AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 26, 1999
Registration No. 333-72357
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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TALK.COM INC.
FORMERLY, TEL-SAVE.COM, 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)
12020 SUNRISE VALLEY DRIVE
RESTON, VIRGINIA 22091
(703) 391-7500
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
ALOYSIUS T. LAWN, IV
GENERAL COUNSEL AND SECRETARY
TALK.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: 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. [ ]
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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SUBJECT TO COMPLETION DATED MAY 26, 1999
TALK.COM INC.
FORMERLY, TEL-SAVE.COM, INC.
PROSPECTUS
12,843,356 SHARES OF COMMON STOCK
America Online, Inc. may use this prospectus to offer and sell from time to time
an aggregate of up to 12,843,356 shares of our common stock.
AOL may offer its shares through public or private transactions, on or off the
Nasdaq National Market, at prevailing market prices or at privately negotiated
prices. We will not receive any of the proceeds from the sale of these shares by
AOL.
Our common stock is quoted on the Nasdaq National Market and traded under the
symbol "TALK."
Our principal executive offices are located at 12020 Sunrise Valley Drive,
Reston, Virginia 22091, and our telephone number is (703) 391-7500.
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 determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this Prospectus is __, 1999
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RISK FACTORS
Before you invest in the shares of common stock offered in this prospectus, you
should be aware that there are various risks, including those described below.
You should carefully consider the following factors and other information
contained in our current and future reports and in this prospectus before
deciding to invest in our shares.
A MAJORITY OF OUR SALES ARE CURRENTLY GENERATED BY CUSTOMERS WHO SIGNED UP TO
OUR SERVICE WHILE SUBSCRIBING TO AMERICA ONLINE, INC. OUR BUSINESS CURRENTLY
DEPENDS SIGNIFICANTLY ON OUR AGREEMENTS WITH AOL. ANY SIGNIFICANT REDUCTION IN
THE NUMBER OF AOL SUBSCRIBERS ACQUIRING OUR SERVICE COULD ADVERSELY AFFECT OUR
RESULTS OF OPERATIONS OR OUR REVENUES AND PROFITABILITY.
At the beginning of 1997, we entered into an innovative
telecommunications marketing agreement with AOL, and launched a major initiative
for marketing and selling our telecommunication services online to AOL
subscribers over the AOL service. We believe that our business currently depends
to a material extent upon our agreements and relationship with AOL. We believe
that the results of our agreement with AOL will have a material effect on our
business, financial condition and results of operations. We cannot assure you
that our arrangement with AOL will be profitable for us on a quarter-to-quarter
basis or that our current experience with our AOL long distance business is a
fair indication of the future results of our AOL relationship.
Our agreement with AOL gives us the exclusive right to market long
distance and wireless telephone service over AOL until June 2003. However, AOL
may allow others to market long distance telephone and wireless services to AOL
subscribers after June 2000 if AOL forgoes the fixed quarterly payments that we
are otherwise obligated to pay AOL. We currently cannot predict the impact on
our AOL business if AOL elects to terminate our exclusivity period early.
OUR SPENDING ON MARKETING MAY NOT BE ENOUGH TO ATTRACT AND RETAIN ADDITIONAL
CUSTOMERS.
We have spent substantial amounts of money marketing our AOL service
offerings, and under the amended AOL agreement will continue to do so. We can
provide no assurance that these expenditures are enough to attract substantial
additional customers to our service, or that any new subscribers will remain our
customers long enough to recoup the costs of attracting these additional
customers.
ACTIONS BY LOCAL TELEPHONE COMPANIES HAVE HAMPERED AND MAY IN THE FUTURE
CONTINUE TO HAMPER OUR ABILITY TO SWITCH NEW CUSTOMERS QUICKLY TO OUR SERVICE.
INABILITY TO SWITCH NEW CUSTOMERS QUICKLY TO OUR LONG DISTANCE SERVICE MAKES IT
MORE DIFFICULT FOR US TO SIGN UP NEW CUSTOMERS.
