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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 13, 2000
JFAX.COM, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-25965 51-0371142
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
6922 Hollywood Blvd, Suite 900
Los Angeles, California 90028
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (323)860-9200
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(Former name or former address, if changed since last report)
Item 5. Other Events
Merger Agreement
On July 13, 2000, JFAX.COM, Inc. (the "Company") entered into a merger
agreement (the "Merger Agreement") with eFax.com, Inc. ("EFAX"), and JFAX.COM
Merger Sub, Inc., a newly formed subsidiary of the Company (the "Merger Sub").
Under the terms of the Merger Agreement, EFAX has agreed to merge with the
Merger Sub (the "Merger") and become a wholly owned subsidiary of the Company.
As consideration for the Merger, EFAX's stockholders would receive the
following:
- For each share of EFAX's common stock, par value $.01 per
share ("EFAX Common Stock"), its holder would receive a fraction
of a share of the Company's
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common stock, par value $0.01 per share ("JFAX Common Stock"),
determined by the conversion number included in Annex A to this
report (the "Conversion Number").
- For each share of EFAX's Series D Convertible Preferred Stock,
par value $.01 per share ("Series D Stock"), outstanding
at the time of the Merger, its holder would receive 4,922.75
shares of JFAX Common Stock (collectively, if all 1,447 shares
of Series D Stock are outstanding at the time of the Merger,
7,123,219 shares), which amount will increase between July 12,
2000 and the time of the Merger at an annualized rate of 3.5%.
The holders of the preferred stock (the "Investors") have agreed
to receive a warrant to acquire shares of JFAX Common Stock
under the circumstances described below under "Agreement with
Investors" instead of a portion of the JFAX Common Stock which
they would otherwise have a right to receive as consideration
for the Merger.
- The holders of EFAX Common Stock and Series D Stock will receive
cash in lieu of fractional shares of JFAX Common Stock.
Because the consideration to be received by the Investors is a fixed
amount, subject to the 3.5% annualized rate of increase, any increase or
decrease in the total consideration received in the Merger will only affect the
holders of EFAX Common Stock. The Conversion Number will vary depending on:
- The amount outstanding under the term loan agreement between
EFAX and the Company (the "Term Loan Agreement") on the closing
date for the Merger. Under the Term Loan Agreement, EFAX,
subject to satisfying the conditions contained in the Term Loan
Agreement, may borrow up to $5 million from the Company;
- On the closing date of the Merger, the amount of cash which
EFAX has (other than cash from the sale of certain assets of
EFAX), the amount of certain of EFAX's prepaid expenses and the
amount of EFAX's overdue payables;
- The number, if any, of the shares of EFAX Common Stock into
which the shares of Series D Stock are converted prior to the
time of the Merger; and
- The timing of the Merger.
For example only, for each share of EFAX Common Stock, a stockholder of
EFAX would receive 0.281 shares of JFAX Common Stock (collectively, 3,801,645
shares) if:
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- $5 million is outstanding under the Term Loan Agreement on the
closing date for the Merger;
- On the closing date of the Merger, EFAX has no cash on hand and
it has no prepaid expenses or accounts payable which affect the
Conversion Number; and
- the Merger occurs on October 31, 2000.
As of the date of this report, EFAX has borrowed $2,250,000 under the
Term Loan Agreement.
In the event that the Merger does not occur and EFAX, within two years
of the termination of the Merger discussions with the Company, is acquired by
another entity or EFAX receives at least $5 million from a securities offering
or offerings, EFAX will be required to pay JFAX an amount equal to:
- 1,750,000, times
- The fair market value of one share of EFAX Common Stock at the
time of the acquisition or the securities offering, less $0.10.
The 1,750,000 amount will be reduced to 750,000 if the termination of
the Merger Agreement occurs because the Company's stockholders do not approve
the Merger or if the Company materially breaches the Merger Agreement.
If EFAX is acquired by another entity, it must pay the amount to the
Company promptly following the consummation of the acquisition. If EFAX does a
securities offering, it is required to make the payment within 270 days of the
offering.
