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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 21, 1999
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.
GARY N. PAPILSKY, 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 MAXIMUM PROPOSED MAXIMUM
TITLE OF SHARES TO BE AGGREGATE PRICE PER AGGREGATE OFFERING AMOUNT OF REGISTRATION
REGISTERED AMOUNT TO BE REGISTERED UNIT(1) PRICE(2) FEE
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<S> <C> <C> <C> <C>
Common Stock, $.01 par
value...................... 709,677 $6.125 $434,677.63 $1,208.40
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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 13, 1999.
(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 SECTION 8(a), MAY
DETERMINE.
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PROSPECTUS
709,677 SHARES
FAXSAV INCORPORATED
COMMON STOCK
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This prospectus relates to the resale, which is not being underwritten,
of up to 709,677 shares of our common stock held by a current stockholder and
warrantholder.
The prices at which the stockholder may sell the shares will be determined
by the prevailing market price for the shares or in negotiated transactions. We
will not receive any of the proceeds from the sale of the shares.
Our common stock is quoted on the Nasdaq National Market under the symbol
FAXX. On January 20, 1999, the last reported sales price of our common stock was
$6.375.
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THE SHARES OF COMMON STOCK OF FAXSAV OFFERED OR SOLD UNDER THIS PROSPECTUS
INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 4.
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Neither the Securities and Exchange Commission nor any state commission has
approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
The date of this prospectus is January 21, 1999
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We have not authorized any person to make a statement that differs from
what is in this prospectus. If any person does make a statement that differs
from what is in this prospectus, you should not rely on it. This prospectus is
not an offer to sell, nor is it seeking an offer to buy, these securities in any
state in which the offer or sale is not permitted. The information in this
prospectus is complete and accurate as of its date, but the information may
change after that date.
TABLE OF CONTENTS
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PAGE
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WHERE YOU CAN FIND MORE INFORMATION...............................................................................2
FORWARD-LOOKING INFORMATION.......................................................................................3
THE COMPANY.......................................................................................................3
RISK FACTORS......................................................................................................4
USE OF PROCEEDS..................................................................................................11
PLAN OF DISTRIBUTION.............................................................................................12
SELLING STOCKHOLDER..............................................................................................14
LEGAL MATTERS....................................................................................................14
EXPERTS..........................................................................................................14
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
from the SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information filed with the
SEC will update and supersede this information. We incorporate by reference the
documents listed below and any further filings made with the SEC under Section
13a, 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until this
offering is completed.
(1) Our Annual Report on Form 10-K for the fiscal year ended December 31,
1997;
(2) Our Quarterly Reports on Form 10-Q for the quarters ended March 31,
1998, June 30, 1998 and September 30, 1998;
(3) Our Proxy Statement in connection with our Annual Meeting of the
Stockholders held on May 28, 1998; and
(4) Our Current Report on Form 8-K filed on September 23, 1998.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Peter S. Macaluso
Vice President and Chief Financial Officer
FaxSav Incorporated
399 Thornall Street
Edison, N.J. 08837
732-906-2000
You should rely only on the information incorporated by reference or
provided in this prospectus or the prospectus supplement. We have authorized no
one to provide you with different information. We are not making an offer of
these securities in any state where the offer is not permitted. You should not
assume that the information in this prospectus or the prospectus supplement is
accurate as of any date other than on the front of this document.
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FORWARD-LOOKING INFORMATION
This prospectus includes "forward-looking statements" regarding future
events or our future performance within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. All statements other than
statements of historical facts included in this prospectus or incorporated
herein by reference regarding our financial position and business strategy may
constitute forward-looking statements. Although we believe that the expectations
reflected in such forward-looking statements are reasonable, we can not
guarantee that such expectations will prove to be correct. Important factors
that could cause actual results to differ materially from our expectations
("cautionary statements") are listed in this prospectus, and they include the
forward-looking statements under "risk factors." All subsequent written and oral
forward-looking statements attributable to us or persons acting on our behalf
are expressly qualified in their entirety by the cautionary statements.
THE COMPANY
FaxSav was incorporated in Delaware in November 1989 under the name
Digitran Corporation and changed its name to FaxSav Incorporated in February
1996. Our principal executive offices are located at 399 Thornall Street,
Edison, New Jersey 08837. Our telephone number is (732) 906-2000.
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RISK FACTORS
INVESTING IN THE SHARES OF COMMON STOCK INVOLVES RISKS AND YOU SHOULD NOT
INVEST UNLESS YOU CAN AFFORD TO LOSE THE ENTIRE AMOUNT OF YOUR INVESTMENT. YOU
SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS AND OTHER INFORMATION IN THIS
PROSPECTUS BEFORE PURCHASING ANY SHARES OF COMMON STOCK.
HISTORY OF OPERATING LOSSES; ACCUMULATED DEFICIT
From our inception in 1989 through the nine month period ended September
30, 1998, we have experienced significant operating losses. We incurred
operating losses of $4.1 million, $7.5 million and $7.1 million during the years
ended December 31, 1995, 1996 and 1997, respectively, and $6.0 million during
the nine months ended September 30, 1998. We currently anticipate that we will
have additional operating losses as we attempt to expand our business and we may
not have positive operating income in the future. As of September 30, 1998, we
had an accumulated deficit of $38.1 million.
Since inception, we have incurred substantial costs to develop and enhance
our technology and to create, introduce and enhance our service and product
offerings. We intend to continue these efforts and, in addition, to increase our
marketing spending. We recently announced a new marketing campaign which will
involve significant expenditures by us, including the hiring of an outside
advertising agency. There can be no assurance that our new marketing campaign
will be successful or that it will result in any increase in revenues.
We generated net operating loss ("NOL") carryforwards for income tax
purposes of approximately $30.0 million through December 31, 1997. These NOL
carryforwards have been recorded as a deferred tax asset of approximately $9.5
million. Based on our history of operating losses and other presently known
factors, management has determined that it is more likely than not that we will
be unable to generate sufficient taxable income prior to the expiration of these
NOL carryforwards in order to receive the benefit of them and has accordingly
reduced our deferred tax assets to zero with a full valuation allowance.
INTENSE COMPETITION
The market for facsimile transmission services is intensely competitive and
the industry is characterized by low barriers to entry. We expect that
competition will intensify in the future. We believe that our ability to compete
successfully will depend upon a number of factors, including market presence;
the capacity, reliability and security of our network infrastructure; the
pricing policies of our competitors and suppliers; the timing of introductions
of new services and service enhancements by us and our competitors; and industry
and general economic trends.
Our current and future competitors generally fall into the following
groups: (i) telecommunications companies, such as AT&T, MCI WorldCom, Sprint and
the regional Bell operating companies, and telecommunications resellers; (ii)
Internet service providers, such as Uunet Technologies, Inc., a subsidiary of
MCI WorldCom, Inc., and NETCOM On-Line Communications, Inc., (iii) on-line
services providers, such as Microsoft Corporation and America Online, Inc. and
(iv) 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, technological and
personnel resources than we do. 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
we can. Further, the foundation of our telephony network infrastructure consists
of the right to use the telecommunications lines of several of the
above-mentioned long distance carriers, including MCI WorldCom. There can be no
assurance that these companies will not discontinue or otherwise change their
relationships with us in a manner that would have a material adverse effect upon
our 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 our 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 our 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
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result in price reductions and could result in reduced gross margins and erosion
of our market share, any of which would have a material adverse effect on our
business, financial condition and results of operations. There can be no
assurance that we will be able to compete successfully against current or future
competitors or that competitive pressures will not have a material adverse
effect on our 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. The five-year phase-in period began 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,
we will face increased competition for our international fax services which may
have a material adverse effect on our business, financial condition or results
of operations.
POSSIBLE DELISTING FROM NASDAQ
Our common stock is currently traded on the Nasdaq National Market
("Nasdaq"). In order to continue to trade on Nasdaq, Nasdaq generally requires,
among other things, that we maintain at least $4.0 million in net tangible
assets. In the past, we have not been in compliance with this requirement. We
believe that we are currently in compliance with Nasdaq's requirements. However,
if in the future we are unable to satisfy Nasdaq's requirements, our securities
may be delisted from Nasdaq. There can be no assurance that our common stock
will not be delisted, which would materially affect your ability to buy or sell
shares of our common stock.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FINANCING; DILUTION
We believe that our current cash and cash equivalents will be sufficient to
meet our presently anticipated cash needs for working capital and our capital
expenditure requirements through at least December 31, 1999. However, our cash
requirements may vary materially from those now planned as a result of
unforeseen changes that could consume a significant portion of our available
resources before such time. To the extent that funds expected to be generated
from our operations are insufficient to meet current or planned operating
requirements or to maintain a Nasdaq listing, we will seek to obtain additional
funds through bank facilities, equity or debt financing, collaborative or other
arrangements with corporate partners and from other sources. See "--Possible
Delisting from Nasdaq." Additional funding may not be available when needed or
on terms acceptable to us, which could have a material adverse effect on our
business, financial condition and results of operations. If adequate funds are
not available, we may be required to delay or to eliminate certain expenditures
or to license to third parties the rights to commercialize technologies that we
would otherwise seek to develop ourselves. In addition, in the event that we
obtain any additional funding, such financings may have a dilutive effect on the
holders of our securities.
LIMITED PROTECTION OF INTELLECTUAL PROPERTY RIGHTS; RISK OF THIRD PARTY CLAIMS
OF INFRINGEMENT
Our success is dependent upon our proprietary technology. We rely primarily
on a combination of contract, copyright and trademark law, trade secrets,
confidentiality agreements and contractual provisions to protect our proprietary
rights. We were granted a patent related to our faxSAV Connector and have a
patent application pending for our "e-mail Stamps" security technology
incorporated into our 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 our 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 our know-how. Despite our efforts to protect our proprietary rights,
unauthorized parties may attempt to copy aspects of our services or to obtain
and use information that we regard as proprietary. In addition, the laws of some
foreign countries do not protect our proprietary rights to the same extent as do
the laws of the United States. There can be no assurance that the steps taken by
us to protect our proprietary rights will be adequate or that our competitors
will not independently develop technologies that are substantially equivalent or
superior to our technologies.
There can be no assurance that other third parties will not assert
infringement claims against us in the future. Patents have been granted recently
on fundamental technologies in the communications and desktop software areas,
and patents may issue which relate to fundamental technologies incorporated in
our services. As patent applications in the United States are not publicly
disclosed until the patent issues, applications may have been filed which, if
issued as patents, could relate to our services. We could incur substantial
costs and diversion of management
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resources with respect to the defense of any claims that we have infringed upon
the proprietary rights of others, which costs and diversion could have a
material adverse effect on our business, financial condition and results of
operations. Furthermore, parties making such claims could secure a judgment
awarding substantial damages, as well as injunctive or other equitable relief,
which could effectively block our ability to license and sell our services in
the United States or abroad. Any such judgment could have a material adverse
effect on our business, financial condition and results of operations. In the
event a claim relating to proprietary technology or information is asserted
against us, we may seek licenses to such intellectual property. There can be no
assurance, however, that licenses could be obtained on terms acceptable to us,
or at all. The failure to obtain any necessary licenses or other rights could
have a material adverse effect on our business, financial condition and results
of operations.
