<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 26, 1997
Registration No. 333-______
______________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
PREMIERE TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
GEORGIA 59-3074176
(State or Other Jurisdiction (I.R.S. Employer Identification Number)
of Incorporation or Organization)
3399 PEACHTREE ROAD, N.E.
LENOX BUILDING,SUITE 400
ATLANTA, GEORGIA 30326
(404) 262-8400
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
BOLAND T. JONES
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PREMIERE TECHNOLOGIES, INC.
3399 PEACHTREE ROAD, N.E.
LENOX BUILDING,SUITE 400
ATLANTA, GEORGIA 30326
(404) 262-8400
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
THE COMMISSION IS REQUESTED TO SEND COPIES OF ALL COMMUNICATIONS TO:
JOEL J. HUGHEY PATRICK G. JONES
ALSTON & BIRD LLP SENIOR VICE PRESIDENT
ONE ATLANTIC CENTER FINANCE AND LEGAL
1201 WEST PEACHTREE STREET PREMIERE TECHNOLOGIES, INC.
ATLANTA, GEORGIA 30309-3424 3399 PEACHTREE ROAD, N.E
(404) 881-7000 LENOX BUILDING, SUITE 400
ATLANTA, GEORGIA 30326
(404) 262-8400
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [_]_______
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]______
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]______
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT TO AGGREGATE PRICE AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED BE REGISTERED PER UNIT (1) PRICE (1) REGISTRATION FEE (2)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5 3/4% CONVERTIBLE
SUBORDINATED NOTES $172,500,000 100% $172,500,000 $52,272.73
DUE 2004
- ------------------------------------------------------------------------------------------------
COMMON STOCK,
$.01 PAR VALUE PER (2) (3) (3) (3)
SHARE
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purposes of determining the registration fee.
(2) This Registration Statement covers the registration of such indeterminate
number of shares of common stock, par value $.01 per share (the "Common
Stock"), of Premiere Technologies, Inc. as may be deliverable upon
conversion of the 5 3/4% Convertible Subordinated Notes due 2004 (the
"Notes") being registered hereby.
(3) Pursuant to Rule 457(i), no registration fee is payable with respect to the
shares of Common Stock that may be deliverable upon conversion of the Notes
(the "Conversion Shares") since the Conversion Shares will be issuable for
no separate consideration.
------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+ REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+ SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR +
+ MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+ BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL +
+ OR THE SOLICITATION OF ANY OFFER TO BUY NOR SHALL THERE BE ANY SALE OF +
+ THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE +
+ WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE +
+ SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Prospectus
SUBJECT TO COMPLETION, DATED SEPTEMBER 26, 1997
[LOGO OF PREMIERE TECHNOLOGIES, INC. APPEARS HERE]
$172,500,000
5 3/4% CONVERTIBLE SUBORDINATED NOTES DUE 2004
This Prospectus relates to the offering for resale from time to time (the
"Offering") by the holders of $172,500,000 aggregate principal amount of 5 3/4%
Convertible Subordinated Notes due 2004 (the "Notes") of Premiere Technologies,
Inc., a Georgia corporation ("Premiere" or the "Company") and the shares of
Common Stock, $0.01 par value (the "Common Stock") of the Company issuable upon
the conversion of the Notes (the "Conversion Shares"). The Notes and the
Conversion Shares of Premiere may be offered from time to time for the accounts
of the securityholders named herein (the "Selling Securityholders").
The Notes were issued in a private placement by the Company to certain
institutional investors and non-U.S. investors in June of 1997. The Registration
Statement of which this Prospectus is a part has been filed with the Securities
and Exchange Commission pursuant to the Registration Rights Agreement (as
defined) entered into in connection with the initial private placement.
The Notes will mature on July 1, 2004. The Notes are convertible at any time
through the close of business on the final maturity date of the Notes, unless
previously redeemed or repurchased, into Common Stock of Premiere, at a
conversion price of $33.00 per share, subject to adjustment in certain events.
See "Description of Notes--Conversion." The Company's Common Stock is traded on
the Nasdaq National Market under the symbol "PTEK." The last reported bid
price of the Company's Common Stock as reported on the Nasdaq National Market on
September 25, 1997 was $32.75 per share.
Interest on the Notes is payable semi-annually on January 1 and July 1 of each
year, commencing January 1, 1998. Prior to July 6, 2000, the Notes are not
redeemable at the option of the Company. Thereafter, the Notes are redeemable at
the option of the Company, in whole or in part, at the declining redemption
prices set forth herein, together with accrued and unpaid interest. See
"Description of Notes--Optional Redemption by the Company." In the event of a
Designated Event (as defined), each holder may require the Company to repurchase
all or a portion of such holder's Notes for cash or, at the Company's option,
Common Stock (valued at 95% of the average closing price for the five trading
days immediately preceding and including the third trading day prior to the
repurchase date) at a repurchase price of 100% of the principal amount of the
Notes to be repurchased plus accrued and unpaid interest to the repurchase date.
See "Description of Notes--Repurchase at Option of Holders Upon a Designated
Event." The Company is a holding company with no business operations of its
own. The Company, therefore, is dependent upon payments, loans, dividends and
distributions from its subsidiaries for funds to pay its obligations, including
payment of principal of and interest on the Notes. The Notes are subordinated to
all existing and future Senior Indebtedness (as defined) of the Company. The
Notes are not guaranteed by the Company's subsidiaries and, therefore, are
effectively subordinated to all liabilities of the Company's subsidiaries. The
Indenture contains no limitations on the incurrence of additional indebtedness
or other liabilities by the Company and its subsidiaries. At June 30, 1997, the
Company had approximately $0 million of indebtedness outstanding that would have
constituted Senior Indebtedness and the Company's subsidiaries had approximately
$24.0 million of indebtedness and other liabilities to which the Notes would
have been effectively subordinated. See "Description of Notes--Subordination."
The Notes and the Conversion Shares may be offered by the Selling
Securityholders from time to time in transactions (which may include block
transactions in the case of the Conversion Shares) on any exchange or market on
which such securities are listed or quoted, as applicable, in negotiated
transactions, through a combination of such methods of sale, or otherwise, at
fixed prices that may be changed, at market prices prevailing at the time of
sale or at prices related to prevailing market prices, or at negotiated prices.
The Selling Securityholders may effect such transactions by selling the Notes or
Conversion Shares directly or to or through broker-dealers, who may receive
compensation in the form of discounts, concessions or commissions from the
Selling Securityholders and/or the purchasers of the Notes or Conversion Shares
for whom such broker-dealers may act as agents or to whom they may sell as
principals, or both (which compensation as to a particular broker-dealer might
be in excess of customary commissions). The Company will not receive any of the
proceeds from the sale of the Notes or Conversion Shares by the Selling
Securityholders. The Company has agreed to pay all expenses incident to the
offer and sale of the Notes and Conversion Shares offered by the Selling
Securityholders hereby, except that the Selling Securityholders will pay all
underwriting discounts and selling commissions, if any. See "Plan of
Distribution." The Notes are currently eligible for trading on the PORTAL
Market. Notes sold pursuant to this Prospectus will not remain eligible for
trading on the PORTAL Market.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 9 FOR INFORMATION THAT
should be considered by prospective purchasers.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1997
<PAGE>
This Prospectus includes product names, trade names, service marks and
trademark of Premiere Technologies, Inc. and its subsidiaries and other
companies including, without limitation, Orchestrate/SM/.
-2-
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements, information statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements, information statements and other information may
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices located at Seven World
Trade Center, Suite 1300, New York, New York 10048 and at the Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Reports,
proxy statements and information statements and other information filed
electronically by the Company with the Commission are available at the
Commission's worldwide web site at http://www.sec.gov. The Company's Common
Stock is quoted on the Nasdaq National Market. Reports, proxy statements and
information statements and other information concerning the Company may also be
inspected at the Nasdaq Stock Market at 1735 K Street, N.W., Washington, D.C.
20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are hereby
incorporated by reference in this Prospectus and made a part hereof:
(a) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 (including those portions of the Company's definitive proxy
statement for the Annual Meeting of Shareholders held on June 11, 1997
incorporated by reference therein);
(b) the Company's Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 31, 1997 and June 30, 1997;
(c) the Company's Current Reports on Form 8-K dated April 2, 1997, June 12,
1997, June 25, 1997, July 25, 1997, and September 26, 1997, respectively;
(d) the Company's Current Report on Form 8-K dated April 30, 1997 as
amended by the Company's Current Report on Form 8-K/A filed with the
Commission on June 16, 1997;
(e) the Company's Current Report on Form 8-K dated November 13, 1996, as
amended by the Company's Current Report on Form 8-K/A filed with the
Commission on February 25, 1997;
(f) the Company's Current Report on Form 8-K, dated May 16, 1997, as
amended by the Company's Current Report on Form 8-K/A filed with the
Commission on June 26, 1997; and
(g) the description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A, declared effective on March 1,
1996.
All reports and other documents filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
of such reports and documents. Any statement incorporated or deemed to be
incorporated herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
-3-
<PAGE>
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus has been delivered, upon
written or oral request of such person, a copy of any or all of the foregoing
documents incorporated herein by reference (other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference into
such documents). Requests for such documents should be made orally or in writing
to the attention of Director of Corporate Communications, Premiere Technologies,
Inc., 3399 Peachtree Road, N.E., The Lenox Building, Suite 400, Atlanta, Georgia
30326, Telephone: (404) 262-8400.
