<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): April 30, 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 2. ACQUISITION OR DISPOSITION OF ASSETS.
On April 30, 1997, Premiere Technologies, Inc. ("Premiere" or the
"Company") completed the previously announced acquisitions (the "Acquisitions"),
in separate transactions, of: (i) Voice-Tel Enterprises, Inc. ("VTE"); (ii) VTN,
Inc. ("VTN"), the general partner of Voice-Tel Network Limited Partnership
("VTNLP"), an affiliate of VTE; (iii) the limited partner interests in VTNLP
owned by Merchandising Productions, Inc. ("MPI"); and (iv) certain independently
operated franchisees of VTE (the "Franchisees"). The Acquisitions were made
pursuant to: (i) an Agreement and Plan of Merger dated as of April 2, 1997 by
and among the Company, PTEK Merger Corporation, a wholly-owned subsidiary of the
Company, VTE and the Stockholders of VTE; (ii) an Agreement and Plan of Merger
dated as of April 2, 1997 by and among the Company, PTEK Merger Corporation II,
a wholly-owned subsidiary of the Company, VTN and the Stockholders of VTN; (iii)
a Purchase and Sale Agreement dated April 2, 1997 by and between the Company and
MPI; and (iv) Transfer Agreements dated as of April 2, 1997 by and among the
Company, each Franchisee and the Owner(s) of each Franchisee.
An aggregate of approximately 5,059,000 shares (the "Shares") of the
Company's $.01 par value common stock were issued in exchange for all of the
issued and outstanding par value common stock of VTE, VTN and the Franchisees
and for the purchase of certain loans payable to Owner(s) of certain of the
Franchisees. An aggregate of approximately 623,000 of the Shares were
placed in escrow pursuant to Escrow Agreements by and among the Company, the
escrow agent and the Stockholders of VTE and VTN and the Owner(s) of each
Franchisee in order to secure certain indemnification obligations of those
Stockholders and Owners. In addition, the Company granted certain demand and
piggyback registration rights to holders of the Shares issued pursuant to the
Acquisitions. Also pursuant to the Acquisitions, the Company entered into
Employment Agreements with certain senior executives of the acquired businesses.
The Company acquired MPI's limited partner interests in VTNLP for
$9,200,000 in cash. The Company funded the cash purchase price with proceeds
from a term loan from NationsBank, N.A. (South) (the "NationsBank Loan"). The
NationsBank Loan bears interest at an adjustable rate per annum of the Federal
Funds rate plus 90 basis points and matures in 60 days. 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.
All but one of the Acquisitions that meet the significance tests of Rule
3-05 of Regulation S-X were accounted for under the pooling-of-interests method
of accounting. The Acquisition of the assets of MPI was accounted for under the
purchase method of accounting. VTE, VTN and the Franchisees will continue to
operate as, or within, wholly-owned subsidiaries of the Company.
ITEM 7. EXHIBITS.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
The financial statements of TeleT Communications LLC ("TeleT"), which
was acquired by the Company in September 1996 and accounted for under the
purchase method of accounting, have been previously filed with the
Securities and Exchange Commission (the "Commission") and are incorporated
by reference from the Company's Amended Current Report on Form 8-K/A dated
September 18, 1996 and the Company's Annual Report on Form 10-K for the
year ended December 31, 1996. The following financial statements of VTE,
VTN and the Franchisees that meet the significance tests of Rule 3-05 of
Regulation S-X (the "Significant Franchisees") are included herein:
- 1 -
<PAGE>
Voice-Tel Enterprises, Inc. ("VTE")
Report of Independent Public Accountants.........................
Consolidated Balance Sheets as of December 31, 1996 and 1995....
Consolidated Statements of Operations for the years ended
December 31, 1996 and 1995...............................
Consolidated Statements of Shareholders' Equity (Deficit) for the
years ended December 31, 1996 and 1995...................
Consolidated Statements of Cash Flows for the years ended
December 31, 1996 and 1995...............................
Notes to Consolidated Financial Statements.......................
Consolidating Balance Sheet as of December 31, 1996..............
VTN, Inc. ("VTN")
Report of Independent Public Accountants.........................
Consolidated Balance Sheets as of December 31, 1996 and 1995.....
Consolidated Statements of Operations for the years ended
December 31, 1996, 1995 and 1994.........................
Consolidated Statements of Shareholders' Deficit for the years
ended December 31, 1996, 1995 and 1994...................
Consolidated Statements of Cash Flows for the years ended
December 31, 1996 and 1995...............................
Notes to Consolidated Financial Statements.......................
Continuum, Inc. ("Continuum")
Report of Independent Public Accountants.........................
Balance Sheet as of December 31, 1996............................
Statement of Operations for the year ended December 31, 1996.....
Statement of Shareholders' Deficit for the year ended
December 31, 1996........................................
Statement of Cash Flows for the year ended December 31, 1996.....
Notes to Financial Statements....................................
DMG, Inc. and VTG, Inc. ("DMG")
Report of Independent Public Accountants.........................
Combined Balance Sheet as of December 31, 1996...................
Combined Statement of Operations for the year ended
December 31, 1996........................................
Combined Statement of Shareholders' Equity for the year ended
December 31, 1996........................................
Combined Statement of Cash Flows for the year ended
December 31, 1996........................................
Notes to Combined Financial Statements...........................
- 2 -
<PAGE>
Penta Group, Inc. and Scepter Communications, Inc. ("Penta")
Report of Independent Public Accountants.........................
Combined Balance Sheet as of December 31, 1996...................
Combined Statement of Operations for the year ended
December 31, 1996........................................
Combined Statement of Shareholders' Equity for the year ended
December 31, 1996........................................
Combined Statement of Cash Flows for the year ended
December 31, 1996........................................
Notes to Combined Financial Statements...........................
Premier Business Services, Inc. ("PBS")
Report of Independent Public Accountants.........................
Balance Sheet as of December 31, 1996............................
Statement of Income for the year ended December 31, 1996.........
Statement of Shareholders' Equity for the year ended
December 31, 1996........................................
Statement of Cash Flows for the year ended December 31, 1996.....
Notes to Financial Statements....................................
Sands Communications, Inc. d.b.a. Voice-Tel of Arizona, SandsComm,
Inc. d.b.a. Voice-Tel of Orange County, Sands Comm, Inc. d.b.a.
Voice-Tel of New Mexico, and Dunes Communications, Inc. d.b.a.
Voice-Tel of San Fernando Valley ("Sands")
Report of Independent Public Accountants.........................
Combined Balance Sheet as of December 31, 1996...................
Combined Statement of Operations for the year ended
December 31, 1996........................................
Combined Statement of Shareholder's Equity for the year ended
December 31, 1996........................................
Combined Statement of Cash Flows for the year ended
December 31, 1996........................................
Notes to Combined Financial Statements...........................
Shamlin, Inc. d.b.a. Voice-Tel of Colorado ("Shamlin")
Report of Independent Public Accountants.........................
Balance Sheet as of December 31, 1996............................
Statement of Operations for the year ended December 31, 1996.....
Statement of Shareholder's Deficit for the year ended
December 31, 1996........................................
Statement of Cash Flows for the year ended December 31, 1996
Notes to Financial Statements....................................
- 3 -
<PAGE>
Voice-Tel of Ohio and Subsidiary ("VTO")
Report of Independent Public Accountants.........................
Consolidated Balance Sheet as of December 31, 1996...............
Consolidated Statement of Income for the year ended
December 31, 1996........................................
Consolidated Statement of Partners' Deficit for the year ended
December 31, 1996........................................
Consolidated Statement of Cash Flows for the year ended
December 31, 1996........................................
Notes to Combined Financial Statements...........................
SDVT, Inc. ("SDVT")
Report of Independent Public Accountants.........................
Balance Sheet as of December 31, 1996............................
Statement of Operations for the year ended December 31, 1996.....
Statement of Members' Capital for the year ended
December 31, 1996........................................
Statement of Cash Flows for the year ended December 31, 1996.....
Notes to Financial Statements....................................
Car Zee, Inc. ("Car Zee")
Report of Independent Public Accountants.........................
Balance Sheet as of December 31, 1996............................
Statement of Operations for the year ended December 31, 1996.....
Statement of Shareholders' Equity for the year ended
December 31, 1996........................................
Statement of Cash Flows for the year ended December 31, 1996.....
Notes to Financial Statements....................................
1086236 Ontario Inc. d.b.a. Voice-Tel of Eastern Canada , Inc. ("VTEC")
Report of Independent Public Accountants.........................
Balance Sheet as of January 31, 1997.............................
Statement of Operations for the year ended January 31, 1997......
Statement of Shareholders' Equity for the year ended
January 31, 1997.........................................
Statement of Cash Flows for the year ended January 31, 1997......
Notes to Financial Statements....................................
- 4 -
<PAGE>
Flanagan/Allan Inc. ("Flanagan/Allan")
Report of Independent Public Accountants.........................
Combined Balance Sheet as of January 31, 1997....................
Combined Statement of Operations for the year ended
January 31, 1997.........................................
Combined Statement of Shareholders' Equity for the year ended
January 31, 1997.........................................
Combined Statement of Cash Flows for the year ended
January 31, 1997.........................................
Notes to Combined Financial Statements...........................
(b) PRO FORMA FINANCIAL INFORMATION.
Pro forma financial information relating to the Company and TeleT
has been previously filed with the Commission and is incorporated by
reference from the Company's Amended Current Report on Form 8-K/A
dated September 18, 1996 and the Company's Annual Report on Form 10-K
for the year ended December 31, 1996. The following pro forma
financial information relating to the Company, TeleT, VTE, VTN and the
Significant Franchisees is included herein:
Pro Forma Combined Balance Sheet as of December 31, 1996..........
Pro Forma Combined Statements of Income for the years
ended 1996, 1995 and 1994..................................
Notes to Unaudited Pro Forma Combined Condensed
Financial Statements.......................................
(c) EXHIBITS.
2.1 Agreement and Plan of Merger dated as of April 2, 1997 by and among
Premiere Technologies, Inc., PTEK Merger Corporation, Voice-Tel
Enterprises, Inc. and the Stockholders of Voice-Tel Enterprises, Inc.
(incorporated by reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K dated April 2, 1997).
2.2 Agreement and Plan of Merger dated as of April 2, 1997 by and among
Premiere Technologies, Inc., PTEK Merger Corporation II, VTN, Inc. and
the Stockholders of VTN, Inc. (incorporated by reference to Exhibit
2.2 to the Company's Current Report on Form 8-K dated April 2, 1997).
2.3 Purchase and Sale Agreement dated April 2, 1997 by and between
Premiere Technologies, Inc. and Merchandising Productions, Inc.
(incorporated by reference to Exhibit 2.3 to the Company's Current
Report on Form 8-K dated April 2, 1997).
2.4 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies Inc., Continuum, Inc. and Owners of Continuum, Inc.
- 5 -
<PAGE>
2.5 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., DMG, Inc. and Owners of DMG, Inc. and Transfer
Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., VTG, Inc. and Owners of VTG, Inc.(1)
2.6 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., Penta Group, Inc. and Owners of Penta Group, Inc.
and Transfer Agreement dated as of April 2, 1997 by and among and
Premiere Technologies, Inc., Scepter Communications, Inc. and Owners
of Scepter Communications, Inc.(1)
2.7 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., Premier Business Services, Inc. and Owners of
Premier Business Services, Inc.
2.8 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., Dunes Communications, Inc., Sands Communications,
Inc., Sands Comm, Inc., SandsComm, Inc., and Owner of Dunes
Communications, Inc., Sands Communications, Inc., Sands Comm, Inc.,
and SandsComm, Inc.(1)
2.9 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., Shamlin, Inc. and Owner of Shamlin, Inc.
2.10 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., VT of Ohio, Inc. and Owners of VT of Ohio, Inc.;
Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., Carter Voice, Inc. and Owners of Carter Voice,
Inc.; Transfer Agreement dated as of April 2, 1997 by and among
Premiere Technologies, Inc., Widdoes Enterprises, Inc. and Owners of
Widdoes Enterprises, Inc.; and Transfer Agreement dated as of April 2,
1997 by and among Premiere Technologies, Inc., Dowd Enterprises, Inc.
and Owners of Dowd Enterprises, Inc.(1)
2.11 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., SDVT, Inc. and Owners of SDVT, Inc.
2.12 Amended and Restated Transfer Agreement dated as of April 2, 1997 by
and among Premiere Technologies, Inc., Car Zee, Inc. and Owners of Car
Zee, Inc.
2.13 Transfer Agreement dated as of March 31, 1997 by and among Premiere
Technologies, Inc. and Owners of the VTEC Franchisee: 1086236 Ontario
Inc.
2.14 Transfer Agreement dated as of March 31, 1997 by and among Premiere
Technologies, Inc. and Owners of the Eastern Franchisees: 1139133
Ontario Inc., 1136827 Ontario Inc., 1006089 Ontario Inc., and 1063940
Ontario Inc.(1)
2.15 Uniform Terms and Conditions (incorporated by reference to Exhibit A
to Exhibit 2.4 to the Company's Current Report on Form 8-K dated April
2, 1997).
2.16 Asset Purchase Agreement dated September 18, 1996 by and among
Premiere Technologies, Inc., PTEK Acquisition Corporation, TeleT
Communications LLC and the Members of TeleT Communications LLC
(incorporated by reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K dated September 18, 1996).
10.1 Promissory Note dated April 30, 1997 between Premiere Communications,
Inc. and NationsBank, N.A. (South).
23.1 Consent of Arthur Andersen LLP.
- 6 -
<PAGE>
99.1 Press Release dated April 2, 1997 (incorporated by reference to
Exhibit 99.1 to the Company's Current Report on Form 8-K dated April
2, 1997).
- - --------------------
(1) Certain of the Franchisees operate through multiple, but commonly
owned, business entities.
- 7 -
<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: May 13, 1997
- 8 -
<PAGE>
VOICE-TEL ENTERPRISES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995
TOGETHER WITH REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Voice-Tel Enterprises, Inc.:
We have audited the accompanying consolidated balance sheets of Voice-Tel
Enterprises, Inc. (a Delaware Corporation) and subsidiary as of December 31,
1996 and 1995, and the related consolidated statements of operations,
shareholders' equity (deficit) and cash flows for the years then ended. These
consolidated financial statements and the supplementary consolidating
information referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and supplementary consolidating information based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Voice-Tel
Enterprises, Inc. and subsidiary as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the consolidated
financial statements taken as a whole. The consolidating information is
presented for purposes of additional analysis of the consolidated financial
statements rather than to present the financial position and results of
operations of the individual companies. This information has been subjected to
the auditing procedures applied in our audit of the consolidated financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the consolidated financial statements taken as a whole.
/s/ Arthur Andersen LLP
Cleveland, Ohio,
March 7, 1997.
(Except with respect to the matter discussed in Note 8, as to
which the date is April 30, 1997).
<PAGE>
VOICE-TEL ENTERPRISES, INC.
---------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
ASSETS
------
<TABLE>
<CAPTION>
1996 1995
----------- -----------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 354,063 $ 246,032
Accounts receivable, trade and
advances to affiliates, less
allowance for doubtful accounts of
approximately $196,000 and $300,000
in 1996 and 1995, respectively 7,194,057 8,173,383
Notes receivable, trade and affiliates 2,426,655 2,348,722
Refundable income taxes 45,000 -
Inventories 699,265 869,081
Deferred income taxes 425,000 320,000
Other assets 233,916 124,962
----------- -----------
Total current assets 11,377,956 12,082,180
----------- -----------
PROPERTY AND EQUIPMENT, at cost:
Furniture and fixtures 729,972 542,175
Equipment 2,071,957 2,044,246
Capital leases and leasehold
improvements 6,328,865 5,905,011
----------- -----------
9,130,794 8,491,432
Less-Accumulated depreciation and
amortization (4,638,363) (2,981,528)
----------- -----------
4,492,431 5,509,904
----------- -----------
OTHER ASSETS:
Notes receivable, trade and affiliates 519,010 1,684,209
Intangible assets, less accumulated
amortization of $734,804 and $452,258
in 1996 and 1995, respectively 2,979,774 2,963,379
Deferred income taxes 250,000 1,627,033
Deposits and other assets 94,710 90,474
----------- -----------
$19,713,881 $23,957,179
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
<PAGE>
VOICE-TEL ENTERPRISES, INC.
---------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
LIABILITIES AND SHAREHOLDERS' DEFICIT
-------------------------------------
<TABLE>
<CAPTION>
1996 1995
----------- -----------
CURRENT LIABILITIES:
<S> <C> <C>
Notes payable and current portion of
long-term debt $ 3,411,474 $ 2,881,850
Capital lease obligations 1,376,715 931,341
Accounts payable 3,919,762 4,828,175
Accrued expenses 2,565,564 1,895,664
Customer deposits 1,710,962 1,605,034
Accrued taxes 161,180 203,201
----------- -----------
Total current liabilities 13,145,657 12,345,265
----------- -----------
LONG-TERM DEBT, net of current portion 1,086,432 3,783,732
above
CAPITAL LEASE OBLIGATIONS 2,324,115 3,438,265
NOTE PAYABLE TO SHAREHOLDER 5,000,000 5,000,000
DEFERRED INCOME TAXES 725,000 275,000
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIT:
Common stock, Class A, no par value,
2,500 shares authorized, 388 shares
issued at December 31, 1996 and 1995 3,205,500 3,205,500
Common stock, Class B, no par value,
500 shares authorized, 37.5 shares
issued and outstanding at December
31, 1996 and 1995 656,250 656,250
Retained deficit (4,922,318) (3,363,862)
Foreign currency translation adjustment (29,614) (29,371)
----------- -----------
(1,090,182) 468,517
Less- Treasury stock, 57.1992 and 54
shares of Class A common stock at
cost at December 31, 1996 and 1995,
respectively (1,477,141) (1,353,600)
----------- -----------
Total shareholders' deficit (2,567,323) (885,083)
$19,713,881 $23,957,179
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
<PAGE>
VOICE-TEL ENTERPRISES, INC.
---------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
----------------------------------------------
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
REVENUES:
Equipment sales $ 5,684,398 $ 5,948,878
Management and service fees 3,795,992 4,440,702
Franchise fees 154,475 12,750
Royalties 6,979,720 5,540,672
Service center sales 9,032,728 8,486,706
----------- -----------
Total revenues 25,647,313 24,429,708
----------- -----------
COST AND OPERATING EXPENSES:
Cost of goods and services 10,006,233 9,605,229
Selling and administrative expenses 14,215,335 13,977,554
----------- -----------
24,221,568 23,582,783
----------- -----------
Income from operations 1,425,745 846,925
INTEREST EXPENSE, net (886,025) (842,673)
----------- -----------
Income before unusual item and
provision for income taxes 539,720 4,252
LOSS ON LITIGATION SETTLEMENT - (2,500,000)
----------- -----------
INCOME (LOSS) BEFORE PROVISION
(BENEFIT) FOR INCOME TAXES 539,720 (2,495,748)
PROVISION (BENEFIT) FOR INCOME TAXES 2,098,176 (724,007)
----------- -----------
Net loss $(1,558,456) $(1,771,741)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
VOICE-TEL ENTERPRISES, INC.
---------------------------
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
---------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
----------------------------------------------
<TABLE>
<CAPTION>
Common Stock
--------------------------------------------
Class A Class B
----------------------- -----------------
Foreign
Currency
Retained Translation
Shares Amount Shares Amount Deficit Adjustment Total
-------- ---------- ------ -------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1994 322.5000 $1,708,150 37.5 $656,250 $(1,592,121) $(19,301) $ 752,978
Issuance of stock 11.5000 143,750 - - - - 143,750
Foreign currency translation
adjustment - - - - - (10,070) (10,070)
Net loss - - - - (1,771,741) - (1,771,741)
-------- ---------- ---- -------- ----------- -------- -----------
BALANCE AT DECEMBER 31, 1995 334.0000 1,851,900 37.5 656,250 (3,363,862) (29,371) (885,083)
Treasury stock transactions (3.1992) (123,541) - - - - (123,541)
Foreign currency translation
adjustment - - - - - (243) (243)
Net loss - - - - (1,558,456) - (1,558,456)
-------- ---------- ---- -------- ----------- -------- -----------
BALANCE AT DECEMBER 31, 1996 330.8008 $1,728,359 37.5 $656,250 $(4,922,318) $(29,614) $(2,567,323)
-------- ---------- ---- -------- ----------- -------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
VOICE-TEL ENTERPRISES, INC.
---------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
----------------------------------------------
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(1,558,456) $(1,771,741)
Adjustments to reconcile net income to
net cash provided by (used for)
operating activities-
Depreciation and amortization 1,942,840 1,748,822
Loss (gain) on sale of assets 64,173 (33,590)
Deferred taxes 1,722,033 (915,089)
Changes in operating assets and
liabilities-
Accounts receivable, net 263,531 (1,149,326)
Refundable income taxes (45,000) 550,000
Inventories 169,816 (22,891)
Other assets (113,190) (149,512)
Accounts payable (908,413) 714,447
Accrued expenses 669,900 509,577
Customer deposits 105,928 296,017
Accrued taxes (42,021) 170,618
----------- -----------
Net cash provided by (used for)
operating activities 2,271,141 (52,668)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets 171,338 186,071
Decrease (increase) in advances to
affiliates 705,436 (1,885,855)
Additions to property and equipment,
net (252,383) (42,935)
Additions to intangibles (298,941) (175,998)
Decrease in notes receivable, trade
and affiliate 1,087,266 957,194
----------- -----------
Net cash provided by (used for)
investing activities 1,412,716 (961,523)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 395,000 4,150,942
Payments on notes payable and capital
leases (3,847,042) (3,466,297)
Issuance of common stock - 143,750
Purchase of treasury stock (123,541) -
----------- -----------
Net cash (used for) provided by
financing activities (3,575,583) 828,395
----------- -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Effect of exchange rate changes
on cash and cash equivalents $ (243) $ (10,070)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 108,031 (195,866)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 246,032 441,898
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 354,063 $ 246,032
========== ==========
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $1,664,346 $1,351,346
Cash paid for income taxes $ 308,739 $ 60,735
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
VOICE-TEL ENTERPRISES, INC.
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------------------
Nature of the Business
- - ----------------------
Voice-Tel Enterprises, Inc. (the Company) is a franchisor and an operator of an
international network of voice messaging service centers. The Company provides
its franchisees, through metropolitan and local franchises, the right to use the
Voice-Tel name, the Voice-Tel system of operations, initial training programs
and continuing consultation and advisory services. The Company shares royalties
with metropolitan franchises for the support of metropolitan franchise regions.
The Company entered into its first franchise agreement in March 1987. Through
December 31, 1996, the Company had 144 franchise agreements outstanding (143 in
1995), including affiliates and company owned service centers.
During 1996 and 1995, the Company operated six voice messaging service centers
in the United States. Voice-Tel Pty. Ltd. (formally known as Voice-Tralia
Enterprises, Pty. Ltd.), a wholly owned subsidiary, operated 10 service centers
in Australia and New Zealand (11 in 1995). Revenues from direct sales to
service center customers are included in service center sales in the
accompanying consolidated statements of operations.
Principles of Consolidations
- - ----------------------------
The consolidated financial statements include the accounts of the Company and
Voice-Tel Pty. Ltd. All significant intercompany accounts and transactions have
been eliminated in consolidation.
Inventories
- - -----------
Inventories consist of computer and communications equipment purchased for
resale to franchises. Inventory is stated at the lower of cost or market using
primarily the specific identification method.
Property and Equipment
- - ----------------------
Property and equipment are recorded at cost. Depreciation is computed
substantially by the straight-line method for financial accounting purposes to
amortize the cost of property and equipment over the estimated useful lives.
Assets under capital leases and leasehold improvements are amortized over the
lives of the respective leases. The following lives apply to these assets:
Furniture and fixtures 7 years
Equipment 5 years
Capital leases and leasehold
improvements 3 to 7 years
<PAGE>
In 1996, the Company adopted Statement of Financial Accounting Standards (FAS)
No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to Be Disposed of." FAS No. 121 establishes accounting standards for the
impairment of long-lived assets, certain identifiable intangibles, and goodwill
related to those assets. Under provisions of FAS No. 121, impairment losses are
recognized when expected future cash flows are less than the assets' carrying
value. The adoption of FAS No. 121 did not impact the Company's financial
position.
The Company periodically reviews the values assigned to long-lived assets, such
as property and equipment 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.
Intangibles
- - -----------
Intangible assets are recorded at cost and primarily consist of goodwill
obtained as part of the acquisition of company service centers, start-up and
organizational costs incurred in developing Voice-Tel Pty Ltd. and software
development costs for administrative applications. Intangible assets are
amortized by the straight-line method from 5 to 20 years.
Currency Translation
- - --------------------
Assets and liabilities of the international subsidiary have been translated at
current exchange rates in effect as of the end of the year, and revenues and
expenses have been translated at average rates of exchange in effect during the
year. Resulting cumulative translation adjustments have been recorded as a
separate component of shareholders' deficit.
Management and Service Fees
- - ---------------------------
The Company receives management, sales and marketing and technical service fees
from affiliated companies (Note 2). The Company also earns service fee revenue
from its franchises, primarily through the National Accounts Program (NAP).
Franchise Fees and Royalties
- - ----------------------------
The Company recognizes initial franchise fees as revenue when substantially all
the initial services related to such fees have been performed. The costs of
providing initial services are accounted for as a cost of franchise sales.
Expenses associated with advertising for potential franchise owners, issuing
franchise agreements and providing ongoing services are charged to expense as
incurred.
Royalties are based on a percentage of franchise revenue and are recognized as
revenue during the period in which the related sales by the franchise occur.
Statements of Cash Flows
- - ------------------------
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents. Cash
equivalents consist of government backed securities which are not guaranteed.
The effect of noncash capital lease transactions have been omitted from the
statements of cash flows and are discussed below:
<PAGE>
<TABLE>
<CAPTION>
1996 1995
-------- ----------
<S> <C> <C>
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTMENT ACTIVITIES:
Leased asset additions and related
obligations $625,950 $1,575,420
======== ==========
</TABLE>
Accounting Estimates
- - --------------------
The preparation of financial statements in conformity with generally accepted
accounting principles 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
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Reclassifications
- - -----------------
Certain 1995 amounts in the accompanying financial statements have been
reclassified to conform with the current year's presentation.
2. RELATED PARTY TRANSACTIONS:
---------------------------
The Company is partially owned directly and indirectly by franchise owners who,
at December 31, 1996, are a party to or have entered into 25 franchise
agreements.
Transactions which have occurred through the ordinary course of franchise
operations between the Company, its shareholders, the National Accounts Program
and a company related by common ownership (discussed below) are summarized as
follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Royalties and equipment sales $1,004 $ 814
Management and service fee revenue 3,550 4,227
Cost of goods and services (690) (566)
Interest income 424 668
------ ------
Receivable and payable balances with related parties at December 31 are as
follows (in thousands):
1996 1995
------ ------
Advances to affiliates $4,390 $4,946
Accounts receivable 83 92
------ ------
Total included in accounts
receivable $4,473 $5,038
====== ======
Notes receivable, current $2,365 $2,301
Notes receivable, noncurrent 444 1,569
------ ------
Total notes receivable $2,809 $3,870
====== ======
Accounts payable $ (76) $ (70)
</TABLE>
<PAGE>
Advances to affiliates and accounts receivable with related parties primarily
represent advances to Voice-Tel Network Limited Partnership (VTNLP) for the
development of a national voice messaging network. The general partnership
interest in VTNLP is owned by VTN, Inc., a company founded by certain
shareholders of the Company, and the limited partnership interest is owned by a
wholly owned subsidiary of a shareholder of the company.
In April 1994, the Company entered into a $3 million credit agreement with a
bank for the purpose of funding the purchase of equipment necessary to upgrade
VTNLP's national voice messaging network (Note 3). Concurrently, the Company
entered into a lease agreement with VTNLP to make payments to the Company equal
to the principal plus interest due to the bank. The balance outstanding on the
bank note at December 31, 1996 and 1995 of $928,588 and $1,785,724,
respectively, (Note 3) is due from the affiliate in monthly installments of
$71,428 and is included in the current and notes receivable balance
in the above table. Notes receivable also include advances which were due
November 30, 1996, bearing interest at 8% per annum.
The NAP, an association managed by the franchises and the Company, was developed
to increase market share of the Voice-Tel System by providing voice messaging
services to national accounts. Through 1993, the expenditures to develop and
expand this program were being funded by the Company. To offset these
expenditures, the Company received a percentage of national accounts billing and
other service fees from the franchises. The net cumulative funding deficiency at
December 31, 1993 was $1,081,659. Effective January 1, 1994, under agreement
between the Company and NAP, this balance was converted to a five-year note. The
note is being paid monthly and bears interest at the prime rate, adjusted
quarterly. The balance at December 31, 1996 and 1995 was $569,412 and $794,412,
respectively. During 1996 and 1995, the Company received a fee from the NAP of
$1,150,000 and $1,061,322, respectively, for management, accounting and billing
services.
During 1990, the Company entered into a "Service and Reseller Agreement" with
Amway Corporation (Amway) under which the Company will exclusively provide
certain products and services to Amway and its distributors for ultimate use and
resale to their customers under the Company's and Amway's owned tradenames and
trademarks. This agreement can be canceled with 6 months notice by mutual
agreement of the Company and Amway. Amway services represent approximately 52%
and 59% of the revenues derived by the Company's service centers and its
franchises for 1996 and 1995, respectively.
Franchises and company service centers contribute two percent of monthly sales
to a fund maintained by the Company for creation of advertising and promotional
material for the Voice-Tel System. Contributions generated from sales to
National Accounts are directed to the NAP.
<PAGE>
3. NOTES PAYABLE, LONG-TERM DEBT
AND CAPITAL LEASE OBLIGATIONS:
------------------------------
Notes payable and long-term debt consist of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Note payable to plaintiff for legal
settlement due in monthly installments
from September 1995 to April 1998, at
8% interest $1,434,082 $2,253,824
Notes payable to leasing companies, due
from March 1995 to April 2001, payable
in monthly installments, at interest
ranging from 9.5% to 18% 1,281,060 1,766,770
Note payable to bank due in monthly
installments from September 1994 to
March 1998, at prime plus a PR margin
(8.25% at December 31, 1996) 928,588 1,785,724
Note payable to bank due and payable on
demand, at prime plus 0.75% interest
(9% at December 31, 1996) 300,000 -
Note payable to supplier, due on demand
at 13% interest 226,323 226,323
Demand note payable to affiliate at 14%
interest 164,279 309,279
Note payable to shareholders for
partial stock redemptions, due in
monthly installments from April 1994
to August 1999, at 13% interest 143,043 185,742
Note payable to former owner of
acquired franchise operations, due in
monthly installments from March 1994 20,531 127,560
to February 1997, at 10% interest
Other - 10,360
---------- ----------
Total notes payable and debt 4,497,906 6,665,582
Less- Current portion 3,411,474 2,881,850
---------- ----------
Total long-term notes payable and
debt $1,086,432 $3,783,732
========== ==========
</TABLE>
<PAGE>
Capital lease obligations consist of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Capital lease obligations $3,700,830 $4,369,606
Less- Current portion 1,376,715 931,341
---------- ----------
Total long-term capital lease
obligations $2,324,115 $3,438,265
========== ==========
Subordinated convertible note due to
shareholder in December 1999, at 6.25%
interest $5,000,000 $5,000,000
========== ==========
</TABLE>
In December 1994, the Company entered into a $5 million subordinated convertible
note with a shareholder which remains in effect until December 1999. The note
bears interest at 6.25% due on the first business day each quarter. If interest
payments are not made currently, the shareholder can demand full payment of the
note immediately or the interest rate is increased to prime plus 4%. The
shareholder has the right at any time to convert the outstanding loan balance
into equity of the Company and of VTN, Inc.
The Company has a $1.5 million demand note (Agreement) with a bank. Borrowings
outstanding under the Agreement are limited to 80% of eligible receivables plus
35% of eligible inventory not to exceed $500,000. At December 31, 1996, the
available credit under these terms was $1.2 million and $300,000 borrowings were
outstanding. The Agreement has various covenants which limit the Company's
ability to advance funds to affiliated entities, guaranty indebtedness of
others, dispose of properties and merge with another corporation. Borrowings
are secured by certain receivables, inventory, furniture and fixtures and
equipment. At December 31, 1996, the Company was in violation of certain
covenants.
In April 1994, the Company entered into a $3 million credit agreement with a
bank for the purpose of funding the upgrade for VTNLP's national voice messaging
network (Note 2). The affiliate assumes all principal and interest obligations
due under the note. The note is due March 1998 and bears interest at prime plus
a PR margin. The PR margin ranges from 0% to 1-1/2%. The rate at December 31,
1996 was 8.25%. The credit agreement has various covenants which limit the
Company's ability to advance funds to affiliated entities, guaranty indebtedness
of others, dispose of properties and merge with another corporation. The
Company is also required to maintain certain financial ratios as defined in the
credit agreement. The Company was in violation of these covenants at December
31, 1996. The bank has not requested acceleration of payment. However, the
entire amount outstanding on the note, $928,588, has been classified as current
in notes payable and current portion of long-term debt on the accompanying
consolidated balance sheets.
On September 1, 1995, the Company settled a lawsuit for monthly payments over
the next 33 months aggregating $2,500,000 plus interest at 8%. The Company
originally commenced this action to seek a declaratory judgment that no joint
venture agreement or other relationship existed with the defendant relative to
the development of any international markets. Without admitting liability, the
Company agreed to this settlement subsequent to a jury verdict against it for
breach of contract in the amount of $5,280,580. Should the Company default on
its obligation under the settlement agreement, it may be liable for the full
amount of the jury verdict. The settlement also provides for the acceleration
of payments if certain assets are sold during the settlement payment period.
The Company's lenders agreed to waive any violation or event of default that may
occur as a result of this settlement.
<PAGE>
Under certain notes payable and capital lease obligations specific receivables,
inventory, furniture and fixtures and equipment have been pledged as security.
The aggregate maturities of notes payable, long-term debt, capital leases, the
demand note and the subordinated convertible note at December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
Debt Leases Total
---------- ---------- -----------
<S> <C> <C> <C>
1997 $3,411,474 $1,376,715 $ 4,788,189
1998 814,273 1,213,326 2,027,599
1999 5,210,239 906,195 6,116,434
2000 47,938 200,843 248,781
2001 and thereafter 13,982 3,751 17,733
---------- ---------- -----------
Total $9,497,906 $3,700,830 $13,198,736
========== ========== ===========
</TABLE>
Approximately $1,470,000 and $1,620,000 of interest expense was incurred during
1996 and 1995, respectively, and is included in the accompanying consolidated
statements of operations.
4. COMMITMENTS AND CONTINGENCIES:
------------------------------
Lease Agreements
- - ----------------
The Company leases various equipment and office facilities under operating lease
arrangements expiring between 1997 and 2001. The future value of net minimum
annual rentals under these lease arrangements at December 31, 1996 are
approximately $884,000 for 1997; $775,000 for 1998; $677,000 for 1999; $283,000
for 2000 and $25,000 for 2001.
Rental expense under operating leases for 1996 and 1995 was approximately
$896,000 and $864,000, respectively.
The Company has agreed to remarket certain equipment acquired by leasing
companies in the event of default by certain franchisees. If the equipment is
not remarketed within ninety days, the Company will make monthly lease payments
until the equipment is remarketed. The total of contingent lease payments under
these agreements is approximately $627,000 in 1997; $466,000 in 1998; $281,000
in 1999; $184,000 in 2000 and $66,000 in 2001 and thereafter, of which $255,000
represents interest through the final maturity of each lease. At December 31,
1996, there were no franchises in default of their lease agreement.
Source of Supplies
- - ------------------
The Company does not own a transmission network and, accordingly, relies on both
facilities-based and nonfacilities-based local and long-distance carriers and
other companies to provide transmission of its voice messaging subscribers.
Although management feels that alternative telecommunications facilities could
be found in a timely manner, disruption of these services for more than a brief
period would have an adverse effect on operating results.
<PAGE>
Factors Impacting Future Success
- - --------------------------------
The future success of the Company is dependent upon a number of factors,
including the effect of rapid technology changes affecting the markets for the
Company's products and services and management's ability to effectively respond
to those changes, including the development, implementation, marketing and
support of new or improved products, and services to respond to the changing
environment; effects of intense competition in information and telecommunication
services markets, including, among other things, the consequent effects on the
prices that the Company may charge for its products and services; the effect of
regulatory changes in the telecommunications industry; and the risk of
dependence on key managerial personnel.
5. INCOME TAXES:
-------------
All income tax amounts and balances have been computed in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." The income tax provision (benefit) is comprised of the following:
<TABLE>
<CAPTION>
1996 1995
---------- ---------
Current:
<S> <C> <C>
Federal $ 111,000 $ 68,000
State and local 129,000 25,000
International 42,354 25,000
---------- ---------
282,354 118,000
---------- ---------
Deferred:
Federal 475,000 (378,000)
International 1,340,822 (464,007)
---------- ---------
1,815,822 (842,007)
---------- ---------
$2,098,176 $(724,007)
========== =========
</TABLE>
The 1995 tax benefit is lower than the amounts otherwise calculated using the
statutory income tax rates due primarily to certain expenses which are not
deductible in part or in full due to the tax regulations.
The 1996 and 1995 tax provision (benefit) and deferred income taxes reflect the
impact of temporary differences between the amounts of assets and liabilities
recognized for financial reporting purposes and such amounts recognized for tax
purposes. Significant components of the Company's deferred income tax assets
and liabilities at December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
Deferred tax assets (liabilities):
Current-
<S> <C> <C>
Vacation accruals $ 133,000 $ 105,000
Settlement accrual 383,000 279,000
Other assets 128,000 111,000
Other liabilities (219,000) (175,000)
--------- ---------
Total $ 425,000 $ 320,000
========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
Noncurrent-
Settlement accrual $ 105,000 $ 488,000
Other 145,000 (108,000)
Voice-Tel Pty. Ltd. deferred tax asset 1,723,463 1,247,033
Valuation allowance (1,723,463) -
----------- ----------
$ 250,000 $1,627,033
=========== ==========
Property and equipment depreciation $ (405,000) $ (237,000)
Intangible asset amortization (153,000) (30,000)
Other (167,000) (8,000)
----------- ----------
$ (725,000) $ (275,000)
=========== ==========
</TABLE>
In 1996 and 1995, Voice-Tel Pty. Ltd. incurred losses before benefit of income
taxes of approximately $1,459,000 and $1,356,000, respectively. Voice-Tel Pty
Ltd.'s operating results for 1996 were significantly lower than projections as
the expected growth in business volume has not materialized. A valuation
allowance against the total amount of Voice-Tel Pty. Ltd.'s net deferred tax
asset has been established due to management's uncertainty regarding the future
operations of Voice-Tel Pty. Ltd. and whether future operating income generated
by Voice-Tel Pty. Ltd. can be generated in order to realize the deferred tax
asset of $1,723,463. Accordingly, the Company recorded a provision of $1,340,822
for Voice-Tel Pty. Ltd. in 1996 to reflect the establishment of the valuation
allowance.
At December 31, 1996, the Company has tax net operating loss credit
carryforwards in Australia and in New Zealand of approximately $1,821,000 and
$945,000, respectively. Australian and New Zealand tax regulations do not limit
the carryforward period.
6. CAPITAL STOCK:
--------------
In October 1991, the shareholders of the Company approved a Non-Qualified and
Incentive Stock Option Plan (Plan) to encourage key employees and officers of
the Company to acquire or increase their ownership of common stock of the
Company. The Plan provides stock options for an aggregate of 36 shares of Class
A Common Stock. The Plan provides for various vesting periods up to fifty
months. In the event of a change in control, all options are immediately
vested. In November 1991, under the Plan, the Company granted options to
purchase 11.5 of its shares at $12,500 per share. These shares were exercised
during 1995. In January 1993 under the Plan, the Company granted options to
purchase 3.5 of its shares at $15,000 per share exercisable prior to January 11,
1998. In June 1994, under the Plan, the Company granted options to purchase
eight of its shares at $31,000 per share exercisable prior to June 28, 2004. In
July 1995, under the Plan, the Company granted options to purchase 2.5 of its
shares at $31,000 per share exercisable prior to July 11, 2005. In March 1996,
under the Plan, the Company granted options to purchase four of its shares at
$31,000 per share exercisable prior to March 29, 2006.
In 1996, the Company adopted the disclosure-only provisions of Statement of
Financial Accounting Standards (FAS) No. 123, "Accounting for Stock Based
Compensation." FAS No. 123 requires that compensation expense in relation to
stock option plans be determined based on the fair value at the grant date.
Management's pricing model was used to determine that the pro forma impact of
compensation expense from options granted was immaterial.
<PAGE>
In March and August of 1994, the Company redeemed 13.5 and 19.5, respectively,
of the Company's common shares from certain shareholders in exchange for notes
payable of $418,000 and $604,500, respectively, (Note 3). The redemption
allowed the Company to repurchase its stock from certain shareholders that had
acquired the stock in connection with the repurchase of franchised service
centers owned by the shareholders. These shares are classified as treasury
stock in the accompanying consolidated financial statements. This transaction
has been accounted for on the cost method.
In September 1989, nonvoting Class B stock was issued and is subject to a stock
sale agreement which includes a provision granting the shareholder the right to
redeem three shares annually for a 10-year period (the redemption period); and
the Company the right to call any amount of the shares during the redemption
period. The initial redemption and call price was $17,500 per share, to be
adjusted each year based upon the change in the Consumer Price Index. No shares
have been called or redeemed as of December 31, 1996. In 1991, Class B shares
were issued in conjunction with an acquisition which are subject to a put and
call arrangement similar to above.
In April 1995, the Company entered into a separation agreement with an officer
which grants the officer the right beginning January 31, 1996 to redeem 16
shares. The officer, under the agreement, can put .2666 shares per month for 59
months and .2706 shares in the last month and the Company will pay $10,295.09
per month. As of December 31, 1996, 3.1992 shares were put to the Company. The
Company has the right any time to call all or any portion of the shares for a
purchase price of $31,000 per share, subject to adjustment in the event of a
reappraisal as a result of reorganization.
Certain stock transfer restriction agreements have limited the transfer of Class
A shares by allowing the Company and other shareholders the opportunity to
repurchase shares prior to their being offered to an outside person or entity.
The agreement also calls for mandatory repurchase of shares upon the death of
the shareholder. The purchase price to be paid for any redemptions is
determined annually by the shareholders.
7. EMPLOYEE BENEFIT PLAN:
----------------------
Effective May 1, 1993, the Company established an employee savings plan, which
was created under Section 401(k) of the Internal Revenue Code. All employees
who are twenty-one years of age, have completed 90 days of service and worked a
minimum of 500 hours annually are eligible to participate in the plan.
Participants may elect to defer 15% of compensation up to a maximum amount
determined annually pursuant to IRS regulations. For the year ended December
31, 1996, the Company made discretionary matching contributions to the plan
totaling approximately $41,000.
8. SUBSEQUENT EVENT:
-----------------
In April 1997, the Company entered into a definitive agreement to merge with
Premiere Technologies, Inc. (Premiere) in exchange for 729,734 shares of
Premiere common stock. On April 30, 1997, this merger transaction was
consummated. The merger will be accounted for under the pooling of interests
method. Immediately prior to closing the transaction, the Company called the
Class B shares pursuant to the Class B call provisions (Note 6); called the
remaining shares owned by a former officer of the Company pursuant to the
separation agreement (Note 6) reacquired 4.5 shares of treasury stock from a
shareholder; and paid in full the note payable to plaintiff for legal settlement
pursuant to the note agreement (Note 3).
<PAGE>
Additionally, the Company's shareholder converted its $5 million convertible
outstanding note into 95.75 shares of Class A common stock and 78.25 shares of
VTN, Inc. Class A common stock. Immediately following the transaction, Premiere
paid off the note payable to the bank (Note 3).
<PAGE>
VOICE-TEL ENTERPRISES, INC.
---------------------------
CONSOLIDATING BALANCE SHEET
---------------------------
DECEMBER 31, 1996
-----------------
ASSETS
------
<TABLE>
<CAPTION>
Voice-Tel
VTE Pty. Ltd. Eliminations Consolidated
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ - $ 354,063 $ - $ 354,063
Accounts receivable, trade and
advances to affiliates, less
allowance for doubtful accounts 12,075,473 212,082 (5,093,498) 7,194,057
Notes receivable, trade and affiliates 2,426,655 - - 2,426,655
Refundable income taxes 45,000 - - 45,000
Inventories 699,265 - - 699,265
Deferred income taxes 425,000 - - 425,000
Other assets 197,060 51,856 (15,000) 233,916
----------- ----------- ----------- -----------
Total current assets 15,868,453 618,001 (5,108,498) 11,377,956
----------- ----------- ----------- -----------
PROPERTY AND EQUIPMENT, at cost:
Furniture and fixtures 704,559 25,413 - 729,972
Equipment 1,969,066 102,891 - 2,071,957
Capital leases and leasehold
improvements 2,713,317 3,615,548 - 6,328,865
----------- ----------- ----------- -----------
5,386,942 3,743,852 - 9,130,794
Less- Accumulated depreciation and
amortization (3,081,367) (1,556,996) - (4,638,363)
----------- ----------- ----------- -----------
2,305,575 2,186,856 - 4,492,431
----------- ----------- ----------- -----------
OTHER ASSETS:
Notes receivable, trade and affiliates 519,010 - - 519,010
Intangible assets, less accumulated
amortization 2,783,776 261,856 (65,858) 2,979,774
Deferred income taxes 250,000 - - 250,000
Deposits and other assets 22,982 71,728 - 94,710
----------- ----------- ----------- -----------
$21,749,796 $ 3,138,441 $(5,174,356) $19,713,881
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this balance sheet.
<PAGE>
VOICE-TEL ENTERPRISES, INC.
---------------------------
CONSOLIDATING BALANCE SHEET
---------------------------
DECEMBER 31, 1996
-----------------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
<TABLE>
<CAPTION>
VOICE-TEL
VTE PTY. LTD. ELIMINATIONS CONSOLIDATED
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
CURRENT LIABILITIES:
Notes payable and current portion of
long-term debt $ 3,411,474 $ - $ - $ 3,411,474
Capital lease obligations 604,768 771,947 - 1,376,715
Accounts payable 3,632,025 5,381,235 (5,093,498) 3,919,762
Accrued expenses 1,735,604 829,960 - 2,565,564
Customer deposits 1,710,962 - - 1,710,962
Accrued taxes 161,180 - - 161,180
----------- ----------- ----------- -----------
Total current liabilities 11,256,013 6,983,142 (5,093,498) 13,145,657
----------- ----------- ----------- -----------
LONG-TERM DEBT, net of current portion
above 1,086,432 - - 1,086,432
CAPITAL LEASE OBLIGATIONS 710,092 1,614,023 - 2,324,115
NOTE PAYABLE TO SHAREHOLDER 5,000,000 - - 5,000,000
DEFERRED INCOME TAXES 725,000 - - 725,000
SHAREHOLDERS' EQUITY (DEFICIT):
Common stock, Class A 3,205,500 15,000 (15,000) 3,205,500
Common stock, Class B 656,250 - - 656,250
Retained earnings (deficit) 587,650 (5,444,110) (65,858) (4,922,318)
Foreign currency translation adjustment - (29,614) - (29,614)
----------- ----------- ----------- -----------
4,449,400 (5,458,724) (80,858) (1,090,182)
Less- Treasury stock, at cost (1,477,141) - - (1,477,141)
----------- ----------- ----------- -----------
Total shareholder's equity (deficit) 2,972,259 (5,458,724) (80,858) (2,567,323)
----------- ----------- ----------- -----------
$21,749,796 $ 3,138,441 $(5,174,356) $19,713,881
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this balance sheet.
<PAGE>
VTN, INC.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996, 1995 AND 1994
TOGETHER WITH REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
VTN, Inc.:
We have audited the accompanying consolidated balance sheets of VTN, Inc. (an
Ohio corporation) and subsidiary as of December 31, 1996 and 1995, and the
related consolidated statements of operations, shareholders' deficit and cash
flows for the three years in the period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of VTN, Inc. and
subsidiary as of December 31, 1996 and 1995, and the results of their operations
and their cash flows for the three years in the period ended December 31, 1996,
in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Cleveland, Ohio,
March 7, 1997.
(Except with respect to the matter
discussed in Note 6, as to which
the date is April 30, 1997).
<PAGE>
VTN, INC.
---------
CONSOLIDATED BALANCE SHEETS
---------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
ASSETS
------
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 17,477 $ 91,334
Accounts receivable, trade and
affiliates, less allowance for
doubtful accounts of approximately
$63,000 and $60,000 in 1996 and 1995,
respectively 210,541 137,668
----------- -----------
Total current assets 228,018 229,002
----------- -----------
PROPERTY AND EQUIPMENT, at cost:
Network equipment - 774,344
Office equipment and furniture 12,018 12,018
Property under capital leases 3,881,153 4,111,390
----------- -----------
3,893,171 4,897,752
Less- Accumulated depreciation and
amortization (1,081,973) (1,083,817)
----------- -----------
2,811,198 3,813,935
----------- -----------
OTHER ASSETS:
System development and organizational
costs, net of accumulated
amortization of $1,153,814 and
$546,492 in 1996 and 1995,
respectively 2,173,472 2,780,793
Other 15,712 76,731
----------- -----------
$ 5,228,400 $ 6,900,461
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
<PAGE>
VTN, INC.
---------
CONSOLIDATED BALANCE SHEETS
---------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
LIABILITIES AND SHAREHOLDERS' DEFICIT
-------------------------------------
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable to affiliates and others $ 1,232,577 $ 1,811,376
Capital lease obligations from
affiliates and others 1,128,286 1,084,604
Accounts payable - trade 41,986 25,175
Advances from affiliate 4,390,305 4,945,717
Accrued liabilities 951,927 950,775
----------- -----------
Total current liabilities 7,745,081 8,817,647
----------- -----------
LONG-TERM CAPITAL LEASE OBLIGATIONS
FROM AFFILIATES AND OTHERS 395,742 1,475,687
SHAREHOLDERS' DEFICIT:
Common stock, Class A, no par value,
625 shares authorized, 244.5 shares
issued at December 31, 1996 and 1995,
respectively 82,761 82,761
Common stock, Class B, no par value,
125 shares authorized, no shares
issued - -
Retained deficit (2,191,539) (3,167,634)
----------- -----------
(2,108,778) (3,084,873)
Less- Accumulated quarterly priority
returns of subsidiary capital (400,000) -
Less- Treasury stock at cost, 16.1992
and 13 shares of Class A common stock
at December 31, 1996 and 1995,
respectively (403,645) (308,000)
----------- -----------
Total shareholders' deficit (2,912,423) (3,392,873)
----------- -----------
$ 5,228,400 $ 6,900,461
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
<PAGE>
VTN, INC.
---------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
----------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- -----------
<S> <C> <C> <C>
NETWORK REVENUE $8,362,566 $6,201,887 $ 4,196,546
OPERATING EXPENSES:
Operating costs 2,427,595 2,005,476 1,395,169
Selling, general and administrative
expenses 2,652,687 3,309,633 3,352,841
Depreciation and amortization expense 1,643,543 863,829 303,447
---------- ---------- -----------
6,723,825 6,178,938 5,051,457
Income (loss) from operations 1,638,741 22,949 (854,911)
INTEREST EXPENSE 662,646 776,279 407,377
---------- ---------- -----------
Net income (loss) $ 976,095 $ (753,330) $(1,262,288)
========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
VTN, INC.
---------
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
----------------------------------------------------
Common Stock Accumulated Treasury Stock
--------------------- Quarterly --------------------
Class A Priority Class A
--------------------- Retained Returns of --------------------
Shares Amount Deficit Capital Shares Amount Total
-------- ---------- ----------- ------------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993 233.0 $78,878 $(1,152,016) $ - - $ - $(1,073,138)
Treasury stock transactions - - - - 1.0 (20,000) (20,000)
Net loss - - (1,262,288) - - - (1,262,288)
------ ------- ----------- --------- ------- --------- -----------
BALANCE AT DECEMBER 31, 1994 233.0 78,878 (2,414,304) - 1.0 (20,000) (2,355,426)
Issuance of stock 11.5 3,883 - - - - 3,883
Treasury stock transactions - - - - 12.0 (288,000) (288,000)
Net loss - - (753,330) - - - (753,330)
------ ------- ----------- --------- ------- --------- -----------
BALANCE AT DECEMBER 31, 1995 244.5 82,761 (3,167,634) - 13.0 (308,000) (3,392,873)
Treasury stock transactions - - - - 3.1992 (95,645) (95,645)
Accumulated quarterly priority - - - (400,000) - - (400,000)
returns of subsidiary capital
Net income - - 976,095 - - - 976,095
------ ------- ----------- --------- ------- --------- -----------
BALANCE AT DECEMBER 31, 1996 244.5 $82,761 $(2,191,539) $(400,000) 16.1992 $(403,645) $(2,912,423)
====== ======= =========== ========= ======= ========= ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
VTN, INC.
---------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
----------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 976,095 $ (753,330) $(1,262,288)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities-
Depreciation and amortization 1,643,543 863,829 303,447
Write-down of assets 187,881 - -
Changes in operating assets and
liabilities-
Accounts receivable, trade and
affiliates (72,873) 274,875 173,179
Other assets 61,019 56,286 (3,449)
Accounts payable--trade 16,811 (103,718) 74,618
Accrued liabilities 1,152 103,448 816,342
----------- ----------- -----------
Net cash provided by operating
activities 2,813,628 441,390 101,849
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (77,314) (443,375) (35,100)
System development costs - (735,072) (1,305,098)
----------- ----------- -----------
Net cash used for investing
activities (77,314) (1,178,447) (1,340,198)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital lease obligations
to affiliates and others (1,790,647) (1,162,676) (473,547)
Capital contributed - 3,883 -
Purchase of treasury shares (95,645) (288,000) (20,000)
Borrowings on note payable to affiliate 31,533 144,529 116,773
Quarterly priority return payments (400,000) - -
(Decrease) increase in advances from
affiliate (555,412) 2,122,313 1,599,526
----------- ----------- -----------
Net cash (used for) provided by
financing activities (2,810,171) 820,049 1,222,752
----------- ----------- -----------
NET (DECREASE) INCREASE IN CASH (73,857) 82,992 (15,597)
CASH AT BEGINNING OF YEAR 91,334 8,342 23,939
----------- ----------- -----------
CASH AT END OF YEAR $ 17,477 $ 91,334 $ 8,342
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $ 565,303 $ 686,418 $ 330,581
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
VTN, INC.
---------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
DECEMBER 31, 1996, 1995 AND 1994
--------------------------------
1. ORGANIZATION:
-------------
Nature of the Business
- - ----------------------
VTN, Inc. (the Company or General Partner) is an Ohio corporation organized on
October 4, 1990 to be a general partner of Voice-Tel Network, Limited
Partnership (the Partnership). A general partnership was formed on January 3,
1991 between VTN, Inc. and Merchandising Productions, Inc., a Delaware
corporation (MPI or Limited Partner). The Partnership was converted to a
limited partnership in December 1991 with the Company remaining as the General
Partner. The Partnership owns and operates an international network for the
transmission of voice messages.
Principals of the Company and Limited Partner also have ownership interests in
Voice-Tel Enterprises, Inc. (VTE). VTE is a franchisor and operator of an
international network of messaging service centers.
Principles of Consolidations
- - ----------------------------
The consolidated financial statements include the accounts of the Company and
the Partnership. The Company's interest in the Partnership is reflected by the
Partnership Agreement. All significant intercompany accounts and transactions
have been eliminated in consolidation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------------------
Property and Equipment
- - ----------------------
Property and equipment are recorded at cost. Depreciation and amortization (for
assets held under capital lease) are computed substantially by the straight-line
method for financial accounting purposes to allocate the cost of property and
equipment over their estimated useful lives or life of the lease (primarily five
years).
In 1996, the Company adopted Statement of Financial Accounting Standards (FAS)
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed of." FAS No. 121 establishes accounting standards for the
impairment of long-lived assets, certain identifiable intangibles, and goodwill
related to those assets. Under provisions of FAS No. 121, impairment losses are
recognized when expected undiscounted future cash flows are less than the
assets' carrying value. In late 1995, the Company completed a technology
upgrade of the Partnership's national messaging network equipment which involved
replacing the formerly used Tellab equipment. Management has decided to sell or
dispose of all remaining Tellab equipment on hand and estimates that any cash
flows from the sale of the Tellab equipment, less the cost to sell and ship the
equipment to be zero or negligible. Therefore in 1996 the Company recorded a
pretax charge of $187,881 in selling, general and administrative expenses in
connection with the write-down of the remaining book value of the Tellab
equipment.
<PAGE>
The Company periodically reviews the values assigned to long-lived assets, such
as property and equipment 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.
System Development and Organizational Costs
- - -------------------------------------------
System development and organizational costs primarily relate to technological
development and upgrades to the voice messaging network and are recorded at
cost. They consist of network circuit costs, personnel-related expenditures and
professional fees expended for the design, development and construction and
testing of the upgraded network and are amortized by the straight-line method
over a five-year period.
Network Revenue
- - ---------------
The Company earns network revenue primarily from VTE franchises, which resell
the network services to their customers. Revenues are recorded at the wholesale
amounts billed to VTE franchises.
Income Taxes
- - ------------
The Company pays no income taxes because its shareholders have elected to have
its income taxed under Section 1372 of the Internal Revenue Code, which provides
that, in lieu of corporation income taxes, the shareholders are taxed on their
proportionate share of the Company's taxable income.
Statements of Cash Flows
- - ------------------------
The effect of the noncash capital lease transactions have been omitted from the
statements of cash flows and are discussed below:
<TABLE>
<CAPTION>
1996 1995 1994
--------------------------------
<S> <C> <C> <C>
Leased asset additions and related
obligations $144,051 $959,174 $3,418,761
</TABLE>
3. COMMITMENTS AND CONTINGENCIES
-----------------------------
Allocation of Losses and Income
- - -------------------------------
Amortization of each partner's contribution or organizational costs is allocated
proportionally first. Losses of the Partnership are then allocated 20% to the
General Partner and 80% to the Limited Partner. However, in the event that the
balance of the Limited Partner's capital account is reduced to zero, then 100%
of the Limited Partner's share of all subsequent net losses shall be allocated
to the capital account of the General Partner. The General Partner will then be
allocated 100% of the subsequent net income until the aggregate amount of the
net income so allocated equals the aggregate amount of the Limited Partner's net
loss which was allocated to the General Partner. Income is generally,
thereafter, allocated 20% to the General Partner and 80% to the Limited Partner
until the Limited Partner's allocation equals its capital contribution plus
$10,750,000. Any additional income of the Partnership will then be allocated
80% to the General Partner and 20% to the Limited Partner.
There is no minority interest recorded on the accompanying consolidated balance
sheets as the Limited Partner's capital account was reduced to zero and the
General Partner's account reflected the deficits prior to January 1, 1995. 100%
<PAGE>
of the Partnership's net income or loss for the years ended December 31, 1996,
1995 and 1994, respectively, was allocated to the Company (i.e., General
Partner) in accordance with the Partnership agreement. During 1996, the
Partnership remitted $400,000 of priority return payments.
Quarterly Priority Returns and Return of Partnership Contributions
- - ------------------------------------------------------------------
Quarterly Priority Returns are distributions to the partners based upon the
average balance of Preferred Contributions plus the balance of unpaid Quarterly
Priority Returns from prior quarters and is calculated using 1/4 of the prime
rate in effect on the last day of the prior quarter. Distribution of Quarterly
Priority Returns on First Preferred Capital Contributions were to be made
beginning with the quarter ending March 31, 1994 and distributions on Additional
Preferred Capital Contributions were to be made beginning with the quarter
ending December 31, 1994. Quarterly Priority Returns for the calendar quarters
ending prior to the above mentioned quarters were deferred to be distributed
from excess cash quarterly within 30 days following September 30, 1994. The
Partnership was required to return $1,980,000 of Partnership Capital
Contributions and remit all unpaid Quarterly Priority Returns for First
Preferred Capital Contributions by April 30, 1996 and $2,000,000 of Additional
Preferred Capital Contributions by March 8, 1997.
At December 31, 1995, the Partnership had not remitted any Quarterly Priority
Return or Deferred Priority Return payments which totaled $1,275,000 and
consequently was in violation of the Partnership agreement. During 1996, the
Partnership remitted $400,000 of priority payments to the Limited Partner
pursuant to an agreement reached in March 1996.
At December 31, 1996, the total partner Quarterly Priority Returns and Deferred
Quarterly Priority payments due was $1,321,000. Consequently, the Partnership
was in violation of the Partnership Agreement (Note 7).
Accounting Estimates
- - --------------------
The preparation of financial statements in conformity with generally accepted
accounting principles 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 financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ form those estimates.
Source of Supplies
- - ------------------
The Company does not own a transmission network and, accordingly, relies on both
facilities-based and nonfacilities-based local and long-distance carriers.
Although management feels that alternative telecommunications facilities could
be found in a timely manner, disruption of these services for more than a brief
period would have an adverse effect on operating results.
Factors Impacting Future Success
- - --------------------------------
The future success of the Company is dependent upon a number of factors,
including the effect of rapid technological changes affecting the markets for
the Company's products and services and management's ability to effectively
respond to those changes, including the development, implementation, marketing
and support of new or improved products, and services to respond to the changing
environment; effects of intense competition in information and
telecommunications services markets, including, among other things, the
consequent effects on the prices that the Company may charge for its products
<PAGE>
and services; the effect of regulatory changes in the telecommunications
industry; and the risk of dependence on key managerial personnel.
4. RELATED PARTY TRANSACTIONS:
---------------------------
Certain shareholders of the Company and the Limited Partner also have a direct
or indirect interest in VTE, a franchisor of voice messaging systems. VTE
franchises and VTE's service centers are the primary users of the network. All
network services sold during the years ended December 31, 1996, 1995, and 1994
were to VTE franchises, the Limited Partner and VTE's service centers.
Approximately 81%, 88% and 90% of the services sold during 1996, 1995 and 1994,
respectively, were to the Limited Partner, its affiliates and its customers.
The Partnership maintains a management agreement with VTE whereby VTE provides
sales and marketing, finance and administration and management information
services. Management fees under this agreement were $2,400,000, $3,165,000 and
$2,400,000 in 1996, 1995 and 1994, respectively, and are included in selling,
general and administrative expenses in the accompanying statements of
operations.
VTE advances funds to the Company necessary to meet working capital
requirements. Total funds advanced at December 31, 1996 and 1995 were
$4,390,305 and $4,945,717, respectively. Total interest paid on these funds in
1996, 1995 and 1994 was $325,131, $345,049 and $130,724, respectively. Interest
is accrued on the outstanding advances at 8%. VTE also leases certain equipment
to the Partnership (Note 5).
VTE has a $1.5 million demand note (Agreement) with a bank. The Partnership has
guaranteed any indebtedness under this Agreement in the event of a default by
VTE. Under this guaranty, the Partnership has pledged certain assets as
security.
VTE has a $5 million note with a shareholder (parent of the Limited Partner)
with which the Partnership and the General Partner also are obligated as
borrowers. The VTE note is convertible at the shareholders option into common
stock equity of the Company and equity of VTE.
5. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS
TO AFFILIATES AND OTHERS:
-------------------------------------------
Notes payable at December 31, 1996 and 1995 consist of the following:
<TABLE>
<CAPTION>
1996 1995
------------------------
<S> <C> <C>
Note payable to VTE upon demand,
unsecured, interest accrued at 8% $1,232,577 $1,141,044
Note payable to shareholder in monthly
installments of $10,000 at 12%
interest, secured by stock in the - 60,000
Company
Note payable to supplier, due in
monthly installments from October 1995
to September 1996, at 12% interest - 610,332
---------- ----------
Total notes payable $1,232,577 $1,811,376
========== ==========
</TABLE>
<PAGE>
Capital lease obligations at December 31, 1996 and 1995 consist of the
following:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Capital lease obligation to VTE, due in
monthly installments from September
1994 to March 1998, at prime plus a PR
margin $ 928,588 $1,857,152
Capital lease obligations due to
leasing companies, due in monthly
installments ranging from September
1992 to January 2001, at interest
rates ranging from 8.8% to 14% 595,440 703,139
---------- ---------
Total capital lease obligations 1,524,028 2,560,291
Less- Current portion 1,128,286 1,084,604
---------- ----------
Total long-term capital lease
obligations $ 395,742 $1,475,687
========== ==========
</TABLE>
In April 1994, the Partnership entered into a $3 million lease agreement with
VTE for the purpose of funding an upgrade to the Partnership's national voice
messaging network. The upgrade equipment leased from VTE was funded by the
proceeds of a $3 million credit agreement with a bank. Under the lease
agreement, the Partnership makes monthly payments to VTE equal to the principal
of $71,428 plus interest due to the bank. The note is due March 1998 and bears
interest at prime plus a PR margin. The PR margin ranges from 0% to 1.5%. The
interest rate was 8.25%, 8.5% and 8.5% at December 31, 1996, 1995 and 1994,
respectively. Total interest expense was $117,736, $202,223, 145,271 in 1996,
1995 and 1994, respectively. Total lease payments made to VTE were $928,564,
$785,708, and $357,140 in 1996, 1995 and 1994, respectively. The lease
obligation is guaranteed by Amway Corporation, the parent company of MPI.
The future minimum lease payments under capital leases, excluding interest, for
the five years following December 31, 1996 are $1,128,285 for 1997; $237,529 for
1998; $134,310 for 1999; $22,547 for 2000 and $1,331 for 2001 and thereafter.
VTE guaranteed the obligations under capital leases in the event of a default by
the Partnership.
6. CAPITAL STOCK:
--------------
In October 1991, the shareholders of the Company approved a Non-Qualified and
Incentive Stock Option Plan (Plan) to encourage key officers of the Company to
acquire or increase their ownership of common stock of the Company. The Plan
provides stock options for an aggregate of 36 shares of Class A Common stock.
The Plan provides for various vesting periods up to fifty months. In the event
of a change in control, all options are immediately vested. In November 1991,
under the Plan, the Company granted options to purchase 11.5 of its shares at
$338 per share. These shares were exercised during 1995. In January 1993,
under the Plan, the Company granted options to purchase 3.5 of its shares at
$400 per share exercisable prior to January 11, 1998. In June 1994, under the
Plan, the Company granted options to purchase eight of its shares at $24,000 per
share exercisable prior to June 28, 2004. In July 1995, under the Plan, the
Company granted options to purchase 2.5 of its shares at $24,000 per share prior
to July 11, 2005. In March 1996, under the Plan, the Company granted options to
purchase four of its shares at $24,000 per share exercisable prior to March 29,
2006.
<PAGE>
In 1996, the Company adopted the disclosure-only provisions of Statement of
Accounting Standards (FAS) No. 123, "Accounting for Stock Based Compensation."
FAS No. 123 requires that compensation expense in relation to stock option plans
be determined based on the fair value at the grant date. Management's pricing
model was used to determine that the pro forma impact of compensation expense
from options granted was immaterial.
In April 1995, the Company entered into a separation agreement with an officer
which grants the officer the right beginning January 31, 1996 to redeem 16
shares. The officer, under the agreement, can put .2666 shares per month for 59
months and .2706 in the last month and the Company will pay $7,970 per month.
As of December 31, 1996, 3.1992 shares were put to the Company. The Company has
the right any time to call all or any portion of the shares for a purchase price
of $24,000 per share, subject to adjustment in the event of a reappraisal as a
result of the reorganization.
Certain stock transfer restriction agreements have limited the transfer of Class
A shares by allowing the Company and other shareholders the opportunity to
repurchase shares prior to their being offered to an outside person or entity.
The agreement also calls for mandatory repurchase of shares upon the death of
the shareholder. The purchase price to be paid for any redemptions is
determined annually by the shareholders.
7. SUBSEQUENT EVENT:
-----------------
On April 30, 1997, the Company closed a definitive agreement to merge with
Premiere Technologies, Inc. (Premiere) in exchange for 213,668 shares of Premier
common stock. Immediately prior to closing the definitive agreement the Company
called the remaining shares owned by an officer pursuant to the separation
agreement (Note 5) and reacquired 4.5 shares of treasury stock from a
shareowner. Additionally, VTE's shareowner (Parent of Limited Partner) converted
its $5 million VTE convertible outstanding note into 78.25 shares of the
Company's Class A common stock and 95.75 shares of VTE Class A common stock
immediately prior to closing the Premiere transaction. The merger will be
accounted for using the pooling of interests method. Also on April 30, 1997,
Premiere acquired the Limited Partner's interest in the Partnership in a
separate transaction. As a result of these transactions, the Partnership was
dissolved.
<PAGE>
CONTINUUM, INC.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996
TOGETHER WITH REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
and Shareholders of
Continuum, Inc.:
We have audited the accompanying balance sheet of Continuum, Inc. (a Kentucky S
corporation) as of December 31, 1996 and the related statements of income,
shareholders' deficit and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Continuum, Inc. as of December
31, 1996 and the results of its operations and its cash flows for the year
then ended in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Cleveland, Ohio
March 28, 1997
(except with respect to the matter
discussed in Note 10, as to which
the date is May 2, 1997)
<PAGE>
CONTINUUM, INC.
---------------
BALANCE SHEET
-------------
DECEMBER 31, 1996
-----------------
<TABLE>
<CAPTION>
ASSETS LIABILITIES AND SHAREHOLDERS' DEFICIT
------ -------------------------------------
<S> <C> <C> <C>
CURRENT ASSETS: CURRENT LIABILITIES:
Cash $ 19,708 Current portion of notes payable $140,854
Accounts receivable, less allowance Advances from shareholders 54,989
for doubtful accounts of $21,315 125,844 Accounts payable 30,711
Prepaid and other current assets 7,412 Taxes payable 51,385
--------- Unearned revenue 92,310
Total current assets 152,964 --------
Total current liabilities 370,249
--------
NOTES PAYABLE TO BANK 91,082
--------
PROPERTY AND EQUIPMENT, at cost 462,688 Total liabilities 461,331
--------
Less- Accumulated depreciation 281,644
---------
Net property and equipment 181,044 COMMITMENTS AND CONTINGENCIES
---------
SHAREHOLDERS' DEFICIT:
Common stock 4,000
Retained deficit (68,990)
--------
FRANCHISE FEES, net of accumulated
amortization of $22,667 62,333 Net shareholders' deficit (64,990)
--------- --------
Total liabilities and
Total assets $396,341 shareholders' deficit $396,341
========= ========
</TABLE>
The accompanying notes are an integral
part of this balance sheet.
<PAGE>
CONTINUUM, INC.
---------------
STATEMENT OF INCOME
-------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
<TABLE>
<S> <C>
REVENUES $1,094,447
COST OF SALES 187,676
----------
Gross margin 906,771
OPERATING EXPENSES:
Selling, general and administrative 663,351
Depreciation and amortization 100,248
----------
Total operating expenses 763,599
----------
OPERATING INCOME 143,172
OTHER EXPENSE:
Interest expense, net 28,093
----------
NET INCOME $ 115,079
----------
</TABLE>
The accompanying notes
are an integral part of this statement.
<PAGE>
CONTINUUM, INC.
---------------
STATEMENT OF SHAREHOLDERS' DEFICIT
----------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
<TABLE>
<CAPTION>
Common Retained
Stock Deficit Total
------ -------- -----
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995 $ 4,000 $(184,069) $(180,069)
Net income - 115,079 115,079
------- ---------- ----------
BALANCE AT DECEMBER 31, 1996 $ 4,000 $(68,990) $( 64,990)
======= ========== ==========
</TABLE>
The accompanying notes
are an integral part of this statement.
<PAGE>
CONTINUUM, INC.
---------------
STATEMENT OF CASH FLOWS
-----------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 115,079
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation and amortization 100,248
Changes in operating assets and liabilities-
Accounts receivable (54,076)
Prepaid and other current assets (6,565)
Accounts payable (5,327)
Taxes payable 15,713
Unearned revenue 23,899
----------
Net cash provided by operating activities 188,971
----------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of equipment (136,600)
----------
CASH FLOWS USED IN FINANCING ACTIVITIES:
Repayments of notes payable, net (8,063)
Payments on shareholder advances (26,742)
----------
Net cash used in financing activities (34,805)
----------
NET INCREASE IN CASH 17,566
CASH AT BEGINNING OF YEAR 2,142
----------
CASH AT END OF YEAR $ 19,708
==========
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $ 28,093
==========
</TABLE>
The accompanying notes
are an integral part of this statement.
<PAGE>
CONTINUUM, INC.
---------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1996
-----------------
1. COMPANY BACKGROUND:
-------------------
Continuum, Inc. (the Company) was incorporated in 1991. The Company provides
voice messaging services to its customers, who are primarily located in
Kentucky. The Company operates under franchise agreements which allow it to
service the Louisville, Lexington and Bowling Green, Kentucky markets.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES:
Presentation
- - ------------
The accompanying financial statements of the Company are prepared on the accrual
basis of accounting. The financial information included herein may not
necessarily reflect the financial position, results of operations or cash flows
of the Company in the future.
Property and Equipment
- - ----------------------
Property and equipment are recorded at cost. Major additions and improvements
are capitalized in the related property accounts. Replacements and repairs and
maintenance which do not extend the useful life of the property are expensed as
incurred.
The Company provides depreciation on the original cost of property and equipment
in service using the modified accelerated cost recovery system for financial
reporting purposes over the estimated useful lives of the respective assets as
follows:
Messaging computer systems 5 years
Office equipment and furniture 5-7 years
Depreciation expense relating to property and equipment was $95,934 in 1996.
Income Taxes
- - ------------
The Company and its shareholders have elected to be taxed as an S corporation
under the provisions of the Internal Revenue Code. As such, the taxable income
of the Company is included in the individual tax returns of the shareholders for
federal and state income tax purposes.
Intangibles
- - -----------
The costs of franchise rights acquired are being amortized using the straight-
line method over the life of the agreement. Amortization expense for 1996 was
$4,314.
<PAGE>
Revenue Recognition and Unearned Revenues
- - -----------------------------------------
Revenues are recognized as the Company performs services in accordance with
contract terms. Unearned revenue represents sales that have been billed in
advance for voice messaging services that have not been provided as of December
31, 1996. The majority of the Company's customers are billed in monthly
increments; however, some customers have quarterly and semiannual contract
terms.
Cost of Sales
- - -------------
Cost of sales includes all direct expenses incurred in providing voice messaging
services, including long-distance carrier costs and applicable taxes.
Source of Supplies
- - ------------------
The Company does not own a transmission network and, accordingly, relies on both
facilities-based and nonfacilities-based local and long-distance carriers and
other companies to provide transmission of its subscribers' voice messaging.
Although management feels that alternative telecommunications facilities could
be found in a timely manner, disruption of these services for more than a brief
period would have an adverse effect on operating results.
Use of Estimates
- - ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles 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
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Fair Value of Financial Instruments
- - -----------------------------------
In 1995, the Company adopted Statement of Financial Accounting Standards (SFAS)
No. 107, "Disclosures About Fair Value of Financial Instruments," which requires
disclosure of fair value information about instruments, whether or not
recognized in the balance sheet.
The fair value of the long-term debt approximates its carrying value as of
December 31, 1996.
Accounting for Long-Lived Assets
- - --------------------------------
The Company adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," in 1996. SFAS No. 121
requires that long-lived assets and certain identifiable intangible assets be
reviewed for impairment whenever circumstances indicate that the carrying amount
of an asset may not be recoverable. The adoption of this standard did not impact
the Company's financial statements. Management periodically reviews the
realizability of long-lived assets of the Company in accordance with SFAS
No. 121.
<PAGE>
Factors Impacting Future Success
- - --------------------------------
The future success of the Company is dependent upon a number of factors,
including the effect of rapid technological changes affecting the markets for
the Company's products and services and management's ability to effectively
respond to those changes, including the development, implementation, marketing
and support of new or improved products and services to respond to the changing
environment; effects of intense competition in information and telecommunication
services markets, including, among other things, the consequent effects on the
prices that the franchisor may charge for its products and services; the effect
of regulatory changes in the telecommunications industry; and the risk of
dependence on key managerial personnel.
3. CONCENTRATIONS OF CREDIT RISK AND SIGNIFICANT CUSTOMERS:
--------------------------------------------------------
Financial instruments that potentially subject the Company to concentrations of
credit risk consist only of accounts receivable, as collateral is not required.
The Company's risk of loss is limited due to advance billings to customers and
the ability to terminate access on delinquent accounts. The concentration of
credit risk is mitigated by the large number of customers comprising the
customer base and their dispersion across different industries and geographic
regions.
Approximately 25% of the Company's sales were derived through a single entity
during 1996. Although this entity is a single account that is managed on a
collective basis, it is actually comprised of a large number of individual
subscribers located throughout all franchise territories.
4. FRANCHISE AGREEMENTS:
---------------------
The franchise rights were acquired pursuant to franchise agreements entered into
with Voice-Tel Enterprises, Inc. (VTE). The term of each franchise agreement is
20 years with options to renew the agreement in one-year increments for an
additional ten years. The Company is required to pay a monthly royalty in an
amount equal to a specified percentage of gross sales. The royalty rates are 6%
in the first year of the franchise agreement, 8% in the second year, and 10%
thereafter. In addition, the Company is required to pay a monthly marketing and
promotion fee of 2% of gross sales. The Company is periodically required to pay
other special franchise fees and assessments.
In conjunction with the execution of the franchise agreements, the Company has
agreed to act as the service representative of VTE within each of its franchise
areas. As consideration for this, the Company receives a monthly fee equal to
40% of the royalties it pays to VTE.
5. PROPERTY AND EQUIPMENT:
-----------------------
Property and equipment consisted of the following at December 31, 1996:
<TABLE>
<S> <C>
Messaging computer systems $ 427,933
Office equipment and furniture 34,755
----------
462,688
Less- Accumulated depreciation (281,644)
----------
Property and equipment, net $ 181,044
==========
</TABLE>
<PAGE>
6. LONG-TERM DEBT:
---------------
Long-term debt consists of the following as of December 31, 1996:
Note payable, unsecured, monthly payments of principal
and interest of $2,283, interest at 9.05%, final
payment due March 1998 $ 32,272
Note payable, collateralized by certain equipment,
monthly payments of principal and interest of
$332, interest at 11.552%, final payment due
December 1998 7,060
Note payable, collateralized by certain property and
a financing statement, monthly payments of
principal and interest of $2,154, interest at
11.0%, final payment due April 1999 53,381
Note payable, collateralized by certain equipment,
monthly payments of principal and interest,
interest at prime plus 2%, final payment due
April 1999 10,019
Note payable, collateralized by certain equipment and
inventory, monthly payments of principal and
interest of $451, interest at 13.038%, final
payment due July 1999 11,806
Note payable, collateralized by certain accounts
receivable, equipment, and inventory, monthly
payments of principal and interest of $572,
interest at 12.029%, final payment due October
1999 16,462
Note payable, collateralized by certain accounts
receivable, equipment and inventory, monthly
payments of principal and interest of $1,566,
interest at 10.526%, final payment due
September 1998 29,909
Note payable, collateralized by a security agreement,
payments of interest of $429, monthly interest
at 10.5%, final payment of principal and interest
due February 1997 49,067
Note payable, collateralized by certain property and
a financing statement, monthly payments of
principal and interest of $657, interest at
11.0%, final payment due April 1999 16,150
Capital lease obligations, at weighted average
interest rates of 16.56% and 18.0%, payable
in monthly installments in varying amounts
through 1997 5,810
---------
Total 231,936
Less- Current portion of notes payable (140,854)
---------
Total long-term notes payable $ 91,082
=========
<PAGE>
Annual principal payments required under the provisions of the long-term debt
agreements are as follows:
<TABLE>
<CAPTION>
Notes Payable Capital Leases
------------- --------------
<S> <C> <C>
1997 $135,044 $5,810
1998 69,519 -
1999 21,563 -
-------- ------
$226,126 $5,810
======== ======
</TABLE>
7. LEASES:
-------
The Company leases certain equipment under operating leases which expire at
various dates to 1999. At December 31, 1996, future minimum lease payments under
all noncancelable lease arrangements in excess of one year are as follows:
<TABLE>
<CAPTION>
Year Ending Operating
December 31 Leases
---------------- --------------
<S> <C>
1997 $ 8,831
1998 3,443
1999 538
-------
Total minimum
lease payments $12,812
=======
</TABLE>
Certain leases contain purchase options and generally provide that the Company
shall pay for insurance, taxes and maintenance.
8. EQUITY INTERESTS:
-----------------
Capital Stock
- - -------------
The common stock authorized, issued, and outstanding at December 31, 1996 for
the Company is as follows:
<TABLE>
<CAPTION>
Amount
Shares Issued Contributed
Shares and Par Value for Common
Authorized Outstanding Per Share Stock
---------- ------------- --------- -----------
<S> <C> <C> <C> <C>
Continuum, Inc. 2,000 170 None $4,000
</TABLE>
<PAGE>
Stock Transfer Agreement
- - ------------------------
The Company has a share transfer agreement with and between its shareholders.
The agreement covers both voluntary and involuntary transfers of the Company's
common stock. In accordance with the provisions of the agreement, if a
shareholder desires to sell or transfer his shares, the remaining shareholders
have the right to acquire the shares. In the event that the remaining
shareholders do not exercise their right, the Company has the option to
reacquire the shares. The purchase price and the payment terms of any stock
purchase are based on a defined formula specified in the agreement.
9. COMMITMENTS AND CONTINGENCIES:
------------------------------
The Company has guaranteed payment of certain liabilities of an unconsolidated
affiliate. These guarantees are issued primarily to support borrowing
arrangements and are scheduled to expire during 1999. The Company's exposure for
financial guarantees is represented by the contractual amount of these
guarantees. The maximum credit loss in the event of nonperformance by the
affiliated party at December 31, 1996 was approximately $125,000.
10. SUBSEQUENT EVENTS:
------------------
In February 1997, the Company refinanced the note payable due February 1997. The
new note is a 24-month loan in the amount of $48,034. The Company pays $2,217
monthly for principal and interest at a rate of 10.0%. Final payment is due
February 1999.
On May 2, 1997, the Company closed a definitive agreement to merge with Premiere
Technologies, Inc. (Premiere) in exchange for 79,948 shares of Premiere stock.
Premiere provides a comprehensive, integrated suite of information and
telecommunications to a wide range of users. These services are delivered
through its computer telephone platform, which provides users with a single
point of access to Premiere's services. The platform is accessible from
virtually any telephone in the world and is also designed to communicate with
personal computers, facsimile machines and pagers. The merger will be accounted
for using the pooling-of-interests method.
<PAGE>
DMG, INC. AND VTG, INC.
COMBINED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996
TOGETHER WITH
AUDITORS' REPORT
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
DMG, Inc. and VTG, Inc.:
We have audited the accompanying combined balance sheet of DMG, INC. (d.b.a.
Voice-Tel) (a Texas S corporation) and VTG, INC. (d.b.a. Voice-Tel) (a Texas S
corporation) as of December 31, 1996 and the related combined statements of
operations, shareholders' equity, and cash flows for the year then ended. These
combined financial statements are the responsibility of the Companies'
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of DMG, Inc.
and VTG, Inc. as of December 31, 1996 and the results of their operations and
their cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
Atlanta, Georgia
March 26, 1997
(except with respect to the matter
discussed in Note 11, as to which the
date is April 2, 1997)
<PAGE>
DMG, INC. AND VTG, INC.
COMBINED BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $1,238,943
Accounts receivable, less allowance for uncollectible accounts of $0 250,632
Other current assets 11,289
----------
Total current assets 1,500,864
----------
PROPERTY AND EQUIPMENT (NOTE 5) 1,087,310
Less accumulated depreciation 684,267
----------
Net property and equipment 403,043
----------
OTHER ASSETS:
Franchise fee, net of accumulated amortization of $48,823 109,977
Other noncurrent assets 8,674
----------
Total other assets 118,651
----------
Total assets $2,022,558
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 373,215
Accrued liabilities 75,615
Due to affiliate 227,960
Due to shareholders 398,689
Deferred revenue 254,639
Current portion of long-term debt and capital lease obligations (Note 6) 147,594
----------
Total current liabilities 1,477,712
----------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS (NOTE 6) 271,526
----------
COMMITMENTS AND CONTINGENCIES (NOTE 7)
SHAREHOLDERS' EQUITY:
Common stock (Note 8) 299,898
Additional paid-in capital 60,046
Treasury stock (660,000)
Retained earnings 573,376
----------
Total shareholders' equity 273,320
----------
Total liabilities and shareholders' equity $2,022,558
==========
</TABLE>
The accompanying notes are an integral part of this combined balance sheet.
<PAGE>
DMG, INC. AND VTG, INC.
COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
REVENUES $6,078,478
COST OF SALES 2,117,847
-----------
Gross margin 3,960,631
-----------
OPERATING EXPENSES:
Selling and marketing 1,412,681
General and administrative 1,484,432
Depreciation and amortization 182,380
-----------
Total operating expenses 3,079,493
-----------
OPERATING INCOME 881,138
OTHER EXPENSE:
Interest expense (38,412)
-----------
NET INCOME $ 842,726
===========
</TABLE>
The accompanying notes are an integral part of this combined statement.
<PAGE>
DMG, INC. AND VTG, INC.
COMBINED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------- PAID-IN TREASURY RETAINED
SHARES AMOUNT CAPITAL STOCK EARNINGS TOTAL
--------- --------- ----------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE January 1, 1996 593,511 $299,898 $ 60,046 $(660,000) $346,713 $ 46,657
Net income 0 0 0 0 842,726 842,726
Dividends to shareholders 0 0 0 0 (616,063) (616,063)
--------- --------- ----------- ---------- ---------- ---------
BALANCE, December 31, 1996 593,551 $299,898 $ 60,046 $(660,000) $573,376 $ 273,320
========= ========= =========== ========== ========== =========
</TABLE>
The accompanying notes are an integral part of this combined statement.
<PAGE>
DMG, INC. AND VTG, INC.
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 842,726
Adjustments to reconcile net income to net cash provided by operating ------------
activities:
Depreciation and amortization 182,380
Changes in operating assets and liabilities:
Decrease in accounts receivable 20,522
Increase in other current assets (382)
Increase in accounts payable and accrued expenses 572,267
Deferred revenue 143,672
------------
Total adjustments 918,459
------------
Net cash provided by operating activities 1,761,185
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (297,519)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (213,571)
Dividends paid to shareholders (616,063)
------------
Net cash used in financing activities (829,634)
------------
NET INCREASE IN CASH 634,032
CASH AT BEGINNING OF YEAR 604,911
------------
CASH AT END OF YEAR $1,238,943
============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 48,000
============
</TABLE>
The accompanying notes are an integral part of this combined statement.
<PAGE>
DMG, INC. AND VTG, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION AND NATURE OF BUSINESS
ORGANIZATION
DMG, Inc. (d.b.a. Voice-Tel)("DMG") and VTG, Inc. (d.b.a. Voice-Tel)("VTG")
are separate corporations which have common ownership and are collectively
referred to herein as the "Companies." DMG, Inc. and VTG, Inc. were
incorporated in Texas on February 7, 1989 and June 26, 1990, respectively.
NATURE OF BUSINESS
The Companies provide digital messaging services under exclusive franchise
agreements with Voice-Tel Enterprises, Inc. ("VTE"). Business is conducted
using the proprietary trade name "Voice-Tel." The Voice-Tel system operates
on the Companies' computer processing equipment using commercially
available telephone lines. Effective September 1990, VTG acquired the
franchise rights to solicit and provide Voice-Tel services. Effective
August 1989 and December 1993, DMG acquired its franchise rights. The
Companies primarily operate in the state of Texas.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING ESTIMATES
The preparation of these combined financial statements in conformity with
generally accepted accounting principles 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 the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
PRESENTATION
The accompanying combined financial statements of the Companies are
prepared on the accrual basis of accounting and present their combined
assets, liabilities, revenues, expenses, and cash flows as if the Companies
existed as a separate corporation during the period presented.
