, or that the Company will
not experience development delays, resulting in delays in the shipment of
software and a loss of or delay in market acceptance, any of which could have
a material adverse effect on the Company's business, financial condition and
results of operations.
Dependence on Key Personnel
The Company's future performance depends in significant part upon the
continued service of its key technical, sales and senior management
personnel, none of whom is bound by an employment agreement. Competition for
such personnel is intense, and there can be no assurance that the Company can
retain its key technical, sales and managerial employees or that it can
attract, assimilate or retain other highly qualified technical, sales and
managerial personnel in the future.
Risks Related to Potential Acquisitions
The Company may in the future pursue acquisitions of complementary
services or product lines, technologies or businesses, although the Company
has no present understandings, commitments or agreements with respect to any
such acquisitions. Future acquisitions by the Company could result in
potentially dilutive issuances of equity securities, the incurrence of debt
and contingent liabilities and amortization expenses related to goodwill and
other intangible assets, which could materially adversely affect the
Company's business, financial condition and results of operations. In
addition, acquisitions involve numerous risks, including difficulties in the
assimilation of the operations, technologies, services and products of the
acquired companies and the diversion of management's attention from other
business concerns. In the event that any such acquisition were to occur,
there can be no assurance that the Company's business, financial condition
and results of operations would not be materially adversely affected.
Reliance on International Strategic Alliances
The Company is establishing and building an international customer base
by forming strategic sales and marketing alliances with foreign Internet
service providers, telecommunications companies and resellers. There can be
no assurance that the Company will be able to maintain such strategic
alliances. The Company's success in developing an international customer base
depends not only on the formation of such alliances but also on the success
of these partners and their ability to market the Company's services. The
failure to maintain such strategic alliances or the failure of these partners
to successfully develop and sustain a market for the Company's service will
have a material adverse effect on the Company's ability to establish and
build an international customer base, which could have a material adverse
effect on the Company's business, financial condition and results of
operations.
Year 2000 Compliance.
Many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field. These date
code fields will need to accept four digit entries to distinguish 21st
century dates from 20th century dates. As a result, in less than two years,
computer systems and/or software used by many companies may need to be
upgraded to comply with such "Year 2000" requirements. Significant
uncertainty exists in the software industry concerning the potential effects
associated with such compliance. There can be no assurance that the Company's
software contains all necessary date code changes. The Company and its
customers may be affected by Year 2000 issues. Compliance with Year 2000
requirements may disrupt the Company's ability to continue developing and
marketing its facsimile transmission products and services. The Company may
also incur certain unexpected expenditures in connection with Year 2000
compliance. Any of the foregoing could result in a material adverse effect
on the Company's business, financial condition and results of operations.
Government Regulation
The Company is subject to regulation by various state public service and
public utility commissions and by various international regulatory
authorities. FaxSav is licensed by the FCC as an authorized
telecommunications company and is classified as a "non-dominant interexchange
carrier." Generally, the FCC has chosen not to exercise
8
<PAGE>
its statutory power to closely regulate the charges or practices of
non-dominant carriers. Nevertheless, the FCC acts upon complaints against
such carriers for failure to comply with statutory obligations or with the
FCC's rules, regulations and policies. The FCC also has the power to impose
more stringent regulatory requirements on the Company and to change its
regulatory classification. There can be no assurance that the FCC will not
change the Company's regulatory classification or otherwise subject the
Company to more burdensome regulatory requirements.
On August 7, 1997, the FCC issued new rules which may significantly
reduce the cost of international calls originating in the United States. Such
rules are scheduled to be phased in over a five-year period starting on
January 1, 1998. To the extent that these new regulations are implemented and
result in reductions in the cost of international calls originating in the
United States, the Company will face increased competition for its
international fax services which may have a material adverse effect on the
Company's business, financial condition or results in operations.
In connection with the anticipated deployment of Internet-capable nodes
in countries throughout the world, the Company will be required to satisfy a
variety of foreign regulatory requirements. The Company intends to explore
and seek to comply with these requirements on a country-by-country basis as
the deployment of Internet-capable facsimile nodes continues. There can be no
assurance that the Company will be able to satisfy the regulatory
requirements in each of the countries currently targeted for node deployment,
and the failure to satisfy such requirements may prevent the Company from
installing Internet-capable facsimile nodes in such countries. The failure to
deploy a number of such nodes could have a material adverse effect on the
Company's business, operating results and financial condition.
The Company's nodes and its FAXLAUNCHER service utilize encryption
technology in connection with the routing of customer documents through the
Internet. The export of such encryption technology is regulated by the United
States government. The Company has authority for the export of such
encryption technology other than to Cuba, Iran, Libya, North Korea, Sudan and
Syria. Nevertheless, there can be no assurance that such authority will not
be revoked or modified at any time for any particular jurisdiction or in
general. In addition, there can be no assurance that such export controls,
either in their current form or as may be subsequently enacted, will not
limit the Company's ability to distribute its services outside of the United
States or electronically. While the Company takes precautions against
unlawful exportation of its software, the global nature of the Internet makes
it virtually impossible to effectively control the distribution of its
services. Moreover, future Federal or state legislation or regulation may
further limit levels of encryption or authentication technology. Any such
export restrictions, the unlawful exportation of the Company's services, or
new legislation or regulation could have a material adverse effect on the
Company's business, financial condition and results of operations.
Shares Eligible for Future Sale; Effect on Ability to Raise Capital
Sales of substantial amounts of Common Stock in the public market
following this Offering, or the perception that such sales could occur, could
adversely affect the prevailing market price of the Company's Common Stock
and may have a material and adverse effect on the Company's ability to raise
the capital necessary to fund its future operations. As of December 31,
1997, without taking into account shares of Common Stock issued upon exercise
of stock options, warrants or other rights to acquire Common Stock after
December 31, 1997, the Company had outstanding 10,805,721 shares of Common
Stock. The Shares and substantially all of the shares of Common Stock
already outstanding will be freely tradeable in the public market without
restriction under the Securities Act, except that any shares held by
"affiliates" of the Company, as such term is defined in Rule 144(a) under the
Securities Act ("Affiliates"), may generally only be sold in compliance with
the applicable provisions of Rule 144 of the Securities Act. In general,
under Rule 144 an Affiliate is entitled to sell within any three-month period
a number of shares that does not exceed the greater of 1% of the then
outstanding shares of the Company's Common Stock (approximately 108,057
shares) or the average weekly trading volume in the Company's Common Stock on
the NASDAQ National Market during the four calendar weeks preceding the date
on which notice of such sale was filed under Rule 144. Sales under Rule 144
are also subject to certain provisions relating to the manner and notice of
sale and the availability of current public information about the Company.
