AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 24, 1998.
Registration No. 333-______
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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TEL-SAVE.COM, INC.
FORMERLY, TEL-SAVE HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 23-28277736
(State or other jurisdiction (I.R.S. Employee
of incorporation or organization) Identification Number)
6805 ROUTE 202
NEW HOPE, PENNSYLVANIA. 18938
(215) 862-1500
(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.COM, 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: As soon as
practicable after the effective date of this Registration Statement. / From time
to time after this Registration Statement becomes effective on the basis of
market conditions and other factors.
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. [ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
========================== ===================== ==================== ==================== ===============================
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED SHARE(1) PRICE(1) REGISTRATION FEE
- -------------------------- --------------------- -------------------- -------------------- -------------------------------
<S> <C> <C> <C> <C>
Common Stock
Purchase Rights 3,523,285 (2) (2) (2)
- -------------------------- --------------------- -------------------- -------------------- -------------------------------
Common Stock,
$0.01 par value per
share 3,523,285(3) $17.00 (4) $59,895,845 $16,652
========================== ===================== ==================== ==================== ===============================
</TABLE>
(1) Calculated pursuant to Rule 457 under the Securities Act of 1933.
(2) Dividend distribution to holders of Common Stock.
(3) Reflects up to 3,523,285 shares of Common Stock issuable upon exercise of
Common Stock Purchase Rights (the "Rights") that will be issued by the
Company as a dividend to its Common Stockholders of record on December 31,
1998. The Rights will be distributed immediately after the effective date
of this Registration Statement. Rights will also attach to shares of Common
Stock underlying stock options and warrants outstanding on December 31,
1998. These Rights will be issued upon exercise of such options and
warrants.
(4) Based upon the $17.00 per share exercise price of the Rights.
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.
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<PAGE>
SUBJECT TO COMPLETION
DATED DECEMBER 24, 1998
PROSPECTUS
TEL-SAVE.COM, INC.
FORMERLY TEL-SAVE HOLDINGS, INC.
3,523,285 SHARES OF COMMON STOCK
Our Board of Directors declared a dividend of Rights to purchase our common
stock to holders of record as of December 31, 1998. Through this Prospectus, we
are offering the shares of common stock that Rightsholders may purchase upon
exercising the Rights. These Rights cannot be transferred.
Offering Price: $17.00
Our common stock is quoted on the Nasdaq National Market and traded under
the symbol "TALK."
Our principal executive offices are located at 6805 Route 202, New Hope,
Pennsylvania 18938, and our telephone number is (215) 862-1500.
------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF CERTAIN MATERIAL
FACTORS THAT YOU SHOULD CONSIDER IN CONNECTION WITH AN INVESTMENT IN OUR COMMON
STOCK.
------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
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 information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. The prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
<PAGE>
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TABLE OF CONTENTS
PAGE
Risk Factors...................................................................3
Use Of Proceeds...............................................................11
Determination of Offering Price...............................................11
Plan Of Distribution..........................................................11
Description of Rights.........................................................11
Certain Federal Income Tax Considerations.....................................16
Legal Matters.................................................................18
Experts.......................................................................18
Where You Can Find More Information...........................................19
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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 OUR BUSINESS, FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, INCLUDING, WITHOUT LIMITATION, STATEMENTS UNDER THE CAPTIONS
"BUSINESS" AND "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" IN OUR ANNUAL AND QUARTERLY REPORTS. THESE FORWARD
LOOKING STATEMENTS REFLECT OUR PLANS, EXPECTATIONS AND BELIEFS AND, ACCORDINGLY,
ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES. NO ASSURANCE CAN BE GIVEN THAT
ANY OF SUCH FORWARD LOOKING STATEMENTS 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
OF THIS PROSPECTUS ENTITLED "RISK FACTORS."
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RISK FACTORS
You should consider carefully the following factors and other information
in this prospectus before deciding to invest in the shares of our common stock
offered in this prospectus.
DEPENDENCE ON AT&T
Our telecommunications network, which is known as "OBN," "One Better Net"
or "One Better Network," uses AT&T Corp. ("AT&T") transmission facilities,
international long distance services and operator services. AT&T also provides
the AT&T telecommunications services that we resell primarily to independent
long distance and marketing companies known as "partitions," which in turn
resell the services to end users.
Our ability to continue to obtain services from AT&T depends upon our
maintenance of a favorable relationship with AT&T. If AT&T were to cease to
provide services to us, we would seek to enter into similar arrangements with
another long distance carrier. There can be no assurance, however, that the
terms of any agreement would be favorable to us, and we have no specific
contingency arrangements in place to obtain services from other long distance
carriers. We believe it would take at least 30 days to switch to another
carrier, during which time we may be without service or subject to higher rates
than we currently pay to AT&T. Although we believe we may have the right to
switch end users to other providers without their consent, end users have the
right to discontinue such service at any time, and end-user customers and
partitions who want to remain with an AT&T network-based carrier may choose to
terminate their service with us. Accordingly, any termination of our contracts
with AT&T or the loss of telecommunication services from AT&T could have a
material adverse effect on our financial condition and results of operations.
In the deployment and initial marketing of OBN, we emphasized 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. We have continued to reference the
quality of these services in connection with OBN. Our new contract with AT&T
includes guidelines for describing our relationship with AT&T and, specifically,
how we may refer to that relationship in the marketplace. Loss of the ability to
reference the quality of these services in connection with OBN could have a
material adverse effect on our financial condition and results of operations.
RISKS ASSOCIATED WITH AOL AGREEMENT AND OTHER ONLINE INITIATIVES
We launched a major new initiative for online marketing and provisioning of
our telecommunication services in February 1997, when we entered into a
telecommunications and marketing agreement (the "AOL Agreement") with America
Online, Inc. ("AOL"), under which we provide long distance telecommunications
services that are marketed by AOL to the subscribers to AOL's online network. We
have made, and expect to continue to make, substantial investments in the
development and promotion of our online service offerings, including the
services we offer to AOL subscribers.
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We believe that the success or failure of the AOL Agreement and similar
online initiatives may have a material effect on our business, prospects and
financial condition. While to date we have received favorable indications of
acceptance of our online services, as evidenced by the level and rate of rights
of AOL subscribers to our long distance service offering, there can be no
assurance that the AOL Agreement will be successful from our standpoint over
time or that the response to date to our service on AOL is a fair indication of
future results under the AOL Agreement or under similar online arrangements with
others. In addition, while we will continue to have rights regarding the online
service area and use of the service brand name, our exclusive right to market
long distance service over the AOL network will expire on June 30, 2001. See "--
Competition."
Since entering into the AOL Agreement in February 1997, we have had
frequent discussions with AOL, and have negotiated a number of changes,
regarding the marketing of services under the AOL Agreement and expenditures by
us in connection with such marketing, particularly off-line marketing programs.
While these marketing agreements, principally those related to off-line
marketing, have significantly contributed to the rate of growth in our
AOL-related business, we believe that it is necessary to revise further the
terms of these marketing arrangements for future marketing programs. Although we
believe that our AOL-related sales will continue to increase, the rate of growth
will be affected by our ability to negotiate further changes in the AOL
relationship to expand our AOL-related business on economic terms acceptable to
us. If we are unable to revise these marketing arrangements on terms
economically acceptable to us, there could be a material adverse effect on our
AOL business and our financial condition and results of operations.
The success of our online initiatives depends on, among other things, our
ability to develop and maintain the complex systems to support our online
service offerings to AOL subscribers and our other online service offerings. We
have developed and will seek to continue to develop and to improve our systems
for customer care and billing services, including online sign-up, call detail
and billing reports and credit card payment in connection with the AOL
Agreement. We will be required, among other things, to identify and employ
sufficient personnel qualified to provide the necessary programming to develop
and maintain these complex systems. Any unanticipated delays or difficulties in
developing these complex systems or in hiring personnel could adversely affect
the success of this service offering and, specifically, the offering of these
online services to AOL subscribers.
Although we have expended substantial sums on marketing our AOL service
offering, there can be no assurance that these expenditures will prove adequate
to attract substantial additional customers to our service, or that any such
subscribers will remain our customers for a period of time sufficient to recoup
the costs of such marketing expenditures. See "--Maintenance of End User Base."
The success of our online marketing initiatives also depends in part on our
ability timely to provision new customers. Such provisioning has been adversely
affected by so-called "PIC freezes," which require customers who elect the
freeze to contact their local phone company directly to change long distance
carriers, as opposed to having their new long distance carrier contact the local
phone company on their behalf.
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Most of the targeted subscribers of our online services, including those
offered to AOL subscribers, are residential customers rather than business
customers to which we have provided services historically. Depending on the
response to the online marketing of our services, we have been required, and may
need in the future, to expand further OBN to accommodate increased traffic
levels.
RECENT RAPID GROWTH
We began operations in 1989 (as Tel-Save, Inc.) as a reseller of AT&T
services. Since then, we have grown dramatically, becoming a public company in
1995, with revenues in 1997 of $304 million and approximately 520 employees.
Although we have experienced significant growth in a relatively short period of
time and regularly consider growth opportunities through acquisitions, joint
ventures and partnerships as well as other business expansion opportunities,
there can be no assurance that the growth we have experienced will continue or
that we will be able to achieve the growth contemplated by our business
strategy.
Implementation of our current business strategy places and will continue to
place significant demands on our management, operational, financial and other
resources and will require us to enhance further our operations, management,
financial and information systems and controls and to expand, train and manage
our employee base in certain areas including customer service support and
financial and marketing and administrative resources. Success in this regard
depends, among other things, on our ability to fund or finance significant
investments of resources and to manage, attract and retain qualified personnel,
competition for whom is intense. Our strategy also has resulted in significantly
increased financial management requirements.
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. Changes in the regulation of the telecommunications
industry may affect our competitive position, as may consolidation and alliances
across geographic regions and across industry segments. Competition in the long
distance business is based upon pricing, customer service, billing services and
perceived quality. We compete against numerous long distance carriers that offer
essentially the same services as we do. Several of our competitors are
substantially larger and have greater financial, technical and marketing
resources than we do.
Although we believe that we have the human and technical resources to
pursue our strategy and compete effectively in this competitive environment, our
success will depend upon our continued ability to provide high quality, high
value services at prices generally competitive with, or lower than, those
charged by our competitors. While OBN makes us more price competitive,
reductions in long distance prices charged by competitors still may have a
material adverse impact on our profitability. We also from time to time may
consider providing telecommunications services we have not previously provided,
which new services, if offered, would face the same competitive pressures that
affect our existing services.
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In view of the dynamic nature of, and intensifying competition in, the
telecommunications industry, we believe that we eventually must either be, or
become part of, a larger organization to succeed in the long term. We continue
to seek and consider potential acquisitions and strategic partnerships.
Competition for potential acquisition candidates in the telecommunications
industry is often intense. Accordingly, there can be no assurance that any
acquisition or strategic partnership will be consummated, or, if consummated,
that these transactions will be significant or will be effectively integrated
into our business or otherwise prove to be successful. In addition, if we
consummate one or more significant acquisitions in which the consideration
consists, in whole or in part, of our common stock, or rights to purchase our
common stock, our stockholders could suffer significant dilution of their
interests in us, and earnings per share may be adversely affected. Earnings per
share also may be adversely affected by the amortization of goodwill in
connection with cash or other transactions where pooling-of-interest accounting
is unavailable.
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 us or through "partitions," independent carriers and marketing companies
that purchase services from us. If a significant portion of our end users were
to decide to purchase long distance service from other long distance service
providers, there can be no assurance that we would be able to replace them.
