PREMIERE TECHNOLOGIES INC, 8-K, 1997-07-01

PREMIERE TECHNOLOGIES INC
8-K, 1997-07-01
COMMUNICATIONS SERVICES, NEC

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<PAGE>

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): June 25, 1997

PREMIERE TECHNOLOGIES, INC.
(Exact name of registrant
as specified in its charter)

Georgia 33-80547 59-3074176
- - --------------------------------------------------------------------------------
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)

3399 Peachtree Road, N.E.
The Lenox Building
Suite 400, Atlanta, Georgia 30326
- - --------------------------------------------------------------------------------
(Address of principal executive officers) (Zip Code)

Registrant's telephone number, including area code: (404) 262-8400

N/A
----------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>

ITEM 5. OTHER EVENTS.

On June 26, 1997, Premiere Technologies, Inc. (the "Company") issued a
press release announcing that it would sell $150 million in 5 3/4 percent
convertible notes due July 1, 2004 in a Rule 144A offering. The transaction
closed on June 30, 1997. The Company has granted the initial purchasers a 30-day
option to purchase up to an additional $22.5 million of notes to cover over-
allotments, if any. In connection with the offering, the Company prepared an
Offering Circular certain portions of which are filed as Exhibit 99.1 to this
report and incorporated herein by reference thereto. The filing of this report
and the inclusion of portions of the Offering Circular herein shall not
constitute an offer to sell or a solicitation of an offer to buy any of the
securities described herein.

ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.

Exhibit
No. Description
------- -----------

99.1 Certain portions of Offering Circular dated June 25, 1997.

ITEM 9. Sales of Equity Securities Pursuant to Regulation S.

(a) On June 25, 1997, the Company sold $150,000,000 of 5-3/4%
convertible subordinated notes due 2004 (the "Notes").

(b) The initial purchasers of the Notes were Robertson, Stephens & Company
LLC, Alex. Brown & Sons Incorporated and Donaldson, Lufkin & Jenrette
Securities Corporation (the "Initial Purchasers").

(d) The Company relied upon the exemption set forth in Section 4(2) of
the Securities Act of 1933, as amended (the "Securities Act"), for the
sale of the Notes to the Initial Purchasers. The Initial Purchasers
intend to resell the Notes in the United States to qualified
institutional buyers under Rule 144A under the Securities Act and to a
limited number of other institutional "accredited investors" as defined
in Rule 501 of the Securities Act and outside the United States to non-
U.S. persons in reliance upon Regulation S under the Securities Act.

(e) The Notes, unless previously redeemed or repurchased, are convertible
at the option of the holder at any time through the close of business
on the final maturity date into shares of Common Stock at a conversion
price of $33.00 per share, subject to adjustment in certain events.

-1-
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

PREMIERE TECHNOLOGIES, INC.

By: /s/ Patrick G. Jones
--------------------
Patrick G. Jones
Senior Vice President of Finance and Legal

Dated: June 30, 1997

-2-

<PAGE>

EXHIBIT INDEX

Exhibit No. Description
- - ----------- -----------

99.1 Certain portions of Offering Circular dated June 25,
1997.

<PAGE>
EXHIBIT 99.1

CERTAIN PORTIONS OF OFFERING CIRCULAR

The Company may from time to time make written or oral forward-looking
statements, including statements contained in the Company's filings with the
Commission and its reports to shareholders. This Offering Circular contains and
incorporates by reference certain statements, other than those concerning
historical information, that should be considered forward-looking and subject to
various risks and uncertainties. Such forward-looking statements are made based
on management's belief as well as assumptions made by, and information currently
available to, management pursuant to "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. The Company's actual results may
differ materially from the results anticipated in these forward-looking
statements due to, among other things, factors set forth in this Offering
Circular under the heading "Risk Factors." The Company cautions that such
factors are not exclusive. The Company does not undertake to update any
forward-looking statement that may be made from time to time by, or on behalf
of, the Company.

SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND RATIO DATA AND NOTES)

The following table sets forth summary historical and pro forma financial
information for the Company. The pro forma financial data gives effect to (i)
the acquisition of TeleT and (ii) the acquisitions (the "Significant
Acquisitions") by Premiere in separate transactions of VTE, the general partner
of VTN, the limited partnership interest in VTN and certain Franchisees of VTE
that meet the significance tests, individually or in the aggregate, of Rule 3-
05 of Regulation S-X (the "Significant Franchisees"). The pro forma financial
data does not give effect to the acquisition of the remaining Franchisees,
which are not "significant" under Rule 3-05 of Regulation S-X. The Significant
Acquisitions represented approximately 63%, 67% and 71% of the revenues of the
combined Voice-Tel Entities (eliminating transactions between such entities)
for 1994, 1995 and 1996, respectively. The Supplemental Statement of Operations
Data reflects the revenues of all of the Voice-Tel Entities on a combined basis
(after eliminating transactions between such entities), including the
Significant Franchisees.

In connection with the Voice-Tel Acquisitions, the Company will take a charge
in the second quarter of 1997 of approximately $40 million to $45 million,
consisting of transaction expenses and restructuring and related costs
(including severance costs, charges for asset impairment and costs related to
exiting the franchise business and closing certain facilities) attributable to
the Voice-Tel Acquisitions. Premiere's management believes that the
restructuring and transformation of the Voice-Tel business structure from a
franchise structure to a consolidated business will result in significant cost
savings and operational improvements. As a result, the pro forma financial data
presented below is not expected to be indicative of future results of
operations. The charge, and the anticipated related ongoing changes in the cost
structure of the Company, are not reflected in the pro forma statement of
operations data presented below. The summary financial data set forth below
should be read in conjunction with the "Unaudited Pro Forma Combined Financial
Information," including the notes thereto, the selected financial data of the
Company set forth under Selected Consolidated Financial Information, and the
financial statements of the Company and the Significant Franchisees, including
the notes thereto, which are incorporated herein by reference.

<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
---------------------------- ---------------
1994(1) 1995 1996 1996 1997
STATEMENT OF OPERATIONS DATA: -------- -------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues......................... $ 9,995 $ 22,326 $ 52,079 $10,093 $18,871
Gross margin..................... 6,479 14,723 35,368 6,642 12,660
Operating income (loss).......... (33) 2,299 (4,933) 933 4,592
Operating income (loss), as
adjusted(2)..................... (33) 2,299 7,347 933 4,592
Pro forma net income (loss)
attributable to common
shareholders for primary
earnings per share.............. (500) 1,807 (985) 1,011 4,148
Pro forma net income (loss) per
common and common equivalent
shares--primary(3).............. $(0.05) $0.10 $(0.05) $0.05 $0.16
Shares used in computing pro
forma net income (loss) per
common and common share
equivalent--primary............. 10,804 17,529 20,170 18,751 26,621
OTHER OPERATING DATA:
EBITDA(4)........................ $ 387 $ 2,996 $ 9,603 $ 1,277 $ 5,835
Depreciation and amortization.... 420 697 2,255 344 1,243
PRO FORMA STATEMENT OF OPERATIONS
DATA(5):
Revenues......................... $ 45,829 $ 71,766 $ 116,473 $26,019 $35,125
Gross margin..................... 33,656 53,033 86,685 19,267 25,677
Operating income (loss).......... (3,347) 3,841 16,064 3,452 7,361
Operating income (loss), as
adjusted(2)..................... (3,347) 6,341 17,314 3,452 7,361
Pro forma net income (loss)
attributable to Common
shareholders for primary
earnings per share(3)........... (3,981) 834 8,832 1,620 5,179
Pro forma net income (loss) per
common and common equivalent
shares--primary(3).............. $ (0.26) $ 0.05 $ 0.32 $ 0.07 $ 0.17
Shares used in computing pro
forma net income (loss) per
common and common share
equivalent--primary............. 15,611 15,611 27,336 22,988 30,459
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
--------------------------- -----------------
1994(1) 1995 1996 1996 1997
------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
PRO FORMA OTHER OPERATING
DATA(5):
EBITDA(4)..................... $ 1,801 $ 12,748 $ 27,039 $ 5,637 $ 10,276
Depreciation and
amortization................. 3,998 6,407 9,726 2,185 2,915
Ratio of earnings to fixed
charges(6)................... .39x 1.14x 2.36x 2.09x 3.40x
Ratio of earnings to fixed
charges, as adjusted(6)...... .39x 1.14x 1.76x 1.63x 2.37x
SUPPLEMENTAL STATEMENT OF
OPERATIONS DATA(7):
Combined Voice-Tel Entities
revenues..................... $54,500 $ 71,000 $ 88,000 N/A $ 22,600
Combined Company and Voice-Tel
Entities revenues............ $64,495 $ 93,326 $140,079 N/A $ 41,471
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1997
----------------------------------------
PRO PRO FORMA
HISTORICAL FORMA(5)(9) AS ADJUSTED(8)(9)
---------- ----------- -----------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and
investments......................... $ 67,338 $ 61,193 $206,193
Total assets......................... 143,444 177,159 322,159
Total debt........................... 4,578 29,653 179,653
Total shareholders' equity........... 127,934 86,953 86,953
</TABLE>
- - --------
(1) Year ended December 31, 1994 data was derived from audited data for the
nine months ended December 31, 1994 and the unaudited interim data for the
three months ended March 31, 1994. The data is presented for comparative
purposes and additional analysis.
(2) Operating income as adjusted excludes charges for purchased research and
development and accrued litigation costs incurred by the Company in the
amounts of approximately $11.0 million and approximately $1.3 million,
respectively, in fiscal 1996.
(3) Pro forma net income (loss) per share is computed using the weighted
average number of shares of common stock and dilutive common stock
equivalents from convertible preferred stock (using the if-converted
method) and from stock options (using the modified treasury stock method).
Fully diluted data is not presented as the effect is anti-dilutive or
immaterial for all periods presented.
(4) EBITDA represents the sum of income before interest expense and provision
for income taxes, plus depreciation, amortization, certain other expenses,
which consist of charges for accrued litigation costs. EBITDA should not be
construed as a substitute for operating income, net income or cash flow
from operating activities for purposes of analyzing the Company's operating
performance, financial position and cash flows. The Company has presented
EBITDA because it is commonly used by investors to analyze and compare
companies on the basis of operating performance and to determine a
company's ability to service debt.
(5) The acquisitions of TeleT and the limited partnership interest in VTN were
accounted for under the purchase method of accounting, and the pro forma
financial data gives effect to these transactions as though they each had
occurred January 1, 1996. All remaining Significant Acquisitions were
accounted for under the pooling-of-interests method of accounting, and the
pro forma financial data reflects these transactions as if they had
occurred January 1, 1994.
(6) In computing the ratio of earnings to fixed charges (i) earnings are based
on income before taxes, plus fixed charges, and (ii) fixed charges consist
of interest expense and depreciation and amortization expense, plus the
portion of rent expense under operating leases deemed by the Company to be
representative of the interest factor. Ratio of earnings to fixed charges
is not presented on a historical, stand alone basis because it is not
meaningful. The ratio of earnings to fixed charges, as adjusted gives
effect to the sale by the Company of the $150.0 million of Notes in this
offering at a rate of 5.75% and the application of the net proceeds
therefrom as though the sale occurred on January 1, 1996.
(7) The supplemental financial data for all periods presented represents: (i)
for Combined Voice-Tel Entities revenues, the unaudited combined revenues
of the Voice-Tel Entities after elimination of transactions between such
entities and (ii) for Combined Company and Voice-Tel Entities, the
unaudited revenues of the combined Voice-Tel Entities after elimination of
transactions between such entities plus the historical consolidated
revenues of the Company.
(8) Gives effect to (i) the Significant Acquisitions, on a pro forma basis, and
(ii) the sale by the Company of the $150.0 million of Notes in this
offering and the application of the net proceeds therefrom. See "Use of
Proceeds."
(9) Reflects a $32.5 million reduction in total shareholders' equity to give
effect to a charge (at an assumed level of $45.0 million), net of the
related income tax effect, for transaction expenses and restructuring and
related costs attributable to the Voice-Tel Acquisitions.

VOICE-TEL ACQUISITIONS

GENERAL

On June 12, 1997, the Company announced the completion of the previously
announced acquisitions of Voice-Tel Enterprises, Inc. ("VTE"), its affiliate
Voice-Tel Network Limited Partnership ("VTN"), and substantially all of its
franchisees (the "Franchisees"). VTE, VTN and such Franchisees are sometimes
referred to collectively as the "Voice-Tel Entities" or "Voice-Tel" and such
acquisitions are referred to collectively as the "Voice-Tel Acquisitions". On
June 12, 1997, the Company also announced that in connection with the Voice-
Tel Acquisitions it will take a charge in the second quarter of 1997 of
approximately $40 million to $45 million consisting of transaction expenses
and restructuring and related costs (including severance costs, charges for
asset impairment and costs related to exiting the franchise business and
closing certain facilities) attributable to the Voice-Tel Acquisitions.

The Voice-Tel Entities provide interactive digital voice and data messaging
products on a service bureau basis through approximately 200 service centers
in the United States, Puerto Rico, Canada, Australia and New Zealand, reaching
approximately 90% of the United States and approximately 100% of the Canadian,
Australian and New Zealand populations with local, toll-free service access.
VTN, an affiliate of VTE acquired by the Company, owns and leases various
components of and operates a digital frame relay network that connects and
provides message transmission capabilities to and from the local voice
messaging centers. During the year ended December 31, 1996, the Voice-Tel
Entities generated on a combined basis approximately $88.0 million of gross
revenue (after eliminating transactions between such entities), an increase of
23.9% over the approximately $71.0 million generated in 1995.

The Company does not believe that the historical financial performance of
the Voice-Tel Entities as stand alone entities provides a useful indicator of
future performance in view of the anticipated changes to such businesses
resulting from the consolidation of the businesses and integration of the
businesses into the Company's operations.

TERMS OF ACQUISITIONS

Pursuant to the Voice-Tel Acquisitions, Premiere acquired all the franchise
and company-owned service center operations of VTE, the frame relay network
and operations of VTN and the operations of all VTE Franchisees except for two
related entities that accounted for approximately 2% of revenues of the Voice-
Tel system (after eliminating transactions between the entities in such
system) generated in 1996. In connection with the Voice-Tel Acquisitions, the
Company issued an aggregate of approximately 7.4 million shares of its Common
Stock (including approximately 436,500 shares of Exchangeable Non-Voting
Shares of Voice-Tel Canada Limited, a subsidiary of the Company, issued to the
former shareholders of the Canadian Voice-Tel Entities, which are convertible
at any time into the same number of shares of Common Stock), paid
approximately $16.2 million in cash and assumed approximately $21.3 million in
indebtedness, including capital lease obligations, net of cash acquired. The
transactions were structured primarily as tax-free mergers or share exchanges
and the substantial majority of the transactions were accounted for as
poolings-of-interests. Approximately 947,000 shares of Common Stock (including
approximately 42,500 shares of Exchangeable Non-Voting Shares of Voice-Tel
Canada Limited) and approximately $614,000 in cash consideration were placed
in escrow to secure indemnification obligations of the former owners of the
acquired businesses. The Company granted certain demand and piggyback
registration rights to recipients of Common Stock. See "Risk Factors--Shares
Eligible for Future Sale; Registration Rights" and "Description of Capital
Stock--Registration Rights" and "Description of Capital Stock--Preferred
Stock." In addition, the Company assumed outstanding stock options of VTE and
VTN that, on a converted basis, are exercisable for an aggregate of 45,392
shares of Common Stock.

BUSINESS SYNERGIES

Premiere believes that the acquisition of Voice-Tel will provide important
synergistic benefits to the Company, including opportunities to broaden
product offerings and target markets, develop a significant direct
distribution channel through which to sell these products, cross sell new
products to Voice-Tel's installed customer base and leverage excess capacity
on the Voice-Tel frame relay network to generate additional sales.

<PAGE>

Enhanced Product Offerings. While the Company's measured 800 number access
products have appealed primarily to mobile professionals, the Company believes
that its products, delivered on a fixed fee monthly rate through local access
numbers, will appeal to a significantly larger customer base. Premiere
believes the Voice-Tel Acquisitions increase Premiere's target markets by
providing a platform to migrate existing products and to develop new products
to take advantage of local access economics. Premiere plans to invest $30
million to $40 million in capital expenditures over the next 18 months to
deliver Premiere's products on a local basis, and to integrate Premiere's and
Voice-Tel's platforms and networks.

Expand Distribution Channels. Voice-Tel's historical growth has been
generated through the direct sale of voice messaging services. Voice-Tel
provides Premiere with a new distribution channel through its direct sales
force of approximately 300 sales professionals in the United States, Puerto
Rico, Canada, Australia and New Zealand, who are experienced in selling
communications services to corporate entities. Premiere intends to incentivize
Voice-Tel's sales force to market Premiere products to Voice-Tel's customer
base which uses over 550,000 activated mailboxes. Premiere believes that its
Orchestrate product line in particular will benefit from a direct sales force
to market the services to small businesses. Premiere also intends to market
local access voice messaging to its current customer base and establish
relationships with third party resellers and strategic marketing partners to
provide additional distribution channels for Voice-Tel's voice messaging
services.

Leverage Frame Relay Network. The Voice-Tel frame relay network, which uses
a scalable architecture and is capable of transporting digitized voice and
data, offers Premiere the opportunity to design product offerings featuring
the speed, reliability and security of a private network and to sell excess
network capacity for other applications. To take advantage of this asset while
minimizing system costs, Premiere expects to consolidate unnecessary service
center locations and integrate the Voice-Tel network with the Premiere
computer-telephony platform.

CONSOLIDATION STRATEGY

Premiere believes that the consolidation of the Voice-Tel entities into a
centrally managed business with regional reporting structures will result in
meaningful cost savings and provide opportunities to pursue national accounts
on a unified basis. By consolidating the Voice-Tel Entities, the Company
expects to achieve economies of scale in purchasing telecommunication services
including direct inward dial ("DID") lines, trunks, transmission capacity and
equipment. The Company also plans to rationalize many redundant or unnecessary
costs, including administrative personnel and manager compensation and
centralize or regionalize functions including billing, customer service and
technical support. While Premiere plans to close certain offices and
consolidate various operations, including equipment sites, it intends to
retain substantially all of Voice-Tel's direct sales force. The sales force
has been reorganized under the direction of three regional vice presidents
recruited from several leading Franchisees. Additionally, Premiere is
designing a performance based compensation system for the Voice-Tel officers
that rewards profitable growth and encourages management retention. See "Risk
Factors--Integration of Voice-Tel Acquisitions."

While Voice-Tel had succeeded in marketing to regional special interest
organizations, local businesses and national network and multi-level marketing
organizations such as Amway, Excel and Primerica, Premiere believes that
Voice-Tel had limited success in marketing to large corporations due to its
franchisee structure. Premiere believes that a unified, well capitalized
Voice-Tel will be better positioned to pursue large national corporate
accounts that previously had been uncomfortable with Voice-Tel's
franchisee/franchisor structure. Furthermore, by removing the territorial
limits of the franchisee structure, Voice-Tel will be able to sell local voice
messaging services on a wholesale basis to telecommunications companies that
do not have local access or a voice messaging network.

