As filed with the Securities and Exchange Commission
on April 25, 1997.
Registration No. 333-23193
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Tel-Save Holdings, Inc.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation or organization)
23-2827736
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(I.R.S. Employee Identification Number)
6805 Route 202, New Hope, Pa. 18938 (215) 862-1500
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(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Aloysius T. Lawn, IV
General Counsel and Secretary
Tel-Save Holdings, Inc.
6805 Route 202
New Hope, PA 18938
(215) 862-1500
---------------------------------------------------------
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Approximate date of commencement of proposed sale to the
public: From time to time after this Registration Statement
becomes effective.
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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 (as defined below), 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. ( )
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 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
<PAGE>
Subject to Completion,
April 25, 1997
Prospectus
6,675,400 Shares
Tel-Save Holdings, Inc.
Common Stock
This Prospectus covers the offering for resale of up to 6,675,400
shares of common stock, par value $.01 per share (the "Common Stock"), of
Tel-Save Holdings, Inc., a Delaware corporation (the "Company"), which may be
offered from time to time by the Selling Stockholders named herein under
"Selling Stockholders." The Company will receive no part of the proceeds of
sales made hereunder. All expenses of registration incurred in connection with
this public offering are being borne by the Company, except for the fees,
expenses and disbursements of the Selling Stockholders' counsel. None of the
shares of Common Stock have been registered prior to the filing of the
Registration Statement of which this Prospectus is part.
The Common Stock is quoted on the Nasdaq National Market under
the symbol "TALK." On April 22, 1997, the last reported sale price of the Common
Stock was $17.25.
The Shares may be offered for sale through underwriters or
dealers or from time to time on the Nasdaq National Market System, or otherwise,
at prices then obtainable. The Selling Stockholders and any broker executing
selling orders on behalf of the Selling Stockholders may be deemed to be
underwriters within the meaning of the Securities Act. Commissions received by
underwriters or any such broker may deemed to be underwriting commissions under
the Securities Acts. See "PLAN OF DISTRIBUTION."
Prospective investors should carefully consider the matters
discussed under "RISK FACTORS" beginning on page 5.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is ___________.
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Information contained herein is subject to completion or
amendment. A registration statement relating to these securities has been filed
with the Securities and Exchange Commission. These securities may not be sold
nor may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
No dealer, salesperson or other individual has been authorized to
give any information or to make any representations other than those contained
in or incorporated by reference in this Prospectus in connection with the
offering made by this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the Company
or any of its agents. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create an implication that there has
been no change in the affairs of the Company since the date as of which
information is given in this Prospectus. This Prospectus does not constitute an
offer or solicitation by anyone in any jurisdiction in which the person making
such offer or solicitation is not qualified to do so or to any person to whom,
it is unlawful to make such solicitation.
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AVAILABLE INFORMATION
The Company is subject to the information reporting requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files periodic reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information can be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the Commission located at Seven World Trade Center, 13th
Floor, New York, New York 10048 and Northwestern Atrium Center, 500 West Madison
Street (Suite 1400), Chicago, Illinois 60661. Copies of all or part of such
materials may also be obtained at prescribed rates from the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. In addition, the Commission maintains a
Web site at http://www.sec.gov that contains reports, proxy statements and other
information. Such material also can be inspected at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
The Company has filed with the Commission a registration
statement (which term shall encompass any amendments thereto) on Form S-3 under
the Securities Act of 1933, as amended (the "Securities Act") with respect to
the securities offered hereby (the "Registration Statement"). This Prospectus,
which constitutes part of the Registration Statement, does not contain all of
the information set forth in the Registration Statement, certain items of which
are contained in exhibits to the Registration Statement as permitted by the
rules and regulations of the Commission. For further information with respect to
the Company and the securities offered by this Prospectus, reference is made to
the Registration Statement, including the exhibits thereto, and the financial
statements and notes thereto filed or incorporated by reference as a part
thereof, which are on file at the offices of the Commission and may be obtained
upon payment of the fee prescribed by the Commission, or may be examined without
charge at the offices of the Commission. Statements made in this Prospectus
concerning the contents of any document referred to herein are not necessarily
complete, and, in each such instance, are qualified in all respects by reference
to the applicable documents filed with the Commission. The Registration
Statement and the exhibits thereto filed by the Company with the Commission may
be inspected and copied at the locations described above.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission
pursuant to the Exchange Act (Commission File No. 0-26728) are incorporated
herein by reference:
(a) the Company's annual report on Form 10-K for
the year ended December 31, 1996;
(b) the Company's periodic report on Form 8-K dated
March 7, 1997;
(c) the Company's periodic report on Form 8-K dated
April 24, 1997; and
(d) the description of the Company's Common Stock
contained in the Company's registration statement pursuant to
Section 12(g) of the Exchange Act on Form 8-A, filed on September
8, 1995.
All documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the filing of a post-effective amendment that indicates the
termination of this offering shall be deemed to be incorporated in this
Prospectus by reference and to be a part hereof from the date of filing of such
documents.
Any statements contained herein or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
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The Company will provide, without charge to each person to whom
this Prospectus has been delivered, a copy of any or all of the documents
referred to above that have been or may be incorporated by reference herein
other than exhibits to such documents (unless such exhibits are specifically
incorporated by reference therein). Requests for such copies should be directed
to Tel-Save Holdings, Inc., 6805 Route 202, New Hope, Pennsylvania 18938
Attention: Aloysius T. Lawn, IV, General Counsel and Secretary. Telephone
requests may be directed to (215) 862-1500.