The financial information included herein may not necessarily reflect the
financial position, results of operations, or cash flows of the Companies
in the future or what the
<PAGE>
financial position, results of operations, or cash flows of the Companies
would have been if they were combined as a separate and stand-alone company
during the periods presented.
PRINCIPLES OF COMBINATION
The financial statements include the accounts of DMG, Inc. and VTG, Inc.
All significant intercompany balances and transactions have been eliminated
in combination.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost, and depreciation is provided
for using the straight-line method over the estimated useful lives of the
assets, commencing when the assets are installed or placed in service. The
estimated useful lives are ten years for furniture and fixtures, seven
years for office equipment, and five years for computer equipment. The cost
of installed equipment includes expenditures for installation. Assets
recorded under capital leases and leasehold improvements are depreciated
over the shorter of their useful lives or the term of the related lease.
LONG-LIVED ASSETS
The Companies periodically review the values assigned to long-lived assets,
such as property and equipment, to determine whether any impairments are
other than temporary. Management believes that the long-lived assets in the
accompanying balance sheet are appropriately valued.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the long-term debt approximates its carrying value as of
December 31, 1996.
REVENUE RECOGNITION AND DEFERRED REVENUES
Revenues are recognized as the Companies perform services in accordance
with contract terms. Billings in advance for messaging services are
recorded on the accompanying combined balance sheet as deferred revenue.
These revenues are recognized when the related service is provided. The
majority of the Companies' customers are billed in monthly billing cycles;
however, some customers have quarterly and semiannual billing cycles.
COST OF SERVICES
Cost of services includes all direct expenses incurred in providing voice
messaging services, including long-distance carrier costs and applicable
taxes.
INTANGIBLE ASSETS
Purchased intangible assets, which include franchise agreements, are
recorded at cost. Intangible assets are amortized using the straight-line
method over the estimated useful lives of the related assets or terms of
the agreements (20 years for franchise agreements).
<PAGE>
INCOME TAXES
The Companies have elected to be treated as small business S corporations
for federal and state income tax purposes. As such, in lieu of corporate
income tax consequences arising at the Companies' level, the individual
shareholders are allocated their proportionate shares of the Companies'
taxable income or loss.
REGULATION
The Companies are subject to regulation by the FCC and by various state
public service and public utility commissions.
SOURCE OF SUPPLIES
The Companies do not own a transmission network and, accordingly, rely on
both facilities-based and nonfacilities-based local and long-distance
carriers and other companies to provide transmission of their subscribers'
voice messaging. Although management believes that alternative
telecommunications facilities could be found in a timely manner, disruption
of these services for more than a brief period would have an adverse effect
on operating results.
FACTORS IMPACTING FUTURE SUCCESS
The future success of the Companies is dependent upon a number of factors,
including the effect of rapid technological changes affecting the markets
for the Companies' products and services and management's ability to
effectively respond to those changes, including the development,
implementation, marketing, and support of new or improved products and
services to respond to the changing environment; effects of intense
competition in information and telecommunications services markets,
including, among other things, the consequent effects on the prices that
the Companies may charge for their products and services; the effect of
regulatory changes in the telecommunications industry; and the risk of
dependence on key managerial personnel.
3. CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
Financial instruments that potentially subject the Companies to
concentrations of credit risk consist only of accounts receivable, as
collateral is not required. The Companies' risk of loss is limited due to
advance billings to customers and the ability to terminate access on
delinquent accounts.
The Companies' ten largest customers accounted for approximately 43% of net
sales for the year ended December 31, 1996. Approximately 38% of the
Companies' sales were derived from a single national account during 1996.
Although this entity is a single national account that is managed on a
collective basis, it is actually comprised of a large number of individual
subscribers located throughout all franchise territories, including those
operated by other Voice-Tel franchisees.
<PAGE>
4. FRANCHISE AGREEMENTS
Franchise rights were acquired pursuant to franchise agreements entered
into with VTE (Note 1) in September 1990 by VTG and in August 1989 and
December 1993 by DMG. Under the franchise agreements, the Companies have
the exclusive rights to solicit and provide Voice-Tel digital messaging
services within the state of Texas. The terms of the franchise agreements
are 20 years, with an option to renew for an additional 10 years. In
addition to the initial franchise fee, which is being amortized over the
term of the agreement, the Companies are required to pay a monthly royalty
in an amount equal to 10% of gross sales, less certain costs. A monthly
marketing and promotion fee of 2% of gross sales is also payable to VTE.
In return for the Companies' acting as VTE's exclusive service
representatives and supervising operations of the local franchises, VTE
pays the Companies a continuing fee equal to 40% to VTG and 60% to DMG of
the royalty received by VTE on gross sales, less certain costs, for the
terms of the franchise agreements. The Companies are periodically required
to pay other special franchise fees and assessments. During 1996,
royalties, franchise fees, and other assessments totaled approximately
$788,000, net of any service representative fees received. In addition, the
franchise agreements contain a covenant not to compete for up to three
years subsequent to the termination of such agreement.
5. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1996 consisted of the following:
<TABLE>
<S> <C>
Furniture, fixtures, and equipment $1,085,861
Leasehold improvements 1,449
------------
Total property and equipment 1,087,310
Accumulated depreciation (684,267)
------------
Property and equipment, net $ 403,043
============
</TABLE>
6. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long-term debt and capital lease obligations at December 31, 1996 consisted
of the following:
$264,000 promissory note to a former shareholder; 7%
interest, payable in 60 monthly installments of
approximately $4,500 and remaining principal due in full
April 1999, security interest in future rights to all moneys
received from Amvox, Inc. $156,633
<PAGE>
<TABLE>
<S> <C>
$264,000 promissory note to a former shareholder; 7%
interest, payable in 60 monthly installments of
approximately $4,500 and remaining principal due in full
April 1999, security interest in future rights to all moneys
received from Amvox, Inc. $163,487
$80,000 revolving credit facility to a former shareholder;
12.25% interest, payable in equal monthly installments and
maturing April 1997 6,489
$80,000 revolving credit facility to a former shareholder;
12.25% interest, payable in equal monthly installments and
maturing April 1997 6,475
Capital lease obligations at varying interest rates and
terms, maturing through 1998 86,036
--------
419,120
Less current maturities (147,594)
--------
$271,526
========
</TABLE>
Future maturities of long-term debt and capital lease obligations at December
31, 1996 are as follows:
<TABLE>
<S> <C>
1997 $147,594
1998 131,657
1999 139,869
2000 0
2001 0
Thereafter 0
---------
$419,120
=========
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Companies lease certain facilities used in their operations under
noncancelable operating lease agreements. Future minimum annual rental
obligations under noncancelable operating leases as of December 31, 1996 are
as follows:
<PAGE>
<TABLE>
<S> <C>
1997 $ 108,168
1998 51,948
1999 39,785
2000 24,362
2001 3,082
Thereafter 0
-----------
$ 227,345
===========
</TABLE>
Rental expense was approximately $123,000 during 1996.
8. EQUITY INTERESTS
COMMON STOCK
The common stock authorized, issued, and outstanding at December 31, 1996
for each of the Companies is as follows:
<TABLE>
<CAPTION>
SHARES PAR AMOUNT
ISSUED VALUE CONTRIBUTED
SHARES AND PER FOR COMMON
AUTHORIZED OUTSTANDING SHARE STOCK
-------------- ------------- -------- ------------
<S> <C> <C> <C> <C>
DMG, Inc. 5,000,000 587,227 $0.50 $308,940
VTG, Inc. 1,000,000 6,284 1.00 51,004
</TABLE>
9. RELATED-PARTY TRANSACTIONS
VTG pays management fees to DMG for providing certain administrative
services. All intercompany revenues and expenses have been eliminated in
the accompanying combined financial statements.
As disclosed in Note 6, the Companies have outstanding debt to two former
shareholders for the repurchase of treasury shares and use as working
capital. The amount due to shareholders on the accompanying combined
balance sheet represents earnings distributions to individual
shareholders.
10. EMPLOYEE BENEFIT PLAN
The Companies maintain a separate defined contribution 401(k) savings plan
for all eligible employees. Under the plan, the Companies contribute a
discretionary percentage of each eligible employee's compensation. The
employees immediately vest in all contributions. The Companies'
contribution approximated $11,000 in 1996.
11
<PAGE>
11. SUBSEQUENT EVENT
On April 2, 1997, the Companies entered into a definitive agreement to
merge with Premiere Technologies, Inc. ("Premiere") in exchange for shares
of Premiere stock with a value of approximately $12,898,000. The
acquisition is subject to certain conditions and is expected to be
consummated on or about April 30, 1997. If completed, the merger is
intended to be accounted for using the pooling-of-interests method.
<PAGE>
PENTA GROUP, INC. AND
SCEPTER COMMUNICATIONS, INC.
COMBINED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1996
TOGETHER WITH
AUDITORS' REPORT
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Boards of Directors of
Penta Group, Inc. and
Scepter Communications, Inc.:
We have audited the accompanying combined balance sheet of PENTA GROUP, INC. (a
Washington state S corporation) AND SCEPTER COMMUNICATIONS, INC. (a Washington
state S corporation) as of December 31, 1996 and the related combined statements
of operations, shareholders' equity, and cash flows for the year then ended.
These combined financial statements are the responsibility of the Companies'
management. Our responsibility is to express an opinion on these combined
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Penta
Group, Inc. and Scepter Communications, Inc. as of December 31, 1996 and the
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
/s/ Authur Anderson LLP
Atlanta, Georgia
March 21, 1997
(except with respect to the matter
discussed in Note 11, as to which
the date is April 2, 1997)
<PAGE>
PENTA GROUP, INC. AND
SCEPTER COMMUNICATIONS, INC.
COMBINED BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<CAPTION>
ASSETS
- - ------------------------------------------------------------------------------------
CURRENT ASSETS:
<S> <C>
Cash $ 235,390
Accounts receivable:
Trade, less allowance for uncollectible accounts of $0 316,442
Related party 59,569
Advance to shareholder (Note 10) 38,382
Advance to related party (Note 10) 199,524
Notes receivable--related party (Note 10) 1,500,000
Prepaid expenses and other current assets 9,481
-------------
Total current assets 2,358,788
-------------
PROPERTY AND EQUIPMENT (NOTE 5) 1,934,159
Less accumulated depreciation (1,009,528)
-------------
Net property and equipment 924,631
-------------
OTHER ASSETS:
Franchise agreements, net of accumulated amortization of $73,375 206,625
Other, net 5,946
-------------
Total other assets 212,571
-------------
Total assets $3,495,990
=============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C>
CURRENT LIABILITIES:
Accounts payable $ 98,451
Accrued expenses 126,757
Deferred revenue 59,525
Current portion of long-term debt 1,173,285
Current portion of subordinated debt 265,517
-------------
Total current liabilities 1,723,535
-------------
LONG-TERM LIABILITIES (NOTE 6):
Long-term debt 1,242,228
Long-term portion of subordinated debt 462,901
-------------
Total long-term liabilities 1,705,129
-------------
COMMITMENTS AND CONTINGENCIES (NOTE 7)
SHAREHOLDERS' EQUITY:
Common stock (Note 8) 102,891
Retained earnings 8,205
Subscription receivable (43,770)
-------------
Total shareholders' equity 67,326
-------------
Total liabilities and shareholders' equity $3,495,990
=============
</TABLE>
The accompanying notes are an integral part of this combined balance sheet.
<PAGE>
PENTA GROUP, INC. AND
SCEPTER COMMUNICATIONS, INC.
COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
REVENUES $3,610,885
COST OF SERVICES 561,619
-------------
Gross margin 3,049,266
-------------
OPERATING EXPENSES:
Selling and marketing 453,655
General and administrative 1,514,264
Depreciation and amortization 371,256
-------------
Total operating expenses 2,339,175
-------------
OPERATING INCOME 710,091
OTHER INCOME (EXPENSE):
Interest expense (259,516)
Other, net 9,800
-------------
NET INCOME $ 460,375
=============
</TABLE>
The accompanying notes are an integral part of this combined statement.
<PAGE>
PENTA GROUP, INC. AND
SCEPTER COMMUNICATIONS, INC.
COMBINED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK SUBSCRIPTION RETAINED
-----------------------
SHARES AMOUNT RECEIVABLE EARNINGS TOTAL
-------- ---------- -------------- ------------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996 38,157 $102,891 $(43,770) $(323,898) $(264,777)
Dividends to shareholders 0 0 0 (128,272) (128,272)
Net income 0 0 0 460,375 460,375
-------- ---------- -------------- ------------- ---------
BALANCE, DECEMBER 31, 1996 38,157 $102,891 $(43,770) $ 8,205 $ 67,326
-------- ---------- -------------- ------------- ---------
</TABLE>
The accompanying notes are an integral part of this combined statement.
<PAGE>
PENTA GROUP, INC. AND
SCEPTER COMMUNICATIONS, INC.
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C>
Net income $ 460,375
--------------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 371,256
Changes in operating assets and liabilities:
Increase in accounts receivable--trade (24,465)
Decrease in accounts receivable--related party 403,581
Increase in other current assets (6,074)
Increase in accounts payable 12,278
Increase in accrued wages 92,422
Decrease in other accrued expenses (5,017)
Deferred revenue 7,966
Other 3,366
--------------
Total adjustments 855,313
--------------
Net cash provided by operating activities 1,315,688
--------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (157,434)
Advances to shareholder (38,382)
Advances to related parties (1,199,174)
--------------
Net cash used in investing activities (1,394,990)
--------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds under line of credit 252,018
Proceeds from long-term debt 608,669
Principal payments on long-term debt (411,874)
Principal payments on subordinated debt to shareholder (34,834)
Dividends paid to shareholders (128,272)
--------------
Net cash provided by financing activities 285,707
--------------
NET INCREASE IN CASH 206,405
CASH AT BEGINNING OF YEAR 28,985
--------------
CASH AT END OF YEAR $ 235,390
==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 268,411
==============
</TABLE>
The accompanying notes are an integral part of this combined statement.
<PAGE>
PENTA GROUP, INC. AND
SCEPTER COMMUNICATIONS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION AND NATURE OF BUSINESS
ORGANIZATION
Penta Group, Inc. ("Penta") and Scepter Communications, Inc. ("Scepter")
are S corporations which have common ownership and which are collectively
referred to herein as the "Companies." Penta was incorporated in the state
of Washington on September 10, 1990. Scepter was incorporated in the state
of Washington on March 18, 1994.
NATURE OF BUSINESS
The Companies provide digital messaging services under exclusive franchise
agreements with Voice-Tel Enterprises, Inc. ("VTE"). Business is conducted
using the proprietary trade name "Voice-Tel." The Voice-Tel system operates
on the Companies' computer processing equipment using commercially
available telephone lines. Effective January 1, 1991, Penta acquired the
franchise rights to solicit and provide Voice-Tel services to substantially
the entire state of Washington. Late in 1991, Penta also acquired the
Voice-Tel franchise rights for the entire states of Idaho and Utah. Early
in 1993, Penta acquired the franchise rights for the city of Colorado
Springs, Colorado. Effective January 1, 1995, Scepter acquired the
franchise rights for the state of Alaska.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles 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 those estimates.
PRESENTATION
The accompanying combined financial statements of the Companies are
prepared on the accrual basis of accounting and present their combined
assets, liabilities, revenues,
<PAGE>
expenses, and cash flows as if the Companies existed as a separate
corporation during the period presented.
The financial information included herein may not necessarily reflect the
financial position, results of operations, or cash flows of the Companies
in the future or what the financial position, results of operations, or
cash flows of the Companies would have been if they were combined as a
separate and stand-alone company during the period presented.
PRINCIPLES OF COMBINATION
The financial statements include the accounts of Penta Group, Inc. and
Scepter Communications, Inc. All significant intercompany balances and
transactions have been eliminated in combination.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost, and depreciation is provided
for using the straight-line method over the estimated useful lives of the
assets, commencing when the assets are installed or placed in service. The
estimated useful lives are ten years for furniture and fixtures, seven
years for office equipment, and five years for computer equipment. The cost
of installed equipment includes expenditures for installation. Assets
recorded under capital leases and leasehold improvements are depreciated
over the shorter of their useful lives or the terms of the related leases.
LONG-LIVED ASSETS
The Companies periodically review the values assigned to long-lived assets,
such as property and equipment, to determine if any impairments are other
than temporary. Management believes that the long-lived assets in the
accompanying balance sheet are appropriately valued.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the long-term debt approximates its carrying value as of
December 31, 1996.
REVENUE RECOGNITION AND DEFERRED REVENUES
Revenues are recognized as the Companies perform services in accordance
with contract terms. Billings in advance for messaging services are
recorded on the accompanying combined balance sheet as deferred revenue.
These revenues are recognized when the related service is provided. The
majority of the Companies' customers are billed in monthly billing cycles;
however, some customers have quarterly and semi-annual billing cycles.
COST OF SERVICES
Cost of services includes all direct expenses incurred in providing voice
messaging services, including long-distance carrier costs and applicable
taxes.
<PAGE>
INTANGIBLE ASSETS
Purchased intangible assets, which include franchise agreements, are
recorded at cost. Intangible assets are amortized using the straight-line
method over the estimated useful lives of the related assets or terms of
the agreements (20 years for franchise agreements).
INCOME TAXES
The Companies have elected to be treated as small business S corporations
for federal and state income tax purposes. As such, in lieu of corporate
income tax consequences arising at the Companies' level, the individual
shareholders are allocated their proportionate share of the Companies'
taxable income.
REGULATION
The Companies are subject to regulation by the FCC and by various state
public service and public utility commissions.
SOURCE OF SUPPLIES
The Companies do not own a transmission network and, accordingly, rely on
both facilities-based and nonfacilities-based local and long-distance
carriers and other companies to provide transmission of its subscribers'
voice messaging. Although management believes that alternative
telecommunications facilities could be found in a timely manner, disruption
of these services for more than a brief period would have an adverse effect
on operating results.
FACTORS IMPACTING FUTURE SUCCESS
The future success of the Companies is dependent upon a number of factors,
including the effect of rapid technological changes affecting the markets
for the Companies' products and services and management's ability to
effectively respond to those changes, including the development,
implementation, marketing, and support of new or improved products and
services to respond to the changing environment; effects of intense
competition in information and telecommunications services markets,
including, among other things, the consequent effect on the prices that the
Companies may charge for their products and services; the effect of
regulatory changes in the telecommunications industry; and the risk of
dependence on key managerial personnel.
3. CONCENTRATIONS OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
Financial instruments that potentially subject the Companies to
concentrations of credit risk consist only of accounts receivable, as
collateral is not required. The Companies' risk of loss is limited due to
advance billings to customers and the ability to terminate access on
delinquent accounts. Approximately 70% of the Companies' sales were derived
through a single national account during 1996. Although this entity is a
single national account that is managed on a collective basis, it is
actually comprised of a large number of individual subscribers located
throughout all franchise territories, including those operated by other
Voice-Tel franchises.
<PAGE>
4. FRANCHISE AGREEMENTS
The franchise rights were acquired pursuant to franchise agreements entered
into with VTE (Note 1). The terms of each franchise agreement are 20 years,
with an option to renew the agreement for an additional 10 years. The
Companies are required to pay a monthly royalty in an amount equal to a
specified percentage of gross sales. The royalty rates are 6% in the first
year of the franchise agreement, 8% in the second year, and 10% thereafter.
In addition, the Companies are required to pay a monthly marketing and
promotion fee of 2% of gross sales. The Companies are periodically required
to pay other special franchise fees and assessments.
In conjunction with the execution of the franchise agreements, the
Companies have agreed to act as the service representatives of VTE within
each of their franchise areas except Alaska. As consideration for this, the
Companies receive a monthly fee equal to 40% (20% for the Colorado Springs
franchise) of the royalties they pay to VTE. During 1996, royalties,
franchise fees, and other assessments totaled $278,736, net of any service
representative fees received.
5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31, 1996:
<TABLE>
<S> <C>
Messaging computer systems $ 1,621,503
Office furniture 60,301
Office equipment 170,737
Computer software 25,012
Leasehold improvements 13,174
Vehicles 43,432
---------------
1,934,159
Less accumulated depreciation (1,009,528)
---------------
Property and equipment, net $ 924,631
===============
</TABLE>
6. FINANCING OBLIGATIONS
LONG-TERM DEBT
Long-term debt consisted of the following at December 31, 1996:
<TABLE>
<S> <C>
Borrowings under U.S. Bank of Washington, N.A. ("U.S. Bank") credit
agreement (up to $200,000); monthly interest-only payments at a variable
rate of 1% over the bank's prime rate (9.25% at December 31, 1996); secured
by accounts receivable; personally guaranteed by a shareholder; expires on
June 1, 1997 $ 200,000
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Borrowings under U.S. Bank credit agreement for the purchase of equipment
(up to $200,000); monthly interest-only payments at a variable rate of 1%
over the bank's prime rate (9.25% at December 31, 1996); secured by
equipment; personally guaranteed by a shareholder; expires on June 1, 1997 52,018
Note payable to U.S. Bank in 35 monthly installments of $33,300, plus
interest at a rate of 1% over the bank's prime rate (9.25% at December 31,
1996); one final installment of $834,500, plus interest, is due on November
10, 1998; collateralized by equipment and accounts receivable; personally
guaranteed by a shareholder 1,567,100
Note payable to U.S. Bank in monthly installments of $8,333, plus interest
at a rate of 1.5% over the bank's prime rate (9.75% at December 31, 1996);
balance due June 1, 1997; collateralized by all assets; personally
guaranteed by a shareholder 497,219
Note payable to U.S. Bank in 48 monthly installments of $2,724, principal
and interest at a rate of 1% over the bank's prime rate (9.25% at December
31, 1996); balance due July 1, 2000; collateralized by equipment;
personally guaranteed by a shareholder 99,176
--------------
2,415,513
Less current maturities 1,173,285
--------------
Long-term debt, net of current portion $ 1,242,228
==============
</TABLE>
Maturities of long-term debt at December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997 $1,173,285
1998 1,194,310
1999 29,436
2000 18,482
2001 0
Thereafter 0
------------
$2,415,513
============
</TABLE>
SUBORDINATED DEBT
Subordinated debt consisted of the following at December 31, 1996:
<TABLE>
<S> <C>
Subordinated convertible debentures due to shareholder; monthly interest-
only payments at a rate of 8.5%, due on December 31, 2020, redeemable
(without penalty) at par by the Companies after June 30, 2000, convertible
at any time into common stock of the Companies at a ratio of one share of
stock for each dollar of debenture principal converted, subordinate to all
debt owed to U.S. Bank $ 200,000
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Subordinated term note due to shareholder; monthly interest-only payments
at a rate of 3% over prime rate (11.25% at December 31, 1996) during 1996,
monthly installments of $15,672 plus interest at a rate of 3% over prime
rate beginning January 1, 1997 until balance is paid in full;
collateralized by all assets, subordinate to all debt owed to U.S. Bank $ 450,965
Subordinated demand notes payable to relatives of a shareholder, accrue
interest at a rate of 3% over the prime rate (11.25% at December 31, 1996);
due on demand; subordinated to all debt owed to U.S. Bank 18,712
Subordinated notes payable to shareholders, interest rate of 12%; monthly
installments of interest and principal of $2,118; balance due on
demand after January 1, 1997 or due on March 31, 1998; subordinate to all 58,741
----------
debt owed to U.S. Bank 728,418
Less current maturities 265,517
----------
Long-term subordinated debt, net of current portion $ 462,901
</TABLE>
Principal payments on subordinated debt are due as follows:
<TABLE>
<S> <C>
1997 $ 265,517
1998 188,064
1999 74,837
2000 0
2001 0
Thereafter 200,000
-----------
$ 728,418
-----------
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
LEASE OBLIGATIONS
The Companies have entered into various operating leases for facilities
used in their operations. Aggregate future minimum rental commitments under
noncancelable operating leases with original or remaining periods in excess
of one year as of December 31, 1996 are as follows:
<PAGE>
<TABLE>
<CAPTION>
OPERATING
LEASES
-----------
<S> <C>
1997 $114,061
1998 9,707
1999 0
2000 0
2001 0
Thereafter 0
----------
$123,768
----------
</TABLE>
Rental expense under operating leases amounted to $134,736 for the year ended
December 31, 1996.
8. EQUITY INTERESTS
CAPITAL STOCK
The common stock authorized, issued, and outstanding at December 31, 1996
for each of the Companies is as follows:
<TABLE>
<CAPTION>
AMOUNT
PAR CONTRIBUTED
SHARES VALUE FOR
SHARES ISSUED AND PER COMMON
AUTHORIZED OUTSTANDING SHARE STOCK
------------- -------------- -------- --------------
<S> <C> <C> <C> <C>
Penta Group, Inc. 1,000,000 37,975 None $102,709
Scepter Communications, 50,000 182 None 182
Inc.
</TABLE>
SHARE TRANSFER AGREEMENT
The Companies have a share transfer agreement with and between their
shareholders. The agreement covers both voluntary and involuntary transfers
of the Companies' common stock. In accordance with the provisions of the
agreement, if a shareholder desires to sell or transfer his shares, the
remaining shareholders have the first right to acquire the shares. In the
event that the remaining shareholders do not exercise their right, the
Companies have the option to acquire the shares. The purchase price and the
payment terms of any stock purchase are based on a defined formula
specified in the agreement.
SUBSCRIPTION RECEIVABLE
In 1994, the Companies issued 6,475 shares of common stock in exchange for
a receivable in the amount of $43,770. This amount is recorded in the
Companies' balance sheet as a subscription receivable.
<PAGE>
9. EMPLOYEE BENEFIT PLANS
Effective January 1, 1995, the Companies established an employee savings
plan, which was created under Section 401(k) of the Internal Revenue Code.
All employees who are 21 years of age, have completed one year of service,
and work a minimum of 1,000 hours annually are eligible to participate in
the plan. Participants may elect to defer up to 15% of compensation up to a
maximum amount determined annually pursuant to IRS regulations. For the
year ended December 31, 1996, the Companies made discretionary matching
contributions to the plan totaling $3,783.
10. RELATED-PARTY TRANSACTIONS
As of December 31, 1996, the Companies advanced $157,518 to Virtual
Services, Inc. ("Virtual"), an affiliated company under common ownership,
and reflected this amount in the Companies' balance sheet as an advance to
related-party. Virtual conducts business in the state of Washington.
As of December 31, 1996, the Companies advanced $42,006 to Genesys
Messaging Corporation ("Genesys"), an affiliated company, and reflected
this amount in the Companies' balance sheet as an advance to related party.
Genesys conducts business in Vancouver, British Columbia as Voice-Tel of
Vancouver.
As of December 31, 1996, the Companies had loaned $1.5 million to Teknon
Corporation. The loan bears interest at 1% above the prime rate (9.25% at
December 31, 1996). The loan requires monthly payments of interest only.
The entire principal balance, plus accrued interest, is due on demand after
October 1, 1996. Unless paid sooner, the entire balance of principal and
interest is due on October 1, 1997. The balance of these loans is recorded
as related-party notes receivable in the Companies' balance sheet.
During 1996, the Companies advanced $38,382 to a shareholder. The advance
is short-term and does not bear interest. The amount is recorded in the
Companies' balance sheet as an advance to shareholder.
11. SUBSEQUENT EVENT
On April 2, 1997, the Companies entered into a definitive agreement to
merge with Premiere Technologies, Inc. ("Premiere") in exchange for shares
of Premiere stock with a value of approximately $6,003,000. The acquisition
is subject to certain conditions and is expected to be consummated on or
about April 30, 1997. If completed, the merger is intended to be accounted
for using the pooling-of-interests method.
<PAGE>
PREMIER BUSINESS SERVICES, INC.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996
TOGETHER WITH REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
and Shareholders of
Premier Business Services, Inc.:
We have audited the accompanying balance sheet of Premier Business Services,
Inc. (a North Carolina S corporation) as of December 31, 1996 and the related
statements of income, shareholders' equity and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Premier Business Services, Inc.
as of December 31, 1996 and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Cleveland, Ohio
March 21, 1997
(except with respect to the matter
discussed in Note 9, as to which
the date is May 2, 1997)
<PAGE>
PREMIER BUSINESS SERVICES, INC.
-------------------------------
BALANCE SHEET
-------------
DECEMBER 31, 1996
-----------------
<TABLE>
<CAPTION>
ASSETS LIABILITIES AND SHAREHOLDERS' EQUITY
------ ------------------------------------
<S> <C> <C> <C>
CURRENT ASSETS: CURRENT LIABILITIES:
Cash $ 26,023 Current portion of notes payable $ 69,896
Accounts receivable, less allowance for doubtful Advances from shareholders 44,926
accounts of $16,610 261,018 Accounts payable 3,471
------------
Accrued liabilities 26,109
Total current assets 287,041 Taxes payable 72,000
------------
Unearned revenue 348,962
------------
PROPERTY AND EQUIPMENT 1,489,623
Total current liabilities 565,364
Less- Accumulated depreciation 1,000,558
------------
Net property and equipment 489,065
------------
NOTES PAYABLE TO BANK 71,092
------------
Total liabilities 636,456
------------
OTHER ASSETS:
Goodwill, net of accumulated amortization of
$29,925 169,577
Franchise fees, net of accumulated amortization
of $27,728 41,210 SHAREHOLDERS' EQUITY:
Deposits 5,309 Common stock 56,875
------------
Retained earnings 298,871
-----------
Other assets, net 216,096
------------
Net shareholders' equity 355,746
------------
Total assets $ 992,202
============
Total liabilities and shareholders' equity $ 992,202
============
</TABLE>
The accompanying notes are an integral part of this balance sheet.
<PAGE>
PREMIER BUSINESS SERVICES, INC.
-------------------------------
STATEMENT OF INCOME
-------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
<TABLE>
<CAPTION>
<S> <C>
REVENUES $2,822,497
COST OF SALES 366,864
------------
Gross margin 2,455,633
------------
OPERATING EXPENSES:
Selling, general and administrative expenses 1,622,252
Depreciation and amortization 270,015
------------
Total operating expenses 1,892,267
------------
Operating income 563,366
OTHER EXPENSE:
Interest, net 13,376
Other 16,226
------------
Net income $ 533,764
============
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
PREMIER BUSINESS SERVICES, INC.
-------------------------------
STATEMENT OF SHAREHOLDERS' EQUITY
---------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
<TABLE>
<S> <C>
BALANCE AT DECEMBER 31, 1995 $ 295,132
Net income 533,764
Shareholder distributions paid (473,150)
---------
BALANCE AT DECEMBER 31, 1996 $ 355,746
=========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
PREMIER BUSINESS SERVICES, INC.
-------------------------------
STATEMENT OF CASH FLOWS
-----------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 533,764
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 270,015
Reinhold Covenant payment 3,000
Loss on sale of assets 4,226
Changes in operating assets and liabilities:
Accounts receivable, trade (16,740)
Accounts payable (691)
Accrued liabilities (14,039)
Unearned revenue 36,444
-----------
Net cash provided by operating activities 815,979
-----------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of equipment (274,900)
Proceeds from investments (34,128)
Proceeds from sale of equipment 3,824
Proceeds from Premier Partners, net (15,000)
-----------
Net cash used in investing activities (320,204)
-----------
CASH FLOWS USED IN FINANCING ACTIVITIES:
Repayments of notes payable, net (8,954)
Payments on shareholders' advances, net (57,774)
Dividends paid (473,150)
-----------
Net cash used in financing activities (539,878)
-----------
NET DECREASE IN CASH (44,103)
CASH AT BEGINNING OF YEAR 70,126
-----------
CASH AT END OF YEAR $ 26,023
===========
SUPPLEMENTAL DISCLOSURE:
Cash paid for interest $ 13,376
===========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
PREMIER BUSINESS SERVICES, INC.
-------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1996
-----------------
1. NATURE OF OPERATIONS:
---------------------
Premier Business Services, Inc. (the Company) provides voice messaging services
to its customers, who are primarily located in North Carolina. The Company owns
the rights to operate franchises which provide service to markets in Greensboro,
Raleigh-Durham, Winston-Salem and Wilmington, North Carolina.
In 1991, the Company purchased a 50% interest in a joint venture, Premier
Partners, Inc. (a North Carolina S corporation). Effective March 31, 1996, the
Company merged with Premier Partners of Wilmington, Inc. (PPW) (a North Carolina
S corporation). Prior to the merger, the Company's shareholders each owned a
50% equity interest in both the Company and PPW.
On April 1, 1996, the Company issued stock equivalent to 20% of the total
outstanding shares in order to acquire the remaining 50% interest in Premier
Partners, Inc. The acquisition, accounted for as a purchase, resulted in the
Company recording approximately $200,000 of goodwill.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES:
------------------------------------------
Presentation
- - ------------
The accompanying financial statements of the Company are prepared on the accrual
basis of accounting. The financial information included herein may not
necessarily reflect the financial position, results of operations or cash flows
of the Company in the future.
Property and Equipment
- - ----------------------
Property and equipment are recorded at cost. Major additions and improvements
are capitalized in the related property account. Replacements and repairs and
maintenance which do not extend the useful life of the property are expensed as
incurred.
Depreciation expense is computed using the modified accelerated cost recovery
system (MACRS). Depreciation expense is based on the following estimated useful
lives as described in the tax code:
<TABLE>
<S> <C>
Computer equipment 5 years
Pagers 5-7 years
Furniture and fixtures 7 years
Leasehold improvements 39 years
</TABLE>
Software is being depreciated using the straight-line method using an estimated
useful life of 3-5 years.
Depreciation expense relating to property and equipment was $224,790 in 1996.
<PAGE>
Intangibles
- - -----------
The costs of franchises acquired are being amortized using the straight-line
method over 20 years. Goodwill is being amortized over five years using the
straight-line method. Amortization expense charged to operations was $45,225 in
1996.
Revenue Recognition and Unearned Revenue
- - ----------------------------------------
Revenues are recognized as the Company performs services in accordance with
contract terms. Unearned revenue represents sales that have been billed in
advance for services that have not been provided as of the date of these
financial statements. The majority of the Company's customers are billed in
quarterly increments; however, some customers have monthly and semiannual
contract terms.
Cost of Sales
- - -------------
Cost of sales includes all direct expenses incurred in providing voice messaging
services including long-distance carrier costs and applicable taxes.
Income Taxes
- - ------------
The Company and its shareholders have elected to be taxed as an S corporation
under the provisions of the Internal Revenue Code. As such, the taxable income
of the Company is included in the individual tax returns of the shareholders for
federal and state income tax purposes.
Source of Supplies
- - ------------------
The Company does not own a transmission network and, accordingly, relies on both
facilities-based and nonfacilities-based local and long-distance carriers and
other companies to provide transmission of its subscribers' voice messaging.
Although management feels that alternative telecommunications facilities could
be found in a timely manner, disruption of these services for more than a brief
period would have an adverse effect on operating results.
Use of Estimates
- - ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles 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
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Fair Value of Financial Instruments
- - -----------------------------------
In 1996, the Company adopted Statement of Financial Accounting Standards (SFAS)
No. 107, "Disclosures About Fair Value of Financial Instruments," which requires
disclosure of fair value information about instruments, whether or not
recognized in the balance sheet.
The fair value of the long-term debt approximates its carrying value as of
December 31, 1996.
<PAGE>
Accounting for Long-Lived Assets
- - --------------------------------
The Company adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" in 1996. SFAS No. 121
requires that long-lived assets and certain identifiable intangible assets be
reviewed for impairment whenever circumstances indicate that the carrying amount
of an asset may not be recoverable. The adoption of this standard did not impact
the Company's financial statements. Management periodically reviews the
realizability of long-lived assets of the Company in accordance with SFAS No.
121.
Factors Impacting Future Success
- - --------------------------------
The future success of the Company is dependent upon a number of factors,
including the effect of rapid technological changes affecting the markets for
the Company's products and services and management's ability to effectively
respond to those changes, including the development, implementation, marketing
and support of new or improved products and services to respond to the changing
environment; effects of intense competition in information and
telecommunications services markets, including, among other things, the
consequent effects on the prices that the franchisor may charge for its products
and services; the effect of regulatory changes in the telecommunications
industry; and the risk of dependence on key managerial personnel.
3. CONCENTRATIONS OF CREDIT RISK AND SIGNIFICANT CUSTOMERS:
--------------------------------------------------------
Financial instruments that potentially subject the Company to concentrations of
credit risk consist only of accounts receivable, as collateral is not required.
The Company's risk of loss is limited due to advance billings to customers and
the ability to terminate access on delinquent accounts. The concentration of
credit risk is mitigated by the large number of customers comprising the
customer base and their dispersion across different industries and geographic
regions.
Approximately 19% of the Company's sales were derived through a single entity
during 1996. Although this entity is a single account that is managed on a
collective basis, it is actually comprised of a large number of individual
subscribers located throughout all franchise territories.
4. FRANCHISE AGREEMENTS:
---------------------
The franchise rights were acquired pursuant to franchise agreements entered into
with Voice-Tel Enterprises, Inc. (VTE). The term of each franchise agreement is
20 years with an option to renew the agreement for an additional 10 years. The
Company is required to pay a monthly royalty in an amount equal to a specified
percentage of gross sales. The royalty rates are 6% in the first year of the
franchise agreement, 8% in the second year, and 10% thereafter. In addition,
the Company is required to pay a monthly marketing and promotion fee of 2% of
gross sales. The Company is periodically required to pay other special
franchise fees and assessments.
In conjunction with the execution of the franchise agreements, the Company has
agreed to act as the service representative of VTE within each of its franchise
areas. As consideration for this, the Company receives a monthly fee equal to
10% of the royalties it pays to VTE. These fees are accounted for as an offset
to the royalty expense paid to VTE.
<PAGE>
5. PROPERTY AND EQUIPMENT:
-----------------------
Property and equipment consisted of the following at December 31, 1996:
<TABLE>
<CAPTION>
<S> <C>
Computer equipment $ 1,241,348
Furniture and fixtures 55,213
Equipment pagers 77,065
Software 112,204
Leasehold improvements 3,793
-------------
1,489,623
Less- Accumulated depreciation (1,000,558)
-------------
Property and equipment, net $ 489,065
=============
</TABLE>
6. LONG-TERM DEBT:
---------------
Long-term debt consists of the following as of December 31, 1996:
Note payable collateralized by certain accounts receivable,
inventory and equipment, monthly payments of principal
and interest of $1,800, interest at prime plus 0.5%, final
payment due March 2000 $ 70,200
Note payable collateralized by certain equipment, monthly
payments of principal and interest, interest at prime plus
0.5%, final payment due August 1998 25,402
Note payable collateralized by certain equipment, monthly
payments of principal and interest, interest at prime plus
0.5%, final payment due October 1998 22,279
Note payable, unsecured, monthly payments of principal
and interest, interest at prime plus 0.5%, final payment
due May 1997 5,095
Note payable, corporation, unsecured, monthly payments of
principal and interest, interest at prime plus 0.5%, final
payment due May 1998 18,012
----------
Total 140,988
Less- Current portion of notes payable (69,896)
----------
Total long-term notes payable $ 71,092
==========
<PAGE>
Annual principal payments required under the provisions of the long-term debt
agreements are as follows:
<TABLE>
<CAPTION>
Notes Payable
-------------
<S> <C>
1997 $ 69,896
1998 46,492
1999 20,400
2000 4,200
2001 -
Thereafter -
--------
$140,988
========
</TABLE>
7. EQUITY INTERESTS:
-----------------
Capital Stock
- - -------------
The common stock authorized, issued and outstanding at December 31, 1996 for the
Company is as follows:
<TABLE>
<CAPTION>
Amount
Shares Issued Contributed
Shares and Par Value for Common
Authorized Outstanding Per Share Stock
---------- ------------- --------- -----------
<S> <C> <C> <C> <C>
Premier Business Services, Inc. 100,000 56,875 $1 $ -
</TABLE>
Stock Transfer Agreement
- - ------------------------
The Company has a share transfer agreement with and between its stockholders.
The agreement covers both voluntary and involuntary transfers of the Company's
common stock. In accordance with the provisions of the agreements, if a
shareholder desires to sell or transfer his shares and the remaining
shareholders do not exercise their right, the Company has the option to acquire
the shares. The purchase price and the payment terms of any stock purchase are
based on a defined formula specified in the agreement.
8. EMPLOYEE BENEFIT PLAN:
----------------------
The Company maintains a simplified employee pension plan (SEP) covering
substantially all employees. All employees who are 21 years of age and
have completed one year of service are eligible to participate in the plan.
Under the terms of the plan, the Company contributes a percentage of the
employee's compensation to the plan. Company contributions are made monthly at
the percentage approved by the board of directors. The SEP plan contribution
expense was $88,931 in 1996.
<PAGE>
9. SUBSEQUENT EVENT:
-----------------
On May 2, 1997, the Company closed a definitive agreement to merge with Premiere
Technologies, Inc. (Premiere) in exchange for 256,580 shares of Premiere
stock. Premiere provides a comprehensive, integrated suite of information and
telecommunications to a wide range of users. These services are delivered
through its computer telephony platform, which provides users with a single
point of access to Premiere's services. The platform is accessible from
virtually any telephone in the world and is also designed to communicate with
PCs, facsimile machines and pagers. The merger will be accounted for using the
pooling-of-interests method.
<PAGE>
SANDS COMMUNICATIONS, INC. D.B.A. VOICE-TEL OF ARIZONA,
SANDSCOMM, INC. D.B.A. VOICE-TEL OF ORANGE COUNTY,
SANDS COMM, INC. D.B.A. VOICE-TEL OF NEW MEXICO,
AND DUNES COMMUNICATIONS, INC.
D.B.A. VOICE-TEL OF SAN FERNANDO VALLEY
COMBINED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1996
TOGETHER WITH AUDITORS' REPORT
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Boards of Directors
and Shareholder of
Sands Communications, Inc.
d.b.a. Voice-Tel of Arizona,
SandsComm, Inc.
d.b.a. Voice-Tel of Orange County,
Sands Comm, Inc.
d.b.a. Voice-Tel of New Mexico,
and Dunes Communications, Inc.
d.b.a. Voice-Tel of San Fernando Valley:
We have audited the accompanying combined balance sheet of SANDS COMMUNICATIONS,
INC. D.B.A. VOICE-TEL OF ARIZONA, SANDSCOMM, INC. D.B.A. VOICE-TEL OF ORANGE
COUNTY, SANDS COMM, INC. D.B.A. VOICE-TEL OF NEW MEXICO, AND DUNES
COMMUNICATIONS, INC. D.B.A. VOICE-TEL OF SAN FERNANDO VALLEY as of December 31,
1996 and the related combined statements of operations, shareholder's equity,
and cash flows for the year then ended. These combined financial statements are
the responsibility of the Companies' management. Our responsibility is to
express an opinion on these combined financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the
Companies as of December 31, 1996 and the combined results of their operations
and their cash flows for the year then ended in conformity with generally
accepted accounting principles.
/s/ Arthur Andersen LLP
Atlanta, Georgia
March 25, 1997
(except with respect to the matter
discussed in Note 9, for which
the date is April 2, 1997)
<PAGE>
SANDS COMMUNICATIONS, INC. D.B.A. VOICE-TEL OF ARIZONA,
SANDSCOMM, INC. D.B.A. VOICE-TEL OF ORANGE COUNTY,
SANDS COMM, INC. D.B.A. VOICE-TEL OF NEW MEXICO,
AND DUNES COMMUNICATIONS, INC.
D.B.A. VOICE-TEL OF SAN FERNANDO VALLEY
COMBINED BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash $ 280,966
Accounts receivable 301,245
Less allowance for uncollectible accounts 28,208
-------------
Total current assets 554,003
-------------
PROPERTY AND EQUIPMENT 2,284,646
Less accumulated depreciation (1,402,886)
-------------
Net property and equipment 881,760
-------------
OTHER ASSETS:
Franchise fees, net of accumulated amortization of $114,419 370,581
Customer lists, net of accumulated amortization of $216,237 26,848
Other 6,096
-------------
Total other assets 403,525
-------------
Total assets $ 1,839,288
=============
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Accrued expenses $ 81,968
Deferred revenue 79,440
Current portion of long-term debt 289,122
Revolving line of credit (Note 4) 24,700
-------------
Total current liabilities 475,230
-------------
LONG-TERM LIABILITIES (NOTE 4):
Long-term debt 242,692
-------------
COMMITMENTS AND CONTINGENCIES (NOTE 7)
SHAREHOLDER'S EQUITY:
Common stock:
Sands Communications, Inc. d.b.a. Voice-Tel of Arizona, no par value; 1,000,000 shares
authorized, 100 shares issued and outstanding 5,000
SandsComm, Inc. d.b.a. Voice-Tel of Orange County, no par value; 100,000 shares
authorized, 10,000 shares issued and outstanding 10,000
Sands Comm, Inc. d.b.a. Voice-Tel of New Mexico, $1 stated value; 50,000 shares
authorized, 5,000 shares issued and outstanding 5,000
Dunes Communications, Inc. d.b.a. Voice-Tel of San Fernando Valley, no par value;
100,000 shares authorized, 10,000 shares issued and outstanding 10,000
Additional paid-in capital 943,742
Retained earnings 147,624
-------------
Total shareholder's equity 1,121,366
-------------
Total liabilities and shareholder's equity $ 1,839,288
=============
</TABLE>
The accompanying notes are an integral part of this combined balance sheet.
<PAGE>
SANDS COMMUNICATIONS, INC. D.B.A. VOICE-TEL OF ARIZONA,
SANDSCOMM, INC. D.B.A. VOICE-TEL OF ORANGE COUNTY,
SANDS COMM, INC. D.B.A. VOICE-TEL OF NEW MEXICO,
AND DUNES COMMUNICATIONS, INC.
D.B.A. VOICE-TEL OF SAN FERNANDO VALLEY
COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
REVENUES $3,838,770
COST OF SALES 844,484
------------
Gross margin 2,994,286
------------
OPERATING EXPENSES:
Selling and marketing 141,104
General and administrative 1,567,834
Depreciation and amortization 461,104
------------
Total operating expenses 2,170,042
------------
OPERATING INCOME 824,244
OTHER EXPENSE:
Interest expense 81,449
------------
NET INCOME $ 742,795
============
</TABLE>
The accompanying notes are an integral part of this combined statement.
<PAGE>
SANDS COMMUNICATIONS, INC. D.B.A. VOICE-TEL OF ARIZONA,
SANDSCOMM, INC. D.B.A. VOICE-TEL OF ORANGE COUNTY,
SANDS COMM, INC. D.B.A. VOICE-TEL OF NEW MEXICO,
AND DUNES COMMUNICATIONS, INC.
D.B.A. VOICE-TEL OF SAN FERNANDO VALLEY
COMBINED STATEMENT OF SHAREHOLDER'S EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
SANDS DUNES
COMMUNICATIONS, INC. SANDSCOMM, INC. SANDS COMM, INC. COMMUNICATIONS, INC.
D.B.A. VOICE-TEL D.B.A. VOICE-TEL D.B.A. VOICE-TEL D.B.A. VOICE-TEL OF
OF ARIZONA OF ORANGE COUNTY OF NEW MEXICO SAN FERNANDO VALLEY
COMMON STOCK COMMON STOCK COMMON STOCK COMMON STOCK ADDITIONAL
---------------------- -------------------- -------------------- ---------------------
SHARES SHARES SHARES SHARES PAID-IN
ISSUED AMOUNT ISSUED AMOUNT ISSUED AMOUNT ISSUED AMOUNT CAPITAL
---------- ---------- --------- --------- --------- --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996 5,000 $ 5,000 10,000 $10,000 5,000 $ 5,000 10,000 $10,000 $943,742
Net income 0 0 0 0 0 0 0 0 0
Distributions to shareholder 0 0 0 0 0 0 0 0 0
---------- ---------- --------- --------- --------- --------- ---------- --------- -----------
BALANCE, DECEMBER 31, 1996 5,000 $ 5,000 10,000 $10,000 5,000 $ 5,000 10,000 $10,000 $943,742
========== ========== ========= ========= ========= ========= ========== ========= ===========
<CAPTION>
RETAINED
EARNINGS TOTAL
---------- -----------
<S> <C> <C>
BALANCE, JANUARY 1, 1996 $ 176,277 $1,150,019
Net income 742,795 742,795
Distributions to shareholder (771,448) (771,448)
---------- -----------
BALANCE, DECEMBER 31, 1996 $ 147,624 $1,121,366
========== ===========
</TABLE>
The accompanying notes are an integral part of this combined statement.
<PAGE>
SANDS COMMUNICATIONS, INC. D.B.A. VOICE-TEL OF ARIZONA,
SANDSCOMM, INC. D.B.A. VOICE-TEL OF ORANGE COUNTY,
SANDS COMM, INC. D.B.A. VOICE-TEL OF NEW MEXICO,
AND DUNES COMMUNICATIONS, INC.
D.B.A. VOICE-TEL OF SAN FERNANDO VALLEY
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 742,795
-------------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 461,104
Changes in assets and liabilities:
Accounts receivable 14,859
Deposits and other assets 6,920
Accrued expenses (46,696)
Deferred revenue (2,179)
-------------
Total adjustments 434,008
-------------
Net cash provided by operating activities 1,176,803
-------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (396,474)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Draws on line of credit, net of repayments 24,700
Proceeds from issuance of long-term debt 269,644
Principal repayments on long-term debt (312,143)
Distributions to shareholder (771,448)
-------------
Net cash used in financing activities (789,247)
-------------
NET DECREASE IN CASH (8,918)
CASH AT BEGINNING OF YEAR 289,884
-------------
CASH AT END OF YEAR $ 280,966
=============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 81,449
=============
Cash paid for taxes $ 5,287
=============
</TABLE>
The accompanying notes are an integral part of this combined statement.
<PAGE>
SANDS COMMUNICATIONS, INC. D.B.A. VOICE-TEL OF ARIZONA,
SANDSCOMM, INC. D.B.A. VOICE-TEL OF ORANGE COUNTY,
SANDS COMM, INC. D.B.A. VOICE-TEL OF NEW MEXICO,
AND DUNES COMMUNICATIONS, INC.
D.B.A. VOICE-TEL OF SAN FERNANDO VALLEY
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. NATURE OF OPERATIONS
Sands Communications, Inc. d.b.a. Voice-Tel of Arizona, SandsComm, Inc.
d.b.a. Voice-Tel of Orange County, Sands Comm, Inc. d.b.a. Voice-Tel of New
Mexico, and Dunes Communications, Inc. d.b.a. Voice-Tel of San Fernando
Valley (collectively, the "Companies") operate digital voice messaging
service centers in California, Arizona, and New Mexico.
NATURE OF BUSINESS
The Companies provide digital voice messaging services under exclusive
franchise agreements with Voice-Tel Enterprises, Inc. ("VTE"). Business is
conducted using the proprietary trade name "Voice-Tel." The Voice-Tel
system operates on the Companies' computer processing equipment, using
commercially available telephone lines.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles 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 those estimates.
PRESENTATION
The accompanying combined financial statements include the accounts of
Sands Communications, Inc. d.b.a. Voice-Tel of Arizona, SandsComm, Inc.
d.b.a. Voice-Tel of Orange County, Sands Comm, Inc. d.b.a. Voice-Tel of New
Mexico, and Dunes Communications, Inc. d.b.a. Voice-Tel of San Fernando
Valley, all of which are related
<PAGE>
through common ownership and management. All significant intercompany
transactions have been eliminated.
The accompanying combined financial statements of the Companies are
prepared on the accrual basis of accounting and present their combined
assets, liabilities, revenues, expenses, and cash flows as if the Companies
existed as separate corporations during the period presented.
The financial information included herein may not necessarily reflect the
financial position, results of operations, or cash flows of the Companies
in the future.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of the Companies' current assets and current liabilities
approximates fair value due to the short term in which these instruments
mature. The carrying value of the Companies' long-term debt approximates
fair value because the interest rates on the term notes and equipment loans
approximate prevailing interest rates for similar debt instruments.
REVENUE RECOGNITION AND DEFERRED REVENUES
Revenues are recognized as the Companies perform services in accordance
with contract terms. Billings in advance for messaging services are
recorded on the accompanying balance sheet as deferred revenue. These
revenues are recognized when the related service is provided. The majority
of the Companies' customers are billed monthly; however, some customers
have quarterly and semiannual billing cycles.
COST OF SERVICES
Cost of services includes all expenses incurred in providing voice
messaging services, including long-distance carrier costs and applicable
taxes.
INTANGIBLE ASSETS
Purchased intangible assets, which include a franchise agreement, goodwill,
and noncompete covenants, are recorded at cost. Intangible assets are
amortized using the straight-line method over the estimated useful lives of
the related assets or term of the agreement.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost, and depreciation is provided
for using the straight-line method over the estimated useful lives of the
assets, commencing when the assets are installed or placed in service. The
estimated useful lives are seven years for furniture and fixtures and five
years for office equipment and computer equipment. The cost of installed
equipment includes expenditures for installation. Leasehold improvements
are depreciated over the shorter of their useful lives or the term of the
related lease.
<PAGE>
The Companies periodically review the values assigned to long-lived assets,
such as property and equipment costs, to determine whether any impairments
are other than temporary. Management believes that the long-lived assets in
the accompanying balance sheet are appropriately valued.
INCOME TAXES
The Companies have elected to be taxed under the provisions of Subchapter S
of the Internal Revenue Code, which provides that, in lieu of corporation
taxes, the shareholder is taxed on the Companies' taxable income.
Therefore, no provision for federal income taxes has been made.
REGULATION
The Companies are subject to regulation by the FCC and by various state
public service and public utility commissions.
SOURCE OF SUPPLIES
The Companies do not own a transmission network and, accordingly, rely on
both facilities-based and nonfacilities-based local and long-distance
carriers and other companies to provide transmission of subscribers' voice
messages. Although management believes that alternative telecommunications
facilities could be found in a timely manner, disruption of these services
for more than a brief period would have an adverse effect on operating
results.
FACTORS IMPACTING FUTURE SUCCESS
The future success of the Companies is dependent upon a number of factors,
including the effect of rapid technological changes affecting the markets
for the Companies' products and services and management's ability to
effectively respond to those changes, including the development,
implementation, marketing, and support of new or improved products and
services to respond to the changing environment; effects of intense
competition in information and telecommunications services markets,
including, among other things, the consequent effect on the prices that the
Companies may charge for their products and services; the effect of
regulatory changes in the telecommunications industry; and the risk of
dependence on key managerial personnel.
3. CONCENTRATIONS OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
Financial instruments that potentially subject the Companies to
concentrations of credit risk consist only of accounts receivable, as
collateral is not required. The Companies' risk of loss is limited due to
advance billings to customers and the ability to terminate access on
delinquent accounts. Approximately 62% of the Companies' sales were
derived through a single national account during 1996. Although this
entity is a single national account that is managed on a collective basis,
it is actually comprised of a large number of individual subscribers
located throughout all franchise territories, including those operated by
other Voice-Tel franchises.
<PAGE>
4. FRANCHISE AGREEMENT
The franchise rights were acquired pursuant to a franchise agreement
entered into with VTE (Note 1). The term of the franchise agreement is 16
years and 7 months with an option to renew the agreement for an additional
10 years. The Companies are required to pay a monthly royalty in an amount
equal to 10% of gross sales. In addition, the Companies are required to
pay a monthly marketing and promotion fee of 2% of gross sales. The
Companies are periodically required to pay other special franchise fees and
assessments.
In conjunction with the execution of the franchise agreement, the Companies
have agreed to act as the service representative of VTE within their
franchise area. As consideration for this, the Companies receive a monthly
fee equal to a range of 20% to 60% of the royalties they pay to VTE.
During 1996, royalties, franchise fees, and other assessments totaled
$271,817, net of any service representative fees received.
5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31, 1996:
<TABLE>
<S> <C>
Telephone equipment $ 2,269,281
Furniture and fixtures 15,365
--------------
2,284,646
Less accumulated depreciation and
amortization (1,402,886)
--------------
Property and equipment, net $ 881,760
==============
</TABLE>
6. LONG-TERM DEBT
Long-term debt consisted of the following at December 31, 1996:
<TABLE>
<S> <C>
Term loan payable to Bank of America in 35 monthly installments of
approximately $2,800, plus interest at a rate of 1.5% over prime rate
(8.25% at December 31, 1996) $ 98,185
Revolving line of credit with Bank of America in the amount of $150,000
with interest at a rate of 1.5% over prime rate (8.25% at December 31,
1996) 24,700
Nonrevolving equipment line of credit in the amount of $400,000 with
interest payable at 1.5% over prime rate (8.25% at December 31, 1996); the
balance outstanding at July 15, 1997 is to be repaid in 35 equal monthly
installments 189,521
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Various installment loans with interest payable at various rates from
approximately 13% to approximately 16%; payment terms are for three to five
years with monthly principal and interest aggregating $19,307;
collateralized by equipment $ 244,108
-----------
556,514
Less current maturities 313,822
-----------
Long-term debt, net of current portion $ 242,692
===========
</TABLE>
Maturities of long-term debt at December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997 $313,822
1998 150,641
1999 64,976
2000 27,075
----------
$556,514
==========
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
LEASE OBLIGATIONS
The Companies lease equipment sites, office buildings, and vehicles.
Minimum rental commitments under noncancelable operating leases are as
follows as of December 31, 1996:
<TABLE>
<S> <C>
1997 $124,354
1998 54,790
1999 10,159
2000 0
2001 0
Thereafter 0
----------
$189,303
==========
</TABLE>
Rental expense under operating leases amounted to $142,000 for the year ended
December 31, 1996.
8. DEFERRED COMPENSATION PLAN
The Companies adopted a profit-sharing plan (the "Plan") covering all
employees. To become a participant in the Plan, an employee must have
attained the age of 21 and have been employed for one year with 1,000 hours
of service. Plan participants vest over a period of seven years. A
contribution of $53,585 has been recorded for the year ended December 31,
1996. Annual contributions are at the sole discretion of the Companies'
shareholder.
<PAGE>
9. SUBSEQUENT EVENT
On April 2, 1997, the Companies entered into a definitive agreement to
merge with Premiere Technologies, Inc. ("Premiere") in exchange for shares
of Premiere stock with a value of approximately $8,861,000. The acquisition
is subject to certain conditions and is expected to be consummated on or
about April 30, 1997. If completed, the merger is intended to be accounted
for using the pooling-of-interests method.
<PAGE>
SHAMLIN, INC. D.B.A. VOICE-TEL OF COLORADO
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1996
TOGETHER WITH
AUDITORS' REPORT
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Shamlin, Inc. d.b.a. Voice-Tel of Colorado:
We have audited the accompanying balance sheet of SHAMLIN, INC. D.B.A. VOICE-TEL
OF COLORADO (a Colorado S corporation) as of December 31, 1996 and the related
statements of operations, shareholder's deficit, and cash flows for the year
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Shamlin, Inc. d.b.a. Voice-Tel
of Colorado as of December 31, 1996 and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
Atlanta, Georgia
April 18, 1997
<PAGE>
SHAMLIN, INC. D.B.A. VOICE-TEL OF COLORADO
BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash $ 221,053
Accounts receivable, less allowance for uncollectible accounts of $0 133,498
Prepaid expenses and other current assets 7,873
------------
Total current assets 362,424
------------
PROPERTY AND EQUIPMENT (NOTE 5) 746,850
Less accumulated depreciation (299,836)
------------
Net property and equipment 447,014
------------
INTANGIBLE ASSETS, NET OF ACCUMULATED AMORTIZATION OF $1,266,571 95,767
------------
Total assets $ 905,205
============
LIABILITIES AND SHAREHOLDER'S DEFICIT
CURRENT LIABILITIES:
Accrued expenses $ 126,283
Deferred revenue 47,677
Current portion of long-term debt 139,591
Subordinated debt to shareholder (Note 6) 267,826
------------
Total current liabilities 581,377
------------
LONG-TERM LIABILITIES (NOTE 6):
Long-term debt 673,862
------------
COMMITMENTS AND CONTINGENCIES (NOTE 7)
SHAREHOLDER'S DEFICIT:
Common stock (Note 8) 13,000
Retained deficit (363,034)
------------
Total shareholder's deficit (350,034)
------------
Total liabilities and shareholder's equity $ 905,205
============
</TABLE>
The accompanying notes are an integral part of this balance sheet.
<PAGE>
SHAMLIN, INC. D.B.A. VOICE-TEL OF COLORADO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
REVENUES $1,603,047
COST OF SALES 299,560
------------
Gross margin 1,303,487
------------
OPERATING EXPENSES:
Selling and marketing 271,912
General and administrative 319,670
Depreciation and amortization 410,807
------------
Total operating expenses 1,002,389
------------
OPERATING INCOME 301,098
OTHER INCOME (EXPENSE):
Interest expense (90,680)
Other, net 4,929
------------
NET INCOME $ 215,347
============
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
SHAMLIN, INC. D.B.A. VOICE-TEL OF COLORADO
STATEMENT OF SHAREHOLDER'S DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK RETAINED
------------------
SHARES AMOUNT DEFICIT TOTAL
-------- --------- ------------ ------------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996 13,000 $13,000 $(403,381) $(390,381)
Shareholder's contributions 0 0 0 0
Dividends to shareholder 0 0 (175,000) (175,000)
Net income 0 0 215,347 215,347
-------- --------- ------------ ------------
BALANCE, DECEMBER 31, 1996 13,000 $13,000 $(363,034) $(350,034)
======== ========= ============ ============
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
SHAMLIN, INC. D.B.A. VOICE-TEL OF COLORADO
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 215,347
------------
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 410,807
Changes in operating assets and liabilities:
Increase in accounts receivable (19,903)
Increase in other current assets (7,473)
Decrease in accounts payable and accrued expenses (6,362)
Deferred revenue 15,309
------------
Total adjustments 392,378
------------
Net cash provided by operating activities 607,725
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment (212,891)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (153,860)
Principal payments on subordinated debt to shareholder (10,755)
Dividends paid to shareholder (175,000)
------------
Net cash used in financing activities (339,615)
------------
NET INCREASE IN CASH 55,219
CASH AT BEGINNING OF YEAR 165,834
------------
CASH AT END OF YEAR $ 221,053
============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 68,043
============
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
SHAMLIN, INC. D.B.A. VOICE-TEL OF COLORADO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION, BASIS OF PRESENTATION, AND NATURE OF BUSINESS
ORGANIZATION
Shamlin, Inc. d.b.a. Voice-Tel of Colorado ("VTC") is an S corporation
referred to herein as the "Company." The Company was incorporated in Denver,
Colorado, on September 1, 1993.
NATURE OF BUSINESS
The Company provides digital messaging services under exclusive franchise
agreements with Voice-Tel Enterprises, Inc. ("VTE"). Business is conducted
using the proprietary trade name "Voice-Tel." The Voice-Tel system operates
on the Company's computer processing equipment, using commercially available
telephone lines. The Company provides digital messaging services to the
greater metropolitan Denver area.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles 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 those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the long-term debt approximates its carrying value as of
December 31, 1996.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost, and depreciation is provided
for using the straight-line method over the estimated useful lives of the
assets, commencing when the assets are installed or placed in service. The
estimated useful lives are ten years for furniture and fixtures, seven years
for office equipment, and five years for computer equipment. The cost of
installed equipment includes expenditures for installation. Assets
<PAGE>
recorded under leasehold improvements are depreciated over the shorter of
their useful lives or the term of the related lease.
The Company periodically reviews the values assigned to long-lived assets,
such as property and equipment costs, to determine whether any impairments
are other than temporary. Management believes that the long-lived assets in
the accompanying balance sheet are appropriately valued.
REVENUE RECOGNITION AND DEFERRED REVENUES
Revenues are recognized as the Company performs services in accordance with
contract terms. Billings in advance for messaging services are recorded on
the accompanying balance sheet as deferred revenue. These revenues are
recognized when the related service is provided. The majority of the
Company's customers are billed monthly; however, some customers have
quarterly and semiannual billing cycles.
COST OF SERVICES
Cost of services includes all expenses incurred in providing voice messaging
services, including long-distance carrier costs and applicable taxes.
INTANGIBLE ASSETS
Purchased intangible assets, which include a franchise agreement, goodwill,
and noncompete covenants, are recorded at cost. Intangible assets are
amortized using the straight-line method over the estimated useful lives of
the related assets or term of the agreement (16.6 years for the franchise
agreement).
Intangible balances consisted of the following at December 31, 1996:
<TABLE>
<S> <C>
Customer list and goodwill $ 1,190,000
Franchise agreement 105,000
Noncompete covenants 50,000
Other 17,338
Less accumulated amortization (1,266,571)
--------------
Intangibles, net $ 95,767
==============
</TABLE>
INCOME TAXES
The Company has elected to be treated as a small business S corporation for
federal and state income tax purposes. As such, in lieu of corporate income
tax consequences arising at the company level, the individual shareholder is
allocated the Company's taxable income.
REGULATION
The Company is subject to regulation by the FCC and by various state public
service and public utility commissions.
<PAGE>
SOURCE OF SUPPLIES
The Company does not own a transmission network and, accordingly, relies on
both facilities-based and nonfacilities-based local and long-distance
carriers and other companies to provide transmission of its subscribers'
voice messaging. Although management believes that alternative
telecommunications facilities could be found in a timely manner, disruption
of these services for more than a brief period would have an adverse effect
on operating results.
FACTORS IMPACTING FUTURE SUCCESS
The future success of the Company is dependent upon a number of factors,
including the effect of rapid technological changes affecting the markets
for the Company's products and services and management's ability to
effectively respond to those changes, including the development,
implementation, marketing, and support of new or improved products and
services to respond to the changing environment; effects of intense
competition in information and telecommunications services markets,
including, among other things, the consequent effects on the prices that the
Company may charge for its products and services; the effect of regulatory
changes in the telecommunications industry; and the risk of dependence on
key managerial personnel.
3. CONCENTRATIONS OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
Financial instruments that potentially subject the Company to concentrations
of credit risk consist only of accounts receivable, as collateral is not
required. The Company's risk of loss is limited due to advance billings to
customers and the ability to terminate access on delinquent accounts.
Approximately 55% of the Company's sales were derived through one single
entity during 1996. Although this entity is a single national account that
is managed on a collective basis, it is actually comprised of a large number
of individual subscribers located throughout all franchise territories,
including those operated by other Voice-Tel franchises.
4. FRANCHISE AGREEMENTS
The franchise rights were acquired pursuant to a franchise agreement entered
into with VTE (Note 1). The term of the franchise agreement is 16 years and
7 months with an option to renew the agreement for an additional 10 years.
The Company is required to pay a monthly royalty in an amount equal to 10%
of gross sales, less certain costs. In addition, the Company is required to
pay a monthly marketing and promotion fee of 2% of gross sales. The Company
is periodically required to pay other special franchise fees and
assessments.
In conjunction with the execution of the franchise agreement, the Company
has agreed to act as the service representative of VTE within its franchise
area. As consideration for this, the Company receives a monthly fee equal to
a range of 20% to 60% of the royalties it pays to VTE. During 1996,
royalties, franchise fees, and other assessments totaled $80,506, net of any
service representative fees received.
<PAGE>
5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31, 1996:
<TABLE>
<S> <C>
Computer software $ 202,909
Messaging computer systems 496,367
Office furniture, fixtures, and equipment 42,438
Leasehold improvements 5,136
------------
746,850
Less accumulated depreciation (299,836)
------------
Property and equipment, net $ 447,014
============
</TABLE>
6. LONG-TERM OBLIGATIONS
LONG-TERM DEBT
Long-term debt as of December 31, 1996 consisted of a note payable to the
former owner of the franchise, due on August 31, 1998 at an interest rate of
7%. The note is collateralized by approximately $220,000 of fixed assets of
VTC as well as stock representing the sole shareholder's interest in an
affiliate company, Braverman Development, Inc.
Maturities of long-term debt at December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997 $139,591
1998 673,862
1999 0
2000 0
2001 0
Thereafter 0
----------
$813,453
==========
</TABLE>
SUBORDINATED DEBT
Subordinated debt as of December 31, 1996 consisted of the following:
Subordinated convertible demand note payable to the
sole shareholder, monthly interest payments only at a rate
of 10%, due upon demand with 30 days' written notice,
convertible at any time into common stock of the Company
at a ratio of stock for each dollar of principal converted,
subordinated to debt owed to former owner (discussed on preceding
page) $199,198
Subordinated convertible term note payable to the sole shareholder,
due on September 1, 1998 at an interest rate of 10%, convertible at
any time into common stock of the Company at a ratio of stock for
each dollar of principal converted, subordinated to debt owed to
former owner (discussed on preceding page) 68,628
----------
$267,826
==========
<PAGE>
Principal payments on subordinated debt detailed above are due in 1998;
however, management intends to repay the debt in full in 1997.
7. COMMITMENTS AND CONTINGENCIES
LEASE OBLIGATIONS
The Company has entered into various operating leases for facilities used in
its operations. Aggregate further minimum rental commitments under
noncancelable operating leases with original or remaining periods in excess
of one year as of December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997 $21,643
1998 2,043
1999 0
2000 0
2001 0
Thereafter 0
---------
$23,686
=========
</TABLE>
Rental expense under operating leases amounted to $27,444 for the year ended
December 31, 1996.
8. EQUITY INTERESTS
CAPITAL STOCK
The common stock authorized, issued, and outstanding at December 31, 1996
for the Company is as follows:
<TABLE>
<CAPTION>
AMOUNT
CONTRIBUTED
SHARES FOR
SHARES ISSUED AND PAR VALUE COMMON
AUTHORIZED OUTSTANDING PER SHARE STOCK
------------ ------------- ----------- -------------
<S> <C> <C> <C>
1,000,000 13,000 None $13,000
</TABLE>
9. RELATED-PARTY TRANSACTIONS
Subsequent to year-end, on January 31, 1997, the Company loaned $100,000 to
an affiliate company, Southgate Development Company, Inc. ("Southgate").
Southgate is partially owned by the Company's shareholder and certain of his
relatives. Interest was payable at 7.5% with payment of full principal and
interest due on April 15, 1997. The loan was repayed on April 15, 1997 in
accordance with the original terms.
<PAGE>
10. SUBSEQUENT EVENT
On April 2, 1997, the Company entered into a definitive agreement to merge
with Premiere Technologies, Inc. ("Premiere") in exchange for shares of
Premiere stock with a value of approximately $3,206,000. The acquisition is
subject to certain conditions and is expected to be consummated on or about
April 30, 1997. If completed, the merger is intended to be accounted for
using the pooling-of-interests method.
<PAGE>
VOICE-TEL OF OHIO AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996
TOGETHER WITH REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Voice-Tel of Ohio:
We have audited the accompanying consolidated balance sheet of Voice-Tel of Ohio
and Subsidiary (an Ohio partnership) as of December 31, 1996, and the related
consolidated statements of income, partners' deficit and cash flows for the year
then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Voice-Tel of Ohio and
Subsidiary as of December 31, 1996, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
Cleveland, Ohio
April 1, 1997
(except with respect to the matter
discussed in Note 9, as to which the date is May 2, 1997)
<PAGE>
VOICE-TEL OF OHIO AND SUBSIDIARY
--------------------------------
CONSOLIDATED BALANCE SHEET
--------------------------
DECEMBER 31, 1996
-----------------
<TABLE>
<CAPTION>
ASSETS LIABILITIES AND PARTNERS' DEFICIT
------ ---------------------------------
<S> <C> <C> <C>
CURRENT ASSETS: CURRENT LIABILITIES:
Cash $ 2,849 Accounts payable:
Accounts Receivable: Trade $ 107,374
Trade 248,531 Related parties 26,031
Related party 13,840 Accrued liabilities 259,133
Advances to partners 21,890 Unearned revenue 205,718
Prepaid expenses and other 4,975 Current portion of capital leases and notes payable 388,958
----------- ------------
Total current assets 292,085 Total current liabilities 987,214
----------- ------------
INVESTMENTS 895,790
LONG-TERM LIABILITIES, less current portion:
PROPERTY AND EQUIPMENT: Capital leases 259,253
Voice message equipment 1,146,975 Notes payable 114,968
Office furnishings and equipment 78,144 Notes payable, partners 625,314
Leasehold improvements 3,322 Notes payable, related parties 48,744
----------- -------------
1,228,441 Total long-term liabilities 1,048,279
-------------
Less- Accumulated depreciation and
amortization (779,314) COMMITMENTS AND CONTINGENCIES
-----------
Property and equipment, net 449,127
-----------
OTHER ASSETS: MINORITY INTERESTS IN PARTNERS' DEFICIT OF
Franchise fees, act of accumulated SUBSIDIARY (200,832)
amoritization $63,250 at
December 31, 1996 79,250
------------
$ 1,716,252 PARTNERS' DEFICIT (118,409)
============ ------------
$ 1,716,252
============
</TABLE>
The accompanying notes are an integral part of this consolidated balance sheet.
<PAGE>
VOICE-TEL OF OHIO AND SUBSIDIARY
--------------------------------
CONSOLIDATED STATEMENT OF INCOME
--------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
<TABLE>
<S> <C>
SALES $2,065,093
COST OF SALES 746,339
-----------
Gross margin 1,318,754
OPERATING EXPENSES: -----------
Selling, general and administrative 895,304
Depreciation and amortization 199,630
-----------
Total operating expenses 1,094,934
-----------
Operating income 223,820
OTHER INCOME (EXPENSE):
Interest (150,673)
Investment income and other 388,133
-----------
Income before minority interest 461,280
Minority interests in net income of subsidiary 28,561
-----------
Net income $ 432,719
===========
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
<PAGE>
VOICE-TEL OF OHIO AND SUBSIDIARY
--------------------------------
CONSOLIDATED STATEMENT OF PARTNERS' DEFICIT
-------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
<TABLE>
<S> <C>
BALANCE AT DECEMBER 31, 1995 $ (527,615)
Net income 432,719
Partner distributions (23,513)
-----------
BALANCE AT DECEMBER 31, 1996 $ (118,409)
===========
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
<PAGE>
VOICE-TEL OF OHIO AND SUBSIDIARY
--------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 432,719
Adjustments to reconcile net income to
net cash provided by operating
activities-
Depreciation and amortization 199,630
Equity in income of affiliates, net of
distributions (358,154)
Minority interests in net income of
subsidiary 28,561
Changes in operating assets and
liabilities-
Accounts receivable, trade (76,793)
Advances to partners 16,537
Prepaid expenses and other 347
Accounts payable, trade (20,388)
Accounts payable, related parties (64,738)
Accrued liabilities 28,571
Unearned revenue 40,468
---------
Net cash provided by
operating activities 226,760
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (69,596)
Capital contribution in affiliate (25,000)
---------
Net cash used for investing activities (94,596)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 131,059
Proceeds from notes payable, partners 35,780
Proceeds from notes payable, related
parties 10,000
Repayment of capital leases (125,895)
Repayment of notes payable (46,704)
Repayment of notes payable, partners (117,832)
Repayment of notes payable, related
parties (3,120)
Partner distributions (23,513)
Minority interests in partner
distributions of subsidiary (16,524)
---------
Net cash provided by
financing activities (156,749)
=========
NET DECREASE IN CASH (24,585)
CASH AT BEGINNING OF YEAR 27,434
---------
CASH AT END OF YEAR $ 2,849
=========
</TABLE>
<PAGE>
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 152,318
SUPPLEMENTAL NONCASH INVESTING AND
FINANCING INFORMATION:
Capital lease obligation incurred for new
equipment $ 280,126
The accompanying notes are an integral part of this consolidated statement.
<PAGE>
VOICE-TEL OF OHIO AND SUBSIDIARY
--------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
DECEMBER 31, 1996
-----------------
1. OWNERSHIP STRUCTURE AND NATURE OF OPERATIONS:
---------------------------------------------
Carter Voice, Inc. (CVI) and Widdoes Enterprises, Inc., (WEI) both Ohio
corporations, each own a 50% interest in Voice-Tel of Ohio, an Ohio partnership.
The accompanying consolidated financial statements include the accounts of
Voice-Tel of Ohio and its two-thirds owned subsidiary, Voice Partners Company,
an Ohio partnership (the Subsidiary). Carter Voice, Inc. and Widdoes
Enterprises, Inc. each own 50% of the remaining one-third interest in Voice
Partners Company. Voice-Tel of Ohio and Subsidiary provide voice messaging
services to their customers, who are located primarily in northern Ohio.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------------------
Use of Estimates
- - ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles 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
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Nature of Accounts
- - ------------------
The consolidated financial statements have been prepared solely from the
accounts of Voice-Tel of Ohio and Subsidiary and do not include the personal
accounts of the partners or those of any other operation in which the partners
or the Partnership are engaged.
Consolidation and Minority Interests
- - ------------------------------------
The accounts of Voice-Tel of Ohio and its two-thirds owned subsidiary, Voice
Partners Company, were combined in the accompanying consolidated financial
statements, and all material intercompany accounts were eliminated. The minority
interests in the partners' deficit of the Subsidiary represent CVI's and WEI's
combined one-third direct ownership interest in the net book value and net
income of the Subsidiary.
Fair Value of Financial Instruments
- - -----------------------------------
In 1995, Voice-Tel of Ohio and Subsidiary adopted Statement of Financial
Accounting Standards (SFAS) No. 107, "Disclosures About Fair Value of Financial
Investments," which requires disclosure of fair value information about
instruments, whether or not recognized in the balance sheet.
The fair value of the long-term liabilities approximates their carrying value as
of December 31, 1996.
<PAGE>
Recent Accounting Pronouncements
- - --------------------------------
Voice-Tel of Ohio and Subsidiary adopted SFAS No. 121, "Accounting for the
Impairment of long-lived Assets and for Long-Lived Assets to Be Disposed Of,"
in 1996. SFAS No. 121 requires that long-lived assets and certain identifiable
intangible assets be reviewed for impairment whenever circumstances indicate
that the carrying amount of an asset may not be recoverable. The adoption of
this standard did not impact Voice-Tel of Ohio and Subsidiary's consolidated
financial statements.
Source of Supplies
- - ------------------
Voice-Tel of Ohio and Subsidiary do not own a transmission network and,
accordingly, rely on both facilities-based and nonfacilities-based local and
long-distance carriers and other companies to provide transmission of their
subscribers' voice messaging. Although management feels that alternative
telecommunications facilities could be found in a timely manner, disruption of
these services for more than a brief period would have an adverse effect on
operating results.
Factors Impacting Future Success
- - --------------------------------
The future success of Voice-Tel of Ohio and Subsidiary is dependent upon a
number of factors, including the effect of rapid technological changes affecting
the markets for the partnership's products and services and management's ability
to effectively respond to those changes, including the development,
implementation, marketing and support of new or improved products and services
to respond to the changing environment; effects of intense competition in
information and telecommunication services markets, including, among other
things, the consequent effects on the prices that the franchisor may charge for
its products and services; the effect of regulatory changes in the
telecommunications industry; and the risk of dependence on key managerial
personnel.
Investments
- - -----------
Voice-Tel of Ohio owns a 30% interest in Voice-Tel Enterprises, Inc. (VTE) and a
40% interest in Columbus Voice Partners, both of which are accounted for under
the equity method. Voice Partners Company owns a 25% interest in Voice Partners
of Greater Mahoning Valley, which is also accounted for under the equity method.
For the year ended December 31, 1996, the equity earnings in VTE and Columbus
Voice Partners were $359,596 and $41,835, respectively, and are included in
investment income in the accompanying consolidated statement of income.
Property and Equipment
- - ----------------------
Property and equipment are recorded at cost. Major additions and improvements
are charged to the property accounts, while replacements, maintenance and
repairs which do not improve or extend the lives of the respective assets are
expensed as incurred.
Depreciation expense is computed using accelerated methods and is based on the
following estimated useful lives of the assets:
Voice message equipment 3-5 years
Office furnishings and equipment 5-7 years
Leasehold improvements 7-10 years
<PAGE>
Depreciation and amortization expense relating to property and equipment was
$192,505 in 1996.
Franchise Fees
- - --------------
The costs of franchises acquired are being amortized on the straight-line method
over twenty years. Amortization expense charged to operations was $7,125 in
1996.
Unearned Revenue
- - ----------------
Unearned revenue represents sales that have been billed in advance for services
that have not been provided as of the date of these consolidated financial
statements.
Income Taxes
- - ------------
Voice-Tel of Ohio and Subsidiary is a Partnership and therefore not a taxpaying
entity for federal or state income tax purposes; therefore, no provision for
federal or state income taxes has been recorded in the consolidated financial
statements.
Cost of Sales
- - -------------
Cost of sales includes all direct expenses incurred in providing voice messaging
services including long-distance carrier costs and applicable taxes.
Partners' Compensation
- - ----------------------
Compensation expense to a Partner included in selling, general and
administrative expenses in the accompanying consolidated statement of income was
approximately $82,000 in 1996.
Statement of Cash Flows
- - -----------------------
For purposes of the statement of cash flows, cash includes cash on hand and
money market fund deposits.
3. CONCENTRATIONS OF CREDIT RISK AND SIGNIFICANT CUSTOMERS:
--------------------------------------------------------
Financial instruments that potentially subject Voice-Tel of Ohio and Subsidiary
to concentrations of credit risk consist only of accounts receivable. Voice-Tel
of Ohio and Subsidiary's risk of loss is limited due to advance billings to
customers and the ability to terminate access on delinquent accounts. The
concentration of credit risk is mitigated by the large number of customers
comprising the customer base and their dispersion across different industries
and geographic regions.
Approximately 30% of the Voice-Tel of Ohio and Subsidiary sales were derived
through one single entity during 1996. Although this entity is a single account
that is managed on a collective basis, it is actually comprised of a large
number of individual subscribers located throughout all franchise territories.
4. FRANCHISE AGREEMENTS:
---------------------
The franchise rights were acquired pursuant to franchise agreements entered into
with VTE. The term of each franchise agreement is 20 years with an option to
renew the agreement for an additional 10 years. The Subsidiary is required to
pay a monthly royalty in an amount equal to a specified percentage of gross
sales. The royalty rates are 6% in the first year of the Franchise Agreement, 8%
in the second year, and 10% thereafter. In addition, the Subsidiary
<PAGE>
is required to pay a monthly marketing and promotion fee of 2% of gross sales.
The Subsidiary is periodically required to pay other special franchise fees and
assessments.
In conjunction with the execution of the franchise agreements, Voice Partners
Company has agreed to act as the service representative of VTE within each of
its franchise areas. Voice-Tel of Ohio receives a monthly fee equal to 20% of
the royalties paid by franchises of VTE within its territory. The Voice Partners
Company receives a monthly fee equal to 40% of the royalties it pays to VTE.
During 1996, royalties, franchise fees and other assessments totaled
approximately $66,000, net of any service representative fees received.
5. LEASING ARRANGEMENTS:
---------------------
The Subsidiary is the lessee of voice message equipment under multiple capital
lease obligations. The following is a summary of property held under these
capital leases as of December 31, 1996:
Voice message equipment $622,290
Less- Accumulated amortization 348,343
--------
$273,947
========
Future minimum lease payments under these capital lease obligations as of
December 31, 1996 for each of the next five years in the aggregate are:
1997 $185,852
1998 171,128
1999 90,522
2000 45,748
2001 -
--------
Total future minimum lease payments 493,250
Less- Amount representing interest 105,128
========
Present value of future minimum lease
payments, net $388,122
========
The operations of Voice-Tel of Ohio and Subsidiary are conducted at leased
facilities. Rental expense amounted to $35,963 in 1996.
6. FINANCING ARRANGEMENTS:
-----------------------
Financing arrangements consist of the following of December 31, 1996:
Capital leases, collateralized by certain
equipment, payable in monthly installments,
final payment due November 2000. $ 388,122
Note payable, collateralized by all accounts
receivable, equipment and office furnishings,
guaranteed by two partners, monthly payments
of principal and interest of $2,000, interest
at 14.7%, final payment due March 2000 61,758
<PAGE>
Note payable, collateralized by all accounts
receivable, equipment and office furnishings,
guaranteed by two partners, monthly payments
of principal and interest of $1,539, interest
at 14.0%, final payment due April 2000 $ 48,993
Note payable, collateralized by all accounts
receivable, equipment and office furnishings,
guaranteed by two partners, monthly payments
of principal and interest of $1,135, interest
at 13.3%, final payment due October 1999 31,998
Note payable, collateralized by certain
equipment, guaranteed by two partners,
monthly payments of principal and interest
of $1,387, interest at 14.2%, final payment
due May 1998 21,250
Note payable, collateralized by certain
equipment, monthly payments of principal and
interest of $480, interest at 14.0%, final
payment due August 1998 8,649
Note payable, partner, without collateral,
monthly payments of principal and interest
of $8,000, interest at 10.5%, final payment
due December 1998 178,911
Note payable, partner, without collateral,
monthly payments of principal and interest
of $2,000, interest at 10.0%, final payment
due January 2002 95,365
Note payable, partner, without collateral,
monthly payments of principal and interest
of $11,500, interest at 10.0%, final
payment due January 2002 541,311
Note payable, related party, collateralized
by certain equipment, guaranteed by two
partners, monthly payments of principal and
interest of $800, interest at 11.5%, final
payment due July 2005. This note may become
payable on demand upon the related party's giving
a 90-day notice to that effect to the Subsidiary.
Classification between current and long-term is
based on management's expectations for repayment 52,500
Note payable, related party, monthly payments
of interest at 6%, final payment due
August 1999. This note may become payable
on demand upon the related party's giving a
30-day notice to that effect to the
Subsidiary. Classification between
current and long-term is based on
management's expectations for repayment 8,380
----------
1,437,237
Less- Current portion 388,958
----------
Long-term liabilities, less current portion $1,048,279
==========
<PAGE>
Annual principal payments required under the provisions of the note agreements
and management's expectation for repayment of the notes payable, related parties
are as follows:
<TABLE>
<CAPTION>
Notes
Notes Payable,
Notes Payable, Related
Payable Partners Parties
------- -------- --------
<S> <C> <C> <C>
1997 $57,680 $190,273 $12,136
1998 58,386 204,385 4,212
1999 48,459 125,559 4,723
2000 8,123 138,706 5,295
2001 - 153,231 5,937
Thereafter - 3,433 28,577
-------- -------- -------
$172,648 $815,587 $60,880
======== ======== =======
</TABLE>
7. RELATED-PARTY TRANSACTIONS:
---------------------------
Voice-Tel of Ohio and Subsidiary are affiliated through common ownership and
management with other entities. During 1996, Voice-Tel of Ohio and Subsidiary
incurred charges from related entities for purchases of equipment and royalty,
marketing, network and administrative services. The following table summarizes
transactions with related entities:
<TABLE>
<CAPTION>
Related Parties Description Amount
---------------------------- ----------------- ----------
<S> <C> <C>
Voice-Tel Network, Inc. Network charges $ 18,850
Rent 2,200
---------
21,050
---------
Voice-Tel Enterprises, Inc. Purchase of equipment 171,226
Royalty fees 162,315
Service representative
fees (147,718)
Management advisory
fees (37,500)
Miscellaneous charges 6,727
---------
155,050
---------
Voice Enterprise Systems Systems marketing fees 32,760
---------
Voice Partners of Greater
Mahoning Valley Network charges 3,893
---------
Total $ 212,753
=========
</TABLE>
As a result of these charges, accounts payable, related parties at December 31,
1996 totaled $26,031.
In 1996, Voice-Tel of Ohio and Subsidiary incurred interest charges of $78,886
on notes payable to its partners and notes payable to related parties, as
described in Note 6.
8. EMPLOYEE BENEFIT PLAN:
----------------------
The Subsidiary maintains a 401(k) plan covering substantially all employees.
Under the terms of the plan, employees may voluntarily contribute up to 15% of
their compensation to the plan. Subsidiary contributions are made at the
discretion of the partners. There were no partnership contributions made to this
plan during 1996.