Additional shares of Common Stock, including shares issuable upon exercise of
options, warrants and other rights to acquire Common Stock, will also become
eligible for sale in the public market from time to time in the future.
Furthermore, certain holders of Common Stock have the right to cause the
Company to register their shares under the Securities Act in the future. The
Company is required to bear the expenses of all such required registrations
(except underwriting discounts and commissions). The Company is required to
use its best efforts to effect such registrations, subject to certain
conditions and limitations.
Antitakeover Considerations
The Company's Sixth Amended and Restated Certificate of Incorporation
(the "Certificate of Incorporation") authorizes the Board of Directors to
issue, without stockholder approval, up to 1,000,000 shares of Preferred
Stock with voting, conversion and other rights and preferences that could
adversely affect the voting
9
<PAGE>
power or other rights of the holders of Common Stock. The Certificate of
Incorporation also provides for staggered terms for the members of the Board
of Directors. In addition, the Company will be subject to the provisions of
Section 203 of the Delaware General Corporation Law, which will generally
prohibit the Company from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. The foregoing and
other provisions of the Certificate of Incorporation and the Company's
By-laws, as amended (the "By-laws") and the application of Section 203 of the
Delaware General Corporation Law could have the effect of deterring certain
takeovers or delaying or preventing certain changes in control or management
of the Company, including transactions in which stockholders might otherwise
receive a premium for their shares over then current market prices.
No Dividends
The Company has never paid any cash dividends on its Common Stock and
does not anticipate paying any cash dividends in the foreseeable future.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares.
All proceeds will be received by the Selling Stockholders. See "Selling
Stockholders."
10
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth the number of shares of Common Stock
beneficially owned by each of the Selling Stockholders as of January 8, 1998.
None of the Selling Stockholders has had a material relationship with the
Company within the past three years other than as a result of the ownership
of the Shares or other securities of the Company. The Shares offered by this
Prospectus may be offered from time to time by the Selling Stockholders. See
"Plan of Distribution."
<TABLE>
<CAPTION>
Beneficial Ownership
After Offering
---------------------
Number of Shares Number of Shares
Beneficially Owned Registered Number
Name of Selling Stockholder Prior to Offering for Sale Hereby of Shares Percent
- --------------------------- ------------------ ---------------- ---------- -------
<S> <C> <C> <C> <C>
East River Ventures, L.P. ...................... 412,500 412,500 0 0.0%
Haussmman Holdings, N.V. ....................... 75,000 75,000 0 0.0%
Victory Ventures LLC. .......................... 412,500 412,500 0 0.0%
Watershed Cayman, Ltd. ......................... 100,000 100,000 0 0.0%
--------- ---------- ---- -----
TOTAL .................................. 1,000,000 1,000,000 0 0.0%
--------- ---------- ---- -----
--------- ---------- ---- -----
</TABLE>
- --------------------
The Shares are being registered as a result of a contractual arrangement
with the Selling Stockholders. The Company has agreed to bear certain
expenses (other than underwriting discounts and selling commissions and fees
and disbursements of counsel and other advisors to the Selling Stockholders)
in connection with the registration of the Shares.
The Company has agreed to prepare and file such amendments and
supplements to the Registration Statement as may be necessary to keep this
Registration Statement effective until the earlier of: (a) November 21, 1999;
or (b) the date on which all of the Shares have been sold pursuant to the
terms hereof.
11
<PAGE>
PLAN OF DISTRIBUTION
The Shares offered hereby may be offered by the Selling Stockholders
from time to time in transactions on the Nasdaq National Market, in
negotiated transactions, or a combination of such methods of sale, at fixed
prices which may be changed, at market prices prevailing at the time of sale,
at prices related to prevailing market prices or at negotiated prices. The
Selling Stockholders may effect such transactions by selling the Shares to or
through broker-dealers, and such broker-dealers may receive compensation in
the form of discounts, concessions or commissions from the Selling
Stockholders and/or the purchasers of the Shares for whom such broker-dealers
may act as agents or to whom they sell as principals, or both (which
compensation as to a particular broker-dealer might be in excess of customary
commissions). In order to comply with the securities laws of certain states,
if applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. The Selling Stockholders may
transfer their Shares under certain circumstances to other persons who may,
in turn, resell Shares in the manner described above. In addition, the
Selling Stockholders may pledge or make gifts of their Shares and such Shares
may also be sold by the pledgees or transferees.
At the time a particular offer of Shares is made, to the extent
required, a Prospectus Supplement will be distributed which will set forth
the number of Shares being offered and the terms of the offering including
the name or names of any underwriters, dealers or agents, the purchase price
paid by any underwriter for the Shares purchased from Selling Stockholders,
any discounts, commissions and other items constituting compensation from the
Selling Stockholders and any discounts, commissions or concessions allowed or
reallowed or paid to dealers.
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states
the Shares may not be sold unless they have been registered or qualified for
sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with by the Company
and the Selling Stockholders.
The Selling Stockholders may also transfer their Shares pursuant to
Rule 144, whether or not the Registration Statement, of which this Prospectus
forms a part, is effective at the time of any such transfer.
The Selling Stockholders and any broker-dealers, agents or underwriters
that participate with the Selling Stockholders in the distribution of the
Shares may be deemed to be "underwriters" within the meaning of Section 2(11)
of the Securities Act, and any commissions received by them and any profit on
the resale of the Selling Stockholder Shares purchased by them may be deemed
to be underwriting commissions or discounts under the Securities Act. The
Company has agreed to indemnify the Selling Stockholders and their affiliates
against certain liabilities, including liabilities under the Securities Act.