FORWARD LOOKING STATEMENTS
When used in this Prospectus and elsewhere by management or the Company
from time to time, the words "believes," "anticipates," "expects" and similar
expressions are intended to identify forward-looking statements concerning the
Company's operations, economic performance and financial condition, including in
particular, the Company's business strategy and means to implement the strategy,
goals, amount of capital expenditures, and likelihood of the Company's success
in developing and expanding its business. These statements are based on a
number of assumptions and estimates which are inherently subject to significant
risks and uncertainties, many of which are beyond the control of the Company,
and reflect future business decisions which are subject to change. A variety of
factors could cause actual results to differ materially from those anticipated
in the Company's forward-looking statements, some of which are set forth under
"Risk Factors" in this Prospectus and include successfully completing and
integrating acquisitions in existing and new markets, including the integration
of Voice-Tel Enterprises, Inc. ("VTE") and certain VTE affiliates and related
franchisees, the Company's ability to manage growth, rapid technological change
and risk of obsolescence of the Company's products, services and technology.
The Company cautions that such factors are not exclusive. Consequently, all of
the forward-looking statements made in this Prospectus are qualified by these
cautionary statements and readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof. The
Company undertakes no obligation to publicly release the results of any
revisions to such forward-looking statements that may be made to reflect events
or circumstances after the date hereof, or thereof, as the case may be, or to
reflect the occurrence of unanticipated events.
-4-
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and is subject to, the
more detailed information appearing elsewhere or incorporated by reference in
this Prospectus, including the information set forth under "Risk Factors." This
Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors."
THE COMPANY
The Company is a network-based computer telephony company specializing in the
integration of information and telecommunications services. The Company delivers
its services through its advanced computer telephony platform and, as a result
of the acquisition of the Voice-Tel Entities (as defined), a geographically
broad-based private frame relay digital messaging network that integrates
digital switching technology with enhanced personal communications features such
as e-mail, fax mail, conference calling and call forwarding. The Company's
platform is modular and scalable, with an open-systems design and an advanced
electronic billing and information system ("EBIS"), which allows the Company
to quickly customize its services to meet the needs of its subscribers and
business partners and to easily expand system capacity.
The Company's principal executive offices are located at 3399 Peachtree Road,
N.E., The Lenox Building, Suite 400, Atlanta, Georgia 30326, and its telephone
number is (404) 262-8400.
RECENT DEVELOPMENTS
VOICE-TEL ACQUISITIONS
On June 12, 1997, the Company announced the completion of the previously
announced acquisitions of the Voice-Tel Enterprises, Inc. ("VTE"), its affiliate
Voice-Tel Network Limited Partnership ("VTN"), and substantially all of its
franchisees (the "Franchisees"). (VTE, VTN and such Franchisees are collectively
referred to as the "Voice-Tel Entities" or "Voice-Tel" and such acquisitions are
referred to collectively as the "Voice-Tel Acquisitions"). The Voice-Tel
Entities provide interactive digital voice messaging products on a service
bureau basis through over 200 service centers in the United States, Puerto Rico,
Canada, Australia and New Zealand, reaching approximately 90% of the United
States and approximately 100% of Canadian, Australian and New Zealand
populations with local access. VTN owns and leases various components of and
operates a digital frame relay network that connects and provides message
transmission capabilities to and from the local voice messaging centers. The
network has allowed VTE and the Franchisees to support a national account
program, serving such organizations as Amway Corporation ("Amway"), Excel
Communications Group, Inc. ("Excel") and Primerica Financial Services
Corporation ("Primerica").
Premiere believes that the Voice-Tel Acquisitions enhance the Company's
distribution channels by allowing the Company to offer a local access product.
While the Company's measured 800 access products have appealed primarily to a
mobile customer base, the Company believes that a local access product will
appeal to a broader customer base and will be particularly important to the
marketing of the Company's new Orchestrate product line. In addition to the
advantages of interconnected local access, the Voice-Tel Acquisitions provide
the Company with a direct sales force of approximately 300 persons in four
countries, an expanded subscriber base and greater cross marketing
opportunities. The Company intends to consolidate these separate businesses by
eliminating duplicative and unnecessary costs and merging them under common
management, and to integrate Voice-Tel's service offerings, operations and
systems with those of the Company. In connection with the Voice-Tel
Acquisitions, the Company took a charge in the second quarter of 1997 of
$45,423,000, consisting of transaction expenses and restructuring and related
costs attributable to the Voice-Tel Acquisitions.
-5-
<PAGE>
THE OFFERING
Securities Offered...... $172,500,000 aggregate principal amount of 5 3/4%
Convertible Subordinated Notes due 2004 (the "Notes").
Interest Payment Dates.. January 1 and July 1, beginning January 1, 1998.
Maturity................ July 1, 2004.
Conversion.............. Convertible into common stock, $0.01 par value per
share, of the Company (the "Common Stock") at any
time through the close of business on the final
maturity date of the Notes, unless previously redeemed
or repurchased, at a conversion price of $33.00 per
share, subject to adjustment in certain events. See
"Description of Notes--Conversion."
Optional Redemption..... The Notes are not redeemable at the option of the
Company prior to July 6, 2000. Thereafter, the Notes
will be redeemable on at least 20 days' notice at the
option of the Company, in whole or in part at any time,
initially at 103.286% and thereafter at prices
declining to 100% at maturity, together with accrued
and unpaid interest. See "Description of
Notes--Optional Redemption by the Company."
Repurchase at Option
of Holders Upon a
Designated Event........ In the event that a Designated Event (as defined)
occurs, each holder of a Note may require the Company
to repurchase all or a portion of such holder's Notes
for cash or, at the Company's option, Common Stock
(valued at 95% of the average of the closing prices for
the five trading days immediately preceding and
including the third trading day prior to the repurchase
date) at a repurchase price of 100% of the principal
amount of the Notes to be repurchased, plus accrued
interest to the repurchase date. See "Risk
Factors--Limitations on Repurchase of Notes" and
"Description of Notes--Repurchase at Option of Holders
Upon a Designated Event."
Ranking................. Subordinate to all existing and future Senior
Indebtedness (as defined) of the Company. The Notes are
not guaranteed by the Company's subsidiaries and,
therefore, are effectively subordinated to all
liabilities, including trade payables, of the Company's
subsidiaries. As of June 30, 1997, the Company had
approximately $24.0 million of indebtedness outstanding
(excluding accrued interest thereon) that would have
constituted Senior Indebtedness (which amount includes
subsidiary indebtedness guaranteed directly or
indirectly by the Company) and the Company's
subsidiaries had approximately $24.0 million of
liabilities to which the Notes would have been
effectively subordinated. The Indenture contains no
limitations on the incurrence of additional Senior
Indebtedness or other indebtedness by the Company or
any subsidiary. The Company is a holding company with
no business operations of its own and is dependent upon
payments,
-6-
<PAGE>
loans, dividends and distributions from its
subsidiaries for funds to pay its obligations under the
Notes. See "Description of Notes--Subordination."
Use of Proceeds......... The Company will not receive any of the proceeds from
the sale of the Notes or the Conversion Shares.
Registration Rights..... The Company will be required to pay liquidated damages
to the holders of the Notes or the Common Stock
issuable upon conversion of the Notes, as the case may
be, under certain circumstances if the Company is not
in compliance with its registration obligations under
the Registration Rights Agreement (as defined). See
"Description of Notes--Registration Rights."
-7-
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
----------------------------------------- --------------
1992 1993 1994 1995 1996 1996 1997
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges(1)... 0.18 0.51 0.21 1.39 1.30 2.04 (2.72)
--- ---- ---- ---- ---- ---- ----
</TABLE>
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(1) In computing the ratio of earnings to fixed charges (i) earnings are based
on income before taxes, plus fixed charges, and (ii) fixed charges consist
of interest expense and depreciation and amortization expense, plus the
portion of rent expense under operating leases deemed by the Company to be
representative of the interest factor.
-8-
<PAGE>
RISK FACTORS
Prospective purchasers of the Notes should carefully consider the risk
factors set forth below, as well as the other information contained in this
Prospectus, in evaluating an investment in the Notes. This Prospectus and the
documents incorporated herein contain certain forward-looking statements which
are inherently uncertain. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth below and elsewhere in this
Prospectus.
Integration of Voice-Tel Acquisitions. On June 12, 1997, the Company
announced the completion of the previously announced acquisitions of the Voice-
Tel Entities. The Voice-Tel Entities operate approximately 200 service centers
in five countries. Prior to the acquisition, VTE operated as a franchisor, and
each of the approximately 90 Franchisees was independently owned and operated.
The Company intends to consolidate these separate businesses by eliminating
duplicative and unnecessary costs and merging them under common management, and
to integrate Voice-Tel's service offerings, operations and systems with those of
the Company. The Company is in the process of implementing,and has not yet
finished implementing, these integration plans and, therefore, such plans may
change in the future, perhaps materially. The Company believes that given the
size and fragmented nature of the facilities and businesses of the Voice-Tel
Entities and the technical complexity of integrating the Company's products with
those of Voice-Tel, the integration process will be particularly complex and has
and will place significant demands on the Company's management, engineering,
financial and other resources. The successful consolidation of the Voice-Tel
Entities and their integration into the Company's operations is critical to the
Company's future performance, especially because the combined revenues for the
Voice-Tel Entities approximated 63.4% and 54.3% of the Company's revenues in
1996 and the six months ended June 30, 1997, respectively.