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The success of our online telecommunications sales and marketing
business depends in part on our ability to establish telephone service promptly
after receiving an order. Restrictions on marketing telecommunications services
are becoming stricter in the wake of widespread consumer complaints throughout
the industry about "slamming" (the unauthorized conversion of a customer's
preselected telecommunications carrier). Federal and state legislation and
rulings by the Federal Communications Commission have made the transfer of new
customers to new long distance service more difficult. In addition, many local
exchange carriers have offered their customers programs known as "PIC freezes"
that may be selected by a customer. Once a PIC freeze is selected, a customer
seeking to change long distance carriers is required to contact the local
carrier directly instead of having the long distance carrier contact the local
carrier on the customer's behalf. Many local carriers have imposed burdensome
requirements on customers seeking to lift PIC freezes and change long distance
carriers, which makes it difficult for customers to switch to our long distance
service.
Although these PIC freezes and other restrictions were perhaps designed
to avoid unauthorized transfers of telephone service, by requiring the customer
to directly contact his or her local phone company to change long distance
carriers, they have the effect, we believe, of interfering with a customer's
choice to switch service to a better priced product, such as our AOL long
distance service. This requirement deprives new customers of the ability to take
full advantage of our online services, which allows a customer to sign-up and
authorize a change to our long distance service entirely online through our
innovative online customer care and billing systems. Although the FCC is engaged
in rule-making proceedings that could modify the rules governing the offering,
implementing and lifting of PIC freezes, we can provide no assurance that those
rules will be adopted, or that if adopted, any new rules would effectively limit
the harmful effects of PIC freezes.
IF WE ARE UNABLE TO MAINTAIN THE COMPLEX SYSTEMS REQUIRED TO SUPPORT OUR ONLINE
OPERATIONS, WE COULD LOSE EXISTING LONG DISTANCE CUSTOMERS AND WE MAY BE UNABLE
TO EXPAND OUR CUSTOMER BASE AS MUCH AS WE HAD PLANNED.
The success of our plans to increase and retain our customer base
through a focus on online transactions depends on our ability to develop and
maintain complex systems to support our online sign-up and billing services. 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. We will be required to find, employ
and retain skilled programmers to develop and maintain these complex systems.
Unanticipated delays or difficulties in developing these systems or in hiring
personnel could materially adversely affect our online business, including our
AOL telecommunications business.
WE HAVE GROWN SIGNIFICANTLY OVER THE LAST SEVERAL YEARS. WE MAY NOT BE ABLE TO
SUSTAIN THIS RATE OF GROWTH IN THE FUTURE.
Since we started our business in 1989, we have grown dramatically in
terms of revenues and number of employees and have rapidly expanded the nature
and scope of our business. Although our growth occurred in a relatively short
period of time and we regularly consider growth opportunities through
acquisitions, joint ventures and partnerships as well as other
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business expansion opportunities, we cannot assure you that we will be able to
continue our past rate or type of growth or achieve the growth contemplated by
our business strategy.
Continued growth of our current business will continue to place
significant demands on our management and on our operational, financial and
other resources. Moreover, much of our management, including the new Chief
Executive Officer, recently joined us. We must also continue to improve our
operations, management, financial and information systems and controls and to
expand, train and manage our employee base, including in the areas of customer
service support, finance, marketing and administration. Our ability successfully
to improve in these areas depends, among other things, on our ability to pay for
significant investments of resources. We must also manage, attract and retain
qualified personnel, the competition for whom is intense.
IF WE ARE UNABLE TO COMPETE SUCCESSFULLY IN THE LONG DISTANCE MARKET GENERALLY,
OR IN THE ONLINE LONG DISTANCE MARKET IN PARTICULAR, OUR SALES COULD DECLINE.
The long distance telecommunications industry is highly competitive.
Major participants in the industry regularly introduce new services and
marketing activities. 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.
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. Our competitors' reduction of the long
distance prices they charge may have a material adverse impact on our
profitability. We also from time to time consider providing telecommunications
services we have not previously provided. If we offer these new services, we
would face the same competitive pressures that affect our existing services.
CUSTOMER ATTRITION MAY AFFECT OUR FINANCIAL PERFORMANCE.
Purchasers of our long distance services are not obligated to purchase
any minimum amount of our services, and can stop using our service at any time
and without penalty. Our customers may not continue to buy their long distance
telephone service through us or through our "partitions," who are independent
carriers and marketing companies that purchase services from us. If a
significant portion of our customers were to decide to purchase long distance
service from other long distance service providers, we may not be able to
replace them. A high level of customer attrition is common in the long distance
industry, and our financial results are affected by this attrition. Attrition is
attributable to a variety of factors, including our termination of customers for
nonpayment and the initiatives of existing and new competitors who, to attract
new customers, may
o implement national advertising campaigns,
o utilize telemarketing programs, and
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o provide cash payments and other forms of incentives.