In connection with the Voice-Tel Acquisitions, the Company will take a
charge in the second quarter of 1997 of approximately $40 million to $45
million. The components of the charge include transaction expenses and
restructuring and related costs (including severance costs, charges for asset
impairment and costs related to exiting the franchise business and closing
certain facilities) attributable to the Voice-Tel Acquisitions.

<PAGE>

VOICE-TEL HISTORICAL BUSINESS

General. VTE began business in 1986 to provide local voice messaging
services in Cleveland, Ohio and Richmond, Virginia and expanded primarily
through franchising, from 30 voice mail service centers in 1990 to
approximately 200 centers located in the United States, Puerto Rico, Canada,
Australia and New Zealand, reaching approximately 90% of the United States and
approximately 100% of the Canadian, Australian and New Zealand populations
with local, toll-free service access. The Voice-Tel Entities historically have
sold locally accessed voice messaging products with various feature options
ranging from basic receive and retrieve mail boxes to multiple mailbox
products with enhanced greeting length, message length and storage capacity,
menu driven branching options, store and forward options, such as voice
message broadcast, pager notification options and facsimile retrieval options.
The mailboxes reside on voice mail servers manufactured by Centigram
Communications Corporation ("Centigram") located at local Voice-Tel service
centers and are connected, via a proprietary network interface box ("NIB"), to
a digital frame relay network owned, leased and managed by VTN. Voice-Tel
services have been marketed locally to consumer, professional and small
business customers through a sales force of approximately 300 marketing
persons employed by the various Voice-Tel Entities. The network has allowed
the Voice-Tel Entities to support a national account program that services
multi level marketing organizations such as Amway, Excel and Primerica,
although Voice-Tel has historically had limited success in pursuing other
types of national organizations due to its franchisee/franchisor structure.

Industry Background. Voice messaging allows users to send and respond to
messages interactively to one or several people with one call. The major
national service providers in the voice messaging business, such as Octel
Network Services ("ONS") or VoiceCom Systems, Inc. ("VoiceCom"), historically
provided centralized 800 number voice messaging services to national
organizations. Regional service providers such as the regional Bell operating
companies ("RBOCs") provide local voice messaging or one way voice mail
marketed largely to residential users. Other voice messaging competition
includes customer premise equipment vendors such as AT&T Corp. ("AT&T"),
Northern Telecom Inc. ("Northern Telecom"), Siemens Business Communication
Systems Inc. ("Siemens"), Octel Communications Corporation ("Octel"),
Centigram and others, which sell voice mail equipment to be installed onsite
at the customer's premises. Premiere believes that Voice-Tel is the only
independent voice messaging service firm that has a nationwide digital network
that enables it to move multiple voice messages across the United States or
internationally from a single local call. See "--Competition" and "Risk
Factors--Competition."

Organizational Structure. Voice-Tel historically has operated as three
separate business structures: VTE, the franchisor and owner/operator of 10
voice messaging service centers in the United States and 10 service centers in
Australia and New Zealand; VTN, the owner, lessor and operator of a digital
frame relay network; and over 90 independently owned Franchisees that operate
approximately 200 service centers. The Voice-Tel Entities recorded
approximately $88.0 million of revenue in 1996 on a combined basis (after
eliminating transactions between such entities), representing a 23.9% increase
from approximately $71.0 million of revenue in 1995.

VTE. VTE, a franchisor and operator of voice messaging service centers,
generated 1996 revenues of approximately $18.2 million from royalties,
equipment sales (of Centigram voice messaging equipment), management fees
paid by franchisees, and sales from its wholly owned voice messaging
service centers. VTE's cost of services includes equipment resales and
labor costs attributable to service revenues. Its selling, general and
advertising expenses consist principally of corporate overhead, advertising
and other marketing expenses and ongoing franchisee services. A significant
portion of VTE's revenue will be eliminated upon recording the pooling of
interests with the related Franchisees and the Company.

VTN. VTN, as the owner, lessor and operator of the digital frame network,
generated 1996 revenues of approximately $8.4 million from the sale of
network services comprised of transmission of voice and data on a wholesale
basis to Amway and the Franchisees who, in turn, resold network services to
their distributors or customers. VTN's cost of services include network
circuit costs and installation. VTN's operating costs, which consist of
costs of maintaining the network, are relatively fixed. Due to increased

<PAGE>

capital expenditures for enhanced network capacity, depreciation and
amortization costs have increased each of the last three years. A
significant portion of VTN's revenue will be eliminated upon recording the
pooling of interests with the related Franchisees and the Company.

Franchisees. The Franchisees sold voice messaging services within
designated territories, and collectively generated 1996 revenues of
approximately $71.8 million from the activation of voice messaging accounts
and from ongoing flat rate monthly service charges, usage based network
transmission service of the Voice-Tel network and from local messages
exceeding a monthly maximum. The Franchisee's cost of service consists
primarily of telecommunications costs, including DID fees, trunk charges
and wholesale network charges.

The historical revenue of the Voice-Tel Entities on a combined basis (after
eliminating transactions between such entities) for the fiscal years ended
December 31, 1994, 1995 and 1996 was approximately $54.5, $71.0 and $88.0
million, respectively, and for the three months ended March 31, 1997 was
approximately $22.6 million. Unaudited pro forma combined financial statements
giving effect to a substantial portion (but not all) of the Voice-Tel
Acquisitions are set forth in this Offering Circular under the caption
"Unaudited Pro Forma Combined Financial Information". Such unaudited pro forma
combined financial statements give effect to the acquisitions of Voice-Tel
Entities that accounted for approximately 71% of the total revenue of all of
the Voice-Tel Entities on a combined basis (after eliminating transactions
between such entities) in 1996. The Company does not believe that the
historical financial performance of the Voice-Tel Entities as stand alone
entities provides a useful indicator of future performance in view of the
anticipated changes to such businesses resulting from the consolidation of the
businesses and integration of the businesses into the Company's operations.
See "--Business Synergies" and "--Consolidation Strategy."

Products and Services. Voice-Tel provides subscribers with interactive
digital voice and data messaging products on a service bureau basis. Voice-Tel
has historically sold locally accessed traditional voice messaging products
with various feature options. Subscriber product offerings range from
traditional receive and retrieve mailboxes to multiple mailbox products with
enhanced greeting length, message length and storage capacity, menu driven
branching options, voice store and forward options, including voice message
broadcast, pager notification and facsimile retrieval options. Additionally,
Voice-Tel owns and leases various components of and operates a high speed
digital frame network which provides transmission of messages over a secure
and private network to approximately 200 system locations in the United
States, Canada, Puerto Rico, Australia and New Zealand. The digital network
provides speed and security for messages across the Voice-Tel network.

Voice-Tel subscribers typically establish a voice mailbox with the payment
of a one-time activation fee and are typically charged a monthly flat rate
usage fee. In addition, subscribers are charged a variable usage fee for
network transmission services.

Voice-Tel Network. Voice-Tel's digital frame relay network connects users in
dispersed locations through a secure private wide area network. Messages are
captured and digitized at one of Voice-Tel's approximately 200 local points-
of-presence ("POPs") using a Centigram voice processing system. Voice-Tel's
NIB then converts the digitized data from DDCMP protocol (the data processing
protocol standard of Centigram's system) to TCP/IP Ethernet form. Once
converted to TCP/IP format, the message's path is determined by an ACC router,
which routes the data to one of Voice-Tel's twelve network hubs via T1 local
loops. Cascade frame relay switches located at Voice-Tel's network hubs
collocated at sites of WilTel, a subsidiary of WorldCom, then route the
message data over leased frame relay lines (provided by WilTel in the United
States) to other Voice-Tel hub sites or POPs within a hub region for delivery
to the end user. See "Risk Factors--Dependence Upon Telecommunication
Providers; No Guaranteed Supply."

Customers; Amway Relationship. Voice-Tel provides its services to over
550,000 activated mailboxes throughout the United States, Puerto Rico, Canada,
Australia and New Zealand. Voice-Tel's most significant customer relationship
is with Amway, a large international multi-level marketing organization, that
resells Voice-Tel voicemail and network services to its independent
distributors in the United States, Puerto Rico,

<PAGE>

Canada, Australia and New Zealand. Sales to this organization accounted for
approximately 59.0% and 54.0% of the combined revenues of the Voice-Tel
Entities during 1995 and 1996, respectively. In addition to Amway, significant
customers of the business include Excel and Primerica, although neither Excel
nor Primerica accounted for more than 6.0% of the Voice-Tel Entities' total
revenue during each of the last three years. Other customers include network
marketing and multi-level marketing organizations, residential real estate
brokerages, home health care and physician networks and sales organizations
with numerous locations. Voice-Tel's national accounts program seeks to
attract large scale customers such as special interest groups and national and
multinational companies. See "Risk Factors--Reliance on Amway Relationship."

Customer Service and Technical Support. Individual Voice-Tel Franchisees
provided customer service and support services to subscribers in their
respective franchised territories. Customer service representatives staffed
local phone centers to answer user questions regarding billing, service
interruptions, and any other problems users encountered. Franchisee employed
technical support personnel were also responsible for the maintenance and
support of the approximately 200 Centigram voice processing systems operated
by the Franchisees and the NIBs that connect to the VTN frame relay network.
Technicians in VTN's Cleveland, Ohio diagnostic center provide the service and
support for Voice-Tel's national frame relay network and perform similar
functions as Franchisees with respect to the Company and the Company owned
service centers.

Competition. Voice-Tel faces substantially the same general competitive
conditions as the Company. Voice-Tel's competitors include VoiceCom, ONS,
certain RBOCs and vendors of customer premises equipment solutions such as
AT&T, Northern Telecom, Siemans and Octel. The Company believes that the
principal competitive factors affecting the market for Voice-Tel's products
include price, product features, quality of service and reliability of
service. The Company believes that Voice-Tel competes effectively in these
areas. See "Risk Factors--Competition."

The Company expects that information and telecommunications services markets
will continue to attract new competitors and new technologies, possibly
including alternative technologies that are more sophisticated and cost
effective than Voice-Tel's technology. Voice-Tel does not have the contractual
right to prevent its subscribers from changing to a competing voice mail
solution and the Company's customers may generally terminate their services
with Voice-Tel at will.

Proprietary Rights. Voice-Tel's ability to compete is dependent in part upon
its proprietary technology. Voice-Tel has historically relied on copyright and
trade secret laws to protect its technology. There can be no assurance that
others will not be able to copy or otherwise obtain and use Voice-Tel's
proprietary technology without authorization, or independently develop
technologies that are similar or superior to Voice-Tel's technology. However,
the Company believes that due to the rapid pace of technological change in the
information and telecommunications service industry, factors such as the
technological and creative skills of its personnel (including personnel
employed in the Voice-Tel operations), new product developments, frequent
product enhancements and the timeliness and quality of support services are
more important to establishing and maintaining a competitive advantage in the
industry. Voice-Tel has been issued two U.S. patents and has one U.S. patent
application pending. Voice-Tel also has five registered U.S. trademarks or
service marks and approximately 40 foreign trademark or service mark
registrations or pending applications therefor.

<PAGE>

affected by the diversion of management attention and litigation costs.
Because of this risk, the Company withheld in escrow approximately 176,000
shares of Common Stock from the purchase price for VTE and VTN. This escrow
arrangement terminates in April 2000. There can be no assurance that such
escrow will be sufficient to fully cover the Company's exposure in the event
of litigation or an adverse outcome to the potential infringement claims.

No assurance can be given that other actions or claims alleging trademark,
copyright or patent infringement will not be brought by third parties against
the Voice-Tel Entities or the Company with respect to current or future
products or services, or that, if such actions are brought, the Company and
the Voice-Tel Entities will prevail. Any such claimant may have significantly
greater resources than the Company to pursue litigation of such claims. Any
such claims, whether with or without merit, could be time consuming, result in
costly litigation, cause delays in introducing new or improved products and
services, require the Company to enter into royalty or licensing agreements,
or cause the Company to discontinue use of the challenged trade name, service
mark or technology at potentially significant expense to the Company
associated with the marketing of a new name or the development or purchase of
replacement technology, all of which would have a material adverse effect on
the Company's business, results of operations and financial condition. See
"Risk Factors--Limited Protection of Proprietary Technology," "--Risks of
Infringement Claims" and "--Potential Adverse Impact of Pending Litigation."

Legal Proceedings. One of the franchisees not acquired by the Company is
currently involved in litigation with one of the Franchisees acquired by the
Company concerning rights to the acquired Franchisee's territory. The Company
placed in escrow all of the consideration for the acquired Franchisee pending
the outcome of this matter. In light of the escrow arrangement and other facts
currently available to the Company, the Company does not believe that the
outcome of this matter is likely to have a material adverse effect on the
Company's business, results of operations or financial condition.

Employees. As of May 31, 1997, the Franchisees employed approximately 460
persons, and VTE and VTN employed approximately 100 persons domestically and
25 abroad.

Facilities. The Voice-Tel Entities lease approximately 200 equipment and
office sites. In addition, the Voice-Tel Entities separately lease office
space at approximately 10 locations.

<PAGE>

RISK FACTORS

Integration of Voice-Tel Acquisitions. On June 12, 1997, the Company
announced the completion of the previously announced acquisitions of the
Voice-Tel Entities. The Voice-Tel Entities operate approximately 200 service
centers in five countries. Prior to the acquisition, VTE operated as a
franchisor, and each of the approximately 90 Franchisees was independently
owned and operated. The Company intends to consolidate these separate
businesses by eliminating duplicative and unnecessary costs and merging them
under common management, and to integrate Voice-Tel's service offerings,
operations and systems with those of the Company. The Company is in the
process of developing, and has not yet finalized, these integration plans and,
therefore, such plans may change in the future, perhaps materially. The
Company believes that given the size and fragmented nature of the facilities
and businesses of the Voice-Tel Entities and the technical complexity of
integrating the Company's products with those of Voice-Tel, the integration
process will be particularly complex and has and will place significant
demands on the Company's management, engineering, financial and other
resources. The successful consolidation of the Voice-Tel Entities and their
integration into the Company's operations is critical to the Company's future
performance, especially because the combined revenues for the Voice-Tel
Entities were approximately 169% and 120% of the Company's revenues in 1996
and the three months ended March 31, 1997, respectively.

Potential challenges to the successful consolidation of the Voice-Tel
Entities include, but are not limited to: (i) centralization and
rationalization of financial, operational and administrative functions;
(ii) rationalization of the service centers, network and work force; (iii)
elimination of unnecessary costs; and (iv) realization of economies of scale.
Challenges to the successful integration of the Voice-Tel Entities include,
but are not limited to (i) the localization of Premiere products; (ii)
integration of the Premiere platform with the Voice-Tel network; (iii) cross
selling of products and services to both companies' customer bases; and (iv)
integration of new personnel. There can be no assurance that the Voice-Tel
Entities will be successfully consolidated or integrated with the Company's
operations on schedule or at all, that the Voice-Tel Acquisitions will result
in net sales or earnings level that would justify the Company's investment
therein or the expenses related thereto or that operational synergies will
develop as projected. Failure to successfully integrate the Voice-Tel Entities
or to achieve operating synergies would have a material adverse effect on the
Company's business, financial condition and results of operations.

In connection with the Voice-Tel Acquisitions, the Company will take a
charge in the second quarter of 1997 of approximately $40 million to $45
million, consisting of transaction expenses and restructuring and related
costs attributable to the Voice-Tel Acquisitions. The amount of the charge is
based on the Company's current estimate as to the amount of the costs and
expenses that will be incurred. There can be no assurance that the actual
amount of the costs and expenses incurred will not exceed such estimate. If
the actual amount of the costs and expenses exceeds the Company's estimate,
the Company may take additional charges in the future. In addition, the
Company expects to record approximately $16.9 million of goodwill and other
intangible assets in connection with the Voice-Tel Acquisitions. The Company
intends to amortize the goodwill on a straight-line basis over 40 years. The
Company believes the useful life of the Voice-Tel Entities to be at least 40
years. If the amortization period is accelerated due to a reevaluation of the
useful life of the Voice-Tel Entities or otherwise, amortization expense may
initially increase on a quarterly basis or require a write-down of the
goodwill. An increase in the rate of amortization of goodwill or future write-
downs and restructuring charges could have a material adverse effect on the
Company's financial condition and results of operations.

<PAGE>

Competition. The information and telecommunications services industries are
intensely competitive, rapidly evolving and subject to rapid technological
change. The Company expects competition to increase in the future. Many of the
Company's current and potential competitors have longer operating histories,
greater name recognition, larger customer bases and substantially greater
financial, personnel, marketing, engineering, technical and other resources
than the Company. Such competition could materially adversely affect the
Company's business, operating results or financial condition.

The Company attempts to differentiate itself from its competitors by
offering an integrated suite of information and telecommunications services.
Other providers currently offer each of the individual services and certain
combinations of the services offered by the Company. The Company's worldwide
long distance services and features such as conference calling, including
those acquired pursuant to the Voice-Tel Acquisitions, compete with services
provided by companies such as AT&T, MCI and Sprint, as well as smaller
interexchange long distance providers. The Company's voice mail services,
including those acquired pursuant to the Voice-Tel Acquisitions, compete with
voice mail services provided by AT&T, ONS, certain RBOCs and Voice Com as well
as by customer premised equipment manufacturers such as Octel, Northern
Telecom, Siemens, Centigram, Boston Technology, Inc. ("Boston Technology") and
Digital Sound Corporation ("Digital Sound"). The Company's enhanced travel
services, concierge services, news services and electronic mail services are
competing with services provided by America Online, Prodigy and numerous
Internet service providers. When implemented, the Company's Orchestrate
product line is expected to compete with companies such as Octel, Microsoft
Corp. ("Microsoft"), Novell, Inc. and Lucent Technologies, Inc. ("Lucent") and
numerous smaller entities. The Company's call center technology competes with
companies such as AT&T, MCI and Lucent. The Company expects that other parties
will develop and implement information and telecommunications service
platforms similar to its platform, thereby increasing competition for the
Company's services. For example, Octel and Microsoft recently introduced the
Octel Unified Manager Product which integrates voice and e-mail that can be
accessed and managed from either a computer or a telephone.

In addition, on February 8, 1996, President Clinton signed into law the
Telecommunications Act of 1996, as amended, (the "1996 Act") that will allow
local exchange carriers, including the RBOCs, to provide inter-LATA long
distance telephone service, which will likely significantly increase
competition for long distance services. The new legislation also grants the
Federal Communications Commission (the "FCC") the authority to deregulate
other aspects of the telecommunications industry, which in the future may, if
authorized by the FCC, facilitate the offering of an integrated suite of
information and telecommunications services by regulated entities, including
the RBOCs, in competition with the Company. Such increased competition could
have a material adverse effect on the Company's business, operating results or
financial condition.

Telecommunications companies compete for consumers based on price, with
major long distance carriers conducting extensive advertising campaigns to
capture market share. There can be no assurance that a decrease in the rates
charged for communications services by the major long distance carriers or
other competitors, whether caused by general competitive pressures or the
entry of the RBOCs and other local exchange carriers into the long distance
market, would not have a material adverse effect on the Company's business,
operating results or financial condition.