9. SUBSEQUENT EVENTS:
------------------
On April 30. 1997, CVI and WEI, each of whom owns a 50% equity interest in
Voice-Tel of Ohio, Inc. (VTO, Inc.), contributed their respective 50%
partnership interests in Voice-Tel of Ohio to VTO, Inc. (an Ohio corporation
incorporated on March 28, 1997 for the purpose of receiving the net assets of
the Voice-Tel of Ohio partnership prior to merging with Premiere Technologies
Inc. (Premiere). Pursuant to a definitive agreement dated as of April 2, 1997,
VTO, Inc. agreed to merge with Premiere in exchange for shares of Premiere stock
with a value of approximately $6,361,000. The merger was effective May 2, 1997
and was accounted for using the pooling-of interests method.
<PAGE>
SDVT, Inc.
(FORMERLY KNOWN AS VOICE-TEL OF SAN DIEGO, LLC)
Financial Statements as of December 31, 1996
Together With
Auditors' Report
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of SDVT, Inc.:
We have audited the accompanying balance sheet of SDVT, INC. (a California S
corporation) (formerly known as Voice-Tel of San Diego, LLC) as of December 31,
1996 and the related statements of operations, shareholders' equity, and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SDVT, Inc. as of December 31,
1996 and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Atlanta, Georgia
March 28, 1997
(except with respect to the matters
discussed in Note 13, as to which
the date is April 2, 1997)
<PAGE>
SDVT, INC.
(FORMERLY KNOWN AS VOICE-TEL OF SAN DIEGO, LLC)
BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash $ 46,089
Accounts receivable, less allowance for uncollectible accounts of $0 99,512
Related-party accounts receivable 178,766
Inventory 4,289
Prepaid expenses and other current assets 8,193
--------
Total current assets 336,849
--------
PROPERTY AND EQUIPMENT 720,315
Less accumulated depreciation (452,747)
--------
Net property and equipment 267,568
--------
OTHER ASSETS:
Intangible assets, net (Note 2) 62,125
Other 3,469
--------
Total other assets 65,594
--------
Total assets $670,011
========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 66,819
Accrued expenses 34,909
Deferred revenue 61,124
Current portion of long-term debt 109,756
--------
Total current liabilities 272,608
--------
LONG-TERM LIABILITIES (Note 7):
Long-term debt 52,563
Other accrued liabilities 178,218
--------
Total long-term liabilities 230,781
--------
COMMITMENTS AND CONTINGENCIES (Note 8)
SHAREHOLDERS' EQUITY:
Capital stock 128,000
Retained earnings 38,622
--------
Total shareholders' equity 166,622
--------
Total liabilities and shareholders' equity $670,011
========
</TABLE>
The accompanying notes are an integral part of this balance sheet.
<PAGE>
SDVT, INC.
(FORMERLY KNOWN AS VOICE-TEL OF SAN DIEGO, LLC)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
REVENUES $1,364,088
COST OF SALES 569,417
----------
Gross margin 794,671
----------
OPERATING EXPENSES:
Selling and marketing 114,809
General and administrative 572,964
Depreciation and amortization 130,698
----------
Total operating expenses 818,471
----------
OPERATING LOSS (23,800)
OTHER INCOME (EXPENSE):
Interest expense (12,443)
Other, net 4,507
----------
NET LOSS $ (31,736)
==========
The accompanying notes are an integral part of this statement.
<PAGE>
SDVT, INC.
(FORMERLY KNOWN AS VOICE-TEL OF SAN DIEGO, LLC)
STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Common Stock
-------------------- Retained
Shares Amount Earnings Total
------ --------- --------- ---------
<S> <C> <C> <C> <C>
BALANCE, January 1, 1996 100 $128,000 $115,358 $243,358
Distributions to shareholders 0 0 (45,000) (45,000)
Net loss 0 0 (31,736) (31,736)
--- -------- -------- --------
BALANCE, December 31, 1996 100 $128,000 $ 38,622 $166,622
=== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
SDVT, INC.
(FORMERLY KNOWN AS VOICE-TEL OF SAN DIEGO, LLC)
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (31,736)
---------
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 130,698
Loss on sale of investment 2,014
Changes in operating assets and liabilities:
Increase in accounts receivable (203,743)
Increase in other current assets (3,041)
Decrease in inventory 1,182
Increase in other assets (985)
Increase in accounts payable and accrued expenses 93,237
Increase in deferred revenue 24,589
Increase in other accrued liabilities 178,218
---------
Total adjustments 222,169
---------
Net cash provided by operating activities 190,433
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of furniture, fixtures, and equipment (167,700)
Sale of investment 16,068
---------
Net cash used in investing activities (151,632)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (107,669)
Proceeds under line of credit 30,000
Distributions paid to shareholders (45,000)
Proceeds from issuance of note payable 60,000
---------
Net cash used in financing activities (62,669)
---------
NET DECREASE IN CASH (23,868)
CASH AT BEGINNING OF YEAR 69,957
---------
CASH AT END OF YEAR $ 46,089
=========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 23,656
=========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
SDVT, INC.
(FORMERLY KNOWN AS VOICE-TEL OF SAN DIEGO, LLC)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION AND NATURE OF BUSINESS
Organization
Jack Vincent, d.b.a. Voice-Tel of San Diego (the "Sole Proprietorship")
was established as a sole proprietorship (in California on May 1, 1991.
Effective July 1, 1996, Jack Vincent d.b.a. Voice-Tel of San Diego
became a limited liability corporation and was renamed Voice-Tel of San
Diego, LLC ("VTSD") Effective March 28, 1997, the Company became
an S corporation and was renamed SDVT, Inc. ("the Company")(Note 13).
Upon creation of VTSD, all of the assets and liabilities were
transferred from the Sole Proprietorship. Both VTSD and the Sole
Proprietorship were owned at the time of transfer by the same
individual. VTSD was owned by the same individual at the time of the
formation of the S corporation also. These transfers have been accounted
for in a manner similar to a pooling of interests, and accordingly, the
financial statements for prior periods include the accounts of the Sole
Proprietorship and the limited liability corporation as if they had been
included in the Company.
Nature of Business
The Company provides digital voice messaging services under exclusive
franchise agreements with Voice-Tel Enterprises, Inc. ("VTE"). Business
is conducted using the proprietary name "Voice-Tel." The Voice-Tel
system operates on the Company's computer processing equipment, using
commercially available telephone lines. The Company provides these
services primarily in San Diego County.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles 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 those
estimates.
<PAGE>
Fair Value of Financial Instruments
The fair value of the long-term debt approximates its carrying value as
of December 31, 1996.
Property and Equipment
Property and equipment are recorded at cost and depreciation is provided
for using the straight-line method over the estimated useful lives of
the assets, commencing when the assets are installed or placed in
service. The estimated useful life for all assets is five years. The
cost of installed equipment includes expenditures for installation.
The Company periodically reviews the values assigned to long-lived
assets, such as property and equipment costs and goodwill, to determine
whether any impairments are other than temporary. Management believes
that the long-lived assets in the accompanying balance sheet are
appropriately valued.
Revenue Recognition and Deferred Revenues
Revenues are recognized as the Company performs services in accordance
with contract terms. Billings in advance for messaging services are
recorded on the accompanying balance sheet as deferred revenue. These
revenues are recognized when the related service is provided. The
majority of the Company's customers are billed in monthly increments;
however, some customers have quarterly and semiannual billing cycles.
Cost of Services
Cost of services includes all expenses incurred in providing voice
messaging services, including long-distance carrier costs and applicable
taxes.
Intangible Assets
Purchased intangible assets, which include a franchise agreement,
goodwill, and noncompete covenants, are recorded at cost. Intangible
assets are amortized using the straight-line method over the estimated
useful lives of the related assets or term of the agreement (20 years
for the franchise agreement).
Intangible balances consisted of the following at December 31, 1996:
Customer list and goodwill $ 5,000
Franchise agreement 85,000
Less accumulated amortization (27,875)
--------
Intangibles, net $ 62,125
========
Income Taxes
During the first six months of fiscal year 1996, the Company operated as
a sole proprietorship. Effective July 1, 1996, the Company became a
limited liability corporation. In both instances, in lieu of corporate
<PAGE>
income tax consequences arising at the company level, the individual
members or owners are allocated the Company's or the Sole
Proprietorship's taxable income.
Regulation
The Company is subject to regulation by the FCC and by various state
public service and public utility commissions.
Source of Supplies
The Company does not own a transmission network and, accordingly, relies
on both facilities-based and nonfacilities-based local and long-distance
carriers and other companies to provide transmission of its voice
messaging subscribers. Although management believes that alternative
telecommunications facilities could be found in a timely manner,
disruption of these services for more than a brief period would have an
adverse effect on operating results.
Factors Impacting Future Success
The future success of the Company is dependent upon a number of factors,
including the effect of rapid technological changes affecting the
markets for the Company's products and services and management's ability
to effectively respond to those changes, including the development,
implementation, marketing, and support of new or improved products and
services to respond to the changing environment; effects of intense
competition in information and telecommunications services markets,
including, among other things, the consequent effects on the prices that
the Company may charge for its products and services; the effect of
regulatory changes in the telecommunications industry; and the risk of
dependence on key managerial personnel.
3. CONCENTRATIONS OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
Financial instruments that potentially subject the Company to
concentrations of credit risk consist only of accounts receivable, as
collateral is not required. The Company's risk of loss is limited due to
advance billings to customers and the ability to terminate access on
delinquent accounts. Approximately 55% of the Company's sales were
derived through a single national account during 1996. Although this
entity is a single account that is managed on a collective basis, it is
actually comprised of a large number of individual subscribers located
throughout all franchise territories, including those operated by other
Voice-Tel franchisees.
4. FRANCHISE AGREEMENTS
The franchise rights were acquired pursuant to a franchise agreement
entered into with VTE (Note 1). The term of the franchise agreement is
20 years, with an option to renew the agreement for an additional 10
years. The Company is required to pay a monthly royalty in an amount
equal to 10% of gross sales, less certain costs. In addition, the
Company is required to pay a monthly marketing and promotion fee of 2%
of gross sales. The Company is periodically required to pay other
special franchise fees and assessments.
<PAGE>
In conjunction with the execution of the franchise agreement, the
Company has agreed to act as the service representative of VTE within
its franchise area. As consideration for this, the Company receives a
monthly fee equal to 40% of the royalties it pays to VTE. During 1996,
royalties, franchise fees, and other assessments totaled $135,713, net
of any service representative fees received.
5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31, 1996:
Machinery and equipment $686,385
Auto and truck equipment 16,606
Office furniture, fixtures, and equipment 17,324
720,315
Less accumulated depreciation (452,747)
--------
Property and equipment, net $267,568
========
6. LOANS PAYABLE
In December 1996, the Company established two line-of-credit agreements
with Scripps Bank for $50,000 and $10,000. Amounts drawn under the lines
require monthly payments of interest only at a variable interest rate of
2% over the prime rate (the Company's rate at December 31, 1996 was
10.25%). These notes are collateralized by accounts receivable,
equipment, general intangibles, and fixtures and has been personally
guaranteed by the members. The line-of-credit agreements expire on
December 10, 1997. There was $30,000 outstanding under these
line-of-credit agreements on December 31, 1996. At December 31, 1996,
the Company was in compliance with all loan covenants.
7. LONG-TERM OBLIGATIONS
Long-Term Debt
Long-term debt as of December 31, 1996 consisted of notes payable to a
leasing company, due in monthly installments, at an interest rate of
14.4% to 16%. The notes are collateralized by the equipment of the
Company.
Maturities of long-term debt at December 31, 1996 are as follows:
1997 $ 79,756
1998 41,759
1999 12,088
2000 10,804
2001 0
Thereafter 0
--------
$132,319
========
<PAGE>
8. COMMITMENTS AND CONTINGENCIES
Lease Obligations
The Company has entered into various operating leases for facilities
used in its operations. Aggregate further minimum rental commitments
under noncancelable operating leases with original or remaining periods
in excess of one year as of December 31, 1996 are as follows:
1997 $ 23,654
1998 23,736
1999 21,576
2000 20,496
2001 11,956
Thereafter 0
--------
$101,418
========
Rental expense under operating leases amounted to $20,753 for the year
ended December 31, 1996.
Contingency
As of December 31, 1996, a vendor of the Company has asserted a claim of
$90,000 for alleged unpaid services. The vendor contends that it
provided services to a customer of the Company for which the Company is
liable. The Company contends that the services were not authorized, and
to the extent they were provided by the vendor, they were provided as a
result of a fraud perpetrated by the customer. As such, the Company has
rejected any claim by the vendor and intends to defend itself vigorously
in this matter. At March 21, 1997, the Company and its counsel were
unaware that any legal action had commenced.
The Company has not accrued for any potential liability in its December
31, 1996 financial statements, as the claim has not progressed
sufficiently to allow for an accurate assessment of its likelihood of
materializing. The Company has estimated that the most likely outcome of
any litigation in this matter would be a negotiated settlement of
significantly less than $90,000.
9. EQUITY INTERESTS
Subsequent to the formation of the Sole Proprietorship into a limited
liability corporation, two of the current shareholders of the Company
exercised options pursuant to two option agreements which were issued in
1994. The options exercised totaled 5% and 1% of the Company. At
December 31, 1996, there was 4% remaining unexercised, at an exercise
price of $17,270, under one of the agreements issued in 1994. Subsequent
to year end, but prior to the formation of the S corporation, these
options were exercised. The amounts paid for the exercised options were
paid directly to the owner of the Company
<PAGE>
Pursuant to the formation of the Company into an S corporation, the
common stock authorized, issued, and outstanding for the Company is as
follows:
Shares Par Amount
Issued Value Contributed
Shares and Per for Common
Authorized Outstanding Share Stock
---------- ----------- ----- -----------
1,000 100 None $128,000
10. VOLUNTARY EMPLOYEE BENEFICIARY ASSOCIATION
Effective December 15, 1996, the Company established a voluntary
employee beneficiary association trust. This is a health and welfare
benefit trust established under Internal Revenue Code 501(c)9 for the
purpose of providing certain benefits to employees utilizing a
tax-exempt trust. Any employee who has reached the age of 21 and
completed 1 year of service is eligible to participate.
At December 31, 1996, there were seven employees covered by this trust.
The first year's premium of approximately $88,000 was expensed during
1996.
11. DEFERRED COMPENSATION PLAN
Effective October 1, 1996, the Company established an employee savings
plan, which was created under Section 401(k) of the Internal Revenue
Code. All employees who are at least 21 years of age and have completed
12 months of service are eligible to participate in the plan. Eligible
employees can contribute up to 15% of their annual compensation up to a
maximum of $9,500. Contributions and matching funds are immediately
vested.
The Company matches 50% of the employees' contributions up to 3% of
their total income, except for the first three months of the employees'
eligibility, during which time the Company matches 100% of contributions
up to 3%. For the year ended December 31, 1996, the Company made a
discretionary matching contribution to the plan of $20,000.
12. RELATED-PARTY TRANSACTIONS
Throughout 1996, the Company loaned approximately $182,000 to Computemp,
a company 100% owned by the Company's majority owner. This loan bears
interest at 9% and is due on demand. In December 1996, Computemp paid
the Company $16,500, $6,743 of which was applied to principal and $9,757
of which was applied to interest. The balance of approximately $178,000
at December 31, 1996 is reflected in the accompanying financial
statements as a related-party accounts receivable.
In October 1996, one of the Company's owners loaned approximately
$39,000 to the Company to help fund the Voluntary Employee Benefit
Association trust. This loan was intended to be short-term in nature. As
<PAGE>
such, there is no associated interest component and the balance of
$38,616 at December 31, 1996 is reflected as an accounts payable in the
accompanying financial statements.
In 1995, a relative of the Company's owner loaned $25,000 to the Company
to be used for operating purposes. The loan bears simple interest at 9%
and is due upon demand. The loan agreement states interest payments are
to be paid quarterly. The Company expensed $2,250 in 1996 related to
interest.
13. SUBSEQUENT EVENT
On March 28, 1997, the Company was formed into an S corporation under
the name SDVT, Inc.
On April 2, 1997, the Company entered into a definitive agreement to
merge with Premiere Technologies, Inc. ("Premiere") in exchange for
shares of Premiere stock with a value of approximately $3,470,000. The
acquisition is subject to certain conditions and is expected to be
consummated on or about April 30, 1997. If completed, the merger is
intended to be accounted for using the pooling-of-interests method.
<PAGE>
CAR ZEE, INC.
(FORMERLY KNOWN AS VOICE-TEL OF SAN JOSE)
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1996
TOGETHER WITH
AUDITORS' REPORT
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Car Zee, Inc.:
We have audited the accompanying balance sheet of CAR ZEE, INC. (a California S
corporation) (formerly known as Voice-Tel of San Jose) as of December 31, 1996
and the related statements of operations, shareholders' equity, and cash flows
for the year then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Car Zee, Inc. as of December
31, 1996 and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Atlanta, Georgia
May 6, 1997
<PAGE>
CAR ZEE, INC.
(FORMERLY KNOWN AS VOICE-TEL OF SAN JOSE)
BALANCE SHEET
DECEMBER 31, 1996
ASSETS
- - -------------------------------------------------------
CURRENT ASSETS:
Cash and cash equivalents $ 50,532
Accounts receivable, less allowance for
uncollectible accounts of $0 110,551
Interest receivable 14,606
Investments 10,774
Prepaid expenses and other current assets 5,061
Notes receivable 153,999
Notes receivable--related party 329,528
----------
Total current assets 675,051
----------
PROPERTY AND EQUIPMENT 1,137,207
Less accumulated depreciation (756,495)
----------
Net property and equipment 380,712
----------
OTHER ASSETS:
Intangible assets, net 334,383
Other 1,349
----------
Total other assets 335,732
----------
Total assets $1,391,495
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
- - -------------------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 9,500
Accrued liabilities 32,564
Deferred revenue 27,544
Current portion of long-term and leases 83,235
----------
Total current liabilities 152,843
----------
LOSSES IN EXCESS OF INVESTMENT
IN JOINT VENTURE (Note 8) 239,251
----------
LONG-TERM DEBT AND CAPITAL LEASES (Note 6) 797,244
----------
SHAREHOLDERS' EQUITY:
Common stock 801,436
Treasury stock (240,000)
Retained deficit (359,279)
----------
Total shareholders' equity 202,157
----------
Total liabilities and shareholders'
equity $1,391,495
==========
The accompanying notes are an integral part of this balance sheet.
<PAGE>
CAR ZEE, INC.
(FORMERLY KNOWN AS VOICE-TEL OF SAN JOSE)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
REVENUES $1,521,386
COST OF SALES 261,905
----------
Gross margin 1,259,481
----------
OPERATING EXPENSES:
Selling and marketing 257,028
General and administrative 340,550
Depreciation and amortization 317,914
----------
Total operating expenses 915,492
----------
OPERATING INCOME 343,989
OTHER INCOME (EXPENSE):
Interest expense (125,232)
Other, net 65,780
----------
NET INCOME $ 284,537
==========
The accompanying notes are an integral part of this statement.
<PAGE>
CAR ZEE, INC.
(FORMERLY KNOWN AS VOICE-TEL OF SAN JOSE)
STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK
--------------- --------------- TREASURY RETAINED
SHARES AMOUNT SHARES AMOUNT STOCK DEFICIT TOTAL
------ -------- ------ -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1996 862 $186,625 138 $578,811 $ 0 $(308,484) $456,952
Shareholders' contributions 0 36,000 0 0 0 0 36,000
Dividends to shareholders 0 0 0 0 0 (321,410) (321,410)
Shareholder buyout 0 0 0 0 (240,000) (13,922) (253,922)
Net income 0 0 0 0 0 284,537 284,537
--- -------- --- -------- --------- --------- --------
BALANCE, December 31, 1996 862 $222,625 138 $578,811 $(240,000) $(359,279) $202,157
=== ======== === ======== ========= ========= ========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
CAR ZEE, INC.
(FORMERLY KNOWN AS VOICE-TEL OF SAN JOSE)
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 284,537
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 317,914
Changes in operating assets and
liabilities:
Accounts and interest
receivable (11,335)
Prepaid expenses and other
current assets (1,710)
Accounts payable and accrued
liabilities (13,511)
Deferred revenue 3,805
---------
Net cash provided by operating
activities 579,700
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Contributions to joint venture (12,204)
Purchase of equipment (65,924)
Payments on notes receivable 129,755
Issuances notes receivable (262,545)
---------
Net cash used in investing
activities (210,918)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions by shareholders 36,000
Proceeds from issuance of long-term
subordinated debt 60,000
Principal payments on subordinated debt (172,035)
Distributions paid to shareholders (321,410)
---------
Net cash used in financing
activities (397,445)
---------
NET DECREASE IN CASH (28,663)
CASH AT BEGINNING OF YEAR 79,195
---------
CASH AT END OF YEAR $ 50,532
=========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for interest $ 117,844
=========
Conversion of shareholders' capital to
long-term debt $ 280,335
=========
The accompanying notes are an integral part of this statement.
<PAGE>
CAR ZEE, INC.
(FORMERLY KNOWN AS VOICE-TEL OF SAN JOSE)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION AND NATURE OF BUSINESS
ORGANIZATION
Voice-Tel of San Jose was formed as a California limited partnership (the
"Limited Partnership") on January 1, 1993. The company was incorporated on
April 24, 1997 in the state of California as Car Zee, Inc. ("the Company").
NATURE OF BUSINESS
The Company provides digital voice messaging services under exclusive
franchise agreements with Voice-Tel Enterprises, Inc. ("VTE"). Business is
conducted using the proprietary trade name "Voice-Tel." The Voice-Tel system
operates on the Company's computer processing equipment using commercially
available telephone lines. The Company provides digital voice messaging
services in the greater San Jose and Sacramento metropolitan areas.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRESENTATION
The Company was formed on April 24, 1997. Immediately prior to the merger
with Premiere Technologies, Inc. ("Premiere") (Note 9), the assets and
liabilities of Voice-Tel of San Jose were transferred to the Company under
the same ownership. Accordingly, the transfer has been accounted for in a
manner similar to a pooling-of-interests for the period presented.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles 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 those estimates.
<PAGE>
CASH AND CASH EQUIVALENTS
For financial reporting purposes, cash and cash equivalents include cash on
hand and highly liquid money market investments.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost, and depreciation is provided for
using the straight-line method over the estimated useful lives of the assets,
commencing when the assets are installed or placed in service. The estimated
useful lives for property and equipment are from five to seven years. The
cost of installed equipment includes expenditures for installation. Assets
recorded under capital leases are depreciated over the shorter of their
useful lives or the term of the related lease.
LONG-LIVED ASSETS
The Company periodically reviews the values assigned to long-lived assets,
such as intangible assets and property and equipment, to determine whether
any impairments are other than temporary. Management believes that the long-
lived assets in the accompanying balance sheet are appropriately valued.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and investments approximates fair value because
their maturity is generally less than one year in duration.
The fair value of the long-term debt approximates its carrying value as of
December 31, 1996.
REVENUE RECOGNITION AND DEFERRED REVENUES
Revenues are recognized as the Company performs services in accordance with
contract terms. Billings in advance for messaging services are recorded on
the accompanying balance sheet as deferred revenue. These revenues are
recognized when the related service is provided. The majority of the
Company's customers are billed monthly; however, some customers have
quarterly and semiannual billing cycles.
COST OF SERVICES
Cost of services includes all direct expenses incurred in providing voice
messaging services, including long-distance carrier costs and applicable
taxes.
INTANGIBLE ASSETS
Purchased intangible assets, which include franchise agreements, are recorded
at cost. Intangible assets are amortized using the straight-line method over
the estimated useful lives of the related assets or terms of the agreements.
Franchise agreements and goodwill are amortized over 20 years. Customer lists
are amortized over five years.
<PAGE>
Intangible assets consisted of the following at December 31, 1996:
Franchise agreements $ 170,000
Customer lists 447,824
Goodwill 135,496
---------
753,320
Less accumulated amortization (418,937)
---------
$ 334,383
=========
INCOME TAXES
The Company elected to be treated as a limited partnership for federal and
state income tax purposes as of December 31, 1996. As such, in lieu of
corporate income tax consequences arising at the partnership level, the
individual partners are allocated their proportionate shares of the Company's
taxable income.
REGULATION
The Company is subject to regulation by the FCC and by various state public
service and public utility commissions.
SOURCE OF SUPPLIES
The Company does not own a transmission network and, accordingly, relies on
both facilities-based and nonfacilities-based local and long-distance
carriers and other companies to provide transmission of its subscribers'
voice messaging. Although management feels that alternative
telecommunications facilities could be found in a timely manner, disruption
of these services for more than a brief period would have an adverse effect
on operating results.
FACTORS IMPACTING FUTURE SUCCESS
The future success of the Company is dependent upon a number of factors,
including the effect of rapid technological changes affecting the markets for
the Company's products and services and management's ability to effectively
respond to those changes, including the development, implementation,
marketing, and support of new or improved products and services to respond to
the changing environment; effects of intense competition in information and
telecommunications services markets, including, among other things, the
consequent effect on the prices that the Company may charge for its products
and services; the effect of regulatory changes in the telecommunications
industry; and the risk of dependence on key managerial personnel.
3. CONCENTRATIONS OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
Financial instruments that potentially subject the Company to concentrations
of credit risk consist only of accounts receivable, as collateral is not
required. The Company's risk of loss is limited due to advance billings to
customers and the ability to terminate access on delinquent accounts.
Approximately 77% of the Company's sales were derived through a single
<PAGE>
national account during 1996. Although this entity is a single national
account that is managed on a collective basis, it is actually comprised of a
large number of individual subscribers located throughout all franchise
territories, including those operated by other Voice-Tel franchises.
4. FRANCHISE AGREEMENTS
The franchise rights were acquired pursuant to a franchise agreement entered
into with VTE (Note 1). The term of the franchise agreement is 20 years,
with an option to renew the agreement for an additional 10 years. The
Company is required to pay a monthly royalty in an amount equal to a
specified percentage of gross sales. The royalty rates are 6% in the first
year of the franchise agreement, 8% in the second year, and 10% thereafter.
In addition, the Company is required to pay a monthly marketing and promotion
fee of 2% of gross sales. The Company is periodically required to pay other
special franchise fees and assessments.
In conjunction with the execution of the franchise agreements, the
Partnership has agreed to act as the service representatives of VTE within
each of VTE's franchise areas, except Alaska. As consideration for this, the
Company receives a monthly fee equal to 40% of the royalties it pays to VTE.
During 1996, royalties, franchise fees, and other assessments totaled
$169,150, net of any service representative fees received.
5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31, 1996:
Messaging computer systems $ 177,855
Computer software 959,352
----------
1,137,207
Less accumulated depreciation (756,495)
----------
Property and equipment, net $ 380,712
==========
6. LONG-TERM OBLIGATIONS
Subordinated debt consisted of the following at December 31, 1996:
Note payable to shareholder, interest only
payments monthly until January 1, 2000,
interest rate 14%, with amortization over 60
months beginning January 1, 2000 $184,144
Note payable to shareholder, interest
accrues monthly through January 1, 2000,
interest rate 16%, with amortization over 60
months beginning January 1, 2000 5,694
<PAGE>
Note payable to shareholder, interest and
principal payments monthly, interest rate
16% $ 10,057
Notes payable to relatives of shareholders,
interest only payments monthly until
June 30, 2000, interest rates ranging from
11% to 16%, with amortization over 60 months
beginning on January 1, 2000 386,207
Notes payable to relatives of shareholders,
interest accrues monthly through June 30,
2000, interest rates ranging from 12% to
16%, with amortization over 60 months
beginning on January 1, 2000 16,447
Notes payable to relatives of shareholders,
interest and principal payments monthly,
interest rate 16% 5,181
Notes payable to individuals, interest and
principal payments due every June 15 and
December 15, interest at the Bank of America
reference rate (8.25% at December 31, 1996
and 8.5% at December 31, 1995) 240,795
Note payable to individual, interest and
principal payments monthly, interest rate
16% 7,064
--------
855,589
Less current maturities (61,007)
--------
Long-term subordinated debt, net of current
portion $794,582
========
Principal payments on subordinated debt are due as follows:
1997 $ 61,007
1998 40,986
1999 39,846
2000 133,802
2001 139,923
Thereafter 440,025
--------
$855,589
========
CAPITAL LEASE OBLIGATIONS
The present value of future minimum lease payments as
of December 31, 1996 are:
1997 $23,592
1998 2,885
-------
Total minimum lease payments 26,477
Less interest (1,587)
-------
Present value of lease payments $24,890
=======
<PAGE>
7. SHAREHOLDERS' EQUITY
The limited partnership agreement was created with an initial term of ten
years. The agreement stipulates that limited partners may elect to retire
from the Limited Partnership prior to the end of the ten-year period. The
agreement further states that the general partners will acquire the ownership
interest of retiring partners at a price equal to the retiring partners'
initial capital contribution, plus a 14% premium.
During 1996, two limited partners elected to retire from the Limited
Partnership. In accordance with the terms of the limited partnership
agreement, the partners have been issued notes in amounts equal to their
respective initial investments, plus the 14% premium. These purchases are
shown as treasury stock in the accompanying statement of shareholders'
equity. These notes are reflected in long-term obligations in the
accompanying balance sheet.
On April 24, 1997, Voice-Tel of San Jose was incorporated in the state of
California as Car Zee, Inc. The general and limited partnership interests
were exchanged for common stock in conjunction with the transaction with
Premiere (Note 9). The statement of shareholders' equity retroactively
reflects this issuance of common stock of the Company. Shares authorized and
issued are as follows:
Amount
Par Contributed
Shares Value for
Shares Issued and Per Common
Authorized Outstanding Share Stock
Class A common shares 99,000 862 None 222,625
Class B common shares 1,000 138 None 578,811
Class C common shares 1,000 0 None 0
Class D common shares 1,000 0 None 0
Class E common shares 1,000 0 None 0
8. JOINT VENTURE
On January 1, 1993, the Company formed a 50-50 joint venture with Voice-Tel
In-Touch Technologies, Inc. d.b.a. Voice-Tel of California ("VTC") under the
name of Voice-Tel of the Pacific. The joint venture provides administrative
and sales services to the Company and VTC. The investment has been accounted
for under the equity method of accounting, and losses in excess of
contributions to the joint venture have been presented as a long-term
liability in the accompanying balance sheet to reflect the Company's
contractually obligated pro rata share of the accumulated deficit of the
joint venture. The Company's equity in the joint venture is immaterial and
not disclosed separately in the statement of operations.
<PAGE>
Condensed financial information of the joint venture for fiscal 1996 is
summarized below:
Condensed financial information:
Total assets $114,108
========
Total liabilities $572,715
========
Loss for the year $ 22,748
========
9. SUBSEQUENT EVENT
On April 2, 1997, the Company entered into a definitive agreement to merge
with Premiere in exchange for shares of Premiere stock with a value of
approximately $3,083,000. The acquisition is subject to certain conditions
and was consummated on May 6, 1997. If completed, the merger has been
accounted for using the pooling-of-interests method.
<PAGE>
1086236 ONTARIO INC.
D.B.A. VOICE-TEL OF EASTERN CANADA, INC.
FINANCIAL STATEMENTS AS OF JANUARY 31, 1997
TOGETHER WITH
AUDITORS' REPORT
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
1086236 Ontario Inc.
d.b.a. Voice-Tel of Eastern Canada, Inc.:
We have audited the accompanying balance sheet of 1086236 ONTARIO INC. D.B.A.
VOICE-TEL OF EASTERN CANADA, INC. (a Canadian corporation) as of January 31,
1997 and the related statements of operations, shareholders' equity, and cash
flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of 1086236 Ontario Inc. d.b.a.
Voice-Tel of Eastern Canada, Inc. as of January 31, 1997 and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles in the United States of America.
/s/ Arthur Andersen LLP
Atlanta, Georgia
April 25, 1997
<PAGE>
1086236 ONTARIO INC.
D.B.A. VOICE-TEL OF EASTERN CANADA, INC.
BALANCE SHEET
JANUARY 31, 1997
(IN CANADIAN DOLLARS)
<TABLE>
<CAPTION>
ASSETS
- - ----------------------------------------------------------------------------
<S> <C>
CURRENT ASSETS:
Cash $ 57,027
Accounts receivable, less allowance for uncollectible
accounts of $0 5,061
------------
Total current assets 62,088
------------
PROPERTY AND EQUIPMENT (NOTE 5) 318,075
Less accumulated depreciation (93,525)
------------
Net property and equipment 224,550
------------
OTHER ASSETS:
Franchise agreement, net of accumulated amortization of
$16,010 112,084
Service agreement, net of accumulated amortization of
$64,050 64,050
------------
Total other assets 176,134
------------
Total assets $462,772
============
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
- - ----------------------------------------------------------------------------
<S> <C>
CURRENT LIABILITIES:
Accounts payable:
Trade $ 57,016
Related party 6,776
Accrued expenses 28,625
Income taxes payable 11,230
Deferred revenue 7,416
Current portion of long-term debt (Note 6) 89,388
------------
Total current liabilities 200,451
------------
LONG-TERM LIABILITIES (NOTE 6):
Long-term debt 60,352
Shareholder notes payable 100,000
------------
Total long-term liabilities 160,352
------------
DEFERRED TAX LIABILITY 49,198
------------
COMMITMENTS AND CONTINGENCIES (NOTE 7)
SHAREHOLDERS' EQUITY:
Common stock, $.10 par value; unlimited shares
authorized, 1,000 shares issued and outstanding 100
Retained earnings 52,671
------------
Total shareholders' equity 52,771
------------
Total liabilities and shareholders' equity $462,772
============
</TABLE>
The accompanying notes are an integral part of this balance sheet.
<PAGE>
1086236 ONTARIO INC.
D.B.A. VOICE-TEL OF EASTERN CANADA, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 31, 1997
(IN CANADIAN DOLLARS)
<TABLE>
<S> <C>
REVENUES $682,188
COST OF SALES 209,270
------------
Gross margin 472,918
------------
OPERATING EXPENSES:
Selling and marketing 45,114
General and administrative 182,631
Depreciation and amortization 80,272
------------
Total operating expenses 308,017
------------
OPERATING INCOME 164,901
OTHER EXPENSE:
Interest expense (12,357)
Other, net (4,772)
------------
INCOME BEFORE INCOME TAXES 147,772
INCOME TAX PROVISION 2,662
------------
NET INCOME $145,110
============
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
1086236 ONTARIO INC.
D.B.A. VOICE-TEL OF EASTERN CANADA, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED JANUARY 31, 1997
(IN CANADIAN DOLLARS)
<TABLE>
<CAPTION>
RETAINED
COMMON STOCK (DEFICIT)
-------------------
SHARES AMOUNT EARNINGS TOTAL
--------- -------- ------------ ------------
<S> <C> <C> <C> <C>
BALANCE, FEBRUARY 1, 1996 1,000 $100 $(92,439) $(92,339)
Net income 0 0 145,110 145,110
--------- -------- ------------ ------------
BALANCE, JANUARY 31, 1997 1,000 $100 $ 52,671 $ 52,771
========= ======== ============ ============
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
1086236 ONTARIO INC.
D.B.A. VOICE-TEL OF EASTERN CANADA, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JANUARY 31, 1997
(IN CANADIAN DOLLARS)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 145,110
------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 80,272
Changes in operating assets and liabilities:
Deferred income taxes (6,159)
Increase in accounts receivable (380)
Decrease in accounts payable (15,314)
Increase in accrued expenses 2,068
Increase in income taxes payable 11,230
Deferred revenue 7,416
Other (5,688)
------------
Total adjustments 73,445
------------
Net cash provided by operating activities 218,555
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (123,748)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 27,000
Principal payments on long-term debt (83,988)
Principal payments on shareholder notes payable (128,000)
------------
Net cash used in financing activities (184,988)
------------
NET DECREASE IN CASH (90,181)
CASH AT BEGINNING OF YEAR 147,208
------------
CASH AT END OF YEAR $ 57,027
============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 9,857
============
Cash paid for income taxes $ 0
============
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
1086236 ONTARIO INC.
D.B.A. VOICE-TEL OF EASTERN CANADA, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1997
1. ORGANIZATION AND NATURE OF BUSINESS
ORGANIZATION
1086236 Ontario Inc. d.b.a. Voice-Tel of Eastern Canada, Inc. (the "Company")
is a Canadian corporation and was incorporated in Ontario on June 17, 1994.
NATURE OF BUSINESS
The Company provides digital messaging services under an exclusive franchise
agreement with Voice-Tel Enterprises, Inc. ("VTE"). Business is conducted
using the proprietary trade name "Voice-Tel." The Voice-Tel system operates
on the Company's computer processing equipment using commercially available
telephone lines.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles 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 those estimates.
PRESENTATION
The accompanying financial statements of the Company are prepared in
conformity with accounting principles generally accepted in the United States
of America and are presented in Canadian dollars.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost, and depreciation is provided for
using the straight-line method over the estimated useful lives of the assets,
commencing when the assets are installed or placed in service. The estimated
useful lives are ten years for furniture and fixtures, seven years for office
equipment, and five years for computer equipment. The cost of installed
equipment includes expenditures for installation. Assets recorded under
capital leases and leasehold improvements are depreciated over the shorter of
their useful lives or the terms of the related leases.
<PAGE>
LONG-LIVED ASSETS
The Company periodically reviews the values assigned to long-lived assets,
such as property and equipment, to determine whether any impairments are
other than temporary. Management believes that the long-lived assets in the
accompanying balance sheet are appropriately valued.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the long-term debt approximates its carrying value as of
January 31, 1997.
REVENUE RECOGNITION AND DEFERRED REVENUES
Revenues are recognized as the Company performs services in accordance with
contract terms. Billings in advance for messaging services are recorded on
the accompanying balance sheet as deferred revenue. These revenues are
recognized when the related service is provided. The majority of the
Company's customers are billed monthly; however, some customers have
quarterly and semiannual billing cycles.
COST OF SERVICES
Cost of services includes all direct expenses incurred in providing voice
messaging services, including long-distance carrier costs and applicable
taxes.
INTANGIBLE ASSETS
Purchased intangible assets, which include a franchise agreement and a
service agreement, are recorded at cost. Intangible assets are amortized
using the straight-line method over the estimated useful lives of the
related assets or terms of the agreements (20 years for the franchise
agreement).
INCOME TAXES
The Company utilizes the liability method of accounting for income taxes,
as set forth in Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." Using the liability method, deferred taxes
are determined based on the difference between the financial and tax bases
of assets and liabilities using enacted tax rates in effect in the years in
which the differences are expected to reverse.
SOURCE OF SUPPLIES
The Company does not own a transmission network and, accordingly, relies on
both facilities-based and nonfacilities-based local and long-distance
carriers and other companies to provide subscribers' voice messaging.
Although management believes that alternative telecommunications facilities
could be found in a timely manner, disruption of these services for more
than a brief period would have an adverse effect on operating results.
<PAGE>
FACTORS IMPACTING FUTURE SUCCESS
The future success of the Company is dependent upon a number of factors,
including the effect of rapid technological changes affecting the markets
for the Company's products and services and management's ability to
effectively respond to those changes, including the development,
implementation, marketing, and support of new or improved products and
services to respond to the changing environment; effects of intense
competition in information and telecommunications services markets,
including, among other things, the consequent effects on the prices that
the Company may charge for its products and services; the effect of
regulatory changes in the telecommunications industry; and the risk of
dependence on key managerial personnel.
3. CONCENTRATIONS OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
Financial instruments that potentially subject the Company to
concentrations of credit risk consist only of accounts receivable, as
collateral is not required. The Company's risk of loss is limited due to
advance billings to customers and the ability to terminate access on
delinquent accounts. Approximately 98% of the Company's sales were
affiliated with a single national account during fiscal 1997. This entity
is comprised of a large number of individual subscribers located throughout
the franchise territory as well as territories operated by other Voice-Tel
franchises who are billed and remit payment on an individual basis.
4. FRANCHISE AGREEMENTS
The franchise rights were acquired pursuant to a franchise agreement
entered into with VTE (Note 1). The term of the franchise agreement is 20
years, with an option to renew the agreement for an additional 10 years.
The Company is required to pay a monthly royalty in an amount equal to a
specified percentage of gross sales, less certain costs. The royalty rates
are 6% in the first year of operation under the franchise agreement, 8% in
the second year, and 10% thereafter. In addition, the Company is required
to pay a monthly marketing and promotion fee of 2% of gross sales, less
certain costs. The Company is periodically required to pay other special
franchise fees and assessments. During fiscal 1997, royalties, franchise
fees, and other assessments totaled $51,454.
5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at January 31, 1997:
<TABLE>
<S> <C>
Voice messaging hardware $313,585
Computer equipment 3,890
Office equipment 600
-----------
318,075
Less accumulated depreciation (93,525)
-----------
Property and equipment, net $224,550
===========
</TABLE>
<PAGE>
6. LONG-TERM OBLIGATIONS
Long-term debt consisted of the following at January 31, 1997:
<TABLE>
<S> <C>
Note payable to the Toronto-Dominion Bank in 42 monthly installments of
$2,610, plus interest at a rate of 1% over the bank's prime rate (4.75% at
January 31, 1997); balance due February 20, 1998; collateralized by
equipment $ 33,930
Note payable to the Toronto-Dominion Bank in 40 monthly installments of
$405, plus interest at a rate of 1% over the bank's prime rate (4.75% at
January 31, 1997); balance due March 16, 1998; collateralized by equipment 5,670
Note payable to the Toronto-Dominion Bank in 37 monthly installments of
$715, plus interest at a rate of 1% over the bank's prime rate (4.75% at
January 31, 1997); balance due April 22, 1999; collateralized by equipment 10,725
Note payable to the Toronto-Dominion Bank in 40 monthly installments of
$500, plus interest at a rate of 2% over the bank's prime rate (4.75% at
January 31, 1997); balance due April 22, 1999; collateralized by equipment 13,500
Note payable to the Toronto-Dominion Bank in 40 monthly installments of
$2,000, plus interest at a rate of 2% over the bank's prime rate (4.75% at
January 31, 1997); balance due April 12, 1999; collateralized by equipment 54,000
Note payable to the Toronto-Dominion Bank in 40 monthly installments of
$675, plus interest at a rate of 2% over the bank's prime rate (4.75% at
January 31, 1997); balance due January 20, 2000; collateralized by
equipment 24,300
Note payable to the Toronto-Dominion Bank in 35 monthly installments of
$544, plus interest at a rate of 2.25% over the bank's prime rate (4.75% at
January 31, 1997); balance due March 20, 2008; collateralized by equipment 7,615
------------
149,740
Less current maturities 89,388
------------
Long-term debt, net of current portion $ 60,352
============
</TABLE>
Maturities of long-term debt at January 31, 1997 are as follows:
<TABLE>
<S> <C>
1998 $ 89,388
1999 44,752
2000 15,600
2001 0
2002 0
Thereafter 0
----------
$149,740
==========
</TABLE>
<PAGE>
The Company also has noninterest-bearing notes payable to each of its four
shareholders in the amount of $25,000, which are payable on demand.
7. COMMITMENTS AND CONTINGENCIES
LEASE OBLIGATIONS
The Company has entered into various operating leases for facilities used
in its operations. Aggregate future minimum rental commitments under
noncancelable operating leases with original or remaining periods in excess
of one year as of January 31, 1997 are as follows:
<TABLE>
<CAPTION>
OPERATING
LEASES
-----------
<S> <C>
1998 $6,060
1999 3,030
2000 0
2001 0
2002 0
Thereafter 0
----------
$9,090
==========
</TABLE>
Rental expense under operating leases amounted to $9,159 for the year ended
January 31, 1997.
8. INCOME TAXES
Details of the income tax provision (benefit) for the year ended January
31, 1997 are as follows:
<TABLE>
<S> <C>
Current:
Federal $ 4,924
Provincial 3,897
--------
Total current provision 8,821
--------
Deferred:
Federal (4,375)
Provincial (1,784)
--------
Total deferred benefit (6,159)
--------
Total provision $ 2,662
========
</TABLE>
The tax effect of temporary differences between the carrying amounts of
assets and liabilities in the financial statements and their respective tax
bases which gives rise to deferred tax assets and liabilities as of January
31, 1997 is as follows:
<PAGE>
<TABLE>
<S> <C>
Noncurrent deferred tax liabilities:
Property, plant, and equipment basis difference $49,198
==========
</TABLE>
A reconciliation of the federal statutory income tax rate to the effective
income tax rate for the year ended January 31, 1997 is as follows:
<TABLE>
<S> <C>
Federal statutory income tax rate 38.0%
Increase (decrease) in taxes resulting from:
Provincial income taxes 15.5
Net operating loss carryforwards (42.7)
Tax credits (9.0)
--------
Effective income tax rate 1.8%
========
</TABLE>
9. RELATED-PARTY TRANSACTIONS
At January 31, 1997, the Company has recorded a payable to Voice-Tel
Services ("VTS") of $3,682 for administrative fees and a payable to a
shareholder for business expense reimbursement in the amount of $3,094. VTS
provides billing and collecting services to the Company.
10. SUBSEQUENT EVENT
On April 2, 1997, the Company entered into a definitive agreement to merge
with Premiere Technologies, Inc. ("Premiere") in exchange for shares of
Premiere stock with a value of approximately $1,508,000. The acquisition
is subject to certain conditions and is expected to be consummated on or
about April 30, 1997. If completed, the merger is intended to be accounted
for using the pooling-of-interests method.
<PAGE>
Flanagan/Allan Inc.
Combined Financial Statements as of January 31, 1997
Together With
Auditors' Report
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
Flanagan/Allan Inc.:
We have audited the accompanying combined balance sheet of FLANAGAN/ALLAN INC.
(a Canadian corporation) as of January 31, 1997 (See Note 1 for a listing of
entities combined) and the related combined statements of operations,
shareholders' equity, and cash flows for the year then ended. These combined
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Flanagan/Allan Inc.
as of January 31, 1997 and the results of their operations and their cash flows
for the year then ended in conformity with generally accepted accounting
principles in the United States of America.
/s/ Arthur Andersen LLP
Atlanta, Georgia
April 25, 1997
<PAGE>
FLANAGAN/ALLAN INC.
COMBINED BALANCE SHEET
JANUARY 31, 1997
(In Canadian Dollars)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash $ 121,330
Accounts receivable--trade, less allowance for
doubtful accounts of $0 77,365
Accounts receivable--related-party 95,471
Prepaids and other 4,956
----------
Total current assets 299,122
----------
PROPERTY AND EQUIPMENT (Note 5) 1,678,752
Less accumulated depreciation (614,433)
----------
Net property and equipment 1,064,319
----------
INVESTMENT IN SUBSIDIARY 26,386
----------
OTHER ASSETS:
Franchise agreement, net of accumulated amortization
of $32,828 131,309
Service agreement, net of accumulated amortization
of $116,665 47,472
----------
Total other assets 178,781
----------
Total assets $1,568,608
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable:
Trade $ 268,064
Related party 63,193
Accrued expenses 354,963
Income taxes payable 5,723
Deferred revenue 54,219
Current portion of long-term debt (Note 6) 121,116
Shareholder notes payable 192,050
----------
Total current liabilities 1,059,328
----------
LONG-TERM LIABILITIES (Note 6):
Long-term debt 375,074
----------
DEFERRED TAX LIABILITY 95,454
----------
COMMITMENTS AND CONTINGENCIES (Note 7)
SHAREHOLDERS' EQUITY:
Common stock, no par value; unlimited shares authorized;
12 shares issued and outstanding 12
Class B common stock, no par value; unlimited shares
authorized; 1 share issued and outstanding 1
Class C common stock, no par value; unlimited shares authorized;
1 share issued and outstanding 1
Common stock, no par value; unlimited shares authorized;
110 shares issued and outstanding 110
Additional paid-in capital 40
Retained earnings 38,588
----------
Total shareholders' equity 38,752
----------
Total liabilities and shareholders' equity $1,568,608
==========
</TABLE>
The accompanying notes are an integral part of this combined balance sheet.
<PAGE>
FLANAGAN/ALLAN INC.
COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 31, 1997
(In Canadian Dollars)
REVENUES $3,422,258
COST OF SALES 1,077,963
----------
Gross margin 2,344,295
----------
OPERATING EXPENSES:
Selling and marketing 387,613
General and administrative 1,294,897
Depreciation and amortization 317,270
----------
Total operating expenses 1,999,780
----------
OPERATING INCOME 344,515
OTHER EXPENSE:
Interest expense 39,851
Other, net 32,792
----------
INCOME BEFORE INCOME TAXES 271,872
INCOME TAX PROVISION 86,985
----------
NET INCOME $ 184,887
==========
The accompanying notes are an integral part of this combined statement.
<PAGE>
FLANAGAN/ALLAN INC.
COMBINED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED JANUARY 31, 1997
(In Canadian Dollars)
<TABLE>
<CAPTION>
Common Stock Additional Retained
-------------------- Paid-In (Deficit)
Shares Amount Capital Earnings Total
------ ------ --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE, February 1, 1996 124 $124 $40 $(146,299) $(146,135)
Net income 0 0 0 184,887 184,887
--- ---- --- --------- ---------
BALANCE, January 31, 1997 124 $124 $40 $ 38,588 $ 38,752
=== ==== === ========= =========
</TABLE>
The accompanying notes are an integral part of this combined statement.
<PAGE>
FLANAGAN/ALLAN INC.
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JANUARY 31, 1997
(In Canadian Dollars)
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $184,887
--------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 317,270
Loss on disposal of equipment 29,111
Changes in operating assets and liabilities:
Increase in accounts receivable--trade (17,190)
Decrease in accounts receivable--related party 59,105
Increase in investment in subsidiary (72,555)
Decrease in accounts payable--trade (50,256)
Increase in accounts payable--related party 37,644
Increase in accrued expenses 54,963
Decrease in income taxes payable (38,602)
Deferred revenue (53,581)
Deferred income taxes 14,956
Other (4,956)
---------
Total adjustments 275,909
---------
Net cash provided by operating activities 460,796
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (423,176)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (26,636)
Principal payments on shareholder notes payable (91,098)
---------
Net cash used in financing activities (117,734)
---------
NET DECREASE IN CASH (80,114)
CASH AT BEGINNING OF YEAR 201,444
---------
CASH AT END OF YEAR $121,330
=========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 21,963
=========
Cash paid for income taxes $ 20,291
=========
</TABLE>
The accompanying notes are an integral part of this combined statement.
<PAGE>
FLANAGAN/ALLAN INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
JANUARY 31, 1997
1. ORGANIZATION AND NATURE OF BUSINESS
Organization
Flanagan/Allan Inc. (the "Company") is a Canadian corporation and was
amalgamated on April 29, 1997 (Note 10). The Company owns 100% of
1086237 Ontario Inc., a holding company, which wholly owns 1139133
Ontario Inc. d.b.a. Voice-Tel of Hamilton, 1136827 Ontario Inc. d.b.a.
Voice-Tel of London, 1006089 Ontario Inc. d.b.a. Voice-Tel of Ontario,
and 1063940 Ontario Inc. d.b.a. Voice-Tel of Ottawa. In addition,
1086237 Ontario Inc. owns a 50% interest in 1086236 Ontario In c.d.b.a.
Voice-Tel of Eastern Canada.
Nature of Business
The Company provides digital messaging services under exclusive
franchise agreements with Voice-Tel Enterprises, Inc. ("VTE"). Business
is conducted using the proprietary trade name "Voice-Tel." The Voice-Tel
system operates on the Company's computer processing equipment using
commercially available telephone lines.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Presentation
The combined financial statements include the accounts of the Company
and the consolidated accounts of its wholly owned subsidiary 1086237
Ontario Inc. The equity method of accounting has been used to account
for 1086237 Ontario Inc.'s investment in Voice-Tel of Eastern Canada.
All significant intercompany transactions have been eliminated.
The accompanying combined financial statements of the Company are
prepared on the accrual basis of accounting and present their combined
assets, liabilities, revenues, expenses, and cash flows as if the
Company and its subsidiaries existed as a separate corporation during
the period presented.
The financial information included herein may not necessarily reflect
the financial position, results of operations or cash flows of the
Company in the future or what the financial position, results of
operations, or cash flows of the Company and its subsidiaries would have
been if they were combined as a separate and stand-alone company during
the period presented.
<PAGE>
The accompanying financial statements of the Company are prepared in
conformity with accounting principles generally accepted in the United
States of America and are presented in Canadian dollars, herein referred
to as "Canadian dollars" or "$."
Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles 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 those
estimates.
Property and Equipment
Property and equipment are recorded at cost and depreciation is provided
for using the straight-line method over the estimated useful lives of
the assets, commencing when the assets are installed or placed in
service. The estimated useful lives are ten years for furniture and
fixtures, seven years for office equipment, and five years for computer
equipment. The cost of installed equipment includes expenditures for
installation. Assets recorded under capital leases and leasehold
improvements are depreciated over the shorter of their useful lives or
the terms of the related leases.
Long-Lived Assets
The Company periodically reviews the values assigned to long-lived
assets, such as property and equipment, to determine whether any
impairments are other than temporary. Management believes that the long-
lived assets in the accompanying balance sheet are appropriately
valued.
Fair Value of Financial Instruments
The fair value of the long-term debt approximates its carrying value as
of January 31, 1997.
Revenue Recognition and Deferred Revenues
Revenues are recognized as the Company performs services in accordance
with contract terms. Billings in advance for messaging services are
recorded on the accompanying balance sheet as deferred revenue. These
revenues are recognized when the related service is provided. The
majority of the Company's customers are billed monthly; however, some
customers have quarterly and semiannual billing cycles.
Cost of Services
Cost of services includes all direct expenses incurred in providing
voice messaging services, including long-distance carrier costs and
applicable taxes.
Intangible Assets
Purchased intangible assets, which include two franchise agreements and
two service agreements, are recorded at cost. Intangible assets are
amortized using the straight-line
<PAGE>
method over the estimated useful lives of the related assets or terms of
the agreements (20 years for the franchise agreement).
Income Taxes
The Company utilizes the liability method of accounting for income
taxes, as set forth in Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes." Using the liability method, deferred
taxes are determined based on the difference between the financial and
tax bases of assets and liabilities using enacted tax rates in effect in
the years in which the differences are expected to reverse. The Company
is primarily subject to Canadian federal and provincial income taxes.
Source of Supplies
The Company does not own a transmission network and, accordingly, relies
on both facilities-based and nonfacilities-based local and long-
distance carriers and other companies to provide subscribers' voice
messaging. Although management believes that alternative
telecommunications facilities could be found in a timely manner,
disruption of these services for more than a brief period would have an
adverse effect on operating results.
Factors Impacting Future Success
The future success of the Company is dependent upon a number of factors,
including the effect of rapid technological changes affecting the
markets for the Company's products and services and management's ability
to effectively respond to those changes, including the development,
implementation, marketing, and support of new or improved products and
services to respond to the changing environment; effects of intense
competition in information and telecommunications services markets,
including, among other things, the consequent effects on the prices that
the Company may charge for its products and services; the effect of
regulatory changes in the telecommunications industry; and the risk of
dependence on key managerial personnel.
3. CONCENTRATIONS OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
Financial instruments that potentially subject the Company to
concentrations of credit risk consist only of accounts receivable, as
collateral is not required. The Company's risk of loss is limited due to
advance billings to customers and the ability to terminate access on
delinquent accounts. Approximately 92% of the Company's sales were
affiliated with a single national account during fiscal 1997. This
entity is comprised of a large number of individual subscribers located
throughout the franchise territory as well as territories operated by
other Voice-Tel franchises who are billed and remit payment on an
individual basis.
4. FRANCHISE AGREEMENTS
The franchise rights were acquired pursuant to two franchise agreements
entered into with VTE (Note 1). A franchise agreement exists that
governs the operations of Voice-Tel of Ontario as well as Voice-Tel of
Hamilton. A separate agreement exists that governs the operations of
<PAGE>
Voice-Tel of Ottawa and Voice-Tel of London. The term of the franchise
agreements are 20 years, with an option to renew the agreements for an
additional ten years. The Company is required to pay a monthly royalty
in an amount equal to a specified percentage of gross sales, less
certain costs. The royalty rates are 6% in the first year of operation
under the franchise agreements, 8% in the second year, and 10%
thereafter. In addition, the Company is required to pay a monthly
marketing and promotion fee of 2% of gross sales, less certain costs.
The Company is periodically required to pay other special franchise fees
and assessments.
In conjunction with the execution of these franchise agreements, the
Company has agreed to act as the service representative of VTE within
two of its franchise areas. As consideration for this, the Company
receives a monthly fee equal to 20% of the royalties it pays to VTE.
During fiscal 1997, royalties, franchise fees, and other assessments
totaled $232,607, net of any service representative fees received.
5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at January 31, 1997:
Voice messaging hardware $1,440,320
Computer equipment 203,358
Vehicle 19,980
Office equipment 15,094
----------
1,678,752
Less accumulated depreciation (614,433)
----------
Property and equipment, net $1,064,319
==========
6. LONG-TERM OBLIGATIONS
Long-term debt consisted of the following at January 31, 1997:
<TABLE>
<S> <C>
Note payable to the Toronto-Dominion Bank in 84 monthly installments of
$1,071, plus interest at a rate of 1.75% over the bank's prime rate
(4.75% at January 31, 1997); through balance due February 25, 2001;
collateralized by equipment $ 52,500
Note payable to the Toronto-Dominion Bank in 84 monthly installments of
$988, plus interest at a rate of 1.75% over the bank's prime rate
(4.75% at January 31, 1997); balance due August 12, 2001;
collateralized by equipment 54,345
Note payable to the Toronto-Dominion Bank in 84 monthly installments of
$917, plus interest at a rate of 1.75% over the bank's prime rate
(4.75% at January 31, 1997); balance due June 1, 2001; collateralized
by equipment 48,583
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Note payable to the Toronto-Dominion Bank in 84 monthly installments of
$2,381, plus interest at a rate of 1.75% over the bank's prime rate
(4.75% at January 31, 1997); balance due November 15, 2000;
collateralized by equipment $109,524
Note payable to the Toronto-Dominion Bank in 84 monthly installments of
$595, plus interest at a rate of 1.75% over the bank's prime rate
(4.75% at January 31, 1997); balance due February 11, 2001;
collateralized by equipment 29,167
Note payable to the Toronto-Dominion Bank in 84 monthly installments of
$1,042, plus interest at a rate of 2% over the bank's prime rate (4.75%
at January 31, 1997); balance due June 12, 2003; collateralized by
equipment 80,208
Note payable to the Hong Kong Bank of Canada in 47 monthly installments
of $1,792, plus interest at a rate of 2% over the bank's prime rate
(4.75% at January 31, 1997); balance due September 30, 1999;
collateralized by equipment 59,125
Note payable to the Hong Kong Bank of Canada in 60 monthly installments
of $1,307, plus interest at a rate of 2% over the bank's prime rate
(4.75% at January 31, 1997); balance due January 31, 2001;
collateralized by equipment 62,738
--------
496,190
Less current maturities 121,116
--------
Long-term debt, net of current portion $375,074
========
</TABLE>
Maturities of long-term debt at January 31, 1997 are as follows:
1998 $121,109
1999 121,109
2000 115,745
2001 94,855
2002 25,658
Thereafter 17,714
--------
$496,190
========
The Company also has noninterest-bearing notes payable to two of its
four shareholders totaling $192,050, which are payable on demand.
7. COMMITMENTS AND CONTINGENCIES
Lease Obligations
The Company has entered into various operating leases for facilities and
transmission equipment used in its operations. Aggregate future minimum
rental commitments under noncancelable operating leases with original or
remaining periods in excess of one year as of January 31, 1997 are as
follows:
Operating
Leases
---------
1998 $ 74,640
1999 59,940
2000 50,240
2001 48,240
2002 0
Thereafter 0
--------
$233,060
========
Rental expense under operating leases amounted to $49,804 for the year
ended January 31, 1997.
<PAGE>
8. INCOME TAXES
Details of the income tax provision for the year ended January 31, 1997
are as follows:
Current:
Federal $31,054
Provincial 24,400
-------
Total current provision 55,454
-------
Deferred:
Federal 22,387
Provincial 9,144
-------
Total deferred benefit 31,531
-------
Total provision $86,985
=======
The tax effect of temporary differences between the carrying amounts of
assets and liabilities in the financial statements and their respective
tax bases which gives rise to deferred tax assets and liabilities as of
January 31, 1997 is as follows:
Noncurrent deferred tax liabilities:
Property, plant, and equipment bases differences $ 81,519
Service and franchise fees 19,238
--------
100,757
--------
Noncurrent deferred tax asset:
Capital and operating loss carryforwards 99,382
Less valuation allowance (94,079)
--------
5,303
--------
Net deferred tax liability $ 95,454
========
The combined entities file stand alone federal and provincial tax and
capital returns. Due to uncertainty as to realization of the entire tax
benefit on operating and capital loss carryforwards, a valuation
allowance has been recorded.
<PAGE>
Voice-Tel of Hamilton has loss carryforwards available to reduce future
federal and provincial taxable income of approximately $57,000 at
January 31, 1997 which expire between 2003 and 2004. Flanagan/Allan Inc.
has a capital loss carryforwards available to reduce future federal and
provincial capital gains of approximately $129,000. These capital loss
carryforwards may be carried forward indefinitely.
A reconciliation of the federal statutory income tax rate to the
effective income tax rate for the year ended January 31, 1997 is as
follows:
Federal statutory income tax rate 38.0%
Increase (decrease) in taxes resulting from:
Provincial income taxes 15.5
Meals and entertainment 1.4
Operating loss carryforward 3.3
Tax credits (26.2)
-----
Effective income tax rate 32.0%
=====
9. SUBSEQUENT EVENT
On April 29, 1997, Flanagan/Allan Inc. and Jeffrey J. Allan & Associates
Inc. amalgamated into the legal entity Flanagan/Allan Inc. These
financial statements represent the financial position and operations of
the amalgamated entity as though it had been in existence since the
inception of the individual companies .
Prior to the amalgamation, these companies each owned 50% of 1086237
Ontario Inc. The ownership structure of Flanagan/Allan Inc. consists of
the same shareholders of the previous individual companies. In
conjunction with this transaction, all outstanding s hares of the
preamalgamated companies were exchanged for common shares of the new
company.
On April 2, 1997, the Company entered into a definitive agreement to
merge with Premiere Technologies, Inc. ("Premiere") in exchange for
shares of Premiere stock with a value of approximately $6,529,000. The
acquisition is subject to certain conditions and is expected to be
consummated on or about April 30, 1997. If completed, the merger is
intended to be accounted for using the pooling-of-interests method.
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
PRO FORMA COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------------------------------------------------------------------
PREMIERE DMG SHAMLIN PBS SANDS VTO
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 74,133,745 $ 1,238,943 $ 221,053 $ 26,023 $ 280,966 $ 2,849
Accounts receivable 4,870,748 250,632 133,498 244,552 273,037 284,261
Deferred tax assets, net 3,571,938 - - - - -
Prepaid expenses and other current assets 2,283,944 11,289 7,873 - - 4,975
-----------------------------------------------------------------------------------------
Total current assets 84,860,375 1,500,864 362,424 270,575 554,003 292,085
-----------------------------------------------------------------------------------------
Property and equipment, net 16,773,200 403,043 447,014 460,265 881,760 449,127
Other assets: 38,417,534 118,651 95,767 216,096 403,525 975,040
-----------------------------------------------------------------------------------------
Total assets: 140,051,109 2,022,558 905,205 946,936 1,839,288 1,716,252
=========================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt 2,847,142 147,594 407,417 69,896 289,122 388,958
Accounts payable and accrued expenses 11,870,434 1,075,479 126,283 29,580 106,668 392,538
Accrued payroll and related taxes 138,671 - - - - -
Unearned revenue 452,618 254,639 47,677 348,962 79,440 205,718
-----------------------------------------------------------------------------------------
Total current liabilities 15,308,865 1,477,712 581,377 448,438 475,230 987,214
-----------------------------------------------------------------------------------------
Long-term liabilities:
Long-term debt 249,235 271,526 673,862 71,092 242,692 1,048,279
Subordinated debt - - - - - -
Deferred taxes 334,520 - - - - -
Other accrued liabilities - - - - - (200,832)
-----------------------------------------------------------------------------------------
Total long-term liabilities 583,755 271,526 673,862 71,092 242,692 847,447
-----------------------------------------------------------------------------------------
Total Liabilities 15,892,620 1,749,238 1,255,239 519,530 717,922 1,834,661
-----------------------------------------------------------------------------------------
Shareholders' equity:
Common stock 240,118 299,898 13,000 47,500 30,000 -
Treasury stock (660,000) - - - -
Additional paid in capital 125,785,798 60,046 - - 943,742 -
Stock subscription receivable - - - - -
Retained earnings (1,867,427) 573,376 (363,034) 379,906 147,624 (118,409)
-----------------------------------------------------------------------------------------
Total equity 124,158,489 273,320 (350,034) 427,406 1,121,366 (118,402)
-----------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 140,051,109 $ 2,022,558 $ 905,205 $ 946,936 $ 1,839,288 $ 1,716,252
=========================================================================================
<PAGE>
<CAPTION>
HISTORICAL
-----------------------------------------------------------------------------------------
SDVT CONTINUUM PENTA CAR ZEE FLANAGAN/ALLAN(L) VTEC(L)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and equivalents $ 46,089 $ 19,708 $ 235,390 $ 50,532 $ 90,998 $ 42,770
Accounts receivable 278,278 118,347 613,917 110,551 129,627 3,796
Deferred tax assets, net - - - - - -
Prepaid expenses and other current assets 12,482 7,412 1,509,481 513,968 3,717 -
-----------------------------------------------------------------------------------------
Total current assets 336,849 145,467 2,358,788 675,051 224,342 46,566
-----------------------------------------------------------------------------------------
Property and equipment, net 267,568 171,015 924,631 380,712 798,239 168,413
Other assets 65,594 62,333 212,571 335,732 153,875 132,101
-----------------------------------------------------------------------------------------
Total assets 670,011 378,815 3,495,990 1,391,495 1,176,456 347,080
=========================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt 109,756 140,854 1,438,802 83,235 234,875 67,041
Accounts payable and accrued expenses 101,728 85,700 225,208 42,064 514,665 69,313
Accrued payroll and related taxes - 26,312 - - 4,292 8,423
Unearned revenue 61,124 92,310 59,525 27,544 40,664 5,562
-----------------------------------------------------------------------------------------
Total current liabilities 272,608 345,176 1,723,535 152,843 794,496 150,339
-----------------------------------------------------------------------------------------
Long-term liabilities:
Long-term debt 52,563 91,082 1,242,228 797,244 281,306 120,264
Subordinated debt - - 462,901 - - -
Deferred taxes - - - - 71,591 36,899
Other accrued liabilities 178,218 - - 239,251 - -
-----------------------------------------------------------------------------------------
Total long-term liabilities 230,781 91,082 1,705,129 1,036,495 352,896 157,163
-----------------------------------------------------------------------------------------
Total liabilities 503,389 436,258 3,428,664 1,189,338 1,147,392 307,502
-----------------------------------------------------------------------------------------
Shareholders' equity:
Common stock - 4,000 102,891 - 93 75
Treasury stock - - - (240,000) - -
Additional paid in capital 128,000 - - 801,436 30 -
Stock subscription receivable - - (43,770) - - -
Retained earnings 38,622 (61,443) 8,205 (359,279) 28,941 39,503
-----------------------------------------------------------------------------------------
Total equity 166,622 (57,443) 67,326 202,157 29,064 39,578
-----------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 670,011 $ 378,815 $3,495,990 $1,391,495 $ 1,176,456 $ 347,080
=========================================================================================
<PAGE>
<CAPTION>
HISTORICAL
------------------------------
PRO FORMA
VTN VTE ADJUSTMENTS PRO FORMA
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 17,477 $ 354,063 $ (9,678,000) (C) $ 67,082,606
Accounts receivable 210,541 7,194,057 (7,199,601) (A) 7,516,241
Deferred tax assets, net - 425,000 682,857 (D) 4,679,795
Prepaid expenses and other current assets - 3,404,836 (70,000) (B) 7,689,977
-----------------------------------------------------------------------
Total current assets 228,018 11,377,956 (16,264,744) - 86,968,619
-----------------------------------------------------------------------
Property and equipment, net 2,811,198 4,492,431 8,740,000 (C) 37,570,654
(597,962) (A)
Other assets: 2,189,184 3,843,494 (885,000) (A)
(1,506,000) (B) 46,212,598
1,382,101 (D)
-----------------------------------------------------------------------
Total assets: 5,228,400 19,713,881 (9,131,605) - 170,751,871
=======================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt 2,360,863 4,788,189 (6,551,000) (A) 6,822,744
Accounts payable and accrued expenses 5,384,218 6,485,326 (648,601) (A) 26,846,383
985,780 (D)
Accrued payroll and related taxes - 161,180 338,878
Unearned revenue - 1,710,962 - 3,386,745
-----------------------------------------------------------------------
Total current liabilities 7,745,081 13,145,657 (6,213,821) 37,394,750
-----------------------------------------------------------------------
Long-term liabilities:
Long-term debt 395,742 3,410,547 - 8,947,662
Subordinated debt - 5,000,000 - 5,462,901
Deferred taxes - 725,000 1,971,560 (D) 3,139,569
Other accrued liabilities - - 216,637
-----------------------------------------------------------------------
Total long-term liabilities 395,742 9,135,547 1,971,560 17,766,769
-----------------------------------------------------------------------
Total liabilities 8,140,823 22,281,204 (4,242,261) 55,161,519
-----------------------------------------------------------------------
Shareholders' equity:
Common stock 82,761 3,861,750 (4,407,505) (E) 274,581
Treasury stock (803,645) (1,477,141) 3,180,786 (E) -
Additional paid in capital - - (5,652,366) (E) 122,066,686
Stock subscription receivable - - 43,770 (E) -
Retained earnings (2,191,539) (4,951,932) 1,945,971 (6,750,915)
-----------------------------------------------------------------------
Total equity (2,912,423) (2,567,323) (4,889,344) 115,590,352
-----------------------------------------------------------------------
Total liabilities and shareholders' equity $ 5,228,400 $19,713,881 $ (9,131,605) $ 170,751,871
=======================================================================
</TABLE>
Page 1
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION> HISTORICAL
-----------------------------
(1) (2) PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
PREMIERE TELET TELET PREMIERE DMG SHAMLIN
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 52,079,338 $ 250,603 $ 52,329,941 $ 6,078,478 $ 1,603,047
Cost of services 16,710,820 - 16,710,820 2,015,847 299,560
----------------------------------------------------------------------------------
Gross margin 35,368,518 250,603 - 35,619,121 4,062,631 1,303,487
Operating expenses:
Selling, general and administrative 25,765,839 884,576 - 26,650,415 2,999,113 591,582
Depreciation and amortization 2,225,253 53,571 (G) 2,308,824 182,380 410,807
Charge for purchased R & D 11,030,000 (11,030,000)(H) - - -
Accrued litigation 1,250,000 1,250,000 - -
----------------------------------------------------------------------------------
Total operating expenses 40,301,092 884,576 (10,976,429) 30,209,239 3,181,493 1,002,389
----------------------------------------------------------------------------------
Operating income (loss) (4,932,574) (633,973) 10,976,429 5,409,882 881,138 301,098
Other income (expense):
Interest income 2,529,197 (111,930)(I) 2,417,267 - -
Interest expense (188,340) (188,340) (38,412) (90,680)
Other, net 68,641 (13,007) 55,634 - 4,929
----------------------------------------------------------------------------------
Net income (loss) before income taxes (2,523,076) (646,980) 10,864,499 7,694,443 842,726 215,347
Provision (benefit) for income taxes (1,626,541) (252,322) 4,236,972 (J) 2,358,109 - -
----------------------------------------------------------------------------------
Net income (loss) $ (896,535) $ (394,658) $ 6,627,527 $ 5,336,334 $ 842,726 $ 215,347
Preferred stock dividends 29,337 $ 29,337 - -
----------------------------------------------------------------------------------
Pro forma income (loss) attributable to
common shareholders for primary earnings
per share $ (925,872) (394,658) $ 6,627,527 $ 5,306,997 $ 842,726 $ 215,347
==================================================================================
Earnings per share $ (0.05) $ 0.26
============= ===========
Weighted average number of common shares
and common share equivalents outstanding 20,170,000 498,187 (K) 20,668,187
============= ========= ===========
<PAGE>
<CAPTION>
HISTORICAL
------------------------------------------------------------------------------------
PBS SANDS VTO SDVT CONTINUUM PENTA
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 2,822,497 $ 3,838,770 $ 2,065,093 $ 1,364,088 $ 1,094,447 $ 3,610,885
Cost of services 366,864 844,484 746,339 183,401 187,676 561,619
--------------------------------------------------------------------------------------
Gross margin 2,455,633 2,994,286 1,318,754 1,180,687 906,771 3,049,266
Operating expenses:
Selling, general and administrative 1,622,252 1,708,938 895,304 1,073,789 663,351 1,967,919
Depreciation and amortization 270,015 461,104 199,630 130,698 100,248 371,256
Charge for purchased R & D - - - - - -
Accrued litigation - - - - - -
--------------------------------------------------------------------------------------
Total operating expenses 1,892,267 2,170,042 1,094,934 1,204,487 763,599 2,339,175
--------------------------------------------------------------------------------------
Operating income (loss) 563,366 824,244 223,820 (23,800) 143,172 710,091
Other income (expense):
Interest income - - - - - -
Interest expense (13,376) (81,499) (150,673) (12,443) (28,093) (259,516)
Other, net (16,226) - 388,133 4,507 - 9,800
--------------------------------------------------------------------------------------
Net income (loss) before income taxes 533,764 742,795 461,280 (31,736) 115,079 460,375
Provision (benefit) for income taxes - - 28,561 - - -
--------------------------------------------------------------------------------------
Net income (loss) $ 533,764 $ 742,795 $ 432,719 $ (31,736) $ 115,079 $ 460,375
Preferred stock dividends - - - - - -
--------------------------------------------------------------------------------------
Pro forma income (loss) attributable to
common shareholders for primary earnings
per share $ 533,764 $ 742,795 $ 432,719 $ (31,736) $ 115,079 $ 460,375
======================================================================================
Earnings per share
Weighted average number of common shares
and common share equivalents outstanding
<PAGE>
<CAPTION>
HISTORICAL
-------------------------------------------------------------------------
CAR ZEE FLANAGAN/ALLAN(L) VTEC(L) VTN VTE
<S> <C> <C> <C> <C> <C>
Revenues $ 1,521,386 $ 2,566,644 $ 511,641 $ 8,362,566 $ 25,647,313
Cost of services 261,905 808,472 63,345 2,427,595 10,006,233
-------------------------------------------------------------------------
Gross margin 1,259,481 1,758,221 448,296 5,934,971 15,641,080
Operating expenses:
Selling, general and administrative 597,578 1,261,883 264,416 2,652,687 12,272,495
Depreciation and amortization 317,914 237,953 60,204 1,643,543 1,942,840
Charge for purchased R & D - - - - -
Accrued litigation - 0 - - -
-------------------------------------------------------------------------
Total operating expenses 915,492 1,499,835 324,620 4,296,230 14,215,335
-------------------------------------------------------------------------
Operating income (loss) 343,989 258,386 123,676 1,638,741 1,425,745
Other income (expense):
Interest income - - - - 680,477
Interest expense (125,232) (29,888) (9,268) (662,645) (1,566,502)
Other, net 65,780 (24,594) (3,579) - -
-------------------------------------------------------------------------
Net income (loss) before income taxes 284,537 203,904 110,829 976,095 539,720
Provision (benefit) for income taxes - 65,239 1,997 - 2,098,176
-------------------------------------------------------------------------
Net income (loss) $ 284,537 $ 138,665 $ 108,832 $ 976,095 $ (1,558,456)
Preferred stock dividends - - - - -
-------------------------------------------------------------------------
Pro forma income (loss) attributable to
common shareholders for primary earnings
per share $ 284,537 $ 138,665 $ 108,832 $ 976,095 $ (1,558,456)
=========================================================================
Earnings per share
Weighted average number of common shares
and common share equivalents outstanding
<PAGE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
<S> <C> <C>
Revenues $ (4,398,345)(A) $ 109,018,500
Cost of services (307,000)(A) 35,177,160
----------------------------------------
Gross margin (4,091,345) 73,841,340
Operating expenses:
Selling, general and administrative (3,853,000)(A) 51,368,722
Depreciation and amortization (214,032)(A) 8,442,383
460,000 (C)
(441,000)(B)
Charge for purchased R & D -
Accrued litigation 1,250,000
----------------------------------------
Total operating expenses (4,048,032) 61,061,105
----------------------------------------
Operating income (loss) (43,313) 12,780,235
Other income (expense):
Interest income (325,131)(A) 2,294,613
Interest expense (478,000)(C) (2,931,387)
325,131 (A)
Other, net 484,384
----------------------------------------
Net income (loss) before income taxes (521,313) 12,627,845
Provision (benefit) for income taxes 1,493,100 (D) 6,045,181
----------------------------------------
Net income (loss) (2,014,413) 6,582,663
Preferred stock dividends 29,337
----------------------------------------
Pro forma income (loss) attributable to
common shareholders for primary earnings
per share 6,553,326
===============
Earnings per share $ 0.28
===============
Weighted average number of common shares
and common share equivalents outstanding 2,953,813 (F) 23,622,000
============= ===============
</TABLE>
(1) Excludes effect of extraordinary items of $59,000, net of tax effect.
(2) Derived from the historical statements of operations of the Company and
Connect, Inc. (incorporated by reference herein), Leitess Information
Solutions, LLC and Planet Communications LLC (collectively, "Telet
Communications LLC").
Page 2
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
-------------------------------------------------------------------------------------------------------
PREMIERE DMG SHAMLIN PBS SANDS VTO SDVT
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES $ 22,325,938 $ 2,951,772 $ 1,446,958 $ 1,326,722 $ 3,268,203 $ 1,794,274 $ 1,076,185
Cost of services 7,602,511 560,061 246,050 321,735 601,879 480,393 109,339
------------------------------------------------------------------------------------------------------
Gross margin 14,723,427 2,391,711 1,200,908 1,004,987 2,666,324 1,313,881 966,846
Operating expenses:
Selling, general and
administrative 11,727,559 1,637,542 531,011 818,031 1,815,067 973,655 658,529
Depreciation and
amortization 696,898 181,490 212,334 88,932 412,821 192,604 159,298
Charge for purchased
R & D - - - - - - -
Accrued litigation - - - - - - -
-------------------------------------------------------------------------------------------------------
Total operating expenses 12,424,457 1,819,032 743,345 906,963 2,227,888 1,166,259 817,827
-------------------------------------------------------------------------------------------------------
Operating income (loss) 2,298,970 572,679 457,563 98,024 438,436 147,622 149,019
Other income (expense):
Interest income 283,082 556 13,251 - - - (46,591)
Interest expense (366,034) (14,911) (101,245) (8,238) (103,461) (88,797) (9,242)
Other, net 32,062 77,308 8 180,694 - (13,548) -
-------------------------------------------------------------------------------------------------------
Net income (loss) before
income taxes 2,248,080 635,632 369,577 270,480 334,975 45,277 93,186
Provision (benefit) for
income taxes 330,486 - - - - - -
-------------------------------------------------------------------------------------------------------
Net income (loss) $ 1,917,594 $ 635,632 $ 369,577 $ 270,480 $ 334,975 $ 45,277 $ 93,186
=======================================================================================================
Preferred stock dividends 308,419
-------------------------------------------------------------------------------------------------------
Pro forma income (loss)
Attributable to common
shareholders for primary
earnings per share $ 1,609,175 $ 635,632 $ 369,577 $ 270,480 $ 334,975 $ 45,277 $ 93,186
=======================================================================================================
Earnings per share $ 0.09
===============
Weighted average number of
common shares and common
share equivalents
outstanding $ 17,529,000
===============
<PAGE>
<CAPTION>
HISTORICAL
--------------------------------------------------------------------------------------------------
CONTINUUM PENTA CAR ZEE FLANAGAN/ALLAN(L) VTEC(L) VTN VTE
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 638,318 $ 3,338,157 $ 1,437,385 $ 1,977,726 $ 337,322 $ 6,201,887 $ 17,373,001
Cost of services 140,269 992,298 226,183 305,767 22,519 2,005,476 2,548,522
--------------------------------------------------------------------------------------------------
Gross margin 498,049 2,345,859 1,211,202 1,671,959 314,803 4,196,411 14,824,479
Operating expenses:
Selling, general and
administrative 373,644 1,722,636 594,695 1,355,186 228,078 3,309,633 12,228,732
Depreciation and
amortization 57,923 430,080 276,818 151,790 47,188 863,829 1,748,822
Charge for purchased
R & D - - - - - - -
Accrued litigation - - - - - - 2,500,000
--------------------------------------------------------------------------------------------------
Total operating expenses 431,567 2,152,716 871,513 1,506,976 275,266 4,173,462 16,477,554
--------------------------------------------------------------------------------------------------
Operating income (loss) 66,482 193,143 339,689 164,983 39,537 22,949 (1,653,075)
Other income (expense):
Interest income - - 57,078 - - - 790,803
Interest expense - (215,815) (116,428) (29,894) (8,906) (776,279) (1,633,476)
Other, net - 5,000 - - - - -
--------------------------------------------------------------------------------------------------
Net income (loss) before
income taxes 66,482 (17,672) 280,339 135,089 30,631 (753,330) (2,495,748)
Provision (benefit) for
income taxes - - - 38,194 - - (724,007)
--------------------------------------------------------------------------------------------------
Net income (loss) $ 66,482 $ (17,672) $ 280,339 $ 96,895 $ 30,631 $ (753,330) $ (1,771,741)
==================================================================================================
Preferred stock dividends
--------------------------------------------------------------------------------------------------
Pro forma income (loss)
attributable to common
shareholders for primary
earnings per share $ 66,482 $ (17,672) $ 280,339 $ 96,895 $ 30,631 $ (753,330) $ (1,771,741)
==================================================================================================
Earnings per Share
Weighted average number of
common shares and common
share equivalents
outstanding
<PAGE>
<CAPTION>
PRO FORMA
ADJUSTMENT PRO FORMA
<S> <C> <C>
REVENUES $ (4,786,060) (A) $ 60,707,788
Cost of services 1,115,000 (B) 17,278,002
-------------------------------------
Gross margin (5,901,060) 43,429,786
Operating expenses:
Selling, general and
administrative (4,563,776) (A) 33,410,222
Depreciation and
amortization (168,969) (A) 5,144,585
(207,000) (B)
Charge for purchased
R & D - -
Accrued litigation - 2,500,000
-------------------------------------
Total operating expenses (4,939,745) 41,055,080
-------------------------------------
Operating income (loss) (961,315) 2,374,706
Other income (expense):
Interest income (345,049) (A) 753,130
Interest expense 345,049 (A) (3,127,677)
Other, net - 281,524
-------------------------------------
Net income (loss) before
income taxes (961,315) 281,683
Provision (benefit) for
income taxes 149,089 (D) (206,238)
-------------------------------------
Net income (loss) $ (1,110,404) $ 487,921
=====================================
Preferred stock dividends 308,419
-------------------------------------
Pro forma income (loss)
attributable to common
shareholders for primary
earnings per share $ 179,502
==================
Earnings per share
$ 0.01
==================
Weighted average number of
common shares and common
share equivalents
outstanding $ (3,264,108) (F) $ 14,264,892
=====================================
</TABLE>
Page 3
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
<TABLE>
HISTORICAL
----------------------------------------------------------------------------------------------------------
PREMIERE DMG SHAMLIN PBS SANDS VTO VTSD CONTINUUM
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES $ 9,995,000 $ 2,642,709 $ 1,101,698 $ 1,106,987 $ 2,715,791 $ 1,825,062 $ 852,732 $ 400,912
Cost of services 3,516,000 466,638 166,588 311,542 477,539 371,363 128,752 99,251
----------------------------------------------------------------------------------------------------------
Gross margin 6,479,000 2,176,071 935,110 795,445 2,238,252 1,453,699 723,980 301,661
Operating expenses:
Selling, general and
administrative 6,092,000 1,229,526 376,408 727,227 1,471,503 952,642 413,186 276,073
Depreciation and
amortization 420,000 197,824 174,831 95,249 638,498 197,903 187,281 46,978
Charge for purchased
R & D - - - - - - - -
Accrued litigation - - - - - - - -
----------------------------------------------------------------------------------------------------------
Total operating expenses 6,512,000 1,427,350 551,239 822,476 2,110,001 1,150,545 600,467 323,051
----------------------------------------------------------------------------------------------------------
Operating income (loss) (33,000) 748,721 383,871 (27,031) 128,251 303,154 123,513 (21,390)
Other income (expense):
Interest income 149,000 1,144 21,602 - - - 929 53
Interest expense (291,000) (55,913) (102,214) (8,875) (137,158) (90,086) - -
Other, net 43,000 12,808 - 219,475 - 5,296 - -
----------------------------------------------------------------------------------------------------------
Net income (loss) before
income taxes (132,000) 706,760 303,259 183,569 (8,907) 218,364 124,442 (21,337)
Provision (benefit) for
income taxes 48,000 - - - - - - -
----------------------------------------------------------------------------------------------------------
Net income (loss) $ (180,000) $ 706,760 $ 303,259 $ 183,569 $ (8,907) $ 218,364 $ 124,442 $(21,337)
==========================================================================================================
Preferred stock dividends 320,000
----------------------------------------------------------------------------------------------------------
Pro forma income(loss)
attributable to common
shareholders for primary
earnings per share $ (500,000) $ 706,760 $ 303,259 $ 183,569 $ (8,907) $ 218,364 $ 124,442 $ (21,337)
==========================================================================================================
Earnings per share $ (0.05)
=============
Weighted average number
of common shares and
common share equivalents
outstanding 10,804,000
=============
<PAGE>
<CAPTION>
HISTORICAL
--------------------------------------------------------------------------------
PENTA CAR ZEE FLANAGAN/ALLAN(L) VTEC(L) VTN VTE PRO FORMA
ADJUSTMENTS
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES $ 2,866,373 $ 1,407,743 $ 1,118,191 $ 83,828 $ 4,196,546 $12,419,847 $(3,967,704) (A)
Cost of Services 891,036 335,979 121,452 5,771 1,395,169 2,266,491 856,000 (B)
-----------------------------------------------------------------------------------------------------
Gross Margin 1,975,337 1,071,764 996,739 78,057 2,801,377 10,153,356 (4,823,704)
Operating expenses:
Selling, general and
administrative 1,286,442 527,090 747,955 93,672 3,352,841 13,330,090 (3,494,000) (A)
Depreciation and
amortization 359,371 261,601 101,491 20,901 303,447 1,141,722 (99,370) (A)
(50,000) (B)
Charge for purchased
R & D - - - - - - -
Accrued litigation - - - - - - -
-----------------------------------------------------------------------------------------------------
Total operating expenses 1,645,813 788,691 849,446 114,573 3,656,288 14,471,812 (3,643,370)
-----------------------------------------------------------------------------------------------------
Operating income (loss) 329,524 283,073 147,293 (36,516) (854,911) (4,318,456) (1,180,334)
Other income (expense):
Interest income - 33,328 - - - 341,345 (121,131) (A)
Interest expense (133,648) (130,270) (27,635) (3,909) (407,377) (915,712) 121,131 (A)
Other, net 60,000 (333) - - - -
-----------------------------------------------------------------------------------------------------
Net income (loss) before
income taxes 255,876 185,798 119,658 (40,425) (1,262,288) (4,892,823) (1,180,334)
Provision (benefit) for
income taxes - - 16,399 17,170 - (1,446,810) (202,867) (D)
-----------------------------------------------------------------------------------------------------
Net income (loss) $ 255,876 $ 185,798 $ 103,259 $ (57,595) $(1,262,288) $(3,446,013) $ (977,467)
=====================================================================================================
Preferred stock dividends
-----------------------------------------------------------------------------------------------------
Pro forma income(loss)
attributable to common
shareholders for primary
earnings per share $ 255,876 $ 185,798 $ 103,259 $ (57,595) $(1,262,288) $(3,446,013) $ (977,467)
=====================================================================================================
Earnings per share
Weighted average number
of common shares and
common share equivalents
outstanding (3,460,892) (F)
===================
<PAGE>
<CAPTION>
PRO FORMA
<S> <C>
REVENUES $38,765,715
Cost of Services 11,409,571
---------------
Gross Margin 27,356,144
Operating expenses:
Selling, general and
administrative 27,382,655
Depreciation and
amortization 3,997,727
Charge for purchased
R & D -
Accrued litigation -
---------------
Total operating expenses 31,380,382
---------------
Operating income (loss) (4,024,238)
Other income (expense):
Interest income 426,270
Interest expense (2,182,666)
Other, net 340,246
---------------
Net income (loss) before
income taxes (5,440,388)
Provision (benefit) for
income taxes (1,568,108)
---------------
Net income (loss) (3,872,280)
===============
Preferred stock dividends 320,000
---------------
Pro forma income(loss)
attributable to common
shareholders for primary
earnings per share (4,192,280)
===============
Earnings per share $ (.29)
===============
Weighted average number
of common shares and
common share equivalents
outstanding 14,264,892
===============
</TABLE>
Page 4
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying pro forma combined condensed financial statements have been
prepared to give effect to the acquisitions (the "Significant Acquisitions") by
Premiere Technologies, Inc. ("Premiere" or the "Company"), in separate
transactions, of VTE, VTN (the general partner of VTNLP, an affiliate of VTE),
the limited partner interests in VTNLP owned by MPI and certain Franchisees of
VTE that meet the significance tests of Rule 3-05 of Regulation S-X (the
"Significant Franchisees").