QUARTERLY FLUCTUATIONS; POSSIBLE VOLATILITY OF STOCK PRICE
We may experience significant quarter to quarter fluctuations in our
results of operations, which may result in volatility in the price of our common
stock. Quarterly results of operations may fluctuate as a result of a variety of
factors, including demand for our services, the introduction of new services and
service enhancements by us or our 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. Our revenues are difficult to forecast.
Shortfalls in revenues may adversely and disproportionately affect our results
of operations because a high percentage of our operating expenses are relatively
fixed, and planned expenditures, such as the anticipated expansion of our
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 our common stock.
Accordingly, we believe 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 we
will be profitable in any future quarter. Due to the foregoing factors, it is
likely that in one or more future quarters our 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 our common stock.
DEPENDENCE ON NETWORK INFRASTRUCTURE; NO ASSURANCE OF ADDITIONAL
INTERNET-CAPABLE NODE DEPLOYMENT
Our future success will depend in part upon the capacity, reliability and
security of our network infrastructure and in part upon our ability to expand
the deployment of an international network of Internet-capable facsimile nodes.
We must continue to expand and adapt our network infrastructure as the number of
customers and the volume of traffic they wish to transmit increases. The
expansion and adaptation of our network infrastructure will require substantial
financial, operational and management resources. There can be no assurance that
we will be able to expand or adapt our 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 we will be able to deploy
additional contemplated Internet-capable facsimile nodes on a timely basis, at a
commercially reasonable cost, or at all. Any failure to expand our network
infrastructure on a timely basis, to adapt it to changing customer requirements
or evolving industry standards or to complete the development of the
contemplated Internet-capable facsimile node infrastructure on a timely basis
would have a material adverse effect on our business, financial condition and
results of operations. Further, there can be no assurance that we will be able
to satisfy the regulatory requirements in each of the countries currently
targeted for node deployment, which may prevent us from installing
Internet-capable facsimile nodes in such countries and may have a material
adverse effect on our business, financial condition and results of operations.
DEPENDENCE ON THE INTERNET AS A LOW-COST FACSIMILE TRANSMISSION MEDIUM; NO
ASSURANCE OF INCREASED MARKET ACCEPTANCE
We believe that our future success will depend in part upon our ability to
significantly expand our base of Internet-capable nodes and route more of our
customers' traffic through the Internet. Our 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. We access the
Internet from our Internet-
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capable nodes by dedicated connection to third party internet service providers.
We pay fixed monthly fees for such Internet access, regardless of our usage or
the volume of our 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, our business, financial
condition and results of operations would be materially and adversely affected.
In addition, our future success is dependent upon the increased acceptance by
potential customers of the Internet as the preferred medium for transmission of
documents. There can be no assurance that such market acceptance shall continue
to increase. Lack of increased market acceptance would materially and adversely
affect our business, financial condition and results of operations.
NO ASSURANCE OF SUCCESSFUL MANAGEMENT OF GROWTH
We have rapidly and significantly expanded our operations and anticipate
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 our expenses. Our inability to promptly address and respond to these
circumstances could have a material adverse effect on our 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 we provide or reduce the cost of existing
products or services, any of which could enable our existing or potential
customers to fulfill their fax communications needs more cost efficiently. There
can be no assurance that we 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 our services noncompetitive.
Our inability 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 our services
noncompetitive would have a material adverse effect on our business, financial
condition and results of operations.
RISK OF SYSTEM FAILURE; SECURITY RISKS
Our operations are dependent on our ability to protect our network from
interruption by damage from fire, earthquake, power loss, telecommunications
failure, unauthorized entry, computer viruses or other events beyond our
control. Most of our current computer hardware and switching equipment,
including our processing equipment, is currently located at three sites. There
can be no assurance that our 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, our infrastructure may also be vulnerable to computer
viruses, hackers or similar disruptive problems caused by our 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 our
services. This may result in significant liability to us and also may deter
potential customers from using our services. Any damage, failure or security
breach that causes interruptions or data loss in our operations or in the
computer systems of our customers could have a material adverse effect on our
business, financial condition and results of operations.
DEPENDENCE UPON SUPPLIERS; SOLE AND LIMITED SOURCES OF SUPPLY
We rely on third parties to supply key components of our network
infrastructure, including long distance telecommunications services and
telecommunications node equipment, many of which are available only from sole or
limited sources. MCI WorldCom is our primary provider of long distance
telecommunications services. We have from time-to-time experienced partial
interruptions of service from our telecommunications carriers which have
temporarily prevented customers in limited geographical areas from reaching the
FaxSav network. There can be no
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assurance that we will not experience partial or complete service interruptions
in the future. There can be no assurance that MCI WorldCom and our other
telecommunications providers will continue to provide long distance services to
us at attractive rates, or at all, or that we 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 we require. 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 our
business, financial condition and results of operations.
All of the faxboards used in our telecommunications nodes are supplied by
Brooktrout Technology, Inc. We purchase Brooktrout faxboards on a non-exclusive
basis pursuant to purchase orders placed from time-to-time, carry a limited
inventory of faxboards and have no guaranteed supply arrangement with
Brooktrout. In addition to faxboards, many of the routers, switches and other
hardware components used in our network infrastructure are supplied by sole or
limited sources on a non-exclusive, purchase order basis. There can be no
assurance that Brooktrout or our other suppliers will not enter into exclusive
arrangements with our competitors, or cease selling these components to us at
commercially reasonable prices, or at all. The anticipated expansion of our
network infrastructure is expected to place a significant demand on our
suppliers, some of which have limited resources and production capacity. In
addition, certain of our suppliers, in turn, rely on sole or limited sources of
supply for components included in their products. Should our suppliers fail to
adjust to meet such increasing demand, they may be unable to continue to supply
components and products in the quantities and quality and at the times required
by us, or at all. Our 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 our network
infrastructure or in our inability to properly maintain the existing network
infrastructure, which would have a material adverse effect on our business,
financial condition and results of operations.
RISK OF SOFTWARE DEFECTS OR DEVELOPMENT DELAYS
Software-based services and equipment, such as our 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 us and by current and potential customers,
errors will not be found in such software or other releases after commencement
of commercial shipments, or that we 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 our business,
financial condition and results of operations.
DEPENDENCE ON KEY PERSONNEL
Our future performance depends in significant part upon the continued
service of our 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 we can retain our key technical,
sales and managerial employees or that we can attract, assimilate or retain
other highly qualified technical, sales and managerial personnel in the future.
RELIANCE ON INTERNATIONAL STRATEGIC ALLIANCES; RISKS ASSOCIATED WITH
INTERNATIONAL OPERATIONS
We have established and intend to expand 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 we will be able to establish additional strategic alliances or to maintain
such strategic alliances. Our success in expanding our international customer
base depends not only on the formation of additional strategic alliances but
also on the success of these partners and their ability to market our services.
The failure to maintain such strategic alliances or the failure of these
partners to successfully develop and sustain a market for our services will have
a material adverse effect on our ability to expand our international customer
base, which could have a material adverse effect on our business, financial
condition and results of operations.
In 1997, we derived approximately $2.3 million, or 13.2% of our total
revenues, from customers outside of the United States. We expect that such
revenues will represent an increasing percentage of our total revenues in the
future. Risks inherent in our international business activities generally
include foreign currency exchange risk, unexpected changes in regulatory
requirements, tariffs and other trade barriers, costs of localizing products for
foreign countries, lack of acceptance of localized products in foreign markets,
longer accounts receivable payment cycles, difficulties in managing
international operations, potentially adverse tax consequences, and the burdens
of
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complying with a wide variety of foreign laws. There can be no assurance that
such factors will not have a material adverse effect on our future international
revenues and, consequently, on our 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 a year, computer systems and/or
software used by many companies may need to be upgraded to comply with such
"Year 2000" requirements or risk system failure or miscalculations causing
disruptions of normal business activities.
STATE OF READINESS. We have conducted a study of the Year 2000 readiness of
our information technology ("IT") systems, including our computing and
networking systems, and our non-IT systems. Our study consisted of (i)
contacting third-party vendors and licensors of material hardware, software and
services that are both directly and indirectly related to the delivery of the
our faxSAV for internet suite of services and the faxSAV Connector; (ii)
contacting vendors of material non-IT systems; (iii) assessment of repair or
replacement requirements; and (iv) repair or replacement. We intend to conduct a
test our IT systems to verify the results of our study prior to the year 2000.
We have been informed by many of our vendors of material hardware and software
components of our IT systems that the products that we use are currently Year
2000 compliant. The computing systems that provide application layer services
(i.e., FaxSav customer services) within the FaxSav network are based upon some
variant of the Unix operating system, which adequately represents dates beyond
the year 2000. Many of the computing systems that support the internal
operations of our business have the similar capacity to represent dates beyond
the year 2000. In addition, for all of our internal accounting applications, we
have purchased new accounting system software that the manufacturer specifies as
Year 2000 compliant. We will require vendors of our other material hardware and
software components of our IT systems to provide assurances of their Year 2000
compliance, and we plan to complete this process during the first half of 1999.
We will also seek assurances of Year 2000 compliance from providers of our
material non-IT systems.
COSTS. To date, we have not incurred any material expenditures in
connection with identifying or evaluating Year 2000 compliance issues. Most of
our expenses have related to, and are expected to continue to relate to, the
operating costs associated with time spent by employees in the evaluation
process and Year 2000 compliance matters generally. Our expected cost to
implement the new accounting software mentioned above is approximately $0.2
million.
RISKS. We are not currently aware of any Year 2000 compliance problems
relating to the faxSAV for internet suite of services, the faxSAV Connector or
our other IT or non-IT systems that would have a material adverse effect on our
business, financial condition and results of operations, without taking into
account our efforts to avoid or fix such problems. There can be no assurance
that our software contains all necessary date code changes or that all problems
can be identified by our study and subsequent testing. Compliance with Year 2000
requirements may disrupt our ability to continue developing and marketing
facsimile transmission products and services. The failure to adequately address
Year 2000 compliance issues in our products and services, and in our IT and
non-IT systems could result in claims of mismanagement, misrepresentation or
breach of contract and related litigation, which could be costly and
time-consuming to defend.
In addition, there can be no assurance that governmental agencies, utility
companies, Internet access companies, third-party service providers and others
outside of our control will be Year 2000 compliant. The failure by such entities
to be Year 2000 compliant could result in a systemic failure beyond our control,
such as a prolonged Internet, telecommunications or electrical failure, which
could also prevent us from delivering services to our customers, which could
have a material adverse effect on our business, financial condition and results
of operations.
CONTINGENCY PLAN. As discussed above, we intend to conduct further tests of
our Year 2000 compliance to confirm the results of our study, and have not yet
developed any contingency plans. The results of our tests and the responses
received from third-party vendors and service providers will be taken into
account in determining the nature and extent of any contingency plans.
9
<PAGE>
GOVERNMENT REGULATION
We are subject to regulation by various state public service and public
utility commissions and by various international regulatory authorities. We are
licensed by the FCC as an authorized telecommunications company and are
classified as a "non-dominant interexchange carrier." Generally, the FCC has
chosen not to exercise 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 us and to change our regulatory
classification. There can be no assurance that the FCC will not change our
regulatory classification or otherwise subject us to more burdensome regulatory
requirements.