A high level of customer attrition is inherent in the long distance
industry, and our financial results are affected by such attrition. Attrition is
attributable to a variety of factors, including the initiatives of existing and
new competitors as they engage in, among other things, national advertising
campaigns, telemarketing programs and cash payments and other forms of
incentives, as well as our termination of customers for non-payment.
DIRECT TELEMARKETING RISKS
Both federal and state officials are tightening the rules governing the
telemarketing of telecommunications services and the requirements imposed on
carriers acquiring customers in that manner. Customer complaints of unauthorized
conversion or "slamming" are widespread in the long distance industry and are
beginning to occur with respect to newly competitive local services. While our
discontinuance of our internal telemarketing operations should reduce our
exposure to customer complaints and federal or state enforcement actions with
respect to telemarketing practices, certain state officials have made inquiries
with respect to the marketing of our services. There is the risk of enforcement
actions by virtue of our prior telemarketing efforts, our ongoing support of our
customer/partitions and telemarketing done in connection with our online
marketing agreements.
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RELIANCE ON INDEPENDENT CARRIER AND MARKETING COMPANIES; LACK OF CONTROL OVER
MARKETING ACTIVITIES
Historically, we have marketed a significant portion of our services
through partitions, which generally have entered into non-exclusive agreements
with us. Most partitions to date have made no minimum use or revenue commitments
to us under these agreements. If we were to lose access to services on the AT&T
network or billing services or experience difficulties with OBN, our agreements
with partitions could be adversely affected.
Provisions in our agreements with the partitions mandate that they comply
with state and federal statutes and regulations, including those regulating
telemarketing. See "--Government Regulation" and "--Direct Telemarketing Risks."
Because our partitions are independent carriers and marketing companies,
however, we are unable to control their activities. We are also unable to
predict the extent of their compliance with applicable regulations or the effect
of increased regulatory review. Increased regulatory review could also affect
possible future acquisitions of new business from new partitions or other
resellers.
GOVERNMENT REGULATION
The Federal Communications Commission (the "FCC") and various state public
service and public utility commissions regulate us as a non-dominant provider of
long distance services. There can be no assurance that the FCC or state
regulators will not take action having an adverse effect on our business,
financial condition or results of operations. FCC or state regulatory action
also could affect the partitions adversely. We also are subject to applicable
regulatory standards for marketing activities, and the increased FCC and state
attention to certain marketing practices could be significant to us. See
"--Direct Telemarketing Risks."
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. We believe that our future success will depend on our ability to
anticipate such changes and to offer on a timely basis services that meet or
compete with these evolving standards. There can be no assurance that we 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.
RISKS RELATED TO OBN
In 1997, we deployed our own nationwide telecommunications network, One
Better Net, or OBN. At December 14, 1998, we provided services over OBN to
approximately 80% of the lines using our services. Operation as a switch-based
provider subjects us to risk of significant interruption in the provision of
services on OBN in the event of damage to our facilities (switching equipment or
connections to transmission facilities) such as fire or natural disaster could
cause. To the extent that we, rather than AT&T or another carrier, are
principally responsible for providing end users with telecommunications
services, interruption or failure to provide such services may subject us to
claims from end users who suffer damages as a result of
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such interruption or failure. Thus, interruptions or other difficulties in
operating OBN could have a material adverse effect on our financial condition
and results of operations.
ABSENCE OF DIVIDENDS
We have not paid cash dividends since inception and do not anticipate
paying any cash dividends in the foreseeable future.
INVESTMENT COMPANY ACT CONSIDERATIONS
The Investment Company Act of 1940 principally regulates vehicles for
pooled investments in securities, such as mutual funds. The Investment Company
Act, however, also may be applicable to companies that are not organized for the
purpose of investing or trading in securities but nonetheless have more than a
specified percentage of their assets in investment securities. We are engaged in
the telecommunications business, and the availability of cash and liquid
securities is important to our ability to take advantage of opportunities to
acquire other telecommunications businesses, assets and technologies from time
to time. We believe, therefore, that our activities do not and will not subject
us to regulation under the Investment Company Act.
If we were to be deemed to be an investment company within the meaning of
the Investment Company Act, we would become subject to certain restrictions
relating to our activities, including, but not limited to, restrictions on the
conduct of our business, the nature of our investments, the issuance of
securities and transactions with affiliates. Therefore, our characterization as
an investment company would have a material adverse effect on us. In the
Indenture governing our 5% Convertible Subordinated Notes, we have covenanted
that we will not become an investment company within the meaning of the
Investment Company Act and that we will take all such actions as are necessary
to continue not to be deemed an investment company.
CONTROL BY EXISTING STOCKHOLDERS; ANTI-TAKEOVER CONSIDERATIONS
As of December 14, 1998, Mr. Borislow owned beneficially approximately
30.9% of our outstanding common stock. Accordingly, Mr. Borislow may have the
ability to control the election of all of the members of our board of directors
and the outcome of corporate actions 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 may
have the ability to control the outcome of such actions. In addition to Mr.
Borislow, as of December 14, 1998, our other directors and executive officers
owned beneficially approximately 6.7% of our outstanding common stock.
We also have an authorized class of 5,000,000 shares of preferred stock
that may be issued by our board of directors on such terms and with such rights,
preferences and designations as our board may determine. Issuance of such
preferred stock, depending upon its rights, preferences and designations, may
have the effect of delaying, deterring or preventing a change in control. A
change of control also may be delayed or prevented by provisions of the Delaware
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General Corporation Law and our bylaws, as well as our charter, which divides
our board of directors into three classes, each of which is elected for three
year terms.
Such anti-takeover effects may deter a third party from acquiring us or
engaging in a similar transaction affecting control in which our stockholders
might receive a premium for their shares over the then-current market value.
OUR SHARES ELIGIBLE FOR FUTURE SALE
Future sales of substantial amounts of our common stock could adversely
affect the market price of our common stock. As of December 14, 1998, Mr.
Borislow owned of record or had dispositive power with respect to approximately
16.6% of the outstanding common stock, and a decision by Mr. Borislow to sell
his shares could adversely affect the market price of the common stock.
As of December 14, 1998, our employees, former employees and directors had
outstanding options to purchase 10,679,812 shares of common stock. In addition,
as of such date, there were warrants outstanding to purchase up to 12,000,000
shares of common stock and 11,809,321 shares reserved for issuance upon the
conversion of our outstanding 4-1/2% Convertible Subordinated Notes due 2002 and
our 5% Convertible Subordinated Notes due 2004. Holders of warrants also have
registration rights under certain conditions.
Sales of substantial amounts of our common stock in the public market, or
the perception that such sales could occur, may adversely affect the market
price of our common stock.
YEAR 2000 RISKS
The "Year 2000" issue refers to the potential harm from computer programs
that identify dates by the last two digits of the year rather than using the
full four digits. As such, dates after January 1, 2000 could be misidentified
and such programs could fail.
If those systems were to malfunction due to the "Year 2000" problem, our
services could fail as well. Such failures could have a material adverse effect
upon our business, results of operations and financial condition. We are
inquiring of such third parties to determine the effect, if any, of the "Year
2000" problem on the systems upon which we are dependent, and to obtain
appropriate assurance that no such problem exists.
If such a failure occurs to our internal computer-based systems or if the
computer-based systems, on which our business depends, that are operated by
others were to malfunction, we could be unable to continue to provide
telecommunications services, to sign up new customers or to bill existing
customers for services. Such failures, if they occur, would have a material
adverse effect on our business and financial condition. However, because of the
complexity of the issues and the number of parties involved whose actions could
affect us and the fact that many of the issues are outside our control, it is
difficult for us to predict the nature or likelihood of such effects.
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Our internal staff has conducted a review of most of our internal
computer-based systems that we use in conducting our business. Most of our
systems are relatively new. Much of the software we use in our business has been
developed internally and we regularly modify and update it to meet changing
requirements. We expect that our critical internal systems will be able to
process relevant date information in the future to permit us to continue to
provide services without significant interruption or material adverse effect on
our business, results of operations and financial condition. However, we cannot
guarantee that we will not experience unanticipated negative consequences caused
by undetected errors or defects in the technology we use internally.
We are, however, dependent upon computer systems operated by third parties,
such as local exchange carriers, AT&T, AOL and other vendors. Other parties
whose ability to deal with Year 2000 issues could affect us include our
partitions and the credit card companies through which most of our and AOL's
customers are billed. We have asked some of these parties with which we have
direct relationships about their respective levels of preparedness for Year 2000
issues and we will continue follow up with them. We will also monitor the public
disclosures of these companies regarding their Year 2000 status. The companies
we have asked about their Year 2000 issues have generally given us vague answers
regarding their levels of preparedness or their willingness to provide
assurances to us. In almost all cases, we are not in a position to require
either that these other companies give assurances to the Company as to their
continued provision of services or that such companies take the necessary
actions to assure that they will be ready for the Year 2000. Accordingly, while
none of these other companies on which we depend have told us that they do not
expect to be ready for Year 2000 issues, we do not believe we can project the
likelihood of such parties' abilities to provide uninterrupted services to us.
We have considered possible contingency plans, should one of these
significant suppliers fail, including entering into contracts with long-distance
service providers other than AT&T to support our OBN network. However, given the
nature of our relationships with most of these significant suppliers, it may be
impracticable for us to replace should they be unable to continue to provide
these services. The failure of any of these companies to provide uninterrupted
service to us likely would have a material adverse effect on our business and
results of operations and financial condition.
We do not separately identify costs incurred in connection with Year 2000
compliance activities. To date, however, we do not believe such costs to be
significant because they generally have been incurred in normal course
activities of our internal personnel in regularly modifying and updating our
software programs. Future expenditures are not expected to be significant and
will be funded out of operating cash flows.
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USE OF PROCEEDS
The Company will use the net proceeds, if any, realized from the exercise
of the Rights for working capital and for general corporate purposes, at the
discretion of management.
DETERMINATION OF OFFERING PRICE
The Offering Price of the shares offered upon exercise of the Rights is
$17.00 per share. The exercise price per Right was determined by the Company and
bears no relationship to the market price of the Company's Common Stock, the
prevailing market conditions, operating results of the Company in recent
periods, the book value of the Company, or other recognized criteria of value.
PLAN OF DISTRIBUTION
The Rights entitle the holders to acquire up to approximately 3,523,285
shares of Common Stock on a fully diluted basis and assuming all Rights are
exercised upon payment of the applicable exercise price. The Company issued the
Rights as a dividend to all of its stockholders of record on December 31, 1998.
Rights also attached to shares of Common Stock underlying all stock options and
warrants outstanding on December 31, 1998.
The Company is offering shares of Common Stock underlying the Rights. No
underwriter or placement agent has been engaged to assist the Company in this
regard and no commissions or similar compensation will be paid to any person.
The shares of Common Stock to be issued upon exercise of the Rights are
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act.
DESCRIPTION OF RIGHTS
GENERAL
The shares of Common Stock offered hereby are issuable upon the exercise of
the Rights. Stockholders of record on December 31, 1998 (the "Record Date") will
be entitled to receive a dividend of one right for every twenty (20) shares of
Common Stock held (the "Stock Rightsholders"). The Rights will be distributed on
the date of this Prospectus. Each Right will entitle the holder thereof to
purchase one share of Common Stock at an exercise price of $17.00 (the "Exercise
Price"). The Rights are exercisable for a one-year period beginning upon the
date of this Prospectus.