THIS PROSPECTUS CONTAINS AND INCORPORATES BY REFERENCE CERTAIN
FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995 WITH RESPECT TO THE FINANCIAL CONDITION, RESULTS
OF OPERATIONS AND BUSINESS OF THE COMPANY, INCLUDING, WITHOUT LIMITATION,
STATEMENTS UNDER THE CAPTION "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" IN THE COMPANY'S ANNUAL AND QUARTERLY
REPORTS. THESE FORWARD LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND
UNCERTAINTIES. NO ASSURANCE CAN BE GIVEN THAT ANY OF SUCH MATTERS WILL BE
REALIZED. FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
CONTEMPLATED BY SUCH FORWARD LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THE
FACTORS DISCUSSED IN THE SECTION HEREIN ENTITLED "RISK FACTORS."
RISK FACTORS
AOL Agreement
The Company and its wholly-owned operating subsidiary, Tel-Save,
Inc. (referred to collectively as the "Company"), have entered into a
Telecommunications Marketing Agreement (the "Agreement"), dated as of February
22, 1997 and effective as of February 25, 1997, with America Online, Inc.
("AOL"), under which the Company will be the exclusive provider of long distance
telecommunications services to be marketed by AOL to all of the subscribers of
AOL's online network. The Company made an initial payment of $100 million to AOL
at signing and agreed to provide marketing payments to AOL based on a percentage
of the Company's profits from the services (between 50% and 70% depending on the
number of subscribers to the services). The Agreement provides that $43 million
of the initial payment will be offset and recoverable by the Company through
reduction of such profit-based marketing payments during the initial term of the
Agreement or, subject to certain monthly reductions by offset of the amount
thereof, directly by AOL upon certain earlier terminations of the Agreement. The
$57 million balance of the initial payment will be offset and is recoverable
through a percentage of such profit-based marketing payments made after the
first five years of the
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Agreement (when extended beyond the initial term) and by offset against a
percentage of AOL's share of the profits from the services after termination or
expiration of the Agreement. Any portion of the $43 million not previously
recovered or reduced in amount would be added to the $57 million and would be
similarly recoverable.
The profitability of the Agreement for the Company depends on the
Company's ability to develop in a timely fashion online ordering, call detail,
billing and customer services for the AOL members, which will require, among
other things, being able to identify and employ sufficient personnel qualified
to provide the necessary programming; the ability of the Company and AOL to work
together effectively to develop jointly the online marketing contemplated by the
Agreement; the response rate to online promotions to AOL's online subscribers,
most of whom are expected to be potential residential customers rather than
business customers to which the Company has marketed historically; the Company's
ability to expand OBN to accommodate increased traffic levels; and AOL's ability
to execute successfully its publicly stated business plan and implement its
announced network changes to improve member access to its online service.
Dependence on AT&T
The design for the Company's telecommunications network, which is
known as "OBN," "One Better Net" or "One Better Network," relies upon AT&T Corp.
("AT&T") transmission facilities, international long distance services, and
operator services. If AT&T were to terminate the Company's use of AT&T
transmission facilities, international long distance services, or operator
services, the Company would seek to enter into similar arrangements with other
long distance providers. There can be no assurance that the terms of such
agreements would be favorable to the Company. The Company's current operations
and strategy with OBN emphasize the quality and functionality of the AT&T (now
Lucent Technologies, Inc., hereinafter "Lucent") manufactured equipment,
AT&T-provided transmission facilities and billing services, and AT&T operator
services. Loss of the ability to market OBN emphasizing the quality of these
AT&T-based services could have a material adverse effect on the Company's
results of operations and financial conditions.
The Company also will continue to depend on AT&T to provide the
AT&T telecommunication services that the Company resells directly to end users
and to independent marketing companies known as "partitions," which in turn
resell the services on the AT&T network to end user. The Company's ability to
resell such services on the AT&T network depends upon whether the Company can
continue to maintain a favorable relationship
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with AT&T. AT&T may terminate the provision of services under its tariffs for
limited reasons, including for nonpayment by the Company, for national defense
purposes or if the provision of services to the Company were to have a
substantial adverse impact on AT&T's network. While AT&T policy historically has
been to provide 30-day notice prior to termination of services, there are no
specific notice requirements with respect to such termination. Although the
Company has no specific contingency arrangements in place to provide service to
end users if AT&T were to discontinue its service to the Company, based upon
discussions that the Company has had with other long distance providers and
based upon such providers' published tariffs, the Company believes that it could
negotiate and obtain contracts with other long distance providers to resell long
distance services at rates comparable to its current contract tariffs with AT&T.
If the Company were to enter into contracts with another provider, however, the
Company believes it would take approximately 14 to 28 days to switch end users
to that provider. Although the Company believes it may have the right to switch
end users without their consent to such other providers, end users have the
right to discontinue such service at any time. Accordingly, the termination or
non-renewal of the Company's contract tariffs with AT&T or the loss of
telecommunication services from AT&T likely would have a material adverse effect
on the Company's result of operations and financial condition.
Risks Related to Development of OBN
Prior to the deployment of OBN, the Company marketed services by
emphasizing its use of AT&T's transmission facilities and switches ("AT&T
network") and billing services. Although such marketing can continue for
services on the AT&T network that the Company resells, the Company has had to
reduce its emphasis on AT&T in marketing OBN, which makes less use of the AT&T
network. There can be no assurance that the Company will be able to market OBN
successfully, even though OBN uses Company-owned, AT&T (now Lucent) manufactured
switching equipment and AT&T transmission facilities and employs the billing
services of AT&T and AT&T's College and University Systems ("ACUS"). Failure to
market OBN successfully would have a material adverse effect on the Company's
financial condition and results of operations.