In connection with the deployment of Internet-capable nodes in countries
throughout the world, we are required to satisfy a variety of foreign regulatory
requirements. We intend 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 we 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 us 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 our
business, operating results and financial condition.
Our nodes and 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. We have the authority to export such encryption technology except to
Cuba, Iran, Iraq, Libya, North Korea and Rwanda. 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 our ability to distribute our services
outside of the United States or electronically. While we take precautions
against unlawful exportation of our software, the global nature of the Internet
makes it virtually impossible to effectively control the distribution of our
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 our services, or new legislation or
regulation could have a material adverse effect on our business, financial
condition and results of operations.
SHARES ELIGIBLE FOR FUTURE SALE; EFFECT ON ABILITY TO RAISE CAPITAL
The market price of our common stock could drop as a result of sales of
substantial amounts of common stock in the public market during and after this
offering, or the perception that such sales could occur. In addition to the
shares being sold pursuant to this registration statement, additional
registration statements are in effect covering the sale of up to 2,000,000
shares of our common stock. Such a price drop may make it more difficult for us
to raise the capital necessary to fund our future operations by selling common
stock. As of December 27, 1998, without taking into account shares of common
stock issued upon exercise of stock options, warrants or other rights to acquire
common stock after such date, we had outstanding 13,259,042 shares of common
stock. The shares being sold pursuant to this registration statement 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 our "affiliates", 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 our common stock (approximately 132,590 shares)
or the average weekly trading volume in our common stock on Nasdaq 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 us. 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 us to register their shares under the Securities Act in the future. We are
required to bear the expenses of all such required registrations (except
underwriting discounts and commissions). We are required to use our best efforts
to effect such registrations, subject to certain conditions and limitations.
10
<PAGE>
ANTITAKEOVER CONSIDERATIONS
Our Sixth Amended and Restated 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 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, we will
be subject to the provisions of Section 203 of the Delaware General Corporation
Law, which will generally prohibit us 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 our By-laws, as amended 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 our control or management, including transactions in which
stockholders might otherwise receive a premium for their shares over then
current market prices.
NO DIVIDENDS
We have never paid any cash dividends on our common stock and do not intend
to pay any cash dividends in the foreseeable future.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares. All proceeds
will be received by the selling stockholder. See "Selling Stockholder."
11
<PAGE>
PLAN OF DISTRIBUTION
FaxSav is registering all 709,677 shares on behalf of the Selling
Stockholder. All of the shares either originally were issued by us or will be
issued upon exercise of warrants to acquire shares of our common stock in
connection with the recent purchase by The Tail Wind Fund Ltd. of 645,161 shares
of our common stock and warrants to purchase 64,516 shares of our common stock
pursuant to a Purchase Agreement. Should FaxSav sell common stock or rights to
acquire common stock within a period ending the later of (a) December 28, 1999,
and (b) nine months after the effective date of this registration statement at a
price less than $5.425 per share, FaxSav will be required to issue additional
shares to Tail Wind so that the purchase price of the shares that Tail Wind has
purchased is reduced to the lower price. The above provision does not apply to
(a) sales of fewer than 50,000 shares of common stock in any one transaction or
related transactions, subject to a limit of 150,000 shares pursuant to this
exclusion, (b) sales of shares by FaxSav upon conversion or exercise of any
convertible securities, options or warrants outstanding 30 days prior to the
date of the Purchase Agreement, if the conversion price was fixed as of December
24, 1998, and (c) sales of shares by FaxSav pursuant to the provisions of any
stockholder-approved employee benefit or incentive plan.
FaxSav will receive no proceeds from this offering. The Selling Stockholder
named in the table below or pledgees, donees, transferees or other
successors-in-interest selling shares received from the Selling Stockholder as a
gift, partnership distribution or other non-sale related transfer after the date
of this prospectus (collectively, the "Selling Stockholder") may sell the shares
from time to time. The Selling Stockholder will act independently of FaxSav in
making decisions with respect to the timing, manner and size of each sale. The
sales may be made on one or more exchanges or in the over-the-counter market or
otherwise, at prices and at terms then prevailing or at prices related to the
then current market price, or in negotiated transactions. The Selling
Stockholder may effect such transactions by selling the shares to or through
broker-dealers. The shares may be sold by one or more of, or a combination of,
the following:
- a block trade in which the broker-dealer so engaged will attempt to sell
the shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction,
- purchases by a broker-dealer as principal and resale by such
broker-dealer for its account pursuant to this prospectus,
- an exchange distribution in accordance with the rules of such exchange,
- ordinary brokerage transactions and transactions in which the broker
solicits purchasers, and
- in privately negotiated transactions.
To the extent required, this prospectus may be amended or supplemented from
time to time to describe a specific plan of distribution. In effecting sales,
broker-dealers engaged by the Selling Stockholder may arrange for other
broker-dealers to participate in the resales.
The Selling Stockholder may enter into hedging transactions with
broker-dealers in connection with distributions of the shares or otherwise. In
such transactions, broker-dealers may engage in short sales of the shares in the
course of hedging the positions they assume with the Selling Stockholder. The
Selling Stockholder also may sell shares short and redeliver the shares to close
out such short positions. The Selling Stockholder may enter into option or other
transactions with broker-dealers which require the delivery to the broker-dealer
of the shares. The broker-dealer may then resell or otherwise transfer such
shares pursuant to this prospectus. The Selling Stockholder also may loan or
pledge the shares to a broker-dealer. The broker-dealer may sell the shares so
loaned, or upon a default the broker-dealer may sell the pledged shares pursuant
to this prospectus.
Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from Selling Stockholder. Broker-dealers
or agents may also receive compensation from the purchasers of the shares for
whom they act as agents or to whom they sell as principals, or both.
Compensation as to a particular broker-dealer might be in excess of customary
commissions and will be in amounts to be negotiated in connection with the sale.
Broker-dealers or agents and any other participating broker-dealers or the
Selling Stockholder may be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act in connection with sales of the shares.
Accordingly, any such commission, discount or concession received by them and
any profit on the resale of the shares purchased by them may be deemed to be
underwriting discounts or commissions under the Securities Act.
12
<PAGE>
Because the Selling Stockholder may be deemed to be an "underwriter" within the
meaning of Section 2(11) of the Securities Act, the Selling Stockholder will be
subject to the prospectus delivery requirements of the Securities Act. In
addition, any securities covered by this prospectus which qualify for sale
pursuant to Rule 144 promulgated under the Securities Act may be sold under Rule
144 rather than pursuant to this prospectus. The Selling Stockholder has advised
FaxSav that it has not entered into any agreements, understandings or
arrangements with any underwriters or broker-dealers regarding the sale of the
securities. There is no underwriter or coordinating broker acting in connection
with the proposed sale of shares by the Selling Stockholder.
The shares will be sold only through registered or licensed brokers or
dealers if required under applicable state securities laws. 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.
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 our common stock for a period of two
business days prior to the commencement of such distribution. In addition, the
Selling Stockholder will be subject to applicable provisions of the Exchange Act
and the associated rules and regulations under the Exchange Act, including
Regulation M, which provisions may limit the timing of purchases and sales of
shares of our common stock by the Selling Stockholder. FaxSav will make copies
of this prospectus available to the Selling Stockholder and has informed it of
the need for delivery of copies of this prospectus to purchasers at or prior to
the time of any sale of the shares.
FaxSav will file a supplement to this prospectus, if required, pursuant to
Rule 424(b) under the Securities Act upon being notified by the Selling
Stockholder that any material arrangement has been entered into with a
broker-dealer for the sale of shares through a block trade, special offering,
exchange distribution or secondary distribution or a purchase by a broker or
dealer. Such supplement will disclose:
- the name of the Selling Stockholder and of the participating
broker-dealer(s),
- the number of shares involved,
- the price at which such shares were sold,
- the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable,
- that such broker-dealer(s) did not conduct any investigation to verify
the information set out or incorporated by reference in this prospectus,
and
- other facts material to the transaction.
In addition, upon being notified by the Selling Stockholder that a donee or
pledgee intends to sell more than 500 shares, FaxSav will file a supplement to
this prospectus.
FaxSav will bear all costs, expenses and fees in connection with the
registration of the shares. The Selling Stockholder will bear all commissions
and discounts, if any, attributable to the sales of the shares. The Selling
Stockholder may agree to indemnify any broker-dealer or agent that participates
in transactions involving sales of the shares against certain liabilities,
including liabilities arising under the Securities Act. FaxSav and the Selling
Stockholder have agreed to indemnify each other against certain liabilities in
connection with the offering of the shares, including liabilities arising under
the Securities Act.
13
<PAGE>
SELLING STOCKHOLDER
The following table sets forth, as of January 14, 1999, the number of
shares owned by the Selling Stockholder. The Selling Stockholder has not had a
material relationship with FaxSav within the past three years other than as a
result of the ownership of the shares or other securities of FaxSav. No estimate
can be given as to the amount of shares that will be held by the Selling
Stockholder after completion of this offering because the Selling Stockholder
may offer all or some of the shares and because there currently are no
agreements, arrangements or understandings with respect to the sale of any of
the shares. The shares offered by this prospectus may be offered from time to
time by the Selling Stockholder named below.
<TABLE>
<CAPTION>
Percent of Number of Shares
Number of Shares Outstanding Registered
Name of Selling Stockholder Beneficially Owned Shares for Sale Hereby(1)
- ------------------------------ -------------------- ------------ ------------------
<S> <C> <C> <C>
The Tail Wind Fund Ltd.(2)........ 709,677 5% 709,677
------- -------
TOTAL.................... 709,677 709,677
------- -------
------- -------
</TABLE>
(1) This registration statement also shall cover any additional shares of
common stock which become issuable in connection with the shares registered for
sale hereby by reason of any stock divided, stock split, recapitalization or
other similar transaction effected without the receipt of consideration which
results in an increase in the number of FaxSav's outstanding shares of common
stock.
(2) Includes 64,516 shares issuable upon the exercise of a Warrant.
Pursuant to a Purchase Agreement between FaxSav and Tail Wind, FaxSav may be
required to issue additional shares to Tail Wind under certain circumstances.
See "Plan of Distribution."
We have agreed to prepare and file such amendments and supplements to the
Registration Statement as may be necessary to keep this Registration Statement
effective so long as the Selling Stockholder desires to dispose of the
securities covered by this Registration Statement, or if earlier, at such time
when the Selling Stockholder could sell all of such securities under Rule
144(k).
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for
FaxSav by Brobeck, Phleger & Harrison LLP, New York, New York.
EXPERTS
The balance sheets as of December 31, 1997 and 1996 and the statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1997, incorporated by reference in this
Prospectus, have been incorporated herein, in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in accounting and auditing.
14
<PAGE>
709,677 SHARES
FAXSAV INCORPORATED
COMMON STOCK
PROSPECTUS
January 21, 1999
<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 FaxSav Incorporated in connection with the issuance and distribution of the
securities being registered hereby. All such expenses will be borne by FaxSav
Incorporated:
<TABLE>
<CAPTION>
Amount to
Be Paid
---------
<S> <C>
Nasdaq Listing Application.............................................................. $12,903
SEC Registration Fee.................................................................... 1,209
Legal Fees and Expenses................................................................. 10,000
Accounting Fees and Expenses............................................................ 10,000
Miscellaneous........................................................................... 5,888
---------
Total................................................................................... $ 40,000
---------
---------
</TABLE>
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.