The Company expects that the information and telecommunications services
markets will continue to attract new competitors and new technologies,
possibly including alternative technologies that are more sophisticated and
cost effective than the technology of the Company and the Voice-Tel Entities.
Neither the Company nor the Voice-Tel Entities have the contractual right to
prevent its subscribers from changing to a competing network, and the
Company's subscribers may generally terminate their service with the Company
at will.

Dependence on Key Management and Personnel. The Company's success is largely
dependent upon its executive officers and other key personnel, the loss of one
or more of whom could have a material adverse effect on the Company. The
Company believes that its continued success will depend to a significant
extent

<PAGE>

upon the efforts and abilities of Boland T. Jones, Chairman and President, D.
Gregory Smith, Executive Vice President, Gregg S. Freishtat, Senior Vice
President of Premiere Communications, Inc. ("PCI"), Leonard A. DeNittis, Vice
President of Engineering and Operations, Raja Rajaraman, Chief Technical
Officer of VTE, and certain other key executives. The loss of services of any
of these individuals could have a material adverse effect upon the Company.
Messrs. Jones, Smith and DeNittis have entered into employment agreements with
the Company which expire in December 1999, and the Company maintains key man
life insurance on each of these persons in the amounts of $3.0 million, $2.0
million and $2.0 million, respectively. Mr. Rajaraman has entered into an
employment agreement with VTE which expires in April 2000.

The Company also believes that to be successful it must hire and retain
highly qualified engineering and product development personnel. Competition in
the recruitment of highly qualified personnel in the information and
telecommunications services industry is intense. The inability of the Company
to locate, hire and retain such personnel may have a material adverse effect
on the Company. No assurance can be given that the Company will be able to
retain its key employees or that it will be able to attract qualified
personnel in the future.

Ability to Manage Growth; Acquisition Risks. The Company has experienced
substantial growth in revenue and personnel in recent years. This growth has
placed significant demands on all aspects of the Company's business, including
its administrative, technical and financial personnel and systems. Additional
expansion by the Company may further strain the Company's management,
financial and other resources. There can be no assurance that the Company's
systems, procedures, controls and existing space will be adequate to support
expansion of the Company's operations. The Company's future operating results
will substantially depend on the ability of its officers and key employees to
manage changing business conditions and to implement and improve its
technical, administrative, financial control and reporting systems. If the
Company is unable to respond to and manage changing business conditions, then
the quality of the Company's services, its ability to retain key personnel and
its results of operations could be materially adversely affected. At certain
stages of growth in network usage, the Company is required to add capacity to
its computer telephony platform and its digital central office switches and
will need to continually add capacity to the Voice-Tel Network, thus requiring
the Company continuously to attempt to predict growth in its network usage and
add capacity to its switches accordingly. Difficulties in managing continued
growth, including difficulties in predicting the growth in network usage,
could have a material adverse effect on the Company.

The Company regularly evaluates acquisition opportunities and intends to
grow in substantial part through acquisitions of complementary services,
products, technologies or businesses. Acquisitions may result in potentially
dilutive issuances of equity securities, the incurrence of additional debt,
the assumption of known and unknown liabilities, the write-off of software
development costs and the amortization of expenses related to goodwill and
other intangible assets, all of which could have a material adverse effect on
the Company's business, operating results or financial condition. For example,
the Voice-Tel Entities have established reserves for certain potential tax
liabilities that management believes to be adequate. If, however, such
potential liabilities ultimately were to exceed established reserves, the
Company could experience a material adverse effect with respect to its
business, financial condition or results of operations. Acquisitions also
involve numerous additional risks, including difficulties in the assimilation
of the operations, services, products and personnel of the acquired company,
the diversion of management's attention from other business concerns, entering
markets in which the Company has little or no direct prior experience and the
potential loss of key employees of the acquired company. The Company is unable
to predict whether or when any prospective acquisition candidate will become
available or the likelihood that any acquisition will be completed.

Technological Change; Risk of Obsolesence; Dependence on New Services. The
information and telecommunications services markets are characterized by rapid
technological change, frequent new product introductions and evolving industry
standards. The Company's future success will depend in significant part on its
ability to anticipate industry standards, continue to apply advances in
technologies, enhance its current services, develop and introduce new services
on a timely basis, enhance its software and its computer telephony platform
and successfully compete with products and services based on evolving or new
technology.

<PAGE>

The Company expects new products and services, and enhancements to existing
products and services, to be developed and introduced which will compete with
the services offered by the Company. Among the new and evolving technologies
that the Company expects to compete for are notebook computers equipped with
sound cards, fax modems and cellular modems, portable Internet appliances
which would allow connection to the Internet over wireless networks and
personal digital assistants with enhanced communications features. In
addition, aspects of the Company's Orchestrate product line compete within
markets where larger companies are working to provide a unified messaging
solution. The Company is also aware that products currently exist which allow
text-to-voice e-mail conversion and provide "meet me" services, and that
several communications companies are developing or have developed services
that would compete with the Company's proposed "follow me" service by allowing
users to have a single telephone number for all of their communications
devices.

The Voice-Tel Acquisitions constitute a significant investment by the Com-
pany in a frame relay network architecture. Alternative architectures cur-
rently exist, and technological advances may result in the development of ad-
ditional network architectures. There can be no assurance that the telecommu-
nications industry will not standardize on an architecture other than a frame
relay network or that such architecture will not become obsolete. Such events
would require the Company to invest significant capital in upgrading or re-
placing its frame relay network, and could have a material adverse effect on
the Company's business, financial condition and results of operations.

The Company must continually introduce new products in response to evolving
industry standards and customer demands for enhancements to Company's existing
products. There can be no assurance that the Company will be successful in
developing and marketing service enhancements or new services that respond to
these or other technological changes or evolving industry standards, that the
Company will not experience difficulties that could delay or prevent the
successful development, introduction and marketing of its services, or that
its new services and the enhancements thereto, will adequately meet the
requirements of the marketplace and achieve market acceptance. Delays in the
introduction of new services, the inability of the Company to develop such new
services or the failure of such services to achieve market acceptance could
have a material adverse effect on the Company's business, operating results or
financial condition.

Uncertainty of Market Acceptance of Computer Telephony. The Company's future
success depends upon the market acceptance of its existing and future computer
telephony product lines and services. Computer telephony integrates the
functionality of telephones and computers and thus represents a departure from
standards for information and telecommunications services. Market acceptance
of computer telephony products and services generally requires that
individuals and enterprises accept a new way of exchanging information. The
Company believes that broad market acceptance of its computer telephony
product lines and services will depend on several factors, including ease of
use, price, reliability, access and quality of service, system, security,
product functionality and the effectiveness of strategic marketing and
distribution relationships. There can be no assurance that the Company's
computer telephony products will achieve broad market acceptance or that such
market acceptance will occur at the rate which the Company currently
anticipates. A decline in the demand for, or the failure to achieve broad
market acceptance of, the Company's computer telephony product lines and
services would have a material adverse effect on the Company's business,
financial condition and results of operations.

Limited Protection of Proprietary Technology. The Company relies primarily
on a combination of copyright and trade secret laws and contractual
confidentiality provisions to protect its proprietary rights. These laws and
contractual provisions provide only limited protection of the Company's
proprietary rights. The Company has three patent applications pending and 10
trademark or service mark registrations pending. The Company has one
registered service mark. Voice-Tel has been issued two U.S. patents and has
one U.S. patent application pending. Voice-Tel also has five registered U.S.
trademarks or service marks and approximately 40 foreign trademark or service
mark registrations or pending applications therefor. Despite the Company's
efforts to protect its proprietary rights, unauthorized parties may attempt to
copy aspects of the Company's software or services or to obtain and use
information that the Company regards as proprietary. Although the Company is
not aware of any current or previous infringement on its proprietary rights,
there can be no assurance that the Company's means of protecting its
proprietary rights will be adequate or that

<PAGE>

the Company's competitors will not independently develop similar technology.
In addition, the laws of some foreign countries do not protect the Company's
proprietary rights to as great an extent as the laws of the United States.

Risks of Infringement Claims. Many patents have been issued in the general
areas of information and telecommunications services and computer telephony.
The Company believes that in the ordinary course of its business third parties
will claim that the Company's current or future products or services infringe
the patent, copyright or trademark rights of such third parties. No assurance
can be given that legal actions alleging infringement will not be commenced
against the Company, or that, if such actions are brought, the Company will
ultimately prevail. Any such claiming third parties may have significantly
greater resources than the Company to pursue litigation of such claims. Any
such claims, whether with or without merit, could be time consuming, result in
costly litigation, cause delays in introducing new or improved products and
services, require the Company to enter into royalty or licensing agreements,
or cause the Company to discontinue use of the challenged tradename, service
mark or technology at potentially significant expense to the Company
associated with the marketing of a new name or the development or purchase of
replacement technology, all of which could have a material adverse effect on
the Company.

The Company is aware of other companies that use the terms "WorldLink" or
"Premiere" in describing their products and services, including
telecommunications products and services. Certain of those companies hold
registered trademarks which incorporate the names "WorldLink" or "Premiere."
The Company has received correspondence from a provider of prepaid calling
cards which claims that the Company's use of the term "Premiere WorldLink"
infringes upon its trademark rights. In addition, the Company has received
correspondence from a major bank, which is among the holders of registered
trademarks incorporating the term "WorldLink," inquiring as to the nature of
the Company's use of the term "WorldLink" as a part of its mark "Premiere
WorldLink." Based on, among other things, the types of businesses in which the
other companies are engaged and the low likelihood of confusion, the Company
believes these claims to be without merit.

In October 1996, VTE received a letter from a third party claiming that
certain aspects of VTE's products and services may be infringing upon one or
more of the third party's patents. The Company has reviewed the patent claims
of the third party and does not believe that the Company's products or
services infringe on the claims of the third party. No patent infringement
claims against the Company have been filed by the third party at this time.
Should the third party file patent infringement claims against the Company,
the Company believes that it would have meritorious defenses to any such
claims. However, due to the inherent uncertainties of litigation, the Company
is unable to predict the outcome of any potential litigation with the third
party, and any adverse outcome could have a material adverse effect on the
Company's business, results of operations or financial condition. Even if the
Company were to ultimately prevail, the Company's business could be adversely
affected by the diversion of management attention and litigation costs.
Because of this risk, the Company withheld in escrow approximately 176,000
shares of Common Stock from the purchase price of VTE and VTN. This escrow
arrangement terminates in April 2000. There can be no assurance that such
escrow will be sufficient to fully cover the Company's exposure in the event
of litigation or an adverse outcome to the potential infringement claims.

On June 28, 1996, AudioFAX IP LLC ("AudioFAX") filed a complaint against the
Company and Premiere Communications, Inc. in the United States District Court
for the Northern District of Georgia. In the complaint, AudioFAX alleged that
the Company manufactures, uses, sells and/or distributes certain enhanced
facsimile products which infringe three United States patents and one Canadian
patent allegedly held by AudioFAX. In the third quarter of 1996, the Company
took a one-time charge for the estimated legal fees and other costs that the
Company expected to incur to resolve this matter. On February 11, 1997, the
Company entered into a long term, non-exclusive license agreement with
AudioFAX settling the litigation.

In May 1997, Premiere received a letter from a manufacturer and marketer of
certain telecommunications equipment asserting that Premiere is offering cer-
tain "calling card and related enhanced services," "single number service" and
"call connecting services" covered by three patents held by that company and
inviting Premiere to obtain a license. Premiere has preliminarily reviewed the
subject patents and, based on that review, presently believes that its prod-
ucts and services currently being marketed do not infringe two of

<PAGE>

the patents. Premiere intends, however, to conduct a further review of these
two patents in order to determine whether it would be helpful to its future
products and services to license the patents. The third patent relates to cer-
tain call origination technology. Premiere is conducting a further review of
this patent to determine if its # call reorigination system would infringe
upon this patent. If Premiere ultimately determines that it is infringing this
patent, it could seek to license the technology or discontinue using it and
employ an alternate technology. There can be no assurance that Premiere would
be able to license the technology on commercially reasonable terms or that it
could easily and inexpensively migrate to a new # call reorigination technolo-
gy. Premiere's # call reorigination service is only one service that it offers
and management does not believe that this service is critical to the marketing
of Premiere's overall suite of services. Consequently, Premiere does not be-
lieve that its inability to license the technology or migrate to a new tech-
nology would have a material adverse effect on its business, financial condi-
tion or results of operations. No claim has been asserted beyond this letter,
but no assurance can be given that the third party will not commence an in-
fringement action against Premiere. If a patent infringement claim is brought
against Premiere, there can be no assurance that Premiere would prevail and
any adverse outcome could have a material adverse effect on Premiere's busi-
ness, financial condition and results of operations.

Uncertainty of Strategic Relationships. A principal element of the Company's
strategy is the creation and maintenance of strategic relationships that will
enable the Company to offer its services to a larger customer base than the
Company could otherwise reach through its direct marketing efforts. The
Company has experienced growth in its existing strategic relationships during
1996 and 1997, and has entered into or initiated new strategic relationships
with several companies, including WorldCom and CompuServe Interactive (United
Kingdom). Although the Company intends to continue to expand its direct
marketing channels, the Company believes that strategic partner relationships
may offer a potentially more effective and efficient marketing channel.
Consequently, the Company's success depends in part on the ultimate success of
these relationships and on the ability of these strategic partners to market
effectively the Company's services. Failure of one or more of the Company's
strategic partners to successfully develop and sustain a market for the
Company's services, or the termination of one or more of the Company's
relationships with a strategic partner, could have a material adverse effect
on the Company's overall performance due to the possibility of more costly
direct marketing expenditures by the Company and other factors.

In November 1996 the Company entered into a strategic alliance agreement
with WorldCom, the fourth largest long-distance carrier in the United States,
in which WorldCom is required, among other things, to provide the Company with
the right of first opportunity to provide enhanced computer telephony services
for a period of at least 25 years. In connection with this agreement, the
Company issued to WorldCom 2,050,000 shares of Common Stock valued at
approximately $25.2 million (based on an independent appraisal) and paid
WorldCom $4.7 million in cash. The Company recorded the value of this
agreement as an intangible asset. While the Company believes that the
intangible asset will be recovered over the life of the agreement, this
recoverability is dependent upon the success of the strategic relationship.
The Company will continually evaluate the realizability of the intangible
asset recorded, and there can be no assurance that future evaluations will not
require a write-down of this asset.

Although the Company views its strategic relationships as a key factor in
its overall business strategy and in the development and commercialization of
its services, there can be no assurance that its strategic partners view their
relationships with the Company as significant for their own businesses or that
they will not reassess their commitment to the Company in the future. The
Company's arrangements with its strategic partners do not always establish
minimum performance requirements for the Company's strategic partners, but
instead rely on the voluntary efforts of these partners in pursuing joint
goals. Certain of these arrangements prevent the Company from entering into
strategic relationships with other companies in the same industry as the
Company's strategic partners, either for specified periods of time or while
the arrangements remain in force. In addition, even when the Company is
without contractual restriction, it may be restrained by business
considerations from pursuing alternative arrangements. The ability of the
Company's strategic partners to incorporate the Company's services into
successful commercial ventures will require the Company, among other things,
to continue to successfully enhance its existing services and develop new
services. The Company's inability to meet the requirements of its strategic
partners or to comply with the terms of its

<PAGE>

strategic partner arrangements could result in its strategic partners failing
to market the Company's services, seeking alternative providers of
communications and information services or canceling their contracts with the
Company, any of which could have a material adverse impact on the Company.

Reliance on Amway Relationship. Historically, the Voice-Tel Entities have
relied on sales through Amway for a substantial portion of their revenue. Such
sales accounted for approximately 59.0% and 54.0% of the Voice-Tel Entities'
combined revenue for 1995 and 1996, respectively, and approximately 44.9% and
33.9% of the combined Company's and Voice-Tel Entities' revenue for 1995 and
1996, respectively. Amway's relationship with VTE commenced in 1990 when VTE
began managing the voice messaging operations previously conducted by Amway's
subsidiary, Amvox, Inc. ("Amvox"). VTE subsequently acquired and franchised
the former Amvox service centers from Amway in exchange for an equity interest
in VTE. Amway subsequently invested in the development of the digital frame
relay network through VTN. As a result of these transactions, Amway also
became the single largest equity holder in VTE and VTN. VTE and Amway have
entered into a service and reseller agreement (the "Amway Agreement")
providing, among other things, for the sale by VTE of voice messaging and
network transmission services on an exclusive basis to Amway for resale by
Amway to its independent distributors under the "Amvox" tradename. The Amway
Agreement does not bind the Amway distributors, who are free to acquire
messaging services from alternative vendors. The Amway Agreement may be
cancelled by either party upon 180 days prior written notice or upon shorter
notice in the event of a breach. The Amway Agreement does not prohibit VTE
from continuing to provide voice messaging and network transmission services
to Amway's distributors following termination of the Amway Agreement. However,
in the event that Amway recommended a voice messaging and network transmission
services provider other than the Company, there can be no assurance that
Amway's distributors would not follow such recommendation. Although Amway has
indicated a desire to continue to use VTE for its voice messaging services
following the Voice-Tel Acquisitions, there is no assurance that the
relationship will continue at historical levels or at all, nor is there any
assurance of long term price protection for services provided to Amway. Loss
or natural diminution in the Amway relationship, or a decrease in average
sales price without an offsetting increase in volume, could have a material
adverse effect on the results of operation and financial condition of the
Company.

Dependence on Licensing and Strategic Relationships. The Company has
licensing relationships with companies that have chosen to outsource part or
all of their communications card services to Premiere. License fees accounted
for approximately 26.5% of Premiere's 1996 revenues and 32.7% of Premiere's
first quarter 1997 revenues. One licensee, Communications Network Corporation
("CNC"), accounted for approximately 19.6% of Premiere's 1996 license fees and
approximately 5.2% of the Company's total 1996 revenues. On August 6, 1996,
CNC was placed into bankruptcy under Chapter 11 of the United States
Bankruptcy Code. CNC owed the Company approximately $627,000 as of December
31, 1996. However, CNC's transmission provider, WilTel, is also obligated to
pay this amount to the Company. In addition, WorldCom accounted for
approximately 43.5% of Premiere's 1996 license fees and approximately 11.5% of
Premiere's total 1996 revenues, and approximately 24.1% of the Company's first
quarter 1997 revenues. The Company believes that through a combination of new
licensing agreements, the strategic alliance agreement with WorldCom and
increased revenues from existing licensees, the Company has replaced all of
the anticipated CNC revenue.

The Company intends to increase its number of licensees and its licensee
transaction volume in the future. The Company's success depends in part upon
the ultimate success or failure of its licensees. The telecommunications
industry is intensely competitive and rapidly consolidating. The majority of
companies that have chosen to outsource communications card services to
Premiere are small or medium-sized telecommunications companies that may be
unable to withstand the intense competition in the telecommunications
industry. During the past 12 months, one licensee, in addition to CNC, ceased
doing business with the Company primarily due to financial difficulties.
Licensees that ceased doing business with Premiere due to financial
difficulties contributed in the aggregate approximately $2.9 million of
Premiere's 1996 revenues. Although the Company was able to add new licensees
in 1996 and the first quarter of 1997, there can be no assurance that the
failure of one or more of the Company's licensees to develop and sustain a
market for the Company's services, or termination of one or more of the
Company's licensing relationships, will not have a material adverse effect on
the Company's business, operating results or financial condition.