Holders of stock options and holders of outstanding warrants to purchase
Common Stock as of December 31, 1998 also will be entitled to receive Rights
based on the number of shares of Common Stock underlying the stock options or
warrants held on the respective record dates. One Right will attach to every
twenty (20) shares of Common Stock underlying stock options
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and warrants held of record on December 31, 1998. The number of Rights relating
to the amount of Common Stock purchased upon exercise of stock options or
warrants will be issued to the stock option holders or warrant holders (the
"Option/Warrant Rightsholders" and together with the Stock Rightsholders, the
"Rightsholders") upon exercise of the stock options or warrants.
No fractional Rights or cash in lieu thereof will be issued or paid.
Instead, the number of Rights issued to a Rightsholder will be rounded up to the
nearest whole number. A depository, bank, trust company or securities broker or
dealer holding shares of Common Stock on the Record Date for more than one
beneficial owner may, upon delivery to the Rights Agent of the Certification and
Request for Additional Rights form available from the Rights Agent, exchange its
Right Certificate to obtain a Rights Certificate for the number of Rights to
which all such beneficial owners in the aggregate would have been entitled had
each been a holder on the Record Date. No other Rights Certificate may be so
divided as to increase the number of Rights to which the original recipient was
entitled. The Company reserves the right to refuse to issue any Rights
Certificate if such issuance would be inconsistent with the principle that each
beneficial owner's holdings will be rounded up to the nearest whole number of
Rights. The Rights Agent must receive the Certification and Request for
Additional Rights no later than 5:00 p.m., New York time, on the 30th day
following each date of distribution of the Rights, after which time no new
Rights Certificates will be issued.
Because the number of Rights issued to each Rightsholder will be rounded up
to the nearest whole number, beneficial owners of Common Stock who are also the
record holders of their shares will receive more Rights under certain
circumstances than beneficial owners of Common Stock who are not the record
holders of their shares and who do not obtain (or cause the record holder of
their shares of Common Stock to obtain) a separate Rights Certificate with
respect to the shares beneficially owned by them, including shares held in an
investment advisory or similar account. To the extent that record holders or
beneficial owners of Common Stock who obtain a separate Rights Certificate
receive more Rights, they will be able to subscribe for more shares. Beneficial
owners of Common Stock who are not record holders should contact the nominee
Rightsholder to obtain a separate Rights Certificate. See " -- Exercise of
Rights."
NON-TRANSFERABLE
The Rights are not transferable and bear a legend to that effect.
EXPIRATION
In the event the Rights are not exercised within the applicable one-year
period, all unexercised Rights will expire and be void and of no further force
or effect. A Right exercise period may be extended by the Company at the sole
discretion of the Board of the Directors upon thirty (30) days' notice to the
Rightsholders. The Rights will expire, become void and be of no further force or
effect upon conclusion of the applicable exercise period, or any extension
thereof.
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REDEMPTION
The Rights are redeemable upon 30 days notice, at the option of the
Company, at a redemption price of $0.01 per Right, if the last sale price for
the Company's Common Stock exceeds $20.40 for 20 consecutive trading days or
upon a "Change of Control" (defined below). The exercise price, number and kind
of shares to be received upon exercise of the Rights are subject to adjustment,
in the sole discretion of the Board of Directors, on the occurrence of certain
events, such as stock splits, stock dividends or recapitalization of the
Company. In the event of liquidation, dissolution or winding up of the Company,
the Rightsholders will not be entitled to participate in the distribution of the
assets of the Company. Additionally, Rightsholders have no voting, pre-emptive,
liquidation or other rights of stockholders, and no dividends will be declared
on the Rights or the shares underlying the Rights.
A "Change in Control" means any event where: (i) any "person" or "group"
(as such terms are used in Section 13(d) and 14(d) of the Exchange Act) is or
becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act) of shares representing more than 50% of the combined voting power
of the then-outstanding securities entitled to vote generally in elections of
directors of the Company ("Voting Stock"), (ii) the Company consolidates with or
merges into any other corporation, or any other person merges into the Company,
and, in the case of any such transaction, the outstanding Common Stock of the
Company is reclassified into or exchanged for any other property or security,
unless the stockholders of the Company immediately before such transaction own,
directly or indirectly immediately following such transaction, at least a
majority of the combined voting power of the outstanding voting securities of
the corporation resulting from such transaction in substantially the same
proportion as their ownership of the Voting Stock immediately before such
transaction, (iii) the Company conveys, transfers or leases all or substantially
all of its assets to any person (other than to one or more wholly-owned
subsidiaries of the Company) or (iv) any time the Continuing Directors do not
constitute a majority of the Board of Directors of the Company (or, if
applicable, a successor corporation to the Company). "Continuing Directors"
means as of any date of determination, any member of the Board of Directors of
the Company who (i) was a member of such Board of Directors on the date of this
Agreement or (ii) was nominated for election or elected to such Board of
Directors with the approval of a majority of the Continuing Directors who were
members of such board at the time of such nomination or election.
EXERCISE OF RIGHTS
The Rights may be exercised only to the extent that beneficial ownership of
some or all of the shares to which the Rights relate have been continuously held
from the Record Date or Option/Warrant Exercise Date, as applicable, through the
date of exercise of the Rights. Any transfers of beneficial ownership of shares
between the Record Date, or Option/Warrant Exercise Date, as applicable, will
correspondingly reduce the number of Rights, and any fractions thereof, that may
be exercised. To illustrate:
o A Rightsholder who beneficially owns 100 shares on the Record Date will
receive five (5) Rights (based on the 1:20 ratio of Rights to shares held).
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o If, between the Record Date and date of exercise of the Rights, the
Rightsholder transfers beneficial ownership of 20 out of the 100 shares,
then the Rightsholder may only exercise four of the Rights.
o If, between the Record Date and date of exercise of the Rights, the
Rightsholder instead transfers beneficial ownership of 10 out of the 100
shares, then the Rightsholder still may only exercise four of the Rights.
Though the transfer of the 10 shares correspond to only one half of a
right, the entire fifth right becomes unexercisable because, in the case of
transferred shares, fractional Rights are rounded down to the nearest whole
Right.
A Rightsholder who is both the record holder and beneficial owner of the
shares of Common Stock to which the Rights relate must certify as to the number
of shares beneficially owned on the Record Date or Option/Warrant Exercise Date,
as applicable. Such Rightsholder must also certify as to the number of such
shares that, as of the date of exercise, continue to be beneficially owned,
having not been transferred since the Record Date or Option/Warrant Exercise
Date, as applicable.
A Rightsholder who holds shares of Common Stock for the account of others,
such as a broker, a trustee or a depository for securities must certify as to
the number of shares beneficially owned on the Record Date or Option/Warrant
Exercise Date, as applicable, by each beneficial owner for which such
Rightsholder holds shares. Such Rightsholder must also certify as to the
corresponding number of such shares that, as of the date of exercise, continue
to be the beneficially owned, having not been transferred since the Record Date
or Option/Warrant Exercise Date, as applicable.
The Company intends to monitor beneficial ownership by Rightholders who
elect to exercise all or a portion of their Rights.
Rights may be exercised by delivering to the Rights Agent, on or prior to
5:00 p.m., New York time, on the Expiration Date, the properly completed and
executed Rights Certificate evidencing such Rights with any required signatures
guarantees, together with payment in full of the Exercise Price for each Right
exercised. Such payment in full must be by: (i) check drawn upon a U.S. bank or
postal, telegraphic or express money order payable to [AGENT] as Rights Agent;
or (ii) wire transfer of funds to the account maintained by the Rights Agent for
such purpose at ___________________________. Payment of the Exercise Price will
be deemed to have been received by the Rights Agent only upon (a) clearance of
any uncertified check, (b) receipt by the Rights Agent of any certified check
drawn upon a United States bank or of any postal, telegraphic or express money
order, or (c) receipt of good funds in the Rights Agent's account designated
above.
IF PAYING BY UNCERTIFIED PERSONAL CHECK, PLEASE NOTE THAT THE FUNDS PAID
THEREBY MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR. ACCORDINGLY, HOLDERS WHO
WISH TO PAY THE EXERCISE PRICE BY MEANS OF UNCERTIFIED PERSONAL CHECK ARE URGED
TO MAKE PAYMENT SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO ENSURE THAT
SUCH PAYMENT IS RECEIVED AND CLEARS BY SUCH DATE AND ARE URGED TO CONSIDER
PAYMENT BY MEANS OF CERTIFIED OR CASHIER'S CHECK, MONEY ORDER OR WIRE TRANSFER
OF FUNDS.
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If a Rightsholder wishes to exercise Rights, but time will not permit such
Rightsholder to cause the Rights Certificate or Rights Certificates evidencing
such Rights to reach the Rights Agent on or prior to the Expiration Date, such
Rights may nevertheless be exercised if all of the following conditions (the
"Guaranteed Delivery Procedures") are met: (i) such Rightsholder has caused
payment in full of the Exercise Price for each share of Common Stock being
subscribed for to be received (in the manner set forth above) by the Rights
Agent on or prior to the Expiration Date; (ii) the Rights Agent receives, on or
prior to the Expiration Date, a guaranteed notice (a "Notice of Guaranteed
Delivery"), substantially in the form distributed with the Rights Certificates,
from a member firm of a registered national securities exchange or a member of
the National Association of Securities Dealers, Inc., or from a commercial bank
or trust company having an office or correspondent in the United States (each,
an "Eligible Institution"), stating the name of the exercising Rightsholder, the
number of Rights represented by the Rights Certificate(s) held by such
exercising Rightsholder, the number of shares of Common Stock being purchased
and guaranteeing the delivery to the Rights Agent of any Rights Certificate(s)
evidencing such Rights within three NASDAQ trading days following the date of
the Notice of Guaranteed Delivery; and (iii) the properly completed Rights
Certificate(s), with any required signatures guaranteed, is received by the
Rights Agent within three NASDAQ trading days following the date of the Notice
of Guaranteed Delivery relating thereto. The Notice of Guaranteed Delivery may
be delivered to the Rights Agent in the same manner as Rights Certificates at
the addresses set forth above, or may be transmitted to the Rights Agent by
facsimile transmission (telecopy nos. ( ) ____________ or ( ) ____________.
Additional copies of the form of Notice of Guaranteed Delivery are available
upon request from the Rights Agent, whose address and telephone numbers are set
forth below.
A Rightsholder who holds shares of Common Stock for the account of others,
such as a broker, a trustee or a depository for securities, should notify the
respective beneficial owners of such shares as soon as possible to ascertain
such beneficial owner's intentions and to obtain instructions with respect to
the Rights. If the beneficial owner so instructs, the record holder of such
Rights should complete the Rights Certificate and submit it to the Rights Agent
with the proper payment. In addition, the beneficial owner of Common Stock or
Rights held through such a holder of record should contact the Rightsholder and
request the Rightsholder to effect transactions in accordance with the
beneficial owner's instructions.
Unless a Rights Certificate (i) provides that the shares of Common Stock to
be issued pursuant to the exercise of Rights represented thereby are to be
delivered to the Rightsholder or (ii) is submitted for the account of an
Eligible Institution, signatures on such Rights Certificate must be guaranteed
by an Eligible Institution.
If either the number of shares being subscribed for is not specified on the
Rights Certificate, or the amount delivered is not enough to pay the Exercise
Price for all shares stated to be purchased, the number of shares purchased will
be assumed to be the maximum amount that could be purchased upon payment of such
amount, after allowance for the Exercise Price of any specified shares.