The Selling Stockholders have agreed to indemnify the Company and its
affiliates against certain liabilities, including liabilities under the
Securities Act.
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the Shares may not simultaneously
engage in market making activities with respect to the Common Stock of the
Company for a period of two business days prior to the commencement of such
distribution. In addition and without limiting the foregoing, each Selling
Stockholder will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation,
Regulation M, which provisions may limit the timing of purchases and sales of
shares of the Company's Common Stock by the Selling Stockholders.
The Company has agreed to bear certain expenses (other than underwriting
discounts and selling commissions and fees and disbursements of counsel and
other advisors to the Selling Stockholders) in connection with the
registration of the Shares.
12
<PAGE>
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon for the
Company by Brobeck, Phleger & Harrison LLP, New York, New York.
EXPERTS
The balance sheets as of December 31, 1996 and 1995 and the statements
of operations, stockholders' equity (deficit) and cash flows for each of the
three years in the period ended December 31, 1996, incorporated by reference
in this prospectus, have been incorporated herein, in reliance on the report
of Coopers & Lybrand L.L.P., independent accountants, given on the authority
of that firm as experts in accounting and auditing.
13
<PAGE>
1,000,000 Shares
FAXSAV INCORPORATED
Common Stock
PROSPECTUS
January 9, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses Of Issuance And Distribution
The following table sets forth an estimate of the expenses to be
incurred by the Company in connection with the issuance and distribution of
the securities being registered hereby. All such expenses will be borne by
the Company:
Amount to
Be Paid
---------
SEC Registration Fee . . . . . . . . . . . . . . . . . . . . . . $ 710
Nasdaq Listing Fee . . . . . . . . . . . . . . . . . . . . . . . 17,500
Legal Fees and Expenses. . . . . . . . . . . . . . . . . . . . . 20,000
Accounting Fees and Expenses . . . . . . . . . . . . . . . . . . 10,000
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . 1,792
--------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 50,000
--------
--------
Item 15. Indemnification Of Directors And Officers
Section 145 of the Delaware General Corporation Law authorizes a court
to award or a corporation's Board of Directors to grant indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of
1933, as amended (the "Act"). Article IX of the Registrant's Sixth Amended
and Restated Certificate of Incorporation provides for indemnification of its
directors and officers and permissible indemnification of employees and other
agents to the maximum extent permitted by the Delaware General Corporation
Law.
The Company has purchased liability insurance on behalf of its directors
and officers for liabilities arising out of their capacities as such.
Item 16. Exhibits
The following is a list of Exhibits filed as part of the Registration
Statement:
3.1 Registrant's Sixth Amended and Restated Certificate of
Incorporation (incorporated by reference to Exhibit 3.3 to the
Registrant's Registration Statement on Form S-1, Registration No.
333-09613 ("Registrant's Registration Statement")).
3.2 By-laws of the Registrant (incorporated by reference to Exhibits
3.4 and 3.5 to the Registrant's Registration Statement).
4.1 Specimen certificate for shares of the Registrant's Common Stock,
incorporated herein by reference to Exhibit 4.1 to the Registrant's
Registration Statement.
4.2 Provisions of the Articles of Incorporation and By-laws of the
Registrant defining rights of holders of Common Stock of the
Registrant, incorporated herein by reference to Exhibits 3.1, 3.2,
3.3, 3.4 and 3.5 to the Registrant's Registration Statement.
5.1 Opinion of Brobeck, Phleger & Harrison LLP.*
10.1 Form of Common Stock Purchase Agreement, Dated November 21, 1997.*
23.1 Consent of Brobeck, Phleger & Harrison LLP (included in the opinion
filed as Exhibit 5.1).
23.2 Consent of Coopers & Lybrand LLP, independent public accountants.*
II-1
<PAGE>
24.1 Power of Attorney (included with signature page).
- ---------------
* Filed herewith.
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions described in
Item 14 above, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made of the securities offered hereby, a post-effective amendment to this
Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information
set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that the undertakings set forth in paragraphs (i) and (ii)
above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in this
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
The undersigned Registrant hereby undertakes that:
II-2
<PAGE>
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
KNOW ALL MEN BY THESE PRESENTS, that each person or entity whose
signature appears below constitutes and appoints Thomas F. Murawski and Peter
S. Macaluso, and each of them, its true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for it and in its
name, place and stead, in any and all capacities, to sign any and all
amendments, including any post-effective amendments, to this Registration
Statement on Form S-3, or any registration statement relating to the offering
to be effective upon filing pursuant to Rule 462(b) under the Securities Act
of 1933, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as it might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Edison, State of New
Jersey, on January 8, 1998.
FAXSAV INCORPORATED
By: /s/ Thomas F. Murawski
-------------------------------------------
Thomas F. Murawski, Chairman of the Board of
Directors, President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons
in the capacities indicated on January 8, 1998.
Signature Title
--------- -----
/s/ Thomas F. Murawski
- -----------------------------------
Thomas F. Murawski Chairman of the Board of Directors,
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Peter S. Macaluso
- -----------------------------------
Peter S. Macaluso Vice President and Chief Financial
Officer (Principal Financial and
Accounting Officer)
/s/ Jeffrey M. Drazan
- -----------------------------------
Jeffrey M. Drazan Director
/s/ Peter A. Howley
- -----------------------------------
Peter A. Howley Director
/s/ Robert Labant
- -----------------------------------
Robert Labant Director
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description Page
- ------- ----------- ----
3.1 Registrant's Sixth Amended and Restated Certificate of
Incorporation (incorporated by reference to Exhibit 3.3 to
the Registrant's Registration Statement on Form S-1,
Registration No. 333- 09613 ("Registrant's Registration
Statement")....................................................
3.2 By-Laws of the Registrant (incorporated by reference to Exhibit
3.4 and 3.5 to the Registrant's Registration Statement)........
4.1 Specimen certificate for shares of the Registrant's Common
Stock, incorporated herein by reference to Exhibit 4.1 to the
Registrant's Registration Statement............................
4.2 Provisions of the Articles of Incorporation and By-laws of the
Registrant defining rights of holders of Common Stock of the
Registrant, incorporated herein by reference to Exhibits 3.1.