The consummation of the Merger will depend upon the approval of the
Merger by both the holders of a majority of the outstanding shares of EFAX
Common Stock and the holders of a majority of the outstanding shares of JFAX
Common Stock being voted at the meeting to approve the Merger. To complete the
Merger, EFAX and the Company must also fulfill the other conditions required by
the Merger Agreement. Prior to the stockholders' meetings, a registration
statement on Form S-4 must be filed with the Securities and Exchange Commission
and be declared effective. If all of the required conditions are met, the Merger
is expected to be completed in the fourth quarter of 2000.
The details of the Merger and the Merger Agreement are more fully
presented in the Merger Agreement which is attached as Exhibit 2.1 to this
report.
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Agreements with Investors
On July 13, 2000, EFAX entered into an exchange agreement (the "Exchange
Agreement") with the Investors and EFAX and the Company entered into a side
agreement (the "Side Agreement") with the Investors. Under the terms of the
Exchange Agreement, the shares of Series B Convertible Preferred Stock held by
the Investors were converted into an equal number of shares of Series D Stock
on July 17, 2000.
Under the terms of the Side Agreement, each Investor has agreed that as
consideration for the Merger it would receive:
- Shares of JFAX Common Stock to the extent that such shares held
by the Investor and its affiliates do not exceed 10% (the "10%
Limitation") of the total outstanding shares of JFAX Common
Stock immediately following the Merger; and
- A warrant, exercisable for JFAX Common Stock at $0.01 per share,
to acquire the number of shares of JFAX Common Stock which could
not be acquired because of the 10% Limitation.
The Conversion Number will be unaffected by whether the Investors
receive shares of JFAX Common Stock or a warrant to acquire shares of JFAX
Common Stock.
In addition, the Side Agreement provides that the Company will file a
resale registration statement to permit the Investors to resell any shares of
JFAX Common Stock which the Investors may acquire upon the exercise of the
warrant. The Investors also have agreed to waive any appraisal rights which they
may have in connection with the Merger.
Under the terms of the Certificate of Designations, Preferences and
Rights of the Series D Stock, the holders of Series D Stock have the right to
require EFAX to redeem shares of Series D Stock for cash in certain events,
including if the total consideration payable to the holders of EFAX Common Stock
is more than 4.8 million shares of JFAX Common Stock.
Agreement with IGC
On June 30, 2000, EFAX and the Company entered into an Agreement of
Understanding (the "Agreement of Understanding") with Integrated Global
Concepts, Inc. ("IGC"). IGC has been providing EFAX with development and
co-location services necessary for EFAX's operations. The Agreement of
Understanding provides that at the time of the closing of the Merger:
- IGC will grant EFAX a license to certain software developed by
IGC which EFAX uses in its operations.
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- IGC will waive all claims which it may have against EFAX
in connection with development services it has previously
provided to EFAX.
- The Company will issue 2,000,000 shares of JFAX Common Stock to
IGC. In addition, the Agreement of Understanding provides that
the Company will file a resale registration statement to permit
IGC to resell the shares of JFAX Common Stock which it is
acquiring.
The Agreement of Understanding was entered into as a result of EFAX's
desire to acquire a license to the software developed by IGC, to pay IGC for
development work performed by IGC for which IGC claimed it had not received
adequate compensation and to ensure the provision of certain transition
services.
NOTE TO FORWARD-LOOKING STATEMENTS
The statements contained in this report that are not purely historical
are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including
statements regarding the timing of the Merger, EFAX's expected borrowings under
the Term Loan Agreement and the calculation of the Conversion Number which are
intended to be forward-looking statements within the meaning of the Securities
Act and the Exchange Act. All forward-looking statements included in this report
are based on information available to the Company on the date of this document,
and the Company assumes no obligation to update any forward-looking statements.
Investors are cautioned that any forward-looking
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statements are not guarantees of future results and are subject to risks and
uncertainties that actual results may differ materially from those included in
the forward-looking statements as a result of various factors. Factors that
could affect the Conversion Number include those affecting EFAX's cash flow and
the timing of the closing of the transaction. Factors that could affect the date
of the Merger include (a) events that could affect the date of any filing of the
registration statement on Form S-4; (b) events that could affect the timing of
the effectiveness of the registration statement, including substantive issues
raised by the Securities and Exchange Commission; (c) the Company's or EFAX's
inability to obtain a quorum or the required affirmative vote for the respective
stockholders meetings; and (d) difficulty in obtaining approvals from third
parties, including governmental entities, which may be necessary to meet the
conditions required to complete the Merger. Factors that could affect the amount
which EFAX borrows under the Term Loan Agreement include (a) the timing of the
Merger; (b) any factor affecting EFAX's liquidity, including revenues from
operations and unexpected expenses; and (c) EFAX's ability to meet the
conditions of the Term Loan Agreement in order to be able to borrow additional
amounts.