INCREASED REGULATION OF TELEMARKETING MAY HINDER OUR ABILITY TO OBTAIN NEW
CUSTOMERS AND MAY EXPOSE US TO CERTAIN LIABILITIES.
Both federal and state officials are tightening and increasing
enforcement of the rules that govern direct marketing, including the
telemarketing of telecommunications services. They are also increasing the
enforcement of the requirements imposed on long distance carriers seeking to
acquire customers through telemarketing. 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. We have
discontinued our internal telemarketing operations, which may reduce our
exposure to related customer complaints and federal, state or local enforcement
actions. However, certain government officials have made inquiries with respect
to the marketing of our services and could hold us accountable under applicable
laws for the direct marketing activities of third parties carried out for our
benefit. Our prior telemarketing and other marketing efforts, our ongoing
support of our customer/partitions, and telemarketing and other marketing done
in connection with our online marketing agreements also raise the risk of
enforcement actions against us.
WE USE MARKETING COMPANIES, CALLED PARTITIONS, TO SELL SOME OF OUR SERVICES. THE
ACTIVITIES OF THESE COMPANIES MAY EXPOSE US TO ADDITIONAL LIABILITIES.
Historically, we marketed a significant portion of our services through
partitions, which generally have entered into non-exclusive agreements with us.
Most of these agreements do not contain any minimum use or revenue commitments
by those partitions. If we were to lose access to services on the third party
networks or billing services that we use or if we were to have difficulties with
OBN, our agreements and relationships with partitions would suffer, and our
results would suffer.
Provisions in our agreements with the partitions require them to comply
with state and federal statutes and regulations, including those regulating
telemarketing. Because our partitions are independent carriers and marketing
companies, however, we cannot control their activities. We also cannot predict
the extent of their compliance with applicable regulations. State and Federal
regulatory authorities have, in the past, tried to hold us liable for activities
of our partitions and have subjected us to increased regulatory review.
Increased regulatory review could affect possible future acquisitions of new
business from new partitions or other resellers.
NEW REGULATIONS IMPOSED ON US OR ON THE PARTITIONS BY FEDERAL OR STATE AGENCIES
COULD HAVE A NEGATIVE IMPACT ON US OR ON OUR PARTITIONS.
The FCC and various state public service and public utility commissions
regulate us as a provider of long distance services. We can make no assurances
that the FCC, state regulators or other government entities will not take action
that would have an adverse effect on our business, financial condition or
results of operations. FCC or state regulatory or enforcement action could also
have a negative affect on our partitions.
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WE MUST CONTINUE TO KEEP PACE WITH TECHNOLOGICAL CHANGES IN OUR INDUSTRY IN
ORDER TO SUCCEED.
The telecommunications industry is characterized by:
o rapid technological change,
o frequent new service introductions, and
o evolving industry standards.
Our inability to anticipate these changes and to respond quickly by
offering services that meet or compete with these evolving standards could
negatively affect our chances for success. There can be no assurance that we
will have sufficient resources to make the necessary investments or to introduce
new services that would satisfy an expanded range of partition and customer
needs.
ESTABLISHING, DEPLOYING AND RELYING ON OUR OWN "ONE BETTER NET" NETWORK
INCREASES THE LIKELIHOOD THAT WE COULD INCUR LOSSES OR FACE OTHER DIFFICULTIES
IF SERVICE WAS INTERRUPTED OR OUR EQUIPMENT DAMAGED.
We provide services over OBN, using our own switches, to approximately
80% of the lines using our long distance services. Operation as a switch-based
provider subjects us to risk of significant interruption in our ability to
provide services if our facilities such as switching equipment or connections to
transmission facilities were damaged by fire or other natural disaster. To the
extent that we are principally responsible for providing our customers with
telecommunications services, interruption or failure to provide these services
may subject us to claims from customers who are damaged as a result of an
interruption or failure. Interruptions or other difficulties in operating OBN
could have a material adverse effect on our financial condition and results of
operations.
WE RELY ON THIRD-PARTY CARRIERS TO SUPPORT THE SERVICES WE OFFER. IF ANY OF
THESE THIRD PARTIES FAIL OR REFUSE TO CARRY OUR CALLS, OR IF THEY INCREASE THE
PRICES THEY CHARGE US, IT COULD HAVE A NEGATIVE EFFECT ON OUR FINANCIAL
CONDITION.