DO NOT SEND RIGHTS CERTIFICATES TO THE COMPANY.
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THE METHOD OF DELIVERY OF RIGHTS CERTIFICATES AND PAYMENT OF THE EXERCISE
PRICE TO THE RIGHTS AGENT WILL BE AT THE ELECTION AND RISK OF THE RIGHTSHOLDER,
BUT IF SENT BY MAIL IT IS RECOMMENDED THAT SUCH CERTIFICATES AND PAYMENTS BE
SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, AND
THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO ENSURE DELIVERY TO THE RIGHTS
AGENT AND CLEARANCE OF PAYMENT PRIOR TO 5:00 P.M., NEW YORK TIME, ON THE
EXPIRATION DATE. BECAUSE UNCERTIFIED PERSONAL CHECKS MAY TAKE AT LEAST FIVE
BUSINESS DAYS TO CLEAR, RIGHTSHOLDERS ARE STRONGLY URGED TO PAY, OR ARRANGE FOR
PAYMENT, BY MEANS OF CERTIFIED OR CASHIER'S CHECK, MONEY ORDER OR WIRE TRANSFER
OF FUNDS.
All questions concerning the timeliness, validity, form and eligibility of
any exercise of Rights will be determined by the Company, whose determinations
will be final and binding. The Company, in its sole discretion, may waive any
defect or irregularity, or permit a defect or irregularity to be corrected
within such time as it may determine, or reject the purported exercise of any
Right. Rights will not be deemed to have been received or accepted until all
irregularities have been waived or cured within such time as the Company
determines in its sole discretion. NEITHER THE COMPANY NOR THE RIGHTS AGENT WILL
BE UNDER ANY DUTY TO GIVE NOTIFICATION OF ANY DEFECT OR IRREGULARITY IN
CONNECTION WITH THE SUBMISSION OF RIGHTS CERTIFICATES OR INCUR ANY LIABILITY FOR
FAILURE TO GIVE SUCH NOTIFICATION.
Any questions or requests for assistance concerning the method of
exercising Rights or requests for additional copies of this Prospectus or the
Notice of Guaranteed Delivery should be directed to the Rights Agent whose
address and telephone numbers are set forth below.
NO REVOCATION
ONCE A RIGHTSHOLDER HAS EXERCISED THOSE RIGHTS, SUCH EXERCISE MAY NOT BE
REVOKED.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following is a general discussion of certain U.S. federal income tax
considerations applicable upon the issuance, exercise, disposition and lapse of
Rights issued to the existing stockholders pursuant to the Rights Offering. This
summary is based upon current provisions of the Internal Revenue Code of 1986,
as amended (the "Code"), regulations of the Treasury Department, administrative
rulings and pronouncements of the Internal Revenue Service (the "Service"), and
judicial decisions currently in effect, all of which are subject to change,
possibly with retroactive effect. This discussion does not deal with all aspects
of federal income taxation that may be relevant to particular holders of Common
Stock in light of their personal investment circumstances (for example, to
persons holding Common Stock as part of a conversion transaction or as part of a
hedge or hedging transaction, or as a position in a straddle for tax purposes),
nor does it discuss federal income tax considerations applicable to certain
holders of Common Stock subject to special treatment under the federal income
tax laws (for example,
16
<PAGE>
insurance companies, tax-exempt organizations, financial institutions or
broker-dealers, taxpayers subject to the alternative minimum tax, or non-United
States persons).
This discussion only addresses the existing stockholders who will both hold
their Common Stock as capital assets and will hold any Common Stock received
upon exercise of the Rights as capital assets (persons who may not be holding
their Common Stock in the Company as capital assets might include, for example,
securities dealers or traders who do not hold their interests primarily for
investment or who treat their interests as inventory for federal income tax
purposes). In addition, this discussion does not consider the effect of any
foreign, state, local, gift or estate or other tax laws that may be applicable
to a particular investor. No ruling has been or will be sought from the Service
concerning the tax issues addressed herein, and such issues may be subject to
substantial uncertainty resulting from the lack of definitive judicial or
administrative authority and interpretations applicable thereto. THEREFORE, ALL
HOLDERS OF COMMON STOCK ARE URGED TO CONSULT WITH THEIR TAX ADVISORS REGARDING
THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE RIGHTS OFFERING, INCLUDING THE
EFFECTS OF FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX LAWS.
ISSUANCE OF RIGHTS
Existing law is not clear as to whether the distribution of Rights to the
existing stockholders would be characterized as a distribution under Section
305(a) of the Code or, alternatively, as a distribution under Sections 301 and
305(b) of the Code. The Company believes that it is likely that the Rights
Offering to existing stockholders will be properly characterized as a Section
305(a) distribution. Assuming that the Rights Offering to existing stockholders
is properly characterized as a Section 305(a) distribution, the distribution of
Rights to holders of Common Stock would be nontaxable without regard to the
Company's earnings and profits. If the distribution of Rights to the existing
stockholders were treated as a Section 301 distribution, and provided the
Company has current or accumulated earnings and profits, the fair market value
of the Rights distributed would be treated as dividends (taxable as ordinary
income) to the extent of such earnings and profits. To the extent that the
amount of the distribution exceeded the earnings and profits of the Company, it
would be treated first as a tax-free return of capital to the extent of the
holder's tax basis in the underlying Common Stock, and thereafter as capital
gain.
BASIS AND HOLDING PERIOD
If the Rights Offering to existing stockholders is properly characterized
as a nontaxable Section 305(a) distribution and either (i) the fair market value
of the Rights on the date of distribution is equal to 15% or more of the fair
market value on that date of the Common Stock with respect to which they are
received or (ii) the stockholder elects, in his or her federal income tax return
of the taxable year in which the Rights are received, to allocate part of the
tax basis of the Common Stock to the Rights, then upon exercise or transfer of
the Rights, the stockholder's tax basis in the Common Stock will be allocated
between the Common Stock and the Rights in proportion to the fair market values
of each on the date of the issuance of the Rights.
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Otherwise, as a nontaxable Section 305(a) distribution, the tax basis of
Rights received by a stockholder as a distribution with respect to the
stockholder's Common Stock will be zero. If, however, the distribution of Rights
to the existing stockholders were treated as a taxable Section 301 distribution,
each existing stockholder would have a tax basis in the Rights that such
stockholder received equal to the fair market value of the Rights on the date of
distribution of the Rights and the holder's tax basis in his or her Common Stock
would be reduced by the nontaxable portion of the distribution, if any (as
discussed above).
If the Rights Offering to the existing stockholders is treated as a
nontaxable Section 305(a) distribution, the holding period of an existing
stockholder with respect to Rights received as a distribution on the
stockholder's Common Stock will include the stockholder's holding period for the
Common Stock with respect to which the Rights were issued. If, however, the
Rights Offering to the existing stockholders were treated as a taxable Section
301 distribution, the existing stockholders would have a holding period that
begins on the day following the date of distribution of the Rights.
LAPSE OF RIGHTS
If the Rights Offering to the existing stockholders is treated as a
nontaxable Section 305(a) distribution, an existing stockholder who allows
Rights received by him or her to lapse without exercising or selling them will
not recognize any gain or loss, and, as the Rights were neither exercised nor
sold, no adjustment will be made to the tax basis of the Common Stock, if any,
owned by the stockholder. If, however, the Rights Offering to the existing
stockholders were treated as a taxable Section 301 distribution, an existing
stockholder who allowed the Rights to lapse would have a capital loss in an
amount equal to his or her tax basis in the Rights (as discussed above), and no
adjustment would be made to the tax basis of the Common Stock, if any, owned by
the stockholder.
EXERCISE OF RIGHTS
An existing stockholder will not recognize any gain or loss upon the
exercise of Rights. The tax basis of the Common Stock acquired through exercise
of Rights will be equal to the sum of the Exercise Price therefor and the
holder's tax basis in the Rights, if any. The holding period for the Common
Stock acquired through exercise of the Rights will begin on the day following
the date the Rights are considered exercised.
LEGAL MATTERS
Aloysius T. Lawn, IV, our General Counsel and Secretary, has rendered an
opinion to the effect that the shares of common stock offered by this prospectus
are duly authorized, legally issued, fully paid and non-assessable. Mr. Lawn
owns 219,561 shares of common stock.
EXPERTS
The consolidated financial statements and schedule of the Company and its
subsidiaries incorporated by reference in this prospectus have been audited by
BDO Seidman, LLP,
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independent certified public accountants, to the extent and for the periods set
forth in their reports incorporated in this prospectus by reference, and are
incorporated in this prospectus in reliance upon such reports given upon the
authority of said firm as experts in accounting and auditing.
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
at the SEC's web site at http://www.sec.gov.
The SEC allows us to incorporate by reference the information that we file
with the SEC, 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 information that we file later
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings (File
No. 0-26728) we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934:
a. our annual report on Form 10-K for the year ended December 31,
1997 and the amendments to our annual report filed with the SEC
on April 17, 1998 and April 30, 1998;
b. our quarterly reports on Form 10-Q for the quarters ended March
31, 1998, June 30, 1998 and September 30, 1998;
c. our current reports on Form 8-K, dated March 10, 1998, August 27,
1998, September 18, 1998 and October 29, 1998; and
d. the description of our capital stock contained in our
registration statement on Form 8-A, dated September 8, 1995.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Aloysius T. Lawn, IV
General Counsel and Secretary
Tel-Save.com, Inc.
6805 Route 202
New Hope, PA 18938
(215) 862-1500
This prospectus is part of a registration statement we filed with the SEC.
You should rely only on the information or representations provided in this
prospectus. We have authorized no
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<PAGE>
one to provide information other than that provided in this prospectus. 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 is accurate as of any
date other than the date on the front of this document.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
SEC registration fee.......................................... $16,652
Legal fees and expenses....................................... *
Accounting fees and expenses.................................. *
Transfer agent fees........................................... *
Miscellaneous................................................. *
----------
Total $ *
- ----------
* To be filed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS 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. These agreements do not
provide indemnification for, among other things, conduct which is adjudged to be
fraud, deliberate dishonesty or willful misconduct.
The Company has purchased an insurance policy that purports to insure the
officers and directors against certain liabilities incurred by them in the
discharge of their functions as officers and directors.
ITEM 16. EXHIBITS.
EXHIBIT NO. DESCRIPTION
----------- -----------
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 (included as part of the signature
page).
99.1 Form of Rights Certificate
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Certification and Request for Additional Rights
<PAGE>
99.4 Form of Rights Agent Agreement
- ----------
* 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 the registration statement (or the most
recent post-effective amendment thereof) which, 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 from 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 post-effective 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 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
II-2
<PAGE>
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.
II-3
<PAGE>
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 pre-effective
amendment to the registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Township of Solebury,
Commonwealth of Pennsylvania, on December 24, 1998.
TEL-SAVE.COM, INC.
By: /s/ Daniel Borislow
---------------------------
Daniel Borislow
Chairman of the Board of
Directors, Chief Executive
Officer and Director
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Daniel Borislow and Aloysius T. Lawn, IV, and
each of them each with full power to act without the other, his true and lawful
attorney-in-fact and agent, each with full power of substitution and
resubstitution, for such person and in his name, place and stead, in any and all
capacities, to sign any or all further amendments or supplements (including
post-effective amendments) to this Form S-3 Registration Statement and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange commission, granting unto each of
said attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully as to all intent and purposes as he might or could do in
person, hereby ratifying and confirming all that each of said attorneys-in-fact
and agents, or his substitutes, may lawfully do or cause to be done by virtue
thereof.