Potential challenges to the successful consolidation of the Voice-Tel Entities
include, but are not limited to: (i) centralization and rationalization of
financial, operational and administrative functions; (ii) rationalization of the
service centers, network and work force; (iii) elimination of unnecessary costs;
and (iv) realization of economies of scale. Challenges to the successful
integration of the Voice-Tel Entities include, but are not limited to (i) the
localization of Premiere products; (ii) integration of the Premiere platform
with the Voice-Tel network; (iii) cross selling of products and services to both
companies' customer bases; and (iv) integration of new personnel. There can be
no assurance that the Voice-Tel Entities will be successfully consolidated or
integrated with the Company's operations on schedule or at all, that the Voice-
Tel Acquisitions will result in net sales or earnings level that would justify
the Company's investment therein or the expenses related thereto or that
operational synergies will develop as projected. Failure to successfully
integrate the Voice-Tel Entities or to achieve operating synergies would have a
material adverse effect on the Company's business, financial condition and
results of operations.
In connection with the Voice-Tel Acquisitions, the Company took a charge in
the second quarter of 1997 of $45,423,000, consisting of transaction expenses
and restructuring and related costs attributable to the Voice-Tel Acquisitions.
The amount of the charge is based on the Company's current estimate as to the
amount of the costs and expenses that will be incurred. There can be no
assurance that the actual amount of the costs and expenses incurred will not
exceed such estimate. If the actual amount of the costs and expenses exceeds the
Company's estimate, the Company may take additional charges in the future. In
addition, the Company expects to record approximately $16.9 million of goodwill
and other intangible assets in connection with the Voice-Tel Acquisitions. The
Company intends to amortize the goodwill on a straight-line basis over 40 years.
The Company believes the useful life of the Voice-Tel Entities to be at least 40
years. If the amortization period is accelerated due to a reevaluation of the
useful life of the Voice-Tel Entities or otherwise, amortization expense may
initially increase on a quarterly basis or require a write-down of the goodwill.
An increase in the rate of amortization of goodwill or future write-downs and
restructuring charges could have a material adverse effect on the Company's
financial condition and results of operations.
Competition. The information and telecommunications services industries are
intensely competitive, rapidly evolving and subject to rapid technological
change. The Company expects competition to increase in the future.
-9-
<PAGE>
Many of the Company's current and potential competitors have longer operating
histories, greater name recognition, larger customer bases and substantially
greater financial, personnel, marketing, engineering, technical and other
resources than the Company. Such competition could materially adversely affect
the Company's business, operating results or financial condition.
The Company attempts to differentiate itself from its competitors by offering
an integrated suite of information and telecommunications services. Other
providers currently offer each of the individual services and certain
combinations of the services offered by the Company. The Company's worldwide
long distance services and features such as conference calling, including those
acquired pursuant to the Voice-Tel Acquisitions, compete with services provided
by companies such as AT&T, MCI and Sprint, as well as smaller interexchange long
distance providers. The Company's voice mail services, including those acquired
pursuant to the Voice-Tel Acquisitions, compete with voice mail services
provided by AT&T, ONS, certain RBOCs and VoiceCom as well as by customer
premised equipment manufacturers such as Octel, Northern Telecom, Siemens,
Centigram, Boston Technology, Inc. ("Boston Technology") and Digital Sound
Corporation ("Digital Sound"). The Company's enhanced travel services,
concierge services, news services and electronic mail services are competing
with services provided by America Online, Prodigy and numerous Internet service
providers. When implemented, the Company's Orchestrate product line is expected
to compete with companies such as Octel, Microsoft Corp. ("Microsoft"),
Novell, Inc. and Lucent Technologies, Inc. ("Lucent") and numerous smaller
entities. The Company's call center technology competes with companies such as
AT&T, MCI and Lucent. The Company expects that other parties will develop and
implement information and telecommunications service platforms similar to its
platform, thereby increasing competition for the Company's services. For
example, Octel and Microsoft recently introduced the Octel Unified Manager
Product which integrates voice and e-mail that can be accessed and managed from
either a computer or a telephone.
In addition, on February 8, 1996, President Clinton signed into law the
Telecommunications Act of 1996, as amended, (the "1996 Act") that will allow
local exchange carriers, including the RBOCs, to provide inter-LATA long
distance telephone service, which will likely significantly increase competition
for long distance services. The new legislation also grants the Federal
Communications Commission (the "FCC") the authority to deregulate other
aspects of the telecommunications industry, which in the future may, if
authorized by the FCC, facilitate the offering of an integrated suite of
information and telecommunications services by regulated entities, including the
RBOCs, in competition with the Company. Such increased competition could have a
material adverse effect on the Company's business, operating results or
financial condition.
Telecommunications companies compete for consumers based on price, with major
long distance carriers conducting extensive advertising campaigns to capture
market share. There can be no assurance that a decrease in the rates charged for
communications services by the major long distance carriers or other
competitors, whether caused by general competitive pressures or the entry of the
RBOCs and other local exchange carriers into the long distance market, would not
have a material adverse effect on the Company's business, operating results or
financial condition.
The Company expects that the information and telecommunications services
markets will continue to attract new competitors and new technologies, possibly
including alternative technologies that are more sophisticated and cost
effective than the technology of the Company and the Voice-Tel Entities. Neither
the Company nor the Voice-Tel Entities have the contractual right to prevent its
subscribers from changing to a competing network, and the Company's subscribers
may generally terminate their service with the Company at will.
Dependence on Key Management and Personnel. The Company's success is largely
dependent upon its executive officers and other key personnel, the loss of one
or more of whom could have a material adverse effect on the Company. The Company
believes that its continued success will depend to a significant extent upon the
efforts and abilities of Boland T. Jones, Chairman and President, and certain
other key executives. The loss of services of Mr. Jones or any of these other
key executive officers could have a material adverse effect upon the Company.
Mr. Jones has entered into an employment agreement with the Company which
expires in December
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1999, and the Company maintains key man life insurance on Mr. Jones in the
amount of $3.0 million. Mr. Rajaraman has entered into an employment agreement
with VTE which expires in April 2000.
The Company also believes that to be successful it must hire and retain highly
qualified engineering and product development personnel. Competition in the
recruitment of highly qualified personnel in the information and
telecommunications services industry is intense. The inability of the Company to
locate, hire and retain such personnel may have a material adverse effect on the
Company. No assurance can be given that the Company will be able to retain its
key employees or that it will be able to attract qualified personnel in the
future.
Ability to Manage Growth; Acquisition Risks. The Company has experienced
substantial growth in revenue and personnel in recent years. This growth has
placed significant demands on all aspects of the Company's business, including
its administrative, technical and financial personnel and systems. Additional
expansion by the Company may further strain the Company's management, financial
and other resources. There can be no assurance that the Company's systems,
procedures, controls and existing space will be adequate to support expansion of
the Company's operations. The Company's future operating results will
substantially depend on the ability of its officers and key employees to manage
changing business conditions and to implement and improve its technical,
administrative, financial control and reporting systems. If the Company is
unable to respond to and manage changing business conditions, then the quality
of the Company's services, its ability to retain key personnel and its results
of operations could be materially adversely affected. At certain stages of
growth in network usage, the Company is required to add capacity to its computer
telephony platform and its digital central office switches and will need to
continually add capacity to the Voice-Tel Network, thus requiring the Company
continuously to attempt to predict growth in its network usage and add capacity
to its switches accordingly. Difficulties in managing continued growth,
including difficulties in predicting the growth in network usage, could have a
material adverse effect on the Company.
The Company regularly evaluates acquisition opportunities and intends to grow
in substantial part through acquisitions of complementary services, products,
technologies or businesses. Acquisitions may result in potentially dilutive
issuances of equity securities, the incurrence of additional debt, the
assumption of known and unknown liabilities, the write-off of software
development costs and the amortization of expenses related to goodwill and other
intangible assets, all of which could have a material adverse effect on the
Company's business, operating results or financial condition. For example, the
Voice-Tel Entities have established reserves for certain potential tax
liabilities that management believes to be adequate. If, however, such potential
liabilities ultimately were to exceed established reserves, the Company could
experience a material adverse effect with respect to its business, financial
condition or results of operations. Acquisitions also involve numerous
additional risks, including difficulties in the assimilation of the operations,
services, products and personnel of the acquired company, the diversion of
management's attention from other business concerns, entering markets in which
the Company has little or no direct prior experience and the potential loss of
key employees of the acquired company. The Company is unable to predict whether
or when any prospective acquisition candidate will become available or the
likelihood that any acquisition will be completed.
Technological Change; Risk of Obsolescence; Dependence on New Services. The
information and telecommunications services markets are characterized by rapid
technological change, frequent new product introductions and evolving industry
standards. The Company's future success will depend in significant part on its
ability to anticipate industry standards, continue to apply advances in
technologies, enhance its current services, develop and introduce new services
on a timely basis, enhance its software and its computer telephony platform and
successfully compete with products and services based on evolving or new
technology. The Company expects new products and services, and enhancements to
existing products and services, to be developed and introduced which will
compete with the services offered by the Company. Among the new and evolving
technologies that the Company expects to compete for are notebook computers
equipped with sound cards, fax modems and cellular modems, portable Internet
appliances which would allow connection to the Internet over wireless networks
and personal digital assistants with enhanced communications features. In
addition, aspects of the Company's Orchestrate product line compete within
markets where larger companies are working to provide a unified messaging
solution. The Company is also aware that products currently exist which allow
text-to-voice e-mail
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conversion and provide "meet me" services, and that several communications
companies are developing or have developed services that would compete with the
Company's proposed "follow me" service by allowing users to have a single
telephone number for all of their communications devices.
