AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 6,
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
TEL-SAVE HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 23-28277736
(State or other jurisdiction of incorporation or organization) (I.R.S. Employee Identification Number)
</TABLE>
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 HOLDINGS, INC.
6805 ROUTE 202
NEW HOPE, PENNSYLVANIA 18938
(215) 862-1500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after this Registration Statement becomes effective.
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. [ ]
CALCULATION OF REGISTRATION
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<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED AMOUNT TO BE REGISTERED SHARE(1) PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value
per share $0.01 ............ 16,528,544 $ 9.15625 $151,339,481 $45,860
</TABLE>
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(1) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933 based on the
average of the high and low price of the common stock on the Nasdaq National
Market on October 5, 1998.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE>
SUBJECT TO COMPLETION DATED OCTOBER 6, 1998
PROSPECTUS
[TEL-SAVE LOGO]
16,528,544 SHARES OF COMMON STOCK
----------------
We may offer from time to time up to 16,528,544 shares of our common stock
that are held in treasury. We will determine the price and other specific terms
at the time of sale and set them forth in a prospectus supplement.
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.
We may sell the common stock directly, through agents, or through
underwriters or dealers. If any agents or underwriters are involved in the sale
of any common stock, their names and any applicable commissions or discounts
will be set forth in a prospectus supplement. The net proceeds to us from the
sale of common stock will be set forth in a prospectus supplement.
We may terminate this offering under certain conditions. No minimum number
of shares must be sold for the offering to go forward. Consequently, we may sell
less than the total number of shares offered by this prospectus in the offering.
----------------
SEE "RISK FACTORS" BEGINNING ON PAGE 2 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>
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."
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.
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
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subscription 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 (AOL Long
Distance), our exclusive right to market long distance service over the AOL
network will expire on June 30, 2001, unless it is extended by agreement of the
parties. See "-- Competition."
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 subscribers 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 consumers 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.
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 its 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
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
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and alliances across geographic regions and across industry segments.
Competition in the long distancebusiness 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 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.
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 September 1, 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 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
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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 September 22, 1998, Mr. Borislow owned beneficially approximately
31.9% 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 September 22, 1998, our other directors and executive officers
owned beneficially approximately 12.6% of the our outstanding common stock. See
"Description of Capital Stock" regarding references to percentages of the
outstanding common stock in this prospectus.
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
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 September 22, 1998, Mr.
Borislow owned of record or had dispositive power with respect to approximately
16.8% 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 September 22, 1998, our employees, former employees and directors had
outstanding options to purchase 7,166,510 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 15,762,757 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.
Paul Rosenberg, the holder of 7,440,000 shares of common stock, has the
right, under certain conditions, to participate in future registrations of
common stock and to cause us to register certain shares of common stock owned by
him. 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.
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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. We have examined our computer-based systems and
believe that the "Year 2000" problem is not present on such systems. We are,
however, dependent upon computer systems operated by third parties, such as
local exchange carriers, AT&T, AOL and other vendors. 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.
THE COMPANY
The Company, originally incorporated in 1989 as Tel-Save, Inc., provides
long distance telephone service. For further information about our business and
operations, reference is made to our reports incorporated in this prospectus by
reference. See "Where You Can Find More Information."
DESCRIPTION OF CAPITAL STOCK
As of September 22, 1998, our authorized capital stock consisted of
300,000,000 shares of common stock, $.01 par value per share, and 5,000,000
shares of undesignated preferred stock, $.01 par value per share. As of
September 22, 1998, 50,406,091 shares of common stock were issued and
outstanding, which number (and other references in this prospectus to
percentages of outstanding common stock), reflects as held in treasury and no
longer outstanding all shares of common stock that had been purchased for our
account as of September 22, 1998 and for which we have paid, notwithstanding
that delivery of such shares to us may not have been made. No shares of
preferred stock were designated or issued. For further information about our
authorized capital stock, reference is made to our reports incorporated in this
prospectus by reference. See "Where You Can Find More Information."