Additionally, there can be no assurance that the Company will be
able to maintain or secure future AT&T contract tariffs or contracts for
transmission at cost-effective rates. Further, to the extent that the Company,
rather than AT&T, is responsible for providing the Company's telecommunications
services, the Company's potential liability increases if such services are not
provided.
OBN utilizes AT&T (now Lucent) manufactured 5ESS-2000 switching
equipment, which employs the new Digital Networking
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Unit-SONET (Synchronous Optical Network) technology and initially utilized the
5E10 software, which was recently upgraded to 5E11 software. While the 5ESS-2000
switches have operated successfully in the local environment, the Digital
Networking Unit-SONET and 5E11 software offer new technologies that have not
been used extensively, and there can be no assurance that the switches will
function effectively.
Additional management personnel and information systems are
required to support OBN, the costs of which are increasing the Company's
overhead. In order for the Company to provide service over the OBN, the Company
must operate and be responsible for the maintenance of its own switching
equipment. While the Company has hired additional personnel with experience in
operating a switch-based provider, there can be no assurance that the Company
will be successful in operating as a switch-based provider.
Moreover, operation as a switch-based provider subjects the
Company to risk of significant interruption in the provision of services on OBN
in the event of damage to the Company's facilities (switching equipment or
connections to AT&T transmission facilities) such as could be caused by fire or
natural disaster. Such interruptions could have a material adverse effect on the
Company's financial condition and results of operations.
The Company's deployment of OBN is intended to increase gross
margins, which have decreased over the past 3 years during which the Company has
operated as a switchless, nonfacilities-based reseller of AT&T services. Gross
profit, as a percentage of sales, has decreased largely as a result of the
Company's offering higher volume discounts with new and larger partitions. Any
difficulties in operating OBN could result in a negative impact on margins and
the results of operations.
Potential Decline in Pricing of Long Distance Services
Although the basic rates of the three largest long distance
carriers -- AT&T, MCI Communications Corp. and Sprint Corporation -- have
consistently increased over the past three years and remained unchanged through
the fourth quarter of 1996, AT&T and other carriers have announced new price
plans aimed at residential customers (the Company's primary target audience
under the AOL contract) with significantly simplified rate structures, which may
have the impact of lowering overall long distance prices. There can be no
assurance that AT&T or other carriers will not make similar offerings available
to the small to medium-sized businesses that the Company serves. Although
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OBN makes the Company more price competitive, a reduction in long distance
prices still may have a material adverse impact on the Company's profitability.
Dependence Upon Key Personnel
The success of the Company's operations during the foreseeable
future will depend largely upon the continued services of Daniel Borislow, the
Company's Chairman and Chief Executive Officer. Mr. Borislow has entered into an
employment agreement with the Company that contain non-competition covenants
that extend for a period of up to 18 months following termination of employment.
The Company's success also depends in part on its ability to
manage, attract and retain qualified personnel. Competition for such personnel
is intense. There can be no assurance that the Company will be successful in
attracting and retaining the personnel that it requires to manage the growth of
its business successfully. The Company's results of operations could be
adversely affected if the Company were unable to attract, manage and retain
these personnel, or if revenue were to fail to increase at a rate sufficient to
absorb the resulting increase in expenses.
Reliance on AT&T Billing Services
The Company uses billing services provided by AT&T and ACUS.
There can be no assurance that either AT&T or ACUS will continue to offer
billing services to the Company on terms acceptable to the Company. AT&T has
removed its name on bills for which it provides billing services and could
further obscure its role in providing billing services or cease providing
billing services altogether. Loss of the AT&T and ACUS billing services or
decreased customer awareness of the AT&T name could have a material adverse
effect on the Company's marketing strategy and retention of existing partitions
and end users. The Company is developing its own information systems in order to
have its own billing capacity, although the Company has not provided such direct
billing services to end users in the past.
Competition
The long distance telecommunications industry is highly
competitive and affected by the introduction of new services by, and the market
activities of, major industry participants. Competition in the long distance
business is based upon pricing, customer service, billing services and perceived
quality. The Company competes against various national and regional long
distance carriers and competes against the numerous companies in the long
distance telecommunications market that offer essentially the same services as
the Company. Several of the Company's competitors are substantially larger and
have greater
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financial, technical and marketing resources than the Company. The Company's
competitors that resell non-AT&T services do so at prices below that which the
Company can provide as an AT&T switchless reseller, although the deployment of
OBN enables the Company to be price competitive with non-AT&T resellers at
current industry pricing levels. The ability of the Company to compete
effectively in the telecommunications industry will depend upon the Company's
continued ability to provide high quality services at prices generally
competitive with, or lower than, those charged by its competitors. Although the
Company believes that gross margins will improve following the deployment of
OBN, revenues could decline if competition for long distance service forced the
Company to offer services at greater discounts.