<PAGE>

Increased Leverage. In connection with the sale of the Notes, the Company
will incur approximately $150.0 million in additional indebtedness ($172.5
million if the over-allotment option is exercised) which will increase the
ratio of its long-term debt to its total capitalization from 16.1%, at March
31, 1997, to 65.7%, on a pro forma basis (including the effect of debt assumed
in the Significant Acquisitions and the effects of the anticipated $40 million
to $45 million charge on total shareholders' equity). As a result of this
increased leverage, the Company's principal and interest obligations will
increase substantially. The degree to which the Company will be leveraged
could adversely affect the Company's ability to obtain additional financing
for working capital, acquisitions or other purposes and could make it more
vulnerable to economic downturns and competitive pressures. The Company's
increased leverage could also adversely affect its liquidity, as a substantial
portion of available cash from operations may have to be applied to meet debt
service requirements and, in the event of a cash shortfall, the Company could
be forced to reduce other expenditures and forego potential acquisitions to be
able to meet such requirements. See "Capitalization," "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" and "Selected Consolidated Financial Information."

Shares Eligible for Future Sale; Registration Rights. As of June 25, 1997,
the Company had 31,648,017 shares of Common Stock outstanding (including
436,526 shares of Exchangeable Non-Voting Shares of Voice-Tel Canada Limited,
a subsidiary of the Company, issued to the former shareholders of the Canadian
Voice-Tel Entities, which are convertible at any time into 436,526 shares of
Common Stock). Of these shares, upon completion of the offering, 16,017,719
shares of Common Stock will be freely tradeable without restriction or further
registration under the Securities Act of 1933, as amended (the "Securities
Act"). The remaining 15,630,298 shares of Common Stock outstanding upon
completion of the offering are "restricted securities" as that term is defined
in Rule 144 under the Securities Act ("Rule 144").

Upon the expiration of the lock-up agreements between the Company's officers
and directors and the Initial Purchasers on August 15, 1997, 5,656,732 shares
will be eligible for sale pursuant to Rule 144, subject to the volume, manner
of sale and notice requirements of Rule 144 (the "Rule 144 Restrictions").
Beginning on September 18, 1997, an additional 498,187 shares will be eligible
for sale pusuant to Rule 144, subject to the Rule 144 Restrictions. Beginning
on November 13, 1997, and additional 2,050,000 shares will be eligible

<PAGE>

for sale pusuant to Rule 144, subject to the Rule 144 Restrictions. The
remaining 7,425,379 outstanding shares will become eligible for sale pursuant
to the Rule 144 Restrictions from time to time after April 30, 1998.

As of June 25, 1997, options and warrants to purchase an aggregate of
9,363,096 shares of Common Stock were outstanding. Options and warrants to
purchase an aggregate of 3,563,045 shares of Common Stock are vested and
immediately exercisable. Options and warrants to purchase the remaining
5,800,051 shares of Common Stock are exercisable at various times thereafter.

A total of approximately 11,440,259 shares of Common Stock are subject to
various registration rights. Of this total, 7,425,379 shares were issued by
the Company in connection with the Voice-Tel Acquisitions. Such persons
collectively have the one-time right to require the Company to file a
registration statement under the Securities Act within 90 days of receiving
notice of such request, provided that (i) such request must be initiated by an
Amway entity or holders of 10% or more of the Registrable Securities (as
defined) and (ii) such one-time demand must be made after July 15, 1997 and
before the nine month anniversary from the date the acquisition was
consummated. The Company anticipates that a valid request to register the
foregoing shares of Common Stock will be made promptly after July 15, 1997.
See "Description of Capital Stock--Registration Rights" and "Description of
Capital Stock--Preferred Stock."

No prediction can be made as to the effect, if any, that the availability of
additional shares for sale will have on the market prices of the Common Stock
or the Notes prevailing from time to time. Nevertheless, sales of substantial
amounts of the Common Stock in the public market could adversely affect
prevailing market prices of the Common Stock and the Notes and the ability of
the Company to raise equity capital in the future.

In addition, certain holders of registration rights are permitted to include
their shares of Common Stock in the shelf registration statement with respect
to the resale of the securities offered hereby (the "Shelf Registration
Statement") required to be filed by the Company pursuant to the Registration
Rights Agreement (as defined herein). Under such circumstances, certain
provisions applicable to such registration rights may conflict with various
provisions of the Registration Rights Agreement. Although the Company has
agreed, among other things, to use all commercially reasonable efforts to
eliminate or minimize any adverse effects on the rights of the holders of the
securities offered hereby under the Registration Rights Agreement as a result
of such registration rights, there can be no assurance that such efforts will
be successful and, accordingly, there can be no assurance that the ability of
holders of Notes and Common Stock issued upon conversion of the Notes to sell
such securities pursuant to the Shelf Registration Statement will not be
adversely affected by the assertion or existence of rights by one or more of
the holders of such registration rights. See "Description of Notes--
Registration Rights" and "Description of Capital Stock--Registration Rights."

Potential Adverse Impact of Pending Litigation. The Company has several
litigation matters pending, which the Company is defending vigorously. Due to
the inherent uncertainties of the litigation process and the judicial system,
the Company is unable to predict the outcome of such litigation matters. If
the outcome of one or more of such matters is adverse to the Company, it could
have a material adverse effect on the Company's business, operating results or
financial condition. Information concerning such litigation matters is
contained in the sections entitled "Business--Legal Proceedings" and "Voice-
Tel Acquisitions--Legal Proceedings."

Dependence on Switching Facilities and Computer Telephony Platforms; Damage,
Failure and Downtime. The Company currently maintains switching facilities and
computer telephony platforms in Atlanta, Georgia and Dallas, Texas, and a POP
site in London, England. The Company's network service operations are
dependent upon its ability to protect the equipment and data at its switching
facilities against damage that may be caused by fire, power loss, technical
failures, unauthorized intrusion, natural disasters, sabotage and other
similar events. The Company has taken precautions to protect itself and its
subscribers from events that could interrupt delivery of the Company's
services. These precautions include physical security systems, uninterruptible
power supplies, on-site power generators designed to be sufficient to continue
operation of the Company's network in the event of a power outage for
approximately four days, upgraded backup hardware and fire protection systems.
The Company's network is further designed such that the data on each network
server is duplicated on a separate network server. Notwithstanding such
precautions, there can be no assurance that a fire, act of sabotage, technical
failure, natural disaster or a similar event would not cause the

<PAGE>

failure of a network server and its backup server, other portions of the
Company's network or one of the switching facilities as a whole, thereby
resulting in an interruption of the Company's services. Such an interruption
could have a material adverse effect on the Company. While the Company has not
experienced any downtime of its network due to natural disasters or similar
events, on occasion the Company has experienced downtime due to various
technical failures. When such failures have occurred, the Company has worked
to remedy the failure as soon as possible. The Company believes that these
technical failures have been infrequent. Although the Company maintains
business interruption insurance providing for aggregate coverage of
approximately $10.8 million per policy year, there can be no assurance that
the Company will be able to maintain its business interruption insurance, that
such insurance would continue to be available at reasonable prices or that
such insurance would be sufficient to compensate the Company for losses it
experiences due to the Company's inability to provide services to its
subscribers.

Factors Affecting Operating Results; Seasonality; Potential Fluctuations in
Quarterly Results. The Company's operating results have varied significantly
in the past and may vary significantly in the future. Special factors that may
cause the Company's future operating results to vary include the unique nature
of strategic relationships into which the Company may enter in the future,
changes in operating expenses resulting from such strategic relationships and
other factors, the continued acceptance of the Company's licensing program,
the financial performance of the Company's licensees, the timing of new
service announcements, market acceptance of new and enhanced versions of the
Company's services, potential acquisitions, changes in legislation and
regulation that may affect the competitive environment for the Company's
communications services and general economic and seasonal factors.

In the future, revenues from the Company's strategic relationships may
become an increasingly significant portion of the Company's total revenues.
Due to the unique nature of each strategic relationship, these relationships
may change the Company's mix of expenses relative to revenues.

Quarterly revenues are difficult to forecast because the market for the
Company's information and telecommunications services is rapidly evolving. The
Company's expense levels are based, in part, on its expectations as to future
revenues. If revenue levels are below expectations, the Company may be unable
or unwilling to reduce expenses proportionately and operating results would
likely be adversely affected. As a result, the Company believes that period-
to-period comparisons of its results of operations are not necessarily
meaningful and should not be relied upon as indications of future performance.
Due to all of the foregoing factors, it is likely that in some future quarter
the Company's operating results will be below the expectations of public
market analysts and investors. In such event, the market price of the
Company's Common Stock and the Notes will likely be materially adversely
affected.

Risk of Software Failures or Errors. The software developed and utilized by
the Company in providing its services may contain undetected errors. Although
the Company engages in extensive testing of its software prior to introducing
the software onto its network, there can be no assurance that errors will not
be found in the software after the software goes into use. Any such error may
result in partial or total failure of the Company's network, additional and
unexpected expenses to fund further product development or to add programming
personnel to complete a development project, and loss of revenue because of
the inability of subscribers to use Premiere's network or the cancellation by
subscribers of their service with Premiere, any of which could have a material
adverse effect on the Company. The Company maintains technology errors and
omissions insurance coverage of $10.0 million per policy aggregate.

Dependence Upon Telecommunication Providers; No Guaranteed Supply. The
Company does not own a transmission network and, accordingly, depends on
WilTel, CTG, Cherry, Sprint and other facilities-based and non-facilities
based carriers for transmission of its subscribers' long distance calls. These
long distance telecommunications services generally are procured pursuant to
supply agreements for terms of three to five years, subject to earlier
termination in certain events. Certain of these agreements provide for minimum
purchase requirements. Further, the Company is dependent upon local exchange
carriers for call origination and termination. If there is an outage affecting
one of the Company's terminating carriers, the Company's platform
automatically switches calls to another terminating carrier if capacity is
available. The Company has not experienced significant losses in the past due
to interruptions of service at terminating carriers, but no

<PAGE>

assurance can be made in this regard in the future. The Company's ability to
maintain and expand its business depends, in part, on its ability to continue
to obtain telecommunication services on favorable terms from long distance
carriers and the cooperation of both interexchange and local exchange carriers
in originating and terminating service for its subscribers in a timely manner.
The partial or total loss of the ability to receive or terminate calls would
result in a loss of revenues by the Company and could lead to a loss of
subscribers, which could have a material adverse effect on the Company.

VTN leases capacity on the WilTel backbone to provide connectivity and data
transmission within VTN's frame relay network. The lease agreement expires in
September 1999. VTN's hub equipment is collocated at various WilTel sites
pursuant to collocation agreements that are terminable by either party upon 30
days written notice. Voice-Tel's ability to maintain the network connectivity
is dependent upon its access to transmission facilities provided by WilTel or
an alternative provider. The Company has no assurance that it will be able to
continue such relationship with WilTel beyond the terms of its current
agreements with WilTel or that it will be able to find an alternative provider
on terms as favorable as those offered by WilTel or on any other terms. If VTN
were required to relocate its hub equipment or change its network transmission
provider, it could experience shutdowns in its service and increase costs
which could have a material adverse effect on its customer relationships and
customer retention and, therefore, its business and financial performance and
condition.

Reliance on Major Supplier of Voice Messaging Equipment. Neither the Company
nor Voice-Tel manufactures voice messaging equipment used at the voice
messaging service centers, and such equipment is currently available from a
limited number of sources. The inability of the Company and Voice-Tel to
obtain this equipment could result in delays or reduced delivery of messages
which would materially and adversely affect the Company's operating results.
Although Voice-Tel has not historically experienced any significant difficulty
in obtaining equipment required for its operation and believes that viable
alternative suppliers exist, no assurance can be given that shortages will not
arise in the future.

Regulation. Various regulatory factors may have an impact on the Company's
ability to compete and on its financial performance. The Company is subject to
regulation by the FCC and by various state public service and public utility
commissions. Federal and state regulations and regulatory trends have had, and
may have in the future, both positive and negative effects on the Company and
on the information and telecommunications service industries as a whole. FCC
policy currently requires interexchange carriers to provide resale of the use
of their transmission facilities. The FCC also requires local exchange
carriers to provide all interexchange carriers with equal access to the
origination and termination of calls. If either or both of these requirements
were removed, the Company could be adversely affected. Moreover, the carriers
that provide wholesale services to the Company or terminate and originate the
Company's traffic may experience disruptions in service due to factors outside
the Company's control, which may cause the Company to lose the ability to
complete its subscribers' long distance calls. The Company has made all
filings with the FCC necessary to allow the Company to provide interstate and
international long distance service. In order to provide intrastate long
distance service, the Company is generally required to obtain certification to
provide telecommunications services from the public service or public utility
commissions of each state, or to register or be found exempt from registration
by such commissions. Premiere has made the filings and taken the actions it
believes are necessary to become certified or tariffed to provide intrastate
card services to customers throughout the United States, except in two states,
Alaska and Hawaii, which have historically had restrictions making the cost
prohibitive in light of the immaterial amount of intrastate traffic the
Company handles in those states. This, however, has recently changed and the
Company anticipates authorization with respect to Hawaii in 1997 and with
respect to Alaska in 1998. To date, the Company has not been denied any
licenses or tariffs. The Company has received authorization to provide
intrastate card services in 44 states, and is seeking authorization to provide
intrastate card services in four states. With the exception of one state, New
Mexico, in which the Company's application to provide "0+" service is pending,
the Company has received authorization to provide "0+" service in each state
where the Company provides such service. The Company's platform does not
prevent subscribers from using the platform to make intrastate long distance
calls in any state, including states in which the Company has not received
approval to provide intrastate long distance services. There can be no
assurance that the Company's provision of intrastate card services and "0+"
service

<PAGE>

in states where it is not certified or tariffed to provide such services will
not have a material adverse effect on the Company's business, operating
results or financial condition.

On February 8, 1996, the President signed into law the 1996 Act which will
allow local exchange carriers, including the RBOCs, to provide inter-LATA long
distance telephone service and which also grants the FCC authority to
deregulate other aspects of the telecommunications industry. The new
legislation may result in increased competition to the Company from others,
including the RBOCs, and increased transmission costs in the future. In
addition, the Company may be subject to additional regulatory requirements and
fees as a result of changes made by the 1996 Act.

In conducting its business, the Company is subject to various laws and
regulations relating to commercial transactions generally, such as the Uniform
Commercial Code and is also subject to the electronic funds transfer rules
embodied in Regulation E promulgated by the Board of Governors of the Federal
Reserve System (the "Federal Reserve"). Congress has held hearings regarding,
and various agencies are considering, whether to regulate providers of
services and transactions in the electronic commerce market. For example, the
Federal Reserve Board recently completed a study, directed by Congress,
regarding the propriety of applying Regulation E to stored value cards. The
Department of Treasury recently promulgated proposed rules applying record
keeping, reporting and other requirements to a wide variety of entities
involved in electronic commerce. It is possible that Congress, the states or
various government agencies could impose new or additional requirements on the
electronic commerce market or entities operating therein. If enacted, such
laws, rules and regulations could be imposed on the Company's business and
industry and could have a material adverse effect on the Company's business,
results of operations or financial condition. The Company's proposed
international activities also will be subject to regulation by various
international authorities and the inherent risk of unexpected changes in such
regulation.

Risks Associated with International Expansion. A key component of the
Company's strategy is its planned expansion into international markets. In
1996, the Company opened a POP site in London, England and the Company intends
to pursue long term strategic relationships with European partners. The
Company also intends to establish high speed client/server networks of
personal computers (called "Telnodes") and PCs utilizing the Company's
proprietary software (called "Network Managers") in New Zealand, Canada and
potentially other countries in 1997. Voice-Tel is currently pursuing an
international expansion strategy and currently has service centers in Canada,
Australia, New Zealand and Puerto Rico and is targeting the opening of a
United Kingdom service center in the third quarter of 1997. If international
revenues are not adequate to offset the expense of establishing and
maintaining these international operations, the Company's business, operating
results or financial condition could be materially adversely affected. To
date, the Company has only limited experience in marketing and distributing
its services internationally. There can be no assurance that the Company will
be able to successfully establish the proposed international Telnodes and
Network Managers, or to market, sell and deliver its services in these
markets. In addition to the uncertainty as to the Company's ability to expand
its international presence, there are certain difficulties and risks inherent
in doing business on an international level, such as burdensome regulatory
requirements and unexpected changes in these requirements, export
restrictions, export controls relating to technology, tariffs and other trade
barriers, difficulties in staffing and managing international operations,
longer payment cycles, problems in collecting accounts receivable, political
instability, fluctuations in currency exchange rates, seasonal reductions in
business activity during the summer months in Europe and certain other parts
of the world and potentially adverse tax consequences, all of which could have
a material adverse effect on the performance of the Company's international
operations.

Risk of Loss From Returned Transactions; Fraud; Bad Debt; Theft of
Services. The Company uses two principal financial payment clearance systems:
the Federal Reserve's Automated Clearing House for electronic fund transfers
and the national credit card systems for electronic credit card settlement. In
its use of these established payment clearance systems, the Company generally
bears credit risks similar to those normally assumed by other users of these
systems arising from returned transactions caused by insufficient funds, stop
payment orders, closed accounts, frozen accounts, unauthorized use, disputes,
theft or fraud. From time to time, persons have gained unauthorized access to
the Company's network and obtained services without rendering payment to the
Company by unlawfully using the access numbers and PINs of authorized users.
No assurance can be given that future losses due to unauthorized use of access
numbers and PINs will not be material. The Company attempts to manage these
risks through its internal controls and proprietary billing

<PAGE>

system. The Company's computer telephony platform prohibits a single access
number and PIN from establishing multiple simultaneous connections to the
platform, and the Company establishes preset spending limits for each
subscriber. Although the Company believes that its risk management and bad
debt reserve practices are adequate, there can be no assurance that the
Company's risk management practices or reserves will be sufficient to protect
the Company from unauthorized or returned transactions or thefts of services
which could have a material adverse effect on the Company's business,
operating results or financial condition.

19
<PAGE>

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the Notes in
this offering are estimated to be $145.0 million ($166.8 million if the
Initial Purchasers' over-allotment option is exercised in full), after
deducting the Initial Purchasers' discounts and commissions and estimated
offering expenses payable by the Company. The Company intends to use the net
proceeds for general corporate purposes, including capital expenditures and
working capital. In addition, the Company may apply a portion of the net
proceeds of this offering to acquire complementary businesses, products or
technologies. As part of its ongoing corporate development activities, the
Company expects that it will be considering acquisition opportunities on a
regular basis. In this regard, the Company currently is considering, on a
preliminary basis, certain acquisition opportunities. There can be no
assurance, however, that suitable acquisition candidates will be identified or
that any acquisition will be consummated. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

CAPITALIZATION

The following table sets forth as of March 31, 1997 (i) the unaudited actual
capitalization of the Company without giving effect to the Voice-Tel
Acquisitions, (ii) the unaudited pro forma capitalization of the Company after
giving effect to the Significant Acquisitions and (iii) such unaudited pro
forma capitalization as adjusted to give effect to the issuance and sale of
the Notes offered hereby and the application of the net proceeds therefrom.
See "Use of Proceeds."