USE OF PROCEEDS
Unless otherwise set forth in the applicable prospectus supplement, the net
proceeds from the sale of the shares of common stock offered by this prospectus
will be used for general corporate purposes, which may include repayment of
indebtedness, acquisitions, additions to working capital and capital
expenditures.
PLAN OF DISTRIBUTION
The Company may sell the common stock offered by this prospectus to one or
more underwriters for public offering and sale by them or may offer and sell
common stock to investors directly or through agents or dealers. Any such
underwriter, agent or dealer involved in the offer and sale of common stock will
be named in a prospectus supplement. Common stock offered pursuant to a
particular prospectus supplement is referred to in this prospectus as "Offered
Common Stock." The Company may also sell Offered Common Stock to an agent as
principal.
Underwriters may offer and sell the Offered Common Stock at a fixed price
or prices, which may be changed, or from time to time at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The Company may also, from time to time,
authorize underwriters acting as its agents to offer and sell the Offered Common
Stock upon the terms and conditions set forth in any prospectus supplement. In
connection with the sale of Offered Common Stock, underwriters or agents acting
on the Company's behalf may be deemed to have received compensation from the
Common Stock or from purchasers of Offered Common Stock for whom they may act as
agent in the form of underwriting discounts or commissions. Underwriters may
sell Of-
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fered Common Stock to or through dealers, and such dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters and/or commissions (which may be changed from time to time) from
the purchasers for whom they may act as agent.
If a dealer is used in the sale of the Offered Common Stock in respect of
which this prospectus is delivered, the Company will sell such Offered Common
Stock to such dealer, as principal. The dealer may then resell such Offered
Common Stock to the public at varying prices to be determined by such dealer at
the time of resale.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Offered Common Stock, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in an applicable prospectus supplement. Underwriters, dealers
and agents participating in the distribution of the Offered Common Stock may be
deemed to be "underwriters" under the Securities Act, and any discounts and
commission received by them and any profit realized by them on resale of the
Offered Common Stock may be deemed to be underwriting discounts and commissions
under the Securities Act. Underwriters, dealers and agents may be entitled under
agreements with the Company to indemnification against and contribution toward
certain civil liabilities, including liabilities under the Securities Act, and
to reimbursement by the Company for certain expenses.
If so indicated in an applicable prospectus supplement, the Company will
authorize dealers acting as its agents to solicit offers by certain institutions
to purchase Offered Common Stock from the Company at the public offering price
set forth in such prospectus supplement pursuant to Delayed Delivery Contracts
("Contracts") providing for payment and delivery on the date or dates stated in
such prospectus supplement. Each Contract will be for an amount not less than,
and the aggregate principal amount or offering price of Offered Common Stock
sold pursuant to Contracts shall not be less nor more than, the respective
amounts stated in such prospectus supplement. Institutions with which Contracts,
when authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and other institutions, but will in all cases be subject to the
approval of the Company.
Any underwriter may engage in stabilizing and syndicate covering
transactions in accordance with Rule 104 under the Exchange Act. Rule 104
permits stabilizing bids to purchase the underlying security so long as the
stabilizing bids do not exceed a specified maximum. The underwriters may
over-allot shares of the common stock in connection with an offering of common
stock, thereby creating a short position in the underwriters' account. These
transactions, if commenced, may be discontinued at any time.
The anticipated date of delivery of Offered Common Stock will be set forth
in the applicable prospectus supplement relating to each offer.
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 65,473 shares of common stock and holds vested options to purchase 60,000
shares at a price of $11.625 per share and 90,000 shares at a price of $10.56
per share.
EXPERTS
The consolidated financial statements and schedule of the Company and its
subsidiaries incorporated by reference in this prospectus have been audited by
BDO Seidman, LLP, 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.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
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 and June 30, 1998;
c. our current reports on Form 8-K, dated March 10, 1998, August 27, 1998
and September 18, 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 Holdings, 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 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.