Changes in the regulation of the telecommunications industry may
impact the Company's competitive position. The Telecommunications Act of 1996
(the "1996 Act") effectively opens up the long distance market to competition
from the Bell Operating Companies and Regional Holding Companies (collectively,
"RBOCs"). The entry of these well-capitalized and well-known entities into the
long distance market could significantly alter the competitive environment in
which the Company operates because of the established relationship the RBOCs
have with their local service customers (and the likelihood that the RBOCs will
take advantage of those relationships), as well as the possibility of
interpretations of the 1996 Act favorable to the RBOCs, which may make it more
difficult for other providers, such as the Company, to compete to provide long
distance services. Consolidation and alliances across geographic regions (e.g.,
Bell Atlantic/Nynex and SBC Communications Inc./Pacific Telesis Group
domestically and BT/MCI and France Telecom/Deutsche Telekom/Sprint
internationally) and across industry segments (e.g., WorldCom/MFS/UUNet) may
also impact competition in the telecommunications market and the position of the
Company.
Maintenance of End User Base
End users are not obligated to purchase any minimum usage amount
and can discontinue service, without penalty, at any time. There can be no
assurance that end users will continue to buy their long distance telephone
service through the Company or through partitions that purchase services from
the Company. In the event that a significant portion of the Company's end users
decides to purchase long distance service from another long distance service
provider, there can be no assurance that the Company will be able to replace its
end user base from other sources. Loss of a significant portion of the Company's
end users would have a material adverse effect on the Company's results of
operations and financial condition.
A high level of customer attrition is inherent in the long
distance industry, and the Company's revenues are affected by such attrition.
Attrition is attributable to a variety of factors, including termination of
customers by the Company for non-payment and the initiatives of existing and new
competitors as they engage in, among other things, national advertising
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campaigns, telemarketing programs and the issuance of cash or other forms of
incentives.
Expansion into New Business Activities
In addition to relying on marketing performed by its partitions,
the Company in 1996 began to market its long distance service directly to small
and medium-sized businesses and is now beginning to market its long distance
service directly to residential customers as well. The Company expects that in
1997 a large majority of its direct orders will be generated from direct
marketing. Such direct marketing has and is expected to continue to increase the
Company's costs as it hires new employees, provides increased customer support
and collection services, and acquires additional equipment and facilities. The
Company is required to comply with additional regulatory standards for direct
marketing of telecommunications services, and is subject to increased risk of
customer complaints or federal or state enforcement actions with respect to its
marketing and order verification practices. Actions have been brought against
many carriers based on allegations of "slamming" or the unauthorized conversion
of a customer's chosen long distance carrier. Direct marketing by the Company
may also adversely affect its relationship with its partitions as both the
Company and the partitions will be competing to provide similar services. There
can be no assurance that any costs savings will be realized from direct
marketing.
Reliance on Independent Carrier and Marketing Companies; Lack of Control Over
Marketing Activities
Historically, the Company has marketed its services primarily
through independent carriers and marketing companies known as "partitions,"
which generally have entered into non-exclusive agreements with the Company.
Most partitions to date have made no minimum use or revenue commitments to the
Company under these agreements. If the Company were to lose access to services
on the AT&T network or billing services or experiences difficulties with OBN,
the Company's agreements with partitions could be adversely impacted.
Certain marketing practices, including the methods and means to
convert a customer's long distance telephone service from one carrier to
another, have recently been subject to increased regulatory review at both the
federal and state levels. Provisions in the Company's partition agreements
mandate compliance by the partitions with applicable state and federal
regulations. Because the Company's partitions are independent carriers and
marketing companies, however, the Company is unable to control completely such
partitions' activities. The Company is also unable to predict the extent of its
partitions' compliance with applicable regulations or the effect of such
increased regulatory review. This increased regulatory review could also affect
possible future acquisitions of new business from new partitions or other
resellers.
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Government Regulation
The Company is subject to regulation by the FCC and by various
state public service and public utility commissions as a nondominant provider of
long distance services. Under an FCC order adopted on October 29, 1996,
effectiveness of which has been suspended as of the date hereof by a court
order, the Company, its partitions and all other non-dominant interexchange
carriers would after nine months be required to withdraw their tariffs for
interstate service with the FCC. The Company and its partitions, however, are
still required to file tariffs for international service with the FCC and to
obtain authority and file tariffs for intrastate service provided in most of the
states in which they market long distance services. Changes in existing policies
or regulations in any state or by the FCC could materially adversely affect the
Company's results of operations, particularly if those policies make it more
difficult to obtain service from AT&T or other long distance companies at
competitive rates, or otherwise increase the cost and regulatory burdens of
providing services. There can be no assurance that the regulatory authorities in
one or more states or the FCC will not take action having an adverse effect on
the business or financial condition or results of operations of the Company.
Regulatory action by the FCC or the states also could adversely affect the
partitions, or otherwise increase the partitions' cost and regulatory burdens of
providing long distance services. As it engages in direct marketing to end
users, the Company will be subject to applicable regulatory standards for
marketing activities and the increased FCC and state attention to certain
marketing practices may become more significant to the Company.
Adverse Effect of Rapid Change in Technology and Service
The telecommunications industry has been characterized by rapid
technological change, frequent new service introductions and evolving industry
standards. The Company believes that its future success will depend on its
ability to anticipate such changes and to offer on a timely basis services that
meet these evolving standards. There can be no assurance that the Company will
have sufficient resources to make necessary investments or to introduce new
services that would satisfy an expanded range of partition and end user needs.
Control by Existing Stockholders; Anti-Takeover Considerations
As of the date of this Prospectus, Mr. Borislow owns beneficially
approximately 37.6% of the outstanding Common Stock. Accordingly, Mr. Borislow,
individually, effectively has the ability to control the election of all of the
members of the Company's Board of Directors and the outcome of corporate actions
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requiring majority stockholder approval. Even as to corporate transactions in
which super-majority approval may be required, such as certain fundamental
corporate transactions, Mr. Borislow effectively will control the outcome of
such actions.