3.2 3.3, 3.4 and 3.5 to the Registrant's Registration
Statement......................................................
5.1 Opinion of Brobeck, Phleger & Harrison LLP*....................
10.1 Form of Common Stock Purchase Agreement, Dated November 21,
1997*..........................................................
23.1 Consent of Brobeck, Phleger & Harrison LLP (included in the
opinion filed as Exhibit 5.1)..................................
23.2 Consent of Coopers & Lybrand LLP, independent public
accountants*...................................................
24.1 Power of Attorney (included with signature page)...............
- ---------------
* Filed herewith.
<PAGE>
January 8, 1998
FaxSav Incorporated
399 Thornall Street
Edison, New Jersey 08837
Ladies and Gentlemen:
We have assisted in the preparation and filing by FaxSav Incorporated
(the "Company") of a Registration Statement on Form S-3 (the "Registration
Statement"), with the Securities and Exchange Commission, relating to the sale
of up to 1,000,000 shares (the "Shares") of Common Stock, $0.01 par value (the
"Common Stock"), of the Company. A form of common stock purchase agreement (the
"Common Stock Purchase Agreement") is filed as an exhibit to the Registration
Statement. The Registration Statement relates to 1,000,000 Shares to be sold by
certain stockholders of the Company.(the "Shares")
We have examined such records and documents and have made such
examination of laws as we considered necessary to form a basis for the opinion
set forth herein. In our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, and
the conformity with the originals of all documents submitted to us as copies
thereof.
Based upon and subject to the foregoing, we are of the opinion that
(i) the Shares have been duly authorized and (ii) the Shares have been validly
issued and are fully paid and nonassessable.
<PAGE>
FaxSav Incorporated January 8, 1998
Page 2
We hereby consent to the use of our name in the Registration Statement
under the caption "Legal Matters" in the related Prospectus and consent to the
filing of this opinion as an exhibit thereto.
Very truly yours,
/S/ BROBECK, PHLEGER & HARRISON LLP
------------------------------------
BROBECK, PHLEGER & HARRISON LLP
<PAGE>
FAXSAV INCORPORATED
COMMON STOCK PURCHASE AGREEMENT
________________________
November 21, 1997
<PAGE>
TABLE OF CONTENTS
Page
1. Purchase and Sale of Stock. . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Sale and Issuance of Common Stock . . . . . . . . . . . . . . . . 1
1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Representations and Warranties of the Company . . . . . . . . . . . . . 1
2.1 Organization, Good Standing and Qualification. . . . . . . . . . . 2
2.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Valid Issuance of Common Stock . . . . . . . . . . . . . . . . . . 2
2.4 Governmental Consents. . . . . . . . . . . . . . . . . . . . . . . 2
2.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.6 Compliance with Other Instruments. . . . . . . . . . . . . . . . . 2
2.7 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 3
2.8 SEC Filings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 Other Information. . . . . . . . . . . . . . . . . . . . . . . . . 4
3. Representations and Warranties of the Investor. . . . . . . . . . . . . 4
3.1 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Purchase Entirely for Own Account. . . . . . . . . . . . . . . . . 4
3.3 Disclosure of Information. . . . . . . . . . . . . . . . . . . . . 4
3.4 Investment Experience. . . . . . . . . . . . . . . . . . . . . . . 5
3.5 Accredited Investor. . . . . . . . . . . . . . . . . . . . . . . . 5
3.6 Restricted Securities. . . . . . . . . . . . . . . . . . . . . . . 5
4. Conditions of the Investors' Obligations at Closing . . . . . . . . . . 5
4.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.2 Representations and Warranties . . . . . . . . . . . . . . . . . . 5
4.3 Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.4 Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5. Conditions of the Company's Obligations at Closing. . . . . . . . . . . 5
5.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.2 Representations and Warranties . . . . . . . . . . . . . . . . . . 6
5.3 Payment of Purchase Price. . . . . . . . . . . . . . . . . . . . . 6
5.4 Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6. Registration of Common Stock. . . . . . . . . . . . . . . . . . . . . . 6
6.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.2 Required Registration. . . . . . . . . . . . . . . . . . . . . . . 7
6.3 Obligations of the Company . . . . . . . . . . . . . . . . . . . . 7
6.4 Furnish Information. . . . . . . . . . . . . . . . . . . . . . . . 9
6.5 Expenses of Registration . . . . . . . . . . . . . . . . . . . . . 9
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6.6 Delay of Registration. . . . . . . . . . . . . . . . . . . . . . . 9
6.7 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.8 Assignment of Registration Rights. . . . . . . . . . . . . . . . . 11
6.9 "Lock-Up" Agreement. . . . . . . . . . . . . . . . . . . . . . . . 12
6.10 "Market Stand-Off" Agreement . . . . . . . . . . . . . . . . . . . 12
7. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.1 Survival of Warranties . . . . . . . . . . . . . . . . . . . . . . 13
7.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . 13
7.3 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.5 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . 13
7.6 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.7 Finder's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.8 Attorney's Fees. . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.9 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . 14
7.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.11 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 14
SCHEDULE 1 - List of Investors, addresses, number of shares of
Common Stock being purchased and purchase price due
from each Investor
ii
<PAGE>
COMMON STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of the 21st day of
November 1997, by and between FaxSav Incorporated, a Delaware corporation
(the "Company"), and the investors listed on Schedule 1 attached hereto,
each of which is herein referred to as an "Investor".
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
1.1 Sale and Issuance of Common Stock. Subject to the terms and
conditions of this Agreement, each Investor agrees to purchase at the
Closing and the Company agrees to sell and issue to the Investor at the
Closing, that number of shares of the Company's common stock, $.01 par
value per share ("Common Stock") as is set forth opposite each Investor's
named on Schedule 1 attached hereto, at a purchase price of Two Dollars and
Seventeen and One-Half Cents ($2.175) per share, which is equal to the
average daily closing price per share of the Company's Common Stock on the
NASDAQ National Stock Market for the five-day trading period ended November
19, 1997. The maximum aggregate number of shares of Common Stock sold
pursuant to this Agreement shall be One Million (1,000,000) shares.