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:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Daniel Borislow Chairman of the Board of December 24, 1998
- ----------------------- Directors, Chief Executive
Daniel Borislow Officer and Director (Principal
Executive Officer)
/s/ Gary W. McCulla Director December 24, 1998
- -----------------------
Gary W. McCulla
/s/ Emanuel J. DeMaio Director December 24, 1998
- -----------------------
Emanuel J. DeMaio
/s/ George P. Farley Chief Financial Officer December 24, 1998
- ----------------------- and Director
George P. Farley (Principal Financial Officer)
/s/ Kevin R. Kelly Controller (Principal December 24, 1998
- ----------------------- Accounting Officer)
Kevin R. Kelly
/s/ Harold First Director December 24, 1998
- -----------------------
Harold First
/s/ Ronald R. Thoma Director December 24, 1998
- -----------------------
Ronald R. Thoma
</TABLE>
II-4
EXHIBIT 99.1
FORM OF RIGHTS CERTIFICATE: COMMON STOCKHOLDER
- ----------------- ------------------- ----------------- -----------------
SEQUENCE ACCOUNT KEY RIGHT # RIGHT TO PURCHASE
------------------------
RIGHTS
TEL-SAVE.COM, INC.
RIGHTS
CERTIFICATE
FOR INFORMATION AND ASSISTANCE PLEASE CALL:
The undersigned has Rights of Tel-Save.com, Inc. (the "Company"),
entitling the undersigned to purchase the Company's common stock, par value
$0.01 per share (the "Common Stock"), offered by the Company by its prospectus
dated _____________ (the "Prospectus"), subject to the terms described in the
Prospectus.
By executing this Rights Certificate, the undersigned acknowledges having
received and read the Prospectus, and understands that as a Rightsholder (as
defined in the Prospectus), subject to certain limitations stated in the
Prospectus, the undersigned is entitled to purchase the number of shares of
Common Stock, as is shown above based on a purchase price of $________ per share
of Common Stock.
By _________________________________________
as Rights Agent
IMPORTANT: PAYMENT FOR SHARES OF COMMON STOCK MUST BE MADE BY WIRE TRANSFER,
CHECK OR MONEY ORDER PAYABLE TO ____________________________________, IN U.S.
DOLLARS BEFORE THE APPLICABLE EXPIRATION DATE. IN ORDER TO EXERCISE A RIGHT, THE
RIGHTSHOLDER MUST FORWARD TO THE COMPANY A CHECK PAYABLE TO TEL-SAVE.COM, INC.
IF FULL PAYMENT IS NOT RECEIVED BY ________________________ AND TEL-SAVE.COM,
INC. BEFORE THE APPLICABLE EXPIRATION DATE YOUR PURCHASE WILL BE REJECTED.
AN EXERCISE FOR SHARES OF COMMON STOCK IS IRREVOCABLE.
THESE SECURITIES MAY BE REDEEMED BY THE COMPANY UPON THE TERMS DESCRIBED IN THE
PROSPECTUS.
THE SECURITIES REPRESENTED BY THIS RIGHTS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED OR ENCUMBERED OR IN ANY OTHER WAY ALIENATED. ANY
PURPORTED SALE, TRANSFER, ASSIGNMENT, PLEDGE OR ENCUMBRANCE OR OTHER ALIENATION
OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE NULL AND VOID.
<PAGE>
RIGHTS TO PURCHASE SHARES OF COMMON STOCK OFFERED BY
TEL-SAVE.COM, INC.
Exercise of Rights may have significant tax consequences. See "Certain
Federal Income Tax Consequences" in the accompanying Prospectus.
Upon the terms and subject to the conditions specified in the Prospectus,
the undersigned hereby:
A. Purchases shares of Common Stock as follows:
1. NUMBER OF SHARES OF COMMON STOCK SUBSCRIBED FOR PURSUANT TO RIGHTS:
___________________ (May not exceed the number of Rights on the face
of this certificate)
2. EXERCISE PRICE PER SHARE: $___________________________________
3. TOTAL AMOUNT OF PAYMENT FOR SHARES OF COMMON STOCK TO BE PURCHASED:
$__________________ (Line 1 multiplied by line 2)
Check one box:
o Enclosed is my check or money order payable to [AGENT].
o Payment has been made by wire transfer to the Rights Agent's account
(wire instructions are in the Prospectus).
B. Certifies as follows (check one and complete blanks):
o As of December 31, 1998, I was the record holder AND beneficial owner
of the shares of Common Stock to which the Rights exercised hereunder
relate, and,
(i) as of December 31, 1998, I beneficially owned __________________
shares of Common Stock; and
(ii) as of the date hereof, I continue to be the record holder and
beneficial owner of _________________ shares of Common Stock
listed in (i), having not transferred, assigned, pledged or
otherwise encumbered beneficial ownership of such shares since
the Record Date.
2
<PAGE>
o As of the Record Date of the Rights exercised hereunder,
________________ was the beneficial owner and the undersigned was the
record holder of the shares of Common Stock to which the Rights
exercised hereunder relate, and,
(i) As of December 31, 1998 _________________ beneficially owned
__________________ shares of Common Stock; and
(ii) as of the date hereof, _____________________ continues to be the
beneficial owner of ___________________ shares of Common Stock
listed in (i), having not transferred, assigned, pledged or
otherwise encumbered beneficial ownership of such shares since
the Record Date.
AS DESCRIBED IN THE PROSPECTUS, ONE RIGHT WILL BE FORFEITED FOR EVERY 20 SHARES
OF COMMON STOCK (OR PORTION THEREOF) SOLD OR TRANSFERRED BEWTEEN DECEMBER 31,
1998 AND THE DATE OF EXERCISE.
RETURN THIS FORM IN THE BLUE PRE-ADDRESSED STAMPED ENVELOPE ALONG WITH A PAYMENT
IN U.S. DOLLARS BY CHECK, DRAFT OR MONEY ORDER PAYABLE TO [AGENT], (OR PAYMENT
MAY BE MADE BY WIRE TRANSFER) TO:
BY MAIL: BY HAND/OVERNIGHT
DELIVERY:
Acceptance or rejection by the Company of this executed Rights Certificate
shall be effective in accordance with the terms set forth in the Prospectus. All
questions concerning the timeliness, validity, form and eligibility of any
exercise of Rights will be determined by the Company, whose determinations shall
be final and binding.
Shares of Common Stock will be registered in the same manner as set forth
on the face of this Rights Certificate. Stock certificates evidencing such
shares of Common Stock will be sent to you as soon as practicable after receipt
of valid payment therefor.
Date: ____________________
Signature: __________________________________
Day Phone: ( ) _____________________________
Eve Phone: ( ) _____________________________
3
<PAGE>
FORM OF RIGHTS CERTIFICATE: OPTION OR WARRANT HOLDER
- ----------------- ------------------- ----------------- -----------------
SEQUENCE ACCOUNT KEY RIGHT # RIGHT TO PURCHASE
------------------------
RIGHTS
TEL-SAVE.COM, INC.
RIGHTS
CERTIFICATE
FOR INFORMATION AND ASSISTANCE PLEASE CALL:
The undersigned has Rights of Tel-Save.Com, Inc. (the "Company"), entitling
the undersigned to purchase the Company's common stock, par value $0.01 per
share (the "Common Stock"), offered by the Company by its prospectus dated
_____________, 199__ (the "Prospectus"), subject to the terms described in the
Prospectus.
By executing this Rights Certificate, the undersigned acknowledges having
received and read the Prospectus, and understands that as a Holder of Rights (as
defined in the Prospectus), subject to certain limitations stated in the
Prospectus, the undersigned is entitled to purchase the number of shares of
Common Stock, as is shown above based on a purchase price of $________ per share
of Common Stock.
By _________________________________________
as Rights Agent
IMPORTANT: PAYMENT FOR SHARES OF COMMON STOCK MUST BE MADE BY WIRE TRANSFER,
CHECK OR MONEY ORDER PAYABLE TO ____________________________________, IN U.S.
DOLLARS BEFORE THE APPLICABLE EXPIRATION DATE. IN ORDER TO EXERCISE A RIGHT, THE
RIGHTSHOLDER MUST FORWARD TO THE COMPANY A CHECK PAYABLE TO TEL-SAVE.COM, INC.
IF FULL PAYMENT IS NOT RECEIVED BY ________________________ AND TEL-SAVE.COM,
INC. BEFORE THE APPLICABLE EXPIRATION DATE YOUR PURCHASE WILL BE REJECTED.
AN EXERCISE FOR SHARES OF COMMON STOCK IS IRREVOCABLE.
THESE SECURITIES MAY BE REDEEMED BY THE COMPANY UPON THE TERMS DESCRIBED IN THE
PROSPECTUS.
THE SECURITIES REPRESENTED BY THIS RIGHTS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED OR ENCUMBERED OR IN ANY OTHER WAY ALIENATED. ANY
PURPORTED SALE, TRANSFER, ASSIGNMENT, PLEDGE OR ENCUMBRANCE OR OTHER ALIENATION
OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE NULL AND VOID.
<PAGE>
RIGHTS TO PURCHASE SHARES OF COMMON STOCK OFFERED BY
TEL-SAVE.COM, INC.
Upon the terms and subject to the conditions specified in the Prospectus,
the undersigned hereby:
A. Purchases shares of Common Stock as follows:
1. NUMBER OF SHARES OF COMMON STOCK SUBSCRIBED FOR PURSUANT TO RIGHTS:
__________ (May not exceed the number of Rights on the face of this
certificate)
2. EXERCISE PRICE PER SHARE:
$___________________________________________________
3. TOTAL AMOUNT OF PAYMENT FOR SHARES OF COMMON STOCK TO BE PURCHASED:
$_________ (Line 1 multiplied by line 2)
Check one box:
o Enclosed is my check or money order payable to [AGENT].
o Payment has been made by wire transfer to the Rights Agent's account
(wire instructions are in the Prospectus).
B. Certifies as follows (check one):
o As of the date on which I exercised stock options or warrants for the
Common Stock to which the Rights exercised hereunder relate, I was the
record holder and beneficial owner of the shares of such Common Stock;
and
(i) Upon the exercise of my options or warrants, I became the
beneficial owner of __________________ shares of Common Stock;
and
(ii) as of the date hereof, I continue to be the record holder and
beneficial owner of_________________ shares of Common Stock
listed in (i), having not transferred, assigned, pledged or
otherwise encumbered beneficial ownership of such shares since I
exercised my stock options or warrants.
o As of the date on which the stock options or warrants were exercised
to purchase the Common Stock to which the Rights exercised hereunder
2
<PAGE>
relate, ________________ was the beneficial owner and the undersigned
was the record holder of the shares of such Common Stock, and
(i) Upon the exercise of options or warrants, _________________
became the beneficial owner of __________________ shares of
Common Stock; and
(ii) as of the date hereof,______________________ continues to be the
record holder and beneficial owner of _________________ the
shares of Common Stock listed in (i), having not transferred,
assigned, pledged or otherwise encumbered beneficial ownership of
such shares since exercising the stock options or warrants.
AS DESCRIBED IN THE PROSPECTUS, ONE RIGHT WILL BE FORFEITED FOR EVERY 20 SHARES
OF COMMON STOCK (OR PORTION THEREOF) SOLD OR TRANSFERRED BEWTEEN THE DATE OF
EXERCISED OF THE OPTION OR WARRANT AND THE DATE OF EXERCISE OF THIS RIGHT.