We obtain services from various long distance and local carriers of
telecommunications services for our OBN network services and our reselling
operations. If these carriers fail to provide service, our customers would still
hold us responsible. We may also not be able to obtain competitive or
satisfactory rates.
If carriers:
o choose not to enter into agreements with us,
o terminate existing contracts with us,
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o reduce the level or type of telecommunication services they offer, or
o refuse to negotiate cost reductions to meet competitive prices,
it could have a material adverse effect on our financial condition and results
of operations.
THE TERMS OF SOME OF OUR AGREEMENTS WITH OTHER PARTIES MAY AFFECT OUR CASH
POSITION AND OUR ABILITY TO RAISE CAPITAL.
When AOL acquired 4,121,372 shares of our common stock for cash and the
surrender of a portion of its warrant rights in January 1999, we agreed to
reimburse AOL for losses that it might suffer if it sold the stock during the
16-month period beginning June 1, 1999 for less than it paid us for the stock.
The maximum amount we might have to pay under this agreement for such stock
sales is approximately $54 million, but the actual amount will depend on the
prices at which AOL sells the stock. We also agreed that when the long distance
exclusivity period under our marketing agreement with AOL ends AOL could require
us to buy back the warrants to purchase our common stock that AOL holds. The
maximum amount that we might have to pay for the AOL warrants is $36.3 million,
which we can pay with shares of our stock. Under certain circumstances, we may
have the right to pay a portion of this amount with a promissory note. To secure
these obligations to AOL, we have pledged all the assets of Talk.com Inc.,
including the stock of its subsidiaries, including our principal operating
company, Tel-Save, Inc., and agreed to fund an escrow account of up to $35
million from 50% of the proceeds of most of our future debt financings over $50
million.
In addition, one of the agreements we entered into in connection with
Mr. Borislow's departure as one of our officers and directors requires us to get
his consent to sell our common stock in all circumstances except for sales on
exercise of employee options and our stock purchase rights if we use the sale
proceeds to repurchase our common stock from Mr. Borislow and two trusts that
are maintained for the benefit of his minor children. The agreement also
requires us to use 40% of the proceeds from our public and private sales of our
debt securities, except for borrowings from a commercial bank or financial
institution, to buy back our convertible notes from Mr. Borislow and the two
trusts. These rights that Mr. Borislow and the trusts have will end if Mr.
Borislow beneficially owns less than 2% of our outstanding common stock.
The exercise by AOL of its rights to sell our stock and require us to
pay the difference could have a significant effect on our cash position and
could hinder our ability to fund our operations as we might otherwise have done
had they not exercised. In addition, the existence of these AOL rights and the
rights of Mr. Borislow and the two trusts could hamper our ability to raise
additional capital.
WE HAVE NO ESTABLISHED CASH DIVIDEND POLICY AND CANNOT ASSURE THE AMOUNT OR
FREQUENCY OF FUTURE DIVIDENDS.
We have no established dividend policy. We have never paid cash
dividends and we do not anticipate paying any cash dividends in the foreseeable
future.
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WE HAVE AN AUTHORIZED CLASS OF SHARES, AND THERE ARE PROVISIONS IN OUR BYLAWS
AND CHARTER, THAT COULD DETER ANOTHER PARTY FROM GAINING CONTROL OF US AND
PAYING OUR SHAREHOLDERS A PREMIUM FOR THEIR SHARES. ALSO, OUR CURRENT RELIANCE
ON THE AOL BUSINESS MAY DETER SOME POTENTIAL ACQUIRORS.
We have an authorized class of 5,000,000 shares of preferred stock that
may be issued by our board of directors. Our board has the right to authorize
the issuance of this stock and could set the terms, rights, preferences and
designations in such a way that could delay, deter or prevent another party from
obtaining control of us. 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 staggered three-year terms, could
also delay or prevent a change of control. These anti-takeover provisions may
deter a third party from acquiring us or attempting to acquire us, which might
preclude our shareholders from receiving a premium for their shares over the
then-current market value. Also, the current significance of our AOL business to
us and AOL's right to choose to terminate our AOL agreement if an AOL competitor
acquires us may deter some parties from acquiring or attempting to acquire us.