The Voice-Tel Acquisitions constitute a significant investment by the Company
in a frame relay network architecture. Alternative architectures currently
exist, and technological advances may result in the development of additional
network architectures. There can be no assurance that the telecommunications
industry will not standardize on an architecture other than a frame relay
network or that such architecture will not become obsolete. Such events would
require the Company to invest significant capital in upgrading or replacing its
frame relay network, and could have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company must continually introduce new products in response to evolving
industry standards and customer demands for enhancements to Company's existing
products. There can be no assurance that the Company will be successful in
developing and marketing service enhancements or new services that respond to
these or other technological changes or evolving industry standards, that the
Company will not experience difficulties that could delay or prevent the
successful development, introduction and marketing of its services, or that its
new services and the enhancements thereto, will adequately meet the requirements
of the marketplace and achieve market acceptance. Delays in the introduction of
new services, the inability of the Company to develop such new services or the
failure of such services to achieve market acceptance could have a material
adverse effect on the Company's business, operating results or financial
condition.
Uncertainty of Market Acceptance of Computer Telephony. The Company's future
success depends upon the market acceptance of its existing and future computer
telephony product lines and services. Computer telephony integrates the
functionality of telephones and computers and thus represents a departure from
standards for information and telecommunications services. Market acceptance of
computer telephony products and services generally requires that individuals and
enterprises accept a new way of exchanging information. The Company believes
that broad market acceptance of its computer telephony product lines and
services will depend on several factors, including ease of use, price,
reliability, access and quality of service, system, security, product
functionality and the effectiveness of strategic marketing and distribution
relationships. There can be no assurance that the Company's computer telephony
products will achieve broad market acceptance or that such market acceptance
will occur at the rate which the Company currently anticipates. A decline in the
demand for, or the failure to achieve broad market acceptance of, the Company's
computer telephony product lines and services would have a material adverse
effect on the Company's business, financial condition and results of operations.
Limited Protection of Proprietary Technology. The Company relies primarily
on a combination of copyright and trade secret laws and contractual
confidentiality provisions to protect its proprietary rights. These laws and
contractual provisions provide only limited protection of the Company's
proprietary rights. The Company has three patent applications pending and 10
trademark or service mark registrations pending. The Company has one registered
service mark. Voice-Tel has been issued two U.S. patents and has one U.S. patent
application pending. Voice-Tel also has five registered U.S. trademarks or
service marks and approximately 40 foreign trademark or service mark
registrations or pending applications therefor. Despite the Company's efforts to
protect its proprietary rights, unauthorized parties may attempt to copy aspects
of the Company's software or services or to obtain and use information that the
Company regards as proprietary. Although the Company is not aware of any current
or previous infringement on its proprietary rights, there can be no assurance
that the Company's means of protecting its proprietary rights will be adequate
or that the Company's competitors will not independently develop similar
technology. In addition, the laws of some foreign countries do not protect the
Company's proprietary rights to as great an extent as the laws of the United
States.
Risks of Infringement Claims. Many patents have been issued in the general
areas of information and telecommunications services and computer telephony. The
Company believes that in the ordinary course of its business third parties will
claim that the Company's current or future products or services infringe the
patent, copyright or trademark rights of such third parties. No assurance can be
given that legal actions alleging infringement will not be commenced against the
Company, or that, if such actions are brought, the Company will
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ultimately prevail. Any such claiming third parties may have significantly
greater resources than the Company to pursue litigation of such claims. Any such
claims, whether with or without merit, could be time consuming, result in costly
litigation, cause delays in introducing new or improved products and services,
require the Company to enter into royalty or licensing agreements, or cause the
Company to discontinue use of the challenged tradename, service mark or
technology at potentially significant expense to the Company associated with the
marketing of a new name or the development or purchase of replacement
technology, all of which could have a material adverse effect on the Company.
The Company is aware of other companies that use the terms "WorldLink" or
"Premiere" in describing their products and services, including
telecommunications products and services. Certain of those companies hold
registered trademarks which incorporate the names "WorldLink" or "Premiere."
The Company has received correspondence from a provider of prepaid calling cards
which claims that the Company's use of the term "Premiere WorldLink" infringes
upon its trademark rights. In addition, the Company has received correspondence
from a major bank, which is among the holders of registered trademarks
incorporating the term "WorldLink," inquiring as to the nature of the
Company's use of the term "WorldLink" as a part of its mark "Premiere
WorldLink." Based on, among other things, the types of businesses in which the
other companies are engaged and the low likelihood of confusion, the Company
believes these claims to be without merit.
In October 1996, VTE received a letter from a third party claiming that
certain aspects of VTE's products and services may be infringing upon one or
more of the third party's patents. The Company has reviewed the patent claims of
the third party and does not believe that the Company's products or services
infringe on the claims of the third party. No patent infringement claims against
the Company have been filed by the third party at this time. Should the third
party file patent infringement claims against the Company, the Company believes
that it would have meritorious defenses to any such claims. However, due to the
inherent uncertainties of litigation, the Company is unable to predict the
outcome of any potential litigation with the third party, and any adverse
outcome could have a material adverse effect on the Company's business, results
of operations or financial condition. Even if the Company were to ultimately
prevail, the Company's business could be adversely affected by the diversion of
management attention and litigation costs. Because of this risk, the Company
withheld in escrow approximately 176,000 shares of Common Stock from the
purchase price of VTE and VTN. This escrow arrangement terminates in April 2000.
There can be no assurance that such escrow will be sufficient to fully cover the
Company's exposure in the event of litigation or an adverse outcome to the
potential infringement claims.
On June 28, 1996, AudioFAX IP LLC ("AudioFAX") filed a complaint against the
Company and Premiere Communications, Inc. in the United States District Court
for the Northern District of Georgia. In the complaint, AudioFAX alleged that
the Company manufactures, uses, sells and/or distributes certain enhanced
facsimile products which infringe three United States patents and one Canadian
patent allegedly held by AudioFAX. In the third quarter of 1996, the Company
took a one-time charge for the estimated legal fees and other costs that the
Company expected to incur to resolve this matter. On February 11, 1997, the
Company entered into a long term, non-exclusive license agreement with AudioFAX
settling the litigation.
In May 1997, Premiere received a letter from a manufacturer and marketer of
certain telecommunications equipment asserting that Premiere is offering certain
"calling card and related enhanced services," "single number service" and
"call connecting services" covered by three patents held by that company and
inviting Premiere to obtain a license. Premiere has preliminarily reviewed the
subject patents and, based on that review, presently believes that its products
and services currently being marketed do not infringe two of the patents.
Premiere intends, however, to conduct a further review of these two patents in
order to determine whether it would be helpful to its future products and
services to license the patents. The third patent relates to certain call
origination technology. Premiere is conducting a further review of this patent
to determine if its call reorigination system would infringe upon this patent.
If Premiere ultimately determines that it is infringing this patent, it could
seek to license the technology or discontinue using it and employ an alternate
technology. There can be no assurance that Premiere would be able to license the
technology on commercially reasonable terms or that it could easily and
inexpensively migrate to a new call reorigination technology. Premiere's call
reorigination service is only one service that it offers and management does not
believe that this service is critical to the marketing of Premiere's overall
suite of services. Consequently, Premiere does not believe that its inability to
license the technology or
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migrate to a new technology would have a material adverse effect on its
business, financial condition or results of operations. No claim has been
asserted beyond this letter, but no assurance can be given that the third party
will not commence an infringement action against Premiere. If a patent
infringement claim is brought against Premiere, there can be no assurance that
Premiere would prevail and any adverse outcome could have a material adverse
effect on Premiere's business, financial condition and results of operations.
Uncertainty of Strategic Relationships. A principal element of the Company's
strategy is the creation and maintenance of strategic relationships that will
enable the Company to offer its services to a larger customer base than the
Company could otherwise reach through its direct marketing efforts. The Company
has experienced growth in its existing strategic relationships during 1996 and
1997, and has entered into or initiated new strategic relationships with several
companies, including WorldCom and CompuServe Interactive (United Kingdom).
Although the Company intends to continue to expand its direct marketing
channels, the Company believes that strategic partner relationships may offer a
potentially more effective and efficient marketing channel. Consequently, the
Company's success depends in part on the ultimate success of these relationships
and on the ability of these strategic partners to market effectively the
Company's services. Failure of one or more of the Company's strategic partners
to successfully develop and sustain a market for the Company's services, or the
termination of one or more of the Company's relationships with a strategic
partner, could have a material adverse effect on the Company's overall
performance due to the possibility of more costly direct marketing expenditures
by the Company and other factors.
In November 1996 the Company entered into a strategic alliance agreement with
WorldCom, the fourth largest long-distance carrier in the United States, in
which WorldCom is required, among other things, to provide the Company with the
right of first opportunity to provide enhanced computer telephony services for a
period of at least 25 years. In connection with this agreement, the Company
issued to WorldCom 2,050,000 shares of Common Stock valued at approximately
$25.2 million (based on an independent appraisal) and paid WorldCom $4.7 million
in cash. The Company recorded the value of this agreement as an intangible
asset. While the Company believes that the intangible asset will be recovered
over the life of the agreement, this recoverability is dependent upon the
success of the strategic relationship. The Company will continually evaluate the
realizability of the intangible asset recorded, and there can be no assurance
that future evaluations will not require a write-down of this asset.
Although the Company views its strategic relationships as a key factor in its
overall business strategy and in the development and commercialization of its
services, there can be no assurance that its strategic partners view their
relationships with the Company as significant for their own businesses or that
they will not reassess their commitment to the Company in the future. The
Company's arrangements with its strategic partners do not always establish
minimum performance requirements for the Company's strategic partners, but
instead rely on the voluntary efforts of these partners in pursuing joint goals.
