AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 12, 1999.
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
-------------------
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: 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. / /
<PAGE>
CALCULATION OF REGISTRATION FEE
-------------------------------
<TABLE>
<CAPTION>
- -------------------------------- --------------------- -------------------------- ------------------------- -----------------
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE PER SHARE AGGREGATE OFFERING REGISTRATION FEE
(1) (2) PRICE (2)
- -------------------------------- --------------------- -------------------------- ------------------------- -----------------
<S> <C> <C> <C> <C>
Common Stock, $0.01
par value
per share 12,843,356 $11.1875 $143,685,045 $39,944
- -------------------------------- --------------------- -------------------------- ------------------------- -----------------
</TABLE>
(1) This Registration Statement covers a total of 12,843,356 shares. This
Registration Statement covers the resale of up to 12,843,356 shares by the
selling shareholder identified herein, of which 4,121,372 are currently issued
and outstanding and held by such. See note 2.
(2) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933 based on the average of
the high and low prices of the Common Stock on the Nasdaq National Market on
February 11, 1999.
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 FEBRUARY 12, 1999
PROSPECTUS
[ ] SHARES OF COMMON STOCK
The person listed in this Prospectus under "Selling Shareholder" may offer and
sell from time to time an aggregate of up to [ ] shares of common stock.
The Selling Shareholder 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 shares by the Selling Shareholder.
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 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 date of this Prospectus is __, 1999
<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
contained in our current and future reports in this prospectus before deciding
to invest in the shares of our common stock offered in this prospectus.
DEPENDENCE ON AOL AGREEMENT AND ELECTRONIC COMMERCE
At the beginning of 1997, we launched a major initiative for marketing and
selling our telecommunication services online. At that time, we entered into an
innovative telecommunications marketing agreement with America Online, Inc.
("AOL"). With the continued focus of our business on the sale and support of our
telecommunications services online and through e-commerce channels, we believe
that our business is currently dependent to a material extent upon our
agreements and relationship with AOL.
In January 1999, we completed substantial amendments to our agreement and
relationship with AOL, including an extension of the term of our AOL marketing
period and a restructuring of our marketing fee payments to AOL. From and after
June 2000, AOL has the right to market on a non-exclusive basis the
telecommunications services previously marketed on an exclusive basis in
exchange for the elimination of the fixed quarterly payments that would
otherwise continue to be payable by us. We cannot currently predict what impact
the elimination of our exclusivity period would have on our AOL business or
whether the minimum exclusivity period is of sufficient length to give us an
enduring competitive advantage in maintaining our AOL customer base. We believe
that the success or failure of our telecommunications agreement with AOL and
similar online initiatives will have a material effect on our business,
financial condition and results of operations. There can be no assurance that
our arrangement with AOL will be profitable for Tel-Save.com, Inc. (the
"Company") on a quarter to quarter basis or that
2
<PAGE>
our current experience with our AOL Long Distance business is a fair indication
of future results under the AOL Agreement or generally in our e-commerce
business.
Although we have expended substantial sums on marketing our AOL service
offerings, and under the new agreement will continue to expend substantial sums
related to marketing, 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 telecommunications sales and marketing business
depends in part on our ability to quickly establish telephone service following
an AOL subscriber's order. The provisioning of new customers has been adversely
affected by "PIC freezes" established by local telephone companies. These "PIC
freezes," though perhaps designed to avoid unauthorized transfers of telephone
service, 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, by requiring the customer to contact his or her local phone company
directly to change long distance carriers. This requirement deprives new
customers of the ability to take full advantage of our online provisioning
service, where a customer can sign-up and authorize a change to AOL Long
Distance entirely online through our innovative online customer care and billing
systems. The Federal Communications Commission is currently engaged in
rule-making proceedings that could modify the rules governing the offering,
implementation and lifting of PIC freezes. There can be no assurance, however,
that any such rules that are finally adopted will effectively limit the harmful
effects of PIC freezes that impede authorized transfers of service.