FaxSav Incorporated 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 Purchase Agreement, dated December 24, 1998, between the Registrant and
The Tail Wind Fund Ltd.*
10.2 Common Stock Warrant between the Registrant and The Tail Wind Fund Ltd.,
dated December 28, 1998.*
23.1 Consent of Brobeck, Phleger & Harrison LLP (included in the opinion filed
as Exhibit 5.1).
23.2 Consent of PricewaterhouseCoopers LLP, independent accountants.*
24.1 Power of Attorney (included with signature page).
- --------------------------
* Filed herewith.
II-1
<PAGE>
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:
(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-2
<PAGE>
SIGNATURES
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 21, 1999.
FAXSAV INCORPORATED
By: /S/ THOMAS F. MURAWSKI
--------------------------------------
Thomas F. Murawski, Chairman of the
Board of Directors, President and
Chief Executive Officer
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,
this Registration Statement has been signed by the following persons in the
capacities indicated on January 21, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/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
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
------- ----------- ----
<S> <C>
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 Purchase Agreement, dated December 24, 1998, between the Registrant and The Tail Wind Fund
Ltd.*......................................................................................
10.2 Common Stock Warrant between the Registrant and The Tail Wind Fund Ltd., dated December
28, 1998*..................................................................................
23.1 Consent of Brobeck, Phleger & Harrison LLP (included in the opinion
filed as Exhibit 5.1)......................................................................
23.2 Consent of PricewaterhouseCoopers LLP, independent accountants*............................
24.1 Power of Attorney (included with signature page)...........................................
</TABLE>
- ----------------------------
* Filed herewith.
II-4
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Exhibit 5.1
January 20, 1999
FaxSav Incorporated
399 Thornall Street
Edison, New Jersey 088837
Re: FaxSav Incorporated Registration Statement on Form
S-3 for 709,677 Shares of Common Stock
Ladies and Gentlemen:
We have acted as counsel to FaxSav Incorporated, a Delaware
corporation (the "Company"), in connection with the proposed issuance and sale
by the Company of up to 709,677 shares of the Company's Common Stock (the
"Shares") pursuant to the Company's Registration Statement on Form S-3 (the
"Registration Statement") filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Act").
This opinion is being furnished in accordance with the
requirements of Item 16 of Form S-3 and Item 601(b)(5)(i) of Regulation S-K.
We have reviewed the Company's charter documents and the
corporate proceedings taken by the Company in connection with the issuance and
sale of the Shares. Based on such review, we are of the opinion that (a) 645,161
of the Shares have been duly authorized, legally issued, fully paid and
nonassessable; and (b) the remaining 64,516 Shares have been duly authorized
and, upon their purchase and sale pursuant to the terms of the Warrant Agreement
between the Company and The Tail Wind Fund Ltd., will be legally issued, fully
paid and nonassessable.
We consent to the filing of this opinion letter as Exhibit 5.1
to the Registration Statement and to the reference to this firm under the
caption "Legal Matters" in the prospectus which is part of the Registration
Statement. In giving this consent, we do not thereby admit that we are within
the category of persons whose consent is required under Section 7 of the Act,
the rules and regulations of the Securities and Exchange Commission promulgated
thereunder, or Item 509 of Regulation S-K.
This opinion letter is rendered as of the date first written
above and we disclaim any obligation to advise you of facts, circumstances,
events or developments which hereafter may be brought to our attention and which
may alter, affect or modify the opinion expressed herein. Our opinion is
expressly limited to the matters set forth above and we render no opinion,
whether by implication or otherwise, as to any other matters relating to the
Company or the Shares.
Very truly yours,
/s/ Brobeck, Phleger & Harrison LLP
------------------------------------
BROBECK, PHLEGER & HARRISON LLP
<PAGE>
PURCHASE AGREEMENT
This Purchase Agreement (the "Agreement") is made as of December 24,
1998, between FaxSav Incorporated, a Delaware corporation (the "Corporation"),
and The Tail Wind Fund Ltd. (the "Purchaser").
The Corporation and the Purchaser hereby agree as follows:
SECTION 1
AUTHORISATION, PURCHASE AND SALE OF THE STOCK AND THE WARRANTS
1.1 AUTHORISATION OF THE STOCK. The Corporation has authorised the
issuance and sale to the Purchaser of 645,161 shares of the Corporation's common
stock (the "Stock") and warrants to purchase 64,516 shares of its common stock
in the form attached hereto as Exhibit A (the "Warrants") and as herein
provided.
1.2 SALE AND PURCHASE OF THE STOCK AND THE WARRANTS. At the Closing,
subject to the terms and conditions hereof and in reliance upon the
representations, warranties and agreements contained herein, the Purchaser will
purchase the Stock from the Corporation and the Corporation shall issue and sell
the stock to the Purchaser at a purchase price of $5.425 per share, $3,500,000
in total and the Corporation shall issue the Warrants to the Purchaser.
SECTION 2
CLOSING, PAYMENT AND DELIVERY
2.1 CLOSING DATE AND PLACE OF CLOSING. The closing shall be held as soon
as practicable, and in no event more than seven (7) business days after
execution of this Agreement, on such date as the Corporation and the Purchaser
may agree to (the "Closing Date").
2.2. PAYMENT AND DELIVERY. At the Closing, the Purchaser will pay or cause
to be paid to the Corporation by wire transfer of same day funds the entire
purchase price. The Corporation will deliver in advance of the Closing to
Purchaser's counsel in trust a certificate or certificates, registered in such
name or names as Purchaser may designate, representing all of the Stock and all
of the Warrants, with instructions that such certificates are to be held for
release to the Purchaser only upon payment of the purchase price to the
Corporation.
<PAGE>
2.3 COVENANT OF BEST EFFORTS AND GOOD FAITH. The Corporation and the
Purchaser agree to use their respective best efforts and to act in good faith to
cause to occur all conditions to Closing which are in their respective control.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
The Corporation hereby represents and warrants to the Purchaser that:
3.1 CORPORATION POWER, QUALIFICATION AND STANDING. The Corporation and its
subsidiaries are validly existing and in good standing under the laws of their
respective jurisdictions of incorporation. Each of them is qualified to transact
business in each jurisdiction in which its ownership of property or conduct of
activities requires such qualification, except where the failure to be so
qualified would not have a material adverse effect on the Corporation's
financial condition, business, assets, results of operations or prospects, or on
the ability of the Corporation to perform its obligations hereunder (hereafter
"Material Adverse Effect"). The Corporation has all requisite corporate power
and authority to enter into this Agreement, to sell the Stock and to carry out
and perform its other obligations under this Agreement.
3.2 S.E.C. REPORTS; FINANCIAL STATEMENTS. The common stock of the
Corporation is registered under Section 12(b) or (g) of the Securities Exchange
Act of 1934 and the Corporation is in full compliance with its reporting and
filing obligations under said Act. The Corporation has delivered to Purchaser
its Annual Reports to shareholders and its reports on Form 10K for its last
three fiscal years, and all its quarterly reports on Form 10Q, and each other
report, registration statement or definitive proxy statement filed with the
S.E.C. since the beginning of said three fiscal years (collectively, the "SEC
Reports"). The SEC Reports do not (as of their respective dates) contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The audited and
unaudited financial statements of the Corporation included in the SEC Reports
(the "Financial Statements") have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis (except as stated
in such Financial Statements or the notes thereto) and fairly present the
financial position of the Corporation and its consolidated subsidiaries as of
the dates thereof and the results of their operations and changes in financial
position for the periods then ended. Except as publicly disclosed by the
Corporation in the SEC Reports or otherwise, since the end of the most recent of
said fiscal years there has been no material adverse change in the business,
financial condition, or results of operations of the Corporation and its
subsidiaries taken together, and there is no existing condition, event or series
of events which can reasonably be expected to have a material adverse effect on
the business, financial condition or results of operations of the Corporation
and its subsidiaries taken together, or its ability to perform its obligations
under this Agreement.
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3.3 AUTHORISATION; NO CONFLICT. Execution and delivery of this Agreement
and issuance and sale of the Stock have been duly authorised by all necessary
corporate action of the Corporation, and the Stock when issued will be validly
issued, fully paid and non assessable. Performance by the Corporation of its
obligations under this Agreement will not conflict with or violate (i) the
charter documents or bylaws of the Corporation, (ii) any indenture, loan
agreement, lease, mortgage or other material agreement binding on the
Corporation, (iii) except where such conflict or violation would not have a
Material Adverse Effect, any order of a court or administrative agency binding
on the Corporation, or (iv) except where such conflict or violation would not
have a Material Adverse Effect, any applicable law or governmental regulation;
and such performance does not and will not require the permission or approval of
any governmental agency, and will not result in the imposition or creation of
any lien or charge against any assets of the Corporation. Except as disclosed in
the Financial Statements, (i) the Corporation has no obligation to redeem or
repurchase any of its equity securities, (ii) no shareholder or other person has
pre-emptive or other rights to acquire equity securities of the Corporation, and
(iii) the Corporation has no obligation to register any of its securities
otherwise than pursuant to Section 7 of this Agreement or as disclosed on
Exhibit A hereto.
3.4 MATERIAL AGREEMENT; NO DEFAULTS. All material indentures, loan
agreements, leases, mortgages and other agreements binding on the Corporation or
its subsidiaries are identified in the list of exhibits contained in the
Corporation's most recent Form 10K report ("Other Agreements"). No material
default on the part of the Corporation or any of its subsidiaries (including any
event which, with notice or the passage of time, would constitute a default)
exists under any of the Other Agreements.
3.5 MATERIAL LIABILITIES. Except for liabilities disclosed in the
Financial Statements or the SEC Reports, and obligations under the Other
Agreements, the Corporation and its subsidiaries have no material liabilities or
obligations, absolute or contingent, other than liabilities arising in the
ordinary course of business subsequent to the date of the most recent of the
Financial Statements.
3.6 PROPERTIES. The Corporation and its subsidiaries (i) have good title
to the properties and assets reflected in the Financial Statements as owned by
them, (ii) have valid leasehold interests in the properties leased by them, and
(iii) own or have the right to use under valid license agreements all
trademarks, trade names, copy rights, patents and other intellectual property
rights regularly utilised by them; subject in each case to no material liens,
security interests or adverse claims except as disclosed in the Financial
Statements.
3.7 LITIGATION. There are no material legal actions, arbitrations, or
administrative proceedings pending against the Corporation or its subsidiaries,
except for the matters disclosed in the SEC Reports.
3.8 TAX MATTERS. The Corporation and its subsidiaries have filed on a
timely basis all tax returns required to be filed by them and have paid their
taxes prior to delinquency, except where such filing failure or non-payment
would not have a Material Adverse Effect,
3
<PAGE>
and have made adequate accruals for tax liabilities on the Financial Statements
in accordance with generally accepted accounting principles.