3
<PAGE>
RETURN THIS FORM IN THE BLUE PRE-ADDRESSED STAMPED ENVELOPE ALONG WITH A PAYMENT
IN U.S. DOLLARS BY CHECK, DRAFT OR MONEY ORDER PAYABLE TO [AGENT], (OR PAYMENT
MAY BE MADE BY WIRE TRANSFER) TO:
BY MAIL: BY HAND/OVERNIGHT
DELIVERY:
Acceptance or rejection by the Company of this executed Rights Certificate
shall be effective in accordance with the terms set forth in the Prospectus. All
questions concerning the timeliness, validity, form and eligibility of any
exercise of Rights will be determined by the Company, whose determinations shall
be final and binding.
Shares of Common Stock will be registered in the same manner as set forth
on the face of this Rights Certificate. Stock certificates evidencing such
shares of Common Stock will be sent to you as soon as practicable after receipt
of valid payment therefor.
Date: ____________________
Signature: ____________________________________
Day Phone: ( ) _______________________________
Eve Phone: ( ) _______________________________
4
<PAGE>
FORM OF RIGHTS CERTIFICATE
PART 2
SPECIAL DELIVERY INSTRUCTIONS FOR RIGHTSHOLDERS: UNLESS OTHERWISE INDICATED
BELOW. THE RIGHTS AGENT IS HEREBY AUTHORIZED TO DELIVER CERTIFICATES FOR COMMON
STOCK TO RIGHTSHOLDERS AT THE ADDRESS SET FORTH ABOVE.
To be completed ONLY if the certificate representing the Common Stock is to be
sent to an address other than that shown above.
Mal and deliver to:
Name:
----------------------------- -------------------------------
(Please Print) Street Address
- ---------------------------------- -------------------------------
City State Zip Code Social Security or Tax ID#
<PAGE>
================================================================================
ACKNOWLEDGMENT
THE RIGHTS CERTIFICATE IS NOT VALID UNLESS YOU SIGN BELOW
I/We acknowledge receipt of the Prospectus and understand that after
delivery to the Company, I/We may not modify or revoke this exercise.
Under penalties of perjury, I/We certify that the information contained
herein, including the social security number or taxpayer identification number
given above, is correct.
The signature below must correspond with the name of the registered holder
exactly as it appears on the books of the Company's transfer agent without any
alteration or change whatsoever.
- --------------------------------------------------------------------------------
Signature(s) of registered holder
Dated:
-------------------
If signature is by trustee(s), executor(s), administrator(s), guardian(s),
attorney(s)-in-fact, agent(s), officers(s) of a corporation or another acting in
a fiduciary or representative capacity, please provide the following
information.
Name: Daytime Phone ( )
-------------------------- -------------------
(Please Print)
Evening Phone ( )
-------------------
Capacity:
----------------------------
(Full Title)
Address:
----------------------------- Social Security or Taxpayer ID#
(Including Zip Code)
--------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
GUARANTEE OF SIGNATURE(S)
All Rightsholders who specify special delivery instructions must have their
signatures guaranteed by an Eligible Institution. An "Eligible Institution" for
this purpose is a bank, stockbroker, savings and loan association and credit
union with membership in an approved signature guaranteed medallion program,
pursuant to Rule 17Ad-15 of the Securities Exchange Act of 1934.
Authorized signature Name of Firm
-------------------- -----------------------
Name Address
------------------------------------ ----------------------------
Title Area Code and
----------------------------------- Telephone Number
Dated -------------------
-----------------------------------
3
<PAGE>
NAME
----------------------------------------------------------------------
ADDRESS
-------------------------------------------------------------------
(CITY, STATE AND ZIP CODE)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
PAYER'S NAME:
- -------------------------------------------------------------------------------------------------------------
- ---------------------------- -------------------------------------------- -----------------------------------
<S> <C> <C>
SUBSTITUTE PART 1: PROVIDE YOUR TIN IN THE BOX TO __________________________________
FORM W-9 THE RIGHT AND CERTIFY BY SIGNING AND Social Security Number OR
DATING BELOW
----------------------------------
Employer Identification No.
- ---------------------------- -------------------------------------------- -----------------------------------
DEPARTMENT OF THE TREASURY PART 2: CERTIFICATION. Under penalties of perjury,
INTERNAL REVENUE SERVICE I certify that (1) the number above on this form is
my correct Taxpayer Identification Number (or I am
waiting for a number to be issued to me), and (2) I
am not subject to backup withholding either because
I am exempt from backup withholding, I have not
been notified by the IRS that I am subject to
backup withholding as a result of a failure to
report all interest or dividends, or the IRS has
notified me that I am no longer subject to backup
withholding.
- ---------------------------- --------------------------------------------------------------------------------
PAYER'S REQUEST FOR PART 3:
TAXPAYER
IDENTIFICATION
NUMBER
(TIN) Awaiting TIN
- ---------------------------- --------------------------------------------------------------------------------
FOR PAYEE EXEMPT FROM PART 4:
BACKUP WITHHOLDING
Exempt:
Certificate Instructions. You must cross out item
(2) above if you have been notified by the IRS that
you are subject to backup withholding because of
underreporting interest or dividends on your tax
return. However, if after being notified by the IRS
that you were subject to backup withholding, you
received another notification from the IRS that you
are no longer subject to backup withholding, do not
cross out item (2).
- ---------------------------- --------------------------------------------------------------------------------
Signature:___________________________________________ Date:________________
Name (Please Print): ______________________________________________________
- ---------------------------- --------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
NOTE:FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY DIVIDEND PAYMENTS MADE TO YOU ON SHARES OF CLASS B COMMON
STOCK ISSUED UPON EXERCISE OF THE RIGHTS. PLEASE REVIEW THE ENCLOSED
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM 2-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
CERTIFICATION OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate IRS Center or
Social Security Administration Office or (b) I intend to mail or deliver an
application in the near future. I understand that if I do not provide a taxpayer
identification number within sixty (60) days, 31% of all reportable dividend
payments made to me thereafter on shares of Common Stock issued upon exercise of
the Rights will be withheld until I provide a taxpayer identification number.
- --------------------------------- ---------------------------------------
Signature Date
- ---------------------------------
Name (Please Print)
- --------------------------------------------------------------------------------
5
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR RIGHTS CERTIFICATES
This form, or one substantially equivalent hereto, must be used to exercise
Rights described in the Prospectus dated ______________ (the "Prospectus")
ofTel-Save.com, Inc., (the "Company"), if a Rightsholder cannot deliver the
Right Certificate(s) evidencing the Rights, to the Rights Agent listed below at
or prior to 5:00 p.m. New York City time on the Expiration Date. Such form must
be delivered by hand or sent by facsimile transmission or mail to the Rights
Agent, and must be received by the Rights Agent on or prior to the Expiration
Date. See "Description of Rights -- Exercise of Rights" in the Prospectus.
Payment of the applicable Exercise Price for each share of the Company's Common
Stock purchased upon exercise of such Rights must be received by the Rights
Agent in the manner specified in the Prospectus at or prior to the Expiration
Date even if the Rights Certificate evidencing such Rights is being delivered
pursuant to the procedure for guaranteed delivery thereof.
The Rights Agent is:
- ------------------------ ---------------------------- --------------------------
By Mail: Facsimile Transmission By Hand or Overnight
Courier
- ------------------------ ---------------------------- --------------------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES
NOT CONSTITUTE A VALID DELIVERY.
Gentlemen:
The undersigned hereby represents that he or she is the holder of a Rights
Certificate(s) representing ______ Rights and that such Right Certificate(s)
cannot be delivered to the Rights Agent at or before the Expiration Date. Upon
the terms and subject to the condition set forth in the Prospectus, receipt of
which is hereby acknowledged, the undersigned hereby elects to purchase one
share of Common Stock per Right with respect to each of ______ Rights
represented by such Right Certificate. The undersigned understands that payment
of the Exercise Price for each share of Common Stock purchased must be received
by the Rights Agent at or before the Expiration Date and represents that such
payment, in the aggregate amount of $_________, either (check appropriate box):
is delivered herewith; or
was delivered separately;
<PAGE>
in the manner set forth below (check appropriate box and complete information
relating thereto):
wire transfer of funds;
name of transferor institution: ______________________________
date of transfer:_____________________________________________
confirmation number (if available):___________________________
uncertified check (payment by uncertified check will not be deemed to have
been received by the Rights Agent until such check has cleared. Holders
paying by such means are urged to make payment sufficiently in advance of
the applicable Expiration Date to ensure that such payment clears by such
time.)
certified check;
bank draft (cashier's check);
money order;
name of maker:______________________________________________
date and number of check, draft or money order number:
____________________________________________________________
bank on which check is drawn or issuer of money order:
____________________________________________________________
Signature(s):____________________________________
Address:_________________________________________
Name(s):_________________________________________
Please Type or Print Area Code
and Tel. No(s).:_________________________________
Right Certificate
No(s). (if available):___________________________
2
<PAGE>
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR RIGHTS CERTIFICATE SIGNATURE GUARANTEE.)
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc. or a commercial bank
or trust company having an office or correspondent in the United States,
guarantees that the undersigned will deliver to the Rights Agent the
certificates representing the Rights being exercised hereby, with any required
signature guarantees and any other required documents, all within five business
days after the date hereof.
Dated: ___________
Name of Firm:_____________________________________
Address:__________________________________________
Telephone: ( )________________________________
Authorized Signature:_____________________________
The institution which completes this form must communicate the guarantee to
the Rights Agent and must deliver the Right Certificate(s) to the Rights Agent
within the time period shown herein. Failure to do so could result in a
financial loss to such institution.
3
EXHIBIT 99.3
CERTIFICATION AND REQUEST FOR ADDITIONAL RIGHTS
To the Rights Agent:
The undersigned securities dealer, commercial bank, broker, trust company
or other nominee holder of Rights (as defined below) hereby certifies that it is
the holder of record ("Rightsholder") of _____________ shares of Common Stock,
$.01 par value (the "Common Stock"), of Tel-Save.com, Inc. (the "Company") on
behalf of certain beneficial owners as of the close of business on December __,
1998, the record date for the for the dividend distribution (the "Record Date"),
of shares of Common Stock pursuant to nontransferable rights ("Rights"), as
described in the Company's Prospectus dated________, a copy of which the
undersigned has received.
The undersigned further certifies that _______________ beneficial owners on
whose behalf it held, as of the close of business on the Record Date,
________________ shares of Common Stock registered in the name of the
undersigned are each entitled to one additional Right as the Company has agreed
that, in lieu of fractional Rights, the number of Rights to which a beneficial
owner would otherwise be entitled will be rounded up to the next whole number
and, accordingly, the undersigned requests that a Rights Certificate evidencing
_______________ additional rights be issued to it.
The undersigned further certifies that each such beneficial owner is a bona
fide beneficial owner of Common Stock, that such beneficial ownership is
reflected on the undersigned's records and that all shares of Common Stock
which, to the undersigned's knowledge, are beneficially owned by any such
beneficial owner through the undersigned have been aggregated in calculating the
foregoing. The undersigned agrees to provide the Company or its designee with
such additional information as the Company deems necessary to verify the
foregoing and acknowledges that the Rights Agent must receive this Certificate
and Request for Additional Rights, properly completed, no later than 5:00 p.m.,
New York Time, on January __, 1999, after which time no new Rights Certificates
will be issued.