The success of our online initiatives depends on our ability to develop and
maintain complex systems to support our online subscription 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 in connection
with the AOL Agreement and other online initiatives. 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.
DEPENDENCE ON AT&T
We have recently entered into long term agreements with AT&T, which, among other
things, significantly lower the overall costs of the services we acquire from
AT&T. There can be no assurances, however, that we would be able to negotiate
further amendments in the future to our agreements with AT&T should it become
necessary to maintain the profitability of our business. Circumstances also may
arise that could give rise to the termination of any of our agreements with AT&T
or otherwise result in the loss of our ability to obtain services from AT&T. Any
termination of our contracts with AT&T, the loss or reduction of
telecommunication services from AT&T, or the inability to negotiate
3
<PAGE>
cost reductions with AT&T to meet competitive prices, could have a material
adverse effect on our financial condition and results of operations.
RECENT RAPID GROWTH
Since the inception of our business in 1989, as a reseller of AT&T
telecommunications services, we have grown dramatically in terms of revenues and
number of employees and have expanded rapidly the nature and scope of our
business. 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.
Continued growth of our current business will continue to place significant
demands on our management (many of whom, including the new President, Chief
Executive Officer, and Chairman of the Board of Directors, have recently joined
the Company), 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, 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 consider providing
telecommunications services we have not previously
4
<PAGE>
provided, which new services, if offered, would face the same competitive
pressures that affect our existing services.
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 MARKETING RISKS
Both federal and state officials are tightening and increasing enforcement of
the rules governing the direct marketing, including the telemarketing of
telecommunications services and the requirements imposed on carriers seeking to
acquire 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. The Company has
discontinued its internal telemarketing operations, which may reduce our
exposure to customer complaints and federal, state or local enforcement actions
with respect to such direct telemarketing practices. However, certain government
officials have made inquiries with respect to the marketing of our services and
there remains a risk that we could be held accountable under applicable federal
and state laws for the direct marketing activities of third parties carried out
for our benefit. There also is the risk of enforcement actions by virtue of 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.
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.
5
<PAGE>
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 Marketing 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, state regulators
or other government entities will not take action having an adverse effect on
our business, financial condition or results of operations. FCC or state
regulatory or enforcement 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 Marketing 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 31, 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.
6
<PAGE>
ABSENCE OF DIVIDENDS
We have not paid cash dividends since inception and do not anticipate paying any
cash dividends in the foreseeable future.
ANTI-TAKEOVER CONSIDERATIONS
We 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 shareholders might receive a
premium for their shares over the then-current market value.
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of substantial amounts of our common stock could adversely affect
the market price of our common stock. Although the Company believes that as of
January 11, 1999, each of Mr. Borislow and Mr. Paul Rosenberg beneficially owned
less than 10% of the outstanding common stock of the Company, a decision by
either of Mr. Borislow or Mr. Rosenberg to sell his shares could adversely
affect the market price of the common stock. Each of Mr. Borislow and Mr.
Rosenberg has a registration rights agreement with the Company covering the
shares of common stock owned by him.
As of January 11, 1999 our employees and directors had outstanding options to
purchase 10,230,810 shares of common stock. In addition, as of such date, there
were warrants outstanding to purchase up to 2,721,984 shares of common stock and
4,596,698 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.
7
<PAGE>
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.
We are 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 are
generally 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. Given the nature of our relationships with
most of these significant suppliers, it may be impracticable for us to replace
them 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.
USE OF PROCEEDS
We will not receive any of the proceeds from shares offered in this prospectus.