<TABLE>
<CAPTION>
MARCH 31, 1997
------------------------------------
PRO FORMA
ACTUAL PRO FORMA(1) AS ADJUSTED(1)
-------- ------------ --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Current maturities of long-term debt
(capital lease obligations).............. $ 4,406 $ 12,921 $ 12,921
======== ======== ========
Notes payable, non current................ 12 13,349 13,349
Capital lease obligations, non current.... 160 3,383 3,383
Long-term debt:
5 3/4% Convertible Subordinated Notes
due 2004............................... -- -- $150,000
-------- -------- --------
Total long-term debt.................. 172 16,732 166,732
Shareholders' equity
Common stock, $0.01 par value;
150,000,000 shares authorized;
24,094,769, 31,525,066 and 31,525,066
shares outstanding,
respectively(2)(3)..................... 241 289 289
Additional paid in capital.............. 125,798 127,410 127,410
Accumulated earnings (deficit).......... 1,895 40,751 40,751
-------- -------- --------
Total shareholders' equity............ 127,934 86,948 86,948
-------- -------- --------
Total Capitalization................ $128,106 $103,680 $253,680
======== ======== ========
</TABLE>
- - --------
(1) Reflects a $32.5 million reduction in accumulated earnings, total
shareholders' equity and total capitalization to give effect to a charge
(at an assumed level of $45 million), net of the related income tax
effect, for certain transaction expenses and restructuring and related
costs (including severance costs, charges for asset impairment and costs
related to exiting the franchise business and closing certain facilities)
attributable to the Voice-Tel Acquisitions.
(2) Excludes (i) 7,498,654 shares of Common Stock issuable upon exercise of
options and warrants outstanding as of March 31, 1997, with a weighted
average exercise price of $4.71; (ii) approximately 45,392 shares of
Common Stock issuable upon the exercise of options assumed by the Company
in the Voice-Tel Acquisitions, with a weighted average exercise price of
$18.76; and (iii) 1,950,000 shares of Common Stock issuable upon the
exercise of options and warrants granted to employees, consultants and
advisors subsequent to March 31, 1997 through June 25, 1997, with a
weighted average exercise price of $24.14. Also excludes shares of Common
Stock issuable upon conversion of the Notes.
(3) Pro Forma and Pro Forma As Adjusted columns include one share of Series B
Voting Preferred Stock, par value $.01 per share.

20
<PAGE>

21
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in connection with the Company's
consolidated financial statements and the related notes thereto included
elsewhere herein. Effective December 31, 1994, the Company changed its fiscal
year end from March 31 to December 31.

The Voice-Tel Entities will have a significant impact on the Company's results
of operations in future reporting periods. Except as otherwise specifically
indicated below, no discussion of the Voice-Tel Entities is included in this
Management's Discussion and Analysis of Financial Condition and Results of
Operations.

OVERVIEW

Premiere is a network-based computer telephony company specializing in the
integration of information and telecommunications services. The Company
delivers its services through its advanced computer telephony platform, which
is accessible from, and provides access to, a variety of devices including the
telephone, fax machine, pager and computer. The platform is modular and
scalable, with an open-systems design and the EBIS, which allows the Company
to quickly customize its services to meet the needs of its subscribers and
business partners and to easily expand system capacity.

Premiere's revenues consist of: (i) subscriber services from information and
telecommunications services; (ii) license fees from use of its computer
telephony platform by customers of companies that have licensing relationships
with Premiere; and, to a lesser extent, (iii) other revenues, primarily long
distance charges from hospitality services. Subscriber services revenues from
information and telecommunications services, including Premiere WorldLink,
AFCOM and co-branded services, are based primarily on a per minute charge.
License fees are contracted on a long term basis and are generally based on a
per minute charge and, in certain circumstances, a per usage charge. Other
revenue charges are based on long distance rates established by the Company
depending upon the originating location of the call, and other various
methods.

Cost of services consists primarily of transmission costs. Licensees
generally arrange for, and directly bear the cost of, transmission.
Consequently, while the per minute fees for licensee platform usage are lower
than those for the subscriber services, the gross margin from license
arrangements is considerably higher than for subscriber services.

Selling and marketing expenses include commissions to co-branded partners,
strategic partners and financial institutions that promote the Company's AFCOM
services and businesses participating in the hospitality program, the cost of
print advertisements, direct sales force salaries and commissions, travel and
entertainment expenses, bad debt expense and other operating costs related to
the selling and marketing functions.

General and administrative expenses include salaries and benefits (except
for selling and marketing salaries), rent and facility expense, accounting and
audit fees, legal fees, property taxes and other administrative expenses.

Depreciation and amortization includes depreciation of computer and network
operations equipment and amortization of intangible assets. The Company
provides for depreciation using the straight-line method of depreciation over
the estimated useful lives of the assets, which range from five to ten years,
with the exception of leasehold improvements which are depreciated on a
straight-line basis over the shorter of the term of the lease or the estimated
useful life of the assets. Amortization of intangible assets includes deferred
software development costs and the WorldCom strategic alliance contract
intangible, which are amortized over five years and 25 years, respectively. In
addition, the Company anticipates recording goodwill of approximately $16.9 in
connection with the Voice-Tel Acquisitions, which the Company anticipates will
be amortized over 40 years.

Premiere electronically bills most subscriber services revenue directly to
the subscriber's credit card or bank account using the EBIS. The Company bills
subscribers at least monthly and in certain instances more

22
<PAGE>

frequently if a particular subscriber exceeds pre-set spending limits. Because
substantially all of the Company's subscriber services are billed
electronically through the EBIS, the Company believes it has shortened the
collection cycle compared to a traditional 30-day non-electronic billing
arrangement. License fees are generally billed and invoiced on a 30-day basis.

The preparation of financial statements in conformity with generally
accepted accounting principles ("GAAP") requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from the estimates. The Company
periodically reviews the values assigned to long-lived assets, such as
property and equipment and software costs, to determine if any impairments are
other than temporary. Management believes that the long-lived assets in the
accompanying balance sheets are appropriately valued.

In connection with the Voice-Tel Acquisitions, the Company will take a
charge in the second quarter of 1997 of approximately $40 million to $45
million. In addition, in connection with the CNC litigation discussed under
"Business--Legal Proceedings," the Company currently anticipates that it will
establish a reserve in the second quarter of 1997 for anticipated legal
expenses and settlement costs in an amount of up to $1.5 million.

RESULTS OF OPERATIONS

The following table presents, for the periods indicated, the percentage
relationship of certain statement of operations items to total revenues.

<TABLE>
<CAPTION>
NINE MONTHS THREE MONTHS
ENDED YEAR ENDED ENDED
------------ -------------------------------------- -------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31,
1994 1994(1) 1995 1996 1996 1997
------------ ------------ ------------ ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Subscriber services.... 64.8% 66.0% 67.6% 70.2% 71.4% 65.6%
License fees........... 21.0 19.4 26.6 26.5 22.7 32.7
Other revenues......... 14.2 14.6 5.8 3.3 5.9 1.6
----- ----- ----- ----- ----- -----
Total revenues......... 100.0 100.0 100.0 100.0 100.0 100.0
Cost of Services........ 33.6 35.2 34.1 32.1 34.2 32.9
----- ----- ----- ----- ----- -----
Gross Margin............ 66.4 64.8 65.9 67.9 65.8 67.1
----- ----- ----- ----- ----- -----
Operating Expenses:
Selling and marketing.. 36.3 37.5 32.5 32.6 36.2 24.9
General and
administrative........ 21.9 23.4 20.0 16.9 17.0 11.3
Depreciation and
amortization.......... 3.0 4.2 3.1 4.3 3.4 6.6
Charge for purchased
research and
development........... 0.0 0.0 0.0 21.2 0.0 0.0
Accrued litigation
costs................. 0.0 0.0 0.0 2.4 0.0 0.0
----- ----- ----- ----- ----- -----
Total operating
expenses.............. 61.2 65.1 55.6 77.4 56.6 42.8
Operating Income
(Loss)................. 5.2 (0.3) 10.3 (9.5) 9.2 24.3
----- ----- ----- ----- ----- -----
Other Income (Expense):
Interest income........ 1.5 1.5 1.3 4.9 2.6 3.7
Interest expense....... (2.9) (2.9) (1.6) (0.4) (0.9) (0.4)
Other, net............. 0.5 0.4 0.1 0.2 (0.0) 0.2
----- ----- ----- ----- ----- -----
Total other income
(expense)............. (0.9) (1.0) (0.2) 4.7 1.7 3.5
----- ----- ----- ----- ----- -----
Net Income (Loss) Before
Income Taxes and
Extraordinary Loss..... 4.3 (1.3) 10.1 (4.8) 10.9 27.9
Provision for (Benefit
From) Income Taxes..... 0.6 0.5 1.5 (3.1) 3.7 7.9
----- ----- ----- ----- ----- -----
Net Income (Loss) Before
Extraordinary Loss..... 3.7 (1.8) 8.6 (1.7) 7.2 20.0
Extraordinary Loss on
Early Extinguishment of
Debt, Net of Tax Effect
of $37,880............. 0.0 0.0 0.0 0.1 0.6 0.0
----- ----- ----- ----- ----- -----
Net Income (Loss)....... 3.7% (1.8)% 8.6% (1.8)% 6.6% 20.0%
===== ===== ===== ===== ===== =====
</TABLE>
- - -------
(1) Year ended December 31, 1994 data was derived from the nine months ended
December 31, 1994 data and the unaudited interim data for the three months
ended March 31, 1994. The data is presented for comparative purposes and
additional analysis.

23
<PAGE>

THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31,
1997

Revenues. Total revenues increased $8.8 million or 87.1% from $10.1 million
in the three months ended March 31, 1996 to $18.9 million in the three months
ended March 31, 1997. Subscriber services revenues increased $5.2 million or
72.2% from $7.2 million in the three months ended March 31, 1996 to $12.4
million in the three months ended March 31, 1997. This increase was due
primarily to increased revenues from Premiere WorldLink subscriber services
resulting from response to the Company's print advertising campaign and
additional co-branded relationships which were in existence during the three
months ended March 31, 1997. In addition, the increase in subscriber services
was also due in part to a nonrecurring debit card arrangement in existence
during the first quarter of 1997. AFCOM subscriber services revenues declined
$0.4 million or 19.0% from $2.1 million in the three months ended March 31,
1996 to $1.7 million in the three months ended March 31, 1997. This decrease
was attributable primarily to certain branches of the military modifying their
payroll practices to require direct deposit, which has resulted in a reduction
in the level of banking activity at certain military financial institutions
with which the Company has marketing arrangements. The Company has revised its
AFCOM marketing strategy to address this situation. License fee revenues
increased $3.9 million or 169.6% from $2.3 million in the three months ended
March 31, 1996 to $6.2 million in the three months ended March 31, 1997. This
increase was due to the establishment of additional licensing relationships
and increased revenues from existing licensees. Other revenues decreased
$284,000 or 47.9% from $593,000 in the three months ended March 31, 1996 to
$309,000 in the three months ended March 31, 1997. This decrease was
attributable primarily to nonrecurring system design and development revenues
in the three months ended March 31, 1996.

On August 6, 1996, CNC, a licensing customer of the Company, was placed into
bankruptcy under Chapter 11 of the Bankruptcy Code. CNC accounted for none of
the Company's licensing revenues and total revenues in the three months ended
March 31, 1997, although it accounted for 47.8% and 10.9% of the Company's
licensing revenues and total revenues in the first quarter of 1996,
respectively. The Company is owed approximately $627,000 by CNC; however, the
transmission provider (WorldCom Network Services, Inc.) for CNC is also
obligated to pay this amount to the Company. The Company believes that through
a combination of new licensing agreements, the strategic alliance agreement
with WorldCom and increased revenues from existing licensees, the Company has
replaced all of the anticipated CNC revenue.

Cost of Services. Cost of services increased $2.7 million or 77.1% from $3.5
million in the three months ended March 31, 1996 to $6.2 million in the three
months ended March 31, 1997. These expenses decreased as a percentage of
revenues from 34.7% in the three months ended March 31, 1996 to 32.8% in the
three months ended March 31, 1997. The decrease in cost of services as a
percentage of revenues reflects higher margins resulting from relatively lower
per minute transmission costs and the relative increase in contribution from
license fees, which have a lower cost of services because the licensees bear
the cost of call transmission.

Selling and Marketing Expenses. Selling and marketing expenses increased
$1.0 million or 27.0% from $3.7 million in the three months ended March 31,
1996 to $4.7 million in the three months ended March 31, 1997. This increase
was due to greater expenditures on print advertising and other selling and
marketing costs related to the increase in subscribers and revenues. These
expenses decreased as a percentage of revenues from 36.6% in the three months
ended March 31, 1996 to 24.9% in the three months ended March 31, 1997. This
decrease resulted from improved operating leverage related to increased
recurring revenues.

General and Administrative Expenses. General and administrative expenses
increased $0.4 million or 23.5% from $1.7 million in the three months ended
March 31, 1996 to $2.1 million in the three months ended March 31, 1997. This
increase was due primarily to increased numbers of employees and related
expenses to support the Company's growth. These expenses decreased as a
percentage of revenues from 16.8% in the three months ended March 31, 1996 to
11.1% in the three months ended March 31, 1997. This decrease resulted from
approved operating leverage related to increased recurring revenues.

24
<PAGE>

Depreciation and Amortization Expenses. Depreciation and amortization
expenses increased $856,000 or 248.8% from $344,000 in the three months ended
March 31, 1996 to $1.2 million in the three months ended March 31, 1997. This
increase was due primarily to depreciation of additional equipment acquired
during the last three quarters of 1996 and the three months ended March 31,
1997.

Operating Income. Operating income increased $3.7 million or 396.6% from
$933,000 in the three months ended March 31, 1996 to $4.6 million in the three
months ended March 31, 1997.

Interest Income. Interest income increased $441,000 or 165.8% from $266,000
in the three months ended March 31, 1996 to $707,000 in the three months ended
March 31, 1997. This increase was attributable to the Company receiving the
full benefit for the entire first quarter of 1997 from the investment of the
proceeds from the Company's initial public offering in March 1996, as compared
to the partial quarter of benefit in the three months ended March 31, 1996.

Interest Expense. Interest expense decreased $12,000 or 13.3% from $90,000
in the three months ended March 31, 1996 to $78,000 in the three months ended
March 31, 1997. This decrease is attributable to the early extinguishment of
long term debt during the first quarter of 1996.

Income Taxes. Income taxes increased $1.1 million or 296.5% from $371,000 in
the three months ended March 31, 1996 to $1.5 million in the three months
ended March 31, 1997. The Company's effective tax rate was less than the
statutory rate during these periods as a result of the use of net operating
loss carryforwards and the tax savings effect of investing in certain non-
taxable and tax-reduced instruments.

Net Income. As a result of the foregoing, net income increased $3.1 million
or 459.9% from $674,000 in the three months ended March 31, 1996 to $3.8
million in the three months ended March 31, 1997. As a percentage of revenues,
net income increased from 6.7% in the three months ended March 31, 1996 to
20.1% in the three months ended March 31, 1997.

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

Revenues. Total revenues increased 133.6% from $22.3 million in the year
ended December 31, 1995 to $52.1 million in the year ended December 31, 1996.
Subscriber services revenues increased 142.4% from $15.1 million in the year
ended December 31, 1995 to $36.6 million in the year ended December 31, 1996,
due primarily to increased revenues from Premiere WorldLink subscriber
services. Revenues from Premiere WorldLink subscriber services increased
principally as a result of response to the Company's print advertising
campaign, which was substantially expanded starting in January 1996, as well
as the Company's entering into additional co-branded relationships. Revenues
from AFCOM subscriber services decreased 11.5% from $8.7 million in the year
ended December 31, 1995 to $7.7 million in the year ended December 31, 1996,
primarily due to certain branches of the military modifying their payroll
practices to require direct deposit upon entering active duty. This
requirement has resulted in a reduction in the level of banking activity at
certain military financial institutions with which the Company has marketing
arrangements. The Company has revised its AFCOM marketing strategy to attempt
to address this situation. License fees increased 133.9% from $5.9 million in
the year ended December 31, 1995 to $13.8 million in the year ended December
31, 1996, due to both the establishment of additional licensing relationships
and increased revenues from existing licensees. Other revenues increased 30.8%
from $1.3 million for the year ended December 31, 1995 to $1.7 million for the
year ended December 31, 1996. This increase was attributable primarily to non-
recurring system design and development revenues.

On August 6, 1996, CNC, a licensing customer of the Company, was placed into
bankruptcy under Chapter 11 of the Bankruptcy Code. CNC accounted for 19.6%
and 5.2% the Company's licensing revenues and total revenues, respectively,
during the year ended December 31, 1996. CNC owed the Company approximately
$627,000 as of December 31, 1996. However, CNC's transmission provider,
WilTel, is also obligated to pay this amount to the Company. The Company
believes that through a combination of new

25
<PAGE>

licensing agreements, the strategic alliance agreement with WorldCom and
increased revenues from existing licensees, the Company has replaced all of
the anticipated CNC revenue.

Cost of Services. Cost of services increased 119.7% from $7.6 million in the
year ended December 31, 1995 to $16.7 million in the year ended December 31,
1996, but decreased as a percentage of revenues from 34.1% in the year ended
December 31, 1995 to 32.1% for the same period of 1996. The decrease in cost
of services as a percentage of revenues reflects higher margins resulting from
relatively lower per minute transmission costs and the relative increase in
contribution from license fees, which have a lower cost of services because
the licensees bear the cost of call transmission.

Selling and Marketing Expenses. Selling and marketing expenses increased
132.9% from $7.3 million in the year ended December 31, 1995 to $17.0 million
in the year ended December 31, 1996, and decreased as a percentage of revenues
from 32.7% to 32.6%. The increase in selling and marketing expenses was due
primarily to greater expenditures on print advertising and other selling and
marketing costs related to the increase in subscribers and revenues, and an
increase in bad debt expense during the fourth quarter of 1996. Despite the
increase in bad debt expense, the Company was still able to maintain selling
and marketing costs as a percentage of revenues consistent with the prior
year.

General and Administrative Expenses. General and administrative expenses
increased 95.6% from $4.5 million in the year ended December 31, 1995 to $8.8
million in the year ended December 31, 1996, due primarily to an increased
number of employees and related expenses to support the Company's growth.
These expenses decreased as a percentage of revenues from 20.2% in the year
ended December 31, 1995 to 16.9% for the same period in 1996. This decrease
was attributable primarily to increased operating leverage resulting from
higher revenues.