9
<PAGE>
<TABLE>
<CAPTION>
======================================================= ====================================================
16,528,544 SHARES
[GRAPHIC OMITTED]
TABLE OF CONTENTS
PAGE
-----
<S> <C>
Risk Factors ................................. 2
The Company .................................. 7
Description Of Capital Stock ................. 7
Use Of Proceeds .............................. 7
Plan Of Distribution ......................... 7
Legal Matters ................................ 8
Experts ...................................... 8 COMMON STOCK
Where You Can Find More Information .......... 9
----------
PROSPECTUS
----------
October 6, 1998
======================================================= ====================================================
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
SEC registration fee ................. $45,860
Legal fees and expenses ..............
Accounting fees and expenses .........
Transfer agent fees ..................
Miscellaneous ........................ -------
Total ................................ $
ITEM 15. INDEMNIFICATION OF DIRECTOR AND OFFICERS.
The Delaware General Corporation Law provides, in substance, that Delaware
corporations shall have the power, under specified circumstances, to indemnify
their directors, officers, employees and agents in connection with actions or
suits by or in the right of the corporation, by reason of the fact that they
were or are such directors, officers, employees and agents, against expenses
(including attorneys' fees) and, in the case of actions, suits or proceedings
brought by third parties, against judgment, fines and amounts paid in settlement
actually and reasonably incurred in any such action, suit or proceeding.
The Company's Bylaws also provide for indemnification to the fullest extent
permitted by the Delaware General Corporation Law. Reference is made to the
Company's Bylaws.
As permitted by the Delaware General Corporation Law, the Company's Bylaws
eliminate the personal liability of its directors to the Company and its
stockholders, in certain circumstances, for monetary damages arising from a
breach of the director's duty of care. Additionally, the Company has entered
into indemnification agreements with some of its directors and officers. These
agreements provide for indemnification to the fullest extent permitted by law
and, in certain respects, may provide greater protection than that specifically
provided for by 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 in Exhibit 5.1).
24.1 Power of Attorney
(included as part of the signature page).
- ----------
* To be filed by amendment.
II-1
<PAGE>
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 registrant 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 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.
(d) The undersigned hereby undertakes that:
II-2
<PAGE>
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as a part of
this registration statement in reliance upon Rule 430A and contained in any
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Township of Solebury, Commonwealth of Pennsylvania, on
October 6, 1998.
TEL-SAVE HOLDINGS, 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 October 6, 1998
- --------------------------- Directors, Chief Executive
Daniel Borislow Officer and Director (Principal
Executive Officer)
/s/ GARY W. MCCULLA Director October 6, 1998
- ---------------------------
Gary W. McCulla
/s/ EMANUEL J. DEMAIO Director October 6, 1998
- ---------------------------
Emanuel J. DeMaio
/s/ GEORGE P. FARLEY Chief Financial Officer, and October 6, 1998
- --------------------------- Director (Principal Financial
George P. Farley Officer)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ KEVIN R. KELLY Controller (Principal October 6, 1998
- --------------------------- Accounting Officer)
Kevin R. Kelly
/s/ HAROLD FIRST Director October 6, 1998
- ---------------------------
Harold First
/s/ RONALD R. THOMA Director October 6, 1998
- ---------------------------
Ronald R. Thoma
</TABLE>
II-5
EXHIBIT 23.1
CONSENT OF BDO SEIDMAN, LLP
Tel-Save Holdings, Inc.
New Hope, Pennsylvania
We hereby consent to the incorporation by reference in this Prospectus
constituting a part of this Registration Statement of our reports dated February
5, 1998, relating to the consolidated financial statements and schedule of
Tel-Save Holdings, Inc. and Subsidiaries (the "Company") appearing in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO Seidman, LLP
New York, New York
October 6, 1998