The acquisition of the limited partner interest in VTNLP owned by MPI was
accounted for under the purchase method of accounting. The accompanying
unaudited pro forma combined condensed financial statements give effect to the
transaction as though it occurred effective January 1, 1996. All remaining
Significant Acquisitions were accounted for under the pooling-of-interests
method of accounting. Accordingly, the unaudited pro forma combined condensed
financial statements reflect those transactions as though they occurred at the
beginning of the earliest period presented.
The number of pro forma weighted average number of common shares and common
share equivalents used to compute pro forma net income per share reflects the
aggregate of the weighted average outstanding shares or owners' interests of the
businesses acquired through the Significant Acquisitions, adjusted to equivalent
shares of Premiere for all periods presented.
The Company's historical fiscal period for the nine months ended December
31, 1994 has been adjusted to reflect a comparative twelve month period ended
December 31, 1994 reported for the Significant Franchisees. The additional three
month period adjustment is unaudited and should be read in conjunction with the
Company's Annual Report on Form 10-K for the year ended December 31, 1996
incorporated by reference herein.
Certain balance sheet and income statement amounts contained in historical
financial statements of VTE, VTN and the Significant Franchisees have been
reclassified to confirm with the unaudited pro forma combined condensed
financial statements presentation and disclosure practices of Premiere.
In addition, the unaudited pro forma combined condensed financial information
gives effect to the Company's acquisition of TeleT Communications LLC ("TeleT")
on September 18, 1996 as though the transaction occurred January 1, 1996.
Premiere exchanged 498,187 shares of its common stock and paid approximately
$2.8 million in cash for TeleT. This acquisition has been accounted for under
the purchase method of accounting.
The unaudited pro forma combined condensed financial information is presented
for illustrative purposes only and is not necessarily indicative of the
financial position or results of operations that would have actually been
reported had the Significant Acquisitions occurred at the beginning of the
periods presented nor is it necessarily indicative of future financial position
or results of operations. These unaudited pro forma combined condensed financial
statements are based on the respective historical financial statements for
Premiere, VTE, VTN, the Significant Franchisees and TeleT and should be read in
conjunction with the respective historical financial statements incorporated by
reference or included herein. The unaudited pro forma combined condensed
financial statements do not incorporate benefits which may arise from cost
savings and operational synergies of the combined company.
TRANSACTIONS COSTS
Premiere, VTE and the Significant Franchisees estimate that they will incur
direct transaction costs in connection with the Significant Acquisitions of
approximately $12 million. These costs consist of investment banking, legal,
accounting and other related costs and will be charged to operations in the
quarter ending June 30, 1997.
<PAGE>
PRO FORMA ADJUSTMENTS - VTE, VTN AND THE SIGNIFICANT FRANCHISEES
- - ---------
Pro forma adjustments have been made to:
- - ---------
(A) Eliminate intercompany transactions between VTE, VTN and the Significant
Franchisees. These transactions include royalties, transaction fees for
network usage, management fees and equipment sales. All sales and cost of
sales associated with such transactions, including intercompany profit
included in equipment cost and depreciation, are eliminated in the pro
forma combined condensed financial statements. Also, adjustments have been
made to eliminate intercompany accounts receivable and payable.
(B) Conform VTE and VTN accounting treatment for certain preoperating costs
with policies followed by Premiere. Adjustments have been made to charge to
expense during the period incurred preoperating cost capitalized by VTE and
VTN which would have been expensed under policies followed by Premiere.
Associated amortization expense has been reduced to reflect such
adjustments.
(C) Give effect to purchase of MPI's limited partner interest in VTNLP as
though the purchase occurred on January 1, 1996. These adjustments consist
of allocation of the $9.2 million cash purchase price to VTNLP assets and
liabilities and additional depreciation and amortization resulting from
increased basis of property and equipment over an estimated useful life of
20 years and a reduction in interest income resulting from the reduction of
cash.
(D) Provide for income taxes for entities which operated as S Corporations or
partners prior to the Significant Acquisitions as if they were combined
with Premiere and subject to taxation for all periods presented. Such
entities include the Significant Franchisees, except for VTEC,
Flanagan/Allan and VTE. In addition, adjustments have been made for the
income tax effect of all of the foregoing pro forma adjustments.
(E) Reflects the issuance of shares of Premiere common stock in exchange for
all of the outstanding common shares of VTE, VTN and the Significant
Franchisees. The excess of the par value of Premiere common stock over
those received in exchange for VTE, VTN and the Significant Franchisees is
reflected as a reduction of additional paid in capital of the combined
company.
(F) Give effect to additional shares issued to Significant Franchisees as
though such shares were issued January 1, 1994 and adjust for change in
shares computed under the modified treasury stock method.
PRO FORMA ADJUSTMENTS-TELET
- - ---------
Pro forma adjustments necessary to reflect the purchase of TeleT as though such
transaction occurred effective January 1, 1996 have been made to:
(G) Reflect additional depreciation and amortization expense associated with
the increase in the basis of the acquired assets to fair market value at
the date of acquisition.
(H) Reverse the nonrecurring charge for in process research and development.
(I) Reflect reduction in interest income resulting form cash paid in
acquisition.
(J) Reflect income tax effect of pro forma adjustments.
(K) Give effect to additional shares issued in connection with the acquisition
as though such shares were issued January 1, 1996.
(L) Financial information has been translated from Canadian dollars to US
dollars using an average exchange rate of .75 US dollars per one Canadian
dollar.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
2.1 Agreement and Plan of Merger dated as of April 2, 1997 by and among
Premiere Technologies, Inc., PTEK Merger Corporation, Voice-Tel
Enterprises, Inc. and the Stockholders of Voice-Tel Enterprises, Inc.
(incorporated by reference to Exhibit 2.1 to the Company's Current Report
on Form 8-K dated April 2, 1997).
2.2 Agreement and Plan of Merger dated as of April 2, 1997 by and among
Premiere Technologies, Inc., PTEK Merger Corporation II, VTN, Inc. and
the Stockholders of VTN, Inc. (incorporated by reference to Exhibit 2.2
to the Company's Current Report on Form 8-K dated April 2, 1997).
2.3 Purchase and Sale Agreement dated April 2, 1997 by and between Premiere
Technologies, Inc. and Merchandising Productions, Inc. (incorporated by
reference to Exhibit 2.3 to the Company's Current Report on Form 8-K
dated April 2, 1997).
2.4 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., Continuum, Inc. and Owners of Continuum, Inc.
2.5 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., DMG, Inc. and Owners of DMG, Inc. and Transfer
Agreement dated as of April 2, 1997 by and among Premiere Technologies,
Inc., VTG, Inc. and Owners of VTG, Inc.(1)
2.6 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., Penta Group, Inc. and Owners of Penta Group, Inc. and
Transfer Agreement dated as of April 2, 1997 by and among and Premiere
Technologies, Inc., Scepter Communications, Inc. and Owners of Scepter
Communications, Inc.(1)
2.7 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., Premier Business Services, Inc. and Owners of Premier
Business Services, Inc.
2.8 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., Dunes Communications, Inc., Sands Communications,
Inc., Sands Comm, Inc., SandsComm, Inc., and Owner of Dunes
Communications, Inc., Sands Communications, Inc., Sands Comm, Inc., and
SandsComm, Inc.(1)
2.9 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., Shamlin, Inc. and Owner of Shamlin, Inc.
2.10 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., VT of Ohio, Inc. and Owners of VT of Ohio, Inc.;
Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., Carter Voice, Inc. and Owners of Carter Voice, Inc.;
Transfer Agreement dated as
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
of April 2, 1997 by and among Premiere Technologies, Inc., Widdoes
Enterprises, Inc. and Owners of Widdoes Enterprises, Inc.; and Transfer
Agreement dated as of April 2, 1997 by and among Premiere Technologies,
Inc., Dowd Enterprises, Inc. and Owners of Dowd Enterprises, Inc.(1)
2.11 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., SDVT, Inc. and Owners of SDVT, Inc.
2.12 Amended and Restated Transfer Agreement dated as of April 2, 1997 by and
among Premiere Technologies, Inc., Car Zee, Inc. and Owners of Car Zee,
Inc.
2.13 Transfer Agreement dated as of March 31, 1997 by and among Premiere
Technologies, Inc. and Owners of the VTEC Franchisee: 1086236 Ontario Inc.
2.14 Transfer Agreement dated as of March 31, 1997 by and among Premiere
Technologies, Inc. and Owners of the Eastern Franchisees: 1139133 Ontario
Inc., 1136827 Ontario Inc., 1006089 Ontario Inc., and 1063940 Ontario
Inc.(1)
2.15 Uniform Terms and Conditions (incorporated by reference to Exhibit A to
Exhibit 2.4 to the Company's Current Report on Form 8-K dated April 2,
1997).
2.16 Asset Purchase Agreement dated September 18, 1996 by and among Premiere
Technologies, Inc., PTEK Acquisition Corporation, TeleT Commumications
LLC and the Members of TeleT Commumications LLC (incorporated by
reference to Exhibit 2.1 to the Company's Current Report on Form 8-K
dated September 18, 1996).
10.1 Promissory Note dated April 30, 1997 between Premiere Communications,
Inc. and NationsBank, N.A. (South).
23.1. Consent of Arthur Andersen LLP.
99.1 Press Release dated April 2, 1997 (incorporated by reference to Exhibit
99.1 to the Company's Current Report on Form 8-K dated April 2, 1997).
</TABLE>
- - ---------------
(1) Certain of the Franchisees operate through multiple, but commonly owned,
business entities.
<PAGE>
EXHIBIT 2.4
TRANSFER AGREEMENT
BY AND AMONG
PREMIERE TECHNOLOGIES, INC.,
CONTINUUM, INC.
AND
OWNERS OF CONTINUUM, INC.
DATED AS OF APRIL 2, 1997
<PAGE>
TRANSFER AGREEMENT
------------------
THIS TRANSFER AGREEMENT (this "Agreement") is entered into as of April 2,
1997 by and among Premiere Technologies, Inc., a Georgia corporation
("Premiere"), Continuum, Inc., a Kentucky corporation (the "Company"), and those
parties listed on the signature pages hereto as the owners of the Company (the
"Owners").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, this Agreement provides for the acquisition of the Company by
Premiere pursuant to the merger of the Company with and into a wholly owned
subsidiary of Premiere ("Merger Corp"), with Merger Corp as the surviving
corporation in such merger (the "Merger");
WHEREAS, the respective Boards of Directors of Premiere and the Company have
approved the terms and conditions set forth in this Agreement;
WHEREAS, the Owners own one hundred percent (100 %) of the equity interests
in the Company;
WHEREAS, this Agreement provides for all of the Owners' equity interests in
the Company to be converted into the right to receive shares of Premiere Stock
in connection with the Merger;
WHEREAS, it is also the intention of the parties hereto that the form of the
transactions with respect to the Company, Premiere and Merger Corp shall qualify
as a "reorganization" within the meaning of Section 368(a) of the Code for
federal income tax purposes; and
WHEREAS, it is also the intention of the parties hereto that the business
combination to be effected by the Merger be accounted for as a pooling of
interests.
NOW, THEREFORE, in consideration of the foregoing, the mutual agreements and
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
I. UNIFORM TERMS AND CONDITIONS
--------------------------------
1.1 Incorporation by Reference. The Uniform Terms and Conditions attached
--------------------------
hereto as Exhibit A (the "Uniform Terms") are hereby made a part of and
---------
incorporated herein as if fully restated herein. Capitalized terms not defined
herein shall have the meanings provided in the Uniform Terms.
<PAGE>
II. TERMS OF MERGER
--------------------
2.1 The Merger.
----------
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time, the Company shall be merged with and into Merger Corp in
accordance with the provisions of the business corporation act under the laws of
the State of Kentucky (the "Kentucky Act") and the laws of the State of Georgia
(the "Georgia Act"). Merger Corp shall be the surviving corporation resulting
from the Merger, shall thereafter conduct the business and operations of the
Company as a wholly owned subsidiary of Premiere and shall continue to be
governed by the laws of the State of Georgia. The Merger shall be consummated
pursuant to the terms of this Agreement, which has been approved and adopted by
the respective boards of directors of Premiere, Merger Corp and the Company.
(b) Subject to the provisions of this Agreement, the parties shall
file a Certificate of Merger executed in accordance with the relevant provisions
of the Kentucky Act and a Certificate of Merger executed in accordance with the
relevant provisions of the Georgia Act and shall make all other filings or
recordings required under each such Act as soon as practicable on or after the
Closing Date. The Merger and other transactions contemplated by this Agreement
shall become effective on the date and at the time the Certificate of Merger
reflecting the Merger becomes effective with the Secretary of State of the State
of Kentucky and the Certificate of Merger reflecting the Merger becomes
effective with the Secretary of State of the State of Georgia (the "Effective
Time").
(c) The charter and Bylaws of Merger Corp in effect immediately prior
to the Effective Time shall be the charter and Bylaws of the surviving
corporation until otherwise amended or repealed, the directors of Merger Corp
immediately prior to the Effective Time shall serve as the directors of the
surviving corporation from and after the Effective Time, and the officers of
Merger Corp in office immediately prior to the Effective Time shall serve as the
officers of the surviving corporation from and after the Effective Time.
2.2 Conversion of Shares. Subject to the provisions of this Section 2.2,
--------------------
and in consideration for the transactions contemplated hereby, at the Effective
Time, by virtue of the Merger and without any action on the part of the parties
hereto or the shareholders of any of the parties hereto, the shares of the
constituent corporations of the Merger shall be converted as follows:
(a) Each share of Premiere Stock and each share of Merger Corp common
stock issued and outstanding at the Effective Time shall remain issued and
outstanding after the Effective Time.
(b) All of the shares of the no par value capital stock of the
Company ("Company Stock") (excluding treasury shares and excluding shares held
by shareholders who perfect their statutory dissenters' rights as provided in
Section 2.4 of this Agreement) issued and outstanding at the Effective Time
shall cease to be outstanding and shall be converted into and exchanged for the
right to receive:
(i) the number of shares of Premiere Stock determined by
dividing (A) the product of .9 multiplied by the
Company Purchase Price, by (B) the Average Closing
Price; and
-2-
<PAGE>
(ii) the number of shares of Premiere Stock determined by
dividing (A) the product of .1 multiplied by the
Company Purchase Price, by (B) the Average Closing
Price (the "General Escrow Amount");
all as determined in accordance with Section 2.3 below (collectively, the
"Consideration"). Subject to Section 2.2(d) below, the Consideration shall be
issuable to the Owners pro rata in accordance with their ownership of Company
Common Stock pursuant to Section 2.6, which ownership the Owners represent has
not been adjusted in contemplation of the transactions described herein.
(c) Any and all shares of Company Common Stock held as treasury
shares by the Company shall be canceled and retired at the Effective Time, and
no consideration shall be issued in exchange therefor.
(d) Upon consummation of the Merger, the Owners shall deliver the
General Escrow Amount in negotiable form to the Escrow Agent to be held in
escrow pursuant to the terms and conditions of the Escrow Agreement in the form
attached hereto as Exhibit B which shall be executed and delivered by Premiere
---------
and the Owners at the Closing.
2.3 Calculation of Consideration. For purposes of determining the
----------------------------
Consideration issuable to the Owners pursuant to Section 2.2(b) above, the
following shall apply:
(a) "Average Closing Price" shall be the average of the daily last
sale prices of Premiere Stock for the period consisting of twenty (20)
consecutive trading days on which such shares are actually traded on the Nasdaq
National Market (as reported by the Wall Street Journal or, if not reported
thereby, any other authoritative source selected by Premiere) ending at the
close of trading on the first trading day immediately preceding the Closing;
provided, however, that the Average Closing Price shall not be less than $22.50
- - -------- -------
nor more than $30.50 (collectively, $22.50 and $30.50 are referred to as the
"Average Closing Price Limitations").
(b) "Company Purchase Price" shall be the sum of (i) the amount
determined by multiplying the Normalized EBITDA of the Company by the Stock
Multiple, plus (ii) the amount of cash reflected on the Closing Date Balance
----
Sheet, minus (iii) the aggregate amount of principal and accrued and unpaid
-----
interest under funded debt and capital lease obligations reflected on the
Closing Date Balance Sheet, minus (iv) the amount by which the Transaction Costs
-----
exceed the Deductible Amount.
(c) "Deductible Amount" shall be an amount equal to $10,000.
(d) "Normalized EBITDA" of the Company shall be an amount equal to
$370,000.00.
(e) "Registration Right" shall mean the right to include Premiere
Stock issued in the Merger in a registration statement which Premiere intends to
file promptly after the end of the first full fiscal quarter of Premiere
containing the period of post-Merger combined operations required by ASRs 130
and 135, pursuant to the terms and conditions of the Stock Restriction and
Registration Rights Agreement in the form attached hereto as of Exhibit C (the
---------
"Registration Rights Agreement").
-3-
<PAGE>
(f) "Stock Multiple" shall be six (6).
(g) "Transaction Costs" shall mean all amounts incurred but unpaid by
the Company in connection with (i) the negotiation and preparation of this
Agreement, (ii) the preparation of the Audited Financial Statements, (iii) the
consummation of the Transactions and (iv) one-half of the costs and expenses of
public record searches pursuant to Section 5.9(b) of the Uniform Terms.
2.4 Dissenting Shareholders. Subject to Section 4.2, any holder of shares
-----------------------
of voting capital stock of the Company who perfects any available dissenters'
rights in accordance with and as contemplated by the Kentucky Act shall be
entitled to receive the value of such shares in cash from the Company after the
Effective Time as determined pursuant to such provision of law; provided, that
no such payment shall be made to any dissenting shareholder unless and until
such dissenting shareholder has complied with the applicable provisions of the
Kentucky Act and surrendered to the Company the certificate or certificates
representing the shares for which payment is being made. In the event that a
dissenting shareholder of the Company fails to perfect, or effectively withdraws
or loses, its right to appraisal and of payment for its shares, Premiere shall
issue and deliver the consideration to which such holder of shares of Company
capital stock is entitled under this Article II (without interest) upon
surrender of certificates representing such shares held by such holder.
2.5 Closing. The Closing shall take place at the offices of Alston & Bird
-------
LLP, Atlanta, Georgia, at 10:00 a.m. local time, on the date set forth in the
Uniform Terms, provided all conditions set forth in Articles V and VI of the
Uniform Terms and Articles IV and V of this Agreement have been satisfied or
waived, or on such other date or at such other place and time mutually agreed
upon by the parties.
2.6 Exchange of Shares. Promptly after the Effective Time, Premiere and
------------------
Company shall cause to be mailed to the former Company shareholders appropriate
transmittal materials for the surrender of the certificate or certificates
formerly representing their shares of Company Common Stock in exchange for
shares of Premiere Stock as provided in this Agreement. Until surrendered for
exchange in accordance herewith, each certificate theretofore representing
shares of Company Common Stock shall from and after the Effective Time represent
only the right to receive the Consideration provided in this Agreement in
exchange therefor. No certificates representing fractional shares will be
issued as a result of the Merger. Each holder of shares of Company Common Stock
exchanged pursuant to the Merger who would otherwise have been entitled to
receive a fraction of a share of Premiere Common Stock shall receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional part of a
share of Premiere Common Stock multiplied by the Average Closing Price.
2.7 Purchase for Investment, Etc. Each Owner, represents and warrants the
-----------------------------
following to Premiere:
(a) such Owner has accurately completed the Investor Questionnaire
required by Premiere prior to or contemporaneous with the execution of the
Transfer Agreement and the statements therein are true and correct and
acknowledges that Premiere has relied upon such statements in entering into this
Agreement;
-4-
<PAGE>
(b) such Owner is acquiring Premiere Stock for such Owner's own
account and not with a view to or for sale in connection with any public
distribution thereof within the meaning of the Securities Act;
(c) such Owner (i) has sufficient knowledge and experience in
financial and business matters to enable him, her or it to evaluate the merits
and risks of an investment in Premiere Stock, (ii) has the ability to bear the
economic risk of acquiring Premiere Stock for an indefinite period and to afford
a complete loss thereof and (iii) has had an opportunity to ask questions of and
to receive answers from the officers of Premiere and to obtain additional
information in writing as requested, which has been made available to and
examined by such Owner or such Owner's advisors; and
(d) such Owner (i) acknowledges that Premiere Stock has not been
registered under any securities laws and cannot be resold without registration
thereunder or exemption therefrom, (ii) agrees not to transfer all or any
Premiere Stock received by such Owner unless such transfer has been registered
or is exempt from registration under applicable securities laws and (iii)
acknowledges that the certificate(s) representing Premiere Stock shall bear the
following legend with respect to the restrictions on transfer under applicable
securities laws:
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, and may not be offered, sold,
transferred or otherwise disposed of unless registered with the
Securities and Exchange Commission of the United States and the
securities regulatory authorities of applicable states or unless an
exemption from such registration is available."
2.8 Accounting, Tax and Regulatory Matters. Each Owner and the Company,
--------------------------------------
jointly and severally, represents and warrants to Premiere that neither the
Company, any Owner nor any Affiliate thereof has taken or agreed to take any
action or has any knowledge of any fact or circumstance that is reasonably
likely to (i) prevent the Merger from qualifying for pooling-of-interests
accounting treatment or as a reorganization within the meaning of Section 368(a)
of the Code, or (ii) materially impede or delay receipt of any consents referred
to in Section 5.6 of the Uniform Terms or result in the imposition of a
condition or restriction of the type referred to in the last sentence of such
Section.
III. ADDITIONAL AGREEMENTS
---------------------------
3.1 Filings with State Offices. Upon the terms and subject to the
--------------------------
conditions of this Agreement, the Company and Merger Corp shall execute and file
the Certificate of Merger with the Secretary of State of the State of Kentucky
and a Certificate of Merger with the Secretary of State of the State of Georgia
in connection with the Closing.
3.2 Conditions to Closing. The Company, the Owners and Premiere agree to
---------------------
use their commercially reasonable best efforts to satisfy the closing conditions
set forth in Articles IV and V of this Agreement by the date indicated therein
or the Closing Date, as applicable.
3.3 Additional Indemnification Items. Subject to Sections 8.2 through 8.6
--------------------------------
of the Uniform Terms, the Owners and, if the Transactions involve an Asset
Transfer, the Company, shall jointly and severally indemnify and hold harmless
Premiere, and its officers, directors, agents or affiliates,
-5-
<PAGE>
from and against any and all Losses suffered or incurred by any such party by
reason of or arising out of any of the following: (a) a breach of Section 2.19
of the Uniform Terms as it relates to liability for sales tax (irrespective of
whether disclosed on Schedule 2.19 or in the Financial Statements; and (b) any
liabilities arising from the Company's obligations arising from its guarantees
of the leases referenced in 4.6 of this Transfer Agreement and Schedule 2.13 of
the Uniform Terms and Conditions Agreement.
3.4 Tax Matters. Each of the Company, the Owners and Premiere undertakes
-----------
and agrees to use its reasonable efforts to cause the Merger, and to take no
action which would cause the Merger not, to qualify as a "reorganization" within
the meaning of Section 368(a) of the Code for federal income tax purposes.
Notwithstanding the foregoing, the Owners understand that (i) Premiere makes no
representation or warranty regarding the tax treatment of this Agreement or the
Merger, (ii) the Closing is not subject to a condition that an Internal Revenue
Service ruling or tax opinion be obtained as to the federal income tax
consequences of this Agreement or the Merger, and (iii) the Company and the
Owners shall look to their respective advisors for advice concerning the tax
consequences of this Agreement and the Merger.
3.5 Registration Rights. At the Closing Premiere and the Owners shall
-------------------
execute and deliver the Registration Rights Agreement.
3.6 Accounting Treatment.
--------------------
(a) The Company and each of the Owners has accurately completed the
Pooling Questionnaire required by Premiere prior to or contemporaneous with the
execution of this Agreement, and the statements therein are true and correct.
(b) Premiere, the Company and each of the Owners agrees to use its
reasonable efforts to cause the Merger, and to take no action which would cause
the Merger not, to qualify for treatment as a pooling of interests for
accounting purposes. Without limiting the foregoing, the Company and each of
the Owners agrees not to sell, transfer, or otherwise dispose of his, her or its
interests in, or reduce his, her or its risk relative to, any of the shares of
Premiere Common Stock received in connection with the Merger until such time as
Premiere notifies the Company and each such Owner that the requirements of ASRs
130 and 135 have been met. The Company and each of the Owners understands that
ASRs 130 and 135 relate to the publication of financial results of at least
thirty (30) days of post-Merger combined operations of Premiere and the Company.
Premiere agrees that it shall publish such results within forty-five (45) days
after the end of the first fiscal quarter of Premiere containing the required
period of post-Merger combined operations and that it shall notify the Company
and each of the Owners promptly following such publication. Premiere shall be
entitled to place the following restrictive legend on the shares of Premiere
Stock issued pursuant to the Merger to enforce the foregoing restrictions:
"The shares represented by this certificate were issued pursuant to a
business combination which is accounted for as a "pooling of interests"
and may not be sold, nor may the owner thereof reduce his risks relative
thereto in any way, until such time as Premiere Technologies, Inc.
("Premiere") has published the financial results covering at least 30
days of combined operations after the effective date of the merger
through which the business combination was effected.
-6-
<PAGE>
3.7 Affiliate Agreements. The Company has disclosed in Schedule 3.7 all
-------------------- ------------
Persons whom it reasonably believes is an "affiliate" of the Company for
purposes of Rule 145 under the 1933 Act. The Company shall use its reasonable
efforts to cause each such Person to deliver to Premiere as soon as reasonably
practicable following the execution of this Agreement, a written agreement,
substantially in the form attached hereto as Exhibit D.
----------
3.8 Tax Representations. In connection with the opinion to be rendered to
-------------------
Premiere by Alston & Bird to the effect that the transactions contemplated
hereby will constitute a tax-free reorganization within the meaning of Section
368(a) of the Code, the Owners shall furnish such counsel with such
representations as to their plans for the disposition of the shares of Premiere
Stock to be received in the Transactions as such counsel shall reasonably
request.
3.9 Restricted Stock. All contractual restrictions or limitations on
----------------
transfer with respect to Company Common Stock under any plan, program, contract
or arrangement, to the extent that such restrictions or limitations have not
already lapsed (whether as a result of the Transactions or otherwise), and
except as otherwise expressly provided in such plan, program, contract or
arrangement, shall remain in full force and effect with respect to shares of
Premiere Stock into which such restricted stock is converted pursuant to Section
2.2 of this Transfer Agreement.
3.10 Exchange Listing. Premiere shall use its reasonable efforts to list,
----------------
prior to the Effective Time, on the Nasdaq National Market the shares of
Premiere Stock to be issued to the Owners pursuant to the Transactions, and
Premiere shall give all notices and make all filings with the NASD required in
connection with the Transactions.
3.11 Non-Competition for Robert B. Nesmith. The definition of Business
--------------------------------------
Activities set forth in Section 4.7 of the Uniform Terms, for purposes of Robert
B. Nesmith, shall exclude any financial interest and operational involvement in
Vocal Link, LLC, a Wildfire Service Provider, as currently conducted.
3.12. Non-Competition for Edward P. Pearsall. The definition of Business
---------------------------------------
Activities as set forth in Section 4.7 of the Uniform Terms, as it applies to
Edward P. Pearsall, shall exclude the maintenance of the current financial
position held by Edward P. Pearsall in Vocal Link, LLC, a Wildfire Service
Provider.
IV. SUPPLEMENTAL CONDITIONS TO OBLIGATIONS OF PREMIERE
-------------------------------------------------------
In addition to the conditions of Premiere contained in Article V of the
Uniform Terms, the obligation of Premiere to consummate the Transactions is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions:
4.1 Approval of Owners. The Owners shall have approved the Merger in
------------------
accordance with the requirements of the Kentucky Act and the Company shall have
provided Premiere certified copies of such resolutions, and Owners holding no
more than ten percent (10%) of the Company Common Stock issued and outstanding
immediately prior to the Effective Time shall have exercised any of the rights
described in Section 2.4.
4.2 Grand Solution Documents. VTNLP, VTE, the NAP and each of the
-----------------------
Franchisee Companies shall have executed and delivered Grand Solution Documents
reflecting the terms described in Exhibit E hereto in form and substance
reasonable satisfactory to Premiere.
-7-
<PAGE>
4.3 Audited Financial Statements. Premiere shall have received financial
----------------------------
statements of the Company as of the fiscal years ended December 31, 1995 and
1996 and the related statements of operations, cash flow and changes in Owners'
equity for the fiscal years then ended (collectively, the "Audited Financial
Statements") prepared in accordance with GAAP and Regulation S-X promulgated by
the Commission, accompanied by an unqualified audit opinion of Arthur Andersen
LLP relating thereto. The Audited Financial Statements shall not reflect any
material change in the Company's financial condition or results of operations
from the condition and results reported in the Financial Statements for the
corresponding periods delivered by the Company prior to the execution of this
Agreement.
4.4 Pooling Letter. Premiere shall have received a letter, dated as of the
--------------
Effective Time, in form and substance reasonably acceptable to Premiere, from
Arthur Andersen LLP to the effect that the Merger will qualify for pooling of
interests accounting treatment, and no action shall have been taken by any
regulatory authority or any statute, rule, regulation or order enacted,
promulgated or issued by any regulatory authority, or any proposal made for any
such action by any regulatory authority which is reasonably likely to be put
into effect, that would prevent Premiere from accounting for the business
combination to be effected by the Merger as a pooling of interests.
4.5 Reorganization Opinion. Premiere shall have received an opinion of
----------------------
Alston & Bird LLP, counsel to Premiere, to the effect that the transactions
contemplated by the Agreement, including the Merger, will constitute a tax-free
reorganization within the meaning of Section 368(a) of the Code.
4.6 Guarantees. The Company shall use commercially reasonable efforts to
----------
provide written notification to Premiere prior to Closing that it has been
released as a guarantor on the leases referenced in 2.13 (a) to the Agreement.
V. SUPPLEMENTAL CONDITIONS TO OBLIGATIONS OF THE COMPANY
---------------------------------------------------------
AND THE OWNERS
--------------
In addition to the conditions of the Company and the Owners contained in
Article VI of the Uniform Terms, the obligation of the Company and the Owners to
consummate the Transactions is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions:
5.1 Approval of Premiere and Merger Corp. The Board of Directors of
------------------------------------
Premiere and the Board of Directors and the shareholder of Merger Corp shall
have approved the Merger in accordance with the requirement of applicable state
law. Premiere and Merger Corp shall have provided the Company certified copies
of such resolutions.
5.2 Registration Rights. Premiere and each Owner shall have executed and
-------------------
delivered a Registration Rights Agreement.
-8-
<PAGE>
VI. MISCELLANEOUS
------------------
6.1 Notices. The addresses for notices in accordance with Section 10.1 of
-------
the Uniform Terms for the Company and the Owners are as follows:
If to the Company: With a copy to:
8700 Westport Rd. Baker & Hostetler LLP
Suite 106 1900 East 9th Street
Louisville, KY 40242 Cleveland, OH 44114-3485
Attn: ______________ Attn: Michael P. McNamara, Jr.
Phone: (502) 423-5400 Phone: (216) 621-0200
Fax: (502) 423-0798 Fax: (216) 696-0740
If to the Owners: With a copy to:
8700 Westport Rd. Baker & Hostetler LLP
Suite 106 1900 East 9th Street
Louisville, KY 40242 Cleveland, OH 44114-3485
Attn: ______________ Attn: Michael P. McNamara, Jr.
Phone: (502) 423-5400 Phone: (216) 621-0200
Fax: (502) 423-0798 Fax: (216) 696-0740
6.2 Owner's Representative. The Owners' Representative for purposes of
----------------------
Section 10.2 of the Uniform Terms shall be Edward P. Pearsall, who shall serve
as the Owner's Representative under the terms of said Section 10.2 of the
Uniform Terms.
6.3 Certain Definitions. In addition to the terms defined elsewhere herein
-------------------
and in the Uniform Terms, as used in this Agreement:
(a) "Anticipated Closing Date" shall mean April 30, 1997.
------------------------
(b) "Knowledge" of the Company shall mean the personal knowledge
---------
after due inquiry of those facts that are known or should reasonably
have been known after due inquiry by Edward P. Pearsall and Robert B.
Nesmith and the knowledge of any such Persons obtained or which would
have been obtained from a reasonable investigation.
(c) "Outside Closing Date" shall mean June 30, 1997.
--------------------
-9-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first written above.
PREMIERE:
PREMIERE TECHNOLOGIES, INC.,
a Georgia corporation
By: /s/Patrick G. Jones
-------------------------------------
Patrick G. Jones
Title: Sr. V.P.
Attest:
By: /s/Douglas B. Hadaway
---------------------------------
Douglas B. Hadaway
Title: Assistant Secretary
COMPANY:
CONTINUUM, INC.,
a Kentucky corporation
By: /s/Edward P. Pearsall
-------------------------------------
Edward P. Pearsall
Title: President
Attest:
By: /s/Robert B. Nesmith
---------------------------------
Robert B. Nesmith
Title: Secretary
OWNERS:
/s/Edward P. Pearsall
----------------------------------------
Edward P. Pearsall,
an individual resident of the
State of Kentucky
Witness:
By: /s/Robert B. Nesmith
---------------------------------
Robert B. Nesmith
[Signatures Continued on Next Page]
<PAGE>
/s/Robert B. Nesmith
----------------------------------------
Robert B. Nesmith,
an individual resident of the
State of Kentucky
Witness:
By: /s/Edward P. Pearsall
---------------------------------
Edward P. Pearsall
<PAGE>
EXHIBIT 2.5
TRANSFER AGREEMENT
BY AND AMONG
PREMIERE TECHNOLOGIES, INC.,
DMG, INC.
AND
OWNERS OF DMG, INC.
DATED AS OF APRIL 2, 1997
<PAGE>
TRANSFER AGREEMENT
------------------
THIS TRANSFER AGREEMENT (this "Agreement") is entered into as of April 2,
1997 by and among Premiere Technologies, Inc., a Georgia corporation
("Premiere"), DMG, Inc., a Texas corporation (the "Company"), and those parties
listed on the signature pages hereto as the owners of the Company (the
"Owners").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, this Agreement provides for the acquisition of the Company by
Premiere pursuant to the merger of the Company with and into a wholly owned
subsidiary of Premiere ("Merger Corp"), with Merger Corp as the surviving
corporation in such merger (the "Merger");
WHEREAS, the respective Boards of Directors of Premiere and the Company have
approved the terms and conditions set forth in this Agreement;
WHEREAS, the Owners own one hundred percent (100%) of the equity interests in
the Company;
WHEREAS, this Agreement provides for all of the Owners' equity interests in
the Company to be converted into the right to receive shares of Premiere Stock
in connection with the Merger;
WHEREAS, it is also the intention of the parties hereto that the form of the
transactions with respect to the Company, Premiere and Merger Corp shall qualify
as a "reorganization" within the meaning of Section 368(a) of the Code for
federal income tax purposes; and
WHEREAS, it is also the intention of the parties hereto that the business
combination to be effected by the Merger be accounted for as a pooling of
interests.
NOW, THEREFORE, in consideration of the foregoing, the mutual agreements and
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
I. UNIFORM TERMS AND CONDITIONS
--------------------------------
1.1 Incorporation by Reference. The Uniform Terms and Conditions attached
--------------------------
hereto as Exhibit A (the "Uniform Terms") are hereby made a part of and
---------
incorporated herein as if fully restated herein. Capitalized terms not defined
herein shall have the meanings provided in the Uniform Terms.
<PAGE>
II. TERMS OF MERGER
--------------------
2.1 The Merger.
----------
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time, the Company shall be merged with and into Merger Corp in
accordance with the provisions of the business corporation act under the laws of
the State of Texas(the "Texas Act") and the laws of the State of Georgia (the
"Georgia Act"). Merger Corp shall be the surviving corporation resulting from
the Merger, shall thereafter conduct the business and operations of the Company
as a wholly owned subsidiary of Premiere and shall continue to be governed by
the laws of the State of Georgia. The Merger shall be consummated pursuant to
the terms of this Agreement, which has been approved and adopted by the
respective boards of directors of Premiere, Merger Corp and the Company.
(b) Subject to the provisions of this Agreement, the parties shall
file [Articles] [a Certificate] of Merger executed in accordance with the
relevant provisions of the Texas Act and a Certificate of Merger executed in
accordance with the relevant provisions of the Georgia Act and shall make all
other filings or recordings required under each such Act as soon as practicable
on or after the Closing Date. The Merger and other transactions contemplated by
this Agreement shall become effective on the date and at the time the Articles
or Certificate of Merger reflecting the Merger becomes effective with the
Secretary of State of the State of Texas and the Certificate of Merger
reflecting the Merger becomes effective with the Secretary of State of the State
of Georgia (the "Effective Time").
(c) The charter and Bylaws of Merger Corp in effect immediately prior
to the Effective Time shall be the charter and Bylaws of the surviving
corporation until otherwise amended or repealed, the directors of Merger Corp
immediately prior to the Effective Time shall serve as the directors of the
surviving corporation from and after the Effective Time, and the officers of
Merger Corp in office immediately prior to the Effective Time shall serve as the
officers of the surviving corporation from and after the Effective Time.
2.2 Conversion of Shares. Subject to the provisions of this Section 2.2,
--------------------
and in consideration for the transactions contemplated hereby, at the Effective
Time, by virtue of the Merger and without any action on the part of the parties
hereto or the shareholders of any of the parties hereto, the shares of the
constituent corporations of the Merger shall be converted as follows:
(a) Each share of Premiere Stock and each share of Merger Corp common
stock issued and outstanding at the Effective Time shall remain issued and
outstanding after the Effective Time.
(b) All of the shares of the capital stock, par value $.05, of the
Company ("Company Stock") (excluding treasury shares and excluding shares held
by shareholders who perfect their statutory dissenters' rights as provided in
Section 2.4 of this Agreement) issued and outstanding at the Effective Time
shall cease to be outstanding and shall be converted into and exchanged for the
right to receive:
(i) the number of shares of Premiere Stock determined by dividing (A)
the product of .9 multiplied by the Company Purchase Price, by
(B) the Average Closing Price; and
-2-
<PAGE>
(ii) the number of shares of Premiere Stock determined by dividing
(A) the product of .1 multiplied by the Company Purchase Price,
by (B) the Average Closing Price (the "General Escrow Amount");
all as determined in accordance with Section 2.3 below (collectively, the
"Consideration"). Subject to Section 2.2(d) below, the Consideration shall be
issuable to the Owners pro rata in accordance with their ownership of Company
Common Stock pursuant to Section 2.6, which ownership the Owners represent has
not been adjusted in contemplation of the transactions described herein.
(c) Any and all shares of Company Common Stock held as treasury
shares by the Company shall be canceled and retired at the Effective Time, and
no consideration shall be issued in exchange therefor.
(d) Upon consummation of the Merger, the Owners shall deliver the
General Escrow Amount in negotiable form to the Escrow Agent to be held in
escrow pursuant to the terms and conditions of the Escrow Agreement in the form
attached hereto as Exhibit B, which shall be executed and delivered by Premiere
---------
and the Owners at the Closing.
2.3 Calculation of Consideration. For purposes of determining the
----------------------------
Consideration issuable to the Owners pursuant to Section 2.2(b) above, the
following shall apply:
(a) "Average Closing Price" shall be the average of the daily last
sale prices of Premiere Stock for the period consisting of twenty (20)
consecutive trading days on which such shares are actually traded on the Nasdaq
National Market (as reported by the Wall Street Journal or, if not reported
thereby, any other authoritative source selected by Premiere) ending at the
close of trading on the first trading day immediately preceding the Closing;
provided, however, that the Average Closing Price shall not be less than $22.50
- - -------- -------
nor more than $30.50 (collectively, $22.50 and $30.50 are referred to as the
"Average Closing Price Limitations").
(b) "Company Purchase Price" shall be the sum of (i) the amount
determined by multiplying the Normalized EBITDA of the Company by the Stock
Multiple, plus (ii) the amount of cash reflected on the Closing Date Balance
----
Sheet, minus (iii) the aggregate amount of principal and accrued and unpaid
-----
interest under funded debt and capital lease obligations reflected on the
Closing Date Balance Sheet, minus (iv) the amount by which the Transaction Costs
-----
exceed the Deductible Amount.
(c) "Deductible Amount" shall be an amount equal to $5,000.
(d) "Normalized EBITDA" of the Company shall be an amount equal to
$1,542,404.00.
(e) "Registration Right" shall mean the right to include Premiere
Stock issued in the Merger in a registration statement which Premiere intends to
file promptly after the end of the first full fiscal quarter of Premiere
containing the period of post-Merger combined operations required by ASRs 130
and 135, pursuant to the terms and conditions of the Stock Restriction and
Registration Rights Agreement in the form attached hereto as of Exhibit C (the
---------
"Registration Rights Agreement") .
-3-
<PAGE>
(f) "Stock Multiple" shall be six (6).
(g) "Transaction Costs" shall mean all amounts incurred but unpaid by
the Company in connection with (i) the negotiation and preparation of this
Agreement, (ii) the preparation of the Audited Financial Statements, (iii) the
consummation of the Transactions, and (iv) one-half of the costs and expenses of
public record searches pursuant to Section 5.9(b) of the Uniform Terms.
2.4 Dissenting Shareholders. Subject to Section 4.2, any holder of shares
-----------------------
of voting capital stock of the Company who perfects any available dissenters'
rights in accordance with and as contemplated by the Texas Act shall be entitled
to receive the value of such shares in cash from the Company after the Effective
Time as determined pursuant to such provision of law; provided, that no such
payment shall be made to any dissenting shareholder unless and until such
dissenting shareholder has complied with the applicable provisions of the Texas
Act and surrendered to the Company the certificate or certificates representing
the shares for which payment is being made. In the event that a dissenting
shareholder of the Company fails to perfect, or effectively withdraws or loses,
its right to appraisal and of payment for its shares, Premiere shall issue and
deliver the consideration to which such holder of shares of Company capital
stock is entitled under this Article II (without interest) upon surrender of
certificates representing such shares held by such holder.
2.5 Closing. The Closing shall take place at the offices of Alston & Bird
-------
LLP, Atlanta, Georgia, at 10:00 a.m. local time, on the date set forth in the
Uniform Terms, provided all conditions set forth in Articles V and VI of the
Uniform Terms and Articles IV and V of this Agreement have been satisfied or
waived, or on such other date or at such other place and time mutually agreed
upon by the parties.
2.6 Exchange of Shares. Promptly after the Effective Time, Premiere and
------------------
Company shall cause to be mailed to the former Company shareholders appropriate
transmittal materials for the surrender of the certificate or certificates
formerly representing their shares of Company Common Stock in exchange for
shares of Premiere Stock as provided in this Agreement. Until surrendered for
exchange in accordance herewith, each certificate theretofore representing
shares of Company Common Stock shall from and after the Effective Time represent
only the right to receive the Consideration provided in this Agreement in
exchange therefor. No certificates representing fractional shares will be
issued as a result of the Merger. Each holder of shares of Company Common Stock
exchanged pursuant to the Merger who would otherwise have been entitled to
receive a fraction of a share of Premiere Common Stock shall receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional part of a
share of Premiere Common Stock multiplied by the Average Closing Price.
2.7 Purchase for Investment, Etc. Each Owner, represents and warrants the
-----------------------------
following to Premiere:
(a) such Owner has accurately completed the Investor
Questionnaire required by Premiere prior to or contemporaneous with the
execution of the Transfer Agreement and the statements therein are true and
correct and acknowledges that Premiere has relied upon such statements in
entering into this Agreement;
-4-
<PAGE>
(b) such Owner is acquiring Premiere Stock for such Owner's own
account and not with a view to or for sale in connection with any public
distribution thereof within the meaning of the Securities Act;
(c) such Owner (i) has sufficient knowledge and experience in
financial and business matters to enable him, her or it to evaluate the merits
and risks of an investment in Premiere Stock, (ii) has the ability to bear the
economic risk of acquiring Premiere Stock for an indefinite period and to afford
a complete loss thereof and (iii) has had an opportunity to ask questions of and
to receive answers from the officers of Premiere and to obtain additional
information in writing as requested, which has been made available to and
examined by such Owner or such Owner's advisors; and
(d) such Owner (i) acknowledges that Premiere Stock has not been
registered under any securities laws and cannot be resold without registration
thereunder or exemption therefrom, (ii) agrees not to transfer all or any
Premiere Stock received by such Owner unless such transfer has been registered
or is exempt from registration under applicable securities laws and (iii)
acknowledges that the certificate(s) representing Premiere Stock shall bear the
following legend with respect to the restrictions on transfer under applicable
securities laws:
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, and may not be offered, sold,
transferred or otherwise disposed of unless registered with the
Securities and Exchange Commission of the United States and the
securities regulatory authorities of applicable states or unless an
exemption from such registration is available."
2.8 Accounting, Tax and Regulatory Matters. Each Owner and the Company,
--------------------------------------
jointly and severally, represents and warrants to Premiere that neither the
Company, any Owner nor any Affiliate thereof has taken or agreed to take any
action or has any knowledge of any fact or circumstance that is reasonably
likely to (i) prevent the Merger from qualifying for pooling-of-interests
accounting treatment or as a reorganization within the meaning of Section 368(a)
of the Code, or (ii) materially impede or delay receipt of any consents referred
to in Section 5.6 of the Uniform Terms or result in the imposition of a
condition or restriction of the type referred to in the last sentence of such
Section.
III. ADDITIONAL AGREEMENTS
---------------------------
3.1 Filings with State Offices. Upon the terms and subject to the
--------------------------
conditions of this Agreement, the Company and Merger Corp shall execute and file
the [Articles] [Certificate] of Merger with the Secretary of State of the State
of Texas and a Certificate of Merger with the Secretary of State of the State of
Georgia in connection with the Closing.
3.2 Conditions to Closing. The Company, the Owners and Premiere agree to
---------------------
use their commercially reasonable best efforts to satisfy the closing conditions
set forth in Articles IV and V of this Agreement by the date indicated therein
or the Closing Date, as applicable.
3.3 Additional Indemnification Items. Subject to Sections 8.2 through 8.6
--------------------------------
of the Uniform Terms, the Owners and, if the Transactions involve an Asset
Transfer, the Company, shall jointly and severally indemnify and hold harmless
Premiere, and its officers, directors, agents or affiliates,
-5-
<PAGE>
from and against any and all Losses suffered or incurred by any such party by
reason of or arising out of any of the following:
a breach of Section 2.19 of the Uniform Terms as it relates to liability
for sales tax (irrespective of whether disclosed on Schedule 2.19 or in
the Financial Statements).
3.4 Tax Matters. Each of the Company, the Owners and Premiere undertakes
-----------
and agrees to use its reasonable efforts to cause the Merger, and to take no
action which would cause the Merger not, to qualify as a "reorganization" within
the meaning of Section 368(a) of the Code for federal income tax purposes.
Notwithstanding the foregoing, the Owners understand that (i) Premiere makes no
representation or warranty regarding the tax treatment of this Agreement or the
Merger, (ii) the Closing is not subject to a condition that an Internal Revenue
Service ruling or tax opinion be obtained as to the federal income tax
consequences of this Agreement or the Merger, and (iii) the Company and the
Owners shall look to their respective advisors for advice concerning the tax
consequences of this Agreement and the Merger.
3.5 Registration Rights. At the Closing. Premiere and the Owners shall
-------------------
execute and deliver the Registration Rights Agreement.
3.6 Accounting Treatment.
--------------------
(a) The Company and each of the Owners has accurately completed the
Pooling Questionnaire required by Premiere prior to or contemporaneous with the
execution of this Agreement, and the statements therein are true and correct.
(b) Premiere, the Company and each of the Owners agrees to use its
reasonable efforts to cause the Merger, and to take no action which would cause
the Merger not, to qualify for treatment as a pooling of interests for
accounting purposes. Without limiting the foregoing, the Company and each of
the Owners agrees not to sell, transfer, or otherwise dispose of his, her or its
interests in, or reduce his, her or its risk relative to, any of the shares of
Premiere Common Stock received in connection with the Merger until such time as
Premiere notifies the Company and each such Owner that the requirements of ASRs
130 and 135 have been met. The Company and each of the Owners understands that
ASRs 130 and 135 relate to the publication of financial results of at least
thirty (30) days of post-Merger combined operations of Premiere and the Company.
Premiere agrees that it shall publish such results within forty-five (45) days
after the end of the first fiscal quarter of Premiere containing the required
period of post-Merger combined operations and that it shall notify the Company
and each of the Owners promptly following such publication. Premiere shall be
entitled to place the following restrictive legend on the shares of Premiere
Stock issued pursuant to the Merger to enforce the foregoing restrictions:
"The shares represented by this certificate were issued pursuant to a
business combination which is accounted for as a "pooling of interests" and
may not be sold, nor may the owner thereof reduce his risks relative
thereto in any way, until such time as Premiere Technologies, Inc.
("Premiere") has published the financial results covering at least 30 days
of combined operations after the effective date of the merger through which
the business combination was effected.
3.7 Affiliate Agreements. The Company has disclosed in Schedule 3.7 all
-------------------- ------------
Persons whom it reasonably believes is an "affiliate" of the Company for
purposes of Rule 145 under the 1933 Act.
-6-
<PAGE>
The Company shall use its reasonable efforts to cause each such Person to
deliver to Premiere at least 30 days prior to the Effective Time a written
agreement, substantially in the form attached hereto as Exhibit D.
----------
3.8 Tax Representations. In connection with the opinion to be rendered to
-------------------
Premiere by Alston & Bird to the effect that the transactions contemplated
hereby will constitute a tax-free reorganization within the meaning of Section
368(a) of the Code, the Owners shall furnish such counsel with such
representations as to their plans for the disposition of the shares of Premiere
Stock to be received in the Transactions as such counsel shall reasonably
request.
3.9 Restricted Stock. All contractual restrictions or limitations on
----------------
transfer with respect to Company Common Stock under any plan, program, contract
or arrangement, to the extent that such restrictions or limitations have not
already lapsed (whether as a result of the Transactions or otherwise), and
except as otherwise expressly provided in such plan, program, contract or
arrangement, shall remain in full force and effect with respect to shares of
Premiere Stock into which such restricted stock is converted pursuant to Section
2.2 of this Transfer Agreement.
3.10 Exchange Listing. Premiere shall use its reasonable efforts to list,
----------------
prior to the Effective Time, on the Nasdaq National Market the shares of
Premiere Stock to be issued to the Owners pursuant to the Transactions, and
Premiere shall give all notices and make all filings with the NASD required in
connection with the Transactions.
IV. SUPPLEMENTAL CONDITIONS TO OBLIGATIONS OF PREMIERE
-------------------------------------------------------
In addition to the conditions of Premiere contained in Article V of the
Uniform Terms, the obligation of Premiere to consummate the Transactions is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions:
4.1 Approval of Owners. The Owners shall have approved the Merger in
------------------
accordance with the requirements of the Texas Act and the Company shall have
provided Premiere certified copies of such resolutions, and Owners holding no
more than ten percent (10%) of the Company Common Stock issued and outstanding
immediately prior to the Effective Time shall have exercised any of the rights
described in Section 2.4.
4.2 Grand Solution Documents. VTNLP, VTE, the NAP and each of the
------------------------
Franchisee Companies shall have executed and delivered Grand Solution Documents
reflecting the terms described in Exhibit E hereto in form and substance
reasonable satisfactory to Premiere.
4.3 Audited Financial Statements. Premiere shall have received balance
----------------------------
sheets of the Company as of December 31, 1994, 1995 and 1996 and the related
statements of operations, cash flows and changes in Owner's equity for the
fiscal years then ended (collectively, the "Audited Financial Statements")
prepared in accordance with GAAP and Regulation S-X promulgated by the
Commission, accompanied by an unqualified audit opinion of Arthur Andersen LLP
relating thereto. The Audited Financial Statements shall not reflect any
material change in the Company's financial condition or results of operations
from the condition and results reported in the Financial Statements for the
corresponding periods delivered by the Company prior to the execution of this
Agreement.
-7-
<PAGE>
4.4 Pooling Letter. Premiere shall have received a letter, dated as of the
--------------
Effective Time, in form and substance reasonably acceptable to Premiere, from
Arthur Andersen LLP to the effect that the Merger will qualify for pooling of
interests accounting treatment, and no action shall have been taken by any
regulatory authority or any statute, rule, regulation or order enacted,
promulgated or issued by any regulatory authority, or any proposal made for any
such action by any regulatory authority which is reasonably likely to be put
into effect, that would prevent Premiere from accounting for the business
combination to be effected by the Merger as a pooling of interests.
4.5 Reorganization Opinion. Premiere shall have received an opinion of
----------------------
Alston & Bird LLP, counsel to Premiere, to the effect that the transactions
contemplated by the Agreement, including the Merger, will constitute a tax-free
reorganization within the meaning of Section 368(a)of the Code.
V. SUPPLEMENTAL CONDITIONS TO OBLIGATIONS OF THE COMPANY
---------------------------------------------------------
AND THE OWNERS
--------------
In addition to the conditions of the Company and the Owners contained in
Article VI of the Uniform Terms, the obligation of the Company and the Owners to
consummate the Transactions is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions:
5.1 Approval of Premiere and Merger Corp. The Board of Directors of
------------------------------------
Premiere and the Board of Directors and the shareholder of Merger Corp shall
have approved the Merger in accordance with the requirement of applicable state
law. Premiere and Merger Corp shall have provided the Company certified copies
of such resolutions.
5.2 Registration Rights. Premiere and each Owner shall have executed and
-------------------
delivered a Registration Rights Agreement.
VI. MISCELLANEOUS
------------------
6.1 Notices. The addresses for notices in accordance with Section 10.1 of
-------
the Uniform Terms for the Company and the Owners are as follows:
If to the Company: With a copy to:
2080 North HIghway 360 Baker & Hostetler LLP
Suite 360 1900 East 9th Street
Grand Prarie, TX 75050 Cleveland, OH 44114-3485
Attn: Barry Pasarew Attn: Michael P. McNamara, Jr.
Phone: (972) 606-1111 Phone: (216) 621-0200
Fax: (972) 606-2630 Fax: (216) 626-0740
If to the Owners: With a copy to:
2080 North HIghway 360 Baker & Hostetler LLP
Suite 360 1900 East 9th Street
-8-
<PAGE>
Grand Prarie, TX 75050 Cleveland, OH 44114-3485
Attn: Barry Pasarew Attn: Michael P. McNamara, Jr.
Phone: (972) 606-1111 Phone: (216) 621-0200
Fax: (972) 606-2630 Fax: (216) 626-0740
6.2 Owner's Representative. The Owners' Representative for purposes of
----------------------
Section 10.2 of the Uniform Terms shall be Barry Pasarew, who shall serve as the
Owner's Representative under the terms of said Section 10.2 of the Uniform
Terms.
6.3 Certain Definitions. In addition to the terms defined elsewhere herein
-------------------
and in the Uniform Terms, as used in this Agreement:
(a) "Anticipated Closing Date" shall mean April 30, 1997.
------------------------
(b) "Knowledge" of the Company shall mean the personal knowledge
---------
after due inquiry of those facts that are known or should reasonably
have been known after due inquiry by Barry S. Pasarew, Marvlyn Kay
Pasarew, Irene Pasarew, Randolph Meyer, Kenneth Lile, and Ruth Lile
and the knowledge of any such Persons obtained or which would have
been obtained from a reasonable investigation.
(c) "Outside Closing Date" shall mean June 30, 1997.
--------------------
[Signatures begin on next page.]
-9-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first written above.
PREMIERE:
PREMIERE TECHNOLOGIES, INC.,
a Georgia corporation
By: /s/Patrick G. Jones
---------------------------------
Patrick G. Jones
Title: Sr. V.P.
Attest:
By: /s/Douglas B. Hadaway
-----------------------------
Douglas B. Hadaway
Title: Assistant Secretary
COMPANY:
DMG, INC.,
a Texas corporation
By: /s/Barry S. Pasarew
---------------------------------
Barry S. Pasarew
Title: President
Attest:
By: /s/Marvlyn Pasarew
-----------------------------
Marvlyn Pasarew
Title: Secretary
OWNERS:
/s/Barry S. Pasarew
------------------------------------
Barry S. Pasarew,
an individual resident of the
State of TX
Witness:
By: /s/Richard D. Aronson
-----------------------------
Richard D. Aronson
[Signatures continued on next page.]
<PAGE>
/s/Irene Pasarew
------------------------------------
Irene Pasarew,
an individual resident of the
State of MD
Witness:
By: /s/Marilyn Aronson
-----------------------------
Marilyn Aronson
/s/Randolph W. Meyer
------------------------------------
Randolph W. Meyer,
an individual resident of the
State of CT
Witness:
By: /s/Joan P. Beauvais
-----------------------------
Joan P. Beauvais
/s/Kenneth Lile
------------------------------------
Kenneth Lile,
an individual resident of the
State of TX
and
Witness:
By: /s/Barry S. Pasarew
-----------------------------
Barry S. Pasarew
/s/Ruth Lile
------------------------------------
Ruth Lile,
an individual resident of the
State of TX
Witness:
By: /s/Barry S. Pasarew
-----------------------------
Barry s. Pasarew
ESTATE OF ROBERT MCDONALD
By: /s/Ruth Lile
---------------------------------
Ruth Lile
Executor
Witness:
By: /s/Barry S. Pasarew
-----------------------------
Barry s. Pasarew
<PAGE>
/s/Marvlyn Kay Pasarew
------------------------------------
Marvlyn Kay Pasarew
an individual resident of the
State of TX
Witness:
By: /s/Christopher Bennett
-----------------------------
Christopher Bennett
<PAGE>
TRANSFER AGREEMENT
BY AND AMONG
PREMIERE TECHNOLOGIES, INC.,
VTG, INC.
AND
OWNERS OF VTG, INC.
DATED AS OF APRIL 2, 1997
<PAGE>
TRANSFER AGREEMENT
------------------
THIS TRANSFER AGREEMENT (this "Agreement") is entered into as of April 2,
1997 by and among Premiere Technologies, Inc., a Georgia corporation
("Premiere"), VTG, Inc., a Texas corporation (the "Company"), and those parties
listed on the signature pages hereto as the owners of the Company (the
"Owners").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, this Agreement provides for the acquisition of the Company by
Premiere pursuant to the merger of the Company with and into a wholly owned
subsidiary of Premiere ("Merger Corp"), with Merger Corp as the surviving
corporation in such merger (the "Merger");
WHEREAS, the respective Boards of Directors of Premiere and the Company have
approved the terms and conditions set forth in this Agreement;
WHEREAS, the Owners own one hundred percent (100 %) of the equity interests
in the Company;
WHEREAS, this Agreement provides for all of the Owners' equity interests in
the Company to be converted into the right to receive shares of Premiere Stock
in connection with the Merger;
WHEREAS, it is also the intention of the parties hereto that the form of the
transactions with respect to the Company, Premiere and Merger Corp shall qualify
as a "reorganization" within the meaning of Section 368(a) of the Code for
federal income tax purposes; and
WHEREAS, it is also the intention of the parties hereto that the business
combination to be effected by the Merger be accounted for as a pooling of
interests.
NOW, THEREFORE, in consideration of the foregoing, the mutual agreements and
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
I. UNIFORM TERMS AND CONDITIONS
--------------------------------
1.1 Incorporation by Reference. The Uniform Terms and Conditions attached
--------------------------
hereto as Exhibit A (the "Uniform Terms") are hereby made a part of and
---------
incorporated herein as if fully restated herein. Capitalized terms not defined
herein shall have the meanings provided in the Uniform Terms.
<PAGE>
II. TERMS OF MERGER
--------------------
2.1 The Merger.
----------
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time, the Company shall be merged with and into Merger Corp in
accordance with the provisions of the business corporation act under the laws of
the State of Texas (the "Texas Act") and the laws of the State of Georgia (the
"Georgia Act"). Merger Corp shall be the surviving corporation resulting from
the Merger, shall thereafter conduct the business and operations of the Company
as a wholly owned subsidiary of Premiere and shall continue to be governed by
the laws of the State of Georgia. The Merger shall be consummated pursuant to
the terms of this Agreement, which has been approved and adopted by the
respective boards of directors of Premiere, Merger Corp and the Company.
(b) Subject to the provisions of this Agreement, the parties shall
file Articles a Certificate of Merger executed in accordance with the relevant
provisions of the Texas Act and a Certificate of Merger executed in accordance
with the relevant provisions of the Georgia Act and shall make all other filings
or recordings required under each such Act as soon as practicable on or after
the Closing Date. The Merger and other transactions contemplated by this
Agreement shall become effective on the date and at the time the Articles or
Certificate of Merger reflecting the Merger becomes effective with the Secretary
of State of the State of Texas and the Certificate of Merger reflecting the
Merger becomes effective with the Secretary of State of the State of Georgia
(the "Effective Time").
(c) The charter and Bylaws of Merger Corp in effect immediately prior
to the Effective Time shall be the charter and Bylaws of the surviving
corporation until otherwise amended or repealed, the directors of Merger Corp
immediately prior to the Effective Time shall serve as the directors of the
surviving corporation from and after the Effective Time, and the officers of
Merger Corp in office immediately prior to the Effective Time shall serve as the
officers of the surviving corporation from and after the Effective Time.
2.2 Conversion of Shares. Subject to the provisions of this Section 2.2,
--------------------
and in consideration for the transactions contemplated hereby, at the Effective
Time, by virtue of the Merger and without any action on the part of the parties
hereto or the shareholders of any of the parties hereto, the shares of the
constituent corporations of the Merger shall be converted as follows:
(a) Each share of Premiere Stock and each share of Merger Corp common
stock issued and outstanding at the Effective Time shall remain issued and
outstanding after the Effective Time.
(b) All of the shares of the capital stock, no par value per share,
of the Company ("Company Stock") (excluding treasury shares and excluding shares
held by shareholders who perfect their statutory dissenters' rights as provided
in Section 2.4 of this Agreement) issued and outstanding at the Effective Time
shall cease to be outstanding and shall be converted into and exchanged for the
right to receive:
(i) the number of shares of Premiere Stock determined by
dividing (A) the product of .9 multiplied by the Company
Purchase Price, by (B) the Average Closing Price; and
-2-
<PAGE>
(ii) the number of shares of Premiere Stock determined by
dividing (A) the product of .1 multiplied by the Company
Purchase Price, by (B) the Average Closing Price (the
"General Escrow Amount");
all as determined in accordance with Section 2.3 below (collectively, the
"Consideration"). Subject to Section 2.2(d) below, the Consideration shall be
issuable to the Owners pro rata in accordance with their ownership of Company
Common Stock pursuant to Section 2.6, which ownership the Owners represent has
not been adjusted in contemplation of the transactions described herein.
(c) Any and all shares of Company Common Stock held as treasury
shares by the Company shall be canceled and retired at the Effective Time, and
no consideration shall be issued in exchange therefor.
(d) Upon consummation of the Merger, the Owners shall deliver the
General Escrow Amount in negotiable form to the Escrow Agent to be held in
escrow pursuant to the terms and conditions of the Escrow Agreement in the form
attached hereto as Exhibit B, which shall be executed and delivered by Premiere
---------
and the Owners at the Closing.
2.3 Calculation of Consideration. For purposes of determining the
----------------------------
Consideration issuable to the Owners pursuant to Section 2.2(b) above, the
following shall apply:
(a) "Average Closing Price" shall be the average of the daily last
sale prices of Premiere Stock for the period consisting of twenty (20)
consecutive trading days on which such shares are actually traded on the Nasdaq
National Market (as reported by the Wall Street Journal or, if not reported
thereby, any other authoritative source selected by Premiere) ending at the
close of trading on the first trading day immediately preceding the Closing;
provided, however, that the Average Closing Price shall not be less than
- - -------- -------
$22.50 nor more than $30.50 (collectively, $22.50 and $30.50 are referred to as
the "Average Closing Price Limitations").
(b) "Company Purchase Price" shall be the sum of (i) the amount
determined by multiplying the Normalized EBITDA of the Company by the Stock
Multiple, plus (ii) the amount of cash reflected on the Closing Date Balance
----
Sheet, minus (iii) the aggregate amount of principal and accrued and unpaid
-----
interest under funded debt and capital lease obligations reflected on the
Closing Date Balance Sheet, minus (iv) the amount by which the Transaction Costs
-----
exceed the Deductible Amount.
(c) "Deductible Amount" shall be an amount equal to $5,000.
(d) "Normalized EBITDA" of the Company shall be an amount equal to
$497,052.00.
(e) "Registration Right" shall mean the right to include Premiere
Stock issued in the Merger in a registration statement which Premiere intends to
file promptly after the end of the first full fiscal quarter of Premiere
containing the period of post-Merger combined operations required by ASRs 130
and 135, pursuant to the terms and conditions of the Stock Restriction and
Registration Rights Agreement in the form attached hereto as of Exhibit C (the
---------
"Registration Rights Agreement") .
(f) "Stock Multiple" shall be six (6).
-3-
<PAGE>
(g) "Transaction Costs" shall mean all amounts paid or incurred by
the Company in connection with (i) the negotiation and preparation of this
Agreement, (ii) the preparation of the Audited Financial Statements, (iii) the
consummation of the Transactions and (iv) one-half of the costs and expenses of
public record searches pursuant to Section 5.9(b) of the Uniform Terms.
2.4 Dissenting Shareholders. Subject to Section 4.2, any holder of shares
-----------------------
of voting capital stock of the Company who perfects any available dissenters'
rights in accordance with and as contemplated by the Texas Act shall be entitled
to receive the value of such shares in cash from the Company after the Effective
Time as determined pursuant to such provision of law; provided, that no such
payment shall be made to any dissenting shareholder unless and until such
dissenting shareholder has complied with the applicable provisions of the Texas
Act and surrendered to the Company the certificate or certificates representing
the shares for which payment is being made. In the event that a dissenting
shareholder of the Company fails to perfect, or effectively withdraws or loses,
its right to appraisal and of payment for its shares, Premiere shall issue and
deliver the consideration to which such holder of shares of Company capital
stock is entitled under this Article II (without interest) upon surrender of
certificates representing such shares held by such holder.
2.5 Closing. The Closing shall take place at the offices of Alston & Bird
-------
LLP, Atlanta, Georgia, at 10:00 a.m. local time, on the date set forth in the
Uniform Terms, provided all conditions set forth in Articles V and VI of the
Uniform Terms and Articles IV and V of this Agreement have been satisfied or
waived, or on such other date or at such other place and time mutually agreed
upon by the parties.
2.6 Exchange of Shares. Promptly after the Effective Time, Premiere and
------------------
Company shall cause to be mailed to the former Company shareholders appropriate
transmittal materials for the surrender of the certificate or certificates
formerly representing their shares of Company Common Stock in exchange for
shares of Premiere Stock as provided in this Agreement. Until surrendered for
exchange in accordance herewith, each certificate theretofore representing
shares of Company Common Stock shall from and after the Effective Time represent
only the right to receive the Consideration provided in this Agreement in
exchange therefor. No certificates representing fractional shares will be issued
as a result of the Merger. Each holder of shares of Company Common Stock
exchanged pursuant to the Merger who would otherwise have been entitled to
receive a fraction of a share of Premiere Common Stock shall receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional part of a
share of Premiere Common Stock multiplied by the Average Closing Price.
2.7 Purchase for Investment, Etc. Each Owner, jointly and severally,
-----------------------------
represents and warrants the following to Premiere:
(a) such Owner has accurately completed the Investor Questionnaire
required by Premiere prior to or contemporaneous with the execution of the
Transfer Agreement and the statements therein are true and correct and
acknowledges that Premiere has relied upon such statements in entering into this
Agreement;
-4-
<PAGE>
(b) such Owner is acquiring Premiere Stock for such Owner's own
account and not with a view to or for sale in connection with any public
distribution thereof within the meaning of the Securities Act;
(c) such Owner (i) has sufficient knowledge and experience in
financial and business matters to enable him, her or it to evaluate the merits
and risks of an investment in Premiere Stock, (ii) has the ability to bear the
economic risk of acquiring Premiere Stock for an indefinite period and to afford
a complete loss thereof and (iii) has had an opportunity to ask questions of and
to receive answers from the officers of Premiere and to obtain additional
information in writing as requested, which has been made available to and
examined by such Owner or such Owner's advisors; and
(d) such Owner (i) acknowledges that Premiere Stock has not been
registered under any securities laws and cannot be resold without registration
thereunder or exemption therefrom, (ii) agrees not to transfer all or any
Premiere Stock received by such Owner unless such transfer has been registered
or is exempt from registration under applicable securities laws and (iii)
acknowledges that the certificate(s) representing Premiere Stock shall bear the
following legend with respect to the restrictions on transfer under applicable
securities laws:
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, and may not be offered, sold,
transferred or otherwise disposed of unless registered with the
Securities and Exchange Commission of the United States and the
securities regulatory authorities of applicable states or unless an
exemption from such registration is available."
2.8 Accounting, Tax and Regulatory Matters. Each Owner and the Company,
--------------------------------------
jointly and severally, represents and warrants to Premiere that neither the
Company, any Owner nor any Affiliate thereof has taken or agreed to take any
action or has any knowledge of any fact or circumstance that is reasonably
likely to (i) prevent the Merger from qualifying for pooling-of-interests
accounting treatment or as a reorganization within the meaning of Section 368(a)
of the Code, or (ii) materially impede or delay receipt of any consents referred
to in Section 5.6 of the Uniform Terms or result in the imposition of a
condition or restriction of the type referred to in the last sentence of such
Section.
III. ADDITIONAL AGREEMENTS
---------------------------
3.1 Filings with State Offices. Upon the terms and subject to the
--------------------------
conditions of this Agreement, the Company and Merger Corp shall execute and file
the Articles or Certificate of Merger with the Secretary of State of the State
of Texas and a Certificate of Merger with the Secretary of State of the State of
Georgia in connection with the Closing.
3.2 Conditions to Closing. The Company, the Owners and Premiere agree to
---------------------
use their commercially reasonable best efforts to satisfy the closing conditions
set forth in Articles IV and V of this Agreement by the date indicated therein
or the Closing Date, as applicable.
3.3 Additional Indemnification Items. Subject to Sections 8.2 through 8.6
--------------------------------
of the Uniform Terms, the Owners and, if the Transactions involve an Asset
Transfer, the Company, shall jointly and severally indemnify and hold harmless
Premiere, and its officers, directors, agents or affiliates,
-5-
<PAGE>
from and against any and all Losses suffered or incurred by any such party by
reason of or arising out of any of the following:
(a) a breach of Section 2.19 of the Uniform Terms as it relates to
liability for sales tax (irrespective of whether disclosed on
Schedule 2.19 or in the Financial Statements).
3.4 Tax Matters. Each of the Company, the Owners and Premiere undertakes
-----------
and agrees to use its reasonable efforts to cause the Merger, and to take no
action which would cause the Merger not, to qualify as a "reorganization" within
the meaning of Section 368(a) of the Code for federal income tax purposes.
Notwithstanding the foregoing, the Owners understand that (i) Premiere makes no
representation or warranty regarding the tax treatment of this Agreement or the
Merger, (ii) the Closing is not subject to a condition that an Internal Revenue
Service ruling or tax opinion be obtained as to the federal income tax
consequences of this Agreement or the Merger, and (iii) the Company and the
Owners shall look to their respective advisors for advice concerning the tax
consequences of this Agreement and the Merger.
3.5 Registration Rights. At the Closing. Premiere and the Owners shall
-------------------
execute and deliver the Registration Rights Agreement.
3.6 Accounting Treatment.
--------------------
(a) The Company and each of the Owners has accurately completed the
Pooling Questionnaire required by Premiere prior to or contemporaneous with the
execution of this Agreement, and the statements therein are true and correct.
(b) Premiere, the Company and each of the Owners agrees to use its
reasonable efforts to cause the Merger, and to take no action which would cause
the Merger not, to qualify for treatment as a pooling of interests for
accounting purposes. Without limiting the foregoing, the Company and each of
the Owners agrees not to sell, transfer, or otherwise dispose of his, her or its
interests in, or reduce his, her or its risk relative to, any of the shares of
Premiere Common Stock received in connection with the Merger until such time as
Premiere notifies the Company and each such Owner that the requirements of ASRs
130 and 135 have been met. The Company and each of the Owners understands that
ASRs 130 and 135 relate to the publication of financial results of at least
thirty (30) days of post-Merger combined operations of Premiere and the Company.
Premiere agrees that it shall publish such results within forty-five (45) days
after the end of the first fiscal quarter of Premiere containing the required
period of post-Merger combined operations and that it shall notify the Company
and each of the Owners promptly following such publication. Premiere shall be
entitled to place the following restrictive legend on the shares of Premiere
Stock issued pursuant to the Merger to enforce the foregoing restrictions:
"The shares represented by this certificate were issued pursuant to a
business combination which is accounted for as a "pooling of interests" and
may not be sold, nor may the owner thereof reduce his risks relative
thereto in any way, until such time as Premiere Technologies, Inc.
("Premiere") has published the financial results covering at least 30 days
of combined operations after the effective date of the merger through which
the business combination was effected.
-6-
<PAGE>
3.7 Affiliate Agreements. The Company has disclosed in Schedule 3.7 all
-------------------- ------------
Persons whom it reasonably believes is an "affiliate" of the Company for
purposes of Rule 145 under the 1933 Act. The Company shall use its reasonable
efforts to cause each such Person to deliver to Premiere as soon as reasonably
practicable following the execution of this Agreement, a written agreement,
substantially in the form attached hereto as Exhibit D."3
----------
3.8 Tax Representations. In connection with the opinion to be rendered to
-------------------
Premiere by Alston & Bird to the effect that the transactions contemplated
hereby will constitute a tax-free reorganization within the meaning of Section
368(a) of the Code, the Owners shall furnish such counsel with such
representations as to their plans for the disposition of the shares of Premiere
Stock to be received in the Transactions as such counsel shall reasonably
request.
3.9 Restricted Stock. All contractual restrictions or limitations on
----------------
transfer with respect to Company Common Stock under any plan, program, contract
or arrangement, to the extent that such restrictions or limitations have not
already lapsed (whether as a result of the Transactions or otherwise), and
except as otherwise expressly provided in such plan, program, contract or
arrangement, shall remain in full force and effect with respect to shares of
Premiere Stock into which such restricted stock is converted pursuant to Section
2.2 of this Transfer Agreement.
3.10 Exchange Listing. Premiere shall use its reasonable efforts to list,
----------------
prior to the Effective Time, on the Nasdaq National Market the shares of
Premiere Stock to be issued to the Owners pursuant to the Transactions, and
Premiere shall give all notices and make all filings with the NASD required in
connection with the Transactions.
IV. SUPPLEMENTAL CONDITIONS TO OBLIGATIONS OF PREMIERE
-------------------------------------------------------
In addition to the conditions of Premiere contained in Article V of the
Uniform Terms, the obligation of Premiere to consummate the Transactions is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions:
4.1 Approval of Owners. The Owners shall have approved the Merger in
------------------
accordance with the requirements of the Texas Act and the Company shall have
provided Premiere certified copies of such resolutions, and Owners holding no
more than ten percent (10%) of the Company Common Stock issued and outstanding
immediately prior to the Effective Time shall have exercised any of the rights
described in Section 2.4.
4.2 Grand Solution Documents. VTNLP, VTE, the NAP and each of the
------------------------
Franchisee Companies shall have executed and delivered Grand Solution Documents
reflecting the terms described in Exhibit E hereto in form and substance
reasonable satisfactory to Premiere.
4.3 Audited Financial Statements. Premiere shall have received balance
----------------------------
sheets of the Company as of December 31, 1994, 1995 and 1996 and the related
statements of operations, cash flows and changes in Owner's equity for the
fiscal years then ended (collectively, the "Audited Financial Statements")
prepared in accordance with GAAP and Regulation S-X promulgated by the
Commission, accompanied by an unqualified audit opinion of Arthur Andersen LLP
relating thereto. The Audited Financial Statements shall not reflect any
material change in the Company's financial condition or results of operations
from the condition and results reported in the Financial
-7-
<PAGE>
Statements for the corresponding periods delivered by the Company prior to the
execution of this Agreement.
4.4 Pooling Letter. Premiere shall have received a letter, dated as of the
--------------
Effective Time, in form and substance reasonably acceptable to Premiere, from
Arthur Andersen LLP to the effect that the Merger will qualify for pooling of
interests accounting treatment, and no action shall have been taken by any
regulatory authority or any statute, rule, regulation or order enacted,
promulgated or issued by any regulatory authority, or any proposal made for any
such action by any regulatory authority which is reasonably likely to be put
into effect, that would prevent Premiere from accounting for the business
combination to be effected by the Merger as a pooling of interests.
4.5 Reorganization Opinion. Premiere shall have received an opinion of
----------------------
Alston & Bird LLP, counsel to Premiere, to the effect that the transactions
contemplated by the Agreement, including the Merger, will constitute a tax-free
reorganization within the meaning of Section 368(a) of the Code.
V. SUPPLEMENTAL CONDITIONS TO OBLIGATIONS OF THE COMPANY
---------------------------------------------------------
AND THE OWNERS
--------------
In addition to the conditions of the Company and the Owners contained in
Article VI of the Uniform Terms, the obligation of the Company and the Owners to
consummate the Transactions is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions:
5.1 Approval of Premiere and Merger Corp. The Board of Directors of
------------------------------------
Premiere and the Board of Directors and the shareholder of Merger Corp shall
have approved the Merger in accordance with the requirement of applicable state
law. Premiere and Merger Corp shall have provided the Company certified copies
of such resolutions.
5.2 Registration Rights. Premiere and each Owner shall have executed and
-------------------
delivered a Registration Rights Agreement.
VI. MISCELLANEOUS
------------------
6.1 Notices. The addresses for notices in accordance with Section 10.1 of
-------
the Uniform Terms for the Company and the Owners are as follows:
If to the Company: With a copy to:
2080 North Highway 360 Baker & Hostetler LLP
Suite 360 1900 East 9th Street
Grand Prarie, TX 75050 Cleveland, OH 44114-3485
Attn: Barry Pasarew Attn: Michael P. McNamara, Jr.
Phone: (972) 606-1111 Phone: (216) 621-0200
Fax: (972) 606-2630 Fax: (216) 696-0740
If to the Owners: With a copy to:
-8-
<PAGE>
2080 North Highway 360 Baker & Hostetler LLP
Suite 360 1900 East 9th Street
Grand Prarie, TX 75050 Cleveland, OH 44114-3485
Attn: Barry Pasarew Attn: Michael P. McNamara, Jr.
Phone: (972) 606-1111 Phone: (216) 621-0200
Fax: (972) 606-2630 Fax: (216) 696-0740
6.2 Owner's Representative. The Owners' Representative for purposes of
----------------------
Section 10.2 of the Uniform Terms shall be Barry Pasarew, who shall serve as the
Owner's Representative under the terms of said Section 10.2 of the Uniform
Terms.
6.3 Certain Definitions. In addition to the terms defined elsewhere herein
-------------------
and in the Uniform Terms, as used in this Agreement:
(a) "Anticipated Closing Date" shall mean April 30, 1997.
------------------------
(b) "Knowledge" of the Company shall mean the personal knowledge
---------
after due inquiry of those facts that are known or should reasonably
have been known after due inquiry by Randolph Meyer, Kenneth Lile, Ruth
Lile, Marvlyn Kay Pasarew Irene Parasew, and Barry Pasarew and the
knowledge of any such Persons obtained or which would have been obtained
from a reasonable investigation.
(c) "Outside Closing Date" shall mean June 30, 1997.
--------------------
[SIGNATURES BEGIN ON THE FOLLOWING PAGE.]
-9-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first written above.
PREMIERE:
PREMIERE TECHNOLOGIES, INC.,
a Georgia corporation
By: /s/Patrick G. Jones
---------------------------------
Patrick G. Jones
Title: Sr. V.P.
Attest:
By: /s/Douglas B. Hadaway
-----------------------------
Douglas B. Hadaway
Title: Assistant Secretary
COMPANY:
VTG, INC.,
a Texas corporation
By: /s/Barry S. Pasarew
---------------------------------
Barry S. Pasarew
Title: President
Attest:
By: /s/Marvlyn Pasarew
-----------------------------
Marvlyn Pasarew
Title: Secretary
OWNERS:
/s/Randolph W. Meyer
------------------------------------
Randolph W. Meyer,
an individual resident of the
State of CT
Witness:
By: /s/Joan P. Beauvais
-----------------------------
Joan P. Beauvais
[SIGNATURES CONTINUED ON THE FOLLOWING PAGE.]
<PAGE>
/s/Kenneth Lile
------------------------------------
Kenneth Lile,
an individual resident of the
State of TX
and
Witness:
By: /s/Vicki Wilson
-----------------------------
Vicki Wilson
/s/Ruth Lile
------------------------------------
Ruth Lile,
an individual resident of the
State of TX
Witness:
By: /s/Vicki Wilson
-----------------------------
Vicki Wilson
/s/Irene Pasarew
------------------------------------
Irene Pasarew,
an individual resident of the
State of MD
Witness:
By: /s/Marilyn Aronson
-----------------------------
Marilyn Aronson
/s/Barry s. Pasarew
------------------------------------
Barry S. Pasarew,
an individual resident of the
State of TX
Witness:
By: /s/Richard D. Aronson
-----------------------------
Richard d. Aronson
ESTATE OF ROBERT MCDONALD
By: /s/Ruth Lile
---------------------------------
Ruth Lile
Executor
Witness:
By: /s/Vicki Wilson
-----------------------------
Vicki Wilson
<PAGE>
/s/Marvlyn Kay Pasarew
------------------------------------
Marvlyn Kay Pasarew
an individual resident of the
State of TX
Witness:
By: /s/Christopher Bennett
-----------------------------
Christopher Bennett
<PAGE>
EXHIBIT 2.6
TRANSFER AGREEMENT
BY AND AMONG
PREMIERE TECHNOLOGIES, INC.,
PENTA GROUP, INC.
AND
OWNERS OF PENTA GROUP, INC.
DATED AS OF APRIL 2, 1997
<PAGE>
TRANSFER AGREEMENT
------------------
THIS TRANSFER AGREEMENT (this "Agreement") is entered into as of April 2,
1997 by and among Premiere Technologies, Inc., a Georgia corporation
("Premiere"), Penta Group, Inc., a Washington corporation (the "Company"), and
those parties listed on the signature pages hereto as the owners of the Company
(the "Owners").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, this Agreement provides for the acquisition of the Company by
Premiere pursuant to the merger of the Company with and into a wholly owned
subsidiary of Premiere ("Merger Corp"), with Merger Corp as the surviving
corporation in such merger (the "Merger");
WHEREAS, the respective Boards of Directors of Premiere and the Company have
approved the terms and conditions set forth in this Agreement;
WHEREAS, the Owners own one hundred percent (100 %) of the equity interests
in the Company;
WHEREAS, this Agreement provides for all of the Owners' equity interests in
the Company to be converted into the right to receive shares of Premiere Stock
in connection with the Merger;
WHEREAS, it is also the intention of the parties hereto that the form of the
transactions with respect to the Company, Premiere and Merger Corp shall qualify
as a "reorganization" within the meaning of Section 368(a) of the Code for
federal income tax purposes; and
WHEREAS, it is also the intention of the parties hereto that the business
combination to be effected by the Merger be accounted for as a pooling of
interests.
NOW, THEREFORE, in consideration of the foregoing, the mutual agreements and
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
I. UNIFORM TERMS AND CONDITIONS
--------------------------------
1.1 Incorporation by Reference. The Uniform Terms and Conditions attached
--------------------------
hereto as Exhibit A (the "Uniform Terms") are hereby made a part of and
---------
incorporated herein as if fully restated herein. Capitalized terms not defined
herein shall have the meanings provided in the Uniform Terms.
<PAGE>
II. TERMS OF MERGER
--------------------
2.1 The Merger.
----------
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time, the Company shall be merged with and into Merger Corp in
accordance with the provisions of the business corporation act under the laws of
the State of Washington (the "Washington Act") and the laws of the State of
Georgia (the "Georgia Act"). Merger Corp shall be the surviving corporation
resulting from the Merger, shall thereafter conduct the business and operations
of the Company as a wholly owned subsidiary of Premiere and shall continue to be
governed by the laws of the State of Georgia. The Merger shall be consummated
pursuant to the terms of this Agreement, which has been approved and adopted by
the respective boards of directors of Premiere, Merger Corp and the Company.
(b) Subject to the provisions of this Agreement, the parties shall
file Articles or a Certificate of Merger executed in accordance with the
relevant provisions of the Washington Act and a Certificate of Merger executed
in accordance with the relevant provisions of the Georgia Act and shall make all
other filings or recordings required under each such Act as soon as practicable
on or after the Closing Date. The Merger and other transactions contemplated by
this Agreement shall become effective on the date and at the time the Articles
or Certificate of Merger reflecting the Merger becomes effective with the
Secretary of State of the State of Washington and the Certificate of Merger
reflecting the Merger becomes effective with the Secretary of State of the State
of Georgia (the "Effective Time").
(c) The charter and Bylaws of Merger Corp in effect immediately prior
to the Effective Time shall be the charter and Bylaws of the surviving
corporation until otherwise amended or repealed, the directors of Merger Corp
immediately prior to the Effective Time shall serve as the directors of the
surviving corporation from and after the Effective Time, and the officers of
Merger Corp in office immediately prior to the Effective Time shall serve as the
officers of the surviving corporation from and after the Effective Time.
2.2 Conversion of Shares. Subject to the provisions of this Section 2.2,
--------------------
and in consideration for the transactions contemplated hereby, at the Effective
Time, by virtue of the Merger and without any action on the part of the parties
hereto or the shareholders of any of the parties hereto, the shares of the
constituent corporations of the Merger shall be converted as follows:
(a) Each share of Premiere Stock and each share of Merger Corp common
stock issued and outstanding at the Effective Time shall remain issued and
outstanding after the Effective Time.