Depreciation and Amortization Expense. Depreciation and amortization expense
increased 230.0% from $697,000 in the year ended December 31, 1995 to $2.3
million in the year ended December 31, 1996. This increase was due to
depreciation of additional equipment acquired during the period and the
amortization of the strategic alliance contract intangible.

Charge for Purchased Research and Development. This is a one-time charge in
an amount equal to the estimated value of in-process research and development
projects acquired in the acquisition of TeleT. See Note 3 of Notes to
Consolidated Financial Statements incorporated herein by reference.

Accrued Litigation Costs. This is a one-time charge for the estimated legal
fees and other costs that the Company expected to incur to resolve the patent
infringement suit filed by AudioFAX. On February 11, 1997, the Company entered
into a long term, non-exclusive license agreement with AudioFAX settling the
litigation. The one-time charge was adequate to cover the actual costs of
litigation and the cost of the license agreement is not expected to have a
material effect on the Company's earnings. See Note 11 of Notes to
Consolidated Financial Statements incorporated herein by reference.

Income Taxes. Income taxes decreased from a provision of $330,000 in the
year ended December 31, 1995 to a benefit of $1.6 million in the year ended
December 31, 1996. In the year ended December 31, 1995, the Company's
effective income tax rate was less than the statutory rate due to the use of
net operating loss carryforwards. At December 31, 1996, the Company had a
total deferred tax asset of $11.1 million, principally due to net operating
losses for tax purposes generated upon the exercise by employees of non-
qualified stock options which generated compensation expense for tax purposes
in excess of compensation expense as recorded by the Company in accordance
with GAAP. In accordance with GAAP, the related tax benefit of this deduction
was credited to additional paid-in-capital and accordingly, did not reduce
operating tax expense recognized by the Company.

Net Income (Loss). The Company recognized net income of $1.9 million in the
year ended December 31, 1995 and a net loss of $956,000 in the year ended
December 31, 1996. Excluding the one-time charges

26
<PAGE>

for in-process research and development and accrued litigation costs and the
related tax effect, net income would have increased 242.1% from $1.9 million
in the year ended December 31, 1995 to $6.5 million in the year ended December
31, 1996.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

General. Year ended December 31, 1994 data was derived from the nine months
ended December 31, 1994 data and the unaudited interim data for the three
months ended March 31, 1994.

Revenues. Total revenues increased 123.0% from $10.0 million in the year
ended December 31, 1994 to $22.3 million in the year ended December 31, 1995.
Subscriber services revenues increased 128.8% from $6.6 million in the year
ended December 31, 1994 to $15.1 million in the year ended December 31, 1995,
due primarily to increased revenues from both Premiere WorldLink and AFCOM
subscriber services. Revenues from Premiere WorldLink subscriber services
increased principally as a result of response to the Company's print
advertising campaign and additional co-branded relationships. Revenues from
AFCOM subscriber services increased principally due to additional AFCOM
marketing relationships and response to the Company's AFCOM direct mail
advertising campaign. License fees increased 210.5% from $1.9 million in the
year ended December 31, 1994 to $5.9 million in the year ended December 31,
1995, due to both the establishment of additional licensing relationships and
increased revenues from existing licensees. A marked portion of this increase
was due to the Company's relationship with CNC which accounted for
approximately $1.5 million of the increase in license fees from the year ended
December 31, 1995 compared to year ended December 31, 1994. Other revenues
decreased 13.3% from $1.5 million for the year ended December 31, 1994 to $1.3
million for the year ended December 31, 1995.

Cost of Services. Cost of services increased 117.1% from $3.5 million in the
year ended December 31, 1994 to $7.6 million in the year ended December 31,
1995, but decreased as a percentage of revenues from 35.0% in the year ended
December 31, 1994 to 34.1% for the same period of 1995. The decrease in cost
of services as a percentage of revenues reflects higher margins resulting from
relatively lower per minute transmission costs and the relative increase in
contribution from license fees, which have a lower cost of services because
the licensees bear the cost of call transmission.

Selling and Marketing Expenses. Selling and marketing expenses increased
92.1% from $3.8 million in the year ended December 31, 1994 to $7.3 million in
the year ended December 31, 1995, and decreased as a percentage of revenues
from 38.0% to 32.7%. The increase in selling and marketing expenses was due
primarily to greater expenditures on print advertising and other selling and
marketing costs related to the increase in subscribers and revenues.

General and Administrative Expenses. General and administrative expenses
increased 95.7% from $2.3 million in the year ended December 31, 1994 to $4.5
million in the year ended December 31, 1995 due primarily to an increased
number of employees and related expenses to support the Company's growth.
These expenses decreased as a percentage of revenues from 23.0% in the year
ended December 31, 1994 to 20.2% for the same period in 1995. This decrease
was attributable primarily to increased operating leverage resulting from
higher revenues.

Depreciation and Amortization Expense. Depreciation and amortization expense
increased 66.0% from $420,000 in the year ended December 31, 1994 to $697,000
in the year ended December 31, 1995. This increase was due to depreciation of
additional equipment acquired during the period.

Income Taxes. Income taxes increased from $48,000 in the year ended December
31, 1994 to $330,000 in the year ended December 31, 1995, reflecting income
taxes payable on the Company's net income in the year ended December 31, 1995,
as compared to the Company's net loss in the year ended December 31, 1994. The
Company's effective income tax rate was less than the statutory rate due to
the use of net operating loss carry forwards. At December 31, 1995, the
Company had a deferred tax asset of $2.5 million, principally

27
<PAGE>

due to net operating losses for tax purposes generated upon the exercise by
employees of non-qualified stock options which generated compensation expense
for tax purposes in excess of compensation expense as recorded by the Company
in accordance with GAAP. In accordance with GAAP, the related tax benefit of
this deduction was credited to additional paid-in-capital and accordingly, did
not reduce operating tax expense recognized by the Company.

Net Income (Loss). The Company recognized a net loss of $180,000 in the year
ended December 31, 1994 and net income of $1.9 million in the year ended
December 31, 1995. This increase reflects higher revenues achieved in the year
ended December 31, 1995 for all of the Company's services and the increased
gross margin contribution of license fees compared to the year ended December
31, 1994.

LIQUIDITY AND CAPITAL RESOURCES

The Company's operating activities provided cash of $730,000, $3.1 million
and $12.4 million for the years ended December 31, 1994, 1995 and 1996,
respectively, and $2.26 million and $2.29 million for the three months ended
March 31, 1996 and 1997, respectively. Cash provided by operating activities
for the nine months ended December 31, 1994 and the year ended December 31,
1994, reflects the Company's attainment of a level of operating revenues
sufficient to cover its operating costs due to increased subscribers to the
Company's AFCOM and Premiere WorldLink services and increased revenues from
license fees. The increase in cash provided by operating activities in the
year ended December 31, 1995, as compared to earlier periods, reflects the
acceleration of the growth of the Company's subscriber base during that period
and the relatively greater contribution from license fees with their
associated higher gross margin. The increase in cash provided by operating
activities in the year ended December 31, 1996 reflects the acceleration of
the growth of the Company's subscriber base during the period and increased
income from the investment of the net proceeds from the Company's initial
public offering. Cash flows provided by operations were 12.2% of revenues for
the three month period ended March 31, 1997 as compared with 22.4% for the
period ended March 31, 1996. Working capital requirements associated with
increased activity in license and retail programs accounted for the majority
of the decline.

The Company's investing activities used cash of $4.4 million, $2.9 million
and $84.6 million for the years ended December 31, 1994, 1995 and 1996,
respectively, and $76.3 million and $5.9 million for the three months ended
March 31, 1996 and 1997, respectively. The Company's investing activities for
the nine months ended December 31, 1994 and the year ended December 31, 1994
consisted primarily of the investment of $3.5 million of the proceeds of the
Company's sale of Series 1994 Preferred Stock (which was converted into Series
A Preferred Stock in December 1995) and $819,000 in purchases of property and
equipment. Cash used in investing activities for the year ended December 31,
1995, consisted primarily of purchases of property and equipment. The
Company's investing activities for the year ended December 31, 1996 consisted
primarily of purchases of investments in the amount of $63.8 million.
Additionally, the Company purchased property and equipment of $13.7 million.
The Company also used cash to partially fund certain acquisitions and
strategic alliances during the year ended December 31, 1996. Net cash used in
investing activities was $5.9 million for the three month period ended March
31, 1997. The Company made capital expenditures of approximately $5.2 million
during the period consisting primarily of the purchase of computer telephony
to expand and upgrade its Atlanta switching facility capacity and to continue
development associated with the NationsBank Call Center program. See Notes 2
and 3 of Notes to Consolidated Financial Statements incorporated herein by
reference.

The Company's financing activities provided cash of $3.9 million, $223,000
and $77.0 million for the years ended December 31, 1994, 1995 and 1996,
respectively, and $74.4 million and $1.5 million for the three months ended
March 31, 1996 and 1997, respectively. Cash used in financing activities for
the nine months ended December 31, 1994 reflects principal payments under
capital leases offset by proceeds from subscriptions for common stock. Cash
provided by financing activities for the year ended December 31, 1995 reflects
proceeds from exercises of stock options. Cash provided in the year ended
December 31, 1996 was primarily from the net proceeds of the Company's initial
public offering in March 1996. Additionally, proceeds

28
<PAGE>

from the repayment of the above mentioned subscriptions for common stock also
provided cash of $2.4 million in 1996. These sources of cash were partially
offset in 1996 by the repayment of notes payable outstanding at December 31,
1995 as well as payment of dividends on Preferred Stock. Cash provided by
financing activities for the quarter ended March 31, 1997 consisted mainly of
line-of-credit borrowings of approximately $1.6 million which were used to pay
amounts owed in connection with the license arrangement entered into with
AudioFAX. See Notes 2, 4, 6 and 11 of Notes to Consolidated Financial
Statements incorporated herein by reference.

The Company has financed its cash requirements through a combination of
equity and debt financing and, beginning in the year ended December 31, 1994,
through cash flows from operating activities. In May 1992, the Company
borrowed $1.0 million (the "First Sirrom Note") from Sirrom Capital
Corporation ("Sirrom"), an independent lender unaffiliated with the Company,
which was used to fund the Company's operations and for capital expenditures.
In December 1993, the Company borrowed an additional $1.0 million from Sirrom
(the "Second Sirrom Note") (the First Sirrom Note and Second Sirrom Note are
referred to as the "Sirrom Notes"). In connection with entering into the
Sirrom Notes, the Company granted Sirrom warrants to purchase an aggregate of
568,392 shares of Common Stock at $0.042 per share, the terms of which do not
require the cancellation or exercise of the warrants upon repayment of the
Sirrom Notes. The Company used $2.0 million of the net proceeds of its initial
public offering to retire the Sirrom Notes in March 1996. In January 1994, the
Company issued 8% cumulative Series A Preferred Stock to NationsBanc Capital
Corporation ("NationsBanc"), from which it realized net proceeds of $3.9
million. In connection with the issuance of the Company's Series A Preferred
Stock, all of the Company's outstanding 1993 Preferred Stock and Debentures
were converted into Common Stock. A portion of the net proceeds of the Second
Sirrom Note and the issuance of the Series A Preferred Stock was used to fund
operations. The Company invested the remainder of the proceeds of the Second
Sirrom Note and the Series A Preferred Stock, amounting to $3.5 million, in
short-term interest-bearing securities. On January 19, 1996, the Company
exercised its right to redeem the Series A Preferred Stock from NationsBanc.
On February 1, 1996, NationsBanc elected to convert all of the Series A
Preferred Stock into Common Stock. Thus, effective February 1, 1996, all
outstanding shares of Series A Preferred Stock were converted into 3,095,592
shares of Common Stock. In connection with the conversion, the Company paid
NationsBanc $677,000 in accrued but unpaid dividends and interest on the
Series A Preferred Stock during the year ended December 31, 1996. In
connection with the Company's initial public offering, the Company issued
4,570,000 shares of its $0.01 par value Common Stock in March 1996. The
Company received net proceeds of $74.6 million after the underwriting discount
and expenses of the offering.

The Company had working capital of $64.8 million, $69.6 million and $5.5
million at March 31, 1997, December 31, 1996 and 1995, respectively. In
October 1996, the Company established a $5 million line-of-credit with
NationsBank, N.A. to facilitate interim capital equipment financing needs. As
of June 13, 1997, the Company had no borrowings under the line-of-credit.

In April 1997, the Company established a $30 million short-term line of
credit with NationsBank, N.A. (the "NationsBank Loan") that matures on June
30, 1997. As of June 13, 1997, the Company had total borrowings of $6.7
million outstanding under the line-of-credit. The Company plans to repay all
or a portion of the NationsBank Loan with the proceeds of maturing investments
in the Company's investment portfolio. The Company is currently negotiating a
longer term credit facility that it expects to have in place before the
maturity of the NationsBank Loan, and the Company may choose to repay a
portion of the NationsBank Loan with the proceeds of borrowings under the new
credit facility.

The Company's principal commitments consist of an obligation under a capital
lease for switching equipment, which amounted to $456,000, $524,000 and
$528,000 at March 31, 1997, December 31, 1996 and 1995, respectively, and the
NationsBank, N.A. lines-of-credit discussed above. The Company believes that
funds provided by operations, available borrowings under its line of credit,
current amounts of cash, cash equivalents and short term investments,
including the net proceeds of the Company's initial public offering, and the
net proceeds of this offering will be sufficient to meet its capital
requirements for at least the next 12 months.

29
<PAGE>

BUSINESS

GENERAL

Except as otherwise specifically indicated below, no discussion of the
Voice-Tel Entities is included in this Business section.

Premiere is a network-based computer telephony company specializing in the
integration of information and telecommunications services. The Company
delivers its services through its advanced computer telephony platform, which
is accessible from, and provides access to, a variety of devices, including
the telephone, fax machine, pager and computer. The Company's platform is
modular and scalable, with an open-systems design which allows the Company to
quickly customize its services to meet the needs of its subscribers and
business partners and to easily expand system capacity.

The Company's growth to date has been based primarily upon the sale of
Premiere WorldLink communications services in both the retail and wholesale
markets. WorldLink services include worldwide long distance calling, voice
mail, fax mail, text-to-voice e-mail, conference calling, financial news,
headline news, sports updates, weather reports, active message notification,
travel and concierge services, electronic banking and bill payment and "call
connect" services. Individuals may subscribe to Premiere's WorldLink services
through direct distribution channels or through one of Premiere's co-branded
or licensing relationships with companies such as DeltaTel, WorldCom and
CompuServe. These measured 800 number access services have catered primarily
to the mobile business traveler and have been marketed and offered through
communications cards. The Company intends to expand its markets through the
development and implementation of its new Orchestrate product line and
network-based call center technology.

The Company's September 1996 acquisition of TeleT, an Internet-based
technology development company, made possible the development of Orchestrate,
which the Company believes will be the first network-based product to fully
integrate the functionality of telephones and computers. Orchestrate will
allow subscribers to control their communications through either a computer or
telephone, according to their own preferences independent of how a
communication was originally sent. As currently designed, Orchestrate
functions will include messaging, conference calling, information services and
a personal home page on the Web, which subscribers will be able to utilize
without the purchase of any special software or hardware. Premiere has begun
to launch and implement its Orchestrate product line during 1997.

Premiere recently began to implement its network-based call center
technology with NationsBanc Services, an affiliate of NationsBank Corporation,
the nation's fourth largest banking company. This technology will allow
Premiere to streamline and enhance call processing and distributing for
financial institutions and other large corporations.

INFORMATION AND TELECOMMUNICATIONS SERVICES

WorldLink Communications Services. Premiere's computer telephony platform
provides subscribers with a single point of access for information and
telecommunications services. The platform can communicate with a wide variety
of communications devices. Subscribers can access the platform from virtually
any telephone worldwide, and access is toll-free from telephones in the United
States and approximately 60 other countries and territories. After accessing
the platform from a telephone, the subscriber is presented with a variety of
options that can be configured in different ways depending upon how Premiere
or its partners position the following services:

Worldwide Long Distance. Subscribers can place worldwide long distance
calls at rates that are generally significantly lower than the standard
card plan rates currently charged by AT&T, MCI, Sprint or in the case of
United Kingdom subscribers, British Telecom.

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Messaging. Premiere offers a universal inbox for voice, fax and e-mail
messages. Subscribers are notified of new messages every time they access
Premiere's platform, and subscribers can receive message notification
through any pager. The messaging services are offered as part of the
Premiere WorldLink communications services package, and also through
Premiere's Message Center and E-Mail Message Center services. The messaging
functionality for each of these services is very similar, but the
orientation, prompts and positioning differ considerably. The individual
messaging functions are described below:

Voice Mail. Premiere's voice mail service provides traditional voice
mail features, allowing subscribers to customize their mailbox
greetings and to receive, retrieve, save and delete voice mail
messages.

Fax Mail. The fax mail service allows subscribers to receive and
store facsimile transmissions no matter where they travel. Senders of
facsimile messages may attach a voice mail message identifying the
facsimile. The recipient is able to later instruct the system to
forward the stored facsimiles to a specified location.

E-Mail. E-mail messages can be read to the subscriber over the
telephone using Premiere's advanced text-to-speech functionality. E-
mail messages can also be sent to any fax machine. In addition,
subscribers can respond to e-mail by choosing from a variety of
standard responses.

Information Services. Subscribers can access financial news, headline
news, sports updates, weather reports and other information updates,
provided on the system through feeds from Cable News Network, Inc. ("CNN")
and a subsidiary of the Chicago Tribune. These services are frequently
updated and the information is accessible by a series of menus presented to
the user via voice prompts. Information is first presented in a general
format, with the subscriber then being given the option to retrieve more
detailed information on the topic selected.

Conference Calling. Subscribers can initiate conference calls involving
up to six parties. The conference calling feature is automated and the
subscriber is guided through each step.

Enhanced Travel and Concierge Services. Premiere offers travel and
concierge services through its platform which allow subscribers to make
lodging, airline, rental car, dining and golf reservations and to obtain
concert, theater and sporting event tickets. In addition, Premiere's
concierge services provide subscribers with access to travel assistance
services, including emergency medical referrals, legal referrals, tracing
and redirecting lost luggage and pre-trip destination information. A record
of each use by a subscriber of the travel and concierge feature is
maintained so that the subscriber is provided with increasingly efficient
and personalized service.

Electronic Banking and Bill Payment. In connection with its relationship
with Checkfree Corporation ("Checkfree"), Premiere offers subscribers the
option to pay bills electronically through its platform.

"Call Connect" Service. Premiere offers a service that allows inbound
callers to the platform to send a message to a subscriber's pager informing
the subscriber that the subscriber has an incoming call. The system prompts
inbound callers to identify themselves and records this information. While
the inbound caller waits on the line, the subscriber can then call the
platform and be informed of the identity of the inbound caller. The
subscriber then has the choice of having the platform automatically connect
the two calls or route the original call to voice mail.

Other. Premiere provides its subscribers with other services, including
speed dialing, certain travel services, sequential calling, operator
assistance, detailed transaction statements on demand and detailed voice
prompts, available in 10 languages. In addition, the Company offers
telecommunications services to the hospitality industry. This service,
which was the first offered by the Company, consists primarily of reselling
"0+" long distance services to guests of hotels and motels.