THERE ARE CERTAIN PERSONS WHO OWN LARGE NUMBERS OF SHARES OF OUR COMMON STOCK.
IF THEY SOLD ALL OR SOME OF THESE SHARES, IT COULD ADVERSELY AFFECT THE MARKET
PRICE OF OUR COMMON STOCK.
Future sales of substantial amounts of our common stock could
adversely affect the market price of our common stock. America Online, Inc.
beneficially owns 6,843,356 shares of our common stock, including 2,721,984
shares that they can acquire by exercise of our warrants that they hold. Our
agreements with AOL permit them to sell these shares, if they elect to do so, at
any time after May 31, 1999. Mr. Paul Rosenberg last reported that he
beneficially owned 5,759,984 shares of our common stock. Mr. Daniel Borislow,
our former Chairman of the Board and Chief Executive Officer, beneficially owned
2,487,979 shares of our common stock. In addition, a trust for the benefit of
Mr. Borislow's minor children reported that it beneficially owned 4,637,491
shares of our common stock. We have agreed to register the sale of shares by
each of these persons. A decision by any of these persons to sell all or a
significant percentage of its shares could adversely affect the market price of
our common stock.
As of May 25, 1999 our officers and directors beneficially owned
5,775,043 shares, including 3,174,200 shares that they could acquire on exercise
of outstanding stock options and 215,050 shares that they could acquire on the
exercise of stockholder purchase rights. In addition, as of such date, there
were 3,850,100 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. 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.
OUR OPERATIONS MIGHT BE DISRUPTED BY THE "YEAR 2000" PROBLEM.
We use equipment and other devices susceptible to the Year 2000
problem. If we experience such a problem with our internal computer-based
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systems or if the computer-based systems on which we depend that are operated by
others were to malfunction, we might not be able to:
o continue to provide telecommunications services,
o sign up new customers or
o bill existing customers for services.
These 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.
We depend on computer systems operated by third parties, such as local
exchange carriers, long-distance carriers from whom we purchase services, AOL
and other vendors. Other parties whose ability to deal with Year 2000 issues
could affect us include our partitions and the credit and debit card companies
through which most of our and AOL's customers are billed. We are generally not
in a position to require that these other companies assure us as to their
continued provision of services or that they will take the actions necessary to
assure that they will be ready for the Year 2000. Accordingly, while none of
these other companies 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 their abilities
to provide uninterrupted services to us. Even though we have contracts with a
number of long distance service providers to support our OBN network, the
failure of any of the significant suppliers to provide uninterrupted service to
us would likely have a material adverse effect on our business and results of
operations and financial condition.
FORWARD-LOOKING STATEMENTS
Some of the information in this prospectus or incorporated by reference
may contain forward-looking statements, including statements under the captions
"Business" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in our annual and quarterly reports. Those statements can
be identified by the use of forward-looking terminology such as "may," "will,"
"expect," "anticipate," "estimate," "continue," or other similar words. These
statements discuss future expectations, contain projections of results of
operations or of financial condition or state other "forward-looking"
information. When considering these forward-looking statements, you should keep
in mind the risk factors and other cautionary statements contained in this
prospectus. The risk factors and other factors noted in this prospectus or in
the reports incorporated by reference could cause our actual results to differ
materially from those contained in any forward-looking statement. We undertake
no obligation to publicly release any revisions to these forward-looking
statements to reflect events or circumstances after the date of this prospectus
or to reflect the occurrence of unanticipated events.
USE OF PROCEEDS
We will not receive any of the proceeds from shares offered in this
prospectus.
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PLAN OF DISTRIBUTION
This prospectus covers shares being offered on behalf of AOL or its
respective pledgees, donees, transferees or other successors in interest. We
will not receive any proceeds from this offering. AOL may offer the shares from
time to time in the open market, on the Nasdaq National Market, in privately
negotiated transactions, or in a combination of those methods, at market prices
that prevail at the time of sale or at privately negotiated prices. AOL may sell
these shares through one or more brokers or dealers or directly to purchasers.
These broker-dealers may receive compensation in the form of commissions,
discounts or concessions from AOL and/or purchasers of the shares for whom those
broker-dealers may act as agent, or to whom they may sell as principal, or both.
Compensation as to a particular broker-dealer may exceed customary commissions.