Name of Rights Holder:_____________________________________________
By:___________________________________________________________
Name:_________________________________________________________
Title:________________________________________________________
Address:______________________________________________________
Telephone Number:_____________________________________________
Dated:________________________________________________________
EXHIBIT 99.4
RIGHTS AGENT AGREEMENT
This RIGHTS AGREEMENT ("Agreement") is made and entered into as of
_________ ___, 1998, by and between Tel-Save.com, Inc. a Delaware corporation
(the "Company") and _______________ (the "Rights Agent").
R E C I T A L S
A. The Company has (i) declared a dividend of rights (each a "Right") to
purchase shares of common stock, $.01 par value per share ("Common Stock")
payable to stockholders of record on the close of business on December 31, 1998
and (ii) attached Rights to the shares of Common Stock underlying certain
outstanding options and warrants.
B. The Company will file with the Securities and Exchange Commission (the
"SEC"), under the Securities Act of 1933, as amended (the "Act"), a Registration
Statement on Form S-3 to relating the Common Stock to be issued on the exercise
of the Rights.
C. Each Right distributed to holders of record on December 31, 1998 (the
"Record Date") will entitle the holder thereof to purchase, subject to section
4.2 hereof, one share of Common Stock for $17.00 (the "Exercise Price").
D. The Company wishes the Rights Agent to act on its behalf in connection
with the rights offering (the "Rights Offering") as set forth herein, and the
Rights Agent is willing so to act.
A G R E E M E N T
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the Rights
Agent to act as agent in accordance with the instructions set forth in this
Agreement, and the Rights Agent hereby accepts such appointment and agrees to
take such actions as may be necessary to effectuate the terms of this Agreement.
The Company may from time to time appoint such co-rights agents as it may deem
necessary or desirable.
2. DISTRIBUTION OF RIGHTS CERTIFICATES.
2.1. Each Right Certificate, in substantially the form attached as
Exhibit A hereto, subject to such changes as the parties deem necessary ("Rights
Certificates"), shall evidence the holder of Rights (each a "Rightsholder")
therein named to purchase shares of Common Stock upon the terms and conditions
therein and herein set forth.
2
<PAGE>
2.2. Upon the written authorization of the Company, signed by any of
its duly authorized officers, as to the Record Date, the Rights Agent shall,
from a list of the Rightsholders of Common Stock to be prepared by the Rights
Agent in its capacity as Transfer Agent of the Company, prepare and record Right
Certificates in the names of the Rightsholders, setting forth the number of
Rights to purchase shares of Common Stock calculated on the basis of 0.05 Rights
for each share of Common Stock recorded on the books in the name of each such
Rightsholder. The number of Rights distributed to each Rightsholder shall be
rounded up to the nearest whole number. No Rights Certificate may be divided in
such a way as to permit the holder of such certificate to receive a greater
number of Rights than the number to which such Rights Certificate entitles its
holder, except that a registered broker-dealer, commercial bank or trust
company, securities depository or participant therein, or nominee therefor
(each, a "Qualified Financial Institution") holding shares of Common Stock on
the Record Date for more than one beneficial owner may, upon delivery of a duly
completed and executed Certification and Request for Additional Rights,
substantially in the form attached hereto as Exhibit B, to the Rights Agent on
or before 5:00 p.m., New York time, on the 30th day following the date of
distribution for the Rights, exchange its Rights Certificate to obtain a Rights
Certificate for the number of rights to which all such beneficial owners in the
aggregate would have been entitled had each been a Rightsholder. The Rights
Agent will, upon request, promptly deliver to each person making a request
therefor a form of the Certification and Request for Additional Rights referred
to in the preceding sentence. No fractional Rights will be issued upon exchange
of a Rights Certificate, and any requests to exchange a Rights Certificate that
would result in the issuance of fractional Rights will be rejected.
2.3. Upon the written authorization of the Company, signed by any of
its duly authorized officers, as to the exercise of outstanding warrants or
options the Rights Agent shall issue Rights Certificates to the holders of such
options and warrants calculated in the manner set forth in Section 2.2 above.
2.4. Upon the oral or written advice as to the effective date of the
Registration Statement, the Rights Agent shall promptly deliver the Rights
Certificates, together with a copy of the Prospectus, and any other document as
the Company deems necessary or appropriate, to all stockholders with record
addresses in the United States (including its territories and possessions and
the District of Columbia).
3. RIGHTSHOLDERS.
3.1. The Rights Certificate will be prepared by the Rights Agent, and
the Rights Agent shall affix such identifying information as it deems necessary
to identify each Rightsholder. No Rights Certificate shall be valid for any
purpose unless so executed.
3.2. The Rights Agent will keep or cause to be kept, at its principal
offices in the________, books for registration of Rights. Such books will show
the names and addresses of the respective Rightsholders and the number of Rights
that have been granted or are held.
3
<PAGE>
3.3. Rights may not be transferred, assigned, pledged or encumbered by
the Rightsholder or a beneficial owner of such Rightsholder.
3.4. Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
and/or security satisfactory to them, in their sole discretion, and
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Rights
Certificate, if mutilated, the Rights Agent will make and deliver a new Rights
Certificate of like tenor to the registered Rightsholder, in lieu of the Rights
Certificate so lost, stolen, destroyed or mutilated. If required by the Company
or the Rights Agent, an indemnity bond must be sufficient in the judgment of
each party to protect the Company, the Rights Agent or any agent thereof from
any loss that any of them may suffer if a lost, stolen, destroyed or mutilated
Rights Certificate is replaced.
3.5. Rights issued as of the Record Date shall expire one (1) year
after the effective date of the Registration Statement (the "Expiration Date").
4. EXERCISE OF RIGHTS.
4.1. Subject to Section 4.2, a Rightsholder may exercise his or her
Right(s) by completing, signing and delivering or mailing the Rights Certificate
(with any required signature guarantee(s) as required by the form of Rights
Certificate), together with payment in full of the Exercise Price for each Right
for which he or she is exercising as follows: (i) by mail to __________, or (ii)
____________ by hand or overnight delivery to _______________________. In order
for a Rightsholder to exercise his or her Right(s), the completed Rights
Certificate and payment must be received by the Rights Agent by 5:00 p.m. New
York Time on or before the Expiration Date. Checks or money orders should be
made payable to "______________" in United States Dollars.
4.2. A Rightsholder may exercise his or her Rights only to the extent
such Rightsholder maintains continuous ownership (of record or beneficially) of
the shares of Common Stock to which the Rights relate from the Record Date (or,
in the case of warrants and options, the shares of Common Stock underlying such
warrants or options on the date of exercise of such warrants or options) through
the date on which the Rights are exercised. If the Rightsholder is both the
record and beneficial owner of the shares, then the Rightsholder shall certify
continued ownership as part of the executed Rights Certificate. If the
Rightsholder is exercising Rights on behalf of a beneficial owner of the shares
of Common Stock to which the Rights relate, then the Rightsholder shall certify
as to such beneficial owner's continued ownership of shares of Common Stock at
and through the applicable dates. Rights, and any fractions thereof, will become
unexercisable to the extent that beneficial ownership of the shares to which
they relate are transferred between the Record Date and the date of exercise.
4.3. The Exercise Price will be payable in United States dollars by
check drawn upon a U.S. bank or postal, telegraphic or express money order or
wire transfer of funds to the account maintained by the Rights Agent for such
purpose payable
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to the order of the Rights Agent. The Exercise Price will be deemed to have been
received by the Rights Agent only upon: (i) clearance of any uncertified check,
(ii) receipt by the Rights Agent of any certified check drawn upon a United
States bank or of any postal, telegraphic or express money order or (iii)
receipt of good funds in the Rights Agent's account.
5. REDEMPTION OF RIGHTS.
5.1. The Company may, at its option, redeem all but not less than all
of the then outstanding Rights, at a redemption price of $.01 per Right (the
"Redemption Price"), appropriately adjusted to reflect any stock split, stock
dividend or recapitalization, if (i) the last sale price of the Company's Common
Stock as reported on the Nasdaq National Market (or principal exchange on which
the Common Stock is then listed) exceeds $20.40 per share for 20 consecutive
trading days or (ii) upon a "Change is Control." A "Change in Control" means any
event where: (i) any "person" or "group" (as such terms are used in Section
13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act) of shares representing
more than 50% of the combined voting power of the then-outstanding securities
entitled to vote generally in elections of directors of the Company ("Voting
Stock"), (ii) the Company consolidates with or merges into any other
corporation, or any other person merges into the Company, and, in the case of
any such transaction, the outstanding Common Stock of the Company is
reclassified into or exchanged for any other property or security, unless the
stockholders of the Company immediately before such transaction own, directly or
indirectly immediately following such transaction, at least a majority of the
combined voting power of the outstanding voting securities of the corporation
resulting from such transaction in substantially the same proportion as their
ownership of the Voting Stock immediately before such transaction, (iii) the
Company conveys, transfers or leases all or substantially all of its assets to
any person (other than to one or more wholly-owned subsidiaries of the Company)
or (iv) any time the Continuing Directors do not constitute a majority of the
Board of Directors of the Company (or, if applicable, a successor corporation to
the Company). "Continuing Directors" means as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date of this Agreement or (ii) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such board at the time of such
nomination or election.
5.2. Promptly upon action by the Board of Directors of the Company
ordering the redemption of the Rights, the Company and Rights Agent shall give
30 days written notice ("Notice Period") of the redemption of the Rights. The
Rights Agent shall give notice of such redemption to the holders of the then
outstanding Rights by mailing such notice to all such holders at their last
address appearing upon the registry books of the Rights Agent. Any notice that
is mailed in the manner provided herein shall be deemed given, whether or not
the holder receives the notice. Upon expiration of the Notice Period, the right
to exercise the Rights will terminate and the only right thereafter of the
Rightsholders shall be to receive the Redemption Price.
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6. DELIVERY OF SECURITIES. The Rights Agent, in its capacity as the
Transfer Agent, shall issue certificates for Common Stock upon the instructions
of the Company, according to the executed Rights Certificates that have been
accepted by the Company. The Company shall inform the Rights Agent in writing as
to the acceptance of payment and the date for actual issuance of Common Stock to
each Rightsholder. Shares of Common Stock to be issued pursuant to the exercise
of Rights are to be registered in the name of the registered holder of the
Rights Certificate. Delivery of the stock certificates are to be to the
registered holder of the Rights Certificate unless otherwise indicated in the
Rights Certificate, in which case, signatures on such Rights Certificate must be
guaranteed by an Eligible Guarantor Institution, as defined in Rule
17AD-15(a)(2) of the Securities Exchange Act of 1934.
7. FRACTIONAL RIGHTS AND SHARES. No fractional Rights or cash in lieu
thereof will be issued or paid. The number of Rights distributed to each
Rightsholder or beneficial owner holding through a Qualified Financial
Institution that complies with the procedures set forth in Section 2.2 above
will be rounded up to the next whole number. All questions as to the validity
and eligibility of any rounding of fractional Rights (including, without
limitation, in connection with the surrender by a Qualified Financial
Institution of a Rights Certificate, as set forth in Section 2.2 hereof) will be
determined by the Company in its sole discretion, and its determination will be
final and binding.