Orchestrate. Premiere recently launched the telephone access feature of its
Orchestrate product line and expects to introduce on a commercial basis the
computer access feature in the third quarter of 1997. When accessing the
platform from a PC using the new Orchestrate functionality, the subscriber
will be

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presented with a visually rich on-screen interface for control of all
communications and information functions, including:

Messaging. All voice, fax and e-mail messages will be displayed
individually on the subscriber's PC. As currently designed, messages in the
inbox can be viewed and/or listened to (depending upon the type of
message), forwarded to individuals or groups or broadcast, all with the
click of the mouse. This service will include a personal contact database
that will allow subscribers to send or broadcast messages just by clicking
on the names of the appropriate individuals or defined groups in the
database. Messages will be delivered over the Internet as appropriate to
reduce transmission costs. Premiere is also developing a feature that will
allow subscribers to transfer information to the Premiere platform from
other contact databases such as Symantec ACT or Microsoft Outlook.

Conference Calling. Subscribers will be able to establish conference
calls simply by clicking on the names of individuals or groups. The
subscriber will be able to control all aspects of the conference call,
including adding, dropping and muting parties on the conference call, all
with a click of the mouse.

Information Services. Subscribers will be able to tap into a spectrum of
customized information services offered in conjunction with content
providers such as CNN. The types of information available would include
news, sports updates, stock quotes, weather reports, airline and hotel
information and reservations, banking, entertainment and other specialized
information.

Personal Home Page. Each subscriber will be provided with a personal home
page on the Web. The page will act as a "virtual receptionist," presenting
contact information and a voice greeting to any Web user. The Web user will
be able to page, fax or send e-mail to the subscriber directly from this
page. The page will be fully customizable and a subscriber will be able to
update his personal home page from any telephone or any PC connected to the
Internet.

As part of the development of Orchestrate, Premiere intends to greatly
enhance the telephone interface to its platform, allowing a user to access the
same set of functions available via the computer. Using voice and/or telephone
keypad commands, a subscriber will be able to send, forward and broadcast
messages to individuals or groups included in his or her personal Orchestrate
contact database. The subscriber will also be able to set up conference calls
in a similar manner. Upon the introduction of voice recognition and other
enhancements, the platform will offer true "personal assistant" or "personal
agent" functionality.

Call Center Technology. Upon the implementation of its network-based call
center technology during 1997, Premiere's platform will also be used to
provide an outsource solution for call center management. This technology
allows Premiere to offer streamlined and enhanced call processing and call
routing to financial institutions and other large corporations such as the one
currently being developed for NationsBanc Services. Premiere's platform will
be used to enhance call processing service for checking, savings and other
account information available through toll-free telephone access.

Other Services Under Development. The following additional services are also
under development:

Customized On-line Information Access/Content Management. In connection
with the Orchestrate product, Premiere intends to implement a feature
enabling subscribers to retrieve on demand or at predetermined intervals
selected information from the Internet or on-line service providers. This
feature would allow each subscriber to establish "filter and forward"
criteria specifying the type of information desired. A search engine would
retrieve the information requested and transmit this information to the
platform, notifying the subscriber by page, telephone call or other means
as appropriate. The subscriber can then access the information through any
PC connected to the Internet or from any telephone by utilizing the text-
to-speech capabilities of the system.

Enhanced "Follow Me" Services. Premiere is developing an application that
would allow subscribers to provide callers access to all of their current
home, business, voice mail, facsimile and mobile numbers via a single
number. When a subscriber's Premiere number is called, the platform would
attempt to contact each of the subscriber's other specified numbers,
without the caller having to

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remember each number or place each call separately. For example, when a
subscriber receives a call, the platform would attempt to locate the
subscriber at a series of predetermined numbers and page the subscriber if
the paging option is enabled. The platform would allow the caller to leave
a voice mail message if the subscriber is not located.

MARKETING AND DISTRIBUTION

Premiere markets its services through multiple distribution channels that
encompass (i) direct marketing efforts where Premiere is responsible for lead
generation and sales, (ii) co-branded relationships in which Premiere offers
its services to the customers of other companies, such as financial
institutions, that are seeking to increase their revenue from and their
goodwill with their customer base by offering value-added services, (iii)
strategic relationships where Premiere may develop custom applications for its
platform and market its services jointly with its strategic partners, and (iv)
licensing arrangements where other companies market and sell Premiere's
services under their names without significant assistance from Premiere. In
all distribution channels, except licensing arrangements, Premiere enters into
agreements pursuant to which it agrees to pay commissions to or share revenues
with the parties who assist Premiere in marketing its services.

Premiere intends to employ several different distribution strategies for
Orchestrate. In addition to utilizing the four distribution channels described
above, Premiere plans to market Orchestrate through Internet service
providers, on-line service providers, on-line content providers and direct
Internet marketing companies. Premiere will generally compensate such
companies through commissions or revenue sharing arrangements.

Direct. Premiere markets its services directly to potential subscribers.
Premiere has supported this marketing effort by implementing a feature on the
system allowing automated account activation, thereby making it easier for
consumers to establish service with Premiere.

Premiere WorldLink. Premiere markets its services under the name
"Premiere WorldLink" through a variety of traditional direct channels,
including advertisements in publications primarily directed at travelers.
In its marketing efforts, Premiere emphasizes the attractive pricing, the
variety of features, the integrated nature and the ease of use of its
services.

AFCOM. Premiere markets its services under the name "AFCOM" primarily to
United States military personnel. Premiere generally markets the AFCOM
service through financial institutions located on military bases. These
financial institutions assist Premiere in marketing its services in
exchange for subscriber and usage based fees paid by the Company to the
financial institutions.

Co-branded Relationships. Premiere has entered into relationships with a
number of other companies, including First of America Bank Corporation, First
National Bank of Chicago, First USA Bank, First Union National Bank, KeyBank
USA and the Royal Bank of Scotland PLC, under which Premiere provides its
services to customers of those companies. The other company generally offers
its customers access to the Premiere platform via a co-branded communications
card, and Premiere pays subscriber and usage based fees to the other company
with respect to each subscriber who is issued a co-branded communications
card. Premiere believes that companies which enter into co-branded
relationships with Premiere are motivated by the ability to offer additional
value to their customers, reinforce brand equity through custom voice prompts
that their customers hear each time they access the service, communicate with
their customers by broadcasting voice, fax or e-mail messages, and derive
additional revenue. Communications cards are generally issued under the
Premiere WorldLink name, with the other company also placing its logo on the
face of the card.

Strategic Partners. The Company also markets its services by establishing
strategic relationships with parties whose existing customers have an
anticipated need for the telecommunications and information services provided
by Premiere. Strategic relationships are intended to provide the Company's
strategic partners with (i) an efficient means of communicating with their
customers through Premiere's voice mail,

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<PAGE>

e-mail and fax mail features, (ii) increased visibility to their customers
through customized greetings and a private branded communications card, (iii)
the ability to provide customized services to their customers over Premiere's
platform, and (iv) an additional source of revenue. These relationships
provide the Company with the opportunity to develop specialized services for
the strategic partner's customers which, in certain circumstances, the Company
can later offer to its subscribers. In connection with these strategic
relationships, communications cards are generally issued in the name of
Premiere's strategic partner and bear a logo and design of the strategic
partner's choosing. The reverse side of the card generally states that
services are provided by Premiere.

Licensing Relationships. Companies such as WorldCom, Unidial Incorporated
and Touch 1 Communications, Inc. have chosen to outsource part or all of their
communications card services to Premiere. Premiere licenses use of its
platform to these companies, which enables them to provide enhanced services
to their customers and to generate additional revenue without developing or
investing in their own infrastructure. The platform's open architecture allows
customization of services for the licensees. For example, licensees generally
customize voice prompts and may choose to offer their users only selected
services available on the platform. Premiere provides licensees with on-line
access to the database containing their customer information and transaction
records, thus enabling licensees to add and delete subscribers and services
remotely and control fraud and credit exposure. Licensees generally provide
their own transmission services and therefore remain responsible for
transmitting calls to and from Premiere's platform. Licensees currently sell
the enhanced services via communications cards issued in their names. Premiere
formats the billing records for licensees and sends the records to licensees
electronically. Licensees bill their customers for the services, and Premiere
bills the licensees monthly for access to the platform based on licensee
customer usage. Services to licensees are generally provided under agreements
with 30 to 60 month terms which require the payment of a minimum monthly fee
if specified usage minimums are not met.

STRATEGIC PARTNERS AND ALLIANCES

DeltaTel. Premiere and DeltaTel have entered into an agreement pursuant to
which Premiere provides information and telecommunications services to
DeltaTel subscribers. DeltaTel subscribers receive a communications card,
known as the "DeltaTel Card," that allows them to access services on
Premiere's platform. Premiere has developed certain travel related features in
connection with the Company's relationship with DeltaTel. DeltaTel is
marketing the DeltaTel program by distributing marketing materials to
passengers on Delta's flights, sending information to Delta frequent fliers,
placing advertisements in Delta's Crown Rooms and other means.

CompuServe. Premiere and CompuServe have entered into an agreement for
Premiere to provide information and telecommunications services to parties who
subscribe to Premiere's services through CompuServe, and for CompuServe to
make certain of its services available to Premiere's existing subscribers,
strategic partners and licensees. In connection with the CompuServe agreement,
Premiere developed a feature which allows subscribers to listen to e-mail
messages over the telephone and to send e-mail messages to any fax machine.
This feature is being marketed to CompuServe's subscribers on-line and through
direct mailing. In addition, CompuServe Interactive (United Kingdom) is
marketing the combined services to its members in the United Kingdom, which
now number in excess of 400,000.

WorldCom. In November 1996, Premiere entered into a 25-year strategic
alliance agreement with WorldCom which enables WorldCom to couple its voice
and data network with Premiere's advanced, feature-rich platform, which should
lead to new incremental business opportunities for both companies. WorldCom is
the fourth largest long distance carrier in the United States. This agreement
positions Premiere as a preferred provider to WorldCom of network-based
computer telephony technology. In addition, Premiere and WorldCom intend to
jointly market a comprehensive package of services that neither could
previously offer independently.

<PAGE>

CALL CENTER RELATIONSHIPS

Premiere intends to market its call center technology to financial
institutions and other large corporations. Premiere has been selected by
NationsBanc Services as its outsource solution for its customer service
centers, which currently receive in excess of 100 million calls per year.

PREMIERE'S COMPUTER TELEPHONY PLATFORM

Premiere designed its computer telephony platform to provide its subscribers
with efficient and reliable service and to be easily expandable as network
usage increases. The modular and scalable design of the platform and related
software allows expansion of network capacity without requiring replacement of
existing hardware or software or interrupting service. Premiere's open systems
design approach enables Premiere to utilize readily available third party
hardware and software in constructing its platform and facilitates the
integration of services and information provided by third parties into the
system.

Software. The system is controlled by proprietary application and database
access software that was developed by the Company. Premiere's software is
designed to be versatile and adaptable and to allow the system to be
configured to meet the demands of strategic partners, licensees or individual
subscribers. The Company's software is written in the "C" programming language
in accordance with the Company's open systems development strategy and
supports the Company's modular and scalable network architecture. Applications
written for custom or specific functions can be quickly developed and
implemented across the network and offered to all of the Company's
subscribers. Premiere maintains an internal development program in order to
continually enhance its software.

Communications and Information Systems Architecture. The platform consists
of a digital telecommunications switch which interfaces with a high speed
client/server network of personal computers. Clients on the Telnodes are
controlled by Network Managers. Servers on the network are responsible for
performing functions requested by the Telnodes and Network Managers and for
storing and providing access to data. Web servers connected to the network
firewall interface with the Internet and allow Premiere to offer access to its
services from any PC connected to the Internet. The network architecture is
designed to be modular and scalable. To increase the capacity of the network,
the Company adds additional Network Managers, Telnodes and servers and, at
certain points, must add additional modules to the digital switch, but is not
required to replace existing Network Managers, Telnodes and servers. This
modular systems approach also allows Premiere, at the request of licensees and
strategic partners, to provide custom applications for subscribers. The
client/server network utilizes a fault tolerant network operating system and
the network configuration provides for data on each server to be mirrored on a
separate server, thereby providing redundancy for improved system reliability.
Premiere maintains the ability to generate power in the event of a prolonged
power outage or if its uninterruptible power supply fails.

Incoming calls to Premiere's platform are answered by a Telnode, which hosts
an automated voice response unit operator. Resident on each Telnode is the
specialized software and hardware necessary to allow the Telnode to interact
with, and accept input from, users. For communications card applications, the
system initially prompts subscribers for their access number and personal
identification number. The Network Manager instantly verifies this information
for accuracy by querying the database of subscribers and also verifies that
only one subscriber is connected to the platform using this access number.
Once the subscriber has been identified, the Network Manager instructs the
Telnode to present the subscriber with various options, which the subscriber
can access by responding to voice prompts. If the subscriber chooses one of
the enhanced services, the system software processes the request by directing
it to the appropriate server on the network for fulfillment. If the subscriber
chooses to place an outbound telephone call, the Telnode transmits the call
through the digital central office switch, which is designed to select the
least expensive available routing for the call.

<PAGE>

Transmission. Incoming and outgoing communications are transmitted via fiber
optic trunk lines, which are provided by interexchange long distance service
providers pursuant to contractual relationships with the Company. Premiere
obtains transmission service from multiple carriers, thus enhancing Premiere's
ability to avoid service interruptions caused by technical problems at a
single carrier. Because each carrier's trunk lines physically terminate at
Premiere's facility, Premiere can readily alter the routing of its
transmission traffic in the event of technical difficulties.

The Company opened an additional domestic switching facility in Dallas,
Texas in September 1996. This facility is designed to provide geographical
redundancy and increased capacity. The Dallas center is capable of handling
300 million transaction minutes per month, which is the same capacity as
Premiere's core hub in Atlanta, Georgia. In addition, the Company established
a new POP site in London, England. The London POP allows Premiere to offer
even more competitive rates to customers in the United Kingdom and western
Europe.

ELECTRONIC BILLING AND INFORMATION SYSTEM

Premiere's EBIS is designed to allow instant activation of subscribers'
accounts, monitor subscribers' activity in real time and, while operating in
the background without interrupting subscribers' service, interface with
multiple financial institutions and electronically bill subscribers' credit
cards or bank accounts. The EBIS is configurable for the billing requirements
of various financial institutions and currently interfaces electronically with
approximately 3,000 banks and other financial institutions.

Premiere believes the advantages of its billing system are that it (i)
avoids the delay in payment inherent in paper invoices sent through the mail,
(ii) reduces billing and collection costs, and (iii) helps reduce fraud and
bad debt expense by establishing preset spending maximums for subscribers. The
system architecture of Premiere's EBIS is based on the same modular and
scalable design philosophy used by Premiere in implementing its platform.

During a subscriber's initial session on the Premiere network, the
subscriber is routed to Premiere's service activation center. The subscriber
is then asked by the customer service representative or the system (if the
subscriber's service is being activated by the Company's automated service
activation system) to choose an authorization number (usually subscribers
choose their existing business or home telephone number) and a personal
identification number. The subscriber is also asked to provide a credit card
number. The subscriber is then assigned a preset spending limit. When a
subscriber's usage reaches the preset limit, the EBIS, operating in the
background and without interrupting the subscriber's transaction, attempts to
charge this amount to the subscriber's credit card. If the charge is
successful, the EBIS updates the threshold to a zero balance, and the
subscriber may continue the transaction uninterrupted. If the attempted charge
fails, the system suspends service temporarily, and upon the subscriber's next
attempt to access the system, the system directs the subscriber to customer
service. Billing for AFCOM subscribers operates in a similar manner, except
that Premiere establishes an initial balance, which the EBIS bills against as
usage charges are incurred. Once the initial draft is substantially depleted,
the EBIS electronically schedules an additional draft from the subscriber's
bank account on scheduled intervals (generally coinciding with pay periods).

RESEARCH AND DEVELOPMENT

Premiere's research and development and engineering personnel are
responsible for developing and supporting Premiere's proprietary software and
enhanced system features. Premiere's research and development strategy is to
focus its efforts on enhancing its proprietary software and to integrate its
software with readily available software and hardware when feasible. Premiere
maintains an internal software development program pursuant to which the
Company introduces major and minor enhancements of its software.

As of May 31, 1997, Premiere employed 26 salaried people and approximately
10 independent contractors in research and development and engineering
positions. Premiere's research and development

<PAGE>

team continuously monitors the operation of the computer telephony platform
and the EBIS to determine if software or hardware modifications are necessary.
Premiere's research and development and engineering personnel also engage in
joint development efforts with Premiere's strategic partners.

CUSTOMER SERVICE AND TECHNICAL SUPPORT

Premiere believes that effective customer service is essential to attracting
and retaining subscribers. Premiere's customer service department is
responsible for educating and assisting subscribers in using Premiere's
services, for resolving billing related issues and, in consultation with
Premiere's technical support personnel, for resolving technical problems
subscribers may have in using Premiere's services. As of May 31, 1997,
Premiere employed a staff of approximately 76 people in its customer service
department, which is staffed 24 hours per day, seven days per week and is
accessible by a toll-free call. Each member of Premiere's customer service
department is trained in all aspects of customer service in order to enable
them to respond to any service related question raised by a subscriber.

Premiere's platform provides customer service representatives with detailed
information regarding each subscriber and the subscriber's transaction
history. This information is instantly accessible by customer service
representatives from their computer terminals. The real-time monitoring
capabilities of the system assure that subscribers' transaction records
retrieved by customer service representatives are current, even if a
subscriber completed a transaction only moments before contacting the customer
service department.

Premiere employs separate personnel who are responsible for technical
support functions. These employees are generally responsible for consulting
with Premiere's strategic partners and licensees regarding technical issues
and for resolving technical issues brought to their attention by the customer
service department.

COMPETITION

The information and telecommunications service industries are intensely
competitive, rapidly evolving and subject to rapid technological change. The
Company expects competition to increase in the future. Many of the Company's
current and potential competitors have longer operating histories, greater
name recognition, larger customer bases and substantially greater financial,
personnel, marketing, engineering, technical and other resources than the
Company. Such competition could materially adversely affect the Company's
business, operating results or financial condition.

The Company's competitive strategy is to seek to gain a competitive
advantage by being among the first companies to offer an integrated
information and telecommunications services solution, by being an innovator in
the integrated information and telecommunications services market and by
offering unique and innovative services to its subscribers. The Company
intends to capitalize on strategic relationships with WorldCom, DeltaTel,
CompuServe and others in order to build its subscriber base and to maintain
and increase subscriber loyalty. The Company believes that the principal
competitive factors affecting the market for telecommunications and
information services are price, quality of service, reliability of service,
degree of service integration, ease of use, service features and name
recognition. The Company believes that it competes effectively in these areas.