3.9 ERISA COMPLIANCE. Neither the Corporation nor any of its subsidiaries
has incurred any material funding deficiency within the meaning of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or any material
liability to the Pension Benefit Guarantee Corporation in connection with any
employee benefit plan. The Corporation and its subsidiaries are in compliance in
all material respects with all applicable provisions of ERISA, and have no
obligations with respect to any multi-employer plan. No "reportable event" as
such term is defined in ERISA, which may result in any material liability, has
occurred with respect to any employee benefit or other plan maintained for
employees of the Corporation or any subsidiary.
3.10 ENVIRONMENTAL MATTERS. Except as disclosed in the SEC Reports,
neither the Corporation nor any of its subsidiaries (i) has been notified by any
governmental authority that it is, or may be, a Responsible Party with respect
to cleanup or remediation of any environmental condition or hazardous waste
site, (ii) has violated any law, regulation, order or requirement of
governmental authority with respect to Hazardous Substances, except where such
violation would not have a Material Adverse Effect, or (iii) has incurred any
material liability for violation or noncompliance with applicable Environmental
Regulations.
The term "Environmental Regulation" means any law, regulation, order or
requirement relating to protection of the environment, including with
limitation, the Clean Air Act, the Clean Water Act, the Comprehensive
Environmental Response, Compensation and Liability Act, the Resource
Conservation and Recovery Act, the Hazardous Materials Transportation Act and
the Toxic Substances Control Act. The term "Hazardous Substance" means any
substance defined or listed as such in any Environmental Regulation.
3.11 OTHER MATTERS. The Corporation is not now and will not be after
giving effect to the receipt of the proceeds from the sale of the Stock an
"Investment Company" within the meaning of the Investment Company Act of 1940,
nor will it be controlled by or acting on behalf of any person which is such an
investment company. The Corporation is not selling the Stock "for the purpose of
purchasing or carrying any margin stock" within the meaning of Regulation G of
the Board of Governors of the Federal Reserve System. The Corporation has not
offered the Stock to any person other than the Purchaser.
4
<PAGE>
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Corporation that:
4.1 CORPORATE POWER AND AUTHORITY. It is validly existing and in good
standing with all requisite power and authority to enter into this Agreement and
carry out its obligations hereunder and has taken all actions necessary to
authorise it to enter into this Agreement and carry out such obligations.
4.2 INVESTMENT. It is acquiring the Stock for investment and not with the
view to, or for resale in connection with, any distribution thereof. It is an
"accredited investor" within the meaning of the Securities Act of 1933 and the
rules thereunder. It understands that the Stock has not been registered under
the Securities Act of 1933 nor qualified under any State blue sky law by reason
of specified exemptions therefrom which depend upon, among other things, the
bona fide nature of its investment intent as expressed herein.
4.3 RULE 144. It acknowledges that the Stock must be held indefinitely
unless it is subsequently registered under the Securities Act of 1933 or an
exemption from such registration is available. It has been advised or is aware
of the provisions of Rule 144 promulgated under the Securities Act of 1933.
SECTION 5
CONDITIONS TO OBLIGATIONS OF THE PURCHASER
The obligation of the Purchaser to purchase the Stock is subject to the
fulfilment on or prior to the Closing Date of each of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Corporation shall be true and correct in all material respects on the
Closing Date.
5.2 PERFORMANCE. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by the Corporation on or prior
to the Closing Date shall have been performed or complied with in all material
respects.
5.3 OPINION OF CORPORATION'S COUNSEL. The Purchaser shall have received
from counsel to the Corporation an opinion with respect to the representations
set forth in the first sentence of Section 3.3 hereof, and on the basis of such
counsel's review of the Other Agreements and certificates of officers of the
Corporation as to factual matters, with respect to the representations set forth
in the second sentence and clause (ii) of the third sentence relating to
pre-emptive rights of Section 3.3 hereof.
5
<PAGE>
5.4 LEGAL ISSUANCE. At the time of the Closing, the issuance and purchase
of the Stock shall be legally permitted by all laws and regulations to which the
Purchaser and the Corporation are subject.
5.5 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be satisfactory in form and
substance to the Purchaser and its counsel.
5.6 SATISFACTION OF OBLIGATIONS TO BROKER. The Corporation shall have
furnished the Purchaser with assurances satisfactory to the Purchaser that the
Corporation has satisfied its obligation to any broker entitled to compensation
in connection with the sale of the Stock.
SECTION 6
CONDITIONS TO OBLIGATIONS OF THE CORPORATION
The Corporation's obligation to sell the Stock is subject to the
fulfilment on or prior to the Closing Date of each of the following conditions:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by the Purchaser shall be true and correct in all material respects on the
Closing Date.
6.2 LEGAL ISSUANCE. At the time of the Closing, the issuance and purchase
of the Stock shall be legally permitted by all laws and regulations to which the
Purchaser and the Corporation are subject.
6.3 PAYMENT. The Corporation shall concurrently receive payment for the
Stock as provided in Section 2.
SECTION 7
COVENANT TO REGISTER
7.1 For purposes of this Section 7, the following definitions shall apply:
(i) The terms "register", "registered", and "registration" refer to
a registration under the Securities Act of 1933, as amended (the "Act") effected
by preparing and filing a registration statement or similar documents in
compliance with the Act or an amendment thereto, and the declaration or ordering
of effectiveness of such registration statement, document or amendment thereto.
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(ii) The term "Registrable Securities" means the Stock, the shares
issuable upon exercise of the Warrants, additional shares issued pursuant to
Section 10.1 below and any securities of the Corporation or securities of any
successor corporation issued as, or issuable upon the conversion or exercise of
any warrant, right or other security that is issued as, a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
Stock and the shares underlying the Warrants.
7.2 The Corporation agrees to file promptly a registration statement on
Form S-3 in order to register the resale of the Registrable Securities and to
cause such registration statement to be declared effective within one hundred
twenty (120) days after Closing. A 2% cash payment, as liquidated damages, will
accrue for every thirty (30) days after such one hundred twenty (120) days after
Closing that the securities remain unregistered. The payment shall be pro-rated
for period of less than thirty (30) days.
7.3 If the Corporation proposes to register (including for this purpose a
registration effected by the Corporation for shareholders other than the
Purchaser) any of its stock or other securities under the Act in connection with
a public offering of such securities (other than a registration on Form S-4,
Form S-8 or other limited purpose form or a registration effected pursuant to
agreements to register in effect on the date hereof) and the Registrable
Securities have not heretofore been included in a registration statement under
Subsection 7.2, which remains effective, the Corporation shall, at such time,
promptly give the Purchaser written notice of such registration. Upon the
written request of the Purchaser given within ten (10) days after receipt of
such notice by the Purchaser, the Corporation shall cause to be registered under
the Act all of the Registrable Securities that the Purchaser has requested to be
registered. However, the Corporation shall have no obligation under this
Subsection 7.3 to the extent that, with respect to a public offering
registration, any underwriter of such public offering reasonably requests that
the Registrable Securities or a portion thereof be excluded therefrom.
7.4 Whenever required under this Section 7 to effect the registration of
any Registrable Securities, the Corporation shall, as expeditiously as
reasonably possible:
(i) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration to become effective and, upon the request of the Purchaser, keep
such registration statement effective for so long as Purchaser desires to
dispose of the securities covered by such registration statement or, if earlier,
at such time as Purchaser could sell all of such Registrable Securities under
Rule 144(k). The registration statement (and each amendment or supplement
thereto, and each request for acceleration of effectiveness thereof) shall be
provided to (and subject to the approval of) the holders of the Registrable
Securities and their counsel at least 8 days prior to its filing or other
submission, which approval shall be promptly provided and shall not be
unreasonably withheld.
(ii) Prepare and file with the SEC such amendments and supplements
to such registration statements and the prospectus used in connection with such
registration
7
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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 (including any amendment to increase the number of shares subject to
registration to include additional shares issued to the Purchaser pursuant to
Section 10.1 below).
(iii) Furnish to the Purchaser such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as the Purchaser may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by Purchaser.
(iv) 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 Purchaser,
provided that the Corporation 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 and process in any such states or jurisdictions.
(v) Notify Purchaser 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 material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing.
(vi) Furnish, at the request of Purchaser, an opinion of counsel of
the Corporation, dated the effective date of the registration statement, as to
the due authorisation and issuance of the securities being registered and
compliance with securities laws by the Corporation in connection with the
authorisation and issuance thereof.
7.5 The Purchaser will furnish to the Corporation in connection with any
registration under this Section 7 such information regarding itself, the
Registrable Securities and other securities of the Corporation held by it, and
the intended method of disposition of such securities as shall be required to
effect the registration of the Registrable Securities held by Purchaser.
7.6 (i) The Corporation shall indemnify, defend and hold harmless each
holder of Registrable Securities which are included in a registration statement
pursuant to the provisions of this Section 7, any underwriter (as defined in the
Act) for such holder, and the directors, officers and controlling persons of
such holder or underwriter from and against, and shall reimburse all of them
with respect to, any and all claims, suits, demands, causes of action, losses,
damages, liabilities, costs or expenses ("Liabilities") to which any of them may
become subject under the Act or otherwise, arising from or relating to (A) any
untrue statement or alleged untrue statement of any material fact contained in
such registration statement, any prospectus contained therein or any amendment
or supplement thereto, or (B) the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements herein, in light of the circumstances in which they were made, no
misleading; PROVIDED, HOWEVER, that the Corporation shall not be liable in any
such
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case to he extent that any such Liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by such person in writing
specifically for use in the preparation thereof.
(ii) Each holder of Registrable Securities included in a
registration pursuant to the provision of this Section 7 shall indemnify,
defend, and hold harmless the Corporation, its directors and officers, and shall
reimburse the Corporation its directors and officers with respect to, any and
all Liabilities to which any of them may become subject under the Act or
otherwise, arising from or relating to (A) any untrue statement or alleged
untrue statement of any material fact contained in such registration statement,
any prospectus contained therein or any amendment or supplement thereto, or (B)
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was so made in reliance upon and in
strict conformity with written information furnished by or on behalf of such
holder specifically for use in the preparation thereof.
(iii) Promptly after receipt by an indemnified party pursuant to the
provisions of Subsection 7.6(i) or 7.6(ii) of notice of the commencement of any
action involving the subject matter of the foregoing indemnity provisions, such
indemnified party shall, if a claim thereof is to be made against the
indemnifying party pursuant to the provisions of Subsection 7.6(i) or 7.6(ii),
promptly notify the indemnifying party of the commencement thereof; PROVIDED,
HOWEVER, that the failure to so notify the indemnifying party shall not relieve
it from its indemnification obligations hereunder except to the extent that the
indemnifying party is materially prejudiced by such failure . If such action is
brought against any indemnified party and it notifies the indemnifying party of
the commencement thereof, the indemnifying party shall have the right to
participate in, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party; PROVIDED, HOWEVER, if the
defendants in any action include both the indemnified party and the indemnifying
party and the indemnified party shall have reasonably concluded that there may
be legal defenses different from or in addition to those available to the
indemnifying party, or if there is conflict of interest which would prevent
counsel for the indemnifying party from also representing the indemnified party,
the indemnified party shall have the right to select separate counsel to
participate in the defense of such action on behalf of such indemnified party.
After notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party pursuant to Subsection 7.6(i) or 7.6(ii) for
any expense of counsel subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation, unless (A) the indemnified party shall have employed counsel in
accordance with the provisions of the preceding sentence, or (B) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after the notice of the commencement of the action. An
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indemnifying party shall not be responsible for amounts paid in settlement
without its consent, provided that its consent may not be unreasonably withheld.
7.7 (i) With respect to the inclusion of Registrable Securities in a
registration statement pursuant to this Section 7, all fees, costs and expenses
of and incidental to such registration, inclusion and public offering shall be
borne by the Corporation; provided, however, that any securityholders
participating in such registration shall bear their pro rata share of the
underwriting discounts and commissions, if any.
(ii) The fees, costs and expenses of registration to be borne by the
Corporation as provided in this Subsection 7.7 shall include, without
limitation, all registration, filing and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for the Corporation, and all legal fees
and disbursements and other expenses of complying with state securities or Blue
Sky laws of any jurisdiction or jurisdictions in which securities to be offered
are to be registered and qualified.
7.8 The rights to cause the Corporation to register all or any portion of
Registrable Securities pursuant to this Section 7 may be assigned by Purchaser
to a transferee or assignee of 20% or more of the Registrable Securities. Within
a reasonable time after such transfer the Purchaser shall notify the Corporation
of the name and address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned. 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. Any transferee asserting registration rights hereunder shall be bound
by the provision of this Section 7.
7.9 From and after the date of this Agreement, the Corporation shall not
agree to allow the holders of any securities of the Corporation to include any
of their securities in any registration statement filed by the Corporation
pursuant to Subsection 7.2 unless the inclusion of such securities will not
reduce the amount of the Registrable Securities included therein.
7.10 Purchaser hereby agrees that, during the period of duration specified
by the Corporation and an underwriter of common stock or other securities of the
Corporation, following the effective date of a registration statement of the
Corporation filed under the Act for a primary offering of the Company's
securities, it shall not, to the extent requested by the Corporation 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 Corporation held by it at any time during such
period except common stock included in such registration; provided, however,
that:
(i) all officers and directors of the Corporation and all other
persons with registration rights (whether or not pursuant to this Agreement)
enter into similar agreements;
(ii) such market stand off time period shall not exceed 180 days.
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In order to enforce the foregoing covenant, the Corporation may impose stop
transfer instructions with respect to the Registrable Securities of the
Purchaser (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
Notwithstanding the foregoing, the obligations described in this Section 7.10
shall not apply to a registration relating solely to employee benefit plans on
Form S-8 or similar forms, or a registration relating solely to a Rule 145
transaction on Form S-4.
7.11 In connection with any primary offering involving an underwriting of
shares of the Corporation's common stock, the Corporation shall not be required
under this Section 7 to include any of the Purchaser's securities in such
underwriting unless it accepts the terms of the underwriting as agreed upon
between the Corporation and the underwriters selected by it, and then only in
such quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Corporation.
7.12 The Corporation may suspend the effectiveness of a registration
statement required by this Section 7.12 for a period of not more than thirty
(30) days if the Corporation is engaged in confidential negotiations or other
confidential business activities the disclosure of which (in the reasonable
opinion of outside counsel to the Corporation) would be required in such
registration statement and would not be required if such registration statement
were not filed and effective, and the Board of Directors of the Corporation
determines in good faith that such disclosure would be materially detrimental to
the Corporation and its stockholders, provided, however, that the Corporation
shall not utilize this right more than once in any twelve-month period. The
Restricted Period referenced in Section 10.1 below shall be extended for an
additional number of days equal to the number of days during which the right to
sell shares was suspended pursuant to this Section 7.11.
SECTION 8
AFFIRMATIVE COVENANTS OF THE CORPORATION
The Corporation hereby covenants that, during such time as the Purchaser
(or one of its affiliates) owns any Warrants or shares of Stock totaling in
excess of 50,000 shares, or for four years, whichever period is shorter.
8.1 REPORTS AND FINANCIAL STATEMENTS
(a) The Corporation will cause its common stock to continue to be
registered under Sections 12(b) or 12(g) of the Securities Exchange Act of 1934,
will comply in all respects with its reporting and filing obligations under said
Act, and will not take any action or file any document (whether or not permitted
by said Act or the rules thereunder) to terminate or suspend such registration
or to terminate or suspend its reporting and filing obligations under
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said Act. The Corporation will take all action necessary to continue the listing
or trading of its common stock on any national securities exchange or the
Automated Quotation System of the National Association of Securities Dealers on
which such common stock is listed or traded, and will comply in all respects
with its reporting, filing and other obligations under the bylaws or rules of
said exchange or Association.
(b) The Corporation will furnish to the Purchaser, concurrently with the
distribution or filing thereof, each annual and quarterly report to its
shareholders, its reports on Form 10K and 10Q, and each other report,
registration statement, definitive proxy statement or other document filed with
the S.E.C., and each press release or other public announcement issued by the
Corporation.
8.2 MAINTENANCE OF OFFICE. The Corporation will maintain an office or
agency in the United States at such address as may be designated in writing from
time to time to the registered holders of the Stock, where notices,
presentations and demands to or upon the Corporation in respect of the Stock may
be given or made. Unless or until another office or agency is designated by the
Corporation, such office shall be at the address set forth adjacent to the name
of the Corporation at the foot of this Agreement.
8.3 MAINTENANCE AND COMPLIANCE. The Corporation will (i) maintain its
corporate existence, rights, powers and privileges in good standing, (ii) comply
in all material respects with all laws and governmental regulations and
restrictions applicable to its business or properties, (iii) keep records and
books of account and maintain a system of internal accounting controls in
accordance with generally accepted accounting principles and in compliance with
Section 13(b)(2) of the Securities Exchange Act of 1934, and (iv) retain
independent public accountants of recognised national standing as auditors of
the Corporation's annual financial statements.
8.4 ASSIGNMENT OF RIGHTS. The rights of the Purchaser hereunder may be
assigned by the Purchaser in connection with the transfer or assignment to a
single transferee of not less than 20% of the Stock originally purchased by the
Purchaser hereunder, and such rights may be further reassigned by such
transferee to another such single transferee to another such single transferee.
Any transferee asserting rights under this Agreement shall be bound by its
provisions.
8.5 EFFECT OF COVENANTS. The covenants in Sections 8.1 and 8.3 shall not
be deemed to prohibit a merger, sale of all assets or other corporate
reorganisation if (i) the entity surviving or succeeding to the Corporation is
bound by this Agreement with respect to its securities issued in exchange for or
replacement of the Stock, or (ii) the consideration received in exchange for or
replacement of the Stock is cash.
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SECTION 9
LEGEND ON STOCK
Until the registration contemplated by Section 7 above is declared
effective with respect to the stock, each certificate representing the Stock
shall be stamped or otherwise imprinted with a legend substantially in the
following form (in addition to any legend required under any applicable state
securities laws):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR
OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THE SECURITIES UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAW OR AN OPINION OF COUNSEL SATISFACTORY TO THE
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
Upon request of a holder of Stock the Corporation shall remove the
foregoing legend or issue to such holder a new certificate therefor free of any
such legend, if the Corporation shall have received either an opinion of counsel
or a "no-action" letter of the S.E.C., in either case reasonably satisfactory in
substance to the Corporation and its counsel, to the effect that such legend is
no longer required.
SECTION 10
PURCHASE PRICE ADJUSTMENT
10.1 SUBSEQUENT SALE AT LOWER PRICE. Subject to the exclusions contained
in Section 10.5 below, if during the period (a) ending twelve months following
the Closing Date, or (b) ending nine months after the effectiveness of the
registration pursuant to Section 7, whichever is later (the "Restricted
Period"), the Corporation sells any shares of its common stock in a capital
raising transaction at a selling price lower than the purchase price per share
set forth in Section 1.2 hereof, the purchase price per share of the Stock sold
to Purchaser hereunder shall be adjusted downward to equal such lower selling
price; provided, however, that in the event Purchaser then owns less than 60% of
the Stock acquired hereunder, Purchaser shall be entitled to additional shares
only with respect to the number of shares of the Stock then owned by Purchaser .
The Corporation shall give to the Purchaser prompt written notice of any such
sale. The Restricted Period shall be extended by that number of days that the
Purchaser is required to abide by a "market stand off" pursuant to Section 7.10
above and that the Corporation suspends the effectiveness of a registration
statement pursuant to Section 7.11 above.
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10.2 ADJUSTMENT MECHANISM. If an adjustment of the purchase price is
required pursuant to this Section the Corporation shall immediately deliver to
Purchaser such number of additional shares of common stock as will cause (i) the
total number of shares of common stock delivered to Purchaser hereunder,
multiplied by (ii) the adjusted purchase price per share, to equal (iii) the
total purchase price set forth in Section 1.2 hereof; PROVIDED HOWEVER, that the
Corporation shall effect such adjustment in cash, in whole or in part, to the
extent required by the following subsection.
10.3 LIMITATION ON NUMBER OF SHARES. Purchaser shall not be required to
accept, by way of any such adjustment a number of shares of the Corporation such
that the total number of such shares held by Purchaser, which were held by it as
of the date of such adjustment or acquired by them pursuant to this Agreement or
agreements of like tenor, would exceed 4.99% of the total outstanding stock of
the Corporation. The Corporation shall effect the adjustment required by this
Section by cash refund to the extent necessary to avoid causing the aforesaid
limitation to be exceeded.
10.4 CAPITAL ADJUSTMENTS. In case of any stock split or reverse stock
split, stock dividend, reclassification of the common stock, recapitalisation,
merger or consolidation, or like capital adjustment affecting the common stock
of the Corporation, the provisions of this Section shall be applied as if such
capital adjustment event had occurred immediately prior to the Closing Date and
the original purchase price had been fairly allocated to the stock resulting
from such capital adjustment; and in other respects the provisions of this
Section shall be applied in a fair, equitable and reasonable manner so as to
give effect, as nearly as may be, to the purposes hereof.
10.5 EXCLUSIONS. Section 10.1 shall not apply to (i) a sale of fewer than
50,000 shares of common stock in any one transaction or series of related
transactions, subject to a limit of 150,000 shares pursuant to this exclusion
during the Restricted Period; (ii) sales of shares by the Corporation upon
conversion or exercise of any convertible securities, options or warrants
outstanding 30 days prior to the date hereof, if the conversion or exercise
price thereof is fixed at the date of this Agreement, or (iii) sales of shares
by the Corporation pursuant to the provisions of any shareholder-approved
employee benefit or incentive plan heretofore or hereafter adopted by the
Corporation.
10.6 DEFINITIONS. For purposes of Section 10.1 hereof, a sale of shares
shall include the sale or issuance of rights, options, warrants or convertible
securities under which the Corporation is or may become obligated to issue
shares of common stock, and the "selling price" of the common stock covered
thereby shall be the exercise or conversion price thereof plus the consideration
(if any) received by the Corporation upon such sale or issuance. In case of any
such security presently outstanding or issued within twelve months after the
Closing Date, if the conversion or exercise price is variable, the "selling
price" shall be deemed to be the lowest conversion or exercise price at which
such securities are converted or exercised or might have been converted or
exercised during the twenty-four months following the Closing Date. If shares
are issued for a consideration other than cash, the "selling price" shall be the
fair value of such consideration as determined in good faith by the Board of
Directors of the
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Corporation. The term "Stock" as used in this Agreement shall include shares
issued pursuant to this Section.