Certain of these arrangements prevent the Company from entering into strategic
relationships with other companies in the same industry as the Company's
strategic partners, either for specified periods of time or while the
arrangements remain in force. In addition, even when the Company is without
contractual restriction, it may be restrained by business considerations from
pursuing alternative arrangements. The ability of the Company's strategic
partners to incorporate the Company's services into successful commercial
ventures will require the Company, among other things, to continue to
successfully enhance its existing services and develop new services. The
Company's inability to meet the requirements of its strategic partners or to
comply with the terms of its strategic partner arrangements could result in its
strategic partners failing to market the Company's services, seeking alternative
providers of communications and information services or canceling their
contracts with the Company, any of which could have a material adverse impact on
the Company.
Reliance on Amway Relationship. Historically, the Voice-Tel Entities have
relied on sales through Amway for a substantial portion of their revenue. Such
sales accounted for approximately 44.5%, 32.9% and 25.2% of the Company's
revenue for 1995, 1996 and the six months ended June 30, 1997, respectively.
Amway's relationship with VTE commenced in 1990 when VTE began managing the
voice messaging operations previously conducted by Amway's subsidiary, Amvox,
Inc. ("Amvox"). VTE subsequently acquired and franchised the former Amvox
service centers from Amway in exchange for an equity interest in VTE. Amway
subsequently invested in the development of the digital frame relay network
through VTN. As a result of these transactions, Amway also
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became the single largest equity holder in VTE and VTN. VTE and Amway have
entered into a service and reseller agreement (the "Amway Agreement") providing,
among other things, for the sale by VTE of voice messaging and network
transmission services on an exclusive basis to Amway for resale by Amway to its
independent distributors under the "Amvox" tradename. The Amway Agreement does
not bind the Amway distributors, who are free to acquire messaging services from
alternative vendors. The Amway Agreement may be canceled by either party upon
180 days prior written notice or upon shorter notice in the event of a breach.
The Amway Agreement does not prohibit VTE from continuing to provide voice
messaging and network transmission services to Amway's distributors following
termination of the Amway Agreement. However, in the event that Amway recommended
a voice messaging and network transmission services provider other than the
Company, there can be no assurance that Amway's distributors would not follow
such recommendation. Although Amway has indicated a desire to continue to use
VTE for its voice messaging services following the Voice-Tel Acquisitions, there
is no assurance that the relationship will continue at historical levels or at
all, nor is there any assurance of long term price protection for services
provided to Amway. Loss or natural diminution in the Amway relationship, or a
decrease in average sales price without an offsetting increase in volume, could
have a material adverse effect on the results of operation and financial
condition of the Company.
Dependence on Licensing and Strategic Relationships. The Company has licensing
relationships with companies that have chosen to outsource part or all of their
communications card services to Premiere. License fees accounted for
approximately 9.7% of Premiere's 1996 revenues and 14.7% of Premiere's first
quarter 1997 revenues. One licensee, Communications Network Corporation ("CNC"),
accounted for approximately 19.6% of Premiere's 1996 license fees and
approximately 1.9% of the Company's total 1996 revenues. On August 6, 1996, CNC
was placed into bankruptcy under Chapter 11 of the United States Bankruptcy
Code. CNC owed the Company approximately $627,000 as of December 31, 1996.
However, CNC's transmission provider, WilTel, is also obligated to pay this
amount to the Company. In addition, WorldCom accounted for approximately 43.5%
of Premiere's 1996 license fees and approximately 4.2% of Premiere's total 1996
revenues, and approximately 6.2% of the Company's revenues for the six months
ended June 30, 1997. The Company believes that through a combination of new
licensing agreements, the strategic alliance agreement with WorldCom and
increased revenues from existing licensees, the Company has replaced all of the
anticipated CNC revenue.
The Company intends to increase its number of licensees and its licensee
transaction volume in the future. The Company's success depends in part upon the
ultimate success or failure of its licensees. The telecommunications industry is
intensely competitive and rapidly consolidating. The majority of companies that
have chosen to outsource communications card services to Premiere are small or
medium-sized telecommunications companies that may be unable to withstand the
intense competition in the telecommunications industry. During the past 12
months, one licensee, in addition to CNC, ceased doing business with the Company
primarily due to financial difficulties. Licensees that ceased doing business
with Premiere due to financial difficulties contributed in the aggregate
approximately $2.9 million of Premiere's 1996 revenues. Although the Company was
able to add new licensees in 1996 and the first two quarters of 1997, there can
be no assurance that the failure of one or more of the Company's licensees to
develop and sustain a market for the Company's services, or termination of one
or more of the Company's licensing relationships, will not have a material
adverse effect on the Company's business, operating results or financial
condition.
Subordination; Holding Company Structure. The Notes are unsecured and
subordinated in right of payment in full to all existing and future Senior
Indebtedness (as defined) of the Company. As a result of such subordination, in
the event of any insolvency, liquidation or reorganization of the Company, or
payment default on Senior Indebtedness, the assets of the Company will be
available to pay obligations on the Notes only after all Senior Indebtedness has
been paid in full, and there may not be sufficient assets remaining to pay
amounts due on any or all of the Notes then outstanding. The Notes are
effectively subordinated to the liabilities, including trade payables, of the
Company's subsidiaries. The Indenture does not prohibit or limit the incurrence
of Senior Indebtedness or the incurrence of other indebtedness and other
liabilities by the Company or its subsidiaries, and the incurrence of additional
indebtedness and other liabilities by the Company or its subsidiaries could
adversely affect the Company's ability to pay its obligations on the Notes. As
of June 30, 1997, the Company had approximately $24.0 million of outstanding
indebtedness which would have constituted Senior Indebtedness (which amount
includes subsidiary indebtedness guaranteed directly or indirectly by the
Company), and the
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subsidiaries of the Company had approximately $24.0 million of indebtedness and
other liabilities (excluding intercompany liabilities) to which the Notes would
have been effectively subordinated. The Company anticipates that from time to
time it and its subsidiaries will incur additional indebtedness, including
Senior Indebtedness. The Company is a holding company with no business
operations of its own. The Company, therefore, is dependent upon payments,
loans, dividends and distributions from its subsidiaries for funds to pay its
obligations, including payment of principal of and interest on the Notes. The
Notes are not guaranteed by the Company's subsidiaries. The subsidiaries of the
Company are separate and distinct legal entities and have no obligation to pay
any amounts due pursuant to the Notes or to make any funds available therefor,
whether by dividends, loans or other payments. In addition, the payment of
dividends or distributions and the making of loans or other payments to the
Company by any such subsidiaries are subject to statutory and contractual
restrictions, are dependent upon the earnings of such subsidiaries and are
subject to various business considerations. See "Description of Notes--
Subordination."
Increased Leverage. In connection with the issuance of the Notes, the
Company incurred approximately $172.5 million in additional indebtedness which
increased the ratio of its long-term debt to its total capitalization from
0.4%, at March 31, 1997, to 63% as of June 30, 1997. As a result of this
increased leverage, the Company's principal and interest obligations have
increased substantially. The degree to which the Company is leveraged could
adversely affect the Company's ability to obtain additional financing for
working capital, acquisitions or other purposes and could make it more
vulnerable to economic downturns and competitive pressures. The Company's
increased leverage could also adversely affect its liquidity, as a substantial
portion of available cash from operations may have to be applied to meet debt
service requirements and, in the event of a cash shortfall, the Company could be
forced to reduce other expenditures and forego potential acquisitions to be able
to meet such requirements. See "Capitalization," "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources" and "Selected Consolidated Financial Information."
Shares Eligible for Future Sale; Registration Rights. As of June 25, 1997,
the Company had 31,645,386 shares of Common Stock outstanding (including 436,526
shares of Exchangeable Non-Voting Shares of Voice-Tel Canada Limited, a
subsidiary of the Company, issued to the former shareholders of the Canadian
Voice-Tel Entities, which are convertible at any time into 436,526 shares of
Common Stock). Of these shares, as of June 25, 1997, 16,017,719 shares of Common
Stock were freely tradable without restriction or further registration under the
Securities Act of 1933, as amended (the "Securities Act"). The remaining
15,630,298 shares of Common Stock were "restricted securities" as that term is
defined in Rule 144 under the Securities Act ("Rule 144").
As of September 18, 1997, 6,154,919 shares were eligible for sale pursuant to
Rule 144, subject to the volume, manner of sale and notice requirements of Rule
144 (the "Rule 144 Restrictions"). Beginning on November 13, 1997, an additional
2,050,000 shares will be eligible for sale pursuant to Rule 144, subject to the
Rule 144 Restrictions. The remaining 7,425,379 outstanding shares will become
eligible for sale pursuant to the Rule 144 Restrictions from time to time after
April 30, 1998.
As of June 25, 1997, options and warrants to purchase an aggregate of
9,363,096 shares of Common Stock were outstanding. As of such date, options
and warrants to purchase an aggregate of 3,563,045 shares of Common Stock were
vested and immediately exercisable. Options and warrants to purchase the
remaining 5,800,051 shares of Common Stock became or will become exercisable
at various times thereafter.
A total of approximately 11,440,259 shares of Common Stock are subject to
various registration rights. Of this total, 7,425,379 shares were issued by the
Company in connection with the Voice-Tel Acquisitions. Such persons collectively
have the one-time right to require the Company to file a registration statement
under the Securities Act within 90 days of receiving notice of such request,
provided that (i) such request must be initiated by an Amway entity or holders
of 10% or more of the Registrable Securities (as defined) and (ii) such one-time
demand must be made after July 15, 1997 and before the nine month anniversary
from the date the acquisition was consummated. The Company received a request to
initiate the registration of the foregoing shares in August 1997. The holders of
some of such shares have expressed a desire for the shares held by them to be
registered for sale pursuant to the Shelf Registration Statement (as defined
below). However, pursuant to the Registration Rights Agreement (as defined
below), the Company is required to use all commercially reasonable efforts to
obtain waivers from such holders of any rights to include any of their shares of
Common Stock in the Shelf Registration Statement and any other rights
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they would otherwise have with respect to actions required to be taken by the
Company under the Registration Rights Agreement. The Company is currently
seeking, but has not yet obtained, such waivers. See "Description of Notes--
Registration Rights."