As noted, the Company attempts to differentiate itself from its competitors
in part by offering an integrated suite of information and communications
services accessible from multiple devices. Other providers currently offer
each of the individual services and certain combinations of such services
offered by the Company. The Company's worldwide long distance services and
features such as conference calling compete with services provided by
companies such as AT&T, MCI and Sprint, as well as smaller interexchange long
distance providers. The Company's voice mail services compete with voice mail
services provided by AT&T, ONS, certain RBOCs and VoiceCom as well as by
customer premised equipment manufacturers such as Octel, Northern Telecom,
Siemens, Centigram, Boston Technology and Digital Sound. The Company's

<PAGE>

enhanced travel services, concierge services, news services and electronic
mail services compete with services provided by America Online, Prodigy and
numerous Internet service providers. The Company's paging services compete
with paging services offered by companies such as AT&T and MCI.

Although the Company is aware of several companies that are marketing
enhanced calling cards, it is not aware of any major competitor that is
marketing an integrated information and communications service identical to
the service marketed by the Company. Many of the Company's competitors have
substantial resources and technical expertise and could likely develop such a
service if they chose to expend sufficient resources. The Company believes
that existing competitors are likely to expand their service offerings and
that new competitors are likely to enter the information and
telecommunications market and to attempt to integrate information and
telecommunications services, resulting in greater competition for the Company.
In particular, legislation was signed into law on February 8, 1996 that will
allow local exchange carriers, including the RBOCs, to provide inter-LATA long
distance telephone service, which will likely significantly increase
competition for long distance services. The new legislation also grants the
FCC the authority to deregulate other aspects of the telecommunications
industry, which in the future may, if authorized by the FCC, facilitate the
offering of an integrated suite of information and telecommunications services
by regulated entities, including the RBOCs, in competition with the Company.
Such increased competition could have a material adverse effect on the
Company's business, operating results or financial condition.

With respect to Orchestrate, Premiere is aware of a number of companies
offering "unified messaging." For example, Octel and Microsoft recently
announced "Unified Messenger," which places all voice mail, e-mail and fax
messages in a single mailbox accessible by phone and computer. Unlike
Premiere's network-based solution, many of these companies offer a premise-
based solution whereby vendors integrate equipment with local area networks
and PBX equipment. In addition, over the past few years, the number of
companies offering call center technology has grown dramatically, primarily in
response to major outsource initiatives as well as significantly lower
technology costs. Such increased competition could have a material adverse
effect on the Company's business, operating results or financial condition.

The Company expects that the information and telecommunications services
markets will continue to attract new competitors and new technologies,
possibly including alternative technologies that are more sophisticated and
cost effective than the Company's technology. The Company does not have the
contractual right to prevent its subscribers from changing to a competing
network, and the Company's subscribers may generally terminate their service
with the Company at will.

GOVERNMENT REGULATION

The Company provides both telecommunications and information services. The
terms and conditions under which the Company provides its services are
potentially subject to regulation by the state and federal governments of the
United States. Various international authorities may also seek to regulate the
services provided or to be provided by the Company. With regard to the
Company's telecommunications services, federal laws and FCC regulations
generally apply to interstate telecommunications, while state regulatory
authorities generally have jurisdiction over telecommunications that originate
and terminate within the same state.

<PAGE>

Federal. On February 8, 1996, the President signed into law the 1996 Act,
which will allow local exchange carriers, including the RBOCs, to provide
inter-LATA long distance telephone service and which also grants the FCC the
authority to deregulate other aspects of the telecommunications industry. The
new legislation may result in increased competition to the Company from
others, including the RBOCs, and increased transmission costs in the future.
The Company is classified by the FCC as a non-dominant carrier for its common
carrier telecommunications services. The FCC has jurisdiction to act upon
complaints against any common carrier for failure to comply with its statutory
obligations. The FCC also has the authority to impose more stringent
regulatory requirements on the Company and change its regulatory
classification. The Company has applied for and received all necessary
authority from the FCC to provide domestic interstate and international
telecommunications service. The Company has been granted authority by the FCC
to provide international telecommunication services through the resale of
switched services of United States facilities-based carriers. The FCC reserves
the right to condition, modify or revoke such international authority for
violations of the Federal Communications Act or its rules.

Both domestic and international non-dominant carriers must maintain tariffs
on file with the FCC. Although the tariffs of non-dominant carriers and the
rates and charges they specify are subject to FCC review, they are presumed to
be lawful and are seldom contested. In reliance on the FCC's past practice of
allowing relaxed tariff filing requirements for non-dominant domestic
carriers, the Company at one time did not maintain detailed rate schedules for
domestic offerings in its tariffs. The two-year statute of limitations on
claims relating to these tariffs has expired. The FCC recently decided to
"forbear" from requiring that non-dominant interchange carriers file tariffs
for their domestic services. The United States Court of Appeals for the
District of Columbia Circuit, however, has stayed the FCC's decision pending
court review. As an international non-dominant carrier, the Company has always
been required to include, and has included, detailed rate schedules in its
international tariffs. Resale carriers are also subject to a variety of
miscellaneous regulations that, for instance, govern the documentation and
verifications necessary to change a consumer's long distance carrier, limit
the use of "800" numbers for pay-per-call services, require disclosure of
operator services and restrict interlocking directors and management.

As a result of changes made by the 1996 Act, the Company may be subject to
additional regulatory requirements pertaining to its telecommunications and
information services. Although the Company does not believe that these changes
will have a material effect on its business, no assurance can be given at this
time regarding the extent or impact of such changes.

Most importantly, as a non-dominant carrier, the Company will be deemed to
be a "telecommunications carrier" for FCC purposes. As a telecommunications
carrier, the Company will likely be required to contribute to universal
service funds established by the FCC, the states or both. The FCC and the
states are in the process of determining what universal service contribution
requirements to adopt. The FCC released a decision in May 1997 establishing a
framework for universal service fund contributions based on a percentage of
revenues; the FCC has not determined what the percentage (which will change
over time) will be. Further, telecommunications carriers are subject to some
minimal interconnection and network access requirements under the 1996 Act.
These requirements generally require telecommunications carriers to
interconnect their facilities directly or indirectly with the facilities and
equipment of other telecommunications carriers upon request and prohibit them
from installing network features, functions or capabilities that are not
accessible to and usable by persons with disabilities, unless access for
persons with disabilities is not readily achievable.

Moreover, information service providers traditionally have been treated by
the FCC as providing an "enhanced" computer processing service, rather than a
"basic" telecommunications transmission service and, as a result, were thought
to be beyond the FCC's regulatory authority. Most of the Company's business
involves such unregulated enhanced services. Although the 1996 Act continues
to distinguish between unregulated information or enhanced and regulated
telecommunication or basic services, the changes made by the 1996 Act may have
important implications for the providers of unregulated enhanced services.

The 1996 Act did not directly address the FCC's "access charge" system,
which governs the fees paid by long distance carriers to local telephone
companies to terminate calls over the local telephone network. In May 1997,
the FCC adopted changes to its access charge system that are expected as a
general matter to reduce access charges for long distance carriers. The FCC
reaffirmed its previous tentative conclusion not to

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require enhanced service providers to pay access charges, although this is a
controversial area and the FCC could revisit it.

The FCC's May 1997 decision retained the exemption from universal service
fees for enhanced service providers. However, there can be no guarantee that
such fees will not be assessed in the future. Similarly, individual states may
determine that enhanced services providers should be required to contribute to
state universal service funding mechanisms.

State. The intrastate long distance telecommunications operations of
Premiere are subject to various state laws and regulations, including prior
certification, notification and registration requirements. In certain states,
prior regulatory approval may be required for changes in control of
telecommunications operations. The Company is currently subject to varying
levels of regulation in the states in which it provides "0+" service and "1+"
and card services (which are both generally considered "1+" services by the
states). The vast majority of states require Premiere to apply for
certification to provide telecommunications services, or at least to register
or to be found exempt from regulation, before commencing intrastate service.
The vast majority of the states require Premiere to file and maintain detailed
tariffs listing rates for intrastate service. Many states also impose various
reporting requirements and/or require prior approval for transfers of control
of certified carriers, assignments of carrier assets, including customer
bases, carrier stock offerings and incurrence by carriers of significant debt
obligations. Certificates of authority can generally be conditioned, modified,
canceled, terminated or revoked by state regulatory authorities for failure to
comply with state law and/or the rules, regulations and policies of the state
regulatory authorities. Fines and other penalties, including the return of all
monies received for intrastate traffic from residents of a state, may be
imposed for such violations.

Premiere has made the filings and taken the actions it believes are
necessary to become certified or tariffed to provide intrastate card services
to customers throughout the United States, except in two states. The Company
has received authorization to provide intrastate card services in 44 states
and is seeking authorization to provide intrastate card service in four
states. With the exception of one state in which the Company's application to
provide "0+" service is pending, the Company has received authorization to
provide "0+" service in each state where the Company provides such service.
There can be no assurance that the Company's provision of services in states
where it is not licensed or tariffed to provide such services will not have a
material adverse effect on the Company's business, operating results or
financial condition.

Miscellaneous. In conducting its business, the Company is subject to various
laws and regulations relating to commercial transactions, such as the Uniform
Commercial Code and is also subject to the electronic funds transfer rules
embodied in Regulation E promulgated by the Board of Governors of the Federal
Reserve. Congress has held hearings regarding, and various agencies are
considering, whether to regulate providers of services and transactions in the
electronic commerce market. For example, the Federal Reserve Board recently
completed a study, directed by Congress, regarding the propriety of applying
Regulation E to stored value cards. The Department of Treasury recently
promulgated proposed rules applying record keeping, reporting and other
requirements to a wide variety of entities involved in electronic commerce. It
is possible that Congress, the states or various government agencies could
impose new or additional requirements on the electronic commerce market or
entities operating therein. If enacted, such laws, rules and regulations could
be imposed on the Company's business and industry and could have a material
adverse effect on the Company's business, results of operations or financial
condition. The Company's proposed international activities also will be
subject to regulation by various international authorities and the inherent
risk of unexpected changes in such regulation.

PROPRIETARY RIGHTS

The Company's ability to compete is dependent in part upon its proprietary
technology. The Company relies on confidentiality agreements with its
employees and copyright and trade secret laws to protect its technology.
Despite these actions, there can be no assurance that others will not be able
to copy or otherwise obtain and use the Company's proprietary technology
without authorization, or independently develop technologies that are similar
or superior to the Company's technology. However, the Company believes that,

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due to the rapid pace of technological change in the information and
telecommunications service industry, factors such as the technological and
creative skills of its personnel, new product developments, frequent product
enhancements and the timeliness and quality of support services are more
important to establishing and maintaining a competitive advantage in the
industry. The Company has three patent applications pending and 10 trademark
or service mark registrations pending. In addition, the Company currently has
registered the service mark "DIALWEB."

The Company is aware of other companies that use the terms "WorldLink" or
"Premiere" in describing their products and services, including
telecommunications products and services. Certain of those companies hold
registered trademarks which incorporate the names "WorldLink" or "Premiere."
The Company has received correspondence from a provider of prepaid calling
cards which claims that the Company's use of the term "Premiere WorldLink"
infringes upon its trademark rights. In addition, the Company has received
correspondence from a major bank, which is among the holders of registered
trademarks incorporating the term "WorldLink," inquiring as to the nature of
the Company's use of the term "WorldLink" as part of its mark "Premiere
WorldLink." Based on, among other things, the types of businesses in which the
other companies are engaged and the low likelihood of confusion, the Company
believes these claims to be without merit.

Many patents have been issued in the general areas of information and
telecommunications services and computer telephony. The Company believes that
in the ordinary course of its business third parties will claim that the
Company's current or future products or services infringe the patent,
copyright or trademark rights of such third parties. No assurance can be given
that legal actions alleging infringement will not be commenced against the
Company, or that, if such actions are brought, the Company will ultimately
prevail. Any such claiming parties may have significantly greater resources
than the Company to pursue litigation of such claims. Any such claims, whether
with or without merit, could be time consuming, result in costly litigation,
cause delays in introducing new or improved services, require the Company to
enter into royalty or licensing agreements, or cause the Company to
discontinue use of the challenged tradename, service mark or technology at
potentially significant expense to the Company associated with the marketing
of a new name or the development or purchase of replacement technology, all of
which could have a material adverse effect on the Company. See "Risk Factors--
Risk of Infringement Claims."

EMPLOYEES

As of May 31, 1997, the Company had approximately 193 employees. None of the
Company's employees are members of a labor union or are covered by a
collective bargaining agreement.

FACILITIES

Premiere leases approximately 40,886 square feet of office space in Atlanta,
Georgia under a lease expiring August 31, 2004 and has options to lease
additional space in the same building. The Company leases an additional 7,300
square feet of space in Atlanta, Georgia, for the facility that serves as the
Company's primary data and communications center. This lease expires on
December 31, 1998. The Company also leases approximately 7,000 square feet of
space in Dallas, Texas for an additional data and communications center. This
lease expires July 31, 2001. In addition, the Company maintains a single
person sales office in Tulsa, Oklahoma and space in London, England for an
additional data and communications center.

LEGAL PROCEEDINGS

On January 30, 1996, Eric Bott, E.B. Elliott and Cost Recovery Systems, Inc.
("CRS") filed a complaint against the Company's wholly-owned subsidiary, PCI
and the Company's President, Boland T. Jones, in the Superior Court of Fulton
County, Georgia. In the complaint, the plaintiffs allege that: (i) Mr. Bott, a
former Company employee, is entitled to options to purchase 10,000 shares of
common stock of PCI at $5.00 per share; (ii) Mr. Bott is entitled to a
commission equal to 10% of all revenues that have been and in the future are
collected as a result of the Company's licensing arrangement with one of its
customers; (iii) Mr. Bott is entitled to $7,000 for consulting work allegedly
performed for the Company; (iv) Mr. Bott is entitled to

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unspecified damages resulting from his sale in June 1995 of 750 shares of
common stock of PCI to an unrelated third party for an unspecified amount; (v)
Mr. Elliott or CRS, an affiliate of Mr. Elliott, is entitled to options to
purchase 5,000 or 10,000 shares of common stock of PCI at an unspecified
exercise price arising out of work allegedly performed by CRS for the Company;
and (vi) CRS is owed an unspecified amount of commissions from the Company
relating to sales of the Company's telecommunications services by CRS.
Subsequent to the filing of the complaint, the plaintiffs dismissed without
prejudice count (iv) above. The plaintiffs also seek attorneys' fees and
unspecified amounts of punitive damages. The Company filed an answer and
counterclaim denying all allegations of the complaint and asserting various
affirmative defenses. Assuming that the allegations concerning stock options
and stock sales relate to the common stock of Premiere Technologies, Inc.,
rather than PCI, as alleged, the Company believes that the share numbers and
exercise prices have not been adjusted for the 24-to-1 stock split effected in
December 1995. In this regard, the plaintiffs filed a motion to add the
Company as a defendant and to amend their complaint to assert their claims
against the Company. Adjusting the share numbers and exercise prices of these
options to reflect the 24-to-1 stock split, the plaintiffs' claims relate to
options to purchase up to a total of 480,000 shares of common stock and the
alleged exercise price of $5.00 per share with regard to a portion of such
options becomes approximately $0.21 per share. The plaintiffs' motion was
denied on December 17, 1996, and the plaintiffs dismissed the case without
prejudice on January 13, 1997. The plaintiffs filed a new complaint against
PCI and the Company on January 21, 1997 setting forth the same allegations as
described above, except that Mr. Bott no longer alleges that he is entitled to
unspecified damages resulting from his sale in June 1995 of 750 shares of
common stock of PCI, and that Mr. Bott and Mr. Elliott allege that the stock
options relate to the Common Stock of Premier Technologies, Inc. The Company
and PCI have filed an answer and counterclaim denying all allegations of the
complaint and asserting various affirmative defenses and a motion to dismiss
the counts of the complaint against the Company. The Company believes it has
meritorious defenses to the plaintiffs' allegations, but due to the inherent
uncertainties of the litigation process, the Company is unable to predict the
outcome of this litigation. If the outcome of this litigation is adverse to
the Company, it could have a material adverse effect on the Company's
business, operating results or financial condition.

On August 6, 1996, Communication Network Corporation ("CNC"), a licensing
customer of the Company, was placed into bankruptcy under Chapter 11 of the
United States Bankruptcy Code (the "Bankruptcy Code"). On August 23, 1996, CNC
filed a motion to intervene in a separate lawsuit brought by a CNC creditor in
the United States District Court for the Southern District of New York against
certain guarantors of CNC's obligations and to file a third party action
against numerous entities, including such CNC creditor and PCI for alleged
negligent misrepresentations of fact in connection with an alleged fraudulent
scheme designed to damage CNC. The court has not ruled on CNC's request. Based
upon the bankruptcy examiner's findings and the subsequently appointed
bankruptcy trustee's investigation of potential actions directed at PCI,
including an avoidable preference claim under the Bankruptcy Code of an amount
up to approximately $950,000, the trustee and PCI have very recently reached a
tentative agreement of all issues between the parties, subject to Bankruptcy
Court approval. The terms of the proposed settlement have not been made public
but will be disclosed and made available in papers to be filed with the Court.
In this regard, the Company currently anticipates that it will establish a
reserve in the second quarter of 1997 for anticipated legal expenses and
settlement costs in an amount of up to $1.5 million. Due to the inherent
uncertainties of the judicial system, the Company is unable to predict with
certainty whether the settlement will be approved by the Bankruptcy Court. If
the settlement is not approved and the trustee successfully pursues possible
litigation against the Company, it could have a material adverse effect on the
Company's business, operating results or financial condition.

On September 20, 1996, Peter Lucina ("Lucina") filed a complaint against the
Company, Donald B. Gasgarth ("Gasgarth") and Patrick G. Jones ("Jones") in the
United States District Court for the Eastern District of Illinois. In the
complaint, Lucina alleges, among other things, that: (i) in November 1995 he
sold 1,563 shares of the Company common stock to Gasgarth, a former director
of the Company, for $31,260; (ii) Jones offered to "facilitate" the sale;
(iii) in December 1995 the Company filed a registration statement relating to
the initial public offering of its common stock; (iv) prior to his sale of
stock to Gasgarth, neither Gasgarth nor Jones told Lucina that the Company
planned an initial public offering; and (v) the 1,563 shares sold to Gasgarth,
adjusted for the 24-to-1 stock split subsequently effected, was worth $675,216
based on the

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Company's initial public offering at $18 per share in March, 1996. In his
complaint, Lucina asserts violations of the Securities Exchange Act of 1934
and the rules promulgated thereunder, the Illinois Consumer Fraud and
Deceptive Business Practices Act and common law fraud. Lucina seeks the return
of 37,512 shares of common stock of the Company, or in the alternative,
compensatory damages in the amount of $975,312 with interest thereon, punitive
damages in the amount of $1 million and costs of the suit, including
reasonable attorneys' fees and other associated costs. The Company has filed
an answer to the complaint denying allegations of the complaint and asserting
various defenses. Discovery is in its initial stages, and no trial date has
been set. The Company believes that it has meritorious defenses to the Lucina
complaint; however, due to the inherent uncertainties of the litigation
process, the Company is unable to predict the outcome of this litigation. If
the outcome of this litigation is adverse to the Company, it could have a
material adverse effect on the Company's business, operating results or
financial condition.