The Company also has an authorized class of 5,000,000 shares of
preferred stock that may be issued by the Board of Directors on such terms and
with such rights, preferences and designations as the Board may determine.
Issuance of such preferred stock, depending upon the rights, preferences and
designations thereof, may have the effect of delaying, deterring or preventing a
change in control of the Company. In addition, the Delaware General Corporation
Law and other provisions of the Company's Amended and Restated Certificate of
Incorporation, including the provision of the Amended and Restated Certificate
that provides that the Board of Directors be divided into three classes each of
which is elected for three years, and the Bylaws contain provisions that may
have the effect of delaying or preventing a change in control of the Company.
Such anti-takeover effects may deter a third party who would
propose to acquire the Company or to engage in a similar transaction affecting
control of the Company in which the Company's stockholders might receive a
premium for their shares over the then-current market value.
Shares Eligible for Future Sale
Future sales of substantial amounts of the Company's Common Stock
could adversely affect the market price of the Common Stock. As of the date of
this Prospectus, Mr. Borislow owns beneficially 37.6% of the outstanding Common
Stock (including 2.4% of the Common Stock offered hereby and held in the escrow
arrangement described herein under "SELLING STOCKHOLDERS" and 1.0% held in other
voting trust agreements) and a decision by Mr. Borislow to sell his shares could
adversely affect the market price of the Common Stock. Of the Company's
64,158,823 shares of Common Stock, 37,008,823 shares are freely tradeable by
persons other than "affiliates" of the Company. Of the remaining 27,150,000
shares of Common Stock, none are, under current interpretations, eligible for
resale until after the expiration of the lock-up period pursuant to Rule 144
under the Securities Act on April 29, 1997.
There are outstanding options to purchase 7,853,800 shares of
Common Stock held by employees, former employees or directors of the Company. In
addition, there are warrants to purchase up to 13,100,000 shares of Common
Stock, which includes warrants to purchase 12,000,000 shares issued to America
Online, Inc.
Paul Rosenberg, the holder of 7,590,000 shares of Common Stock,
has the right, under certain conditions, to participate in future registrations
of Common Stock and to cause the Company to register certain shares of Common
Stock owned by
<PAGE>
-14-
him. Holders of warrants also have registration rights under certain conditions.
Sales of substantial amounts of Common Stock in the public
market, or the perception that such sales could occur, may adversely affect the
market price of the Common Stock.
THE COMPANY
The Company, originally incorporated in 1989 as Tel-Save, Inc.,
provides long distance telephone service throughout the United States primarily
to small and medium-sized businesses. For further information about the business
and operations of the Company, reference is made to the Company's reports
incorporated herein by reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
The principal executive offices of the Company are located at
6805 Route 202, New Hope, Pennsylvania 18938, and its telephone number is (215)
862-1500.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 100,000,000
shares of Common Stock, $.01 par value per share, and 5,000,000 shares of
undesignated Preferred Stock, $.01 par value per share. As of April 23, 1997,
64,158,823 shares of Common Stock were issued and outstanding. There were no
shares of Preferred Stock designated or issued. For further information about
the Company's authorized capital stock, reference is made to the Company's
reports incorporated herein by reference. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of
the Shares of Common Stock offered by this Prospectus.
SELLING STOCKHOLDERS
The Daniel Borislow Charitable Foundation offers for sale in this
Prospectus 1,200,000 shares that were contributed to it by Daniel Borislow, the
Company's Chairman, Chief Executive Officer and controlling shareholder, on
March 7, 1997.
Massachusetts Financial Services Company, Putnam OTC & Emerging
Growth Fund and Conseco Capital Management (the "Investors") offer for resale in
this Prospectus 5,475,400 shares that they acquired in a private sale on March
10, 1997 (the "Private Sale") from Mr. Borislow. Under the terms of the Private
Sale, Mr. Borislow, in return for a fixed payment, transferred 3,911,000 shares
to the Investors and deposited an additional 1,564,000 shares in escrow (the
"Escrowed Shares") for the benefit of the Investors. The Escrowed Shares will be
distributed to the Investors, in part or in full, if the average current market
price of the Common Stock in the 20 days prior to the fifth business day after
the date on which the Company announces its financial results for the third
quarter of 1997 (the "Determination Date") shall be lower than $16.50 per share.
The amount of Escrowed Shares to be distributed to the Investors is to be
determined by the percentage of decrease, if any, in the price of the Common
Stock. Until the Determination Date, Mr. Borislow retains sole voting powers
with respect to the Escrowed Shares and the right to receive all cash dividends
issued on the Escrowed Shares. After the Determination Date, any Escrowed Shares
that are not distributed to the Investors shall be returned to Mr. Borislow, and
Mr. Borislow offers for sale in this Prospectus any such shares.