No prediction can be made as to the effect, if any, that the availability of
additional shares for sale will have on the market prices of the Common Stock or
the Notes prevailing from time to time. Nevertheless, sales of substantial
amounts of the Common Stock in the public market could adversely affect
prevailing market prices of the Common Stock and the Notes and the ability of
the Company to raise equity capital in the future.
Potential Adverse Impact of Pending Litigation. The Company has several
litigation matters pending, which the Company is defending vigorously. Due to
the inherent uncertainties of the litigation process and the judicial system,
the Company is unable to predict the outcome of such litigation matters. If the
outcome of one or more of such matters is adverse to the Company, it could have
a material adverse effect on the Company's business, operating results or
financial condition.
Dependence on Switching Facilities, Computer Telephony Platforms and Frame
Relay Network; Damage, Failure and Downtime. The Company currently maintains
switching facilities and computer telephony platforms in Atlanta, Georgia and
Dallas, Texas, and a POP site in London, England and a frame relay network in
Cleveland, Ohio. The Company's network service operations are dependent upon its
ability to protect the equipment and data at its switching facilities against
damage that may be caused by fire, power loss, technical failures, unauthorized
intrusion, natural disasters, sabotage and other similar events. The Company has
taken precautions to protect itself and its subscribers from events that could
interrupt delivery of the Company's services. These precautions include physical
security systems, uninterruptible power supplies, on-site power generators
designed to be sufficient to continue operation of the Company's network in the
event of a power outage for approximately four days, upgraded backup hardware
and fire protection systems. The Company's network is further designed such that
the data on each network server is duplicated on a separate network server.
Notwithstanding such precautions, there can be no assurance that a fire, act of
sabotage, technical failure, natural disaster or a similar event would not cause
the failure of a network server and its backup server, other portions of the
Company's network or one of the switching facilities as a whole, thereby
resulting in an interruption of the Company's services. Such an interruption
could have a material adverse effect on the Company. While the Company has not
experienced any downtime of its network due to natural disasters or similar
events, on occasion the Company has experienced downtime due to various
technical failures. When such failures have occurred, the Company has worked to
remedy the failure as soon as possible. The Company believes that these
technical failures have been infrequent. Although the Company maintains business
interruption insurance providing for aggregate coverage of approximately $10.8
million per policy year, there can be no assurance that the Company will be able
to maintain its business interruption insurance, that such insurance would
continue to be available at reasonable prices or that such insurance would be
sufficient to compensate the Company for losses it experiences due to the
Company's inability to provide services to its subscribers.
Factors Affecting Operating Results; Seasonality; Potential Fluctuations in
Quarterly Results. The Company's operating results have varied significantly
in the past and may vary significantly in the future. Special factors that may
cause the Company's future operating results to vary include the unique nature
of strategic relationships into which the Company may enter in the future,
changes in operating expenses resulting from such strategic relationships and
other factors, the continued acceptance of the Company's licensing program, the
financial performance of the Company's licensees, the timing of new service
announcements, market acceptance of new and enhanced versions of the Company's
services, potential acquisitions, changes in legislation and regulation that may
affect the competitive environment for the Company's communications services and
general economic and seasonal factors.
In the future, revenues from the Company's strategic relationships may become
an increasingly significant portion of the Company's total revenues. Due to the
unique nature of each strategic relationship, these relationships may change the
Company's mix of expenses relative to revenues.
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Quarterly revenues are difficult to forecast because the market for the
Company's information and telecommunications services is rapidly evolving. The
Company's expense levels are based, in part, on its expectations as to future
revenues. If revenue levels are below expectations, the Company may be unable or
unwilling to reduce expenses proportionately and operating results would likely
be adversely affected. As a result, the Company believes that period-to-period
comparisons of its results of operations are not necessarily meaningful and
should not be relied upon as indications of future performance. Due to all of
the foregoing factors, it is likely that in some future quarter the Company's
operating results will be below the expectations of public market analysts and
investors. In such event, the market price of the Company's Common Stock and the
Notes will likely be materially adversely affected.
Risk of Software Failures or Errors. The software developed and utilized by
the Company in providing its services may contain undetected errors. Although
the Company engages in extensive testing of its software prior to introducing
the software onto its network, there can be no assurance that errors will not be
found in the software after the software goes into use. Any such error may
result in partial or total failure of the Company's network, additional and
unexpected expenses to fund further product development or to add programming
personnel to complete a development project, and loss of revenue because of the
inability of subscribers to use Premiere's network or the cancellation by
subscribers of their service with Premiere, any of which could have a material
adverse effect on the Company. The Company maintains technology errors and
omissions insurance coverage of $10.0 million per policy aggregate.
Dependence Upon Telecommunication Providers; No Guaranteed Supply. The
Company does not own a transmission network and, accordingly, depends on WilTel,
CTG, Cherry, Sprint and other facilities-based and non-facilities based carriers
for transmission of its subscribers' long distance calls. These long distance
telecommunications services generally are procured pursuant to supply agreements
for terms of three to five years, subject to earlier termination in certain
events. Certain of these agreements provide for minimum purchase requirements.
Further, the Company is dependent upon local exchange carriers for call
origination and termination. If there is an outage affecting one of the
Company's terminating carriers, the Company's platform automatically switches
calls to another terminating carrier if capacity is available. The Company has
not experienced significant losses in the past due to interruptions of service
at terminating carriers, but no assurance can be made in this regard in the
future. The Company's ability to maintain and expand its business depends, in
part, on its ability to continue to obtain telecommunication services on
favorable terms from long distance carriers and the cooperation of both
interexchange and local exchange carriers in originating and terminating service
for its subscribers in a timely manner. The partial or total loss of the ability
to receive or terminate calls would result in a loss of revenues by the Company
and could lead to a loss of subscribers, which could have a material adverse
effect on the Company.
VTN leases capacity on the WilTel backbone to provide connectivity and data
transmission within VTN's frame relay network. The lease agreement expires in
September 1999. VTN's hub equipment is collocated at various WilTel sites
pursuant to collocation agreements that are terminable by either party upon 30
days written notice. Voice-Tel's ability to maintain the network connectivity is
dependent upon its access to transmission facilities provided by WilTel or an
alternative provider. The Company has no assurance that it will be able to
continue such relationship with WilTel beyond the terms of its current
agreements with WilTel or that it will be able to find an alternative provider
on terms as favorable as those offered by WilTel or on any other terms. If VTN
were required to relocate its hub equipment or change its network transmission
provider, it could experience shutdowns in its service and increase costs which
could have a material adverse effect on its customer relationships and customer
retention and, therefore, its business and financial performance and condition.
Reliance on Major Supplier of Voice Messaging Equipment. The Company does
not manufacture voice messaging equipment used at its voice messaging service
centers, and such equipment is currently available from a limited number of
sources. The inability of the Company to obtain this equipment could result in
delays or reduced delivery of messages which would materially and adversely
affect the Company's operating results. Although the Company has not
historically experienced any significant difficulty in obtaining equipment
required for its
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operation and believes that viable alternative suppliers exist,
no assurance can be given that shortages will not arise in the future.
Regulation. Various regulatory factors may have an impact on the Company's
ability to compete and on its financial performance. The Company is subject to
regulation by the FCC and by various state public service and public utility
commissions. Federal and state regulations and regulatory trends have had, and
may have in the future, both positive and negative effects on the Company and on
the information and telecommunications service industries as a whole. FCC policy
currently requires interexchange carriers to provide resale of the use of their
transmission facilities. The FCC also requires local exchange carriers to
provide all interexchange carriers with equal access to the origination and
termination of calls. If either or both of these requirements were removed, the
Company could be adversely affected. Moreover, the carriers that provide
wholesale services to the Company or terminate and originate the Company's
traffic may experience disruptions in service due to factors outside the
Company's control, which may cause the Company to lose the ability to complete
its subscribers' long distance calls. The Company has made all filings with the
FCC necessary to allow the Company to provide interstate and international long
distance service. In order to provide intrastate long distance service, the
Company is generally required to obtain certification to provide
telecommunications services from the public service or public utility
commissions of each state, or to register or be found exempt from registration
by such commissions. Premiere has made the filings and taken the actions it
believes are necessary to become certified or tariffed to provide intrastate
card services to customers throughout the United States, except in two states,
Alaska and Hawaii, which have historically had restrictions making the cost
prohibitive in light of the immaterial amount of intrastate traffic the Company
handles in those states. This, however, has recently changed and the Company
anticipates authorization with respect to Hawaii in 1997 and with respect to
Alaska in 1998. To date, the Company has not been denied any licenses or
tariffs. The Company has received authorization to provide intrastate card
services in 44 states, and is seeking authorization to provide intrastate card
services in four states. With the exception of one state, New Mexico, in which
the Company's application to provide "0+" service is pending, the Company has
received authorization to provide "0+" service in each state where the Company
provides such service. The Company's platform does not prevent subscribers from
using the platform to make intrastate long distance calls in any state,
including states in which the Company has not received approval to provide
intrastate long distance services. There can be no assurance that the Company's
provision of intrastate card services and "0+" service in states where it is
not certified or tariffed to provide such services will not have a material
adverse effect on the Company's business, operating results or financial
condition.