1.2 Closing. The purchase and sale of the Common Stock shall
take place at the offices of Brobeck, Phleger & Harrison, LLP, 1633
Broadway, New York, at such time and place as the Company and Investors
acquiring in the aggregate a minimum of Five Hundred Thousand (500,000)
shares of Common Stock sold pursuant hereto mutually agree upon orally or
in writing (which time and place are designated as the "Initial Closing"),
but any event no later than November 25, 1997. The Company may sell up to
the balance of the authorized number of shares of Common Stock not sold at
the Initial Closing to such Investors (who need not have purchased shares
in the Initial Closing) as it shall select at a purchase price not less
than $2.175 per share, at such other time and place as the Company and such
Investors shall mutually agree upon orally or in writing (an "Additional
Closing", and together with the Initial Closing the "Closing"), provided
each Additional Closing shall take place not later than November 30, 1997.
At each Closing the Company shall deliver to each Investor a certificate
representing the Common Stock which such Investor is purchasing against
either (i) delivery to the Company by such Investor of a check or (ii) a
completed wire transfer, in the amount of the purchase price payable by
such Investor, in favor of the Company.
2. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Investor that:
<PAGE>
2.1 Organization, Good Standing and Qualification. The Company
is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware.
2.2 Authorization. All corporate action on the part of the
Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement and the performance
of all obligations of the Company hereunder and the authorization, issuance
and delivery of the Common Stock being sold hereunder has been taken or
will be taken prior to the Closing, and this Agreement constitutes a valid
and legally binding obligation of the Company, enforceable in accordance
with its terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief, or
other equitable remedies, and (iii) to the extent the indemnification
provisions contained herein may be limited by applicable federal or state
securities laws.
2.3 Valid Issuance of Common Stock. The Common Stock which is
being purchased by each Investor hereunder, when issued, sold and delivered
in accordance with the terms hereof for the consideration expressed herein,
will be duly and validly issued, fully paid and nonassessable, and, based
in part upon the representations of the Investors in this Agreement, will
be issued in compliance with all applicable federal and state securities
laws.
2.4 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration
or filing with, any federal, state or local governmental authority on the
part of the Company is required in connection with the consummation of the
transactions contemplated by this Agreement, except for post-Closing
filings as may be required under applicable state securities laws.
2.5 Litigation. Except as previously disclosed by the Company
in its periodic reports filed with the U.S. Securities and Exchange
Commission (the "SEC") pursuant to the requirements of the Securities
Exchange Act of 1934 (the "1934 Act"), as amended and listed in Section 2.8
hereof, there is no action, suit, proceeding or investigation pending or
currently threatened against the Company. The Company is not a party or
subject to the provisions of any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality. Except as
previously disclosed by the Company in its periodic reports filed with the
SEC pursuant to the requirements of the 1934 Act, there is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
2.6 Compliance with Other Instruments. The Company is not in
violation or default of any provisions of its Sixth Amended and Restated
Certificate of Incorporation or Bylaws, true and correct and complete
copies of which have been furnished to each Investor, or of any
instrument, judgment, order, writ, decree or contract to which it is a
party or by which it is bound or, to its knowledge, of any provision of
federal or state
2
<PAGE>
statute, rule or regulation applicable to the Company. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will not result in any such violation or
be in conflict with or constitute, with or without the passage of time and
giving of notice, either a default under any such provision, instrument,
judgment, order, writ, decree or contract or an event which results in the
creation of any lien, charge or encumbrance upon any assets of the Company
or the suspension, revocation, impairment, forfeiture, or nonrenewal of any
material permit, license, authorization, or approval applicable to the
Company, its business or operations or any of its assets or properties.
2.7 Financial Statements. The Company has delivered to each
Investor its audited financial statements (balance sheet and statement of
operations, statement of stockholders' equity and statement of cash flows)
at December 31, 1996 and for the fiscal year then ended and similar
unaudited financial statements at September 30, 1997 and for the nine-month
period then ended (the "Financial Statements"). The Financial Statements
are complete and correct in all material respects and have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated and with each other. The
Financial Statements accurately set out and describe the financial
condition and operating results of the Company as of the dates, and for the
periods, indicated therein, subject to normal year-end audit adjustments.
Since September 30, 1997 there has occurred no event materially adverse to
the Company, its business or prospects.
2.8 SEC Filings. The Company has delivered to the Investor:
(a) its Prospectus, dated October 11, 1996;
(b) its annual report on Form 10-K for the fiscal year ended
December 31, 1996;
(c) its quarterly report on Form 10-Q for the fiscal quarter
ended March 31, 1997;
(d) its quarterly report on Form 10-Q for the fiscal quarter
ended June 30, 1997;
(e) its quarterly report on Form 10-Q for the fiscal quarter
ended September 30, 1997; and
(f) its proxy statement to stockholders as filed with the SEC on
April 30, 1997.
As of its filing date, no such report or statement filed by the
Company with the SEC contained any untrue statement of a material fact or
omitted to state any material
3
<PAGE>
fact necessary in order to make the statements made therein, in the light
of the circumstances under which they were made, not misleading.
2.9 Other Information. The Company has delivered to the
Investor copies of all press releases, reports to stockholders and other
documents released to the public since January 1, 1997.
3. Representations and Warranties of the Investor. Each
Investor, severally and not jointly, hereby represents and warrants that:
3.1 Authorization. This Agreement constitutes its valid and
legally binding obligation, enforceable in accordance with its terms,
except; (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors rights generally and (ii) as limited by laws
relating to the availability of specific performance, injunctive relief, or
other equitable remedies.
3.2 Purchase Entirely for Own Account. This Agreement is made
with each Investor in reliance upon each Investor's representation to the
Company, which by such Investor's execution of this Agreement such Investor
hereby confirms, that the Common Stock to be received by such Investor will
be acquired for investment for such Investor's own account, not as a
nominee or agent, and not with a view to the resale or distribution of any
part thereof, and that such Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same. By
executing this Agreement, each Investor further represents that it does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third
person, with respect to the Common Stock. Each Investor represents that it
has full power and authority to enter into this Agreement. Notwithstanding
the foregoing, Investors may effect: (i) resales or distributions of up to
twenty percent (20%) of the Common Stock received by each Investor to
accredited investors within the meaning of SEC Rule 501 of Regulation D or
(ii) distributions in kind to any beneficial owners of such Investor
provided, that all such permitted transfers shall be; (i) subject to the
restrictions of applicable federal or state securities laws and (ii) such
transferee or assignee agrees in writing to be bound by and subject to the
terms and conditions of this Agreement.