<PAGE>
-15-
Mr. Borislow remains the beneficial owner of 24,236,540 shares of
the Company's Common Stock, including 7,590,000 pursuant to a voting trust with
Paul Rosenberg, 697,540 shares pursuant to other voting trusts, 1,564,400 shares
held in the escrow arrangement described above and 1,200,000 shares held by the
Daniel Borislow Charitable Foundation. Mr. Borislow has agreed that, except for
the contribution of up to 2,000,000 shares of Common Stock to a charitable
foundation, he will not sell, assign, transfer or otherwise dispose of any
additional shares of Common Stock for a period of 12 months from March 10, 1997
(the "Lock-up Period"); provided, however, that if the current market price of
the Common Stock shall increase by an amount greater than 20% from $16.50 per
share for a period of 20 consecutive trading days, the Lock-up Period shall be
reduced to 90 days. Mr. Borislow shall be released from the aforesaid
restrictions if a third party shall make an offer to purchase a majority of the
Company's outstanding Common Stock.
The following table sets forth certain information with respect
to beneficial ownership of the Company's Common Stock by the Selling
Stockholders and as adjusted to reflect the offering made herein.
<PAGE>
-16-
<TABLE>
<CAPTION>
Beneficial Number Beneficial
Ownership of Ownership
Prior to Offering Shares After Offering
----------------- --------------
Selling Stockholder Number Percentage Offered Number Percentage
- ------------------- ------ ---------- ------- ------ ----------
<S> <C> <C> <C> <C> <C>
Daniel Borislow
Charitable
Foundation(1) 1,200,000(1) 1.9% 1,200,000 0 0
c/o Tel-Save
Holdings, Inc.
6805 Route 202
New Hope, PA
18938
Massachusetts 8,185,500 12.8% 4,200,000(2) 3,985,500 6.2%
Financial
Services Company(2)
500 Boylston St.
Boston, MA 02116
Putnam OTC & Emerging 8,045,342 12.6% 575,400(3) 7,469,942 11.6%
Growth Fund(3)
One Post Office
Square
Boston, MA 02109
Conseco Capital(4) 500,000 * 700,000(4) 0 0
Management
11825 North
Pennsylvania St.
Carmel, IN 46032
Daniel Borislow(5) 24,236,540 37.6% 1,564,400(5) 22,672,140 35.2%
c/o Tel-Save
Holdings, Inc.
6805 Route 202
New Hope, PA
18938
</TABLE>
* less than 1%
(1) As of the date hereof, Daniel Borislow Charitable Foundation, a District of
Columbia non-profit corporation (the "Charitable Foundation"), owns
1,200,000 shares of Common Stock contributed by Mr. Borislow. The
Charitable Foundation's directors are Mr. Borislow, Michele Luff, who is
Mr. Borislow's wife, and George P. Farley, who is a director of the
Company.
<PAGE>
-17-
(2) As of March 11, 1997, Massachusetts Financial Services Company ("MFS") is
the beneficial owner of 6,985,500 shares of the Company's Common Stock,
including 3,000,000 shares that were acquired in the Private Sale. Of those
3,000,000 shares, 2,588,700 are owned by MFS Series Trust II on behalf of MFS
Emerging Growth Fund, 186,900 shares by MFS/Sun Life Series Trust on behalf of
Capital Appreciation Series, 134,900 by MFS Growth Opportunities Fund, and
89,500 by the Sun Life Assurance Company of Canada (U.S.) on behalf of Capital
Appreciation Variable Account. MFS offers hereby, in addition to the 3,000,000
shares acquired in the Private Sale, 1,200,000 shares that it may acquire
pursuant to the escrow arrangement described above.
(3) As of March 11, 1997, Putnam OTC & Emerging Growth Fund ("Putnam") is the
beneficial owner of 8,045,342 shares, including 411,000 shares acquired in the
Private Sale. Putnam offers hereby, in addition to the 411,000 shares acquired
in the Private Sale, 164,400 shares that it may acquire pursuant to the escrow
arrangement described above.
(4) As of March 11, 1997, Conseco Capital Management, Inc. ("Conseco") is the
beneficial owner of 500,000 shares of the Company's Common Stock acquired in the
Private Sale. Of those 500,000 shares, 344,750 are owned by Conseco Series Trust
- -- Common Stock, 22,200 by Conseco Series Trust -- Asset Allocation, 74,200 by
Bankers National Life Fund 4 Equity, 4,300 shares by Beneficial Standard Life --
Convertible Fund, 21,100 shares by Conseco Fund Group -- Equity, 12,200 shares
by Conseco Fund Group -- Asset Allocation, and 21,250 shares by, Conseco Capital
Management for two managed accounts. Conseco offers hereby, in addition to the
500,000 shares acquired in the Private Sale, 200,000 shares that it may acquire
pursuant to the escrow arrangement described above.
(5) Mr. Borislow hereby offers any of the 1,564,400 shares that he deposited in
the escrow arrangement described above that are not transferred to the
Investors. These 1,564,400 shares are subject to the Lock-Up Period described
above and may not be offered until after March 10, 1998.
PLAN OF DISTRIBUTION
The Selling Stockholders have advised the Company that, depending
on market conditions and other factors, they may sell the Shares offered hereby
from time to time, in one or more transactions, which may involve block
transactions, on the Nasdaq National Market System, or otherwise, at market
prices prevailing at the time of sale, at negotiated prices, or at fixed prices,
which may be changed. Such sales may be effected directly or through agents,
underwriters or dealers.
<PAGE>
-18-
To the extent required pursuant to Rule 424 under the Securities
Act, a Prospectus Supplement will be filed with the Commission with respect to a
particular offering setting forth the terms of any offering, including the name
or names of any underwriters or agents, if any, any underwriting discounts and
other items constituting underwriters' compensation, the offering price and any
discounts or concessions allowed or reallowed or paid to dealers. Any offering
price and any discounts or concessions allowed or reallowed or paid to dealers
may be changed from time to time.