Item 7. Financial Statements and Exhibits
(c) Exhibits
2.1 Agreement and Plan of Merger among JFAX.COM, Inc., JFAX.COM Merger
Sub, Inc. and eFax.com, dated July 13, 2000.*
10.1 Side Agreement among eFax.com, JFAX.COM, Inc., Wingate Capital
Ltd. and Fisher Capital Ltd., dated July 13, 2000.*
10.2 Agreement of Understanding among eFax.com, JFAX.COM, Inc. and
Integrated Global Concepts, Inc., dated June 30, 2000.*
10.3 Exchange Agreement, between eFax.com and the current holders of
eFax.com's Series B Convertible Preferred Stock, dated as of July 13,
2000.*
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10.4 First Amendment to Term Loan Agreement, between eFax.com and
JFAX.COM, Inc., dated July 13, 2000.*
10.5 Allonge to Promissory Note made by eFax.com in favor of
JFAX.COM, Inc., dated July 13, 2000.*
99.1 Press Release, dated July 14, 2000, relating to the proposed merger
of eFax.com and JFAX.COM, Inc.*
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* Incorporated by reference to the exhibits to the 8-K, as amended, filed with
the Commission by eFax.com on July 14, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
JFAX.COM, INC.
/s/ Nicholas V. Morosoff
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Nicholas V. Morosoff
Secretary
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ANNEX A
The exchange ratio, or the number of shares of JFAX Common Stock into which each
share of EFAX Common Stock shall be convertible, and for which each share of
EFAX Common Stock shall be exchanged, shall be determined by the following
formula:
CN = 11,000,000 + $5,000,000 - LA + M - O$
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N FMV(J) x N
Where:
CN = the Conversion Number (the second of the fractions comprising CN
may be a negative number).
LA = the sum of (x) the amount of loan proceeds disbursed under the Term
Loan Agreement as of the closing date for the Merger (the "Closing
Date") which have not been repaid and (y) the amount of payables of EFAX
that are 45 days or more past due as of the Closing Date.
FMV(J) = the average closing price of JFAX Common Stock for the five
trading days beginning on and including the seventh trading day prior to
the Closing Date.
M = the sum of (x) cash on hand at EFAX as of the Closing Date (but not
including any cash deposited or required under the terms of the Term
Loan Agreement to be deposited into the Asset Sales Account (as defined
in the Term Loan Agreement) plus (y) any of EFAX's prepaid rents and
insurance premiums (but only to the extent a pro-rata refund of any such
premium is available as to insurance policies (other than EFAX's D&O
insurance policy) which will be cancelled, at the election of JFAX or
otherwise, following the closing) as of closing (in no event will M
exceed LA).
O$ = the amount of any cash received by EFAX upon (a) exercise of
employee stock options under EFAX's stock option plans, (b) purchases
pursuant to EFAX's employee stock purchase plan, or (c) exercise of
EFAX's warrants during the period between July 13, 2000 and the date of
the Merger.
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N = an amount equal to the sum of (w) 13,520,895 (the number of
outstanding shares of EFAX Common Stock on July 13, 2000), plus (x)
shares of EFAX Common Stock, if any, issued upon conversion of shares of
Series D Stock during the period between July 13, 2000 and the time
immediately prior to the time of the Merger, plus (y) any other shares
of EFAX Common Stock issued during the period between July 13, 2000 and
the time immediately prior to the Merger, except any shares issued (a)
upon exercise of employee stock options under EFAX's stock option plans,
(b) upon purchase pursuant to EFAX's employee stock purchase plan, or
(c) upon exercise of EFAX's warrants, plus (z) the total number of
shares of EFAX Common Stock that would be issuable upon the conversion
of the shares of Series D Stock that remain outstanding immediately
prior to the Merger, assuming that all such shares of Series D Stock
were then converted.
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