PLAN OF DISTRIBUTION
The shares offered pursuant to this prospectus are being offered on behalf of
the Selling Shareholder or its respective pledgees, donees, transferees or other
successors in interest. We will not receive any proceeds from this offering. The
shares may be offered for sale from time to time in the open market, on the
Nasdaq National Market, in privately negotiated transactions, or in a
combination of such methods, at market prices prevailing at the time of sale or
at privately negotiated prices. The shares are intended to be sold through one
or more brokers or dealers or directly to purchasers. Such broker-dealers may
receive compensation in the form of commissions, discounts or concessions from
the Selling Shareholder and/or purchasers of the shares for whom such
broker-dealers may act as agent, or to whom they may sell as principal, or both
(which compensation as to a particular broker-dealer may be in excess of
customary commissions). The Selling Shareholder and any broker-dealers who act
in connection with the sale of the shares under this prospectus may deemed to be
"underwriters" within the meaning of the Securities Act, and any commissions
they receive and proceeds of any sale of shares may be deemed to be underwriting
discounts and commissions under the Securities Act.
8
<PAGE>
Pursuant to applicable rules and regulations under the Exchange Act, no
distribution participant or its affiliated purchasers (as defined in Regulation
M adopted under the Exchange Act) may not simultaneously engage in market making
activities with respect to such 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. In addition to, and without limiting the foregoing, the
Selling Shareholder, its affiliated purchasers and any other person
participating in such distribution will be subject to applicable provisions of
the Exchange Act and rules and regulations thereunder, which provisions
prohibit, except under certain limited circumstances, purchases and sales of any
of the shares by the Selling Shareholder and any other such shareholders during
the above-referenced restricted period. The foregoing 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 the shares to the public other than commissions or discounts of
underwriters, broker-dealers or agents. We have agreed to indemnify the Selling
Shareholder against certain liabilities, including certain liabilities under the
Securities Act.
From time to time, the Selling Shareholder 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 such pledges, the shares may
be transferred to the persons to whom the shares have been pledged. If such a
transfer occurs, the transferees will be deemed to be a Selling Shareholder
under this plan of distribution. At the same time, the Selling Shareholder whose
shares were transferred will beneficially own less shares. The plan of
distribution for the shares of the Selling Shareholder 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 the selling shareholder listed below (the "Selling
Shareholder"). The Selling Shareholder acquired 4,121,372 of these shares from
us pursuant to an Investment Agreement between the Selling Shareholder and us
dated as of December 31, 1998 (the "Investment Agreement"). Under the Investment
Agreement, the Selling Shareholder agreed, except under certain circumstances,
not to sell 2,894,737 of these acquired shares before May 31, 1999. The Selling
Shareholder also owns warrants to purchase up to an additional 2,721,984 shares
of our common stock and has the right to exchange certain warrants and shares
for cash or additional shares of our common stock. In connection with these
exchanges and purchases, the Company 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 the Company's
common stock from AOL's purchase price. AOL also has the right, upon the
occurrence of certain events (which include the breach by the Company of certain
material agreements), to put back to the Company all of the shares (at AOL's
purchase price) and warrants (at AOL's booked amount thereafter) held by AOL.
Tel-Save.com, Inc. agreed to secure its obligations under the investment
agreement with a pledge of all of its assets. Tel-Save.com, Inc. also agreed to
limitations on the incurrence of indebtedness and granted certain registration
rights to AOL. The terms of the Investment Agreement are described in our report
on Form 8-K filed on January 20, 1999, which we have incorporated into this
prospectus by reference, and pursuant to a registration rights agreement between
the Selling Shareholder and us, we agreed to register for possible offer and
sale by the Selling Shareholder, under the circumstances contemplated by the
Investment Agreement, all of the above described shares and an additional six
million shares of our common stock, to cover the shares we may deliver in
connection with the above described exercise of such exchange right.
9
<PAGE>
We have an agreement with the Selling Stockholder that relates to the provision
of marketing services by the Selling Shareholders to us. This agreement is
described in more detail at pages 2 and 3 of this Prospectus and in the Report
on Form 8-K are filed on January 20, 1999, which is incorporated by reference in
this prospectus.