(b) All of the shares of the capital stock, no par value per share,
of the Company ("Company Stock") (excluding treasury shares and excluding shares
held by shareholders who perfect their statutory dissenters' rights as provided
in Section 2.4 of this Agreement) issued and outstanding at the Effective Time
shall cease to be outstanding and shall be converted into and exchanged for the
right to receive:
(i) the number of shares of Premiere Stock determined by
dividing (A) the product of .9 multiplied by the Company
Purchase Price, by (B) the Average Closing Price; and
-2-
<PAGE>
(ii) the number of shares of Premiere Stock determined by
dividing (A) the product of .1 multiplied by the Company
Purchase Price, by (B) the Average Closing Price (the
"General Escrow Amount");
all as determined in accordance with Section 2.3 below (collectively, the
"Consideration"). Subject to Section 2.2(d) below, the Consideration shall be
issuable to the Owners pro rata in accordance with their ownership of Company
Common Stock pursuant to Section 2.6, which ownership the Owners represent has
not been adjusted in contemplation of the transactions described herein.
(c) Any and all shares of Company Common Stock held as treasury
shares by the Company shall be canceled and retired at the Effective Time, and
no consideration shall be issued in exchange therefor.
(d) Upon consummation of the Merger, the Owners shall deliver the
General Escrow Amount in negotiable form to the Escrow Agent to be held in
escrow pursuant to the terms and conditions of the Escrow Agreement in the form
attached hereto as Exhibit B, which shall be executed and delivered by Premiere
---------
and the Owners at the Closing.
2.3 Calculation of Consideration. For purposes of determining the
----------------------------
Consideration issuable to the Owners pursuant to Section 2.2(b) above, the
following shall apply:
(a) "Average Closing Price" shall be the average of the daily last
sale prices of Premiere Stock for the period consisting of twenty (20)
consecutive trading days on which such shares are actually traded on the Nasdaq
National Market (as reported by the Wall Street Journal or, if not reported
thereby, any other authoritative source selected by Premiere) ending at the
close of trading on the first trading day immediately preceding the Closing;
provided, however, that the Average Closing Price shall not be less than $22.50
- - -------- -------
nor more than $30.50 (collectively, $22.50 and $30.50 are referred to as the
"Average Closing Price Limitations").
(b) "Company Purchase Price" shall be the sum of (i) the amount
determined by multiplying the Normalized EBITDA of the Company by the Stock
Multiple, plus (ii) the amount of cash reflected on the Closing Date Balance
----
Sheet, minus (iii) the aggregate amount of principal and accrued and unpaid
-----
interest under funded debt and capital lease obligations reflected on the
Closing Date Balance Sheet, minus (iv) the amount by which the Transaction Costs
-----
exceed the Deductible Amount.
(c) "Deductible Amount" shall be an amount equal to $9,000.
(d) "Normalized EBITDA" of the Company shall be an amount equal to
$1,145,741.00.
(e) "Registration Right" shall mean the right to include Premiere
Stock issued in the Merger in a registration statement which Premiere intends to
file promptly after the end of the first full fiscal quarter of Premiere
containing the period of post-Merger combined operations required by ASRs 130
and 135, pursuant to the terms and conditions of the Stock Restriction and
Registration Rights Agreement in the form attached hereto as of Exhibit C (the
---------
"Registration Rights Agreement") .
-3-
<PAGE>
(f) "Stock Multiple" shall be six (6).
(g) "Transaction Costs" shall mean all amounts incurred but unpaid by
the Company in connection with (i) the negotiation and preparation of this
Agreement, (ii) the preparation of the Audited Financial Statements, (iii) the
consummation of the Transactions and (iv) one-half of the costs and expenses of
public record searches pursuant to Section 5.9(b) of the Uniform Terms.
2.4 Dissenting Shareholders. Subject to Section 4.2, any holder of shares
-----------------------
of voting capital stock of the Company who perfects any available dissenters'
rights in accordance with and as contemplated by the Washington Act shall be
entitled to receive the value of such shares in cash from the Company after the
Effective Time as determined pursuant to such provision of law; provided, that
no such payment shall be made to any dissenting shareholder unless and until
such dissenting shareholder has complied with the applicable provisions of the
Washington Act and surrendered to the Company the certificate or certificates
representing the shares for which payment is being made. In the event that a
dissenting shareholder of the Company fails to perfect, or effectively withdraws
or loses, its right to appraisal and of payment for its shares, Premiere shall
issue and deliver the consideration to which such holder of shares of Company
capital stock is entitled under this Article II (without interest) upon
surrender of certificates representing such shares held by such holder.
2.5 Closing. The Closing shall take place at the offices of Alston & Bird
-------
LLP, Atlanta, Georgia, at 10:00 a.m. local time, on the date set forth in the
Uniform Terms, provided all conditions set forth in Articles V and VI of the
Uniform Terms and Articles IV and V of this Agreement have been satisfied or
waived, or on such other date or at such other place and time mutually agreed
upon by the parties.
2.6 Exchange of Shares. Promptly after the Effective Time, Premiere and
------------------
Company shall cause to be mailed to the former Company shareholders appropriate
transmittal materials for the surrender of the certificate or certificates
formerly representing their shares of Company Common Stock in exchange for
shares of Premiere Stock as provided in this Agreement. Until surrendered for
exchange in accordance herewith, each certificate theretofore representing
shares of Company Common Stock shall from and after the Effective Time represent
only the right to receive the Consideration provided in this Agreement in
exchange therefor. No certificates representing fractional shares will be
issued as a result of the Merger. Each holder of shares of Company Common Stock
exchanged pursuant to the Merger who would otherwise have been entitled to
receive a fraction of a share of Premiere Common Stock shall receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional part of a
share of Premiere Common Stock multiplied by the Average Closing Price.
2.7 Purchase for Investment, Etc. Each Owner represents and warrants the
-----------------------------
following to Premiere:
(a) such Owner has accurately completed the Investor Questionnaire
required by Premiere prior to or contemporaneous with the execution of the
Transfer Agreement and the statements therein are true and correct and
acknowledges that Premiere has relied upon such statements in entering into this
Agreement;
-4-
<PAGE>
(b) such Owner is acquiring Premiere Stock for such Owner's own
account and not with a view to or for sale in connection with any public
distribution thereof within the meaning of the Securities Act;
(c) such Owner (i) has sufficient knowledge and experience in
financial and business matters to enable him, her or it to evaluate the merits
and risks of an investment in Premiere Stock, (ii) has the ability to bear the
economic risk of acquiring Premiere Stock for an indefinite period and to afford
a complete loss thereof and (iii) has had an opportunity to ask questions of and
to receive answers from the officers of Premiere and to obtain additional
information in writing as requested, which has been made available to and
examined by such Owner or such Owner's advisors; and
(d) such Owner (i) acknowledges that Premiere Stock has not been
registered under any securities laws and cannot be resold without registration
thereunder or exemption therefrom, (ii) agrees not to transfer all or any
Premiere Stock received by such Owner unless such transfer has been registered
or is exempt from registration under applicable securities laws and (iii)
acknowledges that the certificate(s) representing Premiere Stock shall bear the
following legend with respect to the restrictions on transfer under applicable
securities laws:
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, and may not be offered, sold,
transferred or otherwise disposed of unless registered with the
Securities and Exchange Commission of the United States and the
securities regulatory authorities of applicable states or unless an
exemption from such registration is available."
2.8 Accounting, Tax and Regulatory Matters. Each Owner and the Company,
--------------------------------------
jointly and severally, represents and warrants to Premiere that neither the
Company, any Owner nor any Affiliate thereof has taken or agreed to take any
action or has any knowledge of any fact or circumstance that is reasonably
likely to (i) prevent the Merger from qualifying for pooling-of-interests
accounting treatment or as a reorganization within the meaning of Section 368(a)
of the Code, or (ii) materially impede or delay receipt of any consents referred
to in Section 5.6 of the Uniform Terms or result in the imposition of a
condition or restriction of the type referred to in the last sentence of such
Section.
-5-
<PAGE>
III. ADDITIONAL AGREEMENTS
---------------------------
3.1 Filings with State Offices. Upon the terms and subject to the
--------------------------
conditions of this Agreement, the Company and Merger Corp shall execute and file
the Articles or Certificate of Merger, as appropriate, with the Secretary of
State of the State of Washington and a Certificate of Merger with the Secretary
of State of the State of Georgia in connection with the Closing.
3.2 Conditions to Closing. The Company, the Owners and Premiere agree to
---------------------
use their commercially reasonable best efforts to satisfy the closing conditions
set forth in Articles IV and V of this Agreement by the date indicated therein
or the Closing Date, as applicable.
3.3 Additional Indemnification Items. Subject to Sections 8.2 through 8.6
--------------------------------
of the Uniform Terms, the Owners and, if the Transactions involve an Asset
Transfer, the Company, shall jointly and severally indemnify and hold harmless
Premiere, and its officers, directors, agents or affiliates, from and against
any and all Losses suffered or incurred by any such party by reason of or
arising out of any of the following:
(a) a breach of Section 2.19 of the Uniform Terms as it relates to
liability for sales tax (irrespective of whether disclosed on Schedule 2.19 or
in the Financial Statements).
3.4 Tax Matters. Each of the Company, the Owners and Premiere undertakes
-----------
and agrees to use its reasonable efforts to cause the Merger, and to take no
action which would cause the Merger not, to qualify as a "reorganization" within
the meaning of Section 368(a) of the Code for federal income tax purposes.
Notwithstanding the foregoing, the Owners understand that (i) Premiere makes no
representation or warranty regarding the tax treatment of this Agreement or the
Merger, (ii) the Closing is not subject to a condition that an Internal Revenue
Service ruling or tax opinion be obtained as to the federal income tax
consequences of this Agreement or the Merger, and (iii) the Company and the
Owners shall look to their respective advisors for advice concerning the tax
consequences of this Agreement and the Merger.
3.5 Registration Rights. At the Closing, Premiere and the Owners shall
-------------------
execute and deliver the Registration Rights Agreement.
3.6 Accounting Treatment.
--------------------
(a) The Company and each of the Owners has accurately completed the
Pooling Questionnaire required by Premiere prior to or contemporaneous with the
execution of this Agreement, and the statements therein are true and correct.
(b) Premiere, the Company and each of the Owners agrees to use its
reasonable efforts to cause the Merger, and to take no action which would cause
the Merger not, to qualify for treatment as a pooling of interests for
accounting purposes. Without limiting the foregoing, the Company and each of
the Owners agrees not to sell, transfer, or otherwise dispose of his, her or its
interests in, or reduce his, her or its risk relative to, any of the shares of
Premiere Common Stock received in connection with the Merger until such time as
Premiere notifies the Company and each such Owner that the requirements of ASRs
130 and 135 have been met. The Company and each of the Owners understands that
ASRs 130 and 135 relate to the publication of financial results of at least
thirty (30) days of post-Merger combined operations of Premiere and the Company.
Premiere agrees that it shall publish such results within forty-five (45) days
after the end of the first fiscal
-6-
<PAGE>
quarter of Premiere containing the required period of post-Merger combined
operations and that it shall notify the Company and each of the Owners promptly
following such publication. Premiere shall be entitled to place the following
restrictive legend on the shares of Premiere Stock issued pursuant to the Merger
to enforce the foregoing restrictions:
"The shares represented by this certificate were issued pursuant to a
business combination which is accounted for as a "pooling of interests" and
may not be sold, nor may the owner thereof reduce his risks relative
thereto in any way, until such time as Premiere Technologies, Inc.
("Premiere") has published the financial results covering at least 30 days
of combined operations after the effective date of the merger through which
the business combination was effected.
3.7 Affiliate Agreements. The Company has disclosed in Schedule 3.7 all
-------------------- ------------
Persons whom it reasonably believes is an "affiliate" of the Company for
purposes of Rule 145 under the 1933 Act. The Company shall use its reasonable
efforts to cause each such Person to deliver to Premiere as soon as reasonably
practicable following the execution of this Agreement, a written agreement,
substantially in the form attached hereto as Exhibit D.
---------
3.8 Tax Representations. In connection with the opinion to be rendered to
-------------------
Premiere by Alston & Bird to the effect that the transactions contemplated
hereby will constitute a tax-free reorganization within the meaning of Section
368(a) of the Code, the Owners shall furnish such counsel with such
representations as to their plans for the disposition of the shares of Premiere
Stock to be received in the Transactions as such counsel shall reasonably
request.
3.9 Restricted Stock. All contractual restrictions or limitations on
----------------
transfer with respect to Company Common Stock under any plan, program, contract
or arrangement, to the extent that such restrictions or limitations have not
already lapsed (whether as a result of the Transactions or otherwise), and
except as otherwise expressly provided in such plan, program, contract or
arrangement, shall remain in full force and effect with respect to shares of
Premiere Stock into which such restricted stock is converted pursuant to Section
2.2 of this Transfer Agreement.
3.10 Exchange Listing. Premiere shall use its reasonable efforts to list,
----------------
prior to the Effective Time, on the Nasdaq National Market the shares of
Premiere Stock to be issued to the Owners pursuant to the Transactions, and
Premiere shall give all notices and make all filings with the NASD required in
connection with the Transactions.
IV. SUPPLEMENTAL CONDITIONS TO OBLIGATIONS OF PREMIERE
-------------------------------------------------------
In addition to the conditions of Premiere contained in Article V of the
Uniform Terms, the obligation of Premiere to consummate the Transactions is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions:
4.1 Approval of Owners. The Owners shall have approved the Merger in
------------------
accordance with the requirements of the Washington Act and the Company shall
have provided Premiere certified copies of such resolutions, and Owners holding
no more than ten percent (10%) of the Company Common Stock issued and
outstanding immediately prior to the Effective Time shall have exercised any of
the rights described in Section 2.4.
-7-
<PAGE>
4.2 Grand Solution Documents. VTNLP, VTE, the NAP and each of the Franchisee
------------------------
Companies shall have executed and delivered Grand Solution Documents reflecting
the terms described in Exhibit E hereto in form and substance reasonable
satisfactory to Premiere.
4.3 Audited Financial Statements. Premiere shall have received balance
----------------------------
sheets of the Company as of December 31, 1995 and 1996 and the related
statements of operations, cash flow and changes in Owner's equity for the fiscal
years then ended (collectively, the "Audited Financial Statements") prepared in
accordance with GAAP and Regulation S-X promulgated by the Commission,
accompanied by an unqualified audit opinion of Arthur Andersen LLP relating
thereto. The Audited Financial Statements shall not reflect any material change
in the Company's financial condition or results of operations from the condition
and results reported in the Financial Statements for the corresponding periods
delivered by the Company prior to the execution of this Agreement.
4.4 Pooling Letter. Premiere shall have received a letter, dated as of the
--------------
Effective Time, in form and substance reasonably acceptable to Premiere, from
Arthur Andersen LLP to the effect that the Merger will qualify for pooling of
interests accounting treatment, and no action shall have been taken by any
regulatory authority or any statute, rule, regulation or order enacted,
promulgated or issued by any regulatory authority, or any proposal made for any
such action by any regulatory authority which is reasonably likely to be put
into effect, that would prevent Premiere from accounting for the business
combination to be effected by the Merger as a pooling of interests.
4.5 Reorganization Opinion. Premiere shall have received an opinion of
----------------------
Alston & Bird LLP, counsel to Premiere, to the effect that the transactions
contemplated by the Agreement, including the Merger, will constitute a tax-free
reorganization within the meaning of Section 368(a) of the Code.
4.6 Indebtedness. All amounts owed by Teknon Corporation to the Company
------------
shall have been paid in full and the Company shall be relieved of any obligation
to guaranty the indebtedness of Teknon Corporation.
4.7 Consent to Transactions. Each Owner and the Company shall have provided
-----------------------
to Premiere their written consent to the Transactions in accordance with the
provisions of that certain Share Transfer Agreement dated March 8, 1995, between
the Company, Roger B. Smith and Foster H. Chase.
4.8 Teknon Hardware and Software. Teknon Corporation, the Company and
----------------------------
Premiere shall have entered into an agreement to the satisfaction of Premiere
providing for the assignment, license or transfer to the Company from Teknon
Corporation of the hardware and software that are reasonably necessary to the
operation of the Company
-8-
<PAGE>
V. SUPPLEMENTAL CONDITIONS TO OBLIGATIONS OF THE COMPANY
---------------------------------------------------------
AND THE OWNERS
--------------
In addition to the conditions of the Company and the Owners contained in
Article VI of the Uniform Terms, the obligation of the Company and the Owners to
consummate the Transactions is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions:
5.1 Approval of Premiere and Merger Corp. The Board of Directors of
------------------------------------
Premiere and the Board of Directors and the shareholder of Merger Corp shall
have approved the Merger in accordance with the requirement of applicable state
law. Premiere and Merger Corp shall have provided the Company certified copies
of such resolutions.
5.2 Registration Rights. Premiere and each Owner shall have executed and
-------------------
delivered a Registration Rights Agreement.
VI. MISCELLANEOUS
------------------
6.1 Notices. The addresses for notices in accordance with Section 10.1 of
-------
the Uniform Terms for the Company and the Owners are as follows:
If to the Company: With a copy to:
East 111 Magnesium Rd. Baker & Hostetler LLP
Spokane, WA 99208 1900 East 9th Street
Attn: Roger B. Smith Cleveland, OH 44114-3485
Phone: (___) ___-____ Attn: Michael P. McNamara, Jr.
Fax: (509) 467-1312 Phone: (216) 621-0200
Fax: (216) 696-0740
If to the Owners: With a copy to:
East 111 Magnesium Rd. Baker & Hostetler LLP
Spokane, WA 99208 1900 East 9th Street
Attn: Roger B. Smith Cleveland, OH 44114-3485
Phone: (___) ___-____ Attn: Michael P. McNamara, Jr.
Fax: (509) 467-1312 Phone: (216) 621-0200
Fax: (216) 696-0740
6.2 Owner's Representative. The Owners' Representative for purposes of
----------------------
Section 10.2 of the Uniform Terms shall be Roger B. Smith, who shall serve as
the Owner's Representative under the terms of said Section 10.2 of the Uniform
Terms.
6.3 Certain Definitions. In addition to the terms defined elsewhere herein
-------------------
and in the Uniform Terms, as used in this Agreement:
(a) "Anticipated Closing Date" shall mean April 30, 1997.
------------------------
-9-
<PAGE>
(b) "Knowledge" of the Company shall mean the personal knowledge
---------
after due inquiry of those facts that are known or should reasonably
have been known after due inquiry by Roger B. Smith and Foster H. Chase,
Jr. and the knowledge of any such Persons obtained or which would have
been obtained from a reasonable investigation.
(c) "Outside Closing Date" shall mean June 30, 1997.
--------------------
[SIGNATURES BEGIN ON THE FOLLOWING PAGE.]
-10-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first written above.
PREMIERE:
PREMIERE TECHNOLOGIES, INC.,
a Georgia corporation
By: /s/Patrick G. Jones
---------------------------------
Patrick G. Jones
Title: Sr. V.P.
Attest:
By: /s/Douglas B. Hadaway
-----------------------------
Douglas B. Hadaway
Title: Assistant Secretary
COMPANY:
PENTA GROUP, INC.,
a Washington corporation
By: /s/Roger B. Smith
---------------------------------
Roger B. Smith
Title: Chairman
Attest:
By: /s/David Teague
-----------------------------
David Teague
Title: Secretary/Treasurer
OWNERS:
/s/Roger B. Smith
------------------------------------
Roger B. Smith,
an individual resident of the
State of WA
Witness:
By: /s/David Teague
-----------------------------
David Teague
[Signatures continued on the following page.]
<PAGE>
/s/Gail Smith
------------------------------------
Gail Smith,
an individual resident of the
State of WA
Witness:
By: /s/David Teague
-----------------------------
David Teague
/s/Foster H. Chase, Jr.
------------------------------------
Foster H. Chase, Jr.,
an individual resident of the
State of WA
Witness:
By: /s/David Teague
-----------------------------
David Teague
<PAGE>
TRANSFER AGREEMENT
BY AND AMONG
PREMIERE TECHNOLOGIES, INC.,
SCEPTER COMMUNICATIONS, INC.
AND
OWNERS OF SCEPTER COMMUNICATIONS, INC.
DATED AS OF APRIL 2, 1997
<PAGE>
TRANSFER AGREEMENT
------------------
THIS TRANSFER AGREEMENT (this "Agreement") is entered into as of April 2,
1997 by and among Premiere Technologies, Inc., a Georgia corporation
("Premiere"), Scepter Communications, Inc., a Washington corporation (the
"Company"), and those parties listed on the signature pages hereto as the owners
of the Company (the "Owners").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, this Agreement provides for the acquisition of the Company by
Premiere pursuant to the merger of the Company with and into a wholly owned
subsidiary of Premiere ("Merger Corp"), with Merger Corp as the surviving
corporation in such merger (the "Merger");
WHEREAS, the respective Boards of Directors of Premiere and the Company have
approved the terms and conditions set forth in this Agreement;
WHEREAS, the Owners own one hundred percent (100 %) of the equity interests
in the Company;
WHEREAS, this Agreement provides for all of the Owners' equity interests in
the Company to be converted into the right to receive shares of Premiere Stock
in connection with the Merger;
WHEREAS, it is also the intention of the parties hereto that the form of the
transactions with respect to the Company, Premiere and Merger Corp shall qualify
as a "reorganization" within the meaning of Section 368(a) of the Code for
federal income tax purposes; and
WHEREAS, it is also the intention of the parties hereto that the business
combination to be effected by the Merger be accounted for as a pooling of
interests.
NOW, THEREFORE, in consideration of the foregoing, the mutual agreements and
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
I. UNIFORM TERMS AND CONDITIONS
--------------------------------
1.1 Incorporation by Reference. The Uniform Terms and Conditions attached
--------------------------
hereto as Exhibit A (the "Uniform Terms") are hereby made a part of and
---------
incorporated herein as if fully restated herein. Capitalized terms not defined
herein shall have the meanings provided in the Uniform Terms.
<PAGE>
II. TERMS OF MERGER
--------------------
2.1 The Merger.
----------
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time, the Company shall be merged with and into Merger Corp in
accordance with the provisions of the business corporation act under the laws of
the State of Washington (the "Washington Act") and the laws of the State of
Georgia (the "Georgia Act"). Merger Corp shall be the surviving corporation
resulting from the Merger, shall thereafter conduct the business and operations
of the Company as a wholly owned subsidiary of Premiere and shall continue to be
governed by the laws of the State of Georgia. The Merger shall be consummated
pursuant to the terms of this Agreement, which has been approved and adopted by
the respective boards of directors of Premiere, Merger Corp and the Company.
(b) Subject to the provisions of this Agreement, the parties shall
file Articles or a Certificate of Merger executed in accordance with the
relevant provisions of the Washington Act and a Certificate of Merger executed
in accordance with the relevant provisions of the Georgia Act and shall make all
other filings or recordings required under each such Act as soon as practicable
on or after the Closing Date. The Merger and other transactions contemplated by
this Agreement shall become effective on the date and at the time the Articles
or Certificate of Merger reflecting the Merger becomes effective with the
Secretary of State of the State of Washington and the Certificate of Merger
reflecting the Merger becomes effective with the Secretary of State of the State
of Georgia (the "Effective Time").
(c) The charter and Bylaws of Merger Corp in effect immediately prior
to the Effective Time shall be the charter and Bylaws of the surviving
corporation until otherwise amended or repealed, the directors of Merger Corp
immediately prior to the Effective Time shall serve as the directors of the
surviving corporation from and after the Effective Time, and the officers of
Merger Corp in office immediately prior to the Effective Time shall serve as the
officers of the surviving corporation from and after the Effective Time.
2.2 Conversion of Shares. Subject to the provisions of this Section 2.2,
--------------------
and in consideration for the transactions contemplated hereby, at the Effective
Time, by virtue of the Merger and without any action on the part of the parties
hereto or the shareholders of any of the parties hereto, the shares of the
constituent corporations of the Merger shall be converted as follows:
(a) Each share of Premiere Stock and each share of Merger Corp common
stock issued and outstanding at the Effective Time shall remain issued and
outstanding after the Effective Time.
(b) All of the shares of the capital stock, no par value per share,
of the Company ("Company Stock") (excluding treasury shares and excluding shares
held by shareholders who perfect their statutory dissenters' rights as provided
in Section 2.4 of this Agreement) issued and outstanding at the Effective Time
shall cease to be outstanding and shall be converted into and exchanged for the
right to receive:
(i) the number of shares of Premiere Stock determined by
dividing (A) the product of .9 multiplied by the Company
Purchase Price, by (B) the Average Closing Price; and
-2-
<PAGE>
(ii) the number of shares of Premiere Stock determined by
dividing (A) the product of .1 multiplied by the Company
Purchase Price, by (B) the Average Closing Price (the
"General Escrow Amount");
all as determined in accordance with Section 2.3 below (collectively, the
"Consideration"). Subject to Section 2.2(d) below, the Consideration shall be
issuable to the Owners pro rata in accordance with their ownership of Company
Common Stock pursuant to Section 2.6, which ownership the Owners represent has
not been adjusted in contemplation of the transactions described herein.
(c) Any and all shares of Company Common Stock held as treasury
shares by the Company shall be canceled and retired at the Effective Time, and
no consideration shall be issued in exchange therefor.
(d) Upon consummation of the Merger, the Owners shall deliver the
General Escrow Amount in negotiable form to the Escrow Agent to be held in
escrow pursuant to the terms and conditions of the Escrow Agreement in the form
attached hereto as Exhibit B, which shall be executed and delivered by Premiere
---------
and the Owners at the Closing.
2.3 Calculation of Consideration. For purposes of determining the
----------------------------
Consideration issuable to the Owners pursuant to Section 2.2(b) above, the
following shall apply:
(a) "Average Closing Price" shall be the average of the daily last
sale prices of Premiere Stock for the period consisting of twenty (20)
consecutive trading days on which such shares are actually traded on the Nasdaq
National Market (as reported by the Wall Street Journal or, if not reported
thereby, any other authoritative source selected by Premiere) ending at the
close of trading on the first trading day immediately preceding the Closing;
provided, however, that the Average Closing Price shall not be less than $22.50
- - -------- -------
nor more than $30.50 (collectively, $22.50 and $30.50 are referred to as the
"Average Closing Price Limitations").
(b) "Company Purchase Price" shall be the sum of (i) the amount
determined by multiplying the Normalized EBITDA of the Company by the Stock
Multiple plus (ii) the amount of cash reflected on the Closing Date Balance
----
Sheet, minus (iii) the aggregate amount of principal and accrued and unpaid
-----
interest under funded debt and capital lease obligations reflected on the
Closing Date Balance Sheet, minus (iv) the amount by which the Transaction Costs
-----
exceed the Deductible Amount.
(c) "Deductible Amount" shall be an amount equal to $1,000.
(d) "Normalized EBITDA" of the Company shall be an amount equal to
$81,408.00.
(e) "Registration Right" shall mean the right to include Premiere
Stock issued in the Merger in a registration statement which Premiere intends to
file promptly after the end of the first full fiscal quarter of Premiere
containing the period of post-Merger combined operations required by ASRs 130
and 135, pursuant to the terms and conditions of the Stock Restriction and
Registration Rights Agreement in the form attached hereto as of Exhibit C (the
---------
"Registration Rights Agreement").
(f) "Stock Multiple" shall be six (6).
-3-
<PAGE>
(g) "Transaction Costs" shall mean all amounts incurred but unpaid by
the Company in connection with (i) the negotiation and preparation of this
Agreement, (ii) the preparation of the Audited Financial Statements, (iii) the
consummation of the Transactions and (iv) one-half of the costs and expenses of
public record searches pursuant to Section 5.9(b) of the Uniform Terms.
2.4 Dissenting Shareholders. Subject to Section 4.2, any holder of shares
-----------------------
of voting capital stock of the Company who perfects any available dissenters'
rights in accordance with and as contemplated by the California Act shall be
entitled to receive the value of such shares in cash from the Company after the
Effective Time as determined pursuant to such provision of law; provided, that
no such payment shall be made to any dissenting shareholder unless and until
such dissenting shareholder has complied with the applicable provisions of the
California Act and surrendered to the Company the certificate or certificates
representing the shares for which payment is being made. In the event that a
dissenting shareholder of the Company fails to perfect, or effectively withdraws
or loses, its right to appraisal and of payment for its shares, Premiere shall
issue and deliver the consideration to which such holder of shares of Company
capital stock is entitled under this Article II (without interest) upon
surrender of certificates representing such shares held by such holder.
2.5 Closing. The Closing shall take place at the offices of Alston & Bird
-------
LLP, Atlanta, Georgia, at 10:00 a.m. local time, on the date set forth in the
Uniform Terms, provided all conditions set forth in Articles V and VI of the
Uniform Terms and Articles IV and V of this Agreement have been satisfied or
waived, or on such other date or at such other place and time mutually agreed
upon by the parties.
2.6 Exchange of Shares. Promptly after the Effective Time, Premiere and
------------------
Company shall cause to be mailed to the former Company shareholders appropriate
transmittal materials for the surrender of the certificate or certificates
formerly representing their shares of Company Common Stock in exchange for
shares of Premiere Stock as provided in this Agreement. Until surrendered for
exchange in accordance herewith, each certificate theretofore representing
shares of Company Common Stock shall from and after the Effective Time represent
only the right to receive the Consideration provided in this Agreement in
exchange therefor. No certificates representing fractional shares will be
issued as a result of the Merger. Each holder of shares of Company Common Stock
exchanged pursuant to the Merger who would otherwise have been entitled to
receive a fraction of a share of Premiere Common Stock shall receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional part of a
share of Premiere Common Stock multiplied by the Average Closing Price.
2.7 Purchase for Investment, Etc. Each Owner represents and warrants the
-----------------------------
following to Premiere:
(a) such Owner has accurately completed the Investor
Questionnaire required by Premiere prior to or contemporaneous with the
execution of the Transfer Agreement and the statements therein are true and
correct and acknowledges that Premiere has relied upon such statements in
entering into this Agreement;
-4-
<PAGE>
(b) such Owner is acquiring Premiere Stock for such Owner's own
account and not with a view to or for sale in connection with any public
distribution thereof within the meaning of the Securities Act;
(c) such Owner (i) has sufficient knowledge and experience in
financial and business matters to enable him, her or it to evaluate the merits
and risks of an investment in Premiere Stock, (ii) has the ability to bear the
economic risk of acquiring Premiere Stock for an indefinite period and to afford
a complete loss thereof and (iii) has had an opportunity to ask questions of and
to receive answers from the officers of Premiere and to obtain additional
information in writing as requested, which has been made available to and
examined by such Owner or such Owner's advisors; and
(d) such Owner (i) acknowledges that Premiere Stock has not been
registered under any securities laws and cannot be resold without registration
thereunder or exemption therefrom, (ii) agrees not to transfer all or any
Premiere Stock received by such Owner unless such transfer has been registered
or is exempt from registration under applicable securities laws and (iii)
acknowledges that the certificate(s) representing Premiere Stock shall bear the
following legend with respect to the restrictions on transfer under applicable
securities laws:
"The securities represented hereby have not been registered under
the Securities Act of 1933, as amended, and may not be offered,
sold, transferred or otherwise disposed of unless registered with
the Securities and Exchange Commission of the United States and
the securities regulatory authorities of applicable states or
unless an exemption from such registration is available."
2.8 Accounting, Tax and Regulatory Matters. Each Owner and the Company,
--------------------------------------
jointly and severally, represents and warrants to Premiere that neither the
Company, any Owner nor any Affiliate thereof has taken or agreed to take any
action or has any knowledge of any fact or circumstance that is reasonably
likely to (i) prevent the Merger from qualifying for pooling-of-interests
accounting treatment or as a reorganization within the meaning of Section 368(a)
of the Code, or (ii) materially impede or delay receipt of any consents referred
to in Section 5.6 of the Uniform Terms or result in the imposition of a
condition or restriction of the type referred to in the last sentence of such
Section.
III. ADDITIONAL AGREEMENTS
---------------------------
3.1 Filings with State Offices. Upon the terms and subject to the
--------------------------
conditions of this Agreement, the Company and Merger Corp shall execute and file
the Articles or Certificate of Merger with the Secretary of State of the State
of California and a Certificate of Merger with the Secretary of State of the
State of Georgia in connection with the Closing.
3.2 Conditions to Closing. The Company, the Owners and Premiere agree to
---------------------
use their commercially reasonable best efforts to satisfy the closing conditions
set forth in Articles IV and V of this Agreement by the date indicated therein
or the Closing Date, as applicable.
3.3 Additional Indemnification Items. Subject to Sections 8.2 through 8.6
--------------------------------
of the Uniform Terms, the Owners and, if the Transactions involve an Asset
Transfer, the Company, shall jointly and severally indemnify and hold harmless
Premiere, and its officers, directors, agents or affiliates,
-5-
<PAGE>
from and against any and all Losses suffered or incurred by any such party by
reason of or arising out of any of the following:
(a) a breach of Section 2.19 of the Uniform Terms as it relates to
liability for sales tax (irrespective of whether disclosed on Schedule 2.19 or
in the Financial Statements).
3.4 Tax Matters. Each of the Company, the Owners and Premiere undertakes
-----------
and agrees to use its reasonable efforts to cause the Merger, and to take no
action which would cause the Merger not, to qualify as a "reorganization" within
the meaning of Section 368(a) of the Code for federal income tax purposes.
Notwithstanding the foregoing, the Owners understand that (i) Premiere makes no
representation or warranty regarding the tax treatment of this Agreement or the
Merger, (ii) the Closing is not subject to a condition that an Internal Revenue
Service ruling or tax opinion be obtained as to the federal income tax
consequences of this Agreement or the Merger, and (iii) the Company and the
Owners shall look to their respective advisors for advice concerning the tax
consequences of this Agreement and the Merger.
3.5 Registration Rights. At the Closing, Premiere and the Owners shall
-------------------
execute and deliver the Registration Rights Agreement.
3.6 Accounting Treatment.
--------------------
(a) The Company and each of the Owners has accurately completed
the Pooling Questionnaire required by Premiere prior to or contemporaneous with
the execution of this Agreement, and the statements therein are true and
correct.
(b) Premiere, the Company and each of the Owners agrees to use
its reasonable efforts to cause the Merger, and to take no action which would
cause the Merger not, to qualify for treatment as a pooling of interests for
accounting purposes. Without limiting the foregoing, the Company and each of the
Owners agrees not to sell, transfer, or otherwise dispose of his, her or its
interests in, or reduce his, her or its risk relative to, any of the shares of
Premiere Common Stock received in connection with the Merger until such time as
Premiere notifies the Company and each such Owner that the requirements of ASRs
130 and 135 have been met. The Company and each of the Owners understands that
ASRs 130 and 135 relate to the publication of financial results of at least
thirty (30) days of post-Merger combined operations of Premiere and the Company.
Premiere agrees that it shall publish such results within forty-five (45) days
after the end of the first fiscal quarter of Premiere containing the required
period of post-Merger combined operations and that it shall notify the Company
and each of the Owners promptly following such publication. Premiere shall be
entitled to place the following restrictive legend on the shares of Premiere
Stock issued pursuant to the Merger to enforce the foregoing restrictions:
"The shares represented by this certificate were issued pursuant to a
business combination which is accounted for as a "pooling of
interests" and may not be sold, nor may the owner thereof reduce his
risks relative thereto in any way, until such time as Premiere
Technologies, Inc. ("Premiere") has published the financial results
covering at least 30 days of combined operations after the effective
date of the merger through which the business combination was
effected.
3.7 Affiliate Agreements. The Company has disclosed in Schedule 3.7 all
-------------------- ------------
Persons whom it reasonably believes is an "affiliate" of the Company for
purposes of Rule 145 under the 1933 Act.
-6-
<PAGE>
The Company shall use its reasonable efforts to cause each such Person to
deliver to Premiere as soon as reasonably practicable following the execution of
this Agreement, a written agreement, substantially in the form attached hereto
as Exhibit D.
---------
3.8 Tax Representations. In connection with the opinion to be rendered to
-------------------
Premiere by Alston & Bird to the effect that the transactions contemplated
hereby will constitute a tax-free reorganization within the meaning of Section
368(a) of the Code, the Owners shall furnish such counsel with such
representations as to their plans for the disposition of the shares of Premiere
Stock to be received in the Transactions as such counsel shall reasonably
request.
3.9 Restricted Stock. All contractual restrictions or limitations on
----------------
transfer with respect to Company Common Stock under any plan, program, contract
or arrangement, to the extent that such restrictions or limitations have not
already lapsed (whether as a result of the Transactions or otherwise), and
except as otherwise expressly provided in such plan, program, contract or
arrangement, shall remain in full force and effect with respect to shares of
Premiere Stock into which such restricted stock is converted pursuant to Section
2.2 of this Transfer Agreement.
3.10 Exchange Listing. Premiere shall use its reasonable efforts to list,
----------------
prior to the Effective Time, on the Nasdaq National Market the shares of
Premiere Stock to be issued to the Owners pursuant to the Transactions, and
Premiere shall give all notices and make all filings with the NASD required in
connection with the Transactions.
IV. SUPPLEMENTAL CONDITIONS TO OBLIGATIONS OF PREMIERE
-------------------------------------------------------
In addition to the conditions of Premiere contained in Article V of the
Uniform Terms, the obligation of Premiere to consummate the Transactions is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions:
4.1 Approval of Owners. The Owners shall have approved the Merger in
------------------
accordance with the requirements of the California Act and the Company shall
have provided Premiere certified copies of such resolutions, and Owners holding
no more than ten percent (10%) of the Company Common Stock issued and
outstanding immediately prior to the Effective Time shall have exercised any of
the rights described in Section 2.4.
4.2 Grand Solution Documents. VTNLP, VTE, the NAP and each of the
------------------------
Franchisee Companies shall have executed and delivered Grand Solution Documents
reflecting the terms described in Exhibit E hereto in form and substance
reasonable satisfactory to Premiere.
4.3 Audited Financial Statements. Premiere shall have received balance
----------------------------
sheets of the Company as of December 31, 1995 and 1996 and the related
statements of operations, cash flows and changes in Owners' equity for the
fiscal year(s) ended (collectively, the "Audited Financial Statements") prepared
in accordance with GAAP and Regulation S-X promulgated by the Commission,
accompanied by an unqualified audit opinion of Arthur Andersen LLP relating
thereto. The Audited Financial Statements shall not reflect any material change
in the Company's financial condition or results of operations from the condition
and results reported in the Financial Statements for the corresponding periods
delivered by the Company prior to the execution of this Agreement.
-7-
<PAGE>
4.4 Pooling Letter. Premiere shall have received a letter, dated as of the
--------------
Effective Time, in form and substance reasonably acceptable to Premiere, from
Arthur Andersen LLP to the effect that the Merger will qualify for pooling of
interests accounting treatment, and no action shall have been taken by any
regulatory authority or any statute, rule, regulation or order enacted,
promulgated or issued by any regulatory authority, or any proposal made for any
such action by any regulatory authority which is reasonably likely to be put
into effect, that would prevent Premiere from accounting for the business
combination to be effected by the Merger as a pooling of interests.
4.5 Reorganization Opinion. Premiere shall have received an opinion of
----------------------
Alston & Bird LLP, counsel to Premiere, to the effect that the transactions
contemplated by the Agreement, including the Merger, will constitute a tax-free
reorganization within the meaning of Section 368(a) of the Code.
4.6 Guaranty of Teknon Indebtedness. The Company shall have been relieved
-------------------------------
of any and all obligations with respect to the indebtedness of Teknon
Corporation.
V. SUPPLEMENTAL CONDITIONS TO OBLIGATIONS OF THE COMPANY
---------------------------------------------------------
AND THE OWNERS
--------------
In addition to the conditions of the Company and the Owners contained in
Article VI of the Uniform Terms, the obligation of the Company and the Owners to
consummate the Transactions is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions:
5.1 Approval of Premiere and Merger Corp. The Board of Directors of
------------------------------------
Premiere and the Board of Directors and the shareholder of Merger Corp shall
have approved the Merger in accordance with the requirement of applicable state
law. Premiere and Merger Corp shall have provided the Company certified copies
of such resolutions.
5.2 Registration Rights. Premiere and each Owner shall have executed and
-------------------
delivered a Registration Rights Agreement.
VI. MISCELLANEOUS
------------------
6.1 Notices. The addresses for notices in accordance with Section 10.1 of
-------
the Uniform Terms for the Company and the Owners are as follows:
If to the Company: With a copy to:
East 111 Magnesium Rd. Baker & Hostetler LLP
Spokane, WA 99208 1900 East 9th Street
___________________ Cleveland, OH 44114-3485
Attn: Roger B. Smith Attn: Michael P. McNamara, Jr.
Phone: (____) _______ Phone: (216) 621-0200
Fax: (509) 467-1312 Fax: (216) 696-0740
If to the Owners: With a copy to:
-8-
<PAGE>
East 111 Magnesium Rd. Baker & Hostetler LLP
Spokane, WA 99208 1900 East 9th Street
___________________ Cleveland, OH 44114-3485
Attn: Roger B. Smith Attn: Michael P. McNamara, Jr.
Phone: (___) Phone: (216) 621-0200
Fax: (509) 467-1312 Fax: (216) 696-0740
6.2 Owner's Representative. The Owners' Representative for purposes of
----------------------
Section 10.2 of the Uniform Terms shall be Roger B. Smith, who shall serve as
the Owner's Representative under the terms of said Section 10.2 of the Uniform
Terms.
6.3 Certain Definitions. In addition to the terms defined elsewhere herein
-------------------
and in the Uniform Terms, as used in this Agreement:
(a) "Anticipated Closing Date" shall mean April 30, 1997.
------------------------
(b) "Knowledge" of the Company shall mean the personal knowledge
---------
after due inquiry of those facts that are known or should reasonably
have been known after due inquiry by Roger B. Smith and Foster H.
Chase, Jr. and the knowledge of any such persons obtained or whcih
would have been obtained from a reasonable
investigation.
(c) "Outside Closing Date" shall mean June 30, 1997.
--------------------
-9-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first written above.
PREMIERE:
PREMIERE TECHNOLOGIES, INC.,
a Georgia corporation
By:/s/Patrick G. Jones
----------------------------
Patrick G. Jones
Title: Sr. V.P.
Attest:
By: /s/Douglas B. Hadaway
-------------------------
Douglas B. Hadaway
Title: Assistant Secretary
COMPANY:
SCEPTER COMMUNICATIONS, INC.,
a Washington Corporation
By: /s/Roger B. Smith
----------------------------
Roger B. Smith
Title: Chairman
Attest:
By: /s/ David Teague
------------------------
David Teague
Title: Secretary/Treasurer
OWNERS:
/s/Roger B. Smith
-------------------------------
Roger B. Smith
and individual resident of the
State of WA
and
Witness:
/s/Gail L. Smith
-------------------------------
By: /s/David Teague Gail L. Smith
------------------------ an individual resident of the
David Teague state of WA, as
husband and wife
[SIGNATURES CONTINUED ON THE FOLLOWING PAGE]
<PAGE>
/s/Foster H. Chase, Jr.
-------------------------------
Foster H. Chase, Jr.,
an individual resident of the
State of WA
Witness: and
By: /s/David Teague /s/Brenda J. Chase
----------------------- -----------------------------
David Teague Brenda J. Chase,
an individual resident of the
State of WA, as
husband and wife
<PAGE>
EXHIBIT 2.7
TRANSFER AGREEMENT
BY AND AMONG
PREMIERE TECHNOLOGIES, INC.,
PREMIER BUSINESS SERVICES, INC.
AND
OWNERS OF PREMIER BUSINESS SERVICES, INC.
DATED AS OF APRIL 2, 1997
<PAGE>
TRANSFER AGREEMENT
------------------
THIS TRANSFER AGREEMENT (this "Agreement") is entered into as of April 2,
1997 by and among Premiere Technologies, Inc., a Georgia corporation
("Premiere"), Premier Business Services, Inc., a North Carolina corporation (the
"Company"), and those parties listed on the signature pages hereto as the owners
of the Company (the "Owners").
W I T N E S W E T H:
- - - - - - - - - -
WHEREAS, this Agreement provides for the acquisition of the Company by
Premiere pursuant to the merger of the Company with and into a wholly owned
subsidiary of Premiere ("Merger Corp"), with Merger Corp as the surviving
corporation in such merger (the "Merger");
WHEREAS, the respective Boards of Directors of Premiere and the Company have
approved the terms and conditions set forth in this Agreement;
WHEREAS, the Owners own one hundred percent (100%) of the equity interests in
the Company;
WHEREAS, this Agreement provides for all of the Owners' equity interests in
the Company to be converted into the right to receive shares of Premiere Stock
in connection with the Merger;
WHEREAS, it is also the intention of the parties hereto that the form of the
transactions with respect to the Company, Premiere and Merger Corp shall qualify
as a "reorganization" within the meaning of Section 368(a) of the Code for
federal income tax purposes; and
WHEREAS, it is also the intention of the parties hereto that the business
combination to be effected by the Merger be accounted for as a pooling of
interests.
NOW, THEREFORE, in consideration of the foregoing, the mutual agreements and
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
I. UNIFORM TERMS AND CONDITIONS
--------------------------------
1.1 Incorporation by Reference. The Uniform Terms and Conditions attached
--------------------------
hereto as Exhibit A (the "Uniform Terms") are hereby made a part of and
---------
incorporated herein as if fully restated herein. Capitalized terms not defined
herein shall have the meanings provided in the Uniform Terms.
<PAGE>
II. TERMS OF MERGER
--------------------
2.1 The Merger.
----------
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time, the Company shall be merged with and into Merger Corp in
accordance with the provisions of the business corporation act under the laws of
the State of North Carolina (the "North Carolina Act") and the laws of the State
of Georgia (the "Georgia Act"). Merger Corp shall be the surviving corporation
resulting from the Merger, shall thereafter conduct the business and operations
of the Company as a wholly owned subsidiary of Premiere and shall continue to be
governed by the laws of the State of Georgia. The Merger shall be consummated
pursuant to the terms of this Agreement, which has been approved and adopted by
the respective boards of directors of Premiere, Merger Corp and the Company.
(b) Subject to the provisions of this Agreement, the parties shall
file Articles or a Certificate of Merger, as appropriate, executed in accordance
with the relevant provisions of the North Carolina Act and a Certificate of
Merger executed in accordance with the relevant provisions of the Georgia Act
and shall make all other filings or recordings required under each such Act as
soon as practicable on or after the Closing Date. The Merger and other
transactions contemplated by this Agreement shall become effective on the date
and at the time the Articles or a Certificate of Merger, as appropriate,
reflecting the Merger becomes effective with the Secretary of State of the State
of North Carolina and the Certificate of Merger reflecting the Merger becomes
effective with the Secretary of State of the State of Georgia (the "Effective
Time").
(c) The charter and Bylaws of Merger Corp in effect immediately prior
to the Effective Time shall be the charter and Bylaws of the surviving
corporation until otherwise amended or repealed, the directors of Merger Corp
immediately prior to the Effective Time shall serve as the directors of the
surviving corporation from and after the Effective Time, and the officers of
Merger Corp in office immediately prior to the Effective Time shall serve as the
officers of the surviving corporation from and after the Effective Time.
2.2 Conversion of Shares. Subject to the provisions of this Section 2.2,
--------------------
and in consideration for the transactions contemplated hereby, at the Effective
Time, by virtue of the Merger and without any action on the part of the parties
hereto or the shareholders of any of the parties hereto, the shares of the
constituent corporations of the Merger shall be converted as follows:
(a) Each share of Premiere Stock and each share of Merger Corp common
stock issued and outstanding at the Effective Time shall remain issued and
outstanding after the Effective Time.
(b) All of the shares of the capital stock, no par value per share,
of the Company ("Company Stock") (excluding treasury shares and excluding shares
held by shareholders who perfect their statutory dissenters' rights as provided
in Section 2.4 of this Agreement) issued and outstanding at the Effective Time
shall cease to be outstanding and shall be converted into and exchanged for the
right to receive:
(i) the number of shares of Premiere Stock determined by
dividing (A) the product of .9 multiplied by the Company
Purchase Price, by (B) the Average Closing Price; and
-2-
<PAGE>
(ii) the number of shares of Premiere Stock determined by dividing (A) the
product of .1 multiplied by the Company Purchase Price, by (B) the Average
Closing Price (the "General Escrow Amount"); all as determined in accordance
with Section 2.3 below (collectively, the "Consideration"). Subject to Section
2.2(d) below, the Consideration shall be issuable to the Owners pro rata in
accordance with their ownership of Company Common Stock pursuant to Section 2.6,
which ownership the Owners represent has not been adjusted in contemplation of
the transactions described herein.
(c) Any and all shares of Company Common Stock held as treasury
shares by the Company shall be canceled and retired at the Effective Time, and
no consideration shall be issued in exchange therefor.
(d) Upon consummation of the Merger, the Owners shall deliver the
General Escrow Amount in negotiable form to the Escrow Agent to be held in
escrow pursuant to the terms and conditions of the Escrow Agreement in the form
attached hereto as Exhibit B, which shall be executed and delivered by Premiere
---------
and the Owners at the Closing.
2.3 Calculation of Consideration. For purposes of determining the
----------------------------
Consideration issuable to the Owners pursuant to Section 2.2(b) above, the
following shall apply:
(a) "Average Closing Price" shall be the average of the daily last
sale prices of Premiere Stock for the period consisting of twenty (20)
consecutive trading days on which such shares are actually traded on the Nasdaq
National Market (as reported by the Wall Street Journal or, if not reported
thereby, any other authoritative source selected by Premiere) ending at the
close of trading on the first trading day immediately preceding the Closing;
provided, however, that the Average Closing Price shall not be less than $22.50
- - -------- -------
nor more than $30.50 (collectively, $22.50 and $30.50 are referred to as the
"Average Closing Price Limitations").
(b) "Company Purchase Price" shall be the sum of (i) the amount
determined by multiplying the Normalized EBITDA of the Company by the Stock
Multiple, plus (ii) the amount of cash reflected on the Closing Date Balance
----
Sheet, minus (iii) the aggregate amount of principal and accrued and unpaid
-----
interest under funded debt and capital lease obligations reflected on the
Closing Date Balance Sheet, minus (iv) the amount by which the Transaction Costs
-----
exceed the Deductible Amount.
(c) "Deductible Amount" shall be an amount equal to $10,000.
(d) "Normalized EBITDA" of the Company shall be an amount equal to
$1,030,195.
(e) "Registration Right" shall mean the right to include Premiere
Stock issued in the Merger in a registration statement which Premiere intends to
file promptly after the end of the first full fiscal quarter of Premiere
containing the period of post-Merger combined operations required by ASRs 130
and 135, pursuant to the terms and conditions of the Stock Restriction and
Registration Rights Agreement in the form attached hereto as of Exhibit C (the
---------
"Registration Rights Agreement").
(f) "Stock Multiple" shall be six (6).
-3-
<PAGE>
(g) "Transaction Costs" shall mean all amounts incurred but unpaid by
the Company in connection with (i) the negotiation and preparation of this
Agreement, (ii) the preparation of the Audited Financial Statements, (iii) the
consummation of the Transactions and (iv) one-half of the costs and expenses of
public record searches pursuant to Section 5.9(b) of the Uniform Terms.
2.4 Dissenting Shareholders. Subject to Section 4.2, any holder of shares
-----------------------
of voting capital stock of the Company who perfects any available dissenters'
rights in accordance with and as contemplated by the North Carolina Act shall be
entitled to receive the value of such shares in cash from the Company after the
Effective Time as determined pursuant to such provision of law; provided, that
no such payment shall be made to any dissenting shareholder unless and until
such dissenting shareholder has complied with the applicable provisions of the
North Carolina Act and surrendered to the Company the certificate or
certificates representing the shares for which payment is being made. In the
event that a dissenting shareholder of the Company fails to perfect, or
effectively withdraws or loses, its right to appraisal and of payment for its
shares, Premiere shall issue and deliver the consideration to which such holder
of shares of Company capital stock is entitled under this Article II (without
interest) upon surrender of certificates representing such shares held by such
holder.
2.5 Closing. The Closing shall take place at the offices of Alston & Bird
-------
LLP, Atlanta, Georgia, at 10:00 a.m. local time, on the date set forth in the
Uniform Terms, provided all conditions set forth in Articles V and VI of the
Uniform Terms and Articles IV and V of this Agreement have been satisfied or
waived, or on such other date or at such other place and time mutually agreed
upon by the parties.
2.6 Exchange of Shares. Promptly after the Effective Time, Premiere and
------------------
Company shall cause to be mailed to the former Company shareholders appropriate
transmittal materials for the surrender of the certificate or certificates
formerly representing their shares of Company Common Stock in exchange for
shares of Premiere Stock as provided in this Agreement. Until surrendered for
exchange in accordance herewith, each certificate theretofore representing
shares of Company Common Stock shall from and after the Effective Time represent
only the right to receive the Consideration provided in this Agreement in
exchange therefor. No certificates representing fractional shares will be
issued as a result of the Merger. Each holder of shares of Company Common Stock
exchanged pursuant to the Merger who would otherwise have been entitled to
receive a fraction of a share of Premiere Common Stock shall receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional part of a
share of Premiere Common Stock multiplied by the Average Closing Price.
2.7 Purchase for Investment, Etc. Each Owner represents and warrants the
-----------------------------
following to Premiere:
(a) such Owner has accurately completed the Investor Questionnaire
required by Premiere prior to or contemporaneous with the execution of the
Transfer Agreement and the statements therein are true and correct and
acknowledges that Premiere has relied upon such statements in entering into this
Agreement;
(b) such Owner is acquiring Premiere Stock for such Owner's own
account and not with a view to or for sale in connection with any public
distribution thereof within the meaning of the Securities Act;
-4-
<PAGE>
(c) such Owner (i) has sufficient knowledge and experience in
financial and business matters to enable him, her or it to evaluate the merits
and risks of an investment in Premiere Stock, (ii) has the ability to bear the
economic risk of acquiring Premiere Stock for an indefinite period and to afford
a complete loss thereof and (iii) has had an opportunity to ask questions of and
to receive answers from the officers of Premiere and to obtain additional
information in writing as requested, which has been made available to and
examined by such Owner or such Owner's advisors; and
(d) such Owner (i) acknowledges that Premiere Stock has not been
registered under any securities laws and cannot be resold without registration
thereunder or exemption therefrom, (ii) agrees not to transfer all or any
Premiere Stock received by such Owner unless such transfer has been registered
or is exempt from registration under applicable securities laws and (iii)
acknowledges that the certificate(s) representing Premiere Stock shall bear the
following legend with respect to the restrictions on transfer under applicable
securities laws:
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, and may not be offered, sold,
transferred or otherwise disposed of unless registered with the
Securities and Exchange Commission of the United States and the
securities regulatory authorities of applicable states or unless an
exemption from such registration is available."
2.8 Accounting, Tax and Regulatory Matters. Each Owner and the Company,
--------------------------------------
jointly and severally, represents and warrants to Premiere that neither the
Company, any Owner nor any Affiliate thereof has taken or agreed to take any
action or has any knowledge of any fact or circumstance that is reasonably
likely to (i) prevent the Merger from qualifying for pooling-of-interests
accounting treatment or as a reorganization within the meaning of Section 368(a)
of the Code, or (ii) materially impede or delay receipt of any consents referred
to in Section 5.6 of the Uniform Terms or result in the imposition of a
condition or restriction of the type referred to in the last sentence of such
Section.
III. ADDITIONAL AGREEMENTS
---------------------------
3.1 Filings with State Offices. Upon the terms and subject to the
--------------------------
conditions of this Agreement, the Company and Merger Corp shall execute and file
the Articles or a Certificate of Merger, as appropriate, with the Secretary of
State of the State of North Carolina and a Certificate of Merger with the
Secretary of State of the State of Georgia in connection with the Closing.
3.2 Conditions to Closing. The Company, the Owners and Premiere agree to
---------------------
use their commercially reasonable best efforts to satisfy the closing conditions
set forth in Articles IV and V of this Agreement by the date indicated therein
or the Closing Date, as applicable.
3.3 Additional Indemnification Items. Subject to Sections 8.2 through 8.6
--------------------------------
of the Uniform Terms, the Owners and, if the Transactions involve an Asset
Transfer, the Company, shall jointly and severally indemnify and hold harmless
Premiere, and its officers, directors, agents or affiliates, from and against
any and all Losses suffered or incurred by any such party by reason of or
arising out of any of the following:
-5-
<PAGE>
(a) a breach of Section 2.19 of the Uniform Terms as it relates to
liability for sales or income tax (irrespective of whether disclosed on Schedule
2.19 or in the Financial Statements).
3.4 Tax Matters. Each of the Company, the Owners and Premiere undertakes
-----------
and agrees to use its reasonable efforts to cause the Merger, and to take no
action which would cause the Merger not, to qualify as a "reorganization" within
the meaning of Section 368(a) of the Code for federal income tax purposes.
Notwithstanding the foregoing, the Owners understand that (i) Premiere makes no
representation or warranty regarding the tax treatment of this Agreement or the
Merger, (ii) the Closing is not subject to a condition that an Internal Revenue
Service ruling or tax opinion be obtained as to the federal income tax
consequences of this Agreement or the Merger, and (iii) the Company and the
Owners shall look to their respective advisors for advice concerning the tax
consequences of this Agreement and the Merger.
3.5 Registration Rights. At the Closing, Premiere and the Owners shall
-------------------
execute and deliver the Registration Rights Agreement.
3.6 Accounting Treatment.
--------------------
(a) The Company and each of the Owners has accurately completed the
Pooling Questionnaire required by Premiere prior to or contemporaneous with the
execution of this Agreement, and the statements therein are true and correct.
(b) Premiere, the Company and each of the Owners agrees to use its
reasonable efforts to cause the Merger, and to take no action which would cause
the Merger not, to qualify for treatment as a pooling of interests for
accounting purposes. Without limiting the foregoing, the Company and each of
the Owners agrees not to sell, transfer, or otherwise dispose of his, her or its
interests in, or reduce his, her or its risk relative to, any of the shares of
Premiere Common Stock received in connection with the Merger until such time as
Premiere notifies the Company and each such Owner that the requirements of ASRs
130 and 135 have been met. The Company and each of the Owners understands that
ASRs 130 and 135 relate to the publication of financial results of at least
thirty (30) days of post-Merger combined operations of Premiere and the Company.
Premiere agrees that it shall publish such results within forty-five (45) days
after the end of the first fiscal quarter of Premiere containing the required
period of post-Merger combined operations and that it shall notify the Company
and each of the Owners promptly following such publication. Premiere shall be
entitled to place the following restrictive legend on the shares of Premiere
Stock issued pursuant to the Merger to enforce the foregoing restrictions:
"The shares represented by this certificate were issued pursuant to a
business combination which is accounted for as a "pooling of interests" and
may not be sold, nor may the owner thereof reduce his risks relative
thereto in any way, until such time as Premiere Technologies, Inc.
("Premiere") has published the financial results covering at least 30 days
of combined operations after the effective date of the merger through which
the business combination was effected.
3.7 Affiliate Agreements. The Company has disclosed in Schedule 3.7 all
-------------------- ------------
Persons whom it reasonably believes is an "affiliate" of the Company for
purposes of Rule 145 under the 1933 Act. The Company shall use its reasonable
efforts to cause each such Person to deliver to Premiere as
-6-
<PAGE>
soon as reasonably practicable following the execution of this Agreement, a
written agreement, substantially in the form attached hereto as Exhibit D.
----------
3.8 Tax Representations. In connection with the opinion to be rendered to
-------------------
Premiere by Alston & Bird to the effect that the transactions contemplated
hereby will constitute a tax-free reorganization within the meaning of Section
368(a) of the Code, the Owners shall furnish such counsel with such
representations as to their plans for the disposition of the shares of Premiere
Stock to be received in the Transactions as such counsel shall reasonably
request.
3.9 Restricted Stock. All contractual restrictions or limitations on
----------------
transfer with respect to Company Common Stock under any plan, program, contract
or arrangement, to the extent that such restrictions or limitations have not
already lapsed (whether as a result of the Transactions or otherwise), and
except as otherwise expressly provided in such plan, program, contract or
arrangement, shall remain in full force and effect with respect to shares of
Premiere Stock into which such restricted stock is converted pursuant to Section
2.2 of this Transfer Agreement.
3.10 Exchange Listing. Premiere shall use its reasonable efforts to list,
----------------
prior to the Effective Time, on the Nasdaq National Market the shares of
Premiere Stock to be issued to the Owners pursuant to the Transactions, and
Premiere shall give all notices and make all filings with the NASD required in
connection with the Transactions.
IV. SUPPLEMENTAL CONDITIONS TO OBLIGATIONS OF PREMIERE
-------------------------------------------------------
In addition to the conditions of Premiere contained in Article V of the
Uniform Terms, the obligation of Premiere to consummate the Transactions is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions:
4.1 Approval of Owners. The Owners shall have approved the Merger in
------------------
accordance with the requirements of the North Carolina Act and the Company shall
have provided Premiere certified copies of such resolutions, and Owners holding
no more than ten percent (10%) of the Company Common Stock issued and
outstanding immediately prior to the Effective Time shall have exercised any of
the rights described in Section 2.4.
4.2 Grand Solution Documents. VTNLP, VTE, the NAP and each of the Franchisee
Companies shall have executed and delivered Grand Solution Documents reflecting
the terms described in Exhibit E hereto in form and substance reasonable
---------
satisfactory to Premiere.
4.3 Audited Financial Statements. Premiere shall have received balance
----------------------------
sheets of the Company as of December 31, 1995 and 1996 and the related
statements of operations, cash flows and changes in owners' equity for the
fiscal years then ended (the "Audited Financial Statements") prepared in
accordance with GAAP and Regulation S-X promulgated by the Commission,
accompanied by an unqualified audit opinion of Arthur Andersen LLP relating
thereto. The Audited Financial Statements shall not reflect any material change
in the Company's financial condition or results of operations from the condition
and results reported in the Financial Statements for the corresponding periods
delivered by the Company prior to the execution of this Agreement.
-7-
<PAGE>
4.4 Pooling Letter. Premiere shall have received a letter, dated as of the
--------------
Effective Time, in form and substance reasonably acceptable to Premiere, from
Arthur Andersen LLP to the effect that the Merger will qualify for pooling of
interests accounting treatment, and no action shall have been taken by any
regulatory authority or any statute, rule, regulation or order enacted,
promulgated or issued by any regulatory authority, or any proposal made for any
such action by any regulatory authority which is reasonably likely to be put
into effect, that would prevent Premiere from accounting for the business
combination to be effected by the Merger as a pooling of interests.
4.5 Reorganization Opinion. Premiere shall have received an opinion of
----------------------
Alston & Bird LLP, counsel to Premiere, to the effect that the transactions
contemplated by the Agreement, including the Merger, will constitute a tax-free
reorganization within the meaning of Section 368(a) of the Code.
4.6 Waiver of Rights of First Refusal. Each Owner and the Company shall
---------------------------------
have waived in writing any and all rights to purchase Company Equity Securities
which may be triggered by the Transactions, including, without limitation, any
and all rights accruing under (i) that certain Stock Redemption Agreement dated
April 1, 1996 between the Company and Joseph Rawley, (ii) that certain Cross
Purchase Agreement dated April 1, 1996 between Larry J. Diana and John A.
Hughes.
V. SUPPLEMENTAL CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE OWNERS
------------------------------------------------------------------------
In addition to the conditions of the Company and the Owners contained in
Article VI of the Uniform Terms, the obligation of the Company and the Owners to
consummate the Transactions is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions:
5.1 Approval of Premiere and Merger Corp. The Board of Directors of
------------------------------------
Premiere and the Board of Directors and the shareholder of Merger Corp shall
have approved the Merger in accordance with the requirement of applicable state
law. Premiere and Merger Corp shall have provided the Company certified copies
of such resolutions.
5.2 Registration Rights. Premiere and each Owner shall have executed and
-------------------
delivered a Registration Rights Agreement.
VI. MISCELLANEOUS
------------------
6.1 Notices. The addresses for notices in accordance with Section 10.1 of
-------
the Uniform Terms for the Company and the Owners are as follows:
If to the Company: With a copy to:
P. O. Box 41170 706 Green Valley Rd., Ste. 104
Greensboro, NC 27404-1170 Greensboro, NC 27408
Attn: ______________ Attn: ______________
Phone: (___) ___-____ Phone: (___) ___-____
-8-
<PAGE>
Fax: (___) ___-____ Fax: (910) 373-8855
If to the Owners: With a copy to:
P. O. Box 41170 706 Green Valley Rd., Ste. 104
Greensboro, NC 27404-1170 Greensboro, NC 27408
Attn: ______________ Attn: ______________
Phone: (___) ___-____ Phone: (___) ___-____
Fax: (___) ___-____ Fax: (910) 373-8855
6.2 Owner's Representative. The Owners' Representative for purposes of
----------------------
Section 10.2 of the Uniform Terms shall be Larry Diana, who shall serve as the
Owner's Representative under the terms of said Section 10.2 of the Uniform
Terms.
6.3 Certain Definitions. In addition to the terms defined elsewhere herein
-------------------
and in the Uniform Terms, as used in this Agreement:
(a) "Anticipated Closing Date" shall mean April 30, 1997.
------------------------
(b) "Knowledge" of the Company shall mean the personal knowledge
---------
after due inquiry of those facts that are known or should reasonably
have been known after due inquiry by Larry Diana, John Hughes and Joe
Rawley and the knowledge of any such Persons obtained or which would
have been obtained from a reasonable investigation.
(c) "Outside Closing Date" shall mean June 30, 1997.
--------------------
[Signatures begin on next page.]
-9-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first written above.
PREMIERE:
PREMIERE TECHNOLOGIES, INC.,
a Georgia corporation
By: /s/Patrick G. Jones
------------------------------------
Patrick G. Jones
Title: Sr. V.P.
Attest:
By: /s/Douglas B. Hadaway
---------------------------------
Douglas B. Hadaway
Title: Assistant Secretary
COMPANY:
PREMIER BUSINESS
SERVICES, INC.,
a North Carolina corporation
By: /s/Lawrence J. Diana
-----------------------------------
Lawrence J. Diana
Title: President
Attest:
By: /s/Ashley I. Johnson
---------------------------------
Ashley I. Johnson
Title: Controller
OWNERS:
/s/Lawrence J. Diana
--------------------------------------
Lawrence J. Diana,
an individual resident of the
State of North Carolina
Witness:
By: /s/Ashley I. Johnson
---------------------------------
Ashley I. Johnson
[Signatures continued on the following page.]
<PAGE>
OWNERS:
/s/John A. Hughes
--------------------------------------
John A. Hughes,
an individual resident of the
State of North Carolina
Witness:
By: /s/Ashley I. Johnson
---------------------------------
Ashely I. Johnson
OWNERS:
/s/Joseph P. Rawley
--------------------------------------
Joseph P. Rawley,
an individual resident of the
State of North Carolina
Witness:
By: /s/Ashley I. Johnson
-------------------------------------
Ashely I. Johnson
<PAGE>
EXHIBIT 2.8
TRANSFER AGREEMENT
BY AND AMONG
PREMIERE TECHNOLOGIES, INC.,
DUNES COMMUNICATIONS, INC.,
SANDS COMMUNICATIONS, INC. [ARIZONA],
SANDS COMM, INC. [NEW MEXICO],
SANDSCOMM, INC.
AND
OWNER OF DUNES COMMUNICATIONS, INC.,
SANDS COMMUNICATIONS, INC. [ARIZONA],
SANDS COMM, INC. [NEW MEXICO]
AND
SANDSCOMM, INC.
DATED AS OF APRIL 2, 1997
<PAGE>
TRANSFER AGREEMENT
------------------
THIS TRANSFER AGREEMENT (this "Agreement") is entered into as of April 2,
1997 by and among Premiere Technologies, Inc., a Georgia corporation
("Premiere"), Dunes Communications, Inc., a California corporation ("Dunes"),
Sands Communications, Inc., an Arizona corporation ("Sands A"), Sands Comm,
Inc., a New Mexico corporation ("Sands NM"), Sandscomm, Inc., a California
corporation ("Sandscomm," and collectively with Dunes, Sands A and Sands NM, the
"Company"), and those parties listed on the signature pages hereto as the owner
of the Company (the "Owner").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, this Agreement provides for the acquisition of the Company by
Premiere pursuant to the merger of Dunes, Sands A, Sands NM and Sandscomm with
and into a wholly owned subsidiary of Premiere ("Merger Corp"), with Merger Corp
as the surviving corporation in such mergers (the "Mergers");
WHEREAS, the respective Boards of Directors of Premiere, Dunes, Sands A,
Sands NM and Sandscomm have approved the terms and conditions set forth in this
Agreement;
WHEREAS, the Owner owns one hundred percent (100 %) of the equity interests
in the Company;
WHEREAS, this Agreement provides for all of the Owner's equity interests in
the Company to be converted into the right to receive shares of Premiere Stock
in connection with the Mergers;
WHEREAS, it is also the intention of the parties hereto that the form of the
transactions with respect to the Company, Premiere and Merger Corp shall qualify
as a "reorganization" within the meaning of Section 368(a) of the Code for
federal income tax purposes; and
WHEREAS, it is also the intention of the parties hereto that the business
combination to be effected by the Mergers be accounted for as a pooling of
interests.
NOW, THEREFORE, in consideration of the foregoing, the mutual agreements and
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
I. UNIFORM TERMS AND CONDITIONS
--------------------------------
1.1 Incorporation by Reference. The Uniform Terms and Conditions attached
--------------------------
hereto as Exhibit A (the "Uniform Terms") are hereby made a part of and
incorporated herein as if fully restated herein. Capitalized terms not defined
herein shall have the meanings provided in the Uniform Terms.
<PAGE>
II. TERMS OF MERGER
--------------------
2.1 The Mergers.
-----------
(a) Dunes.
(i) Subject to the terms and conditions of this Agreement,
at the Effective Time (as defined below), Dunes shall be merged with and into
Merger Corp (the "Dunes Merger") in accordance with the provisions of the
business corporation act under the laws of the State of California (the
"California Act") and the laws of the State of Georgia (the "Georgia Act").
Merger Corp shall be the surviving corporation resulting from the Merger, shall
thereafter conduct the business and operations of Dunes as a wholly owned
subsidiary of Premiere and shall continue to be governed by the laws of the
State of Georgia. The Dunes Merger shall be consummated pursuant to the terms of
this Agreement, which has been approved and adopted by the respective boards of
directors of Premiere, Merger Corp and Dunes.
(ii) Subject to the provisions of this Agreement, the
parties shall file Articles or a Certificate of Merger, as appropriate, executed
in accordance with the relevant provisions of the California Act and a
Certificate of Merger executed in accordance with the relevant provisions of the
Georgia Act and shall make all other filings or recordings required under each
such Act as soon as practicable on or after the Closing Date. The Dunes Merger
shall become effective on the date and at the time documents reflecting the
Mergers become effective with the Secretary of State of the States of Arizona,
California, Georgia and New Mexico, as appropriate (the "Effective Time").
(iii) The charter and Bylaws of Merger Corp in effect
immediately prior to the Effective Time shall be the charter and Bylaws of the
surviving corporation in the Dunes Merger until otherwise amended or repealed,
the directors of Merger Corp immediately prior to the Effective Time shall serve
as the directors of the surviving corporation in the Dunes Merger from and after
the Effective Time, and the officers of Merger Corp in office immediately prior
to the Effective Time shall serve as the officers of the surviving corporation
in the Dunes Merger from and after the Effective Time.
(b) Sands A.
(i) Subject to the terms and conditions of this Agreement,
at the Effective Time, Sands A shall be merged with and into Merger Corp (the
"Sands A Merger") in accordance with the provisions of the business corporation
act under the laws of the State of Arizona (the "Arizona Act") and the Georgia
Act. Merger Corp shall be the surviving corporation resulting from the Merger,
shall thereafter conduct the business and operations of Sands A as a wholly
owned subsidiary of Premiere and shall continue to be governed by the laws of
the State of Georgia. The Sands A Merger shall be consummated pursuant to the
terms of this Agreement, which has been approved and adopted by the respective
boards of directors of Premiere, Merger Corp and Sands A.
(ii) Subject to the provisions of this Agreement, the
parties shall file Articles or a Certificate of Merger, as appropriate, executed
in accordance with the relevant provisions of the Arizona Act and a Certificate
of Merger executed in accordance with the relevant provisions of the Georgia Act
and shall make all other filings or recordings required under each such Act as
soon
-2-
<PAGE>
as practicable on or after the Closing Date. The Sands A Merger shall become
effective at the Effective Time.
(iii) The charter and Bylaws of Merger Corp in effect
immediately prior to the Effective Time shall be the charter and Bylaws of the
surviving corporation in the Sands A Merger until otherwise amended or repealed,
the directors of Merger Corp immediately prior to the Effective Time shall serve
as the directors of the surviving corporation in the Sands A Merger from and
after the Effective Time, and the officers of Merger Corp in office immediately
prior to the Effective Time shall serve as the officers of the surviving
corporation in the Sands A Merger from and after the Effective Time.
(c) Sands NM.
(i) Subject to the terms and conditions of this Agreement,
at the Effective Time, Sands NM shall be merged with and into Merger Corp (the
"Sands NM Merger") in accordance with the provisions of the business corporation
act under the laws of the State of New Mexico (the "New Mexico Act") and the
Georgia Act. Merger Corp shall be the surviving corporation resulting from the
Merger, shall thereafter conduct the business and operations of Sands NM as a
wholly owned subsidiary of Premiere and shall continue to be governed by the
laws of the State of Georgia. The Sands NM Merger shall be consummated pursuant
to the terms of this Agreement, which has been approved and adopted by the
respective boards of directors of Premiere, Merger Corp and Sands NM.
(ii) Subject to the provisions of this Agreement, the
parties shall file Articles or a Certificate of Merger executed in accordance
with the relevant provisions of the New Mexico Act and a Certificate of Merger
executed in accordance with the relevant provisions of the Georgia Act and shall
make all other filings or recordings required under each such Act as soon as
practicable on or after the Closing Date. The Sands NM Merger shall become
effective at the Effective Time.
(iii) The charter and Bylaws of Merger Corp in effect
immediately prior to the Effective Time shall be the charter and Bylaws of the
surviving corporation in the Sands NM Merger until otherwise amended or
repealed, the directors of Merger Corp immediately prior to the Effective Time
shall serve as the directors of the surviving corporation in the Sands NM Merger
from and after the Effective Time, and the officers of Merger Corp in office
immediately prior to the Effective Time shall serve as the officers of the
surviving corporation in the Sands NM Merger from and after the Effective Time.
(d) Sandscomm.
(i) Subject to the terms and conditions of this Agreement,
at the Effective Time, Sandscomm shall be merged with and into Merger Corp (the
"Sandscomm Merger") in accordance with the provisions of the California Act and
the Georgia Act. Merger Corp shall be the surviving corporation resulting from
the Merger, shall thereafter conduct the business and operations of Sandscomm as
a wholly owned subsidiary of Premiere and shall continue to be governed by the
laws of the State of Georgia. The Sandscomm Merger shall be consummated pursuant
to the terms of this Agreement, which has been approved and adopted by the
respective boards of directors of Premiere, Merger Corp and Sandscomm.
-3-
<PAGE>
(ii) Subject to the provisions of this Agreement, the
parties shall file Articles or a Certificate of Merger executed in accordance
with the relevant provisions of the California Act and a Certificate of Merger
executed in accordance with the relevant provisions of the Georgia Act and shall
make all other filings or recordings required under each such Act as soon as
practicable on or after the Closing Date. The Sandscomm Merger shall become
effective at the Effective Time.
(iii) The charter and Bylaws of Merger Corp in effect
immediately prior to the Effective Time shall be the charter and Bylaws of the
surviving corporation in the Sandscomm Merger until otherwise amended or
repealed, the directors of Merger Corp immediately prior to the Effective Time
shall serve as the directors of the surviving corporation in the Sandscomm
Merger from and after the Effective Time, and the officers of Merger Corp in
office immediately prior to the Effective Time shall serve as the officers of
the surviving corporation in the Sandscomm Merger from and after the Effective
Time.
2.2 Conversion of Shares. Subject to the provisions of this Section 2.2,
--------------------
and in consideration for the transactions contemplated hereby, at the Effective
Time, by virtue of the Mergers and without any action on the part of the parties
hereto or the shareholders of any of the parties hereto, the shares of the
constituent corporations of the Mergers shall be converted as follows:
(a) Each share of Premiere Stock and each share of Merger Corp common
stock issued and outstanding at the Effective Time shall remain issued and
outstanding after the Effective Time.
(b) All of the shares of the capital stock of Dunes, Sands A, Sands
NM and Sandscomm ("Company Stock") (excluding treasury shares and excluding
shares held by shareholders who perfect their statutory dissenters' rights as
provided in Section 2.4 of this Agreement) issued and outstanding at the
Effective Time shall cease to be outstanding and shall be converted into and
exchanged for the right to receive:
(i) the number of shares of Premiere Stock determined by
dividing (A) the product of .9 multiplied by the
Company Purchase Price, by (B) the Average Closing
Price;
(ii) the number of shares of Premiere Stock determined by
dividing (A) the product of .1 multiplied by the
Company Purchase Price, by (B) the Average Closing
Price (the "General Escrow Amount");
all as determined in accordance with Section 2.3 below (collectively, the
"Consideration"). Subject to Section 2.2(d) below, the Consideration shall be
issuable to the Owners pro rata in accordance with their ownership of Company
Stock pursuant to Section 2.6, which ownership the Owner represents has not been
adjusted in contemplation of the transactions described herein.
(c) Any and all shares of Company Stock held as treasury shares by
the Company shall be canceled and retired at the Effective Time, and no
consideration shall be issued in exchange therefor.
(d) Upon consummation of the Merger, the Owners shall deliver the
General Escrow Amount in negotiable form to the Escrow Agent to be held in
escrow pursuant to the terms and
-4-
<PAGE>
conditions of the Escrow Agreements in the forms attached hereto as Exhibit B,
----------
which shall be executed and delivered by Premiere and the Owners at the Closing.
2.3 Calculation of Consideration. For purposes of determining the
----------------------------
Consideration issuable to the Owner pursuant to Section 2.2(b) above, the
following shall apply:
(a) "Average Closing Price" shall be the average of the daily last
sale prices of Premiere Stock for the period consisting of twenty (20)
consecutive trading days on which such shares are actually traded on the Nasdaq
National Market (as reported by the Wall Street Journal or, if not reported
thereby, any other authoritative source selected by Premiere) ending at the
close of trading on the first trading day immediately preceding the Closing;
provided, however, that the Average Closing Price shall not be less than $22.50
- - -------- -------
nor more than $30.50 (collectively, $22.50 and $30.50 are referred to as the
"Average Closing Price Limitations").
(b) "Company Purchase Price" shall be the sum of (i) the amount
determined by multiplying the Normalized EBITDA of the Company by the Stock
Multiple, plus (ii) the amount of cash reflected on the Closing Date Balance
----
Sheet, minus (iii) the aggregate amount of principal and accrued and unpaid
-----
interest under funded debt and capital lease obligations reflected on the
Closing Date Balance Sheet, minus (iv) the amount by which the Transaction Costs
-----
exceed the Deductible Amount.
(c) "Deductible Amount" shall be an amount equal to $10,000.
(d) "Normalized EBITDA" of the Company shall be an amount equal to
$1,520,054.
(e) "Registration Right" shall mean the right to include Premiere
Stock issued in the Merger in a registration statement which Premiere intends to
file as soon as reasonably practicable after the end of the first full fiscal
quarter of Premiere containing the period of post-Merger combined operations
required by ASRs 130 and 135, pursuant to the terms and conditions of the Stock
Restriction and Registration Rights Agreement in the form attached hereto as of
Exhibit C (the "Registration Rights Agreement").
- - ---------
(f) "Stock Multiple" shall be six (6).
(g) "Transaction Costs" shall mean all amounts incurred but unpaid by
the Company in connection with (i) the negotiation and preparation of this
Agreement, (ii) the preparation of the Audited Financial Statements, (iii) the
consummation of the Transactions and (iv) one-half of the costs and expenses of
public record searches pursuant to Section 5.9(b) of the Uniform Terms.
2.4 Dissenting Shareholders. Subject to Section 4.2, any holder of shares
-----------------------
of voting capital stock of Dunes, Sands A, Sands NM or Sandscomm who perfects
any available dissenters' rights in accordance with and as contemplated by the
Arizona Act, the California Act or the New Mexico Act, as appropriate, shall be
entitled to receive the value of such shares in cash from the Company after the
Effective Time as determined pursuant to such provision of law; provided, that
no such payment shall be made to any dissenting shareholder unless and until
such dissenting shareholder has complied with the applicable provisions of the
Arizona Act, the California Act or the New Mexico Act, as appropriate, and
surrendered to the Company the certificate or certificates representing the
shares for which payment is being made. In the event that a dissenting
shareholder of Dunes, Sands A, Sands NM or Sandscomm fails to perfect, or
effectively withdraws or loses, its
-5-
<PAGE>
right to appraisal and of payment for its shares, Premiere shall issue and
deliver the consideration to which such holder is entitled under this Article II
(without interest) upon surrender of certificates representing such shares held
by such holder.
2.5 Closing. The Closing shall take place at the offices of Alston & Bird
-------
LLP, Atlanta, Georgia, at 10:00 a.m. local time, on the date set forth in the
Uniform Terms, provided all conditions set forth in Articles V and VI of the
Uniform Terms and Articles IV and V of this Agreement have been satisfied or
waived, or on such other date or at such other place and time mutually agreed
upon by the parties.
2.6 Exchange of Shares. Promptly after the Effective Time, Premiere and
------------------
Company shall cause to be mailed to the former shareholders of Dunes, Sands A,
Sands NM and Sandscomm appropriate transmittal materials for the surrender of
the certificate or certificates formerly representing their shares of Company
Stock in exchange for shares of Premiere Stock as provided in this Agreement.
Until surrendered for exchange in accordance herewith, each certificate
theretofore representing shares of Company Stock shall from and after the
Effective Time represent only the right to receive the Consideration provided in
this Agreement in exchange therefor. No certificates representing fractional
shares will be issued as a result of the Mergers. Each holder of shares of
Company Stock exchanged pursuant to the Mergers who would otherwise have been
entitled to receive a fraction of a share of Premiere Common Stock shall
receive, in lieu thereof, cash (without interest) in an amount equal to such
fractional part of a share of Premiere Common Stock multiplied by the Average
Closing Price.
2.7 Purchase for Investment, Etc. The Owner represents and warrants the
-----------------------------
following to Premiere:
(a) such Owner has accurately completed the Investor
Questionnaire required by Premiere prior to or contemporaneous with the
execution of the Transfer Agreement and the statements therein are true and
correct and acknowledges that Premiere has relied upon such statements in
entering into this Agreement;
(b) such Owner is acquiring Premiere Stock for such Owner's own
account and not with a view to or for sale in connection with any public
distribution thereof within the meaning of the Securities Act;
(c) such Owner (i) has sufficient knowledge and experience in
financial and business matters to enable him, her or it to evaluate the merits
and risks of an investment in Premiere Stock, (ii) has the ability to bear the
economic risk of acquiring Premiere Stock for an indefinite period and to afford
a complete loss thereof and (iii) has had an opportunity to ask questions of and
to receive answers from the officers of Premiere and to obtain additional
information in writing as requested, which has been made available to and
examined by such Owner or such Owner's advisors; and
(d) such Owner (i) acknowledges that Premiere Stock has not been
registered under any securities laws and cannot be resold without registration
thereunder or exemption therefrom, (ii) agrees not to transfer all or any
Premiere Stock received by such Owner unless such transfer has been registered
or is exempt from registration under applicable securities laws and (iii)
acknowledges that the certificate(s) representing Premiere Stock shall bear the
following legend with respect to the restrictions on transfer under applicable
securities laws:
-6-
<PAGE>
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, and may not be offered, sold,
transferred or otherwise disposed of unless registered with the Securities
and Exchange Commission of the United States and the securities regulatory
authorities of applicable states or unless an exemption from such
registration is available."
2.8 Accounting, Tax and Regulatory Matters. Each Owner and the Company,
--------------------------------------
jointly and severally, represents and warrants to Premiere that neither the
Company, any Owner nor any Affiliate thereof has taken or agreed to take any
action or has any knowledge of any fact or circumstance that is reasonably
likely to (i) prevent the Mergers from qualifying for pooling-of-interests
accounting treatment or as a reorganization within the meaning of Section 368(a)
of the Code, or (ii) materially impede or delay receipt of any consents referred
to in Section 5.6 of the Uniform Terms or result in the imposition of a
condition or restriction of the type referred to in the last sentence of such
Section.
III. ADDITIONAL AGREEMENTS
---------------------------
3.1 Filings with State Offices. Upon the terms and subject to the
--------------------------
conditions of this Agreement, Dunes, Sands A, Sands NM, Sandscomm and Merger
Corp shall execute and file documents reflecting the Mergers with the Secretary
of State of the States of Arizona, California, Georgia and New Mexico, as
appropriate, in connection with the Closing.
3.2 Conditions to Closing. The Company, the Owner and Premiere agree to use
---------------------
their commercially reasonable best efforts to satisfy the closing conditions set
forth in Articles IV and V of this Agreement by the date indicated therein or
the Closing Date, as applicable.
3.3 Additional Indemnification Items. Subject to Sections 8.2 through 8.6
--------------------------------
of the Uniform Terms, the Owner and, if the Transactions involve an Asset
Transfer, the Company, shall jointly and severally indemnify and hold harmless
Premiere, and its officers, directors, agents or affiliates, from and against
any and all Losses suffered or incurred by any such party by reason of or
arising out of any of the following:
(a) a breach of Section 2.19 of the Uniform Terms as it relates to
liability for sales or income tax (irrespective of whether
disclosed on Schedule 2.19 or in the Financial Statements).
3.4 Tax Matters. The Owner understands that (i) while it is the mutual
-----------
intention of the parties hereto that the Mergers qualify as tax-free plans of
reorganization under Section 368(a) of the Code, Premiere makes no
representation or warranty regarding the tax treatment of this Agreement or the
Mergers, (ii) the Closing is not subject to a condition that an Internal Revenue
Service ruling or tax opinion be obtained as to the federal income tax
consequences of this Agreement or the Mergers, and (iii) the Company and the
Owner shall look to their respective advisors for advice concerning the tax
consequences of this Agreement and the Mergers.
3.5 Registration Rights. At the Closing, Premiere and the Owner shall
-------------------
execute and deliver the Registration Rights Agreement.
-7-
<PAGE>
3.6 Accounting Treatment.
--------------------
(a) The Company and each of the Owner has accurately completed the
Pooling Questionnaire required by Premiere prior to or contemporaneous with the
execution of this Agreement, and the statements therein are true and correct.
(b) Premiere, the Company and each of the Owners agrees to use its
reasonable efforts to cause the Merger, and to take no action which would cause
the Merger not, to qualify for treatment as a pooling of interests for
accounting purposes. Without limiting the foregoing, the Company and each of
the Owners agrees not to sell, transfer, or otherwise dispose of his, her or its
interests in, or reduce his, her or its risk relative to, any of the shares of
Premiere Common Stock received in connection with the Merger until such time as
Premiere notifies the Company and each such Owner that the requirements of ASRs
130 and 135 have been met. The Company and each of the Owners understands that
ASRs 130 and 135 relate to the publication of financial results of at least
thirty (30) days of post-Merger combined operations of Premiere and the Company.
Premiere agrees that it shall publish such results within forty-five (45) days
after the end of the first fiscal quarter of Premiere containing the required
period of post-Merger combined operations and that it shall notify the Company
and each of the Owners promptly following such publication. Premiere shall be
entitled to place the following restrictive legend on the shares of Premiere
Stock issued pursuant to the Merger to enforce the foregoing restrictions:
"The shares represented by this certificate were issued pursuant to a
business combination which is accounted for as a "pooling of interests" and
may not be sold, nor may the owner thereof reduce his risks relative
thereto in any way, until such time as Premiere Technologies, Inc.
("Premiere") has published the financial results covering at least 30 days
of combined operations after the effective date of the merger through which
the business combination was effected.