If underwriters are used in a sale, shares of Common Stock will
be acquired by the underwriters for their own account and may be resold from
time to time in one or more transactions, including negotiated transactions, at
a fixed public offering price or at varying prices determined at the time of
sale. The shares may be offered to the public either through underwriting
syndicates represented by one or more managing underwriters or directly by one
or more firms acting as underwriters. The underwriter or underwriters with
respect to a particular underwritten offering of shares to be named in the
Prospectus Supplement relating to such offering and, if an underwriting
syndicate is used, the managing underwriter or underwriters, will be set forth
on the cover of such Prospectus Supplement. Unless otherwise set forth in the
Prospectus Supplement relating thereto, the obligations of the underwriters to
purchase the offered securities will be subject to conditions precedent and the
underwriters will be obligated to purchase all of the shares if any are
purchased.
If dealers are utilized in the sale of shares of Common Stock in
respect of which this Prospectus is delivered, the Selling Stockholders will
sell such shares to the dealers as principals. The dealers may then resell such
shares to the public at varying prices to be determined by such dealers at the
time of resale. The names of the dealers and the terms of the transaction will
be set forth in a Prospectus Supplement relating thereto.
If an agent is used, the agent will be named, and the terms of
the agency and any commissions will be set forth in a Prospectus Supplement
relating thereto. Unless otherwise indicated in the Prospectus, any such agent
will be acting on a best efforts basis for the period of its appointment.
Shares of Common Stock may be sold directly by the Selling
Stockholder to institutional investors or others, who may be deemed to be
underwriters within the meaning of the Securities Act with respect to any resale
thereof. The term of any such sales, including the terms of any bidding or
auction process, will be described in the Prospectus Supplement relating
thereto.
<PAGE>
-19-
Agents, dealers and underwriters may be entitled under agreements
entered into with the Selling Stockholders to indemnification against certain
civil liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments which such agents, dealers or underwriters
may be required to make in respect thereof. Agents, dealers and underwriters may
be customers of, engage in transactions with, or perform services for the
Company or the Selling Stockholders in the ordinary course of business.
The Company will bear all costs and expenses of the registration
of the Common Stock under the Securities Act and certain state securities laws,
other than fees of counsel for the Selling Stockholders and any discounts or
commissions payable with respect to sales of such Common Stock. The Selling
Stockholder will pay any transaction costs associated with effecting any sales
that occur.
The Selling Stockholders are not restricted as to the price or
prices at which they may sell shares of Common Stock. Such sales may have an
adverse effect on the market price of the Common Stock. Moreover, except for the
Lock-Up Period applicable to Mr. Borislow and described above under "SELLING
STOCKHOLDERS," the Selling Stockholders are not restricted as to the number of
shares of Common Stock that may be sold at any one time, and it is possible that
a significant number of shares could be sold at the same time, which also may
have an adverse effect on the market price of the Common Stock.
Mr. Borislow has agreed to indemnify the Selling Stockholders
against certain civil liabilities, including liabilities under the Securities
Act.
LEGAL MATTERS
Aloysius T. Lawn, IV, the Company's General Counsel and
Secretary, will render an opinion to the effect that the shares of Common Stock
offered by this Prospectus are duly authorized, validly issued, fully paid and
non-assessable. Mr. Lawn owns 180,000 shares of the Company's Common Stock and
holds vested options to purchase 60,000 shares at a price of $11.625 per share
and 90,000 shares at a price of $10.56 per share.
EXPERTS
The consolidated financial statements and schedule incorporated
by reference in this Prospectus have been
<PAGE>
-20-
audited by BDO Seidman, LLP, independent certified public accountants, to the
extent and for the periods set forth in their reports incorporated herein by
reference herein in reliance upon such reports given upon the authority of said
firm as experts in accounting and auditing.
<PAGE>
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . 4
RISK FACTORS. . . . . . . . . . . . . . . . . . . . . 5
THE COMPANY . . . . . . . . . . . . . . . . . . . . . 14
DESCRIPTION OF CAPITAL STOCK . . . . . . . . . . . . 14
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . 14
SELLING STOCKHOLDERS . . . . . . . . . . . . . . . . . 14
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . 17
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . 19
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . 19
<PAGE>
-23-
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
SEC registration . . . . . . . . . . . $ 33,756
Printing and engraving expenses . . . . 1,000*
Legal fees and expenses . . . . . . . . 40,000*
Accounting fees and expenses . . . . . 15,000*
Transfer agent and trustee fees . . . . 1,000*
Miscellaneous . . . . . . . . . . . . . 1,000*
Total . . . . . . . . . . . . . . . . . $ 91,756*
*Estimates
Item 15. Indemnification or Director and Officers.
The Delaware General Corporation Law provides, in substance, that
Delaware corporations shall have the power, under specified circumstances, to
indemnify their directors, officers, employees and agents in connection with
actions or suits by or in the right of the corporation, by reason of the fact
that they were or are such directors, officers, employees and agents, against
expenses (including attorneys' fees) and, in the case of actions, suits or
proceedings brought by third parties, against judgment, fines and amounts paid
in settlement actually and reasonably incurred in any such action, suit or
proceeding.
The Company's Bylaws also provide for indemnification to the
fullest extent permitted by the Delaware General Corporation Law. Reference is
made to the Company's Bylaws.