On February 8, 1996, the President signed into law the 1996 Act which will
allow local exchange carriers, including the RBOCs, to provide inter-LATA long
distance telephone service and which also grants the FCC authority to deregulate
other aspects of the telecommunications industry. The new legislation may result
in increased competition to the Company from others, including the RBOCs, and
increased transmission costs in the future. In addition, the Company may be
subject to additional regulatory requirements and fees as a result of changes
made by the 1996 Act.
In conducting its business, the Company is subject to various laws and
regulations relating to commercial transactions generally, such as the Uniform
Commercial Code and is also subject to the electronic funds transfer rules
embodied in Regulation E promulgated by the Board of Governors of the Federal
Reserve System (the "Federal Reserve"). Congress has held hearings regarding,
and various agencies are considering, whether to regulate providers of services
and transactions in the electronic commerce market. For example, the Federal
Reserve Board recently completed a study, directed by Congress, regarding the
propriety of applying Regulation E to stored value cards. The Department of
Treasury recently promulgated proposed rules applying record keeping, reporting
and other requirements to a wide variety of entities involved in electronic
commerce. It is possible that Congress, the states or various government
agencies could impose new or additional requirements on the electronic commerce
market or entities operating therein. If enacted, such laws, rules and
regulations could be imposed on the Company's business and industry and could
have a material adverse effect on the Company's business, results of operations
or financial condition. The Company's proposed international activities also
will be subject to regulation by various international authorities and the
inherent risk of unexpected changes in such regulation.
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Risks Associated with International Expansion. A key component of the
Company's strategy is its planned expansion into international markets. In 1996,
the Company opened a POP site in London, England and the Company intends to
pursue long term strategic relationships with European partners. The Company
also intends to establish high speed client/server networks of personal
computers (called "Telnodes") and PCs utilizing the Company's proprietary
software (called "Network Managers") in New Zealand, Canada and potentially
other countries in 1997. Voice-Tel is currently pursuing an international
expansion strategy and currently has service centers in Canada, Australia, New
Zealand and Puerto Rico and is targeting the opening of a United Kingdom service
center in the third quarter of 1997. If international revenues are not adequate
to offset the expense of establishing and maintaining these international
operations, the Company's business, operating results or financial condition
could be materially adversely affected. To date, the Company has only limited
experience in marketing and distributing its services internationally. There can
be no assurance that the Company will be able to successfully establish the
proposed international Telnodes and Network Managers, or to market, sell and
deliver its services in these markets. In addition to the uncertainty as to the
Company's ability to expand its international presence, there are certain
difficulties and risks inherent in doing business on an international level,
such as burdensome regulatory requirements and unexpected changes in these
requirements, export restrictions, export controls relating to technology,
tariffs and other trade barriers, difficulties in staffing and managing
international operations, longer payment cycles, problems in collecting accounts
receivable, political instability, fluctuations in currency exchange rates,
seasonal reductions in business activity during the summer months in Europe and
certain other parts of the world and potentially adverse tax consequences, all
of which could have a material adverse effect on the performance of the
Company's international operations.
Risk of Loss From Returned Transactions; Fraud; Bad Debt; Theft of Services.
The Company uses two principal financial payment clearance systems: the Federal
Reserve's Automated Clearing House for electronic fund transfers and the
national credit card systems for electronic credit card settlement. In its use
of these established payment clearance systems, the Company generally bears
credit risks similar to those normally assumed by other users of these systems
arising from returned transactions caused by insufficient funds, stop payment
orders, closed accounts, frozen accounts, unauthorized use, disputes, theft or
fraud. From time to time, persons have gained unauthorized access to the
Company's network and obtained services without rendering payment to the Company
by unlawfully using the access numbers and PINs of authorized users. No
assurance can be given that future losses due to unauthorized use of access
numbers and PINs will not be material. The Company attempts to manage these
risks through its internal controls and proprietary billing system. The
Company's computer telephony platform prohibits a single access number and PIN
from establishing multiple simultaneous connections to the platform, and the
Company establishes preset spending limits for each subscriber. Although the
Company believes that its risk management and bad debt reserve practices are
adequate, there can be no assurance that the Company's risk management practices
or reserves will be sufficient to protect the Company from unauthorized or
returned transactions or thefts of services which could have a material adverse
effect on the Company's business, operating results or financial condition.
Volatility of Notes and Stock Price. There may be significant volatility in
the market price for the Notes and the Common Stock into which the Notes are
convertible. The Company believes factors such as actual or anticipated
quarterly fluctuations in financial results, changes in earnings estimates by
securities analysts and announcements of material events by the Company, its
major strategic partners or licensees or its competitors may cause the market
price for the Notes and the Common Stock into which the Notes are convertible to
fluctuate, perhaps substantially. These fluctuations, as well as general
economic conditions, may have a material adverse effect on the market price of
the Notes and the Common Stock into which the Notes are convertible. In
addition, in recent years the stock market in general, and technology-related
stocks in particular, have experienced price and volume fluctuations that often
have been unrelated or disproportionate to the operating performance of
companies.
Limitations on Repurchase of Notes. If a Designated Event (as defined) were
to occur, there can be no assurance that the Company would have sufficient
financial resources, or would be able to arrange financing, to pay the
repurchase price for all Notes tendered by holders thereof. Any future credit
agreements or other agreements relating to other indebtedness (including other
Senior Indebtedness) to which the Company becomes a party may contain
restrictions on or prohibitions of such repurchases. In the event a Designated
Event occurs at a time when the Company is prohibited from purchasing Notes, the
Company could seek the consent of its lenders to
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the purchase of the Notes or could attempt to refinance the borrowings that
contain such prohibition. If the Company does not obtain such a consent or repay
such borrowings, the Company would remain prohibited from purchasing Notes. In
such case, the Company's failure to repurchase the Notes would constitute an
Event of Default under the Indenture whether or not such repurchase is permitted
by the subordination provisions of the Indenture. Any such default may, in turn,
cause a default under Senior Indebtedness of the Company. Moreover, the
occurrence of a Designated Event in and of itself may constitute an event of
default under Senior Indebtedness of the Company. As a result, in each case, any
repurchase of the Notes would, absent a waiver, be prohibited under the
subordination provisions of the Indenture until the Senior Indebtedness is paid
in full. See "Description of Notes--Subordination" and "Risk Factors--
Subordination."
No Notes may be repurchased at the option of holders upon a Designated Event
if there has occurred and is continuing an Event of Default described under
"Description of Notes--Events of Default and Remedies" below (other than a
default in the payment of the repurchase price with respect to such Notes on the
repurchase date).
Absence of Public Market for the Notes and Restrictions on Resale. The Notes
are currently eligible for trading in the PORTAL market. The Notes sold
pursuant to this Prospectus will not remain eligible for trading on the PORTAL
Market. The Company does not intend to list the Notes on any national securities
exchange or to seek approval for quotation of the Notes on The Nasdaq Stock
Market. In addition, market making activity is subject to the limits imposed by
the Securities Act and the Exchange Act. Accordingly, there can be no assurance
that any market for the Notes will be maintained. If an active market for the
Notes fails to be sustained, the trading price of the Notes could be adversely
affected. See "Description of Notes."
Anti-takeover Effects of Certain Provisions of Articles of Incorporation,
Bylaws and Georgia Law. The Board of Directors of the Company is empowered to
issue preferred stock without shareholder action. The existence of this "blank-
check" preferred could render more difficult or discourage an attempt to obtain
control of the Company by means of a tender offer, merger, proxy contest or
otherwise. The Company's Articles of Incorporation divide the Board of Directors
into three classes, as nearly equal in size as possible, with staggered three-
year terms. One class will be elected each year. The classification of the Board
of Directors could have the effect of making it more difficult for a third party
to acquire control of the Company. The Company is also subject to certain
provisions of the Georgia Business Corporation Code which relate to business
combinations with interested shareholders. In addition to considering the
effects of any action on the Company and its shareholders, the Company's
Articles permit the Board of Directors and the committees and individual members
thereof to consider the interests of various constituencies, including
employees, customers, suppliers, and creditors of the Company, communities in
which the Company maintains offices or operations, and other factors which such
directors deem pertinent, in carrying out and discharging the duties and
responsibilities of such positions and in determining what is believed to be in
the best interests of the Company. See "Description of Capital Stock."
USE OF PROCEEDS
The Notes and the Conversion Shares are offered by the Selling Securityholders
and, accordingly, Premiere will not receive any of the proceeds from the sales
thereof.
SELLING SECURITYHOLDERS
The Notes were originally issued by the Company in a private placement and
were resold by the initial purchasers thereof to qualified institutional buyers
(within the meaning of Rule 144A under the Securities Act) or other
institutional accredited investors (as defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act) in transactions exempt from registration under the
Securities Act, and in sales outside the United States to persons other than
U.S. persons in reliance upon Regulation S under the Securities Act. The Notes
and the Conversion Shares that may be offered pursuant to this Prospectus will
be offered by the Selling Securityholders.
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Prior to any use of this Prospectus in connection with an offering of the
Notes and/or the Conversion Shares, this Prospectus will be supplemented to set
forth the name and number of shares beneficially owned by the Selling
Securityholder intending to sell such Notes and/or Conversion Shares, and the
aggregate principal amount of Notes and/or number of Conversion Shares to be
offered. The Prospectus Supplement will also disclose whether any Selling
Securityholder selling in connection with such Prospectus Supplement has held
any position or office with, been employed by or otherwise has had a material
relationship with, the Company or any of its affiliates during the three (3)
years prior to the date of the Prospectus Supplement.