3.7 Affiliate Agreements. The Company has disclosed in Schedule 3.7 all
-------------------- ------------
Persons whom it reasonably believes is an "affiliate" of the Company for
purposes of Rule 145 under the 1933 Act. The Company shall use its reasonable
efforts to cause each such Person to deliver to Premiere at least 30 days prior
to the Effective Time a written agreement, substantially in the form attached
hereto as Exhibit D.
---------
3.8 Tax Representations. In connection with the opinion to be rendered to
-------------------
Premiere by Alston & Bird to the effect that the transactions contemplated
hereby will constitute a tax-free reorganization within the meaning of Section
368(a) of the Code, the Owner shall furnish such counsel with such
representations as to their plans for the disposition of the shares of Premiere
Stock to be received in the Transactions as such counsel shall reasonably
request.
3.9 Restricted Stock. All contractual restrictions or limitations on
----------------
transfer with respect to Company Stock under any plan, program, contract or
arrangement, to the extent that such restrictions or limitations have not
already lapsed (whether as a result of the Transactions or otherwise), and
except as otherwise expressly provided in such plan, program, contract or
arrangement, shall remain in full force and effect with respect to shares of
Premiere Stock into which such restricted stock is converted pursuant to Section
2.2 of this Transfer Agreement.
3.10 Exchange Listing. Premiere shall use its reasonable efforts to list,
----------------
prior to the Effective Time, on the Nasdaq National Market the shares of
Premiere Stock to be issued to the Owner
-8-
<PAGE>
pursuant to the Transactions, and Premiere shall give all notices and make all
filings with the NASD required in connection with the Transactions.
IV. SUPPLEMENTAL CONDITIONS TO OBLIGATIONS OF PREMIERE
-------------------------------------------------------
In addition to the conditions of Premiere contained in Article V of the
Uniform Terms, the obligation of Premiere to consummate the Transactions is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions:
4.1 Approval of Owner. The Owner shall have approved the Mergers in
-----------------
accordance with the requirements of the Arizona Act, the California Act and the
New Mexico Act, as appropriate, and the Company shall have provided Premiere
certified copies of such resolutions, and Owner shall not have exercised any of
the rights described in Section 2.4.
4.2 Grand Solution Documents. VTNLP, VTE, the NAP and each of the
------------------------
Franchisee Companies shall have executed and delivered the Grand Solution
Documents reflecting the terms described in Exhibit E hereto in form and
---------
substance reasonably satisfactory to Premiere.
4.3 Audited Financial Statements. Premiere shall have received balance
----------------------------
sheets of the Company as of December 31, 1995 and 1996 and the related
statements of operations, cash flows and changes in owner's equity for the
fiscal years then ended (collectively, the "Audited Financial Statements")
prepared in accordance with GAAP and Regulation S-X promulgated by the
Commission, accompanied by an unqualified audit opinion of Arthur Andersen LLP
relating thereto. The Audited Financial Statements shall not reflect any
material change in the Company's financial condition or results of operations
from the condition and results reported in the Financial Statements delivered by
the Company prior to the execution of this Agreement.
4.4 Pooling Letter. Premiere shall have received a letter, dated as of the
--------------
Effective Time, in form and substance reasonably acceptable to Premiere, from
Arthur Andersen LLP to the effect that the Merger will qualify for pooling of
interests accounting treatment, and no action shall have been taken by any
regulatory authority or any statute, rule, regulation or order enacted,
promulgated or issued by any regulatory authority, or any proposal made for any
such action by any regulatory authority which is reasonably likely to be put
into effect, that would prevent Premiere from accounting for the business
combination to be effected by the merger as a pooling of interests.
4.5 Reorganization Opinion. Premiere shall have received an opinion of
----------------------
Alston & Bird LLP, counsel to Premiere, to the effect that the transactions
contemplated by the Agreement, including the Mergers, will constitute a tax-free
reorganization within the meaning of Section 368(a) of the Code.
4.6 Affiliate Obligations. Any and all obligations of the Company to or in
---------------------
respect of the Company's "Wildfire" affiliates shall have been terminated.
-9-
<PAGE>
V. SUPPLEMENTAL CONDITIONS TO OBLIGATIONS OF THE COMPANY
---------------------------------------------------------
AND THE OWNER
-------------
In addition to the conditions of the Company and the Owner contained in
Article VI of the Uniform Terms, the obligation of the Company and the Owner to
consummate the Transactions is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions:
5.1 Approval of Premiere and Merger Corp. The Board of Directors of
------------------------------------
Premiere and the Board of Directors and the shareholder of Merger Corp shall
have approved the Mergers in accordance with the requirement of applicable state
law. Premiere and Merger Corp shall have provided the Company certified copies
of such resolutions.
5.2 Registration Rights. Premiere and each Owner shall have executed and
-------------------
delivered a Registration Rights Agreement.
VI. MISCELLANEOUS
------------------
6.1 Notices. The addresses for notices in accordance with Section 10.1 of
-------
the Uniform Terms for the Company and the Owner are as follows:
<TABLE>
<S> <C> <C>
If to the Company: With a copy to:
5111 N. Scottsdale Rd., Suite 106 Baker & Hostetler LLP
Scottsdale, AZ 85250 1900 East 9th Street
Attn: Paul Sandler Cleveland, OH 44114-3485
Phone: (___) ___-____ Attn: Michael P. McNamara, Jr.
Fax: (___) ___-____ Phone: (216) 621-0200
Fax: (216) 696-0740
If to the Owner: With a copy to:
5111 N. Scottsdale Rd., Suite 106 Baker & Hostetler LLP
Scottsdale, AZ 85250 1900 East 9th Street
Attn: Paul Sandler Cleveland, OH 44114-3485
Phone: (___) ___-____ Attn: Michael P. McNamara, Jr.
Fax: (___) ___-____ Phone: (216) 621-0200
Fax: (216) 696-0740
</TABLE>
6.2 Owner's Representative. The Owner's Representative for purposes of
----------------------
Section 10.2 of the Uniform Terms shall be Paul Sandler, who shall serve as the
Owner's Representative under the terms of said Section 10.2 of the Uniform
Terms.
6.3 Certain Definitions. In addition to the terms defined elsewhere herein
-------------------
and in the Uniform Terms, as used in this Agreement:
(a) "Anticipated Closing Date" shall mean April 30, 1997.
------------------------
-10-
<PAGE>
(b) "Knowledge" of the Company shall mean the personal knowledge
---------
after due inquiry of those facts that are known or should reasonably
have been known after due inquiry by Paul Sandler and the knowledge of
any such Person obtained or which would have been obtained from a
reasonable investigation.
(c) "Outside Closing Date" shall mean June 30, 1997.
--------------------
[SIGNATURES BEGIN ON THE FOLLOWING PAGE.]
-11-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first written above.
PREMIERE:
PREMIERE TECHNOLOGIES, INC.,
a Georgia corporation
By: /s/Patrick G. Jones
-------------------------------------
Patrick G. Jones
Title: Sr. V.P.
Attest:
By: /s/Douglas B. Hadaway
----------------------------------
Douglas B. Hadaway
Title: Assistant Secretary
DUNES:
DUNES COMMUNICATIONS, INC.,
a California corporation
By: /s/Paul Sandler
-------------------------------------
Paul Sandler
Title: President
Attest:
By: /s/Elaine K. Sandler
----------------------------------
Elaine K. Sandler
Title: Secretary
SANDS A:
SANDS COMMUNICATIONS, INC.,
an Arizona corporation
By: /s/Paul Sandler
-------------------------------------
Paul Sandler
Title: President
Attest:
By: /s/Elaine K. Sandler
----------------------------------
Elaine K. Sandler
Title: Secretary
[SIGNATURES CONTINUED ON THE FOLLOWING PAGE.]
<PAGE>
SANDS NM:
SANDS COMM, INC.,
a New Mexico corporation
By: /s/Paul Sandler
-------------------------------------
Paul Sandler
Title: President
Attest:
By: /s/Elaine K. Sandler
----------------------------------
Elaine K. Sandler
Title: Secretary
SANDSCOMM:
SANDS COMM, INC.,
a California corporation
By: /s/Paul Sandler
-------------------------------------
Paul Sandler
Title: President
Attest:
By: /s/Elaine K. Sandler
----------------------------------
Elaine K. Sandler
Title: Secretary
OWNER:
/s/Paul Sandler
----------------------------------------
Paul Sandler,
an individual resident of the
State of AZ
Witness:
By: /s/Elaine K. Sandler
----------------------
Elaine K. Sandler
<PAGE>
EXHIBIT 2.9
TRANSFER AGREEMENT
BY AND AMONG
PREMIERE TECHNOLOGIES, INC.,
SHAMLIN, INC.
AND
OWNER OF SHAMLIN, INC.
DATED AS OF APRIL 2, 1997
<PAGE>
TRANSFER AGREEMENT
------------------
THIS TRANSFER AGREEMENT (this "Agreement") is entered into as of April 2,
1997 by and among Premiere Technologies, Inc., a Georgia corporation
("Premiere"), Shamlin, Inc., a Colorado corporation (the "Company"), and those
parties listed on the signature pages hereto as the Owner of the Company (the
"Owner").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, this Agreement provides for the acquisition of the Company by
Premiere pursuant to the merger of the Company with and into a wholly owned
subsidiary of Premiere ("Merger Corp"), with Merger Corp as the surviving
corporation in such merger (the "Merger");
WHEREAS, the respective Boards of Directors of Premiere and the Company have
approved the terms and conditions set forth in this Agreement;
WHEREAS, the Owner own one hundred percent (100%) of the equity interests in
the Company;
WHEREAS, this Agreement provides for all of the Owner's equity interests in
the Company to be converted into the right to receive shares of Premiere Stock
in connection with the Merger;
WHEREAS, it is also the intention of the parties hereto that the form of the
transactions with respect to the Company, Premiere and Merger Corp shall qualify
as a "reorganization" within the meaning of Section 368(a) of the Code for
federal income tax purposes; and
WHEREAS, it is also the intention of the parties hereto that the business
combination to be effected by the Merger be accounted for as a pooling of
interests.
NOW, THEREFORE, in consideration of the foregoing, the mutual agreements and
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
I. UNIFORM TERMS AND CONDITIONS
--------------------------------
1.1 Incorporation by Reference. The Uniform Terms and Conditions attached
--------------------------
hereto as Exhibit A (the "Uniform Terms") are hereby made a part of and
---------
incorporated herein as if fully restated herein. Capitalized terms not defined
herein shall have the meanings provided in the Uniform Terms.
<PAGE>
II. TERMS OF MERGER
--------------------
2.1 The Merger.
----------
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time, the Company shall be merged with and into Merger Corp in
accordance with the provisions of the business corporation act under the laws of
the State of Colorado (the "Colorado Act") and the laws of the State of Georgia
(the "Georgia Act"). Merger Corp shall be the surviving corporation resulting
from the Merger, shall thereafter conduct the business and operations of the
Company as a wholly owned subsidiary of Premiere and shall continue to be
governed by the laws of the State of Georgia. The Merger shall be consummated
pursuant to the terms of this Agreement, which has been approved and adopted by
the respective boards of directors of Premiere, Merger Corp and the Company.
(b) Subject to the provisions of this Agreement, the parties shall
file Articles or a Certificate of Merger, as appropriate, executed in accordance
with the relevant provisions of the Colorado Act and a Certificate of Merger
executed in accordance with the relevant provisions of the Georgia Act and shall
make all other filings or recordings required under each such Act as soon as
practicable on or after the Closing Date. The Merger and other transactions
contemplated by this Agreement shall become effective on the date and at the
time the Articles or Certificate of Merger, as appropriate, reflecting the
Merger becomes effective with the Secretary of State of the State of Colorado
and the Certificate of Merger reflecting the Merger becomes effective with the
Secretary of State of the State of Georgia (the "Effective Time").
(c) The charter and Bylaws of Merger Corp in effect immediately prior
to the Effective Time shall be the charter and Bylaws of the surviving
corporation until otherwise amended or repealed, the directors of Merger Corp
immediately prior to the Effective Time shall serve as the directors of the
surviving corporation from and after the Effective Time, and the officers of
Merger Corp in office immediately prior to the Effective Time shall serve as the
officers of the surviving corporation from and after the Effective Time.
2.2 Conversion of Shares. Subject to the provisions of this Section 2.2,
--------------------
and in consideration for the transactions contemplated hereby, at the Effective
Time, by virtue of the Merger and without any action on the part of the parties
hereto or the shareholders of any of the parties hereto, the shares of the
constituent corporations of the Merger shall be converted as follows:
(a) Each share of Premiere Stock and each share of Merger Corp common
stock issued and outstanding at the Effective Time shall remain issued and
outstanding after the Effective Time.
(b) All of the shares of the capital stock, no par value per share,
of the Company ("Company Stock") (excluding treasury shares and excluding shares
held by shareholders who perfect their statutory dissenters' rights as provided
in Section 2.4 of this Agreement) issued and outstanding at the Effective Time
shall cease to be outstanding and shall be converted into and exchanged for the
right to receive:
(i) the number of shares of Premiere Stock determined by
dividing (A) the product of .9 multiplied by the Company
Purchase Price, by (B) the Average Closing Price, and then
subtracting the number of shares of
-2-
<PAGE>
Premiere Stock to be placed in a specific escrow account
as determined by paragraph (iii) of Section 2.2;
(ii) the number of shares of Premiere Stock determined by
dividing (A) the product of .1 multiplied by the Company
Purchase Price, by (B) the Average Closing Price (the
"General Escrow Amount"); and
(iii) the number of shares of Premiere Stock determined by
dividing (A) [0] by (B) the Average Closing Price (the
"Specific Escrow Amount").
all as determined in accordance with Section 2.3 below (collectively, the
"Consideration"). Subject to Section 2.2(d) below, the Consideration shall be
issuable to the Owner pro rata in accordance with their ownership of Company
Common Stock pursuant to Section 2.6, which ownership the Owner represent has
not been adjusted in contemplation of the transactions described herein.
(c) Any and all shares of Company Common Stock held as treasury
shares by the Company shall be canceled and retired at the Effective Time, and
no consideration shall be issued in exchange therefor.
(d) Upon consummation of the Merger, the Owner shall deliver the
General Escrow Amount and the Specific Escrow Amount in negotiable form to the
Escrow Agent to be held in escrow pursuant to the terms and conditions of the
Escrow Agreements in the forms attached hereto as Exhibit B and Exhibit B-1,
--------- -----------
which shall be executed and delivered by Premiere and the Owner at the Closing.
2.3 Calculation of Consideration. For purposes of determining the
----------------------------
Consideration issuable to the Owner pursuant to Section 2.2(b) above, the
following shall apply:
(a) "Average Closing Price" shall be the average of the daily last
sale prices of Premiere Stock for the period consisting of twenty (20)
consecutive trading days on which such shares are actually traded on the Nasdaq
National Market (as reported by the Wall Street Journal or, if not reported
thereby, any other authoritative source selected by Premiere) ending at the
close of trading on the first trading day immediately preceding the Closing;
provided, however, that the Average Closing Price shall not be less than $22.50
- - -------- -------
nor more than $30.50 (collectively, $22.50 and $30.50 are referred to as the
"Average Closing Price Limitations").
(b) "Company Purchase Price" shall be the sum of (i) the amount
determined by multiplying the Normalized EBITDA of the Company by the Stock
Multiple, plus (ii) the amount of cash reflected on the Closing Date Balance
----
Sheet, minus (iii) the aggregate amount of principal and accrued and unpaid
-----
interest under funded debt and capital lease obligations reflected on the
Closing Date Balance Sheet, minus (iv) the amount by which the Transaction Costs
-----
exceed the Deductible Amount.
(c) "Deductible Amount" shall be an amount equal to $10,000.
(d) "Normalized EBITDA" of the Company shall be an amount equal to
$676,588.
(e) "Registration Right" shall mean the right to include Premiere
Stock issued in the Merger in a registration statement which Premiere intends to
file promptly after the end of the first
-3-
<PAGE>
full fiscal quarter of Premiere containing the period of post-Merger combined
operations required by ASRs 130 and 135, pursuant to the terms and conditions of
the Stock Restriction and Registration Rights Agreement in the form attached
hereto as of Exhibit C (the "Registration Rights Agreement").
---------
(f) "Stock Multiple" shall be six (6).
(g) "Transaction Costs" shall mean all amounts incurred but unpaid by
the Company in connection with (i) the negotiation and preparation of this
Agreement, (ii) the preparation of the Audited Financial Statements, (iii) the
consummation of the Transactions and (iv) one-half of the costs and expenses of
public record searches pursuant to Section 5.9(b) of the Uniform Terms.
2.4 Dissenting Shareholders. Subject to Section 4.2, any holder of shares
-----------------------
of voting capital stock of the Company who perfects any available dissenters'
rights in accordance with and as contemplated by the Colorado Act shall be
entitled to receive the value of such shares in cash from the Company after the
Effective Time as determined pursuant to such provision of law; provided, that
no such payment shall be made to any dissenting shareholder unless and until
such dissenting shareholder has complied with the applicable provisions of the
Colorado Act and surrendered to the Company the certificate or certificates
representing the shares for which payment is being made. In the event that a
dissenting shareholder of the Company fails to perfect, or effectively withdraws
or loses, its right to appraisal and of payment for its shares, Premiere shall
issue and deliver the consideration to which such holder of shares of Company
capital stock is entitled under this Article II (without interest) upon
surrender of certificates representing such shares held by such holder.
2.5 Closing. The Closing shall take place at the offices of Alston & Bird
-------
LLP, Atlanta, Georgia, at 10:00 a.m. local time, on the date set forth in the
Uniform Terms, provided all conditions set forth in Articles V and VI of the
Uniform Terms and Articles IV and V of this Agreement have been satisfied or
waived, or on such other date or at such other place and time mutually agreed
upon by the parties.
2.6 Exchange of Shares. Promptly after the Effective Time, Premiere and
------------------
Company shall cause to be mailed to the former Company shareholders appropriate
transmittal materials for the surrender of the certificate or certificates
formerly representing their shares of Company Common Stock in exchange for
shares of Premiere Stock as provided in this Agreement. Until surrendered for
exchange in accordance herewith, each certificate theretofore representing
shares of Company Common Stock shall from and after the Effective Time represent
only the right to receive the Consideration provided in this Agreement in
exchange therefor. No certificates representing fractional shares will be
issued as a result of the Merger. Each holder of shares of Company Common Stock
exchanged pursuant to the Merger who would otherwise have been entitled to
receive a fraction of a share of Premiere Common Stock shall receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional part of a
share of Premiere Common Stock multiplied by the Average Closing Price.
2.7 Purchase for Investment, Etc. Each Owner, represents and warrants the
-----------------------------
following to Premiere:
(a) such Owner has accurately completed the Investor Questionnaire
required by Premiere prior to or contemporaneous with the execution of the
Transfer Agreement and the
-4-
<PAGE>
statements therein are true and correct and acknowledges that Premiere has
relied upon such statements in entering into this Agreement;
(b) such Owner is acquiring Premiere Stock for such Owner's own
account and not with a view to or for sale in connection with any public
distribution thereof within the meaning of the Securities Act;
(c) such Owner (i) has sufficient knowledge and experience in
financial and business matters to enable him, her or it to evaluate the merits
and risks of an investment in Premiere Stock, (ii) has the ability to bear the
economic risk of acquiring Premiere Stock for an indefinite period and to afford
a complete loss thereof and (iii) has had an opportunity to ask questions of and
to receive answers from the officers of Premiere and to obtain additional
information in writing as requested, which has been made available to and
examined by such Owner or such Owner's advisors; and
(d) such Owner (i) acknowledges that Premiere Stock has not been
registered under any securities laws and cannot be resold without registration
thereunder or exemption therefrom, (ii) agrees not to transfer all or any
Premiere Stock received by such Owner unless such transfer has been registered
or is exempt from registration under applicable securities laws and (iii)
acknowledges that the certificate(s) representing Premiere Stock shall bear the
following legend with respect to the restrictions on transfer under applicable
securities laws:
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, and may not be offered, sold,
transferred or otherwise disposed of unless registered with the
Securities and Exchange Commission of the United States and the
securities regulatory authorities of applicable states or unless an
exemption from such registration is available."
2.8 Accounting, Tax and Regulatory Matters. Each Owner and the Company,
--------------------------------------
jointly and severally, represents and warrants to Premiere that neither the
Company, any Owner nor any Affiliate thereof has taken or agreed to take any
action or has any knowledge of any fact or circumstance that is reasonably
likely to (i) prevent the Merger from qualifying for pooling-of-interests
accounting treatment or as a reorganization within the meaning of Section 368(a)
of the Code, or (ii) materially impede or delay receipt of any consents referred
to in Section 5.6 of the Uniform Terms or result in the imposition of a
condition or restriction of the type referred to in the last sentence of such
Section.
III. ADDITIONAL AGREEMENTS
---------------------------
3.1 Filings with State Offices. Upon the terms and subject to the
--------------------------
conditions of this Agreement, the Company and Merger Corp shall execute and file
the Articles or Certificate of Merger with the Secretary of State of the State
of Colorado and a Certificate of Merger with the Secretary of State of the State
of Georgia in connection with the Closing.
3.2 Conditions to Closing. The Company, the Owner and Premiere agree to use
---------------------
their commercially reasonable best efforts to satisfy the closing conditions set
forth in Articles IV and V of this Agreement by the date indicated therein or
the Closing Date, as applicable.
-5-
<PAGE>
3.3 Additional Indemnification Items. Subject to Sections 8.2 through 8.6
--------------------------------
of the Uniform Terms, the Owner and, if the Transactions involve an Asset
Transfer, the Company, shall jointly and severally indemnify and hold harmless
Premiere, and its officers, directors, agents or affiliates, from and against
any and all Losses suffered or incurred by any such party by reason of or
arising out of any of the following:
(a) a breach of Section 2.19 of the Uniform Terms as it relates to
liability for sales tax (irrespective of whether disclosed on Schedule 2.19 or
in the Financial Statements).
3.4 Tax Matters. Each of the Company, the Owner and Premiere undertakes and
-----------
agrees to use its reasonable efforts to cause the Merger, and to take no action
which would cause the Merger not, to qualify as a "reorganization" within the
meaning of Section 368(a) of the Code for federal income tax purposes.
Notwithstanding the foregoing, the Owner understand that (i) Premiere makes no
representation or warranty regarding the tax treatment of this Agreement or the
Merger, (ii) the Closing is not subject to a condition that an Internal Revenue
Service ruling or tax opinion be obtained as to the federal income tax
consequences of this Agreement or the Merger, and (iii) the Company and the
Owner shall look to their respective advisors for advice concerning the tax
consequences of this Agreement and the Merger.
3.5 Registration Rights. At the Closing, Premiere and the Owner shall
-------------------
execute and deliver the Registration Rights Agreement.
3.6 Accounting Treatment.
--------------------
(a) The Company and each of the Owner has accurately completed the
Pooling Questionnaire required by Premiere prior to or contemporaneous with the
execution of this Agreement, and the statements therein are true and correct.
(b) Premiere, the Company and each of the Owner agrees to use its
reasonable efforts to cause the Merger, and to take no action which would cause
the Merger not, to qualify for treatment as a pooling of interests for
accounting purposes. Without limiting the foregoing, the Company and each of
the Owner agrees not to sell, transfer, or otherwise dispose of his, her or its
interests in, or reduce his, her or its risk relative to, any of the shares of
Premiere Common Stock received in connection with the Merger until such time as
Premiere notifies the Company and each such Owner that the requirements of ASRs
130 and 135 have been met. The Company and each of the Owner understands that
ASRs 130 and 135 relate to the publication of financial results of at least
thirty (30) days of post-Merger combined operations of Premiere and the Company.
Premiere agrees that it shall publish such results within forty-five (45) days
after the end of the first fiscal quarter of Premiere containing the required
period of post-Merger combined operations and that it shall notify the Company
and each of the Owner promptly following such publication. Premiere shall be
entitled to place the following restrictive legend on the shares of Premiere
Stock issued pursuant to the Merger to enforce the foregoing restrictions:
"The shares represented by this certificate were issued pursuant to a
business combination which is accounted for as a "pooling of interests" and
may not be sold, nor may the owner thereof reduce his risks relative
thereto in any way, until such time as Premiere Technologies, Inc.
("Premiere") has published the financial results covering at least 30 days
of combined operations after the effective date of the merger through which
the business combination was effected.
-6-
<PAGE>
3.7 Affiliate Agreements. The Company has identified Joseph T. Braverman as
--------------------
the only person whom it reasonably believes is an "affiliate" of the Company
for purposes of Rule 145 under the 1933 Act. The Company shall use its
reasonable efforts to cause each such Person to deliver to Premiere as soon as
reasonably practicable following the execution of this Agreement, a written
agreement, substantially in the form attached hereto as Exhibit D."3
----------
3.8 Tax Representations. In connection with the opinion to be rendered to
-------------------
Premiere by Alston & Bird to the effect that the transactions contemplated
hereby will constitute a tax-free reorganization within the meaning of Section
368(a) of the Code, the Owner shall furnish such counsel with such
representations as to their plans for the disposition of the shares of Premiere
Stock to be received in the Transactions as such counsel shall reasonably
request.
3.9 Restricted Stock. All contractual restrictions or limitations on
----------------
transfer with respect to Company Common Stock under any plan, program, contract
or arrangement, to the extent that such restrictions or limitations have not
already lapsed (whether as a result of the Transactions or otherwise), and
except as otherwise expressly provided in such plan, program, contract or
arrangement, shall remain in full force and effect with respect to shares of
Premiere Stock into which such restricted stock is converted pursuant to Section
2.2 of this Transfer Agreement.
3.10 Exchange Listing. Premiere shall use its reasonable efforts to list,
----------------
prior to the Effective Time, on the Nasdaq National Market the shares of
Premiere Stock to be issued to the Owner pursuant to the Transactions, and
Premiere shall give all notices and make all filings with the NASD required in
connection with the Transactions.
IV. SUPPLEMENTAL CONDITIONS TO OBLIGATIONS OF PREMIERE
-------------------------------------------------------
In addition to the conditions of Premiere contained in Article V of the
Uniform Terms, the obligation of Premiere to consummate the Transactions is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions:
4.1 Approval of Owner. The Owner shall have approved the Merger in
-----------------
accordance with the requirements of the Colorado Act and the Company shall have
provided Premiere certified copies of such resolutions, and Owner holding no
more than ten percent (10%) of the Company Common Stock issued and outstanding
immediately prior to the Effective Time shall have exercised any of the rights
described in Section 2.4.
4.2 Grand Solution Documents. VTNLP, VTE, the NAP and each of the Franchisee
------------------------
Companies shall have executed and delivered Grand Solution Documents reflecting
the terms described in Exhibit E hereto in form and substance reasonably
---------
satisfactory to Premiere.
4.3 Audited Financial Statements. Premiere shall have received balance
----------------------------
sheets of the Company as of December 31, 1995 and 1996 and related statements of
operations, cash flows and changes in Owner's equity for the fiscal years then
ended (the "Audited Financial Statements") prepared in accordance with GAAP and
Regulation S-X promulgated by the Commission, accompanied by an unqualified
audit opinion of Arthur Andersen LLP relating thereto. The Audited Financial
Statements shall not reflect any material change in the Company's financial
condition or results of operations from the condition and results reported in
the Financial
-7-
<PAGE>
Statements for the corresponding periods delivered by the Company prior to the
execution of this Agreement.
4.4 Pooling Letter. Premiere shall have received a letter, dated as of the
--------------
Effective Time, in form and substance reasonably acceptable to Premiere, from
Arthur Andersen LLP to the effect that the Merger will qualify for pooling of
interests accounting treatment, and no action shall have been taken by any
regulatory authority or any statute, rule, regulation or order enacted,
promulgated or issued by any regulatory authority, or any proposal made for any
such action by any regulatory authority which is reasonably likely to be put
into effect, that would prevent Premiere from accounting for the business
combination to be effected by the Merger as a pooling of interests.
4.5 Reorganization Opinion. Premiere shall have received an opinion of
----------------------
Alston & Bird LLP, counsel to Premiere, to the effect that the transactions
contemplated by the Agreement, including the Merger, will constitute a tax-free
reorganization within the meaning of Section 368(a) of the Code.
4.6 Loan to Southgate Development Company, Inc. Southgate Development
-------------------------------------------
Company, Inc. shall have paid in full all amounts due and owing to the Company,
which amounts the Company shall be permitted to pay to the Owner to reduce the
amounts payable pursuant to the Company's debt obligations to the Owner.
V. SUPPLEMENTAL CONDITIONS TO OBLIGATIONS OF THE COMPANY
---------------------------------------------------------
AND THE OWNER
-------------
In addition to the conditions of the Company and the Owner contained in
Article VI of the Uniform Terms, the obligation of the Company and the Owner to
consummate the Transactions is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions:
5.1 Approval of Premiere and Merger Corp. The Board of Directors of
------------------------------------
Premiere and the Board of Directors and the shareholder of Merger Corp shall
have approved the Merger in accordance with the requirement of applicable state
law. Premiere and Merger Corp shall have provided the Company certified copies
of such resolutions.
5.2 Registration Rights. Premiere and each Owner shall have executed and
-------------------
delivered a Registration Rights Agreement.
VI. MISCELLANEOUS
------------------
6.1 Notices. The addresses for notices in accordance with Section 10.1 of
-------
the Uniform Terms for the Company and the Owner are as follows:
-8-
<PAGE>
<TABLE>
<S> <C> <C>
If to the Company: With a copy to:
Voice-Tel of Colorado Meardon, Sueppel,Downer & Hayes
1660 S. Albion Street, #606 122 S. Linn St.
Denver, CO 80222 Iowa City, IA 52240
Attn: Joseph Braverman Attn: Mark Hamer
Phone: (303) 757-1400 Phone: (319) 338-9222
Fax: (303) 757-3030 Fax (319) 338-7250
If to the Owner: With a copy to:
Voice-Tel of Colorado Meardon, Sueppel,Downer & Hayes
1660 S. Albion Street, #606 122 S. Linn St.
Denver, CO 80222 Iowa City, IA 52240
Attn: Joseph Braverman Attn: Mark Hamer
Phone: (303) 757-1400 Phone: (303) 757-1400
Fax: (303) 757-3030 Fax: (303) 757-3030
</TABLE>
6.2 Owner's Representative. The Owner' Representative for purposes of
----------------------
Section 10.2 of the Uniform Terms shall be Joseph T. Braverman, who shall serve
as the Owner's Representative under the terms of said Section 10.2 of the
Uniform Terms.
6.3 Certain Definitions. In addition to the terms defined elsewhere herein
-------------------
and in the Uniform Terms, as used in this Agreement:
(a) "Anticipated Closing Date" shall mean April 30, 1997.
------------------------
(b) "Knowledge" of the Company shall mean the personal knowledge
---------
after due inquiry of those facts that are known or should reasonably
have been known after due inquiry by Joseph T. Braverman, and the
knowledge of any such Persons obtained or which would have been
obtained from a reasonable investigation.
(c) "Outside Closing Date" shall mean June 30, 1997.
--------------------
-9-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first written above.
PREMIERE:
PREMIERE TECHNOLOGIES, INC.,
a Georgia corporation
By: /s/ Patrick G. Jones
-------------------------------------
Patrick G. Jones
Title: Sr. V.P.
Attest:
By: /s/ Douglas B. Hadaway
-----------------------------------
Douglas B. Hadaway
Title: Assistant Secretary
COMPANY:
SHAMLIN, INC.,
a Colorado corporation
By: /s/Joseph T. Braverman
-------------------------------------
Joseph T. Braverman
Title: President
Attest:
By: /s/Joseph T. Braverman
-----------------------------------
Title: Secretary
OWNER:
/s/Joseph T. Braverman
----------------------------------------
Joseph T. Braverman,
an individual resident of the
State of Colorado
Witness:
By: /s/Olivia L. Spencer
-----------------------------------
Olivia L. Spencer
<PAGE>
EXHIBIT 2.10
TRANSFER AGREEMENT
BY AND AMONG
PREMIERE TECHNOLOGIES, INC.,
VT OF OHIO, INC.
AND
OWNERS OF VT OF OHIO, INC.
DATED AS OF APRIL 2, 1997
<PAGE>
TRANSFER AGREEMENT
------------------
THIS TRANSFER AGREEMENT (this "Agreement") is entered into as of April 2,
1997 by and among Premiere Technologies, Inc., a Georgia corporation
("Premiere"), VT of Ohio, Inc., an Ohio corporation (the "Company"), and those
parties listed on the signature pages hereto as the owners of the Company (the
"Owners").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, this Agreement provides for the acquisition of the Company by
Premiere pursuant to the merger of the Company with and into a wholly owned
subsidiary of Premiere ("Merger Corp"), with Merger Corp as the surviving
corporation in such merger (the "Merger");
WHEREAS, the respective Boards of Directors of Premiere and the Company have
approved the terms and conditions set forth in this Agreement;
WHEREAS, the Owners own one hundred percent (100%) of the equity interests in
the Company;
WHEREAS, this Agreement provides for all of the Owners' equity interests in
the Company to be converted into the right to receive shares of Premiere Stock
in connection with the Merger;
WHEREAS, it is also the intention of the parties hereto that the form of the
transactions with respect to the Company, Premiere and Merger Corp shall qualify
as a "reorganization" within the meaning of Section 368(a) of the Code for
federal income tax purposes; and
WHEREAS, it is also the intention of the parties hereto that the business
combination to be effected by the Merger be accounted for as a pooling of
interests.
NOW, THEREFORE, in consideration of the foregoing, the mutual agreements and
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
I. UNIFORM TERMS AND CONDITIONS
--------------------------------
1.1 Incorporation by Reference. The Uniform Terms and Conditions attached
--------------------------
hereto as Exhibit A (the "Uniform Terms") are hereby made a part of and
---------
incorporated herein as if fully restated herein. Capitalized terms not defined
herein shall have the meanings provided in the Uniform Terms.
<PAGE>
II. TERMS OF MERGER
--------------------
2.1 The Merger.
----------
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time, the Company shall be merged with and into Merger Corp in
accordance with the provisions of the business corporation act under the laws of
the State of Ohio (the "Ohio Act") and the laws of the State of Georgia (the
"Georgia Act"). Merger Corp shall be the surviving corporation resulting from
the Merger, shall thereafter conduct the business and operations of the Company
as a wholly owned subsidiary of Premiere and shall continue to be governed by
the laws of the State of Georgia. The Merger shall be consummated pursuant to
the terms of this Agreement, which has been approved and adopted by the
respective boards of directors of Premiere, Merger Corp and the Company.
(b) Subject to the provisions of this Agreement, the parties shall
file a Certificate of Merger executed in accordance with the relevant provisions
of the Ohio Act and a Certificate of Merger executed in accordance with the
relevant provisions of the Georgia Act and shall make all other filings or
recordings required under each such Act as soon as practicable on or after the
Closing Date. The Merger and other transactions contemplated by this Agreement
shall become effective on the date and at the time the Certificate of Merger
reflecting the Merger becomes effective with the Secretary of State of the State
of Ohio and the Certificate of Merger reflecting the Merger becomes effective
with the Secretary of State of the State of Georgia (the "Effective Time").
(c) The charter and Bylaws of Merger Corp in effect immediately prior
to the Effective Time shall be the charter and Bylaws of the surviving
corporation until otherwise amended or repealed, the directors of Merger Corp
immediately prior to the Effective Time shall serve as the directors of the
surviving corporation from and after the Effective Time, and the officers of
Merger Corp in office immediately prior to the Effective Time shall serve as the
officers of the surviving corporation from and after the Effective Time.
2.2 Conversion of Shares. Subject to the provisions of this Section 2.2,
--------------------
and in consideration for the transactions contemplated hereby, at the Effective
Time, by virtue of the Merger and without any action on the part of the parties
hereto or the shareholders of any of the parties hereto, the shares of the
constituent corporations of the Merger shall be converted as follows:
(a) Each share of Premiere Stock and each share of Merger Corp common
stock issued and outstanding at the Effective Time shall remain issued and
outstanding after the Effective Time.
(b) All of the shares of the capital stock, no par value per share,
of the Company ("Company Stock") (excluding treasury shares and excluding shares
held by shareholders who perfect their statutory dissenters' rights as provided
in Section 2.4 of this Agreement) issued and outstanding at the Effective Time
shall cease to be outstanding and shall be converted into and exchanged for the
right to receive:
(i) the number of shares of Premiere Stock determined by
dividing (A) the product of .9 multiplied by the Company
Purchase Price, by (B) the Average Closing Price;
-2-
<PAGE>
(ii) the number of shares of Premiere Stock determined by
dividing (A) the product of .1 multiplied by the Company
Purchase Price, by (B) the Average Closing Price (the
"General Escrow Amount"); and
(iii) the number of shares of Premiere Stock received by the
Company pursuant to the Agreement and Plan of Merger of
even date herewith among Premiere, PTEK Merger Corporation,
Voice-Tel Enterprises, Inc. ("VTE") and the Stockholders of
VTE (the "VTE Merger Agreement") including those held in
escrow pursuant to the General Escrow Agreement or the
Specific Escrow Agreement (as defined in the VTE Merger
Agreement); provided, however, that the number of shares of
Premiere Stock held in escrow pursuant to the VTE Merger
Agreement shall be held in escrow pursuant to the terms and
conditions of the Escrow Agreement described in Section
2.2(d) below.
all as determined in accordance with Section 2.3 below (collectively, the
"Consideration"). Subject to Section 2.2(d) below, the Consideration shall be
issuable to the Owners pro rata in accordance with their ownership of Company
Common Stock as of the Closing Date pursuant to Section 2.6, which ownership the
Owners represent has not been adjusted in contemplation of the transactions
described herein.
(c) Any and all shares of Company Common Stock held as treasury
shares by the Company shall be canceled and retired at the Effective Time, and
no consideration shall be issued in exchange therefor.
(d) Upon consummation of the Merger, the Owners shall deliver the
General Escrow Amount in negotiable form to the Escrow Agent to be held in
escrow pursuant to the terms and conditions of the Escrow Agreement in the form
attached hereto as Exhibit B, which shall be executed and delivered by Premiere
---------
and the Owners at the Closing.
2.3 Calculation of Consideration. For purposes of determining the
----------------------------
Consideration issuable to the Owners pursuant to Section 2.2(b) above, the
following shall apply:
(a) "Average Closing Price" shall be the average of the daily last
sale prices of Premiere Stock for the period consisting of twenty (20)
consecutive trading days on which such shares are actually traded on the Nasdaq
National Market (as reported by the Wall Street Journal or, if not reported
thereby, any other authoritative source selected by Premiere) ending at the
close of trading on the first trading day immediately preceding the Closing;
provided, however, that the Average Closing Price shall not be less than $22.50
- - -------- -------
nor more than $30.50 (collectively, $22.50 and $30.50 are referred to as the
"Average Closing Price Limitations").
(b) "Company Purchase Price" shall be the sum of (i) (A) the amount
determined by multiplying the Normalized EBITDA of the Company by the EBITDA
Stock Multiple , plus (B) the amount of cash reflected on the Closing Date
----
Balance Sheet of the Company, minus (C) the aggregate amount of principal and
-----
accrued and unpaid interest under funded debt and capital lease obligations
reflected on the Closing Date Balance Sheet of the Company, minus (D) the amount
-----
by which the Transaction Costs exceed the Deductible Amount, plus (ii) forty
----
percent (40%) of the
-3-
<PAGE>
sum of (A) the amount determined by multiplying the Normalized EBITDA of
Columbus Voice Partners, an Ohio general partnership ("CVP") by the EBITDA Stock
Multiple, plus (B) the amount of cash reflected on the Closing Date Balance
Sheet of CVP, and minus (C) the amount of principal and accrued and unpaid
-----
interest under funded debt and capital lease obligations reflected on the
Closing Date Balance Sheet of CVP, plus (iii) sixty six and two thirds percent
----
(66.7%) of the sum of (A) the amount determined by multiplying the 1996 Revenues
of Voice Partners Company, an Ohio general partnership ("VPC"), by the Revenue
Stock Multiple, plus (B) the amount of cash reflected on the Closing Date
----
Balance Sheet of VPC, and minus (C) the amount of principal and accrued and
-----
unpaid interest under funded debt and capital lease obligations reflected on the
Closing Date Balance Sheet of VPC, and plus (iv) seventeen percent (17%) of the
----
sum of (A) the amount determined by multiplying the 1996 Revenues of Voice
Partners of Greater Mahoning Valley, an Ohio limited partnership ("VPG"), by the
Revenue Stock Multiple, plus (B) the amount of cash reflected on the Closing
----
Date Balance Sheet of VPG, and minus (C) the amount of principal and accrued and
-----
unpaid interest under funded debt and capital lease obligations reflected on the
Closing Date Balance Sheet of VPG.
(c) "Deductible Amount" shall be an amount equal to $5,000.00.
(d) "Normalized EBITDA" of the Company shall be an amount equal to
$71,109.00; and the "Normalized EBITDA" of CVP shall be an amount equal to
$367,284.00.
(e) "Registration Right" shall mean the right to include Premiere
Stock issued in the Merger in a registration statement which Premiere intends to
file promptly after the end of the first full fiscal quarter of Premiere
containing the period of post-Merger combined operations required by ASRs 130
and 135, pursuant to the terms and conditions of the Stock Restriction and
Registration Rights Agreement in the form attached hereto as of Exhibit C (the
---------
"Registration Rights Agreement") .
(f) "EBITDA Stock Multiple" shall be six (6); and "Revenue Stock
Multiple" shall be 1.7.
(g) "Transaction Costs" shall mean all amounts incurred but unpaid by
the Company in connection with (i) the negotiation and preparation of this
Agreement, (ii) the preparation of the Financial Statements, (iii) the
consummation of the Transactions and (iv) one-half of the costs and expenses of
public record searches pursuant to Section 5.9(b) of the Uniform Terms.
(h) "1996 Revenues" of VPC shall be an amount equal to $1,961,622;
and "1996 Revenues" of VPG shall be an amount equal to $96,718.
2.4 Dissenting Shareholders. Subject to Section 4.2, any holder of shares
-----------------------
of voting capital stock of the Company who perfects any available dissenters'
rights in accordance with and as contemplated by the Ohio Act shall be entitled
to receive the value of such shares in cash from the Company after the Effective
Time as determined pursuant to such provision of law; provided, that no such
payment shall be made to any dissenting shareholder unless and until such
dissenting shareholder has complied with the applicable provisions of the Ohio
Act and surrendered to the Company the certificate or certificates representing
the shares for which payment is being made. In the event that a dissenting
shareholder of the Company fails to perfect, or effectively withdraws or loses,
its right to appraisal and of payment for its shares, Premiere shall issue and
deliver the consideration to which such holder of shares of Company capital
stock is entitled under this
-4-
<PAGE>
Article II (without interest) upon surrender of certificates representing such
shares held by such holder.
2.5 Closing. The Closing shall take place at the offices of Alston & Bird
-------
LLP, Atlanta, Georgia, at 10:00 a.m. local time, on the date set forth in the
Uniform Terms, provided all conditions set forth in Articles V and VI of the
Uniform Terms and Articles IV and V of this Agreement have been satisfied or
waived, or on such other date or at such other place and time mutually agreed
upon by the parties.
2.6 Exchange of Shares. Promptly after the Effective Time, Premiere and
------------------
Company shall cause to be mailed to the former Company shareholders appropriate
transmittal materials for the surrender of the certificate or certificates
formerly representing their shares of Company Common Stock in exchange for
shares of Premiere Stock as provided in this Agreement. Until surrendered for
exchange in accordance herewith, each certificate theretofore representing
shares of Company Common Stock shall from and after the Effective Time represent
only the right to receive the Consideration provided in this Agreement in
exchange therefor. No certificates representing fractional shares will be
issued as a result of the Merger. Each holder of shares of Company Common Stock
exchanged pursuant to the Merger who would otherwise have been entitled to
receive a fraction of a share of Premiere Common Stock shall receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional part of a
share of Premiere Common Stock multiplied by the Average Closing Price.
2.7 Purchase for Investment, Etc. Each Owner, represents and warrants the
-----------------------------
following to Premiere:
(a) such Owner has accurately completed the Investor Questionnaire
required by Premiere prior to or contemporaneous with the execution of the
Transfer Agreement and the statements therein are true and correct and
acknowledges that Premiere has relied upon such statements in entering into this
Agreement;
(b) such Owner is acquiring Premiere Stock for such Owner's own
account and not with a view to or for sale in connection with any public
distribution thereof within the meaning of the Securities Act;
(c) such Owner (i) has sufficient knowledge and experience in
financial and business matters to enable him, her or it to evaluate the merits
and risks of an investment in Premiere Stock, (ii) has the ability to bear the
economic risk of acquiring Premiere Stock for an indefinite period and to afford
a complete loss thereof and (iii) has had an opportunity to ask questions of and
to receive answers from the officers of Premiere and to obtain additional
information in writing as requested, which has been made available to and
examined by such Owner or such Owner's advisors; and
(d) such Owner (i) acknowledges that Premiere Stock has not been
registered under any securities laws and cannot be resold without registration
thereunder or exemption therefrom, (ii) agrees not to transfer all or any
Premiere Stock received by such Owner unless such transfer has been registered
or is exempt from registration under applicable securities laws and (iii)
acknowledges that the certificate(s) representing Premiere Stock shall bear the
following legend with respect to the restrictions on transfer under applicable
securities laws:
-5-
<PAGE>
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, and may not be offered, sold,
transferred or otherwise disposed of unless registered with the
Securities and Exchange Commission of the United States and the
securities regulatory authorities of applicable states or unless an
exemption from such registration is available."
2.8 Accounting, Tax and Regulatory Matters. Each Owner and the Company,
--------------------------------------
jointly and severally, represents and warrants to Premiere that neither the
Company, any Owner nor any Affiliate thereof has taken or agreed to take any
action or has any knowledge of any fact or circumstance that is reasonably
likely to (i) prevent the Merger from qualifying for pooling-of-interests
accounting treatment or as a reorganization within the meaning of Section 368(a)
of the Code, or (ii) materially impede or delay receipt of any consents referred
to in Section 5.6 of the Uniform Terms or result in the imposition of a
condition or restriction of the type referred to in the last sentence of such
Section.
2.9 Ownership. Each Owner and the Company, jointly and severally,
---------
represents and warrants to Premiere that at the Closing Date (i) the Company
will own partner interests representing 40% of the equity in the earnings,
losses, assets and liabilities of CVP and partner interests representing 66.7%
of the equity in the earnings, losses, assets and liabilities of VPC and common
stock of Voice-Tel Enterprises, Inc. and (ii) VPC owns partner interests
representing 25% of the earnings, losses, assets and liabilities of VPG, and
that neither the Company nor CVP has any material Assets other than those
partner interests and the Company's ownership of common stock of Voice-Tel
Enterprises, Inc. All references in the Uniform Terms and Conditions to the
Company shall be deemed to refer to the Company and VPC: provided that Company
will also include CVP and VPG for purposes of 2.4, 2.5 (first sentence only),
2.6, 2.10 and 2.16 and CVP for purposes of Sections 2.3, 2.5 (except for the
first sentence), 2.7, 2.8, 2.9, 2.11, 2.12. , 2.13, 2.14, 2.15, 2.17, 2.18,
2.19, 2.20, 2.21 and 2.22.
III. ADDITIONAL AGREEMENTS
---------------------------
3.1 Filings with State Offices. Upon the terms and subject to the
--------------------------
conditions of this Agreement, the Company and Merger Corp shall execute and file
the Certificate of Merger with the Secretary of State of the State of Ohio and a
Certificate of Merger with the Secretary of State of the State of Georgia in
connection with the Closing.
3.2 Conditions to Closing. The Company, the Owners and Premiere agree to
---------------------
use their commercially reasonable best efforts to satisfy the closing conditions
set forth in Articles IV and V of this Agreement by the date indicated therein
or the Closing Date, as applicable.
3.3 Additional Indemnification Items. Subject to Sections 8.2 through 8.6
--------------------------------
of the Uniform Terms, the Owners and the Company, shall jointly and severally
indemnify and hold harmless Premiere, and its officers, directors, agents or
affiliates, from and against any and all Losses suffered or incurred by any such
party by reason of or arising out of any breach of Section 2.19 of the Uniform
Terms as it relates to liability for sales tax (irrespective of whether
disclosed on Schedule 2.19 or in the Financial Statements).
3.4 Tax Matters. Each of the Company, the Owners and Premiere undertakes
-----------
and agrees to use its reasonable efforts to cause the Merger, and to take no
action which would cause the Merger not, to qualify as a "reorganization" within
the meaning of Section 368(a) of the Code for federal
-6-
<PAGE>
income tax purposes. Notwithstanding the foregoing, the Owners understand that
(i) Premiere makes no representation or warranty regarding the tax treatment of
this Agreement or the Merger, (ii) the Closing is not subject to a condition
that an Internal Revenue Service ruling or tax opinion be obtained as to the
federal income tax consequences of this Agreement or the Merger, and (iii) the
Company and the Owners shall look to their respective advisors for advice
concerning the tax consequences of this Agreement and the Merger.
3.5 Registration Rights. At the Closing, Premiere and the Owners shall
-------------------
execute and deliver the Registration Rights Agreement.
3.6 Accounting Treatment.
--------------------
(a) The Company and each of the Owners has accurately completed the
Pooling Questionnaire required by Premiere prior to or contemporaneous with the
execution of this Agreement, and the statements therein are true and correct.
(b) Premiere, the Company and each of the Owners agrees to use its
reasonable efforts to cause the Merger, and to take no action which would cause
the Merger not, to qualify for treatment as a pooling of interests for
accounting purposes. Without limiting the foregoing, the Company and each of
the Owners agrees not to sell, transfer, or otherwise dispose of his, her or its
interests in, or reduce his, her or its risk relative to, any of the shares of
Premiere Common Stock received in connection with the Merger until such time as
Premiere notifies the Company and each such Owner that the requirements of ASRs
130 and 135 have been met. The Company and each of the Owners understands that
ASRs 130 and 135 relate to the publication of financial results of at least
thirty (30) days of post-Merger combined operations of Premiere and the Company.
Premiere agrees that it shall publish such results within forty-five (45) days
after the end of the first fiscal quarter of Premiere containing the required
period of post-Merger combined operations and that it shall notify the Company
and each of the Owners promptly following such publication. Premiere shall be
entitled to place the following restrictive legend on the shares of Premiere
Stock issued pursuant to the Merger to enforce the foregoing restrictions:
"The shares represented by this certificate were issued pursuant to a
business combination which is accounted for as a "pooling of interests" and
may not be sold, nor may the owner thereof reduce his risks relative
thereto in any way, until such time as Premiere Technologies, Inc.
("Premiere") has published the financial results covering at least 30 days
of combined operations after the effective date of the merger through which
the business combination was effected."
3.7 Affiliate Agreements. The Company has disclosed in Schedule 3.7 all
-------------------- ------------
Persons whom it reasonably believes is an "affiliate" of the Company for
purposes of Rule 145 under the 1933 Act. The Company shall use its reasonable
efforts to cause each such Person to deliver to Premiere as soon as reasonably
practicable following the execution of this Agreement, a written agreement,
substantially in the form attached hereto as Exhibit D.
----------
3.8 Tax Representations. In connection with the opinion to be rendered to
-------------------
Premiere by Alston & Bird to the effect that the transactions contemplated
hereby will constitute a tax-free reorganization within the meaning of Section
368(a) of the Code, the Owners shall furnish such counsel with such
representations as to their plans for the disposition of the shares of Premiere
Stock to be received in the Transactions as such counsel shall reasonably
request.
-7-
<PAGE>
3.9 Restricted Stock. All contractual restrictions or limitations on
----------------
transfer with respect to Company Common Stock under any plan, program, contract
or arrangement, to the extent that such restrictions or limitations have not
already lapsed (whether as a result of the Transactions or otherwise), and
except as otherwise expressly provided in such plan, program, contract or
arrangement, shall remain in full force and effect with respect to shares of
Premiere Stock into which such restricted stock is converted pursuant to Section
2.2 of this Transfer Agreement.
3.10 Exchange Listing. Premiere shall use its reasonable efforts to list,
----------------
prior to the Effective Time, on the Nasdaq National Market the shares of
Premiere Stock to be issued to the Owners pursuant to the Transactions, and
Premiere shall give all notices and make all filings with the NASD required in
connection with the Transactions.
IV. SUPPLEMENTAL CONDITIONS TO OBLIGATIONS OF PREMIERE
-------------------------------------------------------
In addition to the conditions of Premiere contained in Article V of the
Uniform Terms, the obligation of Premiere to consummate the Transactions is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions:
4.1 Approval of Owners. The Owners shall have approved the Merger in
------------------
accordance with the requirements of the Ohio Act and the Company shall have
provided Premiere certified copies of such resolutions, and Owners holding no
more than ten percent (10%) of the Company Common Stock issued and outstanding
immediately prior to the Effective Time shall have exercised any of the rights
described in Section 2.4.
4.2 Grand Solution Documents. VTNLP, VTE, the NAP and each of the Franchisee
------------------------
Companies shall have executed and delivered Grand Solution Documents reflecting
the terms described in Exhibit E hereto in form and substance reasonable
---------
satisfactory to Premiere.
4.3 Audited Financial Statements. Premiere shall have received balance
----------------------------
sheets of the Company as of December 31, 1995 and 1996 and the related
statements of operations, cash flows and changes in owner's equity for the
fiscal years then ended (collectively, the "Audited Financial Statements")
prepared in accordance with GAAP and Regulation S-X promulgated by the
Commission, accompanied by an unqualified audit opinion of Arthur Andersen LLP
relating thereto. The Audited Financial Statements shall not reflect any
material change in the Company's financial condition or results of operations
from the condition and results reported in the Financial Statements for the
corresponding periods delivered by the Company prior to the execution of this
Agreement.
4.4 Pooling Letter. Premiere shall have received a letter, dated as of the
--------------
Effective Time, in form and substance reasonably acceptable to Premiere, from
Arthur Andersen LLP to the effect that the Merger will qualify for pooling of
interests accounting treatment, and no action shall have been taken by any
regulatory authority or any statute, rule, regulation or order enacted,
promulgated or issued by any regulatory authority, or any proposal made for any
such action by any regulatory authority which is reasonably likely to be put
into effect, that would prevent Premiere from accounting for the business
combination to be effected by the Merger as a pooling of interests.
-8-
<PAGE>
4.5 Reorganization Opinion. Premiere shall have received an opinion of
----------------------
Alston & Bird LLP, counsel to Premiere, to the effect that the transactions
contemplated by the Agreement, including the Merger, will constitute a tax-free
reorganization within the meaning of Section 368(a) of the Code.
V. SUPPLEMENTAL CONDITIONS TO OBLIGATIONS OF THE COMPANY
---------------------------------------------------------
AND THE OWNERS
--------------
In addition to the conditions of the Company and the Owners contained in
Article VI of the Uniform Terms, the obligation of the Company and the Owners to
consummate the Transactions is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions:
5.1 Approval of Premiere and Merger Corp. The Board of Directors of
------------------------------------
Premiere and the Board of Directors and the shareholder of Merger Corp shall
have approved the Merger in accordance with the requirement of applicable state
law. Premiere and Merger Corp shall have provided the Company certified copies
of such resolutions.
5.2 Registration Rights. Premiere and each Owner shall have executed and
-------------------
delivered a Registration Rights Agreement.
VI. MISCELLANEOUS
------------------
6.1 Notices. The addresses for notices in accordance with Section 10.1 of
-------
the Uniform Terms for the Company and the Owners are as follows:
If to the Company: With a copy to:
VT of Ohio, Inc. Benesch, Friedlander,
70 West Streetsboro Street Copland & Aronoff
Hudson, Ohio 44236 2300 BP American Bldg.
Attn: Thomas G. Widdoes 200 Public Square
Phone: (216) 656-2656 Cleveland, Ohio 44114
Fax: (216) 655-9106 Attn: Deanna C. Kursh
Phone: (216) 363-4613
Fax: (216) 363-4588
If to the Owners:
Widdoes Enterprises, Inc. Carter Voice, Inc.
7073 Victoria Circle 6140 Stoneridge Mall Rd.
Hudson, Ohio 44236 Pleasonton, California 94588
Attn: Thomas G. Widdoes. Attn: Warren E. Carter II
Phone: (216) 856-2656 Phone: (800) 274-3759
Fax: (216) 655-9106 Fax: (619) 683-9113
-9-
<PAGE>
6.2 Owner's Representative. The Owners' Representative for purposes of
----------------------
Section 10.2 of the Uniform Terms shall be Thomas G. Widdoes , who shall serve
as the Owner's Representative under the terms of said Section 10.2 of the
Uniform Terms.
6.3 Certain Definitions. In addition to the terms defined elsewhere herein
-------------------
and in the Uniform Terms, as used in this Agreement:
(a) "Anticipated Closing Date" shall mean April 30, 1997.
------------------------
(b) "Knowledge" of the Company shall mean the personal knowledge
---------
after due inquiry of those facts that are known or should reasonably
have been known after due inquiry by Thomas G. Widdoes and the knowledge
of any such Persons obtained or which would have been obtained from a
reasonable investigation.
(c) "Outside Closing Date" shall mean June 30, 1997.
--------------------
6.4 Waiver. Notwithstanding anything herein to the contrary, the transfer
------
of the assets of Voice Tel of Ohio general partnership as described in section
2.9 and the actions related thereto, including, without limitation, any
amendment to the Company's governing documents, change in equity, issuance of
securities and acquisition of assets, shall not constitute a breach of this
Agreement, including without limitation, under Section 4.4 of the Uniform Terms.
[Signatures begin on next page.]
-10-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first written above.
PREMIERE:
PREMIERE TECHNOLOGIES, INC.,
a Georgia corporation
By: /s/ Patrick G. Jones
---------------------------
Patrick G. Jones
Attest: Title: Sr. V.P.
By: /s/ Douglas B. Hadaway
------------------------------------
Douglas B. Hadaway
Title: Assistant Secretary
COMPANY:
VT OF OHIO, INC., an
Ohio corporation
By: /s/ Thomas G. Widdoes
---------------------------
Thomas G. Widdoes
Title: President
Attest:
By: /s/ Douglas J. Widdoes
------------------------------------
Douglas J. Widdoes
Title: Secretary
OWNERS:
WIDDOES ENTERPRISES, INC.
an Ohio Corporation
By: /s/ Thomas G. Widdoes
---------------------------
Thomas G. Widdoes
Title: President
Witness:
By: /s/ Susan M. Henrick
------------------------------------
Susan M. Henrick
<PAGE>
CARTER VOICE, INC.,
an Ohio corporation
By: /s/ Warren R. Carter, II
---------------------------
Warren R. Carter, II
Title: President
Witness:
By: /s/ Kathleen O'Brien
------------------------------------
Kathleen O'Brien, Individual
Witness: /s/ Thomas G. Widdoes
---------------------------
Thomas G. Widdoes
an individual resident of the
State of Ohio.
By: /s/ Susan M. Henrick
------------------------------------
Susan M. Henrick
Witness: /s/ Warren E. Carter, II
---------------------------
Warren E. Carter, II
an individual resident of the
State of Wyoming.
By: /s/ Kathleen O'Brien
------------------------------------
Kathleen O'Brien
Witness: /s/ James Carter
---------------------------
James Carter
an individual resident of the
State of Ohio
By:------------------------------------
Name:----------------------------------
Witness: /s/ Michelle Carter
---------------------------
Michelle Carter
an individual resident of the
State of California
By:------------------------------------
Name:----------------------------------
<PAGE>
TRANSFER AGREEMENT
BY AND AMONG
PREMIERE TECHNOLOGIES, INC.,
CARTER VOICE, INC.,
AND
OWNERS OF CARTER VOICE, INC.
DATED AS OF APRIL 2, 1997
<PAGE>
TRANSFER AGREEMENT
------------------
THIS TRANSFER AGREEMENT (this "Agreement") is entered into as of April 2,
1997 by and among Premiere Technologies, Inc., a Georgia corporation or its
wholly owned subsidiary ("Premiere") and Carter Voice, Inc., an Ohio corporation
(the "Company"), and those parties listed on the signature pages hereto as the
owners of the Company (the "Owners").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company owns a 16.7% interest (a "VPC Interest") in Voice
Partners Company, an Ohio general partnership ("VPC") and VPC is engaged in the
business of providing interactive voice messaging services pursuant to
franchises granted by Voice-Tel Enterprises, Inc. (the "Business");
WHEREAS, Warrren E. Carter, II, Michelle Carter and James Carter own all of
the equity interest sin the Company;
WHEREAS, subject only to the limitations and exclusions contained in this
Agreement and on the terms and conditions hereinafter set forth, the Company
desires to sell and Premiere desires to purchase the VPC Interest; and
WHEREAS, the Board of Directors of Premiere and each of the shareholders of
the Company have approved the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing, the mutual agreements and
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
I. UNIFORM TERMS AND CONDITIONS
--------------------------------
1.1 Incorporation by Reference. The Uniform Terms and Conditions attached
--------------------------
hereto as Exhibit A (the "Uniform Terms") are hereby made a part of and
---------
incorporated herein as if fully restated herein. Capitalized terms not defined
herein shall have the meanings provided in the Uniform Terms.
II. PURCHASE AND SALE
----------------------
2.1 Transactions.
------------
At the Closing, on and subject to the terms and conditions of this
Agreement, (i) the Company shall sell, transfer, convey and assign to Premiere
all of the Transferred Assets, free and clear of all liens, charges, claims or
encumbrances of any nature whatsoever, (ii) Premiere shall receive and accept
the Transferred Assets and assume the Transferred Liabilities, and (iii) in
exchange for the Transferred Assets, Premiere shall pay the Consideration as
provided herein. The Company shall retain the Retained Liabilities.
<PAGE>
2.2 Transferred Assets. The "Transferred Assets" shall consist of all of
------------------
the Company's right, title and interest in and to the VPC Interest.
2.3 [Reserved]
----------
2.4 Transferred Liabilities. Premiere shall assume at the Closing, all the
-----------------------
liabilities and obligations of the Company arising under or out of the VPC
Interest (the "Transferred Liabilities"). EXCEPT AS EXPRESSLY PROVIDED IN THIS
SECTION 2.4, PREMIERE SHALL NOT ASSUME OR BECOME LIABLE UNDER ANY OTHER CONTRACT
OR AGREEMENT OF THE COMPANY OR FOR ANY OTHER INDEBTEDNESS, OBLIGATION OR
LIABILITY OF THE COMPANY.
2.5 Retained Liabilities. Except as specifically set forth in Section 2.4,
--------------------
the Company shall retain and satisfy any and all of its liabilities and
obligations not included in the Transferred Liabilities (the "Retained
Liabilities"), including such liabilities as may directly or indirectly arise
out of or relate to the operation of the Company on and prior to the Closing
Date, whether such liabilities are known or unknown, disclosed or undisclosed,
matured or unmatured, accrued, absolute or contingent. The Company shall pay,
satisfy and perform all of the Retained Liabilities from cash or assets other
than the Transferred Assets.
2.6 [Reserved]
--------
2.7 Purchase Price.
--------------
(a) Subject to the terms and conditions of this Agreement, the
aggregate consideration to be paid to the Company for the sale, transfer,
conveyance and assignment of the Transferred Assets and the assumption of the
Transferred Liabilities shall be determined as follows:
(i) the number of shares of Premiere Stock determined by dividing (A)
the product of .9 multiplied by the Asset Purchase Price, by (B)
the Average Closing Price; and
(ii) the number of shares of Premiere Stock determined by dividing (A)
the product of .1 multiplied by the Asset Purchase Price, by (B)
the Average Closing Price (the "General Escrow Amount").
all as determined in accordance with Section 2.8 below (collectively, the
"Consideration").
(b) At Closing, the Company shall deliver the General Escrow Amount
in negotiable form to the Escrow Agent to be held in escrow pursuant to the
terms and conditions of the Escrow Agreement in the form attached hereto as
Exhibit B.
- - ---------
2.8 Calculation of Consideration. For purposes of determining the
----------------------------
Consideration issuable to the Company pursuant to Section 2.7(a) above, the
following shall apply:
(a) "Average Closing Price" shall be the average of the daily last
sale prices of Premiere Stock for the period consisting of twenty (20)
consecutive trading days on which such shares are actually traded on the Nasdaq
National Market (as reported by the Wall Street Journal
-2-
<PAGE>
or, if not reported thereby, any other authoritative source selected by
Premiere) ending at the close of trading on the first trading day immediately
preceding the Closing; provided, however, that the Average Closing Price shall
-------- -------
not be less than $22.50 nor more than $30.50 (collectively, $22.50 and $30.50
are referred to as the "Average Closing Price Limitations").
(b) "Asset Purchase Price" shall be the sum of (i) sixteen and two-
thirds percent (16.7%) of the sum of (A) the amount determined by multiplying
the 1996 Revenues of VPC by the Stock Multiple, plus (B) the amount of cash
----
reflected on the Closing Date Balance Sheet of VPC, minus (C) the aggregate
-----
amount of principal and accrued and unpaid interest under funded debt and
capital lease obligations reflected on the Closing Date Balance Sheet of VPC,
and minus (ii) the amount by which the Transaction Costs exceed the Deductible
-----
Amount, plus (iii) four percent (4%) of the sum of (A) the amount determined by
----
multiplying the 1996 Revenues of Voice Partners of Greater Mahoning Valley, an
Ohio limited partnership ("VPG") by the Stock Multiple, plus (B) the amount of
----
cash on the Closing Date Balance Sheet of VPG, minus (C) the amount of principal
-----
and accrued and unpaid interest under funded debt and capital lease obligations
reflected on the Closing Date Balance Sheet of VPG.
(c) "Deductible Amount" shall be an amount equal to $2,500.00
(d) "1996 Revenues" of the VPC shall be an amount equal to
$1,961,622, and "1996 Revenues" of VPG shall mean $96,718.
(e) "Registration Right" shall mean the right to include Premiere
Stock issued as Consideration hereunder in a registration statement which
Premiere intends to file promptly after the end of the first full fiscal quarter
of Premiere containing the period of post-Merger combined operations required by
ASRs 130 and 135, pursuant to the terms and conditions of the Stock Restriction
and Registration Rights Agreement in the form attached hereto as of Exhibit C
---------
(the "Registration Rights Agreement").
(f) "Stock Multiple" shall be 1.7.
(g) "Transaction Costs" shall mean all amounts incurred but unpaid by
the Company or VPC in connection with (i) the negotiation and preparation of
this Agreement, (ii) the preparation of the Financial Statements, (iii) the
consummation of the Transactions and (iv) one-half of the costs and expenses of
public record searches pursuant to Section 5.9(b) of the Uniform Terms.
2.9 Closing. The Closing shall take place at the offices of Alston & Bird
-------
LLP, Atlanta, Georgia, at 10:00 a.m. local time, on the date set forth in the
Uniform Terms, provided all conditions set forth in Articles V and VI of the
Uniform Terms and Articles IV and V of this Agreement have been satisfied or
waived, or on such other date or at such other place and time mutually agreed
upon by the parties.
2.10 Purchase for Investment, Etc. Each Owner represents and warrants the
-----------------------------
following to Premiere:
(a) such Owner has accurately completed the Investor
Questionnaire required by Premiere prior to or contemporaneous with the
execution of the Transfer Agreement and the
-3-
<PAGE>
statements therein are true and correct and acknowledges that Premiere has
relied upon such statements in entering into this Agreement;
(b) such Owner is acquiring Premiere Stock for such Owner's own
account and not with a view to or for sale in connection with any public
distribution thereof within the meaning of the Securities Act;
(c) such Owner (i) has sufficient knowledge and experience in
financial and business matters to enable him, her or it to evaluate the merits
and risks of an investment in Premiere Stock, (ii) has the ability to bear the
economic risk of acquiring Premiere Stock for an indefinite period and to afford
a complete loss thereof and (iii) has had an opportunity to ask questions of and
to receive answers from the officers of Premiere and to obtain additional
information in writing as requested, which has been made available to and
examined by such Owner or such Owner's advisors; and
(d) such Owner (i) acknowledges that Premiere Stock has not been
registered under any securities laws and cannot be resold without registration
thereunder or exemption therefrom, (ii) agrees not to transfer all or any
Premiere Stock received by such Owner unless such transfer has been registered
or is exempt from registration under applicable securities laws and (iii)
acknowledges that the certificate(s) representing Premiere Stock shall bear the
following legend with respect to the restrictions on transfer under applicable
securities laws:
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, and may not be offered, sold,
transferred or otherwise disposed of unless registered with the
Securities and Exchange Commission of the United States and the
securities regulatory authorities of applicable states or unless an
exemption from such registration is available."
2.11 Ownership. Each Owner and the Company, jointly and severally,
---------
represents and warrants to Premiere that as of the Closing Date (i) the Company
will own a partner interest representing 16.7% of the equity in the earnings,
losses, assets and liabilities of VPC and (ii) VPC owns partner interests
representing 25% of the earnings, losses, assets liabilities of VPG. All
references in the Uniform Terms and Conditions to the Company shall be deemed to
refer to the Company and VPC; provided that the Company will also include VPG
for purposes of Section 2.4, 2.5 (first sentence), 2.6, 2.10 and 2.16.
III. ADDITIONAL AGREEMENTS
---------------------------
3.1 Allocation of Purchase Price. To the extent that the Consideration, or
----------------------------
any portion thereof, is required to be allocated among the Transferred Assets
for tax or accounting purposes, an allocation shall be prepared by Premiere, and
Premiere and the Company shall thereafter execute a document setting forth the
agreed upon allocation, which document shall become a part of this Agreement.
In the event that the parties cannot reach an agreement after using commercially
reasonable efforts, the parties shall mutually engage an independent certified
public accountant to determine an allocation, and the costs of such accountant
shall be shared equally by the parties. In furtherance of the foregoing, the
parties agree to execute and deliver IRS Form 8594 reflecting such allocation.
-4-
<PAGE>
3.2 Covenants.
---------
(a) Each Owner acknowledges and agrees that such Owner does not have
and will not claim any individual interest in the Transferred Assets.
(b) The Company covenants and agrees that it shall pay and satisfy as
and when due the Retained Liabilities (whether such payment or obligation shall
be due prior to or following the Closing Date). The Company further covenants
and agrees that it shall not take or fail to take any action the result of
which could be reasonably expected to materially adversely affect Premiere's
relationship with any of the customers or suppliers of the Business conducted by
VPC following the Closing.
3.3 Conditions to Closing. The Company, the Owners and Premiere agree to
---------------------
use their commercially reasonable best efforts to satisfy the closing conditions
set forth in Articles IV and V of this Agreement by the date indicated therein
or the Closing Date, as applicable, and if not by such time, as soon thereafter
as possible.
3.4 Additional Indemnification Items. Subject to Sections 8.2 through 8.6
--------------------------------
of the Uniform Terms, the Owners and, the Company, shall jointly and severally
indemnify and hold harmless Premiere, and its officers, directors, agents or
affiliates, from and against any and all Losses suffered or incurred by any such
party by reason of or arising out of a breach of Section 2.19 of the Uniform
Terms as it relates to liability for sales tax (irrespective of whether
disclosed on Schedule 2.19 or in the Financial Statements).
3.5 Tax Matters. The Owners understand that Premiere makes no
-----------
representation or warranty regarding the tax treatment of this Agreement and the
Company and the Owners shall look to their respective advisors for advice
concerning the tax consequences of this Agreement.
3.6 Registration Rights. At the Closing, Premiere and the Owners shall
-------------------
execute and deliver the Registration Rights Agreement.
3.7 Affiliate Agreements. The Company has disclosed in Schedule 3.7 all
-------------------- ------------
Persons whom it reasonably believes is an "affiliate" of the Company for
purposes of Rule 145 under the 1933 Act. The Company shall use its reasonable
efforts to cause each such Person to deliver to Premiere as soon as reasonably
practicable following the execution of this Agreement, a written agreement,
substantially in the form attached hereto as Exhibit D.
----------
3.8 Exchange Listing. Premiere shall use its reasonable efforts to list,
----------------
prior to the Effective Time, on the Nasdaq National Market the shares of
Premiere Stock to be issued to the Owners pursuant to the Transactions, and
Premiere shall give all notices and make all filings with the NASD required in
connection with the Transactions.
IV. SUPPLEMENTAL CONDITIONS TO OBLIGATIONS OF PREMIERE
-------------------------------------------------------
In addition to the conditions of Premiere contained in Article V of the
Uniform Terms, the obligation of Premiere to consummate the Transactions is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions:
-5-
<PAGE>
4.1 Approval of Owners. The Owners shall have approved the Transactions (to
------------------
the extent required) in accordance with the requirements of the Company's
articles of incorporation, the VPC and VPG partnership agreements and the laws
of the State of Ohio and the Company shall have provided Premiere certified
copies of such resolutions.
4.2 Grand Solution Documents. VTNLP, VTE, the NAP and each of the
------------------------
Franchisee Companies shall have executed and delivered Grand Solution Documents
reflecting the terms described in Exhibit E hereto in form and substance
---------
reasonable satisfactory to Premiere.
V. SUPPLEMENTAL CONDITIONS TO OBLIGATIONS OF THE COMPANY
---------------------------------------------------------
AND THE OWNERS
--------------
In addition to the conditions of the Company and the Owners contained in
Article VI of the Uniform Terms, the obligation of the Company and the Owners to
consummate the Transactions is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions:
5.1 Registration Rights. Premiere and each Owner shall have executed and
-------------------
delivered a Registration Rights Agreement.
VI. MISCELLANEOUS
------------------
6.1 Notices. The addresses for notices in accordance with Section 10.1 of
-------
the Uniform Terms for the Company and the Owners are as follows:
If to the Company: With a copy to:
Carter Voice, Inc. Baker & Hostetler, LLP
6140 Stoneridge Mall Road, Suite 500 3200 National City Center
Pleasonton, CA 94588 1900 East 9th Street
Attn: Warren E. Carter, II Cleveland, OH 44414-3485
Phone: (510) 468-7712 or Attn: Phillip M. Callesen, Esq.
(800) 274-3759 Phone: (216) 621-0200
Fax: (619) 683-9113 Fax: (216) 696-0740
If to the Owners:
Carter Voice, Inc.
6140 Stoneridge Mall Road, Suite 500
Pleasonton, CA 94588
Attn: Warren E. Carter, II
Phone: (510) 468-7712 or
(800) 274-3759
Fax: (619) 683-9113
6.2 Owner's Representative. The Owners' Representative for purposes of
----------------------
Section 10.2 of the Uniform Terms shall be Warren E. Carter, II, who shall serve
as the Owners' Representative under the terms of said Section 10.2 of the
Uniform Terms.
-6-
<PAGE>
6.3 Certain Definitions. In addition to the terms defined elsewhere herein
-------------------
and in the Uniform Terms, as used in this Agreement:
(a) "Anticipated Closing Date" shall mean April 30, 1997.
------------------------
(b) "Knowledge" of the Company shall mean the personal knowledge
---------
after due inquiry of those facts that are known or should reasonably
have been known after due inquiry by Warren E. Carter, II and the
knowledge of any such Persons obtained or which would have been
obtained from a reasonable investigation.
(c) "Outside Closing Date" shall mean June 30, 1997.
--------------------
[Signatures begin on next page.]
-7-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day
and year first written above.
PREMIERE:
PREMIERE TECHNOLOGIES, INC.,
a Georgia corporation
By: /s/Patrick G. Jones
----------------------------
Patrick G. Jones
Title: Sr. V.P.
Attest:
By: /s/Douglas B. Hadaway
----------------------------
Douglas B. Hadaway
Title: Assistant Secretary
COMPANY:
CARTER VOICE, INC.
an Ohio corporation
By: /s/Warren E. Carter, II
----------------------------
Warren E. Carter, II
Attest:
By:__________________________
Title:_______________________
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
<PAGE>
OWNERS:
/s/Warren E. Carter, II
----------------------------
Warren E. Carter, II
an individual resident
of the State of Wyoming
Attest:
By: /s/Kathleen O'Brien
----------------------------
Kathleen O'Brien
Title: Individual
/s/James Carter
----------------------------
James Carter
an individual resident
of the State of Ohio
Attest:
By: /s/Dan Morilak
----------------------------
Dan Morilak
Title:_________________________
/s/Michelle Carter
----------------------------
Michelle Carter
an individual resident
of the State of California
Attest:
By: /s/Sheri Hanson
----------------------------
Sheri Hanson
Title: Administrative Assistant
<PAGE>
TRANSFER AGREEMENT
BY AND AMONG
PREMIERE TECHNOLOGIES, INC.,
WIDDOES ENTERPRISES, INC.,
AND
OWNERS OF WIDDOES ENTERPRISES, INC.
DATED AS OF APRIL 2, 1997
<PAGE>
TRANSFER AGREEMENT
------------------
THIS TRANSFER AGREEMENT (this "Agreement") is entered into as of April 2,
1997 by and among Premiere Technologies, Inc., a Georgia corporation or its
wholly owned subsidiary ("Premiere") and Widdoes Enterprises, Inc., an Ohio
corporation (the "Company"), and those parties listed on the signature pages
hereto as the owners of the Company(the "Owners").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company owns a 16.7% interest (a "VPC Interest") in Voice
Partners Company, an Ohio general partnership ("VPC") and VPC is engaged in the
business of providing interactive voice messaging services pursuant to
franchises granted by Voice-Tel Enterprises, Inc. (the "Business");
WHEREAS, Thomas G. Widdoes owns all of the equity interest in the Company;
WHEREAS, subject only to the limitations and exclusions contained in this
Agreement and on the terms and conditions hereinafter set forth, the Company
desires to sell and Premiere desires to purchase the VPC Interest; and
WHEREAS, the Board of Directors of Premiere and each of the shareholders of
the Company have approved the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing, the mutual agreements and
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
I. UNIFORM TERMS AND CONDITIONS
--------------------------------
1.1 Incorporation by Reference. The Uniform Terms and Conditions attached
--------------------------
hereto as Exhibit A (the "Uniform Terms") are hereby made a part of and
---------
incorporated herein as if fully restated herein. Capitalized terms not defined
herein shall have the meanings provided in the Uniform Terms.
II. PURCHASE AND SALE
----------------------
2.1 Transactions.
------------
At the Closing, on and subject to the terms and conditions of this
Agreement, (i) the Company shall sell, transfer, convey and assign to Premiere
all of the Transferred Assets, free and clear of all liens, charges, claims or
encumbrances of any nature whatsoever, (ii) Premiere shall receive and accept
the Transferred Assets and assume the Transferred Liabilities, and (iii) in
exchange for the Transferred Assets, Premiere shall pay the Consideration as
provided herein. The Company shall retain the Retained Liabilities.
<PAGE>
2.2 Transferred Assets. The "Transferred Assets" shall consist of all of
------------------
the Company's right, title and interest in and to the VPC Interest.
2.3 [Reserved]
----------
2.4 Transferred Liabilities. Premiere shall assume at the Closing, all the
-----------------------
liabilities and obligations of the Company arising under or out of the VPC
Interest (the "Transferred Liabilities"). EXCEPT AS EXPRESSLY PROVIDED IN THIS
SECTION 2.4, PREMIERE SHALL NOT ASSUME OR BECOME LIABLE UNDER ANY OTHER CONTRACT
OR AGREEMENT OF THE COMPANY OR FOR ANY OTHER INDEBTEDNESS, OBLIGATION OR
LIABILITY OF THE COMPANY.
2.5 Retained Liabilities. Except as specifically set forth in Section 2.4,
--------------------
the Company shall retain and satisfy any and all of its liabilities and
obligations not included in the Transferred Liabilities (the "Retained
Liabilities"), including such liabilities as may directly or indirectly arise
out of or relate to the operation of the Company on and prior to the Closing
Date, whether such liabilities are known or unknown, disclosed or undisclosed,
matured or unmatured, accrued, absolute or contingent. The Company shall pay,
satisfy and perform all of the Retained Liabilities from cash or assets other
than the Transferred Assets.
2.6 [Reserved
--------
2.7 Purchase Price.
--------------
(a) Subject to the terms and conditions of this Agreement, the
aggregate consideration to be paid to the Company for the sale, transfer,
conveyance and assignment of the Transferred Assets and the assumption of the
Transferred Liabilities shall be determined as follows:
(i) the number of shares of Premiere Stock determined by dividing (A)
the product of .9 multiplied by the Asset Purchase Price, by (B)
the Average Closing Price; and
(ii) the number of shares of Premiere Stock determined by dividing (A)
the product of .1 multiplied by the Asset Purchase Price, by (B)
the Average Closing Price (the "General Escrow Amount").
all as determined in accordance with Section 2.8 below (collectively, the
"Consideration").
(b) At Closing, the Company shall deliver the General Escrow Amount
in negotiable form to the Escrow Agent to be held in escrow pursuant to the
terms and conditions of the Escrow Agreement in the form attached hereto as
Exhibit B.
- - ---------
2.8 Calculation of Consideration. For purposes of determining the
----------------------------
Consideration issuable to the Company pursuant to Section 2.7(a) above, the
following shall apply:
(a) "Average Closing Price" shall be the average of the daily last
sale prices of Premiere Stock for the period consisting of twenty (20)
consecutive trading days on which such
-2-
<PAGE>
shares are actually traded on the Nasdaq National Market (as reported by the
Wall Street Journal or, if not reported thereby, any other authoritative source
selected by Premiere) ending at the close of trading on the first trading day
immediately preceding the Closing; provided, however, that the Average Closing
-------- -------
Price shall not be less than $22.50 nor more than $30.50 (collectively, $22.50
and $30.50 are referred to as the "Average Closing Price Limitations").
(b) "Asset Purchase Price" shall be the sum of (i) sixteen and two-
thirds percent (16.7%) of the sum of (A) the amount determined by multiplying
the 1996 Revenues of VPC by the Stock Multiple, plus (B) the amount of cash
----
reflected on the Closing Date Balance Sheet of VPC, minus (C) the aggregate
-----
amount of principal and accrued and unpaid interest under funded debt and
capital lease obligations reflected on the Closing Date Balance Sheet of VPC,
and minus (ii) the amount by which the Transaction Costs exceed the Deductible
-----
Amount, plus (iii) four percent (4%) of the sum of (A) the amount determined by
----
multiplying the 1996 Revenues of Voice Partners of Greater Mahoning Valley, an
Ohio limited partnership ("VPG") by the Stock Multiple, plus (B) the amount of
----
cash on the Closing Date Balance Sheet of VPG, minus (C) the amount of principal
-----
and accrued and unpaid interest under funded debt and capital lease obligations
reflected on the Closing Date Balance Sheet of VPG.
(c) "Deductible Amount" shall be an amount equal to $2,500.00
(d) "1996 Revenues" of the VPC shall be an amount equal to
$1,961,622, and "1996 Revenues" of VPG shall mean $96,718.
(e) "Registration Right" shall mean the right to include Premiere
Stock issued as Consideration hereunder in a registration statement which
Premiere intends to file promptly after the end of the first full fiscal quarter
of Premiere containing the period of post-Merger combined operations required by
ASRs 130 and 135, pursuant to the terms and conditions of the Stock Restriction
and Registration Rights Agreement in the form attached hereto as of Exhibit C
---------
(the "Registration Rights Agreement") .
(f) "Stock Multiple" shall be 1.7.
(g) "Transaction Costs" shall mean all amounts incurred but unpaid by
the Company or VPC in connection with (i) the negotiation and preparation of
this Agreement, (ii) the preparation of the Financial Statements, (iii) the
consummation of the Transactions and (iv) one-half of the costs and expenses of
public record searches pursuant to Section 5.9(b) of the Uniform Terms.
2.9 Closing. The Closing shall take place at the offices of Alston & Bird
-------
LLP, Atlanta, Georgia, at 10:00 a.m. local time, on the date set forth in the
Uniform Terms, provided all conditions set forth in Articles V and VI of the
Uniform Terms and Articles IV and V of this Agreement have been satisfied or
waived, or on such other date or at such other place and time mutually agreed
upon by the parties.
2.10 Purchase for Investment, Etc. Each Owner represents and warrants the
-----------------------------
following to Premiere:
(a) such Owner has accurately completed the Investor Questionnaire
required by Premiere prior to or contemporaneous with the execution of the
Transfer Agreement and the
-3-
<PAGE>
statements therein are true and correct and acknowledges that Premiere has
relied upon such statements in entering into this Agreement;
(b) such Owner is acquiring Premiere Stock for such Owner's own
account and not with a view to or for sale in connection with any public
distribution thereof within the meaning of the Securities Act;
(c) such Owner (i) has sufficient knowledge and experience in
financial and business matters to enable him, her or it to evaluate the merits
and risks of an investment in Premiere Stock, (ii) has the ability to bear the
economic risk of acquiring Premiere Stock for an indefinite period and to afford
a complete loss thereof and (iii) has had an opportunity to ask questions of and
to receive answers from the officers of Premiere and to obtain additional
information in writing as requested, which has been made available to and
examined by such Owner or such Owner's advisors; and
(d) such Owner (i) acknowledges that Premiere Stock has not been
registered under any securities laws and cannot be resold without registration
thereunder or exemption therefrom, (ii) agrees not to transfer all or any
Premiere Stock received by such Owner unless such transfer has been registered
or is exempt from registration under applicable securities laws and (iii)
acknowledges that the certificate(s) representing Premiere Stock shall bear the
following legend with respect to the restrictions on transfer under applicable
securities laws:
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, and may not be offered, sold,
transferred or otherwise disposed of unless registered with the
Securities and Exchange Commission of the United States and the
securities regulatory authorities of applicable states or unless an
exemption from such registration is available."
2.11 Ownership. Each Owner and the Company, jointly and severally,
---------
represents and warrants to Premiere that as of the Closing Date (i) the Company
will own a partner interest representing 16.7% of the equity in the earnings,
losses, assets and liabilities of VPC and (ii) VPC owns partner interests
representing 25% of the earnings, losses, assets liabilities of VPG. All
references in the Uniform Terms and Conditions to the Company shall be deemed to
refer to the Company and VPC; provided that the Company will also include VPG
for purposes of Section 2.4, 2.5 (first sentence), 2.6, 2.10 and 2.16.
III. ADDITIONAL AGREEMENTS
---------------------------
3.1 Allocation of Purchase Price. To the extent that the Consideration, or
----------------------------
any portion thereof, is required to be allocated among the Transferred Assets
for tax or accounting purposes, an allocation shall be prepared by Premiere, and
Premiere and the Company shall thereafter execute a document setting forth the
agreed upon allocation, which document shall become a part of this Agreement.
In the event that the parties cannot reach an agreement after using commercially
reasonable efforts, the parties shall mutually engage an independent certified
public accountant to determine an allocation, and the costs of such accountant
shall be shared equally by the parties. In furtherance of the foregoing, the
parties agree to execute and deliver IRS Form 8594 reflecting such allocation.
-4-
<PAGE>
3.2 Covenants.
---------
(a) Each Owner acknowledges and agrees that such Owner does not have
and will not claim any individual interest in the Transferred Assets.
(b) The Company covenants and agrees that it shall pay and satisfy as
and when due the Retained Liabilities (whether such payment or obligation shall
be due prior to or following the Closing Date). The Company further covenants
and agrees that it shall not take or fail to take any action the result of
which could be reasonably expected to materially adversely affect Premiere's
relationship with any of the customers or suppliers of the Business conducted by
VPC following the Closing.
3.3 Conditions to Closing. The Company, the Owners and Premiere agree to
---------------------
use their commercially reasonable best efforts to satisfy the closing conditions
set forth in Articles IV and V of this Agreement by the date indicated therein
or the Closing Date, as applicable, and if not by such time, as soon thereafter
as possible.
3.4 Additional Indemnification Items. Subject to Sections 8.2 through 8.6
--------------------------------
of the Uniform Terms, the Owners and, the Company, shall jointly and severally
indemnify and hold harmless Premiere, and its officers, directors, agents or
affiliates, from and against any and all Losses suffered or incurred by any such
party by reason of or arising out of a breach of Section 2.19 of the Uniform
Terms as it relates to liability for sales tax (irrespective of whether
disclosed on Schedule 2.19 or in the Financial Statements).