The following table provides certain information with respect to the shares held
beneficially owned by the Selling Shareholder 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 the Selling Shareholder named
below. However, the Selling Shareholder is under no obligation to sell all or
any portion of such shares, nor is the Selling Shareholder obligated to sell any
such shares immediately under this prospectus. We will not receive any proceeds
from any sales of shares by the Selling Shareholder. All information with
respect to share ownership has been furnished by the Selling Shareholder.
The following table sets forth certain information with respect to the
beneficial ownership of the shares by the Selling Shareholder as of February
____, 1999.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF NUMBER OF
SHARES SHARES SHARES
NAME AND ADDRESS(1) BENEFICIALLY OWNED REGISTERED HEREIN HELD AFTER
------------------ ----------------- OFFERING(2)
------------
<S> <C> <C> <C>
America Online, Inc. [ ] 12,843,356 [ ]
</TABLE>
- -------------------
(1) The address of the Selling Shareholder is 22000 AOL Way, Dulles,
Virginia 20166.
(2) Assumes all of the shares offered by this prospectus are sold.
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 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.
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.
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
10
<PAGE>
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,
September 18, 1998 and January 20, 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 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.
11
<PAGE>
[ ] SHARES OF COMMON STOCK
PROSPECTUS
- ----------
___, [1999/2000]
TABLE OF CONTENTS
PAGE
----
Risk Factors....................................... 2
Use Of Proceeds.................................... 8
Plan Of Distribution............................... 8
Selling Shareholders............................... 9
Legal Matters...................................... 10
Experts............................................ 10
Where You Can Find More Information................ 10
<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............................................. $ [ ]
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.
10.1* Investment Agreement, dated as of December 31, 1998, among
Tel-Save.com, Inc., America Online, Inc., and, solely for purposes
of Sections 4.5, 4.6 and 7.3(g) thereof, Daniel Borislow, and solely
for purposes of Section 4.12 thereof, Tel-Save, Inc. and the D&K
Retained Annuity Trust dated June 15, 1998 by Mark Pavol, Trustee.
10.2* Registration Rights Agreement, dated as of January 5, 1999, between
Tel-Save.com, Inc. and America Online, Inc.
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).
* 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 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 form the low or high and of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the registration statement is on Form S-3, Form S-8 or Form F-3, and
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished
to the Commission by the registrar pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from the registration by means of a 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.
II-2
<PAGE>
(d) The undersigned hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, any 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 242(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 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 February 12, 1999.
TEL-SAVE.COM, INC.
By: /s/ Gabriel Battista
---------------------------
Gabriel Battista
Chairman of the Board of Directors, Chief
Executive Officer, President and Director
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Gabriel Battista 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/ Gabriel Battista Chairman of the Board of Directors, Chief February 12, 1999
- ------------------------------- Executive Officer, President and Director
Gabriel Battista (Principal Executive Officer)
/s/ Gary W. McCulla
- ------------------------------- Director February 12, 1999
Gary W. McCulla
/s/ Emanuel J. DeMaio
- ------------------------------- Director February 12, 1999
Emanuel J. DeMaio
/s/ George P. Farley Chief Financial Officer and Director February 12, 1999
- ------------------------------- (Principal Financial Officer)
George P. Farley
/s/ Kevin R. Kelly
- ------------------------------- Controller (Principal Accounting Officer) February 12, 1999
Kevin R. Kelly
/s/ Harold First
- ------------------------------- Director February 12, 1999
Harold First
/s/ Ronald R. Thoma
- ------------------------------- Director February 12, 1999
Ronald R. Thoma
</TABLE>
II-4
EXHIBIT 23.1
CONSENT OF BDO SEIDMAN, LLP
Tel-Save.com, Inc.
New Hope, Pennsylvania
We hereby consent to the incorporation by reference in this Prospectus
constituting a part of this Registration Statement on Form S-3 of our reports
dated February 5, 1998, relating to the consolidated financial statements and
schedule of Tel-Save.com, Inc. (the "Company") (formerly Tel-Save Holdings, Inc.
and Subsidiaries) 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
February 10, 1999