3.3 Disclosure of Information. Each Investor believes it has
received all the information it considers necessary or appropriate for
deciding whether to purchase the Common Stock. Each Investor further
represents that it has had an opportunity to ask questions and receive
answers from the Company regarding the terms and conditions of the offering
of the Common Stock. The foregoing, however, does not limit or modify the
representations and warranties of the Company in Section 2 of this
Agreement or the right of each Investor to rely thereon.
4
<PAGE>
3.4 Investment Experience. Each Investor is an investor in
securities of companies at an early stage and acknowledges that it is able
to fend for itself, can bear the economic risk of its investment and has
such knowledge and experience in financial or business matters such that it
is capable of evaluating the merits and risks of its investment in the
Common Stock.
3.5 Accredited Investor. Each Investor is an "accredited
investor" within the meaning of SEC Rule 501 of Regulation D, as presently
in effect.
3.6 Restricted Securities. Each Investor understands that the
shares of Common Stock it is purchasing are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering
and that under such laws and applicable regulations such securities may not
be resold without registration under the Securities Act of 1933, as amended
(the "Act"), except in certain limited circumstances. In this connection,
each Investor represents that it is familiar with Rule 144 under the Act
("Rule 144"), as presently in effect, and understands the resale
limitations imposed thereby and by the Act.
4. Conditions of the Investors' Obligations at Closing. The
obligations of each Investor under subsection 1.1 of this Agreement are
subject to the fulfillment on or before the Closing of each of the
following conditions, the waiver of which shall not be effective against
any Investor who does not consent in writing thereto:
4.1 Closing. The Closing shall have occurred on or before
November 25, 1997.
4.2 Representations and Warranties. The representations and
warranties of the Company contained in Section 2 shall be true on and as of
the Closing with the same effect as though such representations and
warranties had been made on and as of the date of such Closing.
4.3 Performance. The Company shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement
that are required to be performed or complied with by it on or before the
Closing.
4.4 Qualifications. All authorizations, approvals or permits,
if any, of any governmental authority or regulatory body of the United
States or of any state that are required in connection with the lawful
issuance and sale of the Common Stock pursuant to this Agreement shall be
duly obtained and effective as of the Closing.
5. Conditions of the Company's Obligations at Closing. The
obligations of the Company to each Investor under this Agreement are
subject to the fulfillment on or before the Closing of each of the
following conditions by that Investor:
5
<PAGE>
5.1 Closing. The Closing shall have occurred on or before
November 25, 1997.
5.2 Representations and Warranties. The representations and
warranties of the Investor contained in Section 3 shall be true on and as
of the Closing with the same effect as though such representations and
warranties had been made on and as of the Closing.
5.3 Payment of Purchase Price. The Investor shall have
delivered the purchase price specified in Section 1.
5.4 Qualifications. All authorizations, approvals or permits,
if any, of any governmental authority or regulatory body of the United
States or of any state that are required in connection with the lawful
issuance and sale of the Common Stock pursuant to this Agreement shall be
duly obtained and effective as of the Closing.
6. Registration of Common Stock. The Company covenants and
agrees as follows:
6.1 Definitions. For purposes of this Section 6:
(a) The term "register", "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration statement or
document;
(b) The term "Registrable Securities" means (1) the Common
Stock issued pursuant to this Agreement; or (2) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
Common Stock, excluding in all cases, however, any Registrable Securities
which are sold, assigned, pledged, hypothecated or otherwise disposed of by
an Investor in a transaction in which such Investor's rights under this
Agreement are not assigned or assignable;
(c) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are,
Registrable Securities; and
(d) The term "Holder" means one of the Investors.
6
<PAGE>
6.2 Required Registration.
(a) The Company shall, subject to the limitations specified
in this Agreement, use its best efforts to file a registration statement on
Form S-3 within ninety (90) days from the date hereof covering the
registration under the Act of all Registrable Securities then outstanding.
(b) Notwithstanding the foregoing, if the Company shall
furnish to the Holders a certificate signed by the Chief Executive Officer
and President of the Company stating that, in the good faith judgment of
the Board of Directors of the Company, it would be seriously detrimental to
the Company and its stockholders for a registration statement to be filed
and it is therefore essential to defer the filing of such registration
statement, the Company shall have the right to defer taking action with
respect to such filing for a period of not more than thirty (30) days from
the delivery of such certificate to the Holders. The following events or
circumstances may result in the filing of a registration statement being
detrimental to the Company and its shareholders: a pending material
acquisition, merger or sale or purchase of assets, pending or threatened
material litigation, pending or threatened material regulatory or
governmental action, pending material change in the business, prospects,
condition (financial or other) or properties of the Company. The foregoing
list is for illustrative purposes only and is not meant to be exclusive.
(c) The registration statement filed pursuant to this
Section 6.2 may include other securities of the Company (i) which are held
by persons who, by virtue of agreements with the Company, are entitled to
include their securities in any such registration, (ii) which are held by
officers and directors of the Company, or (iii) which are being offered for
the account of the Company provided, however that the number of shares of
the Holders' Registrable Securities to be included in such registration
statement which is firmly underwritten shall not be reduced unless all
other securities are first entirely excluded from the registration
statement.