3.5 Tax Matters. The Owners understand that Premiere makes no
-----------
representation or warranty regarding the tax treatment of this Agreement and the
Company and the Owners shall look to their respective advisors for advice
concerning the tax consequences of this Agreement.
3.6 Registration Rights. At the Closing, Premiere and the Owners shall
-------------------
execute and deliver the Registration Rights Agreement.
3.7 Affiliate Agreements. The Company has disclosed in Schedule 3.7 all
-------------------- ------------
Persons whom it reasonably believes is an "affiliate" of the Company for
purposes of Rule 145 under the 1933 Act. The Company shall use its reasonable
efforts to cause each such Person to deliver to Premiere as soon as reasonably
practicable following the execution of this Agreement, a written agreement,
substantially in the form attached hereto as Exhibit D.
----------
3.8 Exchange Listing. Premiere shall use its reasonable efforts to list,
----------------
prior to the Effective Time, on the Nasdaq National Market the shares of
Premiere Stock to be issued to the Owners pursuant to the Transactions, and
Premiere shall give all notices and make all filings with the NASD required in
connection with the Transactions.
IV. SUPPLEMENTAL CONDITIONS TO OBLIGATIONS OF PREMIERE
-------------------------------------------------------
In addition to the conditions of Premiere contained in Article V of the
Uniform Terms, the obligation of Premiere to consummate the Transactions is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions:
-5-
<PAGE>
4.1 Approval of Owners. The Owners shall have approved the Transactions (to
------------------
the extent required) in accordance with the requirements of the Company's
articles of incorporation, the VPC and VPG partnership agreements and the laws
of the State of Ohio and the Company shall have provided Premiere certified
copies of such resolutions.
4.2 Grand Solution Documents. VTNLP, VTE, the NAP and each of the
------------------------
Franchisee Companies shall have executed and delivered Grand Solution Documents
reflecting the terms described in Exhibit E hereto in form and substance
---------
reasonable satisfactory to Premiere.
V. SUPPLEMENTAL CONDITIONS TO OBLIGATIONS OF THE COMPANY
---------------------------------------------------------
AND THE OWNERS
--------------
In addition to the conditions of the Company and the Owners contained in
Article VI of the Uniform Terms, the obligation of the Company and the Owners to
consummate the Transactions is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions:
5.1 Registration Rights. Premiere and each Owner shall have executed and
-------------------
delivered a Registration Rights Agreement.
VI. MISCELLANEOUS
------------------
6.1 Notices. The addresses for notices in accordance with Section 10.1 of
-------
the Uniform Terms for the Company and the Owners are as follows:
If to the Company: With a copy to:
Widdoes Enterprises, Inc. Benesch, Friedlander,
7073 Victoria Circle Copland & Aronoff
Hudson, Ohio 44236 2300 BP American Bldg.
Attn: Thomas G. Widdoes 200 Public Square
Phone: (216) 656-2656 Cleveland, Ohio 44114
Fax: 216) 655-9106 Attn: Deanna C. Kursh
Phone: (216) 363-4613
Fax: (216) 363-4588
If to the Owners:
Thomas G. Widdoes
7073 Victoria Circle
Hudson, Ohio 44236
Phone: (216) 656-2656
Fax: (216) 655-9106
6.2 Owner's Representative. The Owners' Representatives for purposes of
----------------------
Section 10.2 of the Uniform Terms shall be Thomas G. Widdoes, who shall serve as
the Owners' Representatives under the terms of said Section 10.2 of the Uniform
Terms.
-6-
<PAGE>
6.3 Certain Definitions. In addition to the terms defined elsewhere herein
-------------------
and in the Uniform Terms, as used in this Agreement:
(a) "Anticipated Closing Date" shall mean April 30, 1997.
------------------------
(b) "Knowledge" of the Company shall mean the personal knowledge
---------
after due inquiry of those facts that are known or should reasonably
have been known after due inquiry by Thomas G. Widdoes and the
knowledge of any such Persons obtained or which would have been
obtained from a reasonable investigation.
(c) "Outside Closing Date" shall mean June 30, 1997.
--------------------
[Signatures begin on next page.]
-7-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first written above.
PREMIERE:
PREMIERE TECHNOLOGIES, INC.,
a Georgia corporation
By: /s/Patrick G. Jones
-------------------------------------
Patrick G. Jones
Title: Sr. V.P.
Attest:
By: /s/Douglas B. Hadaway
--------------------------------
Douglas B. Hadaway
Title: Assistant Secretary
COMPANY:
WIDDOES ENTERPRISES, INC.,
an Ohio corporation
By: /s/Thomas G. Widdoes
-------------------------------------
Thomas G. Widdoes, President
Attest:
By: /s/Barbara Widdoes
--------------------------------
Barbara Widdoes
Title: Assistant Secretary
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
<PAGE>
OWNER:
/s/Thomas G. Widdoes
----------------------------------------
Thomas G. Widdoes
an individual resident
of the State of Ohio
Attest:
By: /s/Barbara Widdoes
--------------------------------
Barbara Widdoes
Title: Assistant Secretary
<PAGE>
TRANSFER AGREEMENT
BY AND AMONG
PREMIERE TECHNOLOGIES, INC.,
DOWD ENTERPRISES, INC.
AND
OWNERS OF DOWD ENTERPRISES, INC.
DATED AS OF APRIL 2, 1997
<PAGE>
TRANSFER AGREEMENT
------------------
THIS TRANSFER AGREEMENT (this "Agreement") is entered into as of April 2,
1997 by and among Premiere Technologies, Inc., a Georgia corporation
("Premiere"), Dowd Enterprises, Inc., an Ohio corporation (the "Company"), and
those parties listed on the signature pages hereto as the owners of the Company
(the "Owners").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, this Agreement provides for the acquisition of the Company by
Premiere pursuant to the merger of the Company with and into a wholly owned
subsidiary of Premiere ("Merger Corp"), with Merger Corp as the surviving
corporation in such merger (the "Merger");
WHEREAS, the respective Boards of Directors of Premiere and the Company have
approved the terms and conditions set forth in this Agreement;
WHEREAS, the Owners own one hundred percent (100 %) of the equity interests
in the Company;
WHEREAS, this Agreement provides for all of the Owners' equity interests in
the Company to be converted into the right to receive shares of Premiere Stock
in connection with the Merger;
WHEREAS, it is also the intention of the parties hereto that the form of the
transactions with respect to the Company, Premiere and Merger Corp shall qualify
as a "reorganization" within the meaning of Section 368(a) of the Code for
federal income tax purposes; and
WHEREAS, it is also the intention of the parties hereto that the business
combination to be effected by the Merger be accounted for as a pooling of
interests.
NOW, THEREFORE, in consideration of the foregoing, the mutual agreements and
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
I. UNIFORM TERMS AND CONDITIONS
--------------------------------
1.1 Incorporation by Reference. The Uniform Terms and Conditions attached
--------------------------
hereto as Exhibit A (the "Uniform Terms") are hereby made a part of and
---------
incorporated herein as if fully restated herein. Capitalized terms not defined
herein shall have the meanings provided in the Uniform Terms.
<PAGE>
II. TERMS OF MERGER
--------------------
2.1 The Merger.
----------
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time, the Company shall be merged with and into Merger Corp in
accordance with the provisions of the business corporation act under the laws of
the State of Ohio (the "Ohio Act") and the laws of the State of Georgia (the
"Georgia Act"). Merger Corp shall be the surviving corporation resulting from
the Merger, shall thereafter conduct the business and operations of the Company
as a wholly owned subsidiary of Premiere and shall continue to be governed by
the laws of the State of Georgia. The Merger shall be consummated pursuant to
the terms of this Agreement, which has been approved and adopted by the
respective boards of directors of Premiere, Merger Corp and the Company.
(b) Subject to the provisions of this Agreement, the parties shall
file a Certificate of Merger executed in accordance with the relevant provisions
of the Ohio Act and a Certificate of Merger executed in accordance with the
relevant provisions of the Georgia Act and shall make all other filings or
recordings required under each such Act as soon as practicable on or after the
Closing Date. The Merger and other transactions contemplated by this Agreement
shall become effective on the date and at the time the Certificate of Merger
reflecting the Merger becomes effective with the Secretary of State of the State
of Ohio and the Certificate of Merger reflecting the Merger becomes effective
with the Secretary of State of the State of Georgia (the "Effective Time").
(c) The charter and Bylaws of Merger Corp in effect immediately prior
to the Effective Time shall be the charter and Bylaws of the surviving
corporation until otherwise amended or repealed, the directors of Merger Corp
immediately prior to the Effective Time shall serve as the directors of the
surviving corporation from and after the Effective Time, and the officers of
Merger Corp in office immediately prior to the Effective Time shall serve as the
officers of the surviving corporation from and after the Effective Time.
2.2 Conversion of Shares. Subject to the provisions of this Section 2.2,
--------------------
and in consideration for the transactions contemplated hereby, at the Effective
Time, by virtue of the Merger and without any action on the part of the parties
hereto or the shareholders of any of the parties hereto, the shares of the
constituent corporations of the Merger shall be converted as follows:
(a) Each share of Premiere Stock and each share of Merger Corp common
stock issued and outstanding at the Effective Time shall remain issued and
outstanding after the Effective Time.
(b) All of the shares of the capital stock, par value $1.00 per
share, of the Company ("Company Stock") (excluding treasury shares and excluding
shares held by shareholders who perfect their statutory dissenters' rights as
provided in Section 2.4 of this Agreement) issued and outstanding at the
Effective Time shall cease to be outstanding and shall be converted into and
exchanged for the right to receive:
(i) the number of shares of Premiere Stock determined by
dividing (A) the product of .9 multiplied by the Company
Purchase Price, by (B) the Average Closing Price; and
-2-
<PAGE>
(ii) the number of shares of Premiere Stock determined by
dividing (A) the product of .1 multiplied by the Company
Purchase Price, by (B) the Average Closing Price (the
"General Escrow Amount");
all as determined in accordance with Section 2.3 below (collectively, the
"Consideration"). Subject to Section 2.2(d) below, the Consideration shall be
issuable to the Owners pro rata in accordance with their ownership of Company
Common Stock pursuant to Section 2.6, which ownership the Owners represent has
not been adjusted in contemplation of the transactions described herein.
(c) Any and all shares of Company Common Stock held as treasury
shares by the Company shall be canceled and retired at the Effective Time, and
no consideration shall be issued in exchange therefor.
(d) Upon consummation of the Merger, the Owners shall deliver the
General Escrow Amount in negotiable form to the Escrow Agent to be held in
escrow pursuant to the terms and conditions of the Escrow Agreement in the form
attached hereto as Exhibit B, which shall be executed and delivered by Premiere
---------
and the Owners at the Closing.
2.3 Calculation of Consideration. For purposes of determining the
----------------------------
Consideration issuable to the Owners pursuant to Section 2.2(b) above, the
following shall apply:
(a) "Average Closing Price" shall be the average of the daily last
sale prices of Premiere Stock for the period consisting of twenty (20)
consecutive trading days on which such shares are actually traded on the Nasdaq
National Market (as reported by the Wall Street Journal or, if not reported
thereby, any other authoritative source selected by Premiere) ending at the
close of trading on the first trading day immediately preceding the Closing;
provided, however, that the Average Closing Price shall not be less than $22.50
- - -------- -------
nor more than $30.50 (collectively, $22.50 and $30.50 are referred to as the
"Average Closing Price Limitations").
(b) "Company Purchase Price" shall be (i) sixty percent (60%) of the
sum of (A) the amount determined by multiplying the Normalized EBITDA of
Columbus Voice Partners, an Ohio general partnership ("CVP"), by the Stock
Multiple, plus (B) the amount of cash reflected on the Closing Date Balance
----
Sheet CVP, minus (C) the aggregate amount of principal and accrued and unpaid
-----
interest under funded debt and capital lease obligations reflected on the
Closing Date Balance Sheet CVP, plus (ii) the sum of the amount of cash
----
reflected in the Closing Date Balance Sheet of Dowd Enterprises, Inc. minus
-----
(iii) the aggregate amount of principal and accrued and unpaid interest under
funded debt and capital lease obligations reflected on the Closing Date Balance
Sheet of Dowd Enterprises, Inc. , and minus (iv) the amount by which the
-----
Transaction Costs exceed the Deductible Amount.
(c) "Deductible Amount" shall be an amount equal to $10,000.00.
(d) "Normalized EBITDA" of CVP shall be an amount equal to $367,284.
(e) "Registration Right" shall mean the right to include Premiere
Stock issued in the Merger in a registration statement which Premiere intends to
file promptly after the end of the first full fiscal quarter of Premiere
containing the period of post-Merger combined operations required by ASRs 130
and 135, pursuant to the terms and conditions of the Stock Restriction and
-3-
<PAGE>
Registration Rights Agreement in the form attached hereto as of Exhibit C (the
---------
"Registration Rights Agreement") .
(f) "Stock Multiple" shall be six (6).
(g) "Transaction Costs" shall mean all amounts incurred but unpaid by
the Company in connection with (i) the negotiation and preparation of this
Agreement, (ii) the preparation of the Audited Financial Statements, (iii) the
consummation of the Transactions and (iv) one-half of the costs and expenses of
public record searches pursuant to Section 5.9(b) of the Uniform Terms.
2.4 Dissenting Shareholders. Subject to Section 4.2, any holder of shares
-----------------------
of voting capital stock of the Company who perfects any available dissenters'
rights in accordance with and as contemplated by the Ohio Act shall be entitled
to receive the value of such shares in cash from the Company after the Effective
Time as determined pursuant to such provision of law; provided, that no such
payment shall be made to any dissenting shareholder unless and until such
dissenting shareholder has complied with the applicable provisions of the Ohio
Act and surrendered to the Company the certificate or certificates representing
the shares for which payment is being made. In the event that a dissenting
shareholder of the Company fails to perfect, or effectively withdraws or loses,
its right to appraisal and of payment for its shares, Premiere shall issue and
deliver the consideration to which such holder of shares of Company capital
stock is entitled under this Article II (without interest) upon surrender of
certificates representing such shares held by such holder.
2.5 Closing. The Closing shall take place at the offices of Alston & Bird
-------
LLP, Atlanta, Georgia, at 10:00 a.m. local time, on the date set forth in the
Uniform Terms, provided all conditions set forth in Articles V and VI of the
Uniform Terms and Articles IV and V of this Agreement have been satisfied or
waived, or on such other date or at such other place and time mutually agreed
upon by the parties.
2.6 Exchange of Shares. Promptly after the Effective Time, Premiere and
------------------
Company shall cause to be mailed to the former Company shareholders appropriate
transmittal materials for the surrender of the certificate or certificates
formerly representing their shares of Company Common Stock in exchange for
shares of Premiere Stock as provided in this Agreement. Until surrendered for
exchange in accordance herewith, each certificate theretofore representing
shares of Company Common Stock shall from and after the Effective Time represent
only the right to receive the Consideration provided in this Agreement in
exchange therefor. No certificates representing fractional shares will be
issued as a result of the Merger. Each holder of shares of Company Common Stock
exchanged pursuant to the Merger who would otherwise have been entitled to
receive a fraction of a share of Premiere Common Stock shall receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional part of a
share of Premiere Common Stock multiplied by the Average Closing Price.
2.7 Purchase for Investment, Etc. Each Owner, represents and warrants the
-----------------------------
following to Premiere:
(a) such Owner has accurately completed the Investor
Questionnaire required by Premiere prior to or contemporaneous with the
execution of the Transfer Agreement and the statements therein are true and
correct and acknowledges that Premiere has relied upon such statements in
entering into this Agreement;
-4-
<PAGE>
(b) such Owner is acquiring Premiere Stock for such Owner's own
account and not with a view to or for sale in connection with any public
distribution thereof within the meaning of the Securities Act;
(c) such Owner (i) has sufficient knowledge and experience in
financial and business matters to enable him, her or it to evaluate the merits
and risks of an investment in Premiere Stock, (ii) has the ability to bear the
economic risk of acquiring Premiere Stock for an indefinite period and to afford
a complete loss thereof and (iii) has had an opportunity to ask questions of and
to receive answers from the officers of Premiere and to obtain additional
information in writing as requested, which has been made available to and
examined by such Owner or such Owner's advisors; and
(d) such Owner (i) acknowledges that Premiere Stock has not been
registered under any securities laws and cannot be resold without registration
thereunder or exemption therefrom, (ii) agrees not to transfer all or any
Premiere Stock received by such Owner unless such transfer has been registered
or is exempt from registration under applicable securities laws and (iii)
acknowledges that the certificate(s) representing Premiere Stock shall bear the
following legend with respect to the restrictions on transfer under applicable
securities laws:
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, and may not be offered, sold,
transferred or otherwise disposed of unless registered with the
Securities and Exchange Commission of the United States and the
securities regulatory authorities of applicable states or unless an
exemption from such registration is available."
2.8 Accounting, Tax and Regulatory Matters. Each Owner and the Company,
--------------------------------------
jointly and severally, represents and warrants to Premiere that neither the
Company, any Owner nor any Affiliate thereof has taken or agreed to take any
action or has any knowledge of any fact or circumstance that is reasonably
likely to (i) prevent the Merger from qualifying for pooling-of-interests
accounting treatment or as a reorganization within the meaning of Section 368(a)
of the Code, or (ii) materially impede or delay receipt of any consents referred
to in Section 5.6 of the Uniform Terms or result in the imposition of a
condition or restriction of the type referred to in the last sentence of such
Section.
2.9 Assets. The Company and the Owners, jointly and severally, represent
------
and warrant to Premiere that (i) the Company has no material Assets other than
its ownership of 60% of CVP and (ii) in no event shall CVP incur any Transaction
Costs. To the extent applicable, the term "Company" as used in the Uniform
Terms and herein shall be deemed to refer to Dowd Enterprises, Inc. and CVP,
collectively.
III. ADDITIONAL AGREEMENTS
---------------------------
3.1 Filings with State Offices. Upon the terms and subject to the
--------------------------
conditions of this Agreement, the Company and Merger Corp shall execute and file
the Certificate of Merger with the Secretary of State of the State of Ohio and a
Certificate of Merger with the Secretary of State of the State of Georgia in
connection with the Closing.
-5-
<PAGE>
3.2 Conditions to Closing. The Company, the Owners and Premiere agree to
---------------------
use their commercially reasonable best efforts to satisfy the closing conditions
set forth in Articles IV and V of this Agreement by the date indicated therein
or the Closing Date, as applicable.
3.3 Additional Indemnification Items. Subject to Sections 8.2 through 8.6
--------------------------------
of the Uniform Terms, the Owners and, if the Transactions involve an Asset
Transfer, the Company, shall jointly and severally indemnify and hold harmless
Premiere, and its officers, directors, agents or affiliates, from and against
any and all Losses suffered or incurred by any such party by reason of or
arising out of any of the following: a breach of Section 2.19 of the Uniform
Terms as it relates to liability for sales tax (irrespective of whether
disclosed on Schedule 2.19 or in the Financial Statements).
3.4 Tax Matters. Each of the Company, the Owners and Premiere undertakes
-----------
and agrees to use its reasonable efforts to cause the Merger, and to take no
action which would cause the Merger not, to qualify as a "reorganization" within
the meaning of Section 368(a) of the Code for federal income tax purposes.
Notwithstanding the foregoing, the Owners understand that (i) Premiere makes no
representation or warranty regarding the tax treatment of this Agreement or the
Merger, (ii) the Closing is not subject to a condition that an Internal Revenue
Service ruling or tax opinion be obtained as to the federal income tax
consequences of this Agreement or the Merger, and (iii) the Company and the
Owners shall look to their respective advisors for advice concerning the tax
consequences of this Agreement and the Merger.
3.5 Registration Rights. At the Closing, Premiere and the Owners shall
-------------------
execute and deliver the Registration Rights Agreement.
3.6 Accounting Treatment.
--------------------
(a) The Company and each of the Owners has accurately completed the
Pooling Questionnaire required by Premiere prior to or contemporaneous with the
execution of this Agreement, and the statements therein are true and correct.
(b) Premiere, the Company and each of the Owners agrees to use its
reasonable efforts to cause the Merger, and to take no action which would cause
the Merger not, to qualify for treatment as a pooling of interests for
accounting purposes. Without limiting the foregoing, the Company and each of
the Owners agrees not to sell, transfer, or otherwise dispose of his, her or its
interests in, or reduce his, her or its risk relative to, any of the shares of
Premiere Common Stock received in connection with the Merger until such time as
Premiere notifies the Company and each such Owner that the requirements of ASRs
130 and 135 have been met. The Company and each of the Owners understands that
ASRs 130 and 135 relate to the publication of financial results of at least
thirty (30) days of post-Merger combined operations of Premiere and the Company.
Premiere agrees that it shall publish such results within forty-five (45) days
after the end of the first fiscal quarter of Premiere containing the required
period of post-Merger combined operations and that it shall notify the Company
and each of the Owners promptly following such publication. Premiere shall be
entitled to place the following restrictive legend on the shares of Premiere
Stock issued pursuant to the Merger to enforce the foregoing restrictions:
"The shares represented by this certificate were issued pursuant to a
business combination which is accounted for as a "pooling of interests" and
may not be sold, nor may the owner thereof reduce his risks relative
thereto in any way, until such time as Premiere Technologies, Inc.
("Premiere") has published the financial
-6-
<PAGE>
results covering at least 30 days of combined operations after the
effective date of the merger through which the business combination was
effected."
3.7 Affiliate Agreements. The Company has disclosed in Schedule 3.7 all
-------------------- ------------
Persons whom it reasonably believes is an "affiliate" of the Company for
purposes of Rule 145 under the 1933 Act. The Company shall use its reasonable
efforts to cause each such Person to deliver to Premiere as soon as reasonably
practicable following the execution of this Agreement, a written agreement,
substantially in the form attached hereto as Exhibit D.
----------
3.8 Tax Representations. In connection with the opinion to be rendered to
-------------------
Premiere by Alston & Bird to the effect that the transactions contemplated
hereby will constitute a tax-free reorganization within the meaning of Section
368(a) of the Code, the Owners shall furnish such counsel with such
representations as to their plans for the disposition of the shares of Premiere
Stock to be received in the Transactions as such counsel shall reasonably
request.
3.9 Restricted Stock. All contractual restrictions or limitations on
----------------
transfer with respect to Company Common Stock under any plan, program, contract
or arrangement, to the extent that such restrictions or limitations have not
already lapsed (whether as a result of the Transactions or otherwise), and
except as otherwise expressly provided in such plan, program, contract or
arrangement, shall remain in full force and effect with respect to shares of
Premiere Stock into which such restricted stock is converted pursuant to Section
2.2 of this Transfer Agreement.
3.10 Exchange Listing. Premiere shall use its reasonable efforts to list,
----------------
prior to the Effective Time, on the Nasdaq National Market the shares of
Premiere Stock to be issued to the Owners pursuant to the Transactions, and
Premiere shall give all notices and make all filings with the NASD required in
connection with the Transactions.
IV. SUPPLEMENTAL CONDITIONS TO OBLIGATIONS OF PREMIERE
-------------------------------------------------------
In addition to the conditions of Premiere contained in Article V of the
Uniform Terms, the obligation of Premiere to consummate the Transactions is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions:
4.1 Approval of Owners. The Owners shall have approved the Merger in
------------------
accordance with the requirements of the Ohio Act and the Company shall have
provided Premiere certified copies of such resolutions, and Owners holding no
more than ten percent (10%) of the Company Common Stock issued and outstanding
immediately prior to the Effective Time shall have exercised any of the rights
described in Section 2.4.
4.2 Grand Solution Documents. VTNLP, VTE, the NAP and each of the
------------------------
Franchisee Companies shall have executed and delivered Grand Solution Documents
reflecting the terms described in Exhibit E hereto in form and substance
---------
reasonable satisfactory to Premiere.
4.3 Pooling Letter. Premiere shall have received a letter, in form and
--------------
substance satisfactory to Premiere, from the Company containing representations
related to the pooling of interests accounting treatment, in the form attached
hereto as Exhibit F.
---------
-7-
<PAGE>
4.4 Reorganization Opinion. Premiere shall have received an opinion of
----------------------
Alston & Bird LLP, counsel to Premiere, to the effect that the transactions
contemplated by the Agreement, including the Merger, will constitute a tax-free
reorganization within the meaning of Section 368(a) of the Code.
V. SUPPLEMENTAL CONDITIONS TO OBLIGATIONS OF THE COMPANY
---------------------------------------------------------
AND THE OWNERS
--------------
In addition to the conditions of the Company and the Owners contained in
Article VI of the Uniform Terms, the obligation of the Company and the Owners to
consummate the Transactions is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions:
5.1 Approval of Premiere and Merger Corp. The Board of Directors of
------------------------------------
Premiere and the Board of Directors and the shareholder of Merger Corp shall
have approved the Merger in accordance with the requirement of applicable state
law. Premiere and Merger Corp shall have provided the Company certified copies
of such resolutions.
5.2 Registration Rights. Premiere and each Owner shall have executed and
-------------------
delivered a Registration Rights Agreement.
VI. MISCELLANEOUS
------------------
6.1 Notices. The addresses for notices in accordance with Section 10.1 of
-------
the Uniform Terms for the Company and the Owners are as follows:
IF TO THE COMPANY: WITH A COPY TO:
Sean Dowd Micheal P. McNamara, Jr.
Dowd Enterprise, Inc. Baker & Hostetler LLP
Columbus Voice Partners 1900 East 9th Street
2800 Corporate Exchange Drive, Suite 210 Cleveland, OH 44114-3485
Columbus, Ohio 43231
Wildfire: (614) 220-8111 Phone: (216) 621- 0200
Phone: (614) 898-9929 Fax: (216) 621-0740
Fax: (614) 899-4851
VT: (614) 898-2147
-8-
<PAGE>
If to the Owners: With a copy to:
______________________ ______________________
______________________ ______________________
______________________ ______________________
Attn: _______________ Attn: _______________
Phone: (___) ___-____ Phone: (___) ___-____
Fax: (___) ___-____ Fax: (___) ___-____
6.2 Owner's Representative. The Owners' Representative for purposes of
----------------------
Section 10.2 of the Uniform Terms shall be Sean M. Dowd, who shall serve as the
Owner's Representative under the terms of said Section 10.2 of the Uniform
Terms.
6.3 Certain Definitions. In addition to the terms defined elsewhere herein
-------------------
and in the Uniform Terms, as used in this Agreement:
(a) "Anticipated Closing Date" shall mean April 30, 1997.
------------------------
(b) "Knowledge" of the Company shall mean the personal knowledge
---------
after due inquiry of those facts that are known or should reasonably
have been known after due inquiry by Sean M. Dowd and Marjorie W. Dowd
and the knowledge of any such Persons obtained or which would have
been obtained from a reasonable investigation.
(c) "Outside Closing Date" shall mean June 30, 1997.
--------------------
[Signatures begin on next page.]
-9-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first written above.
PREMIERE:
PREMIERE TECHNOLOGIES, INC.,
a Georgia corporation
By: /s/ Patrick G. Jones
---------------------
Patrick G. Jones
Title: Sr. V.P.
Attest:
By: /s/ Douglas B. Hadaway
---------------------------
Douglas B. Hadaway
Title: Assistant Secretary
COMPANY:
DOWD ENTERPRISES, INC.,
an Ohio corporation
By: /s/ Sean M. Dowd
--------------------------------
Sean M. Dowd
Title: President
Attest:
By: /s/ Marjorie W. Dowd
---------------------------
Marjorie w. Dowd
Title: Secretary
OWNERS:
/s/ Sean M. Dowd
---------------
Sean M. Dowd,
an individual resident of the
State of Ohio
Witness:
By: /s/ Amy L. Thimmes
---------------------------
Amy L. Thimmes
[Signatures continue on next page.]
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first written above.
PREMIERE:
PREMIERE TECHNOLOGIES, INC.,
a Georgia corporation
By: /s/ Patrick G. Jones
---------------------
Patrick G. Jones
Title: Sr. V.P.
Attest:
By: /s/ Douglas B. Hadaway
---------------------------
Douglas B. Hadaway
Title: Assistant Secretary
COMPANY:
DOWD ENTERPRISES, INC.,
an Ohio corporation
By: /s/ Sean M. Dowd
--------------------------------
Sean M. Dowd
Title: President
Attest:
By: /s/ Marjorie W. Dowd
---------------------------
Marjorie w. Dowd
Title: Secretary
OWNERS:
/s/ Sean M. Dowd
---------------
Sean M. Dowd,
an individual resident of the
State of Ohio
Witness:
By: Amy L. Thimmes
---------------------------
Amy L. Thimmes
[Signatures continue on next page.]
<PAGE>
/s/ Marjorie W. Dowd
-------------------
Marjorie w. Dowd,
an individual resident of the
State of Ohio
Witness:
By: /s/ Amy L. Thimmes
---------------------------
Amy L. Thimmes
<PAGE>
EXHIBIT 2.11
TRANSFER AGREEMENT
BY AND AMONG
PREMIERE TECHNOLOGIES, INC.,
SDVT, INC.
AND
OWNERS OF SDVT, INC.
DATED AS OF APRIL 2, 1997
<PAGE>
TRANSFER AGREEMENT
------------------
THIS TRANSFER AGREEMENT (this "Agreement") is entered into as of April 1,
1997 by and among Premiere Technologies, Inc., a Georgia corporation
("Premiere"), SDVT, Inc., a California corporation (the "Company"), and those
parties listed on the signature pages hereto as the owners of the Company (the
"Owners").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, this Agreement provides for the acquisition of the Company by
Premiere pursuant to the merger of the Company with and into a wholly owned
subsidiary of Premiere ("Merger Corp"), with Merger Corp as the surviving
corporation in such merger (the "Merger");
WHEREAS, the respective Boards of Directors of Premiere and the Company have
approved the terms and conditions set forth in this Agreement;
WHEREAS, the Owners own at least one hundred percent (100%) of the equity
interests in the Company;
WHEREAS, this Agreement provides for all of the Owners' equity interests in
the Company to be converted into the right to receive shares of Premiere Stock
in connection with the Merger;
WHEREAS, it is also the intention of the parties hereto that the form of the
transactions with respect to the Company, Premiere and Merger Corp shall qualify
as a "reorganization" within the meaning of Section 368(a) of the Code for
federal income tax purposes; and
WHEREAS, it is also the intention of the parties hereto that the business
combination to be effected by the Merger be accounted for as a pooling of
interests.
NOW, THEREFORE, in consideration of the foregoing, the mutual agreements and
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
I. UNIFORM TERMS AND CONDITIONS
--------------------------------
1.1 Incorporation by Reference. The Uniform Terms and Conditions attached
--------------------------
hereto as Exhibit A (the "Uniform Terms") are hereby made a part of and
---------
incorporated herein as if fully restated herein. Capitalized terms not defined
herein shall have the meanings provided in the Uniform Terms.
<PAGE>
II. TERMS OF MERGER
--------------------
2.1 The Merger.
----------
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time, the Company shall be merged with and into Merger Corp in
accordance with the provisions of the business corporation act under the laws of
the State of California (the "California Act") and the laws of the State of
Georgia (the "Georgia Act"). Merger Corp shall be the surviving corporation
resulting from the Merger, shall thereafter conduct the business and operations
of the Company as a wholly owned subsidiary of Premiere and shall continue to be
governed by the laws of the State of Georgia. The Merger shall be consummated
pursuant to the terms of this Agreement, which has been approved and adopted by
the respective boards of directors of Premiere, Merger Corp and the Company.
(b) Subject to the provisions of this Agreement, the parties shall
file Articles or a Certificate of Merger executed in accordance with the
relevant provisions of the California Act and a Certificate of Merger executed
in accordance with the relevant provisions of the Georgia Act and shall make all
other filings or recordings required under each such Act as soon as practicable
on or after the Closing Date. The Merger and other transactions contemplated by
this Agreement shall become effective on the date and at the time the Articles
or Certificate of Merger reflecting the Merger becomes effective with the
Secretary of State of the State of California and the Certificate of Merger
reflecting the Merger becomes effective with the Secretary of State of the State
of Georgia (the "Effective Time").
(c) The charter and Bylaws of Merger Corp in effect immediately prior
to the Effective Time shall be the charter and Bylaws of the surviving
corporation until otherwise amended or repealed, the directors of Merger Corp
immediately prior to the Effective Time shall serve as the directors of the
surviving corporation from and after the Effective Time, and the officers of
Merger Corp in office immediately prior to the Effective Time shall serve as the
officers of the surviving corporation from and after the Effective Time.
2.2 Conversion of Shares. Subject to the provisions of this Section 2.2,
--------------------
and in consideration for the transactions contemplated hereby, at the Effective
Time, by virtue of the Merger and without any action on the part of the parties
hereto or the shareholders of any of the parties hereto, the shares of the
constituent corporations of the Merger shall be converted as follows:
(a) Each share of Premiere Stock and each share of Merger Corp common
stock issued and outstanding at the Effective Time shall remain issued and
outstanding after the Effective Time.
(b) All of the shares of the no par value capital stock, of the
Company ("Company Stock") (excluding treasury shares and excluding shares held
by shareholders who perfect their statutory dissenters' rights as provided in
Section 2.4 of this Agreement) issued and outstanding at the Effective Time
shall cease to be outstanding and shall be converted into and exchanged for the
right to receive:
(i) the number of shares of Premiere Stock determined by
dividing (A) the product of .9 multiplied by the
Company Purchase Price, by (B) the Average Closing
Price; and
-2-
<PAGE>
(ii) the number of shares of Premiere Stock determined by
dividing (A) the product of .1 multiplied by the Company Purchase Price, by (B)
the Average Closing Price (the "General Escrow Amount");
all as determined in accordance with Section 2.3 below (collectively, the
"Consideration"). Subject to Section 2.2(d) below, the Consideration shall be
issuable to the Owners pro rata in accordance with their ownership of Company
Common Stock pursuant to Section 2.6, which ownership the Owners represent has
not been adjusted in contemplation of the transactions described herein.
(c) Any and all shares of Company Common Stock held as treasury
shares by the Company shall be canceled and retired at the Effective Time, and
no consideration shall be issued in exchange therefor.
(d) Upon consummation of the Merger, the Owners shall deliver the
General Escrow Amount in negotiable form to the Escrow Agent to be held in
escrow pursuant to the terms and conditions of the Escrow Agreement in the form
attached hereto as Exhibit B, which shall be executed and delivered by Premiere
---------
and the Owners at the Closing.
2.3 Calculation of Consideration. For purposes of determining the
----------------------------
Consideration issuable to the Owners pursuant to Section 2.2(b) above, the
following shall apply:
(a) "Average Closing Price" shall be the average of the daily last
sale prices of Premiere Stock for the period consisting of twenty (20)
consecutive trading days on which such shares are actually traded on the Nasdaq
National Market (as reported by the Wall Street Journal or, if not reported
thereby, any other authoritative source selected by Premiere) ending at the
close of trading on the first trading day immediately preceding the Closing;
provided, however, that the Average Closing Price shall not be less than $22.50
- - -------- -------
nor more than $30.50 (collectively, $22.50 and $30.50 are referred to as the
"Average Closing Price Limitations").
(b) "Company Purchase Price" shall be the sum of (i) the amount
determined by multiplying the Normalized EBITDA of the Company by the
appropriate Stock Multiple or Cash Multiple, plus (ii) the amount of cash
----
reflected on the Closing Date Balance Sheet, minus (iii) the aggregate amount of
-----
principal and accrued and unpaid interest under funded debt and capital lease
obligations reflected on the Closing Date Balance Sheet, minus (iv) the amount
-----
by which the Transaction Costs exceed the Deductible Amount.
(c) "Deductible Amount" shall be an amount equal to $10,000.
(d) "Normalized EBITDA" of the Company shall be an amount equal to
$569,233.00.
(e) "Registration Right" shall mean the right to include Premiere
Stock issued in the Merger in a registration statement which Premiere intends to
file promptly after the end of the first full fiscal quarter of Premiere
containing the period of post-Merger combined operations required by ASRs 130
and 135, pursuant to the terms and conditions of the Stock Restriction and
Registration Rights Agreement in the form attached hereto as of Exhibit C (the
---------
"Registration Rights Agreement").
(f) "Stock Multiple" shall be six (6).
-3-
<PAGE>
(g) "Transaction Costs" shall mean all amounts incurred but unpaid by
the Company in connection with (i) the negotiation and preparation of this
Agreement, (ii) the preparation of the Audited Financial Statements, (iii) the
consummation of the Transactions and (iv) one-half of the costs and expenses of
public record searches pursuant to Section 5.9(b) of the Uniform Terms.
2.4 Dissenting Shareholders. Subject to Section 4.2, any holder of shares
-----------------------
of voting capital stock of the Company who perfects any available dissenters'
rights in accordance with and as contemplated by the California Act shall be
entitled to receive the value of such shares in cash from the Company after the
Effective Time as determined pursuant to such provision of law; provided, that
no such payment shall be made to any dissenting shareholder unless and until
such dissenting shareholder has complied with the applicable provisions of the
California Act and surrendered to the Company the certificate or certificates
representing the shares for which payment is being made. In the event that a
dissenting shareholder of the Company fails to perfect, or effectively withdraws
or loses, its right to appraisal and of payment for its shares, Premiere shall
issue and deliver the consideration to which such holder of shares of Company
capital stock is entitled under this Article II (without interest) upon
surrender of certificates representing such shares held by such holder.
2.5 Closing. The Closing shall take place at the offices of Alston & Bird
-------
LLP, Atlanta, Georgia, at 10:00 a.m. local time, on the date set forth in the
Uniform Terms, provided all conditions set forth in Articles V and VI of the
Uniform Terms and Articles IV and V of this Agreement have been satisfied or
waived, or on such other date or at such other place and time mutually agreed
upon by the parties.
2.6 Exchange of Shares. Promptly after the Effective Time, Premiere and
------------------
Company shall cause to be mailed to the former Company shareholders appropriate
transmittal materials for the surrender of the certificate or certificates
formerly representing their shares of Company Common Stock in exchange for
shares of Premiere Stock as provided in this Agreement. Until surrendered for
exchange in accordance herewith, each certificate theretofore representing
shares of Company Common Stock shall from and after the Effective Time represent
only the right to receive the Consideration provided in this Agreement in
exchange therefor. No certificates representing fractional shares will be
issued as a result of the Merger. Each holder of shares of Company Common Stock
exchanged pursuant to the Merger who would otherwise have been entitled to
receive a fraction of a share of Premiere Common Stock shall receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional part of a
share of Premiere Common Stock multiplied by the Average Closing Price.
2.7 Purchase for Investment, Etc. Each Owner represents and warrants the
-----------------------------
following to Premiere:
(a) such Owner has accurately completed the Investor Questionnaire
required by Premiere prior to or contemporaneous with the execution of the
Transfer Agreement and the statements therein are true and correct and
acknowledges that Premiere has relied upon such statements in entering into this
Agreement;
-4-
<PAGE>
(b) such Owner is acquiring Premiere Stock for such Owner's own
account and not with a view to or for sale in connection with any public
distribution thereof within the meaning of the Securities Act;
(c) such Owner (i) has sufficient knowledge and experience in
financial and business matters to enable him, her or it to evaluate the merits
and risks of an investment in Premiere Stock, (ii) has the ability to bear the
economic risk of acquiring Premiere Stock for an indefinite period and to afford
a complete loss thereof and (iii) has had an opportunity to ask questions of and
to receive answers from the officers of Premiere and to obtain additional
information in writing as requested, which has been made available to and
examined by such Owner or such Owner's advisors; and
(d) such Owner (i) acknowledges that Premiere Stock has not been
registered under any securities laws and cannot be resold without registration
thereunder or exemption therefrom, (ii) agrees not to transfer all or any
Premiere Stock received by such Owner unless such transfer has been registered
or is exempt from registration under applicable securities laws and (iii)
acknowledges that the certificate(s) representing Premiere Stock shall bear the
following legend with respect to the restrictions on transfer under applicable
securities laws:
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, and may not be offered, sold,
transferred or otherwise disposed of unless registered with the
Securities and Exchange Commission of the United States and the
securities regulatory authorities of applicable states or unless an
exemption from such registration is available."
2.8 Accounting, Tax and Regulatory Matters. Each Owner and the Company,
--------------------------------------
jointly and severally, represents and warrants to Premiere that neither the
Company, any Owner nor any Affiliate thereof has taken or agreed to take any
action or has any knowledge of any fact or circumstance that is reasonably
likely to (i) prevent the Merger from qualifying for pooling-of-interests
accounting treatment or as a reorganization within the meaning of Section 368(a)
of the Code, or (ii) materially impede or delay receipt of any consents referred
to in Section 5.6 of the Uniform Terms or result in the imposition of a
condition or restriction of the type referred to in the last sentence of such
Section.
III. ADDITIONAL AGREEMENTS
---------------------------
3.1 Filings with State Offices. Upon the terms and subject to the
--------------------------
conditions of this Agreement, the Company and Merger Corp shall execute and file
the Articles or Certificate of Merger with the Secretary of State of the State
of California and a Certificate of Merger with the Secretary of State of the
State of Georgia in connection with the Closing.
3.2 Conditions to Closing. The Company, the Owners and Premiere agree to
---------------------
use their commercially reasonable best efforts to satisfy the closing conditions
set forth in Articles IV and V of this Agreement by the date indicated therein
or the Closing Date, as applicable.
3.3 Additional Indemnification Items. Subject to Sections 8.2 through 8.6
--------------------------------
of the Uniform Terms, the Owners and, if the Transactions involve an Asset
Transfer, the Company, shall jointly and severally indemnify and hold harmless
Premiere, and its officers, directors, agents or affiliates,
-5-
<PAGE>
from and against any and all Losses suffered or incurred by any such party by
reason of or arising out of a breach of Section 2.10 of the Uniform Terms or a
breach of Section 2.19 of the Uniform Terms as it relates to liability for sales
tax (irrespective of whether disclosed on Schedule 2.10, Schedule 2.19 or in the
Financial Statements).
3.4 Tax Matters. Each of the Company, the Owners and Premiere undertakes
-----------
and agrees to use its reasonable efforts to cause the Merger, and to take no
action which would cause the Merger not, to qualify as a "reorganization" within
the meaning of Section 368(a) of the Code for federal income tax purposes.
Notwithstanding the foregoing, the Owners understand that (i) Premiere makes no
representation or warranty regarding the tax treatment of this Agreement or the
Merger, (ii) the Closing is not subject to a condition that an Internal Revenue
Service ruling or tax opinion be obtained as to the federal income tax
consequences of this Agreement or the Merger, and (iii) the Company and the
Owners shall look to their respective advisors for advice concerning the tax
consequences of this Agreement and the Merger.
3.5 Registration Rights. At the Closing, Premiere and the Owners shall
-------------------
execute and deliver the Registration Rights Agreement.
3.6 Accounting Treatment.
--------------------
(a) The Company and each of the Owners has accurately completed the
Pooling Questionnaire required by Premiere prior to or contemporaneous with the
execution of this Agreement, and the statements therein are true and correct.
(b) Premiere, the Company and each of the Owners agrees to use its
reasonable efforts to cause the Merger, and to take no action which would cause
the Merger not, to qualify for treatment as a pooling of interests for
accounting purposes. Without limiting the foregoing, the Company and each of
the Owners agrees not to sell, transfer, or otherwise dispose of his, her or its
interests in, or reduce his, her or its risk relative to, any of the shares of
Premiere Common Stock received in connection with the Merger until such time as
Premiere notifies the Company and each such Owner that the requirements of ASRs
130 and 135 have been met. The Company and each of the Owners understands that
ASRs 130 and 135 relate to the publication of financial results of at least
thirty (30) days of post-Merger combined operations of Premiere and the Company.
Premiere agrees that it shall publish such results within forty-five (45) days
after the end of the first fiscal quarter of Premiere containing the required
period of post-Merger combined operations and that it shall notify the Company
and each of the Owners promptly following such publication. Premiere shall be
entitled to place the following restrictive legend on the shares of Premiere
Stock issued pursuant to the Merger to enforce the foregoing restrictions:
"The shares represented by this certificate were issued pursuant to a
business combination which is accounted for as a "pooling of interests" and
may not be sold, nor may the owner thereof reduce his risks relative
thereto in any way, until such time as Premiere Technologies, Inc.
("Premiere") has published the financial results covering at least 30 days
of combined operations after the effective date of the merger through which
the business combination was effected.
3.7 Affiliate Agreements. The Company has disclosed in Schedule 3.7 all
-------------------- ------------
Persons whom it reasonably believes is an "affiliate" of the Company for
purposes of Rule 145 under the 1933 Act. The Company shall use its reasonable
efforts to cause each such Person to deliver to Premiere as
-6-
<PAGE>
soon as reasonably practicable following the execution of this Agreement, a
written agreement, substantially in the form attached hereto as Exhibit D.
----------
3.8 Tax Representations. In connection with the opinion to be rendered to
-------------------
Premiere by Alston & Bird to the effect that the transactions contemplated
hereby will constitute a tax-free reorganization within the meaning of Section
368(a) of the Code, the Owners shall furnish such counsel with such
representations as to their plans for the disposition of the shares of Premiere
Stock to be received in the Transactions as such counsel shall reasonably
request.
3.9 Restricted Stock. All contractual restrictions or limitations on
----------------
transfer with respect to Company Common Stock under any plan, program, contract
or arrangement, to the extent that such restrictions or limitations have not
already lapsed (whether as a result of the Transactions or otherwise), and
except as otherwise expressly provided in such plan, program, contract or
arrangement, shall remain in full force and effect with respect to shares of
Premiere Stock into which such restricted stock is converted pursuant to Section
2.2 of this Transfer Agreement.
3.10 Exchange Listing. Premiere shall use its reasonable efforts to list,
----------------
prior to the Effective Time, on the Nasdaq National Market the shares of
Premiere Stock to be issued to the Owners pursuant to the Transactions, and
Premiere shall give all notices and make all filings with the NASD required in
connection with the Transactions.
IV. SUPPLEMENTAL CONDITIONS TO OBLIGATIONS OF PREMIERE
-------------------------------------------------------
In addition to the conditions of Premiere contained in Article V of the
Uniform Terms, the obligation of Premiere to consummate the Transactions is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions:
4.1 Approval of Owners. The Owners shall have approved the Merger in
------------------
accordance with the requirements of the California Act and the Company shall
have provided Premiere certified copies of such resolutions, and Owners holding
no more than ten percent (10%) of the Company Common Stock issued and
outstanding immediately prior to the Effective Time shall have exercised any of
the rights described in Section 2.4.
4.2 Grand Solution Documents. VTNLP, VTE, the NAP and each of the
------------------------
Franchisee Companies shall have executed and delivered Grand Solution Documents
reflecting the terms described in Exhibit E hereto in form and substance
reasonable satisfactory to Premiere.
4.3 Audited Financial Statements. Premiere shall have received balance
----------------------------
sheets of the Company as of December 31, 1995 and 1996 and the related
statements of operations, cash flows and changes in Owners' equity for the
fiscal year(s) ended (collectively, the "Audited Financial Statements") prepared
in accordance with GAAP and Regulation S-X promulgated by the Commission,
accompanied by an unqualified audit opinion of Arthur Andersen LLP relating
thereto. The Audited Financial Statements shall not reflect any material change
in the Company's financial condition or results of operations from the condition
and results reported in the Financial Statements for the corresponding periods
delivered by the Company prior to the execution of this Agreement.
-7-
<PAGE>
4.4 Pooling Letter. Premiere shall have received a letter, dated as of the
--------------
Effective Time, in form and substance reasonably acceptable to Premiere, from
Arthur Andersen LLP to the effect that the Merger will qualify for pooling of
interests accounting treatment, and no action shall have been taken by any
regulatory authority or any statute, rule, regulation or order enacted,
promulgated or issued by any regulatory authority, or any proposal made for any
such action by any regulatory authority which is reasonably likely to be put
into effect, that would prevent Premiere from accounting for the business
combination to be effected by the Merger as a pooling of interests.
4.5 Reorganization Opinion. Premiere shall have received an opinion of
----------------------
Alston & Bird LLP, counsel to Premiere, to the effect that the transactions
contemplated by the Agreement, including the Merger, will constitute a tax-free
reorganization within the meaning of Section 368(a) of the Code.
V. SUPPLEMENTAL CONDITIONS TO OBLIGATIONS OF THE COMPANY
---------------------------------------------------------
AND THE OWNERS
--------------
In addition to the conditions of the Company and the Owners contained in
Article VI of the Uniform Terms, the obligation of the Company and the Owners to
consummate the Transactions is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions:
5.1 Approval of Premiere and Merger Corp. The Board of Directors of
------------------------------------
Premiere and the Board of Directors and the shareholder of Merger Corp shall
have approved the Merger in accordance with the requirement of applicable state
law. Premiere and Merger Corp shall have provided the Company certified copies
of such resolutions.
5.2 Registration Rights. Premiere and each Owner shall have executed and
-------------------
delivered a Registration Rights Agreement.
VI. MISCELLANEOUS
------------------
6.1 Notices. The addresses for notices in accordance with Section 10.1 of
-------
the Uniform Terms for the Company and the Owners are as follows:
If to the Company: With a copy to:
4350 Executive Dr., Suite 115 Baker & Hosteler LLP
San Diego, CA 92121-2115 1900 East 9th Street
Attn: Jack Vincent Cleveland, OH 44114-3485
Phone: (619) 490-5252 Attn: Michael P. McNamara, Jr.
Fax: (619) 619-5262 Phone: (216) 621-0200
Fax: (216) 696-0740
If to the Owners: With a copy to:
4350 Executive Dr., Suite 115 Baker & Hosteler LLP
San Diego, CA 92121-2115 1900 East 9th Street
-8-
<PAGE>
Attn: Jack Vincent Cleveland, OH 44114-3485
Phone: (619) 490-5252 Attn: Michael P. McNamara, Jr.
Fax: (619) 619-5262 Phone: (216) 621-0200
Fax: (216) 696-0740
6.2 Owner's Representative. The Owners' Representative for purposes of
----------------------
Section 10.2 of the Uniform Terms shall be Paul J. Vincent, who shall serve as
the Owner's Representative under the terms of said Section 10.2 of the Uniform
Terms.
6.3 Certain Definitions. In addition to the terms defined elsewhere herein
-------------------
and in the Uniform Terms, as used in this Agreement:
(a) "Anticipated Closing Date" shall mean April 30, 1997.
------------------------
(b) "Knowledge" of the Company shall mean the personal knowledge
---------
after due inquiry of those facts that are known or should reasonably
have been known after due inquiry by Paul J. Vincent, Ed Kalankiewicz
and E. Thomas Costello, and the knowledge of any such Persons obtained
or which would have been obtained from a reasonable investigation.
(c) "Outside Closing Date" shall mean June 30, 1997.
--------------------
-9-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first written above.
PREMIERE:
PREMIERE TECHNOLOGIES, INC.,
a Georgia corporation
By: /s/Patrick G. Jones
-------------------------------------
Patrick G. Jones
Title: Sr. V.P.
Attest:
By: /s/Douglas B. Hadaway
----------------------------------
Douglas B. Hadaway
Title: Assistant Secretary
COMPANY:
SDVT, INC.,
a California corporation
By: /s/Ed Kalankiewicz
-------------------------------------
Ed Kalankiewicz
Title: Vice President
Attest:
By: /s/E. Thomas Costello
----------------------------------
E. Thomas Costello
Title: Secretary
OWNERS:
/s/Paul J. Vincent
----------------------------------------
Paul J. Vincent,
an individual resident of the
State of CA
Witness:
By: /s/E. Thomas Costello
----------------------------------
E. Thomas Costello
[SIGNATURES CONTINUED ON THE FOLLOWING PAGE]
<PAGE>
/s/Ed Kalankiewicz
----------------------------------------
Ed Kalankiewicz,
an individual resident of the
State of CA
Witness:
By: /s/E. Thomas Costello
----------------------------------
E. Thomas Costello
/s/E. Thomas Costello
----------------------------------------
E. Thomas Costello,
an individual resident of the
State of CA
Witness:
By: /s/Ed Kalankiewicz
----------------------------------
<PAGE>
EXHIBIT 2.12
AMENDED AND RESTATED
TRANSFER AGREEMENT
BY AND AMONG
PREMIERE TECHNOLOGIES, INC.,
CAR ZEE, INC.
AND
OWNERS OF CAR ZEE, INC.
DATED AS OF APRIL 2, 1997
<PAGE>
TRANSFER AGREEMENT
------------------
THIS TRANSFER AGREEMENT (this "Agreement") is entered into as of April 2,
1997 by and among Premiere Technologies, Inc., a Georgia Corporation
("Premiere"), Car Zee, Inc., a California (the "Company"), and those parties
listed on the signature pages hereto as the owners of the Company (the
"Owners").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, this Agreement provides for the acquisition of the Company by
Premiere pursuant to the merger of the Company with and into a wholly owned
subsidiary of Premiere ("Merger Corp"), with Merger Corp as the surviving
corporation in such merger (the "Merger");
WHEREAS, the respective Boards of Directors of Premiere and the Company have
approved the terms and conditions set forth in this Agreement;
WHEREAS, the Owners own at least ninety-eight percent (98%) of the equity
interests in the Company;
WHEREAS, this Agreement provides for all of the Owners' equity interests in
the Company to be converted into the right to receive shares of Premiere Stock
in connection with the Merger;
WHEREAS, it is also the intention of the parties hereto that the form of the
transactions with respect to the Company, Premiere and Merger Corp shall qualify
as a "reorganization" within the meaning of Section 368(a) of the Code for
federal income tax purposes; and
WHEREAS, it is also the intention of the parties hereto that the business
combination to be effected by the Merger be accounted for as a pooling of
interests.
NOW, THEREFORE, in consideration of the foregoing, the mutual agreements and
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
I. UNIFORM TERMS AND CONDITIONS
--------------------------------
1.1 Incorporation by Reference. The Uniform Terms and Conditions attached
--------------------------
hereto as Exhibit A (the "Uniform Terms") are hereby made a part of and
incorporated herein as if fully restated herein. Capitalized terms not defined
herein shall have the meanings provided in the Uniform Terms.
<PAGE>
II. TERMS OF MERGER
--------------------
2.1 The Merger.
----------
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time, the Company shall be merged with and into Merger Corp in
accordance with the provisions of the business corporation act under the laws of
the State of California (the "California Act") and the laws of the State of
Georgia (the "Georgia Act"). Merger Corp shall be the surviving corporation
resulting from the Merger, shall thereafter conduct the business and operations
of the Company as a wholly owned subsidiary of Premiere and shall continue to be
governed by the laws of the State of Georgia. The Merger shall be consummated
pursuant to the terms of this Agreement, which has been approved and adopted by
the respective boards of directors of Premiere, Merger Corp and the Company.
(b) Subject to the provisions of this Agreement, the parties shall file
Articles or a Certificate of Merger executed in accordance with the relevant
provisions of the California Act and a Certificate of Merger executed in
accordance with the relevant provisions of the Georgia Act and shall make all
other filings or recordings required under each such Act as soon as practicable
on or after the Closing Date. The Merger and other transactions contemplated by
this Agreement shall become effective on the date and at the time the Articles
or a Certificate of Merger reflecting the Merger becomes effective with the
Secretary of State of the State of California and the Certificate of Merger
reflecting the Merger becomes effective with the Secretary of State of the State
of Georgia (the "Effective Time").
(c) The charter and Bylaws of Merger Corp in effect immediately prior
to the Effective Time shall be the charter and Bylaws of the surviving
corporation until otherwise amended or repealed, the directors of Merger Corp
immediately prior to the Effective Time shall serve as the directors of the
surviving corporation from and after the Effective Time, and the officers of
Merger Corp in office immediately prior to the Effective Time shall serve as the
officers of the surviving corporation from and after the Effective Time.
2.2 Conversion of Shares. Subject to the provisions of this Section 2.2,
--------------------
and in consideration for the transactions contemplated hereby, at the Effective
Time, by virtue of the Merger and without any action on the part of the parties
hereto or the shareholders of any of the parties hereto, the shares of the
constituent corporations of the Merger shall be converted as follows:
(a) Each share of Premiere Stock and each share of Merger Corp common
stock issued and outstanding at the Effective Time shall remain issued and
outstanding after the Effective Time.
(b) All of the shares of the capital stock, par value $___ per share,
of the Company ("Company Stock") (excluding treasury shares and excluding shares
held by shareholders who perfect their statutory dissenters' rights as provided
in Section 2.4 of this Agreement) issued and outstanding at the Effective Time
shall cease to be outstanding and shall be converted into and exchanged for the
right to receive:
(i) the number of shares of Premiere Stock determined by dividing
(A) the product of .9 multiplied by the Company Purchase
Price, by (B) the Average Closing Price; and
- 2 -
<PAGE>
(ii) the number of shares of Premiere Stock determined by dividing
(A) the product of .1 multiplied by the Company Purchase
Price, by (B) the Average Closing Price (the "General Escrow
Amount"),
all as determined in accordance with Section 2.3 below (collectively, the
"Consideration"). Subject to Section 2.2(d) below, the Consideration shall be
issuable to the Owners pro rata in accordance with their ownership of Company
Common Stock pursuant to Section 2.6, which ownership the Owners represent has
not been adjusted in contemplation of the transactions described herein.
(c) Any and all shares of Company Common Stock held as treasury shares
by the Company shall be canceled and retired at the Effective Time, and no
consideration shall be issued in exchange therefor.
(d) Upon consummation of the Merger, the Owners shall deliver the
General Escrow Amount in negotiable form to the Escrow Agent to be held in
escrow pursuant to the terms and conditions of the Escrow Agreement(s) in the
form (s) attached hereto as Exhibit B, which shall be executed and delivered by
---------
Premiere and the Owners at the Closing.
2.3 Calculation of Consideration. For purposes of determining the
----------------------------
Consideration issuable to the Owners pursuant to Section 2.2(b) above, the
following shall apply:
(a) "Average Closing Price" shall be the average of the daily last sale
prices of Premiere Stock for the period consisting of twenty (20) consecutive
trading days on which such shares are actually traded on the Nasdaq National
Market (as reported by the Wall Street Journal or, if not reported thereby, any
other authoritative source selected by Premiere) ending at the close of trading
on the first trading day immediately preceding the Closing; provided, however,
-------- -------
that the Average Closing Price shall not be less than $22.50 nor more than
$30.50 (collectively, $22.50 and $30.50 are referred to as the "Average Closing
Price Limitations").
(b) "Company Purchase Price" shall be the sum of (i) the amount
determined by multiplying the Normalized EBITDA of the Company by the
appropriate Stock Multiple or Cash Multiple, plus (ii) the amount of cash
----
reflected on the Closing Date Balance Sheet, minus (iii) the aggregate amount of
-----
principal and accrued and unpaid interest under funded debt and capital lease
obligations reflected on the Closing Date Balance Sheet, minus (iv) the amount
-----
by which the Transaction Costs exceed the Deductible Amount.
(c) "Deductible Amount" shall be an amount equal to $5,000.
(d) "Normalized EBITDA" of the Company shall be an amount equal to
$730,827.00.
(e) "Registration Right" shall mean the right to include Premiere Stock
issued in the Merger in a registration statement which Premiere intends to file
promptly after the end of the first full fiscal quarter of Premiere containing
the period of post-Merger combined operations required by ASRs 130 and 135,
pursuant to the terms and conditions of the Stock Restriction and Registration
Rights Agreement in the form attached hereto as of Exhibit C (the "Registration
---------
Rights Agreement").
- 3 -
<PAGE>
(f) "Stock Multiple" shall be six (6).
(g) "Transaction Costs" shall mean all amounts incurred but unpaid by
the Company in connection with (i) the negotiation and preparation of this
Agreement, (ii) the preparation of the Audited Financial Statements, (iii) the
consummation of the Transactions and (iv) one-half of the costs and expenses of
public record searches pursuant to Section 5.9(b) of the Uniform Terms.
2.4 Dissenting Shareholders. Subject to Section 4.2, any holder of shares
-----------------------
of voting capital stock of the Company who perfects any available dissenters'
rights in accordance with and as contemplated by the California Act shall be
entitled to receive the value of such shares in cash from the Company after the
Effective Time as determined pursuant to such provision of law; provided, that
no such payment shall be made to any dissenting shareholder unless and until
such dissenting shareholder has complied with the applicable provisions of the
California Act and surrendered to the Company the certificate or certificates
representing the shares for which payment is being made. In the event that a
dissenting shareholder of the Company fails to perfect, or effectively withdraws
or loses, its right to appraisal and of payment for its shares, Premiere shall
issue and deliver the consideration to which such holder of shares of Company
capital stock is entitled under this Article II (without interest) upon
surrender of certificates representing such shares held by such holder.
2.5 Closing. The Closing shall take place at the offices of Alston & Bird
-------
LLP, Atlanta, Georgia, at 10:00 a.m. local time, on the date set forth in the
Uniform Terms, provided all conditions set forth in Articles V and VI of the
Uniform Terms and Articles IV and V of this Agreement have been satisfied or
waived, or on such other date or at such other place and time mutually agreed
upon by the parties.
2.6 Exchange of Shares. Promptly after the Effective Time, Premiere and
------------------
Company shall cause to be mailed to the former Company shareholders appropriate
transmittal materials for the surrender of the certificate or certificates
formerly representing their shares of Company Common Stock in exchange for
shares of Premiere Stock as provided in this Agreement. Until surrendered for
exchange in accordance herewith, each certificate theretofore representing
shares of Company Common Stock shall from and after the Effective Time represent
only the right to receive the Consideration provided in this Agreement in
exchange therefor. No certificates representing fractional shares will be
issued as a result of the Merger. Each holder of shares of Company Common Stock
exchanged pursuant to the Merger who would otherwise have been entitled to
receive a fraction of a share of Premiere Common Stock shall receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional part of a
share of premiere Common Stock multiplied by the Average Closing Price.
2.7 Purchase for Investment, Etc. Each Owner represents and warrants the
----------------------------
following to Premiere:
(a) such Owner has accurately completed the Investor Questionnaire required
by Premiere prior to or contemporaneous with the execution of the Transfer
Agreement and the statements therein are true and correct and acknowledges that
Premiere has relied upon such statements in entering into this Agreement;
- 4 -
<PAGE>
(b) such Owner is acquiring Premiere Stock for such Owner's own account and
not with a view to or for sale in connection with any public distribution
thereof within the meaning of the Securities Act;
(c) such Owner (i) has sufficient knowledge and experience in financial and
business matters to enable him, her or it to evaluate the merits and risks of an
investment in Premiere Stock, (ii) has the ability to bear the economic risk of
acquiring Premiere Stock for an indefinite period and to afford a complete loss
thereof and (iii) has had an opportunity to ask questions of and to receive
answers from the officers of Premiere and to obtain additional information in
writing as requested, which has been made available to and examined by such
Owner or such Owner's advisors; and
(d) such Owner (i) acknowledges that Premiere Stock has not been registered
under any securities laws and cannot be resold without registration thereunder
or exemption therefrom, (ii) agrees not to transfer all or any Premiere Stock
received by such Owner unless such transfer has been registered or is exempt
from registration under applicable securities laws and (iii) acknowledges that
the certificate(s) representing Premiere Stock shall bear the following legend
with respect to the restrictions on transfer under applicable securities laws:
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, and may not be offered, sold,
transferred or otherwise disposed of unless registered with the
Securities and Exchange Commission of the United States and the
securities regulatory authorities of applicable states or unless an
exemption from such registration is available."
2.8 Accounting, Tax and Regulatory Matters. Each Owner and the Company,
--------------------------------------
jointly and severally, represents and warrants to Premiere that neither the
Company, any Owner nor any Affiliate thereof has taken or agreed to take any
action or has any knowledge of any fact or circumstance that is reasonably
likely to (i) prevent the Merger from qualifying for pooling-of-interests
accounting treatment or as a reorganization within the meaning of Section 368(a)
of the Code, or (ii) materially impede or delay receipt of any consents referred
to in Section 5.6 of the Uniform Terms or result in the imposition of a
condition or restriction of the type referred to in the last sentence of such
Section.
III. ADDITIONAL AGREEMENTS
---------------------------
3.1 Filings with State Offices. Upon the terms and subject to the
--------------------------
conditions of this Agreement, the Company and Merger Corp shall execute and file
the Articles or Certificate of Merger with the Secretary of State of the State
of California and a Certificate of Merger with the Secretary of State of the
State of Georgia in connection with the Closing.
3.2 Conditions to Closing. The Company, the Owners and Premiere agree to
---------------------
use their commercially reasonable best efforts to satisfy the closing conditions
set forth in Articles IV and V of this Agreement by the date indicated therein
or the Closing Date, as applicable.
3.3 Additional Indemnification Items. Subject to Sections 8.2 through 8.6
--------------------------------
of the Uniform Terms, the Owners and, if the Transactions involve an Asset
Transfer, the Company, shall jointly and severally indemnify and hold harmless
Premiere, and its officers, directors, agents or affiliates,
- 5 -
<PAGE>
from and against any and all Losses suffered or incurred by any such party by
reason of or arising out of a breach of Section 2.19 of the Uniform Terms as it
relates to liability for sales tax (irrespective of whether disclosed on
Schedule 2.19 or in the Financial Statements).
3.4 Tax Matters. Each of the Company, the Owners and Premiere undertakes
-----------
and agrees to use its reasonable efforts to cause the Merger, and to take no
action which would cause the Merger not, to qualify as a "reorganization" within
the meaning of Section 368(a) of the Code for federal income tax purposes.
Notwithstanding the foregoing, the Owners understand that (i) Premiere makes no
representation or warranty regarding the tax treatment of this Agreement or the
Merger, (ii) the Closing is not subject to a condition that an Internal Revenue
Service ruling or tax opinion be obtained as to the federal income tax
consequences of this Agreement or the Merger, and (iii) the Company and the
Owners shall look to their respective advisors for advice concerning the tax
consequences of this Agreement and the Merger.
3.5 Registration Rights. At the Closing. Premiere and the Owners shall
-------------------
execute and deliver the Registration Rights Agreement.
3.6 Accounting Treatment.
--------------------
(a) The Company and each of the Owners has accurately completed the
Pooling Questionnaire required by Premiere prior to or contemporaneous with the
execution of this Agreement, and the statements therein are true and correct.
(b) Premiere, the Company and each of the Owners agrees to use its
reasonable efforts to cause the Merger, and to take no action which would cause
the Merger not, to qualify for treatment as a pooling of interests for
accounting purposes. Without limiting the foregoing, the Company and each of
the Owners agrees not to sell, transfer, or otherwise dispose of his, her or its
interests in, or reduce his, her or its risk relative to, any of the shares of
Premiere Common Stock received in connection with the Merger until such time as
Premiere notifies the Company and each such Owner that the requirements of ASRs
130 and 135 have been met. The Company and each of the Owners understands that
ASRs 130 and 135 relate to the publication of financial results of at least
thirty (30) days of post-Merger combined operations of Premiere and the Company.
Premiere agrees that it shall publish such results within forty-five (45) days
after the end of the first fiscal quarter of Premiere containing the required
period of post-Merger combined operations and that it shall notify the Company
and each of the Owners promptly following such publication. Premiere shall be
entitled to place the following restrictive legend on the shares of Premiere
Stock issued pursuant to the Merger to enforce the foregoing restrictions:
"The shares represented by this certificate were issued pursuant to a
business combination which is accounted for as a "pooling of interests" and
may not be sold, nor may the owner thereof reduce his risks relative
thereto in any way, until such time as Premiere Technologies, Inc.
("Premiere") has published the financial results covering at least 30 days
of combined operations after the effective date of the merger through which
the business combination was effected.
3.7 Affiliate Agreements. The Company has disclosed in Schedule 3.7 all
--------------------
Persons whom it reasonably believes is an "affiliate" of the Company for
purposes of Rule 145 under the 1933 Act. The Company shall use its reasonable
efforts to cause each such Person to deliver to Premiere as
- 6 -
<PAGE>
soon as reasonably practicable following the execution of this Agreement, a
written agreement, substantially in the form attached hereto as Exhibit D.
---------
3.8 Tax Representations. In connection with the opinion to be rendered to
-------------------
Premiere by Alston & Bird to the effect that the transactions contemplated
hereby will constitute a tax-free reorganization within the meaning of Section
368(a) of the Code, the Owners shall furnish such counsel with such
representations as to their plans for the disposition of the shares of Premiere
Stock to be received in the Transactions as such counsel shall reasonably
request.
3.9 Restricted Stock. All contractual restrictions or limitations on
----------------
transfer with respect to Company Common Stock under any plan, program, contract
or arrangement, to the extent that such restrictions or limitations have not
already lapsed (whether as a result of the Transactions or otherwise), and
except as otherwise expressly provided in such plan, program, contract or
arrangement, shall remain in full force and effect with respect to shares of
Premiere Stock into which such restricted stock is converted pursuant to Section
2.2 of this Transfer Agreement.
3.10 Exchange Listing. Premiere shall use its reasonable efforts to list,
----------------
prior to the Effective Time, on the Nasdaq National Market the shares of
Premiere Stock to be issued to the Owners pursuant to the Transactions, and
Premiere shall give all notices and make all filings with the NASD required in
connection with the Transactions.
IV. SUPPLEMENTAL CONDITIONS TO OBLIGATIONS OF PREMIERE
-------------------------------------------------------
In addition to the conditions of Premiere contained in Article V of the
Uniform Terms, the obligation of Premiere to consummate the Transactions is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions:
4.1 Approval of Owners. The Owners shall have approved the Merger in
------------------
accordance with the requirements of the California Act and the Company shall
have provided Premiere certified copies of such resolutions, and Owners holding
no more than two percent (2%) of the Company Common Stock issued and outstanding
immediately prior to the Effective Time shall have exercised any of the rights
described in Section 2.4.
4.2 Grand Solution Documents. VTNLP, VTE, the NAP and each of the Franchisee
------------------------
Companies shall have executed and delivered Grand Solution Documents reflecting
the terms described in Exhibit E hereto in form and substance reasonable
satisfactory to Premiere.
4.3 Audited Financial Statements. Premiere shall have received financial
----------------------------
statements of the Company as of December 31, 1995 and 1996 and the related
statements of operations, cash flows and changes in owners' equity for the
fiscal years then ended (collectively, the "Audited Financial Statements")
prepared in accordance with GAAP and Regulation S-X promulgated by the
Commission, accompanied by an unqualified audit opinion of Arthur Andersen LLP
relating thereto. The Audited Financial Statements shall not reflect any
material change in the Company's financial condition or results of operations
from the condition and results reported in the Financial Statements for the
corresponding periods delivered by the Company prior to the execution of this
Agreement.
- 7 -
<PAGE>
4.4 Pooling Letter. Premiere shall have received a letter, dated as of the
--------------
Effective Time, in form and substance reasonably acceptable to Premiere, from
Arthur Andersen LLP to the effect that the Merger will qualify for pooling of
interests accounting treatment, and no action shall have been taken by any
regulatory authority or any statute, rule, regulation or order enacted,
promulgated or issued by any regulatory authority, or any proposal made for any
such action by any regulatory authority which is reasonably likely to be put
into effect, that would prevent Premiere from accounting for the business
combination to be effected by the Merger as a pooling of interests.
4.5 Reorganization Opinion. Premiere shall have received an opinion of
----------------------
Alston & Bird LLP, counsel to Premiere, to the effect that the transactions
contemplated by the Agreement, including the Merger, will constitute a tax-free
reorganization within the meaning of Section 368(a) of the Code.
V. SUPPLEMENTAL CONDITIONS TO OBLIGATIONS OF THE COMPANY
---------------------------------------------------------
AND THE OWNERS
--------------
In addition to the conditions of the Company and the Owners contained in
Article VI of the Uniform Terms, the obligation of the Company and the Owners to
consummate the Transactions is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions:
5.1 Approval of Premiere and Merger Corp. The Board of Directors of
------------------------------------
Premiere and the Board of Directors and the shareholder of Merger Corp shall
have approved the Merger in accordance with the requirement of applicable state
law. Premiere and Merger Corp shall have provided the Company certified copies
of such resolutions.
5.2 Registration Rights. Premiere and each Owner shall have executed and
-------------------
delivered a Registration Rights Agreement.
VI. MISCELLANEOUS
------------------
6.1 Notices. The addresses for notices in accordance with Section 10.1 of
-------
the Uniform Terms for the Company and the Owners are as follows:
If to the Company: With a copy to:
6140 Stoneridge Mall Rd. Baker & Hostetler LLP
Suite 500 1900 East 9th Street
Pleasanton, CA 94588 Cleveland, OH 44114-3485
Attn: Kees van der Zee Attn: Michael P. McNamara, Jr.
Phone: (510) 468-7700 Phone: (216) 621-0200
Fax: (510) 468-7710 (216) 621-0740
Voice-Tel (510) 727-6610
Direct # (510) 468-7712
- 8 -
<PAGE>
If to the Owners: With a copy to:
6140 Stoneridge Mall Rd. Baker & Hostetler LLP
Suite 500 1900 East 9th Street
Pleasanton, CA 94588 Cleveland, OH 44114-3485
Attn: Kees van der Zee and Attn: Michael P. McNamara, Jr.
Warren E. Carter, II Phone: (216) 621-0200
Phone: (510) 468-7700 Fax: (216) 621-0740
Fax: (510) 468-7710
6.2 Owner's Representative. The Owners' Representative for purposes of
----------------------
Section 10.2 of the Uniform Terms shall be Kees van der Zee, who shall serve as
the Owner's Representative under the terms of said Section 10.2 of the Uniform
Terms.
6.3 Certain Definitions. In addition to the terms defined elsewhere herein
-------------------
and in the Uniform Terms, as used in this Agreement:
(a) "Anticipated Closing Date" shall mean April 30, 1997.
------------------------
(b) "Knowledge" of the Company shall mean the personal knowledge after
---------
due inquiry of those facts that are known or should reasonably have been
known after due inquiry by Kees van der Zee and Warren E. Carter, II and
the knowledge of any such Persons obtained or which would have been
obtained from a reasonable investigation.
(c) "Outside Closing Date" shall mean June 30, 1997.
--------------------
- 9 -
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first written above.
PREMIERE:
PREMIERE TECHNOLOGIES, INC.,
a Georgia corporation
By: /s/ Patrick G. Jones
-----------------------------
Title: Sr. V.P.
--------------------------
Attest:
By: /s/ Douglas B. Hadaway
------------------------------
Title: Assistant Secretary
---------------------------
COMPANY
CAR ZEE, INC.,
a California corporation
By: /s/ Kees Van Der Zee
-----------------------------
Title: President
--------------------------
Attest:
By: /s/ Julie M. Wood
------------------------------
Title: Acctng. Asst.
---------------------------
OWNERS:
CARVO, INC.,
a Calif. corporation
By: /s/ Warren E. Carter, II
-----------------------------
Title: President
--------------------------
Attest:
By: /s/ Julie M. Wood
------------------------------
Title: Acctng. Asst.
---------------------------
[SIGNATURES CONTINUED ON NEXT PAGE]
<PAGE>
ZEE Corp.,
a Calif. corporation
By: /s/ Kees Van Der Zee
-----------------------------
Title: President
--------------------------
Attest:
By: /s/ Julie M. Wood
-----------------------------
Title: Acctng. Assist.
--------------------------
/s/ Warren E. Carter, II
--------------------------------
WARREN E. CARTER, II,
an individual resident of the
State of Wyoming
Witness:
By: /s/ Julie M. Wood
-----------------------------
Title: Acctng. Assist.
--------------------------
/s/ Kees Van Der Zee
--------------------------------
KEES VAN DER ZEE,
an individual resident of the
State of Calif.
Witness:
By: /s/ Julie M. Wood
-----------------------------
Title: Acctng. Assist.
--------------------------
<PAGE>
EXHIBIT 2.13
========================
VOICE-TEL CANADA
VTEC
COMPANY
========================
TRANSFER AGREEMENT
BY AND AMONG
PREMIERE TECHNOLOGIES, INC.,
AND
OWNERS OF THE VTEC FRANCHISEE:
-1086236 ONTARIO INC.
DATED AS OF MARCH 31, 1997
<PAGE>
TRANSFER AGREEMENT
------------------
THIS TRANSFER AND REORGANIZATION AGREEMENT (this "Agreement") is entered
into as of March 31, 1997.
A M O N G S T:
PREMIERE TECHNOLOGIES, INC.,
a Georgia corporation
(hereinafter referred to as "Premiere")
OF THE FIRST PART;
-AND-
PREMIERE TECHNOLOGIES, INC.
in trust, on behalf of a corporation to
be incorporated under the laws of the
Province of Ontario
(the "Acquisition Sub")
OF THE SECOND PART;
-AND-
PHILIP ALLAN ("Philip")
of the Province of Ontario,
BARBARA JANE ALLAN ("Jane")
of the Province of Ontario,
JEFFREY ALLAN ("Jeffrey")
of the Province of Ontario,
KARIN ALLAN ("Karin")
of the Province of Ontario,
SCOTT ALLAN ("Scott")
of the Province of Ontario, and
BARBARA JOAN ALLAN ("Joan")
of the Province of Ontario,
(Philip, Jane, Jeffrey, Karin, Scott and
Joan sometimes hereinafter collectively
referred to as the "Holdo Owners")
OF THE THIRD PART;
-AND-
1086237 ONTARIO INC. ("Holdco")
an Ontario Corporation
OF THE FOURTH PART;
-AND-
PAT HANEY ("Haney")
of the Province of Manitoba,
<PAGE>
JIM FIELDS ("Fields")
of the Province of Manitoba, and
BROOKS EQUIPMENT LIMITED ("Brooks")
a Manitoba corporation
OF THE FIFTH PART.
WHEREAS, this Agreement provides for the incorporation of the Acquisition
Sub and the acquisition by it of the Companies (as hereafter defined):
AND WHEREAS, the respective boards of directors of Premiere and each of the
Holding Companies approved the terms and conditions set forth in this Agreement;
AND WHEREAS, the Holdco Owners collectively own or have the right to
acquire, directly or indirectly, one hundred percent (100%) of the Equity Stock
of Holdco;
AND WHEREAS, it is also the intention of the parties hereto that the form
of the transactions hereunder with respect to the Company. Premiere and the
Acquisition Sub shall qualify as a "reorganization" within the meaning of
Section 368(a) of the Code for federal income tax purposes and shall qualify as
a rollover pursuant to subsection 85(1) of the Income Tax Act (Canada) ("ITA");
AND WHEREAS, it is also the intention of the parties hereto that the
business combination to be effected by the subject form of transactions be
accounted for as a pooling of interests;
NOW, THEREFORE, in consideration of the foregoing, the mutual agreements
and covenants contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
1. UNIFORM TERMS AND CONDITIONS
-------------------------------
1.1 Incorporation by Reference. The Uniform Terms and Conditions attached
--------------------------
hereto as Exhibit A (the "Uniform Terms") are hereby made a part of and
incorporated herein as if fully restated herein. Capitalized terms not defined
herein shall have the meanings provided in the Uniform Terms.
1.2 Canadianized Terms and Conditions. In accordance with the provisions
---------------------------------
of the Uniform Terms expressing this Agreement to be paramount, attached hereto
as Exhibit AA (the "Canadianized Terms") are terms and conditions amending the
Uniform Terms to conform to matters pertaining to the law of Canada which
Canadianized Terms are hereby made a part of and incorporated herein as if fully
restated herein. Capitalized terms not defined herein and not defined in the
Uniform Terms shall have the meanings provided in the Canadianized Terms.
1.3 Owners. In this Agreement, the term "Owners" includes the Holdco
------
Owners and Fields who own any of the Equity Stock directly or indirectly of the
corporate Owners selling Company Equity Stock hereunder as registered and
beneficial owner. In those circumstances, it is intended that, notwithstanding
any other provision in this Agreement or in the Uniform Terms:
-2-
<PAGE>
(a) Whenever an Owner's liability hereunder is expressed to be
"several", such liability shall be borne severally by the Owners selling Company
Equity Stock (the "Selling Owners") and each such several liability shall then
be borne jointly and severally by such Selling Owner and all other Owners
holding a direct or indirect interest in the Equity Stock of such Selling Owner;
and
(b) Whenever the liability of an Owner is expressed to be "joint and
several" with the liability of the other Owners hereunder, each Owner shall be
so jointly and severally liable together with all other Owners hereunder,
regardless of their relationship to any particular Selling Owner.
2. TERMS OF MERGER
------------------
2.1 The Share Exchange. On or before the Closing Date, as more
------------------
particularly set out herein, the following shall occur (collectively and
interchangeably referred to herein as either the "Merger", or the "Transfer
Transactions").
(a) Incorporation of Acquisition Sub: After the execution and
delivery of this Agreement, and prior to the Closing Date, Premiere shall cause
the Acquisition Sub to be incorporated as a wholly owned subsidiary pursuant to
Certificate of Articles of Incorporation (the "Articles") filed under the OBCA
and under the name "Voice-Tel of Canada" or under such other name as Premiere,
in its discretion, may elect. The share capital of the Acquisition Sub shall be
divided into an unlimited number of common shares (the "Common Shares") and an
unlimited number of exchangeable non-voting special shares (the "Exchangeable
Shares") which Common Shares and Exchangeable Shares shall have the rights,
privileges, restrictions and conditions set out in Exhibit "G" annexed hereto.
Upon the incorporation of the Acquisition Sub as a wholly owned subsidiary of
Premiere, Premiere shall cause the Acquisition Sub to adopt the benefits and
burdens of this Agreement in accordance with Section 21 of the OBCA as the party
of the second part hereunder and as if an original party hereto. Notwithstanding
such adoption by the Acquisition Sub, Premiere shall thereafter continue to be
jointly and severally liable with the Acquisition Sub for the obligations
hereunder of the Acquisition Sub to and including the Closing Date. After the
Closing Date and upon completion of the transactions contemplated hereunder on
the Closing Date, Premiere shall be released and forever discharged from any
further joint and several liability for the obligations hereunder of the
Acquisition Sub; save and except, in respect to any obligations specifically
adopted by Premiere as party of the first part hereunder and expressed to
survive the Closing or as may be embodied in any agreement delivered by Premiere
at the Closing.
(b) Purchase and Sale: Subject to the terms and conditions hereof,
the Acquisition Sub shall purchase from the Owners, and the Owners shall sell to
the Acquisition Sub, the Company Equity Stock on the Closing Date. The
Acquisition Sub and the Owners intend that the purchase price for the Company
Equity Stock shall be equal to the Company Purchase Price determined in
accordance with Section 2.3 below;
(c) Satisfaction of Company Purchase Price: On the Closing Date, the
Acquisition Sub shall satisfy the Company Purchase Price payable to the Owners
for the Company Equity Stock by issuing to the Owners the following securities
in full payment of the Company purchase Price ( the "Consideration"):
(i) each Owner will receive for all stock of a particular class of
stock of the Company being sold by that Owner to the Acquisition
Sub hereunder (the "Particular Stock") that number of
Exchangeable Shares that is equal to the product that is obtained
when the number of shares of such Particular Stock
-3-
<PAGE>
being sold by that Owner is multiplied by the Exchange Ratio
applicable to that class of Particular Stock.
Each Owner shall convey to the Acquisition Sub all of that Owner's right, title
and interest in and to all of the Company Equity Stock to be sold by that Owner
hereunder free and clear of all liens, claims and encumbrances of any nature
whatsoever. The Exchange Ratio for each Particular Stock will be determined in
accordance with Section 2.2 hereof and any fractional Exchange Shares derived
from the application of the foregoing formula will be handled in accordance with
Section 2.6 hereof;
(d) Section 85(1) Election: Notwithstanding that the purchase price
for all of the Company Equity Stock sold hereunder shall be the Company Purchase
Price and that the aggregate issue price for the Exchangeable Share
Consideration issued therefor shall be that amount determined in accordance with
subsections 2.1(b) and 2.1(c) above, the Acquisition Sub and each Selling Owner
shall complete and file an election (the "Election") pursuant to subsection
85(1) of the ITA, electing that the purchase price for each block of Particular
Stock constituting the Company Equity Stock shall be equal to that Owner's
aggregate adjusted cost base therefor as of the date hereof for all purposes of
the ITA (the "Elected Amount"). For these purposes, the Selling Owners advise
that their respective Elected Amounts for each block of Particular Stock sold by
them hereunder shall be as advised by the Owner's Representative by the Closing
Date and, failing such advice, shall be as thereafter advised by the accountants
who, heretofore, have produced the financial statements for the Company issuing
the Particular Stock;
(e) Adjustment to Elected Amount: If, notwithstanding the manner in
which the Acquisition Sub and each Owner have agreed to determine the Elected
Amount pursuant to subsection 2.1(d) hereof for any block of Particular Stock:
(i) there shall be issued to either the Acquisition Sub or the
particular Owner a notice of assessment or reassessment pursuant
to any taxing statute, which assessment or reassessment is based
upon an assumption of fact or a finding by any taxing authority
that there must be an adjustment or deemed adjustment (the
"Adjusted Election") to the Elected Amount in subsection 2.1(d)
hereof; or
(ii) any taxing authority notifies either the Acquisition Sub or the
particular Owner that it intends to issue such notice of
assessment or reassessment;
then, subject to the rights of the Acquisition Sub and the particular Owner, if
any, to object to or appeal such assessment to any authority, board or court of
competent jurisdiction and as applicable to such assessment or reassessment;
(iii) the elected purchase price for that block of Particular Stock and
to the Elected Amount therefor selected under subsection 2.1(e)
shall, for the purposes of this Agreement, be deemed to be and to
have always been the Adjusted Election as finally agreed to
between such taxing authority and the Acquisition Sub or the
particular Owner, as the case may be, or where either the
Acquisition Sub or the Owner has objected to or appealed any such
assessment or reassessment, as finally determined by such
authority, board or court.
(f) Further Assurances: The Acquisition Sub and each particular Owner
shall execute such other documents, cause such meetings to be held, votes cast,
resolutions passed, by-laws enacted, and shall do all such things, including
filing an election pursuant to subsection
-4-
<PAGE>
85(1) of the ITA as may be necessary or desirable to give effect to subsections
2.1(d) and 2.1(e) and the provisions thereof including in respect of the
Adjusted Election(s), if any, Provided the position taken by a particular Owner
in respect of an Adjusted Election is not detrimental to other parties hereto,
each such other party shall reasonably co-operate with that Owner in respect of
the Owner's position on the Adjusted Election;
2.2 Exchange Ratio and Escrow Amounts. Subject to the provisions of this
---------------------------------
Section 2.2, and in consideration of the transactions contemplated hereby, at
the Closing Date, the Company Equity Stock shall be exchanged for Exchangeable
Shares in accordance with exchange ratios (the "Exchange Ratios") determined as
follows:
(a) The aggregate number of Exchangeable Shares to be issued
hereunder (the "Exchangeable Share Total") shall be determined by dividing the
Company Purchase Price (determined on a consolidated basis for all of the
Companies in accordance with Section 2.3 hereof) by the Average Closing Price
(determined in accordance with Section 2.3 hereof);
(b) The Exchange Ratio in respect of each share of Particular Stock
shall be equal to the number, rounded to six (6) decimal places, that is
obtained when the product of the Contributing Factor for Particular Stock times
the Exchangeable Share Total is divided by the number of issued and outstanding
shares of that Particular Stock being purchased hereunder;
(c) For purposes of the foregoing calculation, the `Contributing
Factor' represents the proportion of the Company Purchase Price that is
allocatable to all shares of that Particular Stock being purchased hereunder.
For these purposes, the Owners have advised Premiere and the Acquisition Sub
that the Contributing Factors for each block of Particular Stock, constituting
in the aggregate the Holding Company Equity Stock, and each Owner's pro-rata
share consistent with subsection 2.2(d) below, is that factor set out opposite
that block of Particular Stock in the table below:
================================================================================
BLOCK OF PARTICULAR STOCK CONTRIBUTING FACTORS
- - --------------------------------------------------------------------------------
all issued and outstanding common shares 1,000
of the Company
================================================================================
1,000 total
================================================================================
(d) The parties agree that the Exchangeable Shares issuable to any
Owner pursuant to subsection 2.1(c) hereof, shall be further divided into:
(i) 10% of the Exchangeable Shares receivable by that particular
Owner (the "General Escrow Amount"); and
(ii) 90% of the Exchangeable Shares receivable by that Particular
Owner (the "Deliverable Shares").