As permitted by the Delaware General Corporation Law, the
Company's Bylaws eliminate the personal liability of its directors to the
Company and its stockholders, in certain circumstances, for monetary damages
arising from a breach of the director's duty of care. Additionally, the Company
has entered into indemnification agreements with some of its directors and
officers. These agreements provide for indemnification to the fullest extent
permitted by law and, in certain respects, may provide greater protection than
that specifically provided for by the Delaware General Corporation Law. The
agreements do not provide indemnification for, among other things, conduct which
is adjudged to be fraud, deliberate dishonesty or wilful misconduct.
The Company has purchased an insurance policy that purports to
insure the officers and directors against certain
<PAGE>
-24-
liabilities incurred by them in the discharge of their functions as officers and
directors.
Item 16. Exhibits.
Exhibit No. Description
4.1 Amended and Restated Certificate of Incorporation of the
Company, as amended (incorporated by reference to Exhibit
3.1 to the Company's registration statement on Form S-1
(File No. 33-94940)).
4.2 Amendment to the Amended and Restated Certificate of
Incorporation of the Company effective as of April 15,
1996 (incorporated by reference to Exhibit 3.3 to the
Company's registration statement on Form S-1 (File No.
333-2738)).
4.3 Bylaws of the Company (incorporated by reference
to Exhibit 3.2 to the Company's registration
statement on Form S-1 (File No. 33-94940)).
5.1 Opinion of Aloysius T. Lawn, IV.
23.1** Consent of BDO Seidman, LLP.
23.2 Consent of Aloysius T. Lawn, IV (included as part
of Exhibit 5.1).
24.1* Power of Attorney.
* Previously filed.
** To be filed by amendment.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, 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 registration statement (or the most recent
post-effective amendment thereof) which,
<PAGE>
-25-
individually or in the aggregate, represents 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 form the low or high and 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 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 paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
registrar pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the 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 the registration by means of a posteffective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) 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 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to 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.
(c) 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 foregoing provisions, or otherwise,
the registrant has been
<PAGE>
-26-
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 the 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.
<PAGE>
-27-
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
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 Township of Solebury, Commonwealth of Pennsylvania, on April
24, 1997.
TEL-SAVE HOLDINGS, INC.
By: /s/ Daniel Borislow
_________________________
Daniel Borislow
Chairman of the Board of
Directors, Chief Executive
Officer and Director
<PAGE>
-28-
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated below:
Signature Title Date
/s/ Daniel Borislow Chairman of the Board April 24, 1997
- --------------------- of Directors, Chief
Daniel Borislow Executive Officer and
Director (Principal
Executive Officer)
President, Director April 24, 1997
- --------------------- of Sales and Marketing
Gary W. McCulla and Director
* Chief Operations April 24, 1997
- --------------------- Officer and Director
Emanuel J. DeMaio
* Chief Financial Officer April 24, 1997
- --------------------- and Director (Principal
Joseph A. Schenk Financial Officer)
* Controller (Principal April 24, 1997
- --------------------- Accounting Officer)
Kevin R. Kelly
* Director April 24, 1997
- ---------------------
George P. Farley
* Director April 24, 1997
- ---------------------
Harold First
* Director April 24, 1997
- ---------------------
Ronald R. Thoma
* /s/ Aloysius T. Lawn, IV
- --------------------------
Aloysius T. Lawn, IV
Power of Attorney
<PAGE>
-29-
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
4.1 Amended and Restated Certificate of Incorporation of the
Company, as amended (incorporated by reference to Exhibit
3.1 to the Company's registration statement on Form S-1
(File No. 33-94940)).
4.2 Amendment to the Amended and Restated Certificate of
Incorporation of the Company effective as of April 15,
1996 (incorporated by reference to Exhibit 3.3 to the
Company's registration statement on Form S-1 (File No.
333-2738)).
4.3 Bylaws of the Company (incorporated by reference to
Exhibit 3.2 to the Company's registration statement on
Form S-1 (File No. 33-94940)).
5.1 Opinion of Aloysius T. Lawn, IV.
23.1** Consent of BDO Seidman, LLP.
23.2 Consent of Aloysius T. Lawn, IV (included as part of
Exhibit 5.1).
24.1* Power of Attorney.
* Previously filed.
** To be filed by amendment.
Exhibit 5.1
April 24, 1997
Board of Directors
Tel-Save Holdings, Inc.
6805 Route 202
New Hope, Pennsylvania 18938
Re: Shares of Common Stock of Tel-Save Holdings,
Inc. To Be Resold Pursuant to Registration
Statement on Form S-3 (No. 333-23193)
--------------------------------------------
Gentlemen:
I have acted as general counsel to Tel-Save Holdings, Inc. (the
"Company") in connection with the Company's filing pursuant to the Securities
Act of 1933, as amended, of a registration statement (the "Registration
Statement") on Form S-3 (No. 333-23193) relating to the offering for resale of
up to 6,675,400 shares of the Company's common stock, par value $.01 per share
(the "Common Stock"), by certain persons named in the Registration Statement.
You have requested my opinion as to certain matters with respect to the Common
Stock.
I have examined such corporate records of the Company, including
its Amended and Restated Certificate of Incorporation, its Bylaws, and
resolutions of the Company's board of directors (the "Board of Directors"), as
well as such other documents as I deemed necessary for rendering the opinion
hereinafter expressed.
On the basis of the foregoing, I am of the opinion that the Common
Stock has been duly authorized by the Board of Directors and is validly issued,
fully paid, and nonassessable.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of my name therein.
Sincerely yours,
Aloysius T. Lawn, IV
General Counsel and Secretary