AOL and any broker-dealers who act in connection with the sale of the
shares under this prospectus may be deemed to be "underwriters" within the
meaning of the Securities Act. Any commissions they receive and proceeds of any
sale of shares may be deemed to be underwriting discounts and commissions under
the Securities Act. Under Exchange Act rules and regulations, no distribution
participant or its affiliated purchasers (as defined in Regulation M adopted
under the Exchange Act) may simultaneously engage in market making activities
with respect to those shares for a restricted period beginning on the day proxy
solicitation or offering materials are first disseminated to security holders
and ending upon the completion of the distribution, except under certain limited
circumstances. AOL, its affiliated purchasers and any other person participating
in that distribution will be subject to certain provisions of the Exchange Act
and related rules and regulations. These provisions prohibit, except under
certain limited circumstances, the purchase and sale of any of the shares by
AOL, its affiliated purchasers and any other person participating in such
distribution during the restricted period described above. These restrictions
may affect the marketability of the shares and the ability of any person or
entity to engage in market making activities with respect to the shares.
We have agreed to pay all of the expenses incident to the registration,
offering and sale of these shares to the public other than commissions or
discounts of underwriters, broker-dealers or agents. We have agreed to indemnify
AOL against certain liabilities, including certain liabilities under the
Securities Act.
From time to time, AOL may pledge, hypothecate or grant a security
interest in some or all of the shares it owns. In the event of a foreclosure or
event of default in connection with those pledges, the shares may be transferred
to the persons to whom the shares were pledged. If a transfer of that type
occurs, the transferees will be deemed to have the rights of AOL under this plan
of distribution. At the same time, AOL will beneficially own fewer shares. The
plan of distribution for AOL's shares will otherwise remain unchanged.
SELLING SHAREHOLDER
This prospectus relates to the possible offer for sale of up to
12,843,356 shares of our common stock by AOL. AOL acquired 4,121,372 of these
shares from us under an investment agreement between AOL and us dated as of
December 31, 1998 and amended in February 1999. Under the investment
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agreement, AOL agreed, except under certain circumstances, not to sell 2,894,737
of these acquired shares before May 31, 1999. AOL also owns warrants to purchase
up to an additional 2,721,984 shares of our common stock and has the right to
exchange some of their warrants and shares for cash or additional shares of our
common stock. In connection with these exchanges and purchases, we agreed to
reimburse AOL, during the period commencing on June 1, 1999 and ending on
September 30, 2000, for realized losses up to a specified amount resulting from
a decline in the value of our common stock from AOL's purchase price. AOL also
has the right, upon the occurrence of certain events, which include our breach
of certain material agreements, to put back to us all of AOL's shares, at AOL's
purchase price, and warrants, at AOL's booked amount therefor. We agreed to
secure our obligations under the investment agreement with a pledge of all of
the assets of Talk.com Inc., including the stock of our subsidiaries. We also
agreed to limitations on the amount of debt we could incur and granted
registration rights to AOL.
Under a registration rights agreement between AOL and us, we agreed to
register for possible offer and sale by AOL, under the circumstances
contemplated by the investment agreement, all of the shares described above and
an additional six million shares of our common stock, to cover the shares we may
deliver in connection with the exercise of the exchange right described above.
We have an agreement with AOL that relates to AOL's provision of marketing
services by AOL to us. This agreement and the investment agreement are both
described in more detail in our reports on Form 8-K, Form 10-K and Form 10-K/A
that were filed on January 20, 1999, March 31, 1999 and April 9, 1999,
respectively, all of which are incorporated by reference in this prospectus.
The information in the following paragraph provides certain information
with respect to the shares beneficially owned by AOL as of the date of this
prospectus. The shares registered under the registration statement of which this
prospectus is a part may be offered from time to time by AOL. However, AOL is
under no obligation to sell all or any portion of such shares, nor is AOL
obligated to sell any shares immediately under this prospectus. We will not
receive any proceeds from any sales of shares by AOL. All information with
respect to share ownership has been furnished by AOL.
As of January 15, 1999, AOL, located at 22000 AOL Way, Dulles Virginia,
reported beneficial ownership of 6,843,356 shares of our common stock. We are
registering for possible resale by AOL 12,843,356 of our shares, which includes
the shares AOL already beneficially owns and 6,000,000 additional shares we may
issue to AOL. If all of the shares offered by this prospectus are sold, AOL will
hold no shares of our stock.
