Solution:

1) Make sure the computer where the fax modem operates has enough memory and processing speed:

a) For a dedicated fax server, use a minimum of 8 MB of memory and a 486 processor.
b) For a dual-purpose fax server and workstation, use a minimum of 12 MB of memory and a 486 processor.

2) Install 'Microsoft Fax and Microsoft Exchange' on the fax server and any other workstations (computers) accessing the fax modem.
<Example: How to install Exchange and MS Fax>
3) Configure Microsoft Fax:

a) Click the 'Start' button to display the 'Start' menu.
b) Select 'Settings' and select 'Control Panel'. (The 'Control Panel' window appears.)
'Control Panel'
c) Double-click the 'Mail and Fax' icon. (The 'Microsoft Exchange' dialog box appears.)
'Mail and Fax'
d) Click the 'Services' tab.
e) Select 'Microsoft Fax' from the list of installed information services.
f) Click 'Properties'. (The 'Microsoft Fax Properties' dialog box appears.)
g) Click the 'Modem' tab.
h) Select the modem to share from the 'Available fax modems' list box.
i) Select the 'Let other people on the network use my modem to send faxes' check box.
j) Click 'Properties...'. (The 'NetFax' dialog box appears.)
k) Type a name in the 'Share Name' box.
'NetFax' dialog box
l) (Optional) Type a comment.
m) Click the type of access.
n) Type a password.
o) Re-type the password when the 'Confirmation of Password' dialog box appears.
p) Click 'OK' as needed.