8. REPORTS. The Rights Agent will notify the Company and its designated
representatives by telephone each commencing on the distribution date and ending
at the Expiration Date, which notice will thereafter be confirmed in writing, of
(i) the number of Rights exercised each week and (ii) the number of Rights for
which a defective Rights Certificate has been received and (iii) cumulative
totals with respect to the information set forth in each of the clauses (i) and
(ii) above. In addition, during the applicable 30-day period, each business day
the Rights Agent will notify the Company or its designated representatives as to
the number of requests from Qualified Financial Institutions holding Rights on
behalf of more than one beneficial owner of Common Stock to exchange a Rights
Certificate or Certificates so as to obtain additional Rights to which such
beneficial holders are entitled, as set forth in Section 2.2 above, and the
increase in the number of Rights that would result from such exchange. The
Rights Agent will also maintain and update a listing of Rightsholders who have
fully or partially exercised their Rights and Rightsholders who have not
exercised their Rights. The Rights Agent will provide the Company and its
respective designated representatives with the information compiled pursuant to
this Section 8 and any Rights Certificates or other documents or date from which
such information is derived, as any of them may request. The Rights Agent hereby
represents and warrants that the information contained in each notification
referred to in this Section 8 will be accurate in all material respects.
9. AMENDMENTS AND WAIVERS; TERMINATION. The Company reserves the right to
alter the Expiration Date upon 30 days notice to Rightsholders, and to amend the
terms and conditions of the Rights, whether the amended terms are more or less
favorable to Rightsholders. All questions as to the timeliness, validity, form
and eligibility (including time of receipt and record ownership) of any exercise
of Rights will be determined by the Company, whose determinations will be final
and binding, and
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Company reserves the right to reject any exercise of a Right if such exercise is
not in proper form, or if the acceptance thereof or the issuance of Common Stock
thereto could be deemed unlawful. The Company also reserves the right to waive
any defect or irregularity or permit a defect or irregularity to be corrected
within such time as it may determine. An exercise of Rights will not be deemed
to have been received or accepted until all irregularities have been waived or
cured within such time as the Company determines in its sole discretion. Neither
the Company nor the Rights Agent will be under any duty to give notification of
any defect or irregularity in connection with the submission of Rights
Certificates or incur any liability for failure to give such notification. Any
exercise as to which no notice of any defect or irregularity has been given by
the Company or the Rights Agent and no notice of rejection has been given prior
to the Expiration Date, shall be deemed accepted by the Company.
10. INSTRUCTIONS. The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder from
the Chief Executive Officer, Chief Financial Officer or General Counsel of the
Company, or any other person designated by any of them, and to apply to such
officers for advice or instructions in connection with its duties, and the
Rights Agent will not be liable for any action taken by it in good faith in
accordance with the instructions of any such officer.
11. FEES OF THE RIGHTS AGENT; INDEMNIFICATION.
11.1. The Company agrees to pay the Rights Agent compensation in
accordance with the fee schedule attached hereto as Exhibit C for all services
rendered by it hereunder and, from time to time, on demand of the Rights Agent,
its reasonable expenses and other disbursements incurred in the administration
and execution of this Agreement.
11.2. The Company hereby covenants and agrees to indemnify and to hold
the Rights Agent (the "Indemnified Party") harmless against any losses, claims,
damages, liabilities, costs and expenses (including reasonable fees and
disbursements of legal counsel) that the Indemnified Party may incur or become
subject to arising from or out of any claim or liability resulting from actions
taken as Rights Agent pursuant to this Agreement; PROVIDED, HOWEVER, that such
covenant and agreement does not extend to, and the Indemnified Party will not be
indemnified or held harmless with respect to, such losses, claims, damages,
liabilities, costs and expenses incurred or suffered by the Indemnified Party as
a result, or arising out of, the faith or breach of this Agreement. In
connection therewith, (i) in no case will the Company be liable with respect to
any claim against the Indemnified Party unless the Indemnified Party notifies
the Company in writing of the assertion of a claim against it or of any action
commenced against it, as soon as practicable after it has notice of any such
assertion of a claim or has been served with the summons or other first legal
process giving information as to the nature and basis of the claim (but in any
event at least ten days prior to the date on which an answer or other pleading
must be served in order to prevent a judgment by default in favor of the person
asserting such claim), (ii) the Company will be entitled to participate at its
own expense in the defense of any suit brought to enforce any such claim, and if
the Company so elects, it may assume the defense of any such suit, in which
event the
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Company will not thereafter be liable for the fees and expenses of any
additional counsel that the Indemnified Party may retain, so long as the Company
retains counsel satisfactory to the party to be indemnified, in the exercise of
the party's reasonable judgment, to defend such suit, and (iii) the Indemnified
Party agrees not to settle any litigation in connection with any claim or
liability with respect to which either or both of them may seek indemnification
from the Company without the prior written consent of the Company.
11.3. The Indemnified Party will be protected and will incur no
liability for or with respect to any action taken, suffered or omitted by it
without negligence and in good faith in connection with its administration of
this Agreement in reliance upon any Rights Certificate, power of attorney,
endorsement, affidavit letter, notice, direction, consent, certificate,
statement or other paper or document reasonably believed by it to be genuine and
to be signed, executed and, where necessary, verified or acknowledged by the
proper person or persons.
11.4. Anything in this Agreement to the contrary notwithstanding, in
no event will the Indemnified Party be liable for special, indirect or
consequential loss or damage of any kind whatsoever (including but not limited
to lost profits), even if the Indemnified Party has been advised of the
likelihood of such loss or damage and regardless of the form of action.
12. MERGER OR CONSOLIDATION. Any corporation into which the Rights Agent or
Company or any successor Rights Agent or Company may be merged or with which it
may be consolidated, or any corporation resulting from any merger or
consolidation to which any of them may be a party, or any corporation succeeding
to their respective businesses, or any successor, will be the successors to the
Rights Agent, or Company, respectively, under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto.
13. CONCERNING THE RIGHTS AGENT. The Rights Agent undertakes the duties and
obligations imposed by this Agreement upon the following terms and conditions:
13.1. The Rights Agent may consult with legal counsel acceptable to
the Company (who may be, but is not required to be, legal counsel for the
Company), and the opinion of such counsel will be full and complete
authorization and protection to the Rights Agent as to any action taken or
omitted by it in good faith and in accordance with such opinion.
13.2. Whenever in the performance of its duties under this Agreement
the Rights Agent may deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by the Chief Executive Officer, Chief
Financial Officer or General Counsel of the Company and delivered to the Rights
Agent, and such certificate will be full authorization to the Rights
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Agent for any action taken or suffered in good faith by it under the provisions
of this Agreement in reliance upon such certificate.
13.3. Nothing herein precludes the Rights Agent from acting in any
other capacity for the Company.
14. CERTAIN TAX MATTERS. The Rights Agent will comply with the information
reporting and backup withholding requirements of the Internal Revenue Code of
1986, as amended from time to time and any successor statute (the "Code"),
including without limitation, where appropriate, on a timely basis, filing with
the Internal Revenue Service and furnishing to the Company a duly completed form
1099B, if applicable. The Rights Agent will also collect and duly preserve Forms
W-8 and W-9 and other forms or information necessary to comply with the backup
withholding requirement of the Code.
15. GENERAL PROVISIONS.
15.1. NOTICES. Unless otherwise specifically permitted by this
Agreement, all notices or other communications required or permitted under this
Agreement shall be in writing, and shall be personally delivered or sent by
registered or certified mail, postage prepaid, return receipt requested, or sent
by telecopy, provided that the telecopy cover sheet contains a notation of the
date and time of transmission, and shall be deemed received: (i) if personally
delivered, upon the date of delivery to the address of the person to receive
such notice, (ii) if mailed in accordance with the provisions of this paragraph,
two (2) business days after the date placed in the United States mail, (iii) if
mailed other than in accordance with the provisions of this paragraph or mailed
from outside the United States, upon the date of delivery to the address of the
person to receive such notice, or (iv) if given by telecopy, when sent. Notices
shall be given at the following address:
If to the Company: Tel-Save.com, Inc.
6805 Route 202
New Hope, Pennsylvania 18938
If to the Rights Agent:
15.2. COMPLETE AGREEMENT; MODIFICATION. This Agreement and written
agreements, if any, entered into concurrently herewith (i) constitute the
parties' entire agreement, including all terms, conditions, definitions,
warranties, representations, and covenants, with respect to the subject matter
hereof, (ii) merge all prior discussions and negotiations between or among any
or all of them as to the subject
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matter hereof, and (iii) supersede and replace all terms, conditions,
definitions, warranties, representations, covenants, agreements, promises and
understandings, whether oral or written, with respect to the subject matter
hereof. This Agreement may not be amended, altered or modified except by a
writing signed by the party to be bound. With regard to such amendments,
alterations, or modifications, telecopied signatures shall be effective as
original signatures. Any amendment, alteration, or modification requiring the
signature of more than one party may be signed in counterparts.
15.3. FURTHER ACTION. Each party agrees to perform any further acts
and execute and deliver any further documents reasonably necessary to carry out
the provisions of this Agreement.
15.4. ASSIGNMENT. No party may assign its rights under this Agreement
without the prior written consent of the other parties hereto.
15.5. SUCCESSORS AND ASSIGNS. Except as explicitly provided herein to
the contrary, this Agreement shall be binding upon and inure to the benefit of
the parties, their respective successors and permitted assigns.
15.6. SEVERABILITY. If any portion of this Agreement shall be held by
a court of competent jurisdiction to be invalid, void, or otherwise
unenforceable, the remaining provisions shall remain enforceable to the fullest
extent permitted by law if enforcement would not frustrate the overall intent of
the parties (as such intent is manifested by all provisions of this Agreement,
including such invalid, void, or otherwise unenforceable portion).
15.7. EXTENSION NOT A WAIVER. No delay or omission in the exercise of
any power, remedy, or right herein provided or otherwise available to any party
shall impair or affect the right of such party thereafter to exercise the same.
Any extension of time or other indulgence granted to a party hereunder shall not
otherwise alter or affect any power, remedy or right of any other party, or the
obligations of the party to whom such extension or indulgence is granted except
as specifically waived.
15.8. TIME OF ESSENCE. Time is of the essence of each and every term,
condition, obligation and provision hereof.
15.9. NO THIRD PARTY BENEFICIARIES. This Agreement and each and every
provision hereof is for the exclusive benefit of the parties hereto and not for
the benefit of any other party.
15.10. HEADINGS. The headings in this Agreement are inserted only as a
matter of convenience, and in no way define, limit, or extend or interpret the
scope of this Agreement or of any particular provision hereof.
15.11. REFERENCES. A reference to a particular paragraph of this
Agreement shall be deemed to include references to all subordinate paragraphs,
if any.
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15.12. GENDER, NUMBER, AND TENSE. Throughout this Agreement, unless
the context otherwise requires:
(i) the masculine, feminine, and neuter genders each includes the
other;
(ii) the singular includes the plural, and the plural includes
the singular; and
(iii) the past tense includes the present, and the present tense
includes the past.
15.13. COUNTERPARTS. This Agreement may be signed in multiple
counterparts with the same force and effect as if all original signatures
appeared on one copy; and in the event this Agreement is signed in counterparts,
each counterpart shall be deemed an original and all of the counterparts shall
be deemed to be one agreement.
15.14. DRAFTER. The parties acknowledge that each party has received
and approved this Agreement and the normal rules of construction to the effect
that any ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Agreement.
15.15. APPLICABLE LAW. This Agreement shall be construed in accordance
with, and governed by, the laws of the State of Delaware.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed as of the date first above written.
Tel-Save.com, Inc.
a Delaware corporation
By:
-------------------------------
Its:
------------------------------
[Rights Agent]
By:
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