SECTION 11
NEGATIVE COVENANTS OF THE CORPORATION
11.1 Limitation on Variable Rate Transactions. For the period of one
calendar month from the Closing Date, without the prior written consent of the
Purchaser (which consent may be withheld in the Purchaser's sole discretion),
the Corporation shall not issue or sell or agree to issue or sell for cash in a
non-public offering any debt or equity securities that are convertible into,
exchangeable or exercisable for, or include the right to receive additional
shares of Common Stock either (a) at a conversion, exercise or exchange rate or
other price that is based upon and/or varies with the trading prices of or
quotations for the Corporation's common stock at any time after the initial
issuance of such convertible debt or equity securities.
11.2 Limitation on Similar Transactions. For the period of one year from
the Closing Date, without the prior written consent of the Purchaser (which
consent may be withheld in the Purchaser's sole discretion), the Corporation
shall not issue or sell or agree to issue or sell for cash in a non-public
offering any equity securities issued in a transaction which grants to an
investor the right to receive additional shares based upon future equity raising
transactions of the Corporation on terms more favorable than those granted to
the investor in the subject transaction.
SECTION 12
ARBITRATION
12. ARBITRATION.
12.1 SCOPE. Resolution of any and all dispute arising from or in
connection with this Agreement, whether based on contract, tort, common law,
equity, statute, regulation, order or otherwise ("Disputes"), including disputes
arising in connection with claims by third persons, shall be exclusively
governed by and settled in accordance with the provisions of this Section 12;
provided, that the foregoing shall not preclude equitable or other judicial
relief to enforce the provisions hereof or to preserve the status quo pending
resolution of Disputes hereunder.
12.2. BINDING ARBITRATION. The parties hereby agree to submit all
Disputes to arbitration for final and binding resolution. Either party may
initiate such arbitration by delivery of a demand therefor (the "Arbitration
Demand") to the other party. The arbitration shall be conducted in New York, New
York by a sole arbitrator selected by agreement of the
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parties not later than 10 days after delivery of the Arbitration Demand, or,
failing such agreement, appointed pursuant to the Commercial Arbitration Rules
of the America Arbitration Association, as amended from time to time (the "AAA
Rules"). If the arbitrator becomes unable to serve, his successor(s) shall be
similarly selected or appointed.
12.3. PROCEDURE. The arbitration shall be conducted pursuant to the
Federal Arbitration Act and such procedures as the parties may agree or, in the
absence of or failing such agreement, pursuant to the AAA Rules. Notwithstanding
the foregoing, (a) each party shall have the right to audit the books and
records of the other party that are reasonably related to the Dispute; (b) each
party shall provide to the other, reasonably in advance of any hearing, copies
of all documents that a party intends to present in such hearing; (c) all
hearings shall be conducted on an expedited schedule; and (d) all proceedings
shall be confidential, except that either party may at its expense make a
stenographic record thereof.
12.4. TIMING. The arbitrator shall complete all hearings not later
than 90 days after his or her selection or appointment, and shall make a final
award not later than 30 days thereafter. The arbitrator shall apportion all
costs and expenses of the arbitration, including the arbitrator's fees and
expenses, and fees and expenses of experts ("Arbitration Costs") between the
prevailing and non-prevailing party as the arbitrator shall deem fair and
reasonable. In circumstances where a Dispute has been asserted or defended
against on grounds that the arbitrator deems manifestly unreasonable, the
arbitrator may assess all Arbitration Costs against the non-prevailing party and
may include in the award the prevailing party's attorney's fees and expenses in
connection with any and all proceedings under this Section 12. Notwithstanding
the foregoing, in no event may the arbitrator award multiple or punitive
damages.
SECTION 13
MISCELLANEOUS
13.1 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. Any action or proceeding
relating to this Agreement may be brought in the courts of New York sitting in
New York City, or in the United States courts located in New York, and each of
the parties irrevocably consents to the jurisdiction of such courts in any such
action or proceeding.
13.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of and be binding upon
the successors and assigns of the parties.
13.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement (including any Exhibits
hereto) and the other documents delivered pursuant hereto constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and
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thereof. Neither this Agreement nor any term hereof may be amended, waived,
discharged or terminated except by a written instrument signed by the
Corporation and the Purchaser.
13.4 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be mailed by internationally recognized courier
service and facsimile addressed (a) if to the Purchaser, as indicated below the
Purchaser's signature with a copy to the designated entity or at such other
address as the Purchaser shall have furnished to the Corporation in writing, or
(b) if to any other holder of any Stock at the address of such holder as shown
on the records of the Corporation, or (c) if to the Corporation, at its address
set forth below or at such other address as the Corporation shall have furnished
to the Purchaser and each such other holder in writing. All such notices or
communications shall be deemed given when delivered personally, by
internationally recognized courier or by facsimile.
13.5 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any party to this Agreement (including any holder of
Stock), upon any breach or default of another party under this Agreement, shall
impair any such right, power or remedy of such party nor shall it be construed
to be a waiver of any such breach or default, or an acquiescence therein, or of
or in any similar breach or default thereafter occurring; nor shall any waiver
of any single breach or default be deemed a waiver of any other breach or
default theretofore or thereafter occurring. All remedies, either under this
Agreement or by law or otherwise afforded to any party, shall be cumulative and
not alternative.
13.6 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
13.7 TITLES AND SUBTITLES. The titles of the Sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
13.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
13.9 PUBLIC STATEMENTS. Any press release or other publicity concerning
this Agreement or the transactions contemplated by this Agreement shall be
submitted to the Purchaser for comment at least two (2) business days prior to
issuance.
13.10 FEES AND EXPENSES. The parties hereto shall pay their own costs and
expenses in connection herewith, except that the Corporation shall pay to Tail
Wind, Inc. the sum of $17,000 as and for legal expenses incurred by The Tail
Wind Fund Ltd. in connection herewith.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their duly authorised officers as of the day and year first
written above.
FAXSAV INCORPORATED
BY: /s/ Peter S. Macaluso
------------------------------------
Peter S. Macaluso, Vice President CEO
ADDRESS:
PURCHASER
BY: /s/ Jason McCarroll /s/ Mizpah Albury
--------------------- ------------------
ADDRESS: MR JASON MCCARROLL
THE TAIL WIND FUND LIMITED
WINDERMERE HOUSE, 404 EAST BAY STREET
PO BOX SS 5539. NASSAU, BAHAMAS.
ALL COMMUNICATIONS SHOULD BE COPIED TO:
MR DAVID CROOK
EASI, 1 REGENT STREET, 4TH FLOOR
LONDON, SW1Y 4NS, ENGLAND
FAX: +44 171 468 7657
<PAGE>
Exhibit 10.2
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT COVERING THIS WARRANT UNDER SAID ACT OR AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT.
VOID AFTER 5:00 P.M. EASTERN TIME ON DECEMBER 28, 2001 ("EXPIRATION
DATE").
FAXSAV INCORPORATED
WARRANT TO PURCHASE 64,516 SHARES OF
COMMON STOCK, PAR VALUE $0.01 PER SHARE
This is to certify that, for VALUE RECEIVED, The Tail Wind Fund Ltd.
("Warrantholder"), is entitled to purchase, subject to the provisions of this
Warrant, from FaxSav Incorporated, a Delaware corporation ("Company"), at any
time not later than 5:00 P.M., Eastern time, on the Expiration Date, at an
exercise price per share of $5.425 (the exercise price in effect being herein
called the "Warrant Price") 64,516 shares ("Warrant Shares") of the Company's
Common Stock, par value $0.01 per share ("Common Stock"). The number of Warrant
Shares purchasable upon exercise of this Warrant and the Warrant Price shall be
subject to adjustment from time to time as described herein.
Section 1. REGISTRATION. The Company shall maintain books for the
transfer and registration of the Warrant. Upon the initial issuance of the
Warrant, the Company shall issue and register the Warrant in the name of the
Warrantholder.
Section 2. TRANSFERS. As provided herein, the Warrant may be transferred
only pursuant to a registration statement filed under the Securities Act of
1933, as amended ("Securities Act") or an exemption from registration
thereunder. Subject to such restrictions, the Company shall transfer the Warrant
from time to time upon the books to be maintained by the Company for that
purpose, upon surrender thereof for transfer properly endorsed or accompanied by
appropriate instructions for transfer upon any such transfer, and a new Warrant
shall be issued to the transferee and the surrendered Warrant shall be canceled
by the Company.
Section 3. EXERCISE OF WARRANT. Subject to the provisions hereof, the
Warrantholder may exercise the Warrant in whole or in part at any time upon
surrender of the Warrant, together with delivery of the duly executed Warrant
exercise form attached hereto (the "Exercise Agreement"), to the Company during
normal business hours on any business day at the Company's principal executive
offices (or such other office or agency of the Company as it may designate by
notice to the holder hereof), and upon payment to the Company in
<PAGE>
cash, by certified or official bank check or by wire transfer for the account of
the Company of the Warrant Price for the Warrant Shares specified in the
Exercise Agreement. The Warrant Shares so purchased shall be deemed to be issued
to the holder hereof or such holder's designee, as the record owner of such
shares, as of the close of business on the date on which this Warrant shall have
been surrendered (or evidence of loss, theft or destruction thereof), the
completed Exercise Agreement shall have been delivered, and payment shall have
been made for such shares as set forth above. Certificates for the Warrant
Shares so purchased, representing the aggregate number of shares specified in
the Exercise Agreement, shall be delivered to the holder hereof within a
reasonable time, not exceeding two (2) business days, after this Warrant shall
have been so exercised. The certificates so delivered shall be in such
denominations as may be requested by the holder hereof and shall be registered
in the name of such holder or such other name as shall be designated by such
holder. If this Warrant shall have been exercised only in part, then, unless
this Warrant has expired, the Company shall, at its expense, at the time of
delivery of such certificates, deliver to the holder a new Warrant representing
the number of shares with respect to which this Warrant shall not then have been
exercised.
To the extent that any part of this Warrant remains outstanding at
5:01 P.M., Eastern time on December __, 2001, such outstanding Warrant shall
automatically expire and be of no further force and effect, and the holders
thereof shall have no further right to exercise or transfer the same.
Section 4. COMPLIANCE WITH THE SECURITIES ACT OF 1933. Neither this
Warrant nor the Common Stock issued upon exercise hereof nor any other security
issued or issuable upon exercise of this Warrant may be offered or sold except
as provided in this agreement and in conformity with the Securities Act of 1933,
as amended, and then only against receipt of an agreement of such person to whom
such offer of sale is made to comply with the provisions of this Section 4 with
respect to any resale or other disposition of such security. The Company may
cause the legend set forth on the first page of this Warrant to be set forth on
each Warrant or similar legend on any security issued or issuable upon exercise
of this Warrant, unless counsel for the Company is of the opinion as to any such
security that such legend is unnecessary.