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 153,650 shares of common stock, holds
11
<PAGE>
vested options to purchase 50,000 shares at a price of $5.75 per share, and
holds rights to purchase 10,183 shares of Common Stock at $17.00 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 those
reports given upon the authority of BDO Seidman, LLP 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, 1998
and amendments to our annual report, filed with the SEC on April 9,
1999 and April 30, 1999;
b. our current report on Form 8-K, dated January 20, 1999;
c. our quarterly report on Form 10-Q for the quarter ended March 31,
1999; 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
Talk.com Inc.
6805 Route 202
New Hope, PA 18938
(215) 862-1500
12
<PAGE>
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.
13
<PAGE>
12,843,356 SHARES OF COMMON STOCK
PROSPECTUS
___, [1999]
TABLE OF CONTENTS
PAGE
Risk Factors................................................... 2
Use Of Proceeds................................................ 9
Plan Of Distribution........................................... 10
Selling Shareholders........................................... 10
Legal Matters.................................................. 11
Experts........................................................ 12
Where You Can Find More Information............................ 12
14
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
SEC registration fee........................ $39,944
Legal fees and expenses..................... 20,000
Accounting fees and expenses................ 5,000
Printing.................................... 2,000
Total....................................... $66,944
ITEM 16. EXHIBITS.
EXHIBIT NO. DESCRIPTION
- ----------- -----------
5.1 Opinion of Aloysius T. Lawn, IV.
23.1 Consent of BDO Seidman, LLP (incorporated by reference to Exhibit
23.1 of our Annual Report on Form 10-K for the year ended December
31, 1998).
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
previously filed).
II-1
<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 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 May 25, 1999.
TALK.COM INC.
By: /s/ Gabriel Battista
----------------------------------
Gabriel Battista
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated below, on May 25, 1999:
SIGNATURE TITLE
--------- -----
/s/ Gabriel Battista Chairman of the Board of Directors, Chief
- ------------------------------- Executive Officer, President and Director
Gabriel Battista (Principal Executive Officer)
*
- ------------------------------- Director
Gary W. McCulla
*
- ------------------------------- Director
Emanuel J. DeMaio
/s/ George P. Farley Chief Financial Officer and Director
- ------------------------------- (Principal Financial Officer)
George P. Farley
/s/ Kevin R. Kelly
- ------------------------------- Controller (Principal Accounting Officer)
Kevin R. Kelly
*
- ------------------------------- Director
Harold First
*
- ------------------------------- Director
Ronald R. Thoma
- --------
* The undersigned hereby signs this Amendment to the Registration Statement on
Form S-3 on behalf of the above person pursuant to powers of attorney duly
executed and filed with the Securities and Exchange Commission, all in the
capacities and on the date indicated.
/s/ Aloysius T. Lawn, IV
-------------------------------------
Aloysius T. Lawn IV, Attorney-in-Fact
II-2
EXHIBIT 5.1
LEGAL OPINION AND CONSENT
May 25, 1999
Board of Directors
Talk.com Inc.
12020 Sunrise Valley Drive
Reston, Virginia 22091
Re: Shares of Common Stock of Tel-Save.com, Inc. To Be Resold Pursuant
to Registration Statement on Form S-3 (No. 333-72357)
-----------------------------------------------------
Gentlemen:
I have acted as general counsel to Talk.com Inc. (formerly,
Tel-Save.com, Inc., the "Company") in connection with the Company's filing
pursuant to the Securities Act of 1933, as amended, of a registration statement
(the "Registration Statement") on Form S-3 (No. 333-72357) relating to the
offering for resale of up to 12,843,356 shares of the Company's common stock,
par value $.01 per share (the "Common Stock"), by a certain person named in the
Registration Statement. You have requested my opinion as to certain matters with
respect to the Common Stock.
I have examined such corporate records of the Company, including its
Amended and Restated Certificate of Incorporation, its Bylaws, and resolutions
of the Company's board of directors (the "Board of Directors"), as well as such
other documents as I deemed necessary for rendering the opinion hereinafter
expressed. On the basis of the foregoing, I am of the opinion that the Common
Stock has been duly authorized by the Board of Directors and is validly issued,
fully paid, and non assessable.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of my name therein.
Sincerely yours,
/s/ Aloysius T. Lawn, IV
--------------------------------
Aloysius T. Lawn, IV
General Counsel and Secretary
II-3