Subject to subsection 2.2(e) below, and in accordance with section 2.6, all
Owners shall be issued the Consideration payable hereunder pro rata in
accordance with their ownership of Holding Company Equity Stock and applicable
Exchange Ratios pursuant to which ownership the Owners represent has not been
adjusted in contemplation of the transactions described herein;
(e) Upon consummation of the share exchange set out in Section 2.1
hereof, each Owner shall deliver his particular General Escrow Amount in
negotiable form to the Escrow
-5-
<PAGE>
Agent to be held in escrow pursuant to the terms and conditions of the Escrow
Agreement(s) in the form(s) attached hereto as Exhibit B, which shall be
executed and delivered by Premiere, the Acquisition Sub and the Owners at the
Closing.
2.3 Calculation of Consideration. For purposes of determining the
----------------------------
Consideration issuable to the Owners pursuant to Section 2.2 above, the
following shall apply:
(a) "Average Closing Price" shall be the average of the daily
last sale US$ prices of Premiere Stock for the period consisting of twenty (20)
consecutive trading days on which such shares are actually traded on the Nasdaq
National Market (as reported by the Wall Street Journal or, if not reported
thereby, any other authoritative source selected by Premiere) ending at the
close of trading on the first trading day immediately preceding the Closing;
provided, however, that the Market Value Per Share shall not be less than
- - -------- -------
US$22.50 nor more than US$30.50 (collectively, US$22.50 and US$30.50 are
referred to as the "Average Closing Price Limitations");
(b) "C$ Company Purchase Price" shall be the C$ sum of (i) the
amount determined by multiplying the Normalized EBITDA of the Company by the
appropriate Stock Multiple or Cash Multiple, plus (ii) the amount of cash
-----
reflected on the Closing Date Balance Sheet, minus (iii) the aggregate amount of
-----
principal and accrued and unpaid interest under funded debt and capital lease
obligations reflected on the Closing Date Balance Sheet, and minus (iv) the
-----
amount by which the Transaction Costs exceed the Deductible Amount;
(c) "Company Purchase Price" means the aforesaid C$ Company
Purchase Price expressed in US$ by multiplying the C$ Company Purchase Price by
the noon spot exchange rate (on the day on which the Average Closing Price is
calculated) for C$ expressed in US$ as reported by the Bank of Canada or, in the
event such spot exchange rate is not available, such exchange rate as is
published in the Toronto Globe and Mail on that date;
(d) "Deductible Amount" shall be an amount equal to C$3,435.00
to be split amongst all Companies, if more than one Company hereunder;
(e) "Normalized EBITDA" of the Company shall be an amount equal
to C$256,794.00;
(f) "Registration Right" shall mean the right to include
underlying Premiere Stock issued pursuant to the attributes of the Exchangeable
Shares in a registration statement which Premiere intends to file promptly after
the end of the first full fiscal quarter of Premiere containing the period of
post-merger combined operations required by ASRs 130 and 135, pursuant to the
terms and conditions of the Stock Restriction and Registration Rights Agreement
in the form attached hereto as Exhibit C (the "Registration Rights Agreement");
(g) "Stock Multiple" shall be six (6);
(h) "Transaction Costs" shall mean all C$ amounts incurred but
unpaid by the Company in connection with (i) the negotiation and preparation of
this Agreement, (ii) the preparation of the Audited Financial Statements, (iii)
the consummation of the Transactions, and one-half (1/2) of the costs and
expenses of public record searches pursuant to Section 5.9(b) of the Uniform
Terms, but shall exclude the portion of the costs and expenses of Arthur
Andersen LLP incurred by Premiere in connection with the preparation of the
Audited Financial Statements for wich the Owners are responsible;
-6-
<PAGE>
2.4 Shareholders. Each of the Owners jointly and severally represents and
------------
warrants that the Owners collectively are the registered, legal and beneficial
owners of all of the Company Equity Stock.
2.5 Closing. The Closing shall take place at the offices of
-------
Morris/Rose/Ledgett, Toronto, Ontario, at 10:00 a.m. local time, on the date set
forth in the Uniform Terms, provided all conditions set forth in Articles V and
VI of the Uniform Terms and Articles IV and V of this Agreement have been
satisfied or waived, or on such other date or at such other place and time
mutually agreed upon by the parties.
2.6 Exchange of Shares.
------------------
(a) Promptly after the Effective Time, Premiere and the
Acquisition Sub shall cause to be mailed to the Owners appropriate transmittal
materials for the surrender of the certificate or certificates formerly
representing their shares of Company Equity Stock in exchange for Exchangeable
Shares of the Acquisition Sub as provided in this Agreement. The Owners shall
use all reasonable best efforts to escrow all Company Equity Stock sold
hereunder with an attorney or equivalent escrow agent designated by the
Acquisition Sub which escrowed Company Equity Stock shall be duly endorsed for
transfer to the Acquisition Sub so that physical exchange of stock hereunder may
take place coincidentally with the determination of the Exchangeable Share Total
and the transmittal of the requisite number of Exchangeable Shares to each
Owner. Until surrendered for exchange in accordance herewith, each certificate
theretofore representing shares of Company Equity Stock shall from and after the
Effective Time represent only the right to receive the Consideration provided in
this Agreement in exchange therefor. No certificates representing fractional
shares will be issued as a result of the this Agreement. Each holder of shares
of Company Equity Stock exchanged pursuant to this Agreement who would otherwise
have been entitled to receive a fraction of an Exchangeable Share shall receive,
in lieu thereof, cash (without interest) in an amount equal to such fractional
part of a share of Premiere Common Stock multiplied by the Actual Closing Value;
(b) In the event that any certificate which immediately prior to
the Closing Date represented Company Equity Stock purchased hereunder shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such certificate to be lost, stolen or destroyed, and upon
receipt of an appropriate bond of indemnity, the Acquisition Sub will issue in
exchange for such lost, stolen or destroyed certificate, certificates
representing Exchangeable Shares subject always to the representations,
warranties and covenants of such Owner in this Agreement with respect to title
to such Company Equity Stock.
2.7 USA and Canadian Securities Issues: Purchase for Investment, Etc.
-----------------------------------------------------------------
Each Owner represents and warrants the following to Premiere and for the benefit
of the Acquisition Sub:
(a) such Owner has accurately completed the Investor
Questionnaire required by Premiere prior to or contemporaneous with the
execution of the Transfer Agreement and the statements therein are true and
correct and acknowledges that Premiere has relied upon such statements in
entering into this Agreement;
(b) such Owner is acquiring the Acquisition Sub's Exchangeable
Shares hereunder and the underlying Premiere Stock exchangeable for that stock
(collectively, the "Acquired Stock") for such Owner's own account and not with a
view to or for sale in connection with any public distribution thereof within
the meaning of the Securities Act;
(c) such Owner (i) has sufficient knowledge and experience in
financial and business matters to enable him, her or it to evaluate the merits
and risks of an investment in
-7-
<PAGE>
Acquired Stock. (ii) has the ability to bear the economic risk of acquiring
Acquired Stock for an indefinite period and to afford a complete loss thereof
and (iii) has had an opportunity to ask questions of and to receive answers from
the officers of Premiere and the Acquisition Sub and to obtain additional
information in writing as requested, which has been made available to and
examined by such Owner or such Owner's advisors; and
(d) such Owner (i) acknowledges that Acquired Stock has not been
registered under any securities laws and cannot be resold without registration
thereunder or exemption therefrom, (ii) agrees not to transfer all or any
Acquired Stock received by such Owner unless such transfer has been registered
or is exempt from registration under applicable securities laws and (iii)
acknowledges that the certificate(s) representing Acquired Stock shall bear the
following legend with respect to the restrictions on transfer under applicable
securities laws:
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, and may not be offered, sold,
transferred or otherwise disposed of unless registered with the
Securities and Exchange Commission of the United States and the
securities regulatory authorities of applicable states or unless an
exemption from such registration is available."
(e) Each Owner has not been provided with, has not requested, and
does not need to receive, a prospectus or an offering memorandum as defined in
the applicable securities legislation, or documents similar to the foregoing,
with respect to the transactions or the Acquired Stock. Accordingly, each Owner
acknowledges he will not obtain the statutory protections that would be
available to an investor in the Province of Ontario acquiring securities
pursuant to a prospectus or offering memorandum;
(f) The Owner's decision to execute this Agreement and the documents
referred to herein has not been based upon any verbal or written representation
as to fact or otherwise made on behalf of Premiere or of the Acquisition Sub
other than as set out herein;
(g) Such Owner acknowledges and agrees:
(i) Premiere is not, nor is it intended that the Acquisition
Sub be, a reporting issuer under the Securities Act
(Ontario) or under the securities legislation of any other
province or territory of Canada;
(ii) there is no market in Canada through which the Acquired
Stock may be sold and none is expected to develop in
Canada in the foreseeable future; and
(iii) the Acquired Stock will be highly illiquid can only be
resold in the United States pursuant to subsection 2.7(d)
above; or in the Province of Ontario in reliance on (X) an
exemption from the prospectus requirements of the
Securities Act (Ontario), (Y) a prospectus which has been
duly filed with the Ontario Securities Commission, or (Z)
a discretionary ruling obtained from the Ontario
Securities Commission; or in the order provinces and
territories of Canada pursuant to exemptions, if any,
available in those jurisdictions.
2.8 Accounting, Tax and Regulatory Matters. Each Owner and the Company,
--------------------------------------
jointly and severally, represents and warrants to Premiere that neither the
Company, any Owner nor any
-8-
<PAGE>
Affiliate thereof has taken or agreed to take any action or has any knowledge of
any fact or circumstance that is reasonably likely to (i) prevent the Merger
from qualifying for pooling-of-interests accounting treatment or as a
reorganization within the meaning of Section 368(a) of the Code, or (ii)
materially impede or delay receipt of any consents referred to in Section 5.6 of
the Uniform Terms or result in the imposition of a condition or restriction of
the type referred to in the last sentence of such Section.
3. ADDITIONAL AGREEMENTS
------------------------
3.1 Conditions to Closing. The Company, the Owners and Premiere agree to
---------------------
use their commercially reasonable best efforts to satisfy the closing conditions
set forth in Articles IV and V of this Agreement by the date indicated therein
or the Closing Date, as applicable.
3.2 Termination. For greater certainty, the rights of termination set out
-----------
in Section 7.2 of the Uniform Terms shall be deemed to include in subsection
7.2(b) thereof the additional closing conditions set out in Article 4 hereof,
and be deemed to include in subsection 7.2(c) thereof the additional conditions
of close set out in Article 5 of this Agreement.
3.3 Additional Indemnification Items. Subject to Sections 8.2 through 8.6
--------------------------------
of the Uniform Terms, the Owners and, if the Transactions involve an Asset
Transfer, the Company, shall, subject also to Section 1.3 of this Agreement,
jointly and severally indemnify and hold harmless Premiere, and its officers,
directors, agents or affiliates, from and against any and all Losses suffered or
incurred by any such party by reason of or arising out of any of the following:
(a) a breach of Section 2.19 of the Uniform Terms as it relates to
liability for sales tax (irrespective of whether disclosed on Schedule 2.19 or
in the Financial Statements);
3.4 Tax Matters. Each of the Company, the Owners and Premiere undertakes
-----------
and agrees to use its reasonable efforts to cause the Merger, and to take no
action which would cause the Merger not to qualify as a "reorganization" within
the meaning of Section 368(a) of the Code for federal income tax purposes.
Notwithstanding the foregoing, the Owners understand that (i) Premiere makes no
representation or warranty regarding the tax treatment of this Agreement or the
Merger, (ii) the Closing is not subject to a condition that an Internal Revenue
Service ruling or tax opinion be obtained as to the federal income tax
consequences of this Agreement or the Merger, and (iii) the Company and the
Owners shall look to their respective advisors for advice concerning the tax
consequences of this Agreement and the Merger.
3.5 Registration Rights. At the Closing. Premiere and the Owners shall
-------------------
execute and deliver the Registration Rights Agreement.
3.6 Accounting Treatment.
--------------------
(a) The Company and each of the Owners has accurately completed
the Pooling Questionnaire required by Premiere prior to or contemporaneous with
the execution of this Agreement, and the statements therein are true and
correct.
(b) Premiere, the Company and each of the Owners agrees to use
its reasonable efforts to cause the Merger, and to take no action which would
cause the Merger not to qualify as a pooling of interests for accounting
purposes. Without limiting the foregoing, the Company and each of the Owners
agrees not to sell, transfer, or otherwise dispose of his, her or its interests
in, or reduce his, her or its risk relative to, any of the shares of Premiere
Common Stock received in connection with the Merger until such time as Premiere
notifies the Company and each such Owner that the requirements of ASRs 130 and
135 have been met. The Company
-9-
<PAGE>
and each of the Owners understands that ASRs 130 and 135 relate to the
publication of financial results of at least thirty (30) days of post-Merger
combined operations of Premiere and the Company. Premiere agrees that it shall
publish such results within forty-five (45) days after the end of the first
fiscal quarter of Premiere containing the required period of post-Merger
combined operations and that it shall notify the Company and each of the Owners
promptly following such publication. Premiere shall be entitled to place the
following restrictive legend on the shares of Premiere Stock issued pursuant to
the Merger to enforce the foregoing restrictions:
"The shares represented by this certificate were issued pursuant
to a business combination which is accounted for as a "pooling
of interests" and may not be sold, nor may the owner thereof
reduce his risks relative thereto in any way, until such time as
Premiere Technologies, Inc. ("Premiere") has published the
financial results covering at least 30 days of combined
operations after the effective date of the merger through which
the business combination was effected.
3.7 Affiliate Agreements. The Company has disclosed in Schedule 3.7
-------------------- ------------
all Persons whom it reasonably believes is an "affiliate" of the Company for
purposes of Rule 145 under the 1933 Act. The Company shall use its reasonable
efforts to cause each such Person to deliver to Premiere as soon as reasonably
practicable following the execution of this Agreement a written agreement,
substantially in the form attached hereto as Exhibit D.
3.8 Exchange Listing. Premiere shall use its reasonable efforts to list,
----------------
prior to the Effective Time, on the Nasdaq National Market the shares of
Premiere Stock underlying the Exchangeable Shares to be issued to the Owners
pursuant to the Transactions, and Premiere shall give all notices and make all
filings with the NASD required in connection with the Transactions.
3.9 Ancillary Documents/Reservations of Shares. Provided all other
------------------------------------------
conditions of this Agreement have been satisfied or waived by the time of
closing:
(a) Premiere and the Acquisition Sub shall execute and deliver a
support agreement between Preimere and the Acquisition Sub containing the terms
and conditions set forth in Exhibit H hereto (the "Support Agreement"), together
with such other terms and conditions as may be agreed to by the parties hereto
acting reasonably;
(b) Premiere, the Acquisition Sub and a Canadian trust company, or
such other suitable entity as may be appropriate, to be selected by Premiere
shall execute and deliver a voting and exchange trust agreement containing the
terms and conditions set forth in Exhibit I hereto (the "Voting Trust
Agreement"), together with such other terms and conditions as may be agreed to
by the parties hereto acting reasonably;
(c) Premiere shall create the Special Premiere Voting Share in
substantially the form annexed as Exhibit J hereto, issued in the name of the
Trustee and deposit the same with the Trustee to be voted in accordance with
the Voting Trust Agreement;
(d) On or prior to the Effective Time, Premiere will reserve for
issuance such number of shares of Premiere Common Stock as shall be necessary
to give effect to the exchanges and conversions and call rights applicable to
the Exchangeable Shares in accordance with the attributes thereof and in
accordance with the Support Agreement.
-10-
<PAGE>
4. SUPPLEMENTAL CONDITIONS TO OBLIGATIONS OF PREMIERE
-------------------------------------------------------
In addition to the conditions of Premiere contained in Article V of the
Uniform Terms, the obligation of Premiere to consummate the Transactions is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions:
4.1 Approval of Owners. The Owners and the Holding Companies shall have
------------------
approved the transfers hereunder in accordance with governing law and shall have
provided Premiere certified copies of such resolutions.
4.2 Grand Solution Documents. VTNLP, VTE, the NAP and each of the
------------------------
Franchisee Companies shall have executed and delivered the Grand Solution
Documents reflecting the terms described in Exhibit E hereto in form and
substance reasonably satisfactory to Premiere.
4.3 Audited Financial Statements. Premiere shall have received balance
---------------------------
sheets of the Companies as of January 31, 1996 and 1997 and related statements
of operations, cash flows, and changes is Owner's equity for the fiscal years
ended on such dates (the "Audited Financial Statements") prepared in accordance
with GAPP and Regulation S-X promulgated by the Commission, accompanied by an
unqualified audit opinion of Arthur Andersen LLP relating thereto. The Audited
Financial Statements shall not reflect any material change in the Company's
financial condition or results of operations from the condition and results
reported in the Financial Statements for the corresponding periods delivered by
the Company prior to the execution of this Agreement.
4.4 Pooling Letter. Premiere shall have received a letter, dated as of
--------------
the Effective Time, in form and substance reasonably acceptable to Premiere,
from Arthur Andersen LLP to the effect that the transfer will qualify for
pooling of interests accounting treatment, and no action shall have been taken
by any regulatory authority or any statute, rule, regulation or order enacted,
promulgated or issued by any regulatory authority, or any proposal made for any
such action, by any regulatory authority which is reasonably likely to be put
into effect, that would prevent Premiere from accounting for the business
combination to be effected by the transfer as a pooling of interests
4.5 Competition Act. The Director of Investigation and Research (the
---------------
"Director") appointed under the Competition Act (Canada) shall have advised
Premiere in form and on terms satisfactory to it that the Director shall not
oppose or threaten to oppose the purchase of any of the Holding Company Equity
Stock on the basis hereunder, nor make or threaten to make an application under
Part VII of the said act in respect of the purchase of the Holding Company
Equity Stock.
5. SUPPLEMENTAL CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE OWNERS
-----------------------------------------------------------------------
In addition to the conditions of the Company and the Owners contained in
Article VI of the Uniform Terms, the obligation of the Company and the Owners
to consummate the Transactions is subject to the satisfaction, at or prior to
the Closing, of each of the following conditions:
5.1 Approval of Premiere and Acquisition Sub. The Board of Directors of
----------------------------------------
Premiere and the Board of Directors and the shareholder of Acquisition Sub shall
have approved the transfer in accordance with the requirement of applicable
state law. Premiere and Acquisition Sub shall have provided the Company
certified copies of such resolutions.
5.2 Registration Rights. Premiere and each Owner shall have executed and
-------------------
delivered a
-11-
<PAGE>
Registration Rights Agreement.
5.3 Ancillary Agreements. Premiere and the Acquisition Sub shall have
--------------------
executed and delivered the Support Agreement, Premiere, the Acquisition Sub and
an appropriate Trustee shall have executed and delivered the voting Trust
Agreement, and Premiere shall have created the Special Premium Voting Share and
issued the same in the name of, and deposited the same with, the Trustee.
6. MISCELLANEOUS
----------------
6.1 Notices. The addresses for notices in accordance with Section 10.1 of
-------
the Uniform Terms for the Company and the Owners are as follows:
If to the Company, or to any Owners:
Voice-Tel
305 Industrial Parkway South, Suite 19
Aurora, Ontario, Canada L4G 6X7
Attention: D. Scott Allan, Vice-President
Telecopy: (905)713-1600
with a copy to:
Mr. Christopher Lobb
Clark, Farb, Fiksel & Tobin
Suite 400, 144 Front Street West
Toronto, Ontario M5J 2L7
Telecopy: (416) 977-8587
6.2 Owner's Representative. The Owners' Representative for purposes of
----------------------
Section 10.2 of the Uniform Terms shall be D. Scott Allan who shall serve as the
Owner's Representative under the terms of said Section 10.2 of the Uniform
Terms.
6.3 Certain Definitions. In addition to the terms defined elsewhere herein
-------------------
and in the Uniform Terms, as used in this Agreement:
(a) "Anticipated Closing Date" shall mean April 30, 1997.
------------------------
(b) "Canadian Owners" means, collectively, the Eastern Owners and
---------------
the Western Owners;
(c) "C$" means the lawful current of Canada;
--
(d) "Companies" and "Company" means 1086236 Ontario Inc.;
---------
(e) "Effective Time" means that time on the Closing Date when all
--------------
of the transactions contemplated hereunder have been completed in accordance
with the terms hereof.
-12-
<PAGE>
(f) "Equity Stock" when used in relation to the stock of any
------------
corporation means all equity securities of that corporation of any type,
including but not limited to common stock, preferred stock, limited partnership
interests, general partnership interests, limited liability company interests,
options to purchase any of the foregoing and securities convertible into any of
the foregoing;
(g) "Company Equity Stock" means the Equity Stock of the Company;
--------------------
(h) "Joint Companies" means 1086236 Ontario Inc. and 1042546 Ontario
---------------
Inc.;
(i) "Knowledge" of the Company shall mean the personal knowledge
---------
after due inquiry of those facts that are known or should reasonably have been
known after due inquiry by the Holdco Owners, Haney and Fields, and the
knowledge of any such Persons obtained or which would have been obtained from a
reasonable investigation.
(j) "OBCA" means the Business Corporations Act (Ontario);
----
(k) "Operating Companies" means the "Company";
-------------------
(l) "Outside Closing Date" shall mean June 30, 1997.
--------------------
(m) "Owners" mean the Holdco Owners, Holdco, Haney, Fields and
------
Brooks;
(n) "Special Premiere Voting Share" means the one (1) share of
-----------------------------
Premiere Class. Preferred Stock, US Dollar 0.001 par value, issued by Premiere
to and deposited with the Trustee which entitles the holder of record to a
number of votes at meetings of holders of Premiere Common Shares equal to that
number of votes that holders of the Exchangeable Shares outstanding from time to
time (other than exchangeable shares held by Premiere, its subsidiaries and
affiliates) would be entitled to if such Exchangeable Shares were exchanged for
Premiere Common Shares;
(o) "Trustee" means. Trust Company of Canada and any successor
-------
trustee.
(p) "US$" means the lawful currency of the United States of America;
---
(q) "Vendor Companies" means Holdco and Brooks.
----------------
6.4 Exhibits. The following exhibits are annexed hereto and incorporated
--------
as part hereof:
A. Uniform Terms
AA. Canadianized Terms
B. Escrow Agreement
C. Registration Rights Agreement
D. Affiliation Agreement
E. Grand Solution Documents
F. Company Pooling of Interests Representations
G. Acquisitions Sub Share Capital
H. Support Agreement
I. Voting Trust Agreement
J. Special Premiere Voting Share
-13-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first written above.
/s/ P B Haney
___________________________ ----------------------------
Witness Pat Haney
/s/ P Allan
___________________________ ----------------------------
Witness Philip Allan
/s/ Barbara J. Allan
___________________________ ----------------------------
Witness Barbara Jane Allan
/s/ Jeffrey Allan
___________________________ ----------------------------
Witness Jeffrey Allan
/s/ Karin Allan
___________________________ ----------------------------
Witness Karin Allan
/s/ D. Scott Allan
___________________________ ----------------------------
Witness Scott Allan
/s/ Barbara J. Allan
___________________________ ----------------------------
Witness Barbara Joan Allan
/s/ J C Fields
___________________________ ----------------------------
Witness Jim Fields
BROOKS EQUIPMENT LIMITED PREMIERE TECHNOLOGIES, INC.
Per: /s/ J C Fields Per: /s/ Patrick G. Jones
---------------------- -----------------------
Name: Name: Patrick G. Jones
Title: Title: Sr. V.P
1086237 ONTARIO INC. PREMIERE TECHNOLOGIES, INC.
on behalf of the party of the third part
hereunder, a corporation to be
incorporated
Per: /s/ Jeffrey Allan Per: /s/ Patrick G. Jones
---------------------- -----------------------
Name: JEFFREY ALLAN Name: Patrick G. Jones
Title: DIRECTOR & OFFICER Title: Sr. V.P.
<PAGE>
EXHIBIT 2.14
===================================
VOICE-TEL CANADA
EASTERN
COMPANIES
===================================
TRANSFER AGREEMENT
BY AND AMONG
PREMIERE TECHNOLOGIES, INC.,
AND
OWNERS OF THE EASTERN FRANCHISES:
-1139133 ONTARIO INC. ("VTH")
-1136827 ONTARIO INC. ("VTL")
-1006089 ONTARIO INC. ("VTO")
-1063940 ONTARIO INC. ("VTOTT")
DATED AS OF MARCH 31, 1997
<PAGE>
TRANSFER AGREEMENT
------------------
THIS TRANSFER AND REORGANIZATION AGREEMENT (this "Agreement") is entered
into as of March 31, 1997.
A M O N G S T:
PREMIERE TECHNOLOGIES, INC.,
a Georgia corporation
(hereinafter referred to as "Premiere")
OF THE FIRST PART;
-AND-
PHILIP ALLAN ("Philip")
of the Province of Ontario,
BARBARA JANE ALLAN ("Jane")
of the Province of Ontario,
JEFFREY ALLAN ("Jeffrey")
of the Province of Ontario
KARIN ALLAN ("Karin")
of the Province of Ontario,
SCOTT ALLAN ("Scott")
of the province of Ontario, and
BARBARA JOAN ALLAN ("Joan")
of the Province of Ontario,
(Philip, Jane, Jeffrey, Karin, Scott and
Joan sometimes hereinafter collectively
referred to as the "Primary Owners")
OF THE SECOND PART;
-AND-
PREMIERE TECHNOLOGIES, INC.
in trust, on behalf of a corporation to
be incorporated under the laws of the
Province of Ontario
(the "Acquisition Sub")
OF THE THIRD PART.
WHEREAS, this Agreement provides for the incorporation of the Acquisition
Sub and the acquisition by it of the Companies (as hereafter defined);
AND WHEREAS, the respective boards of directors of Premiere and each of the
Holding Companies approved the terms and conditions set forth in this Agreement;
AND WHEREAS by Transfer Agreement dated of even date and executed and
delivered earlier this day made amongst Premiere, the Acquisition Sub, the
Primary Owners, 1086237 Ontario Inc. ("Holdco"), Pat Haney, Jim Fields, and
Brooks Equipment Limited respecting the sale of all right, title and interest in
and to all of Equity Stock of 1086236 Ontario Inc. ("Vtec");
<PAGE>
AND WHEREAS, the Primary Owners collectively own or have the right to
acquire, and shall convey or caused to be conveyed hereunder, directly or
indirectly, one hundred percent (100%) of the Equity Stock of the Eastern
Companies;
AND WHEREAS, it is also the intention of the parties hereto that the form
of the transactions hereunder with respect to the Companies, Premiere and the
Acquisition Sub shall qualify as a "reorganization" within the meaning of
Section 368(a) of the Code for federal income tax purposes and shall qualify as
a rollover pursuant to subsection 85(1) of the Income Tax Act (Canada) ("ITA");
AND WHEREAS, it is also the intention of the parties hereto that the
business combination to be effected by the subject form of transactions be
accounted for as a pooling of interests;
NOW, THEREFORE, in consideration of the foregoing, the mutual agreements
and covenants contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
1. UNIFORM TERMS AND CONDITIONS
-------------------------------
1.1 Incorporation by Reference. The Uniform Terms and Conditions attached
--------------------------
hereto as Exhibit A (the "Uniform Terms") are hereby made a part of and
incorporated herein as if fully restated herein. Capitalized terms not defined
herein shall have the meanings provided in the Uniform Terms.
1.2 Canadianized Terms and Conditions. In accordance with the provisions
---------------------------------
of the Uniform Terms expressing this Agreement to be paramount, attached hereto
as Exhibit AA (the "Canadianized Terms") are terms and conditions amending the
Uniform Terms to conform to matters pertaining to the law of Canada which
Canadianized Terms are hereby made a part of and incorporated herein as if fully
restated herein. Capitalized terms not defined herein and not defined in the
Uniform Terms shall have the meanings provided in the Canadianized Terms.
1.3 Company. In this Agreement, the Uniform Terms, and the Canadianized
-------
Terms, references to the singular term "Company" shall be deemed to mean a
reference to all of the Holding Companies and all of the Operating Companies
considered collectively on a consolidated basis except where the context
requires the term to be interpreted as a reference to a particular Company.
1.4 Determination of Vendors. Forthwith after the execution and delivery
------------------------
of this Agreement, and in any event on or before April 7, 1997, the Primary
Owners shall deliver to Premiere and to Arthur Anderson LLP a corporate
organizational chart depicting the Intervening Companies and the Operating
Companies and the beneficial ownership of all of the Equity Stock of each such
corporation which organizational chart must conform to the representations and
warranties in Section 2.4 hereof and conform as Schedules 1.1 and 2.5 to the
Uniform Terms. Premiere shall ask Arthur Andersen LLP to advise Premiere on or
before April 11, 1997 as to the highest level of Intervening Companies that may
be sold hereunder that:
(a) will vest in the Acquisition Sub direct or indirect ownership of
all Equity Stock of the Operating Companies; and
(b) will permit Arthur Andersen LLP to give the pooling letter
referred to in Section 4.4 in respect of the particular Transfer Transactions
hereunder to the effect that the
-2-
<PAGE>
Transfer Transaction will result in a business combination that may be accounted
for by Premiere as a `pooling of interests' transaction for accounting purposes.
Subject to the foregoing paramount objectives, it is the intention of the
parties hereto that as many as possible, if not all, of the Intervening
Companies shall be included in the sale hereunder. As a result of the foregoing,
the advice of Arthur Andersen LLP shall also specify
(c) those Intervening Companies, if any, that cannot be included in
the sale hereunder which corporations shall be added to the list of `Owners'
hereunder; and
(d) those Intervening Companies not designated under subsection
1.4(c) which the Owners shall then further subdivide into those corporations:
(i) the Equity Stock of which is owned by Owners (the "Holding
Companies"); and
(ii) the Equity Stock of which is owned by Holding Companies
(which corporations, if any, shall be added to the list of
`Companies' hereunder).
The advice aforesaid of Arthur Andersen LLP shall be final and binding upon the
parties hereto and on or before April 15, 1997 the Primary Owners shall cause
those Intervening Corporations designated under subsection 1.4(c) to enter into
a counterpart of this Agreement as `Owners' hereunder.
1.5 Owners. In this Agreement, the term "Owners" includes the Primary
------
Owners who own any of the Equity Stock directly or indirectly of the corporate
Owners selling Holding Company Equity Stock hereunder as registered and
beneficial owner. In those circumstances, it is intended that, notwithstanding
any other provision in this Agreement or in the Uniform Terms:
(a) Whenever an Owner's liability hereunder is expressed to be
`several', such liability shall be borne severally by the Owners selling Holding
Company Equity Stock (the "Selling Owners") and each such several liability
shall then be borne jointly and severally by such Selling Owner and all other
Owners holding a direct or indirect interest in the Equity Stock of such Selling
Owner; and
(b) Whenever the liability of an Owner is expressed to be `joint and
several' with the liability of the other Owners hereunder, each Owner shall be
so jointly and severally liable together with all other Owners hereunder,
regardless of their relationship to any particular Selling Owner.
2. TERMS OF MERGER
------------------
2.1 The Share Exchange. On or before the Closing Date, as more
------------------
particularly set out herein, the following shall occur (collectively and
interchangeably referred to herein as either the "Merger", or the "Transfer
Transactions").
(a) Incorporation of Acquisition Sub: After the execution and
delivery of this Agreement, and prior to the Closing Date, Premiere shall cause
the Acquisition Sub to be incorporated as a wholly owned subsidiary pursuant to
Certificate of Articles of Incorporation (the "Articles") filed under the OBCA
and under the name `Voice-Tel of Canada' or under such
-3-
<PAGE>
other name as Premiere, in its discretion, may elect. The share capital of the
Acquisition Sub shall be divided into an unlimited number of common shares (the
"Common Shares") and an unlimited number of exchangeable non-voting special
shares (the Exchangeable Shares") which Common Shares and Exchangeable Shares
shall have the rights, privileges, restrictions and conditions set out in
Exhibit "G" annexed hereto. Upon the incorporation of the Acquisition Sub as a
wholly owned subsidiary of Premiere, Premiere shall cause the Acquisition Sub to
adopt the benefits and burdens of this Agreement in accordance with Section 21
of the OBCA as the party of the third part hereunder and as if an original party
hereto. Notwithstanding such adoption by the Acquisition Sub, Premiere shall
thereafter continue to be jointly and severally liable with the Acquisition Sub
for the obligations hereunder of the Acquisition Sub to and including the
Closing Date. After the Closing Date and upon completion of the transactions
contemplated hereunder on the Closing Date, Premiere shall be released and
forever discharged from any further joint and several liability for the
obligations hereunder of the Acquisition Sub; save and except, in respect of any
obligations specifically adopted by Premiere as party of the first hereunder and
expressed to survive the Closing or as may be embodied in any agreement
delivered by Premiere at the Closing.
(b) Purchase and Sale: Subject to the terms and conditions hereof,
the Acquisition Sub shall purchase from the Owners, and the Owners shall sell to
the Acquisition Sub, the Holding Company Equity Stock on the Closing Date. The
Acquisition Sub and the Owners intend that the purchase price for the Holding
Company Equity Stock shall be equal to the Company Purchase Price determined in
accordance with Section 2.3 below;
(c) Satisfaction of Company Purchase Price: On the Closing Date, the
Acquisition Sub shall satisfy the Company Purchase Price payable to the Owners
for the Holding Company Equity Stock by issuing to the Owners the following
securities in full payment of the Company Purchase Price (the "Consideration"):
(i) each Owner will receive for all stock of a particular class of
stock of a particular Holding Company being sold by that Owner to
the Acquisition Sub hereunder (the "Particular Stock") that
number of Exchangeable Shares that is equal to the product that
is obtained when the number of shares of such Particular Stock
being sold by that Owner is multiplied by the Exchange Ratio
applicable to that class of Particular Stock.
Each Owner shall convey to the Acquisition Sub all of that Owner's right, title
and interest in and to all of the Holding Company Equity Stock to be sold by
that Owner hereunder free and clear of all liens, claims and encumbrances of any
nature whatsoever. The Exchange Ratio for each Particular Stock will be
determined in accordance with Section 2.2 hereof and any fractional Exchange
Shares derived from the application of the foregoing formula will be handled in
accordance with Section 2.6 hereof;
(d) Section 85(1) Election: Notwithstanding that the purchase price
for all of the Holding Company Equity Stock sold hereunder shall be the Company
Purchase Price and that the aggregate issue price for the Exchangeable Share
Consideration issued therefor shall be that amount determined in accordance with
subsections 2.1(b) and 2.1(c) above, the Acquisition Sub and each Selling Owner
shall complete and file an election (the "Election") pursuant to subsection
85(1) of the ITA, electing that the purchase price for each block of Particular
Stock constituting the Company Equity Stock shall be equal to that Owner's
aggregate adjusted cost base therefor as of the date hereof for all purposes of
the ITA (the "Elected Amount"). For these purposes, the Selling Owners advise
that their respective Elected Amounts for each block of Particular Stock sold by
them hereunder shall be as advised by the Owner's Representative by the Closing
Date and, failing such advice, shall be as thereafter advised by the accountants
who, heretofore,
-4-
<PAGE>
have produced the financial statements for the Company issuing the Particular
Stock;
(e) Adjustment to Elected Amount: If, notwithstanding the manner in
which the Acquisition Sub and each Owner have agreed to determine the Elected
Amount pursuant to subsection 2.1(d) hereof for any block of Particular Stock:
(i) there shall be issued to either the Acquisition Sub or the
particular Owner a notice of assessment or reassessment pursuant
to any taxing statute, which assessment or reassessment is based
upon an assumption of fact or a finding by any taxing authority
that there must be an adjustment or deemed adjustment (the
"Adjusted Election") to the Elected Amount in subsection 2.1(d)
hereof; or
(ii) any taxing authority notifies either the Acquisition Sub or the
particular Owner that it intends to issue such notice of
assessment or reassessment;
then, subject to the right of the Acquisition Sub and the particular Owner, if
any, to object to or appeal such assessment to any authority, board or court of
competent jurisdiction and as applicable to such assessment or reassessment;
(iii) the elected purchase price for that block of Particular Stock
and to the Elected Amount therefor selected under subsection
2.1(e) shall, for the purposes of this Agreement, be deemed to
be and to have always been the Adjusted Election as finally
agreed to between such taxing authority and the Acquisition Sub
or the particular Owner, as the case may be, or where either the
Acquisition Sub or the Owner has objected to or appealed any
such assessment or reassessment, as finally determined by such
authority, board or court.
(f) Further Assurances: The Acquisition Sub and each particular
Owner shall execute such other documents, cause such meetings to be held, votes
cast, resolutions passed, by-laws enacted, and shall do all such things,
including filing an election pursuant to subsection 85(1) of the ITA as may be
necessary or desirable to give effect to subsections 2.1(d) and 2.1(e) and the
provisions thereof including in respect of the Adjusted Election(s), if any.
Provided the position taken by a particular Owner in respect of an Adjusted
Election is not detrimental to other parties hereto, each such other party shall
reasonably co-operate with that Owner in respect of the Owner's position on the
Adjusted Election;
2.2 Exchange Ratio and Escrow Amounts. Subject to the provisions of this
---------------------------------
Section 2.2, and in consideration of the transactions contemplated hereby, at
the Closing Date, the Holding Company Equity Stock shall be exchanged for
Exchangeable Shares in accordance with exchange ratios (the "Exchange Ratios")
determined as follows:
(a) The aggregate number of Exchangeable Shares to be issued
hereunder (the "Exchangeable Share Total") shall be determined by dividing the
Company Purchase Price (determined on a consolidated basic for all of the
Companies in accordance with Section 2.3 hereof) by the Average Closing Price
(determined in accordance with Section 2.3 hereof);
(b) The Exchange Ratio in respect of each share of Particular Stock
shall be equal to the number, rounded to six (6) decimal places, that is
obtained when the product of the Contributing Factor for Particular Stock times
the Exchangeable Share Total is divided by the number of issued and outstanding
shares of that Particular Stock being purchased hereunder;
-5-
<PAGE>
(c) For purposes of the foregoing calculation, the `Contributing'
Factor' represents the proportion of the Company Purchase Price that is
allocatable to all shares of that Particular Stock being purchased hereunder.
For these purposes, the Owners will in conjunction with the determination set
out in Section 1.4 advise Premiere and the Acquisition Sub of the Contributing
Factors for each block of Particular Stock, constituting in the aggregate the
Holding Company Equity Stock, and each Owner's pro-rata share consistent with
subsection 2.2(d);
(d) The parties agree that the Exchangeable Shares issuable to any
Owner pursuant to subsection 2.1(c) hereof, shall be further divided into:
(i) 10% of the Exchangeable Shares receivable by that particular
Owner (the "General Escrow Amount"); and
(ii) 90% of the Exchangeable Shares receivable by that Particular
Owner (the "Deliverable Shares").
Subject to subsection 2.2(e) below, and in accordance with Section 2.6, all
Owners shall be issued the Consideration payable hereunder pro rata in
accordance with their ownership of Holding Company Equity Stock and applicable
Exchange Ratios pursuant to which ownership the Owners represent has not been
adjusted in contemplation of the transactions described herein;
(e) Upon consummation of the share exchange set out in Section 2.1 hereof,
each Owner shall deliver his particular General Escrow Amount in negotiable
form to the Escrow Agent to be held in escrow pursuant to the terms and
conditions of the Escrow Agreement(s) in the form(s) attached hereto as Exhibit
B, which shall be executed and delivered by Premiere, the Acquisition Sub and
the Owners at the Closing.
2.3 Calculation of Consideration. For purposes of determining the
----------------------------
Consideration issuable to the Owners pursuant to Section 2.2 above, the
following shall apply:
(a) "Average Closing Price" shall be the average of the daily last
sale US$ prices of Premiere Stock for the period consisting of twenty (20)
consecutive trading days on which such shares are actually traded on the Nasdaq
National Market (as reported by the Wall Street Journal or, if not reported
thereby, any other authoritative source selected by Premiere) ending at the
close of trading on the first day immediately preceding the Closing; provided,
--------
however, that the Market Value Per Share shall not be less than US$22.50 nor
- - -------
more than US$30.50 (collectively, US$22.50 and US$30.50 are referred to as the
"Average Closing Price Limitations");
(b) "C$ Company Purchase Price" shall be the C$ sum of (i) the amount
determined by multiplying the Normalized EBITDA of the Company by the
appropriate Stock Multiple or Cash Multiple, plus (ii) the amount of cash
----
reflected on the Closing Date Balance Sheet, minus (iii) the aggregate amount of
-----
principal and accrued and unpaid interest under funded debt and capital lease
obligations reflected on the Closing Date Balance Sheet, minus (iv) the amount
-----
by which the Transaction Costs exceed the Deductible Amount, and minus (v) one-
-----
half (1/2) of C$ costs and expenses of Arthur Andersen LLP incurred by Premiere
in connection with preparation of the Audited Financial Statements for the
Company but not to exceed C$17,117.00;
(c) "Company Purchase Price" means the aforesaid C$ Company Purchase
Price expressed in US$ by multiplying the C$ Company Purchase Price by the noon
spot exchange rate (on the day on which the Average Closing Price is calculated)
for C$ expressed in US$ as reported by the Bank of Canada or, in the event such
spot exchange rate is not available, such exchange rate as is published in the
Toronto Globe and Mail on that date;
-6-
<PAGE>
(d) "Deductible Amount" shall be an amount equal to C$3,435.00 to be
split amongst all Companies, if more than one Company hereunder;
(e) "Normalized EBITDA" of the Company shall be an amount equal to
C$1,194,653.00;
(f) "Registration Right" shall mean the right to include underlying
Premiere Stock issued pursuant to the attributes of the Exchangeable Shares in a
registration statement which Premiere intends to file promptly after the end of
the first full fiscal quarter of Premiere containing the period of post-merger
combined operations required by ASRs 130 and 135, pursuant to the terms and
conditions of the Stock Registration and Registration Rights Agreement in the
form attached hereto as Exhibit C (the "Registration Rights Agreement");
(g) "Stock Multiple" shall be six (6);
(h) "Transaction Costs" shall mean all C$ amounts incurred but unpaid
by the Company in connection with (i) the negotiation and preparation of this
Agreement, (ii) the preparation of the Audited Financial Statements, (iii) the
consummation of the Transactions, and one-half (1/2) of the costs and expenses
of public record searches pursuant to Section 5.9(b) of the Uniform Terms, but
shall exclude the portion of the costs and expenses of Arthur Andersen LLP
incurred by Premiere in connection with the preparation of the Audited Financial
Statements for which the Owners are responsible;
2.4 Shareholders. Each of the Primary Owners jointly and severally
------------
represents and warrants that the Owners collectively are the registered, legal
and beneficial owners of all of the Holding Company Equity Stock and that the
Holding Companies, in the proportions more particularly set out in this
Agreement, collectively, are the registered, legal and beneficial owners
directly or indirectly of all of the issued and outstanding shares and rights to
shares in the capital stock of all of the Operating Companies.
2.5 Closing. The Closing shall take place at the offices of
-------
Morris/Rose/Ledgett, Toronto, Ontario, at 10:00 a.m. local time, on the date set
forth in the Uniform Terms, provided all conditions set forth in Articles V and
VI of the Uniform Terms and Articles IV and V of this Agreement have been
satisfied or waived, or on such other date or at such other place and time
mutually agreed upon by the parties.
2.6 Exchange of Shares.
------------------
(a) Promptly after the Effective Time, Premiere and the
Acquisition Sub shall cause to be mailed to the Owners appropriate transmittal
materials for the surrender of the certificate or certificates formerly
representing their shares of Holding Company Equity Stock in exchange for
Exchangeable Shares of the Acquisition Sub as provided in this Agreement. The
Owners shall use all reasonable best efforts to escrow all Holding Company
Equity Stock sold hereunder with an attorney or equivalent escrow agent
designated by the Acquisition Sub which escrowed Holding Company Equity Stock
shall be duly endorsed for transfer to the Acquisition Sub so that physical
exchange of stock hereunder may take place coincidentally with the determination
of the Exchangeable Share Total and the transmittal of the requisite number of
Exchangeable Shares to each Owner. Until surrendered for exchange in accordance
herewith, each certificate theretofore representing shares of Holding Company
Equity Stock shall from and after the Effective Time represent only the right to
receive the Consideration provided in this Agreement in exchange therefor. No
certificates representing fractional shares will be issued as a result of the
this Agreement. Each holder of shares of Holding Company Equity Stock exchanged
pursuant to this Agreement who would otherwise have been entitled to receive a
-7-
<PAGE>
fraction of an Exchangeable Share shall receive, in lieu thereof, cash (without
interest) in an amount equal to such fractional part of a share of Premiere
Common Stock multiplied by the Actual Closing Value;
(b) In the event that any certificate which immediately prior to the
Closing Date represented Holding Company Equity Stock purchased hereunder shall
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming such certificate to be lost, stolen or destroyed,
and upon receipt of an appropriate bond of indemnity, the Acquisition Sub will
issue in exchange for such lost, stolen or destroyed certificate, certificates
representing Exchangeable Shares subject always to the representations,
warranties and covenants of such Owner in this Agreement with respect to title
to such Holding Company Equity Stock.
2.7 USA and Canadian Securities Issues: Purchase for Investment, Etc. Each
----------------------------------------------------------------
Owner represents and warrants the following to Premiere and for the benefit of
the Acquisition Sub:
(a) such Owner has accurately completed the Investor Questionnaire
required by Premiere prior to or contemporaneous with the execution of the
Transfer Agreement and the statements therein are true and correct and
acknowledges that Premiere has relied upon such statements in entering into
this Agreement;
(b) such Owner is acquiring the Acquisition Sub's Exchangeable Shares
hereunder and the underlying Premiere Stock exchangeable for that stock
(collectively, the "Acquired Stock") for such Owner's own account and not with a
view to or for sale in connection with any public distribution thereof within
the meaning of the Securities Act;
(c) such Owner (i) has sufficient knowledge and experience in
financial and business matters to enable him, her or it to evaluate the merits
and risks of an investment in Acquired Stock, (ii) has the ability to bear the
economic risk of acquiring Acquired Stock for an indefinite period and to afford
a complete loss thereof and (iii) has had an opportunity to ask questions of and
to receive answers from the officers of Premiere and the Acquisition Sub and to
obtain additional information in writing as requested, which has been made
available to and examined by such Owner or such Owner's advisors; and
(d) such Owner (i) acknowledges that Acquired Stock has not been
registered under any securities laws and cannot be resold without registration
thereunder or exemption therefrom, (ii) agrees not to transfer all or any
Acquired Stock received by such Owner unless such transfer has been registered
or is exempt from registration under applicable securities laws and (iii)
acknowledges that the certificate(s) representing Acquired Stock shall bear the
following legend with respect to the restrictions on transfer under applicable
securities laws:
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, and may not be offered, sold,
transferred or otherwise disposed of unless registered with the
Securities and Exchange Commission of the United States and the
securities regulatory authorities of applicable states or unless an
exemption from such registration is available."
(e) Each Owner has not been provided with, has not requested, and
does not need to receive, a prospectus or an offering memorandum as defined in
the applicable securities legislation, or documents similar to the foregoing,
with respect to the transactions or the Acquired Stock. Accordingly, each Owner
acknowledges he will not obtain the statutory protections that would be
available to an investor in the Province of Ontario acquiring securities
pursuant to a prospectus or offering memorandum:
-8-
<PAGE>
(f) The Owner's decision to execute this Agreement and the documents
referred to herein has not been based upon any verbal or written representation
as to fact or otherwise made on behalf of Premiere or of the Acquisition Sub
other than as set out herein;
(g) Such Owner acknowledges and agrees:
(i) Premiere is not, nor is it intended that the Acquisition
Sub be, a reporting issuer under the Securities Act
(Ontario) or under the securities legislation of any other
province or territory of Canada;
(ii) there is no market in Canada through which the Acquired
Stock may be sold and none is expected to develop in
Canada in the foreseeable future; and
(iii) the Acquired Stock will be highly illiquid and can only be
resold in the United States pursuant to subsection 2.7(d)
above; or in the Province of Ontario in reliance on (X) an
exemption from the prospectus requirements of the
Securities Act (Ontario), (Y) a prospectus which has been
duly filed with the Ontario Securities Commission, or (Z)
a discretionary ruling obtained from the Ontario
Securities Commission; or in the other provinces and
territories of Canada pursuant to exemptions, if any,
available in those jurisdictions.
2.8 Accounting, Tax and Regulatory Matters. Each Owner and the Company,
--------------------------------------
jointly and severally, represents and warrants to Premiere that neither the
Company, any Owner nor any Affiliate thereof has taken or agreed to take any
action or has any knowledge of any fact or circumstance that is reasonably
likely to (i) prevent the Merger from qualifying for pooling-of-interests
accounting treatment or as a reorganization within the meaning of Section 368(a)
of the Code, or (ii) materially impede or delay receipt of any consents referred
to in Section 5.6 of the Uniform Terms or result in the imposition of a
condition or restriction of the type referred to in the last sentence of such
Section.
3. ADDITIONAL AGREEMENTS
------------------------
3.1 Conditions to Closing. The Company, the Owners and Premiere agree to
---------------------
use their commercially reasonable best efforts to satisfy the closing conditions
set forth in Article IV and V of this Agreement by the date indicated therein or
the Closing Date, as applicable.
3.2 Termination. For greater certainty, the rights of termination set out
-----------
in Section 7.2 of the Uniform Terms shall be deemed to include in subsection
7.2(b) thereof the additional closing conditions set out in Article 4 hereof,
and be deemed to include in subsection 7.2(c) thereof the additional conditions
of close set out in Article 5 of this Agreement.
3.3 Additional Indemnification Items. Subject to Sections 8.2 through
--------------------------------
8.6 of the Uniform Terms, the Owners and, if the Transactions involve an Asset
Transfer, the Company, shall, subject also to Section 1.3 of this Agreement,
jointly and severally indemnify and hold harmless Premiere, and its officers,
directors, agents or affiliates, from and against any and all Losses suffered or
incurred by any such party by reason of or arising out of any of the following:
(a) a breach of Section 2.19 of the Uniform Terms as it relates
to liability for sales tax (irrespective of whether disclosed on Schedule 2.19
or in the Financial Statements);
-9-
<PAGE>
3.4 Tax Matters. Each of the Company, the Owners and Premiere undertakes
-----------
and agrees to use its reasonable efforts to cause the Merger, and to take no
action which would cause the Merger not to qualify as a "reorganization" within
the meaning of Section 368(a) of the Code for federal income tax purposes.
Notwithstanding the foregoing, the Owners understand that (i) Premiere makes no
representation or warranty regarding the tax treatment of this Agreement or the
Merger, (ii) the Closing is not subject to a condition that an Internal Revenue
Service ruling or tax opinion be obtained as to the federal income tax
consequences of this Agreement or the Merger, and (iii) the Company and the
Owners shall look to their respective advisors for advice concerning the tax
consequences of this Agreement and the Merger.
3.5 Registration Rights. At the Closing. Premiere and the Owners shall
-------------------
execute and deliver the Registration Rights Agreement.
3.6 Accounting Treatment.
--------------------
(a) The Company and each of the Owners has accuarately completed
the Pooling Questionnaire required by Premiere prior to or contemporaneous with
the execution of this Agreement, and the statements therein are true and
correct.
(b) Premiere, the Company and each of the Owners agrees to use
its reasonable efforts to cause the Merger, and to take no action which would
cause the Merger not to qualify as a pooling of interests for accounting
purposes. Without limiting the foregoing, the Company and each of the Owners
agrees not to sell, transfer, or otherwise dispose of his, her or its interests
in, or reduce his, her or its risk relative to, any of the shares of Premiere
Common Stock received in connection with the Merger until such time as Premiere
notifies the Company and each such Owner that the requirements of ASRs 130 and
135 have been met. The Company and each of the Owners understands that ASRs 130
and 135 relate to the publication of financial results of at least thirty (30)
days of post-Merger combined operations of Premiere and the Company. Premiere
agrees that it shall publish such results within forty-five (45) days after the
end of the first fiscal quarter of Premiere containing the required period of
post-Merger combined operations and that it shall notify the Company and each of
the Owners promptly following such publication. Premiere shall be entitled to
place the following restrictive legend on the shares of Premiere Stock issued
pursuant to the Merger to enforce the foregoing restrictions:
"The shares represented by this certificate were issued pursuant to a
business combination which is accounted for as a "pooling of interests" and
may not be sold, nor may the owner thereof reduce his risks relative
thereto in any way, until such time as Premiere Technologies, Inc.
("Premiere") has published the financial results covering at least 30 days
of combined operations after the effective date of the merger through which
the business combination was affected.
3.7 Affiliate Agreements. The Company has disclosed in Schedule 3.7 all
-------------------- ------------
Persons whom it reasonably believes is an "affiliate" of the Company for
purposes of Rule 145 under the 1933 Act. The Company shall use its reasonable
efforts to cause each such Person to deliver to Premiere as soon as reasonably
practicable following the execution of this Agreement a written agreement,
substantially in the form attached hereto as Exhibit D.
3.8 Exchange Listing. Premiere shall use its reasonable efforts to list,
----------------
prior to the Effective Time, on the Nasdaq National Market the shares of
Premiere Stock underlying the Exchangeable Shares to be issued to the Owners
pursuant to the Transactions, and Premiere shall give all notices and make all
filings with the NASD required in connection with the Transactions.
-10-
<PAGE>
3.9 Ancillary Documents/Reservation of Shares. Provided all other
-----------------------------------------
conditions of this Agreement have been satisfied or waived by the time of
closing.
(a) Premiere and the Acquisition Sub shall execute and deliver a
support agreement between Premiere and the Acquisition Sub containing the terms
and conditions set forth in Exhibit H hereto (the "Support Agreement"), together
with such other terms and conditions as may be agreed to by the parties hereto
acting reasonably;
(b) Premiere, the Acquisition Sub and a Canadian trust company, or
such other suitable entity as may be appropriate, to be selected by Premiere
shall execute and deliver a voting and exchange trust agreement containing the
terms and conditions set forth in Exhibit I hereto (the "Voting Trust
Agreement"), together with such other terms and conditions as may be agreed to
by the parties hereto acting reasonably;
(c) Premiere shall create the Special Premiere Voting Share in
substantially the form annexed as Exhibit J hereto, issued in the name of the
Trustee and deposit the same with the Trustee to be voted in accordance with the
Voting Trust Agreement:
(d) On or prior to the Effective Time, Premiere will reserve for
issuance such number of shares of Premiere Common Stock as shall be necessary to
give effect to the exchanges and conversions and call rights applicable to the
Exchangeable Shares in accordance with the attributes thereof and in accordance
with the Support Agreement.
4. SUPPLEMENTAL CONDITIONS TO OBLIGATIONS OF PREMIERE
--------------------------------------------------
In addition to the conditions of Premiere contained in Article V of the
Uniform Terms, the obligation of Premiere to consummate the Transactions is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions:
4.1 Approval of Owners. The Owners and the Holding Companies shall have
------------------
approved the transfers hereunder in accordance with governing law and shall have
provided Premiere certified copies of such resolutions.
4.2 Grand Solution Documents. VTNLP, VTE, the NAP and each of the
------------------------
Franchisee Companies shall have executed and delivered the Grand Solution
Documents reflecting the terms described in Exhibit E hereto in form and
substance reasonably satisfactory to Premiere.
4.3 Audited Financial Statements. Premiere shall have received balance
----------------------------
sheets of the Companies as of January 31, 1996 and 1997 and related statements
of operations, cash flows, and changes in Owner's equity for the fiscal years
ended on such dates (the "Audited Financial Statements") prepared in accordance
with GAAP and Regulations S-X promulgated by the Commission, accompanied by an
unqualified audit opinion of Arthur Andersen LLP relating thereto. The Audited
Financial Statements shall not reflect any material change in the Company's
financial condition or results of operations from the condition and results
reported in the Financial Statements for the corresponding periods delivered by
the Company prior to the execution of this Agreement.
4.4 Pooling Letter. Premiere shall have received a letter, dated as of the
--------------
Effective Time, in form and substance reasonably acceptable to Premiere, from
Arthur Andersen LLP to the effect that the transfer will qualify for pooling of
interests accounting treatment, and no action shall have been taken by any
regulatory authority or any statute, rule, regulation or order enacted,
promulgated or issued by any regulatory authority, or any proposal made for any
such action by any regulatory authority which is reasonably likely to be put
into effect, that would
-11-
<PAGE>
prevent Premiere from accounting for the business combination to be effected by
the transfer as a pooling of interests
4.5 Competition Act. The Director of Investigation and Research (the
---------------
"Director") appointed under the Competition Act (Canada) shall have advised
Premiere in form and on terms satisfactory to it that the Director shall not
oppose or threaten to oppose the purchase of any of the Holding Company Equity
Stock on the basis hereunder, nor make or threaten to make an application under
Part VII of the said act in respect of the purchase of the Holding Company
Equity Stock.
5. SUPPLEMENTAL CONDITIONS TO OBLIGATIONS OF THE COMPANY
---------------------------------------------------------
AND THE OWNERS
--------------
In addition to the conditions of the Company and the Owners contained in
Article VI of the Uniform Terms, the obligation of the Company and the Owners to
consummate the Transactions is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions:
5.1 Approval of Premiere and Acquisition Sub. The Board of Directors of
----------------------------------------
Premiere and the Board of Directors and the shareholder of Acquisition Sub shall
have approved the transfer in accordance with the requirement of applicable
state law. Premiere and Acquisition Sub shall have provided the Company
certified copies of such resolutions.
5.2 Registration Rights. Premiere and each Owner shall have executed and
-------------------
delivered a Registration Rights Agreement.
5.3 Ancillary Agreements. Premiere and the Acquisition Sub shall have
--------------------
executed and delivered the Support Agreement, Premiere, the Acquisition Sub
and an appropriate Trustee shall have executed and delivered the Voting Trust
Agreement, and Premiere shall have created the Special Premium Voting Share and
issued the same in the name of, and deposited the same with, the Trustee.
6. MISCELLANEOUS
-----------------
6.1 Notices. The addresses for notices in accordance with Section 10.1 of
-------
the Uniform Terms for the Company and the Owners are as follows:
If to the Company, or to any Owners:
Voice-Tel
305 Industrial Parkway South, Suite 19
Aurora, Ontario, Canada L4G 6X7
Attention: D. Scott Allan, Vice-President
Telecopy: (905) 713-1600
with a copy to:
Mr. Christopher Lobb
Clark, Farb, Fiksel & Tobin
Suite 400, 144 Front Street West
Toronto, Ontario M5I 2L7
Telecopy: (416) 977-8587
-12-
<PAGE>
6.2 Owner's Representative. The Owners' Representative for purposes of
----------------------
Section 10.2 of the Uniform Terms shall be D. Scott Allan who shall serve as
the Owner's Representative under the terms of said Section 10.2 of the Uniform
Terms.
6.3 Certain Definitions. In addition to the terms defined elsewhere herein
-------------------
and in the Uniform Terms, as used in this Agreement:
(a) "Anticipated Closing Date" shall mean April 30, 1997.
------------------------
(b) "Canadian Owners" means, collectively, the Eastern Owners and the
---------------
Western Owners;
(c) "C$" means the lawful current of Canada;
--
(d) "Companies" means the Holding Companies together with the
---------
Operating Companies and any Intervening Company included in the sale pursuant to
Section 1.4 which is not otherwise designated as a Holding Company;
(e) "Eastern Companies" means the Operating Companies together with
-----------------
those other companies (the "Intervening Companies") which in the aggregate:
(i) have all of their Enquity Stock beneficially owned directly
or indirectly by one or more of the Owners; and
(ii) in turn, collectively, beneficially own, directly or
indirectly, all of the Equity Stock of the Operating
Companies;
as more particularly described in the organizational chart to be produced under
Section 1.4;
(f) "Effective Time" means that time on the Closing Date when all of
--------------
the transactions contemplated hereunder have been completed in accordance with
the terms hereof;
(g) "Equity Stock" when used in relation to the stock of any
------------
corporation means all equity securities of that corporation of any type,
including but not limited to common stock, preferred stock, limited partnership
interests, general partnership interests, limited liability company interests,
options to purchase any of the foregoing and securities convertible into any of
the foregoing;
(h) "Holding Companies" means those Intervening Companies determined
-----------------
in accordance with Section 1.4 hereof;
(i) "Holding Company Equity Stock" means the Equity Stock of the
----------------------------
Holding Companies;
(j) "Intervening Companies" bears the meaning attributable to that
---------------------
term in the definition of Eastern Companies and includes, without limitation,
Flanagan/Allan Inc. ("FAI"). Jeffrey J. Allan & Assoc. Inc. ("JJAA"), Clam Cove
Holdings Inc. ("Clam"), any corporation resulting from the amalgamation of FAI,
Clam and JJAA, and 1086237 Ontario Inc. ("Holdco");
(k) "Joint Companies" means 1086236 Ontario Inc. and 1042546 Ontario
---------------
Inc.;
(l) "Knowledge" of the Company shall mean the personal knowledge
---------
after due inquiry of those facts that are known or should reasonably have been
known after due inquiry by
-13-
<PAGE>
the Primary Owners and the knowledge of any such Persons obtained or which would
have been obtained from a reasonable investigation.
(m) "OBCA" means the Business Corporations Act (Ontario);
----
(n) "Operating Companies" mean 1139133 Ontario Inc. ("VTH"), 1136827
-------------------
Ontario Inc. ("VTL"), 1006089 Ontario Inc. ("VTO"), and 1063940 Ontario Inc.
("VTOTT");
(o) "Outside Closing Date" shall mean June 30, 1997.
--------------------
(p) "Owners" mean the Primary Owners together with the Intervening
------
Companies designated as 'Owners' pursuant to subsection 1.4(c) hereof;
(q) "Primary Owners" mean those parties so designated in the
--------------
recitals of parties to this Agreement;
(r) "Special Premiere Voting Share" means the one (1) share of
-----------------------------
Premiere Class . Preferred Stock, US Dollar 0.001 par value, issued by Premiere
to and deposited with the Trustee which entitles the holder of record to a
number of votes at meetings of holders of Premiere Common Shares equal to that
number of votes that holders of the Exchangeable Shares outstanding from time to
time (other than exchangeable shares held by Premiere, its subsidiaries and
affiliates) would be entitled to if such Exchangeable Shares were exchanged for
Premiere Common Shares;
(s) "Trustee" means . Trust Company of Canada and any successor
-------
trustee.
(t) "US$" means the lawful currency of the United States of America;
---
(u) "Western Companies" means VTM, 3325882 Manitoba Inc., 601965
-----------------
Alberta Ltd., 3266622 Manitoba Inc., 3337821 Manitoba Inc. and 3266631 Manitoba
Inc.;
(v) "Western Owners" means Brooks Equipment Limited, Jim Fields and
--------------
Patrick Haney.
6.4 Exhibits. The following exhibits are annexed hereto and incorporated
--------
as part hereof:
A. Uniform Terms
AA. Canadianized Terms
B. Escrow Agreement
C. Registration Rights Agreement
D. Affiliation Agreement
E. Grand Solution Documents
F. Company Pooling of Interests Representations
G. Acquisition Sub Share Capital
H. Support Agreement
I. Voting Trust Agreement
J. Special Premiere Voting Share
-14-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first written above.
/s/ P Allan
___________________________ ---------------------------
Witness Philip Allan
/s/ Barbara J Allan
___________________________ ---------------------------
Witness Barbara Jane Allan
/s/ J Allan
___________________________ ---------------------------
Witness Jeffrey Allan
/s/Karin Allan
___________________________ ---------------------------
Witness Karin Allan
/s/ D Scott Allan
___________________________ ---------------------------
Witness Scott Allan
/s/ Barbara Allan
___________________________ ---------------------------
Witness Barbara Joan Allan
PREMIERE TECHNOLOGIES, INC.
Per: /s/ Patrick G. Jones
----------------------
Name: Patrick G. Jones
Title: Sr. V.P
PREMIERE TECHNOLOGIES, INC.
on behalf of the party of
the third part hereunder,
a corporation to be
incorporated
Per: /s/ Patrick G. Jones
----------------------
Name: Patrick G. Jones
Title: Sr. V.P
<PAGE>
EXHIBIT 10.1
NationsBank, N.A. (South) 3806331
Georgia 35386
M993991-001-001
TAN
Promissory Note
Date: April 30, 1997 New
Amount: $30,000,000.00 Maturity Date: June 30, 1997
-------------- -------------
===============================================================================
Bank: Borrower:
NationsBank, N.A. (South)
Banking Center:
Financial Strategies Premiere Communications, Inc.
600 Peachtree Street, NE 3399 Peachtree Road, Suite 400
Atlanta, GA 30308-2214 Atlanta, GA 30326
Fulton County Fulton County
================================================================================
FOR VALUE RECEIVED, the undersigned Borrower unconditionally (and jointly and
severally, if more than one) promises to pay to the order of Bank, its
successors and assigns, without setoff, at its offices indicated at the
beginning of this Note, or at such other place as may be designated by Bank, the
principal amount of Thirty Million Dollars and No Cents ($30,000,000.00), or so
much thereof as may be advanced from time to time in immediately available
funds, together with interest computed daily on the outstanding principal
balance hereunder, at an annual interest rate, and in accordance with the
payment schedule, indicated below.
1. Rate.
The Rate shall be the Rate described in Exhibit A attached hereto and made
a part hereof by reference, plus 0.90 percent, per annum (the "Spread").
Notwithstanding any provision of this Note, Bank does not intend to charge and
Borrower shall not be required to pay any amount of interest or other charges in
excess of the maximum permitted by the applicable law of the State of Georgia;
if any higher rate ceiling is lawful, then that higher rate ceiling shall apply.
Any payment in excess of such maximum shall be refunded to Borrower or credited
against principal, at the option of Bank.
2. Accrual Method. Interest at the Rate set forth above will be calculated by
the actual/360 day method (a daily amount of interest is computed for a
hypothetical year of 360 days; that amount is multiplied by the actual number of
days for which any principal is outstanding hereunder).
3. Rate Change Date. Any Rate based on a fluctuating index or base rate will
change, unless otherwise provided, each time and as of the date that the index
or base rate changes. In the event any index is discontinued, Bank shall
substitute an index determined by Bank to be comparable, at its sole discretion.
4. Payment Schedule. All payments received hereunder shall be applied first to
the payment of any expense or charges payable hereunder or under any other loan
documents executed in connection with this Note, then to interest due and
payable, with the balance applied to principal, or in such other order as Bank
shall determine at its option.
Single Principal Payment. Principal shall be paid in full in a single
payment on June 30, 1997. Interest thereon shall be paid at maturity.
5. Automatic Payment. If an account number appears at the end of this sentence,
Borrower has elected to authorize Bank to effect payment of sums due under this
Note by means of debiting Borrower's account number _______________. This
authorization shall not affect the obligation of Borrower to pay such sums when
due, without notice, if there are insufficient funds in such account to make
such payment in full on the due date thereof, or if Bank fails to debit the
account.
6. Waivers, Consents and Covenants. Borrower, any indorser or guarantor hereof,
or any other party hereto (individually an "Obligor" and collectively
"Obligors") and each of them jointly and severally: (a) waive presentment,
demand, protest, notice of demand, notice of intent to accelerate, notice of
acceleration of maturity, notice of protest, notice of nonpayment, notice of
dishonor, and any other notice required to be given under the law to any Obligor
in connection with the delivery, acceptance, performance, default or enforcement
of this Note, any indorsement or guaranty of this Note, or any other documents
executed in connection with this Note or any other note or other loan documents
now or hereafter executed in connection with any obligation of Borrower to Bank
(the "Loan Documents"); (b) consent to all delays, extensions, renewals or other
modifications of this Note or the Loan Documents, or waivers of any term hereof
or of the Loan Documents, or release or discharge by Bank of any of Obligors, or
release, substitution or exchange of any security for the payment hereof, or the
failure to act on the part of Bank, or any indulgence shown by Bank (without
notice to or further assent from any of Obligors), and agree that no such
action, failure to act or failure to exercise any right or remedy by Bank shall
in any way affect or impair the obligations of any Obligors or be construed as a
waiver by Bank of, or otherwise affect, any of Bank's rights under this Note,
under any indorsement or guaranty of this Note or under any of the Loan
Documents; and (c) agree to pay, on demand, all costs and expenses of collection
or defense of this Note or of any indorsement or guaranty hereof and/or the
enforcement or defense of Bank's rights with respect to, or the administration,
supervision, preservation, or protection of, or realization upon, any property
securing payment hereof, including, without limitation, reasonable attorney's
fees, including fees related to any suit, mediation or arbitration proceeding,
out of court payment agreement, trial, appeal, bankruptcy proceedings or other
proceeding, in such amount as may be determined reasonable by any arbitrator or
court, whichever is applicable.
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7. "Interest" Limited. As used in this Note and for the purposes of Section 7-4-
2 of the Official Code of Georgia Annotated, or any successor thereto, the term
"interest" does not include any fees or other charges imposed on Borrower in
connection with the indebtedness evidenced by this Note, other than the interest
described above.
8. Prepayments. Prepayments may be made in whole or in part at any time on any
loan for which the Rate is based on the Prime Rate. All prepayments of principal
shall be applied in the inverse order of maturity, or in such other order as
Bank shall determine in its sole discretion. No prepayment of any other loan
shall be permitted without the prior written consent of Bank. Notwithstanding
such prohibition, if there is a prepayment of any such loan, whether by consent
of Bank, or because of acceleration or otherwise, Borrower shall, within 15 days
of any request by Bank, pay to Bank any loss or expense which Bank may incur or
sustain as a result of such prepayment. For the purposes of calculating the
amounts owed only, it shall be assumed that Bank actually funded or committed to
fund the loan through the purchase of an underlying deposit in an amount and for
a term comparable to the loan, and such determination by Bank shall be
conclusive, absent a manifest error in computation.
9. Delinquency Charge. To the extent permitted by law, a delinquency charge may
be imposed in an amount not to exceed four percent (4%) of any payment that is
more than fifteen days late.
10. Events of Default. The following are events of default hereunder: (a) the
failure to pay or perform any obligation, liability or indebtedness of any
Obligor to Bank, or to any affiliate or subsidiary of NationsBank Corporation,
whether under this Note or any Loan Documents, as and when due (whether upon
demand, at maturity or by acceleration); (b) the failure to pay or perform any
other obligation, liability or indebtedness of any Obligor to any other party;
(c) the death of any Obligor (if an individual); (d) the resignation or
withdrawal of any partner or a material owner/guarantor of Borrower, as
determined by Bank in its sole discretion; (e) the commencement of a proceeding
against any Obligor for dissolution or liquidation, the voluntary or involuntary
termination or dissolution of any Obligor or the merger or consolidation of any
Obligor with or into another entity; (f) the insolvency of, the business failure
of, the appointment of a custodian, trustee, liquidator or receiver for or for
any of the property of, the assignment for the benefit of creditors by, or the
filing of a petition under bankruptcy, insolvency or debtor's relief law or the
filing of a petition for any adjustment of indebtedness, composition or
extension by or against any Obligor; (g) the determination by Bank that any
representation or warranty made to Bank by any Obligor in any Loan Documents or
otherwise is or was, when it was made, untrue or materially misleading; (h) the
failure of any Obligor to timely deliver such financial statements, including
tax returns, other statements of condition or other information, as Bank shall
request from time to time; (i) the entry of a judgment against any Obligor which
Bank deems to be of a material nature, in Bank's sole discretion; (j) the
seizure or forfeiture of, or the issuance of any writ of possession, garnishment
or attachment, or any turnover order for any property of any Obligor; (k) the
determination by Bank that it is insecure for any reason; (l) the determination
by Bank that a material adverse change has occurred in the financial condition
of any Obligor; or (m) the failure of Borrower's business to comply with any law
or regulation controlling its operation.
11. Remedies upon Default. Whenever there is a default under this Note (a) the
entire balance outstanding hereunder and all other obligations of any Obligor to
Bank (however acquired or evidenced) shall, at the option of Bank, become
immediately due and payable and any obligation of Bank to permit further
borrowing under this Note shall immediately cease and terminate, and/or (b) to
the extent permitted by law, the Rate of interest on the unpaid principal shall
be increased at Bank's discretion up to the maximum rate allowed by law, or if
none, 25% per annum (the "Default Rate"). The provisions herein for a Default
Rate shall not be deemed to extend the time for any payment hereunder or to
constitute a "grace period" giving Obligors a right to cure any default. At
Bank's option, any accrued and unpaid interest, fees or charges may, for
purposes of computing and accruing interest on a daily basis after the due date
of the Note or any installment thereof, be deemed to be a part of the principal
balance, and interest shall accrue on a daily compounded basis after such date
at the Default Rate provided in this Note until the entire outstanding balance
of principal and interest is paid in full. Upon a default under this Note, Bank
is hereby authorized at any time, at its option and without notice or demand, to
set off and charge against any deposit accounts of any Obligor, (as well as any
money, instruments, securities, documents, chattel paper, credits, claims,
demands, income and any other property, rights and interests of any Obligor),
which at any time shall come into the possession or custody or under the control
of Bank or any of its agents, affiliates or correspondents, any and all
obligations due hereunder. Additionally, Bank shall have all rights and remedies
available under each of the Loan Documents, as well as all rights and remedies
available at law or in equity.
12. Non-Waiver. The failure at any time of Bank to exercise any of its options
or any other rights hereunder shall not constitute a waiver thereof, nor shall
it be a bar to the exercise of any of its options or rights at a later date. All
rights and remedies of Bank shall be cumulative and may be pursued singly,
successively or together, at the option of Bank. The acceptance by Bank of any
partial payment shall not constitute a waiver of any default or of any of Bank's
rights under this Note. No waiver of any of its rights hereunder, and no
modification or amendment of this Note, shall be deemed to be made by Bank
unless the same shall be in writing, duly signed on behalf of Bank; each such
waiver shall apply only with respect to the specific instance involved, and
shall in no way impair the rights of Bank or the obligations of Obligors to Bank
in any other respect at any other time.
13. Applicable Law, Venue and Jurisdiction. This Note and the rights and
obligations of Borrower and Bank shall be governed by and interpreted in
accordance with the law of the State of Georgia. In any litigation in connection
with or to enforce this Note or any indorsement or guaranty of this Note or any
Loan Documents, Obligors, and each of them, irrevocably consent to and confer
personal jurisdiction on the courts of the State of Georgia or the United States
located within the State of Georgia and expressly waive any objections as to
venue in any such courts. Nothing contained herein shall, however, prevent Bank
from bringing any action or exercising any rights within any other state or
jurisdiction or from obtaining personal jurisdiction by any other means
available under applicable law.
14. Partial Invalidity. The unenforceability or invalidity of any provision of
this Note shall not affect the enforceability or validity of any other provision
herein and the invalidity or unenforceability of any provision of this Note or
of the Loan Documents to any person or circumstance shall not affect the
enforceability or validity of such provision as it may apply to other persons or
circumstances.
15. Binding Effect. This Note shall be binding upon and inure to the benefit of
Borrower, Obligors and Bank and their respective successors, assigns, heirs and
personal representatives, provided, however, that no obligations of Borrower or
Obligors hereunder can be assigned without prior written consent of Bank.
16. Controlling Document. To the extent that this Note conflicts with or is in
any way incompatible with any other document related specifically to the loan
evidenced by this Note, this Note shall control over any other such document,
and if this Note does not address an issue, then each other such document shall
control to the extent that it deals most specifically with an issue.
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<PAGE>
17. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO
INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR
DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL
BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION
ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR
ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN
THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON
ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY
TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT MAY BRING AN ACTION, INCLUDING A
SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR
CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH
ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTY OF ANY
BORROWER'S DOMICILE AT THE TIME OF THE EXECUTION OF THIS INSTRUMENT, AGREEMENT
OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF
J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN
THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL
BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE
ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE
COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL BE
DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS INSTRUMENT, AGREEMENT OR
DOCUMENT; OR (II) BE A WAIVER BY BANK OF THE PROTECTION AFFORDED TO IT BY 12
U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE
RIGHT OF BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED
TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY
COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH
AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT
OF A RECEIVER. BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH
PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR
AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES
NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL
OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY,
INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE
CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
Borrower represents to Bank that the proceeds of this loan are to be used
primarily for business, commercial or agricultural purposes. Borrower
acknowledges having read and understood, and agrees to be bound by, all terms
and conditions of this Note and hereby executes this Note under seal as of the
date here above written.
NOTICE OF FINAL AGREEMENT. THIS WRITTEN PROMISSORY NOTE REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN OR ORAL AGREEMENTS BETWEEN THE PARTIES.
Borrower:
Premiere Communications, Inc.
(a Florida Corporation)
By: /s/ Julianne F. Vaio 4-30-97 (Seal)
---------------------------------------------------------------
Name: Julianne F. Vaio
Title: Treasurer and Senior Director of Finance
(Corporate Seal)
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<PAGE>
EXHIBIT A
INTEREST RATE OPTION PROVISIONS
THIS EXHIBIT A is attached to and forms a part of that certain
PROMISSORY NOTE (the "Note"), dated April 30, 1997, executed by Premiere
Communications, Inc. a Florida corporation ("Borrower"), and made payable to the
order of NationsBank, N.A. (South) ("Bank").
1. Borrower's Rates. On the terms and subject to the conditions set
forth below, Borrower will be able to select, from one of the following Rate
Options, an interest rate which will be applicable to a particular dollar
increment of amounts outstanding, or to be disbursed, under the Note: [check the
available options]
[_] The Prime Rate plus ________ (the "Prime Rate Option");
[_] The Treasury Securities Rate plus ____________ (the "Treasury
Securities Rate Option"); or
[_] The LIBOR Funding Rate, plus ________ (the "LIBOR Rate Option");
[_] The Eurodollar Rate, plus _________ (the "Eurodollar Rate Option");
[_] The CD Rate plus ____________ (the "CD Rate Option"); or
[X] The Quoted Rate, plus 0.90 (the "Quoted Rate Option"); (i.e. Fed
Fund Rate);
[_] The Transaction Rate of _______ (the "Transaction Rate Option").
Interest based on the Prime Rate Option is a floating rate and will change on
and as of the date of a change in the Prime Rate. The period of time during
which the Prime Rate shall be applicable shall be a Prime Rate Interest Period.
Interest based on the Treasury Securities Rate Option will be fixed for periods
of ___________ year(s) (each a "Treasury Securities Interest Period"). Interest
based on the LIBOR Rate Option will be fixed for periods of ________________
(each a "LIBOR Interest Period"). Interest based on the Eurodollar Rate Option
will be fixed for periods of ________________ (each a "Eurodollar Interest
Period"). Interest based on the CD Rate Option will be fixed for periods of
___________________________ (each a "CD Interest Period"). Interest based on the
Quoted Rate Option will be fixed for period of 1 day (each a "Quoted Interest
Period"). Interest based on the Transaction Rate Option will be fixed for
periods of ________________________ (each a "Transaction Interest Period"). The
Treasury Securities Rate, the LIBOR Rate, the Eurodollar Rate, the CD Rate, the
Quoted Rate, and the Transaction Rate each being hereafter from time to time
referred to as a "Fixed Rate Option"). [See note below]
2. Selection of Applicable Interest Rate.
(a) Request. Borrower may request (a "Rate Request") that a $1.00
increment or any amount in excess thereof (an "Increment") of the outstanding
principal of, or amounts to be disbursed under, the Note bear interest at the
Prime Rate Option, Treasury Securities Rate Option, the LIBOR Rate Option, the
Eurodollar Rate Option, the CD Rate Option, the Quoted Rate Option or the
Transaction Rate Option, as applicable, by telephonic notice no later than 10:00
a.m. (Atlanta time) a sufficient (in Bank's sole discretion) number of Business
Days prior to the effective date of the Rate Request to permit Bank to quote the
rate requested.
(b) Applicable Interest Rates. Borrower's Rate Request will become
effective, and interest on the Increment designated will be calculated at the
rate (the "Effective Rate") requested by Borrower for the applicable Interest
Period, subject to the following:
(i) Notwithstanding any Rate Request, interest shall be
calculated on the basis of the Prime Rate Option if (a) Bank, in good faith, is
unable to ascertain the requested Fixed Rate Option by reason of circumstances
then affecting the applicable money market or otherwise, (b) it becomes unlawful
or impracticable for the Bank to maintain loans based upon the requested Fixed
Rate Option, or (c) Bank, in good faith, determines that it is impracticable to
maintain loans based on the requested Fixed Rate Option because of increased
taxes, regulatory costs, reserve requirements, expenses or any other costs or
charges that affect such Interest Rate Options. Upon the occurrence of any of
the above events, any Increment to which a requested Fixed Rate Option applies,
shall be immediately (or at the option of Bank, at the end of the current Fixed
Rate Interest Period), without further action of Borrower or Bank, converted to
an Increment to which the Prime Rate Option applies.
(ii) Borrower may have no more than a total of one Effective
Rates applicable to amounts outstanding under the Note at any given time.
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(iii) A Rate Request shall be effective as to amounts to be
disbursed under the Note only if, on the effective date of the Rate Requests,
such amounts are in fact disbursed to or for the account of the Borrower in
accordance with the provisions of the Note and any related loan documents.
(iv) Any amounts of outstanding principal for which a Rate
Request has not been made, or is otherwise not effective, shall bear interest
until paid in full at the Prime Rate Option.
(v) Any amounts of outstanding principal bearing interest
based upon a Fixed Rate Option shall bear interest at such rate until the end of
the Interest Period therefor, and thereafter shall bear interest based upon the
Prime Rate Option unless a new Rate Request for a Fixed Rate Option complying
with the terms hereof has been made and has become effective.
(vi) If Borrower shall be in default under the Note
("Default"), then Bank shall no longer be obligated to honor any Rate Requests.
(vii) No Fixed Rate Interest Period shall extend beyond the
maturity date of the Note.
(c) Repayment. Principal shall be payable on June 30, 1997 and interest
shall be payable as follows: (check all that apply)
[_] For any Interest Period during which the Prime Rate is applicable to any of
the outstanding principal, interest thereon shall be payable [_] monthly, [_]
quarterly or [_] ____________________________________ and continuing on the [_]
same day, [_] last day of each successive month, quarter or other period (as
applicable) thereafter, with a final payment of all accrued and unpaid interest
on the last day of such Interest Period.
[X] For any Interest Period during which the Quoted Rate is applicable to any
of the outstanding principal, interest thereon shall be payable [_] monthly, [_]
quarterly or [_] and continuing on the [X] same day, [_] last day of each
successive month, quarter or other period (as applicable) thereafter, with a
final payment of all accrued and unpaid interest on the last day of such
Interest Period.
[_] For any Interest Period during which the Transaction Rate is applicable to
any of the outstanding principal, interest thereon shall be payable [_] monthly,
[_] quarterly or [_] _______________________________ and continuing on the [_]
same day, [_] last day of each successive month, quarter or other period (as
applicable) thereafter, with a final payment of all accrued and unpaid interest
on the last day of such Interest Period.
[_] For any Interest Period during which the LIBOR Funding Rate is applicable to
any of the outstanding principal, all accrued and unpaid interest thereon shall
be payable on the last day of each applicable Interest Period and, in the case
of an Interest Period greater than three months, at three month intervals after
the first day of such Interest Period.
[_] For any Interest Period during which the Eurodollar Rate is applicable to
any of the outstanding principal, all accrued and unpaid interest thereon shall
be payable on the last day of each applicable Interest Period and, in the case
of an Interest Period greater than three months, at three month intervals after
the first day of such Interest Period.
[_] For any Interest Period during which the CD Rate is applicable to any of the
outstanding principal, all accrued and unpaid interest thereon shall be payable
on the last day of each applicable Interest Period and, in the case of an
Interest Period greater than 90 days, at 90 day intervals after the first day of
such Interest Period.
[_] For any Interest Period during which the Treasuries Securities Rate is
applicable to any outstanding principal, interest thereon shall be payable [_]
monthly, [_] quarterly or [_] _____________________________ and continuing on
the [_] same day, [_] last day of each successive month, quarter or other period
(as applicable) thereafter, with a final payment of all accrued and unpaid
interest on the last day of such Interest Period.
3. Defined Terms. The following terms as used in this Exhibit A shall
have the following meanings:
"Business Day" shall mean a day on which Bank is open for business and
dealing in deposits in Atlanta, Georgia.
"Eurodollar Rate" shall mean the rate of interest set by Bank as the
Eurodollar Rate, as of and at any time during the second Business Day
immediately preceding the first day of such Interest Period, for a term
comparable to such Interest Period, as adjusted from time to time in Bank's sole
discretion for then applicable reserve requirements, deposit insurance
assessment rates and other regulatory costs.
"LIBOR Funding Rate" shall mean the rate of interest set by Bank as the
LIBOR Funding Rate as of and at any time during the second Business Day
immediately preceding the first day
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<PAGE>
of such Interest Period, for a term comparable to such Interest Period, as
adjusted from time to time in Bank's sole discretion for then applicable reserve
requirements, deposit insurance assessment rates and other regulatory costs.
"Prime Rate" is the fluctuating rate of interest established by Bank
from time to time, at its discretion, whether or not such rate shall be
otherwise published. The Prime Rate is established by Bank as an index and may
or may not at any time be the best or lowest rate charged by Bank on any loan.
"Quoted Rate" shall mean a fixed rate of interest per annum agreed upon
by the Bank and Borrower on or prior to the first day of the Interest Period for
which such rate shall be in effect.
"Transaction Rate" shall mean the fixed rate of ___% per annum.
"Treasury Securities Rate" shall mean the rate of interest per annum
determined by Bank, in accordance with its customary general practice from time
to time, to be the weekly average yield on all United States Treasury Securities
adjusted to a constant maturity for a term comparable to such Interest Period,
as most recently reported by the Federal Reserve System in the weekly Federal
Reserve Statistical Release No. H-15(519), entitled "Selected Interest Rates"
(or any succeeding publication)(the "Treasury Securities Rate") adjusted from
time to time in Bank's sole discretion for then applicable reserve requirements,
deposit insurance assessment rates and other regulatory costs.
4. Notices; Authority to Act. Borrower acknowledges and agrees that the
agreement of Bank herein to receive certain notices by telephone is solely for
the convenience of Borrower. Bank shall be entitled to rely on the authority of
the person purporting to be a person authorized by Borrower to give such notice,
and Bank shall have no liability to Borrower on account of any action taken by
Bank in reliance upon such telephonic notice. The obligation of Borrower to
repay all sums owing under the Note shall not be affected in any way or to any
extent by any failure by Bank to receive written confirmation of any telephonic
notice or the receipt by Bank of a confirmation which is at variance with the
terms understood by Bank to be contained in the telephonic notice.
IN WITNESS WHEREOF, the parties hereto have executed this Exhibit A to
Note as of the 21st day of February, 1997.
Borrower: Premiere Communications, Inc.
By: /s/ Julianne F. Vaio 4-30-97
-------------------------------
Julianne F. Vaio
Its: Treasurer & Sr. Director of
Finance
Bank: NationsBank, N.A. (South)
By: /s/ James S. Theiling
--------------------------------
James S. Theiling
Senior Vice President
Note: LIBOR and Eurodollar should be quoted in terms of months (i.e. one, two
three or six months) and not days (i.e. 30, 60, 90 or 180 days). There is no
automatic way to accrue interest on Quoted rate or Transaction Rate,
calculations must be done manually.
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EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports included in this Current Report on Form 8-K, into Premiere Technologies,
Inc.'s previously filed Registration Statements (File Nos. 333-17593 and
333-11281).
/s/Arthur Andersen LLP
Atlanta, Georgia
May 9, 1997