Section 5. PAYMENT OF TAXES. The Company will pay any U.S. documentary
stamp taxes attributable to the initial issuance of Warrant Shares issuable upon
the exercise of the Warrant; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issue or delivery of any certificates for Warrant Shares in a
name other than that of the registered holder of the Warrant in respect of which
such shares are issued, and in such case, the Company shall not be required to
issue or deliver any certificate for Warrant Shares or any Warrant until the
person requesting the same has paid to the Company the amount of such tax or has
established to the Company's satisfaction that such tax has been paid. The
holder shall be responsible for income taxes due under federal or state law, if
any such tax is due.
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Section 6. MUTILATED OR MISSING WARRANTS. In case the Warrant shall be
mutilated, lost, stolen, or destroyed, the Company shall issue in exchange and
substitution of and upon cancellation of the mutilated Warrant, or in lieu of
and substitution for the Warrant lost, stolen or destroyed, a new Warrant of
like tenor and for the purchase of a like number of Warrant Shares, but only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction of the Warrant, and with respect to a lost, stolen or
destroyed Warrant, reasonable indemnity or bond, if requested by the Company.
Section 7. RESERVATION OF COMMON STOCK. The Company hereby represents and
warrants that there have been reserved, and the Company shall at all applicable
times keep reserved, out of the authorized and unissued Common Stock, a number
of shares sufficient to provide for the exercise of the rights of purchase
represented by the Warrant, and the transfer agent for the Common Stock
("Transfer Agent"), and every subsequent transfer agent for the Common Stock or
other shares of the Company's capital stock issuable upon the exercise of any of
the right of purchase aforesaid, shall be irrevocably authorized and directed at
all times to reserve such number of authorized and unissued shares of Common
Stock as shall be requisite for such purpose. The Company agrees that all
Warrant Shares issued upon exercise of the Warrant shall be, at the time of
delivery of the certificates for such Warrant Shares, duly authorized, validly
issued, fully paid and non-assessable shares of Common Stock of the Company. The
Company will keep a conformed copy of this Warrant on file with the Transfer
Agent and with every subsequent transfer agent for the Common Stock or other
shares of the Company's capital stock issuable upon the exercise of the rights
of purchase represented by the Warrant. The Company will supply from time to
time the Transfer Agent with duly executed stock certificates required to honor
the outstanding Warrant.
Section 8. WARRANT PRICE. The Warrant Price, subject to adjustment as
provided in Section 9, shall, if payment is made in cash or by certified check,
be payable in lawful money of the United States of America.
Section 9. ADJUSTMENTS. Subject and pursuant to the provisions of this
Section 9, the Warrant Price and number of Warrant Shares subject to this
Warrant shall be subject to adjustment from time to time as set forth
hereinafter.
(a) If the Company shall at any time or from time to time while the
Warrant is outstanding, pay a dividend or make a distribution on its Common
Stock in shares of Common Stock, subdivide its outstanding shares of Common
Stock into a greater number of shares or combine its outstanding shares into a
smaller number of shares or issue by reclassification of its outstanding shares
of Common Stock any shares of its capital stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), then the number of Warrant Shares
purchasable upon exercise of the Warrant and the Warrant Price in effect
immediately prior to the date upon which such change shall become effective,
shall be adjusted by the Company so that the Warrantholder thereafter exercising
the Warrant shall be entitled to receive the number
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of shares of Common Stock or other capital stock which the Warrantholder would
have received if the Warrant had been exercised immediately prior to such event.
Such adjustment shall be made successively whenever any event listed above shall
occur.
(b) If any capital reorganization, reclassification of the capital
stock of the Company, consolidation or merger of the Company with another
corporation, or sale, transfer or other disposition of all or substantially all
of the Company's properties to another corporation shall be effected, then, as a
condition of such reorganization, reclassification, consolidation, merger, sale,
transfer or other disposition, lawful and adequate provision shall be made
whereby each Warrantholder shall thereafter have the right to purchase and
receive upon the basis and upon the terms and conditions herein specified and in
lieu of the Warrant Shares immediately theretofore issuable upon exercise of the
Warrant, such shares of stock, securities or properties as may be issuable or
payable with respect to or in exchange for a number of outstanding Warrant
Shares equal to the number of Warrant Shares immediately theretofore issuable
upon exercise of the Warrant, had such reorganization, reclassification,
consolidation, merger, sale, transfer or other disposition not taken place, and
in any such case appropriate provision shall be made with respect to the rights
and interests of each Warrantholder to the end that the provisions hereof
(including, without limitations, provision for adjustment of the Warrant Price)
shall thereafter be applicable, as nearly equivalent as may be practicable in
relation to any shares of stock, securities or properties thereafter deliverable
upon the exercise thereof. The Company shall not effect any such consolidation,
merger, sale, transfer or other disposition unless prior to or simultaneously
with the consummation thereof the successor corporation (if other than the
Company) resulting from such consolidation or merger, or the corporation
purchasing or otherwise acquiring such assets or other appropriate corporation
or entity shall assume, by written instrument executed and delivered to the
Company, the obligation to deliver to the holder of the Warrant such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to purchase and the other obligations under this
Warrant. The provisions of this paragraph (b) shall similarly apply to
successive reorganizations, reclassifications, consolidations, mergers, sales,
transfers or other dispositions.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness or assets (other than cash
dividends or cash distributions payable out of consolidated earnings or earned
surplus or dividends or distributions referred to in Section 9(a)), or
subscription rights or warrants, the Warrant Price to be in effect after such
record date shall be determined by multiplying the Warrant Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the total number of shares of Common Stock outstanding multiplied by
the Market Price per share of Common Stock, less the fair market value (as
determined by the Company's Board of Directors in good faith) of said assets or
evidences of indebtedness so distributed, or of such subscription rights or
warrants, and the denominator of which shall be the total number of shares of
Common Stock outstanding multiplied by such current Market Price per share
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of Common Stock. For this purpose, the "Market Price" of the Common Stock shall
be the closing price of the Common Stock on the trading day first preceding the
date of the Exercise Agreement. Such adjustment shall be made successively
whenever such a record date is fixed.
(d) An adjustment shall become effective immediately after the
record date in the case of each dividend or distribution and immediately after
the effective date of each other event which requires an adjustment.
(e) In the event that, as a result of an adjustment made pursuant to
Section 9(a), the holder of the Warrant shall become entitled to receive any
shares of capital stock of the Company other than shares of Common Stock, the
number of such other shares so receivable upon exercise of the Warrant shall be
subject thereafter to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the Warrant
Shares contained in this Warrant.
(f) Shares of Common Stock owned by or held for the account of the
Company or any majority-owned subsidiary shall not be deemed outstanding for the
purpose of any computation under this Agreement.
Section 10. FRACTIONAL INTEREST. The Company shall not be required to
issue fractions of Warrant Shares upon the exercise of the Warrant. If any
fraction of a Warrant Share would, except for the provisions of this Section, be
issuable upon the exercise of the Warrant (or specified portions thereof), the
Company shall round such calculation to the nearest whole number and disregard
the fraction.
Section 11. BENEFITS. Nothing in this Warrant shall be construed to give
any person, firm or corporation (other than the Company and the Warrantholder)
any legal or equitable right, remedy or claim, it being agreed that this Warrant
shall be for the sole and exclusive benefit of the Company and the
Warrantholder.
Section 12. NOTICES TO WARRANTHOLDER. Upon the happening of any event
requiring an adjustment of the Warrant Price, the Company shall forthwith give
written notice thereof to the Warrantholder at the address appearing in the
records of the Company, stating the adjusted Warrant Price and the adjusted
number of Warrant Shares resulting from such event and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based. The certificate of the Company's independent certified
public accountants shall be conclusive evidence of the correctness of any
computation made, absent manifest error. Failure to give such notice to the
Warrantholder or any defect therein shall not affect the legality or validity of
the subject adjustment.
Section 13. IDENTITY OF TRANSFER AGENT. The Transfer Agent for the Common
Stock is Registrar and Transfer Company, Cranford, New Jersey.. Forthwith upon
the appointment of any subsequent transfer agent for the Common Stock or other
shares of the
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Company's capital stock issuable upon the exercise of the rights of purchase
represented by the Warrant, the Company will fax to the Warrantholder a
statement setting forth the name and address of such transfer agent.
Section 14. NOTICES. Any notice pursuant hereto to be given or made by the
Warrantholder to or on the Company shall be sufficiently given or made
personally or if sent by an internationally recognized courier by next day or
two day delivery service, addressed as follows:
FaxSav Incorporated
399 Thornall Street
Edison, NJ 08837
Telephone: 732/906-2000
Telefax: 732/906-1113
Attention: President
or such other address as the Company may specify in writing by notice to the
Warrantholder complying as to delivery with the terms of this Section 14.
Any notice pursuant hereto to be given or made by the Company to or on the
Warrantholder shall be sufficiently given or made if personally delivered or if
sent by an internationally recognized courier service by overnight or two-day
service, to the address set forth on the books of the Company or, as to each of
the Company and the Warrantholder, at such other address as shall be designated
by such party by written notice to the other party complying as to delivery with
the terms of this Section 14.
All such notices, requests, demands, directions and other communications
shall, when sent by courier, be effective two (2) days after delivery to such
courier as provided and addressed as aforesaid.
Section 15. REGISTRATION RIGHTS. The initial holder of this Warrant is
entitled to the benefit of certain registration rights in respect of the Warrant
Shares as provided in the Purchase Agreement dated as of December 24, 1998.
Section 16. SUCCESSORS. All the covenants and provisions hereof
by or for the benefit of the Investor shall bind and inure to the benefit
of its respective successors and assigns hereunder.
Section 17. GOVERNING LAW. This Warrant shall be deemed to be a contract
made under the laws of the State of New York, and for all purposes shall be
construed in accordance with the laws of said State.
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IN WITNESS WHEREOF, the parties hereto have caused this Warrant to be duly
executed, as of the day and year first above written.
FaxSav Incorporated
By: /s/ Peter S. Macaluso
--------------------------------
Name: Peter S. Macaluso
Title: Vice President and CFO
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FAXSAV INCORPORATED
WARRANT EXERCISE FORM
FaxSav Incorporated
399 Thornall Street
Edison, NJ 08837
Attention: President
This undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant ("Warrant") for, and to purchase
thereunder by (CHECK AS APPLICABLE) payment by cash or certified or official
bank check or by wire transfer, _______________ shares of Common Stock ("Warrant
Shares") provided for therein, and requests that certificates for the Warrant
Shares be issued as follows:
-------------------------------
Name
--------------------------------
Address
--------------------------------
--------------------------------
and, if the number of Warrant Shares shall not be all the Warrant Shares
purchasable upon exercise of the Warrant, that a new Warrant for the balance of
the Warrant Shares
Dated: ,
------------------- ----
Signature:
------------------------------
------------------------------
Name (please print)
------------------------------
Address
------------------------------
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration
statement of FaxSav Incorporated (formerly Digitran Corporation, the "Company")
on Form S-3 of our report dated February 4, 1998, on our audits of the financial
statements and financial statement schedule of FaxSav Incorporated as of
December 31, 1997 and 1996 and for the years ended December 31, 1997, 1996 and
1995, which report is included in the Company's Annual Report on Form 10-K. We
also consent to the reference to our firm under the caption "Experts".
/s/ PRICEWATERHOUSECOOPERS, LLP
----------------------------------
PricewaterhouseCoopers, LLP
January 20, 1999
Florham Park, New Jersey