6.3 Obligations of the Company. When required under this
Section 6 to effect the registration of the Registrable Securities, the
Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to the Registrable Securities and use its best efforts to
cause such registration statement to become effective, and keep such
registration statement effective until the earlier of; (i) the second
anniversary of the date hereof or (ii) until all such Registrable
Securities have been sold are eligible to be sold pursuant to Rule 144;
provided that if, during the period the registration statement is required
to be kept effective, the Company delivers a certificate, as per Section
6.2(b), stating that, in the good faith judgment of the Board of Directors
of the Company, it would be seriously detrimental to the Company and its
shareholders for such registration statement to be kept effective during a
specified period of
7
<PAGE>
time (the "Blackout Period"), then the Company shall not be obligated to
keep such registration statement effective for a period of not more than
thirty (30) days, and the Holders of the Registrable Securities covered by
the Registration Statement shall not sell any of their Registrable
Securities covered by the Registration Statement, during such Blackout
Period. The Company shall not utilize this right more than once in any
twelve (12) month period. After the termination of such Blackout Period,
the Company shall file an amendment to such registration statement or a new
registration statement with respect to the unsold portion of the
Registrable Securities included in the original registration statement and
shall keep such amendment or new registration statement effective until the
earlier of; (i) the second anniversary of the date hereof, or (ii) until
all such Registrable Securities have been sold or are eligible to be sold
pursuant to Rule 144.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders whose Registrable Securities are
covered by the Registration Statement such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities
owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders whose Registrable Securities are covered by the
Registration Statement; provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or
to file a general consent to service of process in any such states or
jurisdictions.
(e) Notify the Holders whose Registrable Securities are
covered by the Registration Statement at any time when a prospectus
relating thereto is required to be delivered under the Act of the happening
of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing.
(f) Use its best efforts to furnish, at the request of the
Holders whose Registrable Securities are covered by the Registration
Statement, on the date that such Registrable Securities are delivered to
the underwriters for sale in connection with a registration pursuant to
this Section 6, if such securities are being sold through underwriters, or,
if such securities are not being sold through underwriters, on the date
that the registration statement with respect to such securities becomes
effective, (i) an opinion, dated such date,
8
<PAGE>
of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters
in an underwritten public offering, addressed to the underwriters, if any,
and to the Holders whose Registrable Securities are covered by the
Registration Statement and (ii) a letter dated such date, from the
independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to the Holders whose Registrable
Securities are covered by the Registration Statement.
6.4 Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this
Section 6 with respect to the Registrable Securities of the Holders whose
Registrable Securities are covered by the Registration Statement that each
of such Holders shall furnish to the Company such information regarding
itself, the Registrable Securities held by it, and the intended method of
disposition of such securities as shall be reasonably required to effect
the registration of such Holder's Registrable Securities.
6.5 Expenses of Registration. All expenses incurred in
connection with registrations, filings or qualifications pursuant to
Section 6.2, including (without limitation) all registration, filing and
qualification fees, printers' and accounting fees, fees and disbursements
of counsel for the Company, and the reasonable fees and disbursements of
one counsel for the Holders whose Registrable Securities are covered by the
Registration Statement shall be borne by the Company.
6.6 Delay of Registration. The Holders shall not have any right
to obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect
to the interpretation or implementation of this Section 6.
6.7 Indemnification. In the event any Registrable Securities
are included in a registration statement under this Section 6:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless the Holder whose Registrable Securities are
covered by the Registration Statement, any underwriter (as defined in the
Act) for such Holders and each person, if any, who controls such Holders or
underwriter within the meaning of the Act or the 1934 Act, against any
losses, claims, damages, or liabilities (joint or several) to which they
may become subject under the Act or the 1934 Act, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement or
alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact
9
<PAGE>
required to be stated therein, or necessary to make the statements therein
not misleading, or (iii) any violation or alleged violation by the Company
of the Act, the 1934 Act, or any rule or regulation promulgated under the
Act or the 1934 Act; and the Company will pay to such Holders, and each
such underwriter or controlling person any legal or other expenses
reasonably incurred by them in connection with investigating or defending
any such loss, claim, damage, liability, or action; provided, however, that
the indemnity agreement contained in this Section 6.7 shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld or delayed), nor shall
the Company be liable in any such case for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such
registration by such Holders, or any such underwriter or controlling
person.
(b) To the extent permitted by law, each Holder whose
Registrable Securities are covered by the Registration Statement will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any,
who controls the Company within the meaning of the Act, any underwriter,
and any controlling person of any such underwriter, against any losses,
claims, damages, or liabilities (joint or several) to which any of the
foregoing persons may become subject, under the Act, or the 1934 Act,
insofar as such losses, claims, damages, or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and such
Holder will pay any legal or other expenses reasonably incurred by any
person intended to be indemnified pursuant to this Section 6.7, in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement
contained in this Section 6.7 shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability or action if such settlement is
effected without the consent of such Holder, which consent shall not be
unreasonably withheld; provided that, in no event shall any indemnity under
this Section 6.7 exceed the gross proceeds from the offering received by
such Holder.
(c) Promptly after receipt by an indemnified party under
this Section 6.7 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section
6.7, deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires, jointly with any
other indemnifying party similarly noticed, to assume the defense thereof
with counsel mutually satisfactory to the parties; provided, however, that
an indemnified party (together with all other indemnified parties which may
be represented without conflict by one counsel) shall have the right to
retain one separate counsel, with the fees and expenses to be paid by the
indemnifying party,
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if representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend
such action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 6.7, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under
this Section 6.7.
(d) If the indemnification provided for in this Section 6.7
is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage, or
expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such loss,
liability, claim, damage, or expense in such proportion as is appropriate
to reflect the relative fault of the indemnifying party on the one hand and
of the indemnified party on the other in connection with the statements or
omissions that resulted in such loss, liability, claim, damage, or expense
as well as any other relevant equitable considerations. The relative fault
of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or
omission.
(e) The obligations of the Company and Holders under this
Section 6.7 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 6, and otherwise.
6.8 Assignment of Registration Rights. The right to have the
Company register Registrable Securities pursuant to this Section 6 may not
be assigned; provided, however, that (i) any heir or the estate of an
Investor which acquires the Registrable Securities from such Investor by
will or intestate succession shall be entitled to have the Company register
the Registrable Securities pursuant to this Section 6 (provided that such
heirs or such estate shall have a single attorney in fact for the purpose
of exercising any rights, receiving any notices or taking any action under
this Section 6); (ii) any individual Investor may sell, assign or transfer
Registrable Securities to his or her spouse or children or to a trust
established for the benefit of his or her spouse, children or himself or
herself, and such transferee shall be entitled to have the Company register
the Registrable Securities pursuant to this Section 6; and (iii) such right
may be assigned by a Holder to a permitted transferee or assignee of such
securities who, after such assignment or transfer, holds at least 20,000
shares of Registrable Securities (subject to appropriate adjustment for
stock splits, stock dividends, combinations and other recapitalizations)
provided, (A) the Company is,
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within a reasonable time after such transfer, furnished with written notice
of the name and address of such transferee or assignee and the securities
with respect to which such registration rights are being assigned; (B) such
transferee or assignee agrees in writing to be bound by and subject to the
terms and conditions of this Agreement, including without limitation the
provision of Sections 6.9 and 6.10 hereof; and (C) such assignment shall be
effective only if immediately following such transfer the further
disposition of such securities by the transferee or assignee is restricted
under the Act.
6.9 "Lock-Up" Agreement. Each Investor hereby agrees that, for
a period of six months from the Initial Closing, it shall not, unless
expressly agreed to in writing by the Company, directly or indirectly,
sell, offer to sell, contract to sell (including, without limitation, any
short sale), grant any option to purchase or otherwise transfer or dispose
of (other than to donees who agree to be similarly bound) the Registrable
Securities included in such registration. Notwithstanding the foregoing,
Investors may engage in private resales of the registrable securities
pursuant to Section 4(2) of the Act and Regulation D promulgated
thereunder. The "Lock-Up" Agreement contained in this Section 6.9 shall
automatically terminate upon the public announcement of any of the
following: (i) the acquisition of the Company by another entity by means
of any transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation but, excluding any
merger effected exclusively for the purpose of changing the domicile of the
Company); or (ii) a sale of all or substantially all of the assets of the
Company; unless the shareholders of record as constituted immediately prior
to such acquisition or sale will, immediately after such acquisition or
sale (by virtue of securities issued as consideration for the Company's
acquisition or sale or otherwise) hold at least 51% of the voting power of
the surviving or acquiring entity.
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable
Securities of the Investors (and the shares or securities of every other
person subject to the foregoing restriction) until the end of such period.
6.10 "Market Stand-Off" Agreement. Each Holder hereby agrees
that, during a reasonable period of duration specified by the Company and
an underwriter of common stock or other securities of the Company,
following the effective date of a registration statement of the Company
filed under the Act, it shall not, to the extent reasonably requested by
the Company and such underwriter, directly or indirectly sell, offer to
sell, contract to sell (including, without limitation, any short sale),
grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any securities of the
Company held by it at any time during such period except common stock
included in such registration. The Company shall, at the time of such
offering promptly give each Holder written notice of such registration and
upon the written request of each Holder, the Company shall cause to be
registered under the Act all of the Registrable Securities that each such
Holder has requested to be registered provided,
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however, that if the total amount of securities, including Registrable
Securities, requested by Holders to be included in such offering exceeds
the amount of securities sold other than by the Company that the
underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in
the offering only that number of such securities, including Registrable
Securities, which the underwriters determine in their sole discretion will
not jeopardize the success of the offering (the securities so included to
be apportioned pro rata among the Holders according to the total amount of
securities entitled to be included therein owned by each Holder or in such
other proportions as shall mutually be agreed to by such selling Holders).
7. Miscellaneous.
7.1 Survival of Warranties. The warranties, representations and
covenants of the Company and each Investor contained in or made pursuant to
this Agreement shall survive the execution and delivery of this Agreement
and the Closing and shall in no way be affected by any investigation of the
subject matter thereof made by or on behalf of the Investors or the
Company.
7.2 Successors and Assigns. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of the
parties (including transferees of any shares of Common Stock sold
hereunder). Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations, or liabilities
under or by reason of this Agreement, except as expressly provided in this
Agreement.
7.3 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of New York without regard to the
principles of conflicts or choice of law.
7.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.5 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.6 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be
deemed effectively given upon personal delivery to the party to be notified
or upon deposit with the United States Post Office, by registered or
certified mail, postage prepaid and addressed to the party to be notified
at the address indicated for such party on the signature page hereof in the
case of the
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Company and on Schedule 1 in the case of each Investor, or at such other
address as such party may designate by ten (10) days' advance written
notice to the other parties.
7.7 Finder's Fee. Each party represents that it neither is nor
will be obligated for any finders' fee or commission in connection with
this transaction. Each Investor agrees to indemnify and to hold harmless
the Company from any liability for any commission or compensation in the
nature of a finders' fee (and the costs and expenses of defending against
such liability or asserted liability) for which such Investor or any of its
officers, partners, employees, or representatives is responsible.
The Company agrees to indemnify and hold harmless the Investors
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such
liability or asserted liability) for which the Company or any of its
officers, employees or representatives is responsible.
7.8 Attorney's Fees. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the
prevailing party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements in addition to any other relief to which such party
may be entitled. The Company shall pay all attorney's fees, costs and
necessary disbursements incurred by the Investors, commencing the date
hereof, in connection with the consummation of the transactions as
contemplated by Section 1 hereof.
7.9 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the
holders of a majority of the Common Stock sold hereunder. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon
each holder of any securities purchased under this Agreement at the time
outstanding, each future holder of all such securities, and the Company.
7.10 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable
in accordance with its terms.
7.11 Entire Agreement. This Agreement and the documents referred
to herein constitute the entire agreement among the parties and no party
shall be liable or bound to any other party in any manner by any
warranties, representations, or covenants except as specifically set forth
herein or therein.
[Remainder of this page intentionally left blank]
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IN WITNESS WHEREOF, the parties have executed this
Common Stock Purchase Agreement as of the date first above written.
FAXSAV INCORPORATED
By:
------------------------------
Name:
Title:
Address: 399 Thornhall Street
Edison, NJ 08837
INVESTOR:
By:
------------------------------------
Name:
----------------------------------
(please print)
Title (if a
Corporation or
a Partnership):
------------------------
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EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-3 of our
report dated March 18, 1997, on our audits of the financial statements and
financial statement schedule of FaxSav Incorporated (formerly Digitran
Corporation). We also consent to the reference to our firm under the captions
"Experts".
Coopers & Lybrand, L.L.P.
January 8, 1998
Parsippany, New Jersey