DESCRIPTION OF NOTES
The Notes were issued under an indenture dated as of June 30, 1997 (the
"Indenture"), between the Company and IBJ Schroder Bank & Trust Company, as
trustee (the "Trustee"). The terms of the Notes include those stated in the
Indenture and those stated in the Registration Rights Agreement (the
"Registration Rights Agreement") entered into as of the closing date between
the Company and the initial purchasers in such offering. The following summaries
of certain provisions of the Notes, the Indenture and the Registration Rights
Agreement do not purport to be complete and are subject to, and are qualified in
their entirety by reference to, all the provisions of the Notes, the Indenture
and the Registration Rights Agreement, including the definitions therein of
certain terms which are not otherwise defined in this Prospectus. Wherever
particular provisions or defined terms of the Indenture (or of the form of Note
which is a part thereof) or the Registration Rights Agreement are referred to,
such provisions or defined terms are incorporated herein by reference. As used
in this Description of Notes, the "Company" refers only to Premiere
Technologies, Inc. and does not, unless the context otherwise indicates, include
any of its subsidiaries.
GENERAL
The Notes will represent unsecured general obligations of the Company
subordinate in right of payment to certain other obligations of the Company as
described under "--Subordination," and convertible into Common Stock as
described under "--Conversion." The Notes are issued in fully registered form
only in denominations of $1,000 or any multiple thereof and will mature on July
1, 2004 unless earlier redeemed at the option of the Company or repurchased by
the Company at the option of the holder upon a Designated Event (as defined).
The Notes will bear interest from June 30, 1997 at the rate per annum of 5
3/4% set forth on the cover page hereof, payable semi-annually on January 1 and
July 1, commencing on January 1, 1998, to holders of record at the close of
business on the preceding December 15 and June 15, respectively (subject to
certain exceptions in the case of conversion, redemption or repurchase of such
Notes prior to the applicable interest payment date). Interest will be computed
on the basis of a 360-day year comprised of twelve 30-day months.
Principal and premium, if any, will be payable, and the Notes may be presented
for conversion, registration of transfer and exchange, without service charge,
at the office of the Company maintained by the Company for such purposes in the
Borough of Manhattan, The City of New York, which until otherwise designated by
the Company shall be an office or agency of the Trustee. In addition, interest
may, at the Company's option, be paid by check mailed to such holders, provided
that a holder of Notes with an aggregate principal amount in excess of
$5,000,000 will be paid by wire transfer in immediately available funds at the
election of such holder.
The Indenture does not contain any financial covenants or any restrictions on
the payment of dividends, the repurchase of securities of the Company or the
incurrence of Senior Indebtedness or other indebtedness. The Indenture contains
no covenants or other provisions to afford protection to holders of Notes in the
event of a highly leveraged transaction or a change in control of the Company
except to the limited extent described under "--Repurchase at Option of Holders
Upon a Designated Event" below.
No service charge will be made for any registration or transfer or exchange of
Notes, but the Company may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection therewith. The Company is not
required to exchange or register the transfer of (i) any Note for a period of 15
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days next preceding any selection of Notes to be redeemed, (ii) any Note or
portion thereof selected for redemption, (iii) any Note or portion thereof
surrendered for conversion, or (iv) any Note or portion thereof surrendered for
repurchase (and not withdrawn) in connection with a Designated Event.
The Notes are currently eligible for trading in the PORTAL Market. Notes sold
pursuant to this Prospectus will not remain eligible for trading on the PORTAL
Market.
BOOK-ENTRY; DELIVERY AND FORM; GLOBAL CERTIFICATES
Upon the initial transfer pursuant to the Registration Statement of which this
Prospectus forms a part, the Notes may be represented by one or more fully
registered global notes (the "Global Note") as well as Notes in definitive form
registered in the name of individual purchasers or their nominees. Each such
Global Note will be deposited upon issuance with, or on behalf of, DTC and
registered in the name of DTC or its nominee (the "Global Note Registered
Owner") or will remain in the custody of the Trustee pursuant to a FAST Balance
Certificate Agreement between DTC and the Trustee. Except as set forth below,
the Global Note may be transferred, in whole and not in part, only to another
nominee of DTC or to a successor of DTC or its nominee.
DTC is a limited purpose trust company organized under the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
was created to hold securities for its participant organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic book-
entry changes in accounts of its Participants. The Participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. Access to DTC's system is also available to
other entities such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly (collectively, the "Indirect Participants"). Persons who are not
Participants may beneficially own securities held by or on behalf of DTC only
through the Participants or the Indirect Participants. The ownership interest
and transfer of ownership interest of each actual purchaser of each security
held by or on behalf of DTC are recorded on the records of the Participants and
Indirect Participants.
Pursuant to procedures established by DTC, (i) upon deposit of the Global
Note, DTC will credit the accounts of Participants with portions of the
principal amount of the Global Note and (ii) ownership of such interests in the
Global Note will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants (with respect
to other owners of beneficial interests in the Global Note). The laws of some
states require that certain persons take physical delivery in definitive form of
securities that they own. Consequently, the ability to transfer Notes will be
limited to that extent.
Except as described below, owners of interests in the Global Note will not
have Notes registered in their names, will not receive physical delivery of
Notes in definitive form and will not be considered the registered owners
thereof under the Indenture for any purpose.
None of the Company, the Trustee, nor any agent of the Company or the Trustee
will have any responsibility or liability for (i) any aspect of DTC's records or
any Participant's records relating to or payments made on account of beneficial
ownership interests in the Global Note, or for maintaining, supervising or
reviewing any of DTC's records or any Participant's records relating to the
beneficial ownership interests in the Global Note or (ii) any other matter
relating to the actions and practices of DTC or any of its Participants.
Payments in respect of the principal of, premium, if any, and interest on any
Notes registered in the name of the Global Note Registered Owner on any relevant
record date will be payable by the Trustee to the Global Note Registered Owner
in its capacity as the registered holder under the Indenture. Under the terms
of the Indenture, the Company and the Trustee will treat the person in whose
names the Notes, including the Global Note, are registered as the owners thereof
for the purpose of receiving such payments and for any and all other purposes
whatsoever. Consequently, neither the Company, the Trustee, nor any agent of
the Company or the Trustee has nor will have any responsibility or liability for
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the payment of such amounts to beneficial owners of the Notes or for any other
matter relating to actions or practices of DTC or any of its Participants. The
Company understands that DTC's current practice, upon receipt of any payment in
respect of securities such as the Notes (including principal and interest), is
to credit the accounts of the relevant Participants with the payment on the
payment date, in amounts proportionate to their respective holdings in principal
amount of beneficial interests in the relevant security as shown on the records
of DTC (unless DTC has reason to believe it will not receive payment on such
payment date). Payments by the Participants and the Indirect Participants to
the beneficial owners of Notes will be governed by standing instructions and
customary practices and will be the responsibility of Participants or the
Indirect Participant, and the beneficial owners and not the responsibility of
the DTC, the Trustee or the Company. Neither the Company nor the Trustee will
be liable for any delay by DTC or any of its Participants in identifying the
beneficial owners of the Notes, and the Company and the Trustee may conclusively
rely on and will be protected in relying on instructions from the Global Note
Registered Owner for all purposes.
So long as DTC, or its nominee, is the registered owner or holder of a Global
Note, DTC or such nominee, as the case may be, will be considered the sole owner
or holder of the Notes represented by such Global Note for all purposes under
the Indenture and the Notes. No beneficial owner of an interest in a Global
Note will be able to transfer the interest except in accordance with DTC's
applicable procedures, in addition to those provided for under the Indenture.
Transfers between Participants in DTC will be effected in the ordinary way in
accordance with DTC rules.
The Company expects that DTC will take any action permitted to be taken by a
holder of Notes (including the presentation of Notes for exchange as described
below) only at the direction of one or more Participants to whose account the
DTC interests in a Global Note is credited and only in respect of such portion
of the aggregate principal amount of the Notes as to which such Participant or
Participants has or have given such direction.
Although the Company expects that DTC will agree to the foregoing procedures
in order to facilitate transfers of interests in a Global Note among
Participants of DTC, it is under no obligation to perform or continue to perform
such procedures, and such procedures may be discontinued at any time. Neither
the Company nor the Trustee will have any responsibility for the performance by
DTC or its Participants or Indirect Participants of their respective obligations
under the rules and procedures governing their operations.
If DTC is at any time unwilling or unable to continue as a depositary for a
Global Note and a successor depositary is not obtained, the Company will issue
definitive certificated Notes in exchange for a Global Note. Such definitive
certificated Notes shall be registered in names of the owners of the beneficial
interests in the Global Note as provided by the Participants. Notes issued in
definitive certificated form will be fully registered, without coupons, in
minimum denominations of $1,000 and integral multiples of $1,000 above that
amount. Upon issuance of Notes in definitive certificated form, the Trustee is
required to register the Notes in the name of, and cause the Notes to be
delivered to, the person or persons (or the nominee thereof) identified as the
beneficial owner as DTC shall direct.
The information in this section concerning DTC and DTC's book-entry system has
been obtained from sources that the Company believes to be reliable, but the
Company takes no responsibility for the accuracy thereof.
CONVERSION
The holders of Notes will be entitled at any time through the close of
business on the final maturity date of the Notes, subject to prior redemption or
repurchase, to convert any Notes or portions thereof (in denominations of $1,000
or multiples thereof) into Common Stock of the Company, at the conversion price
of $33.00 per share, subject to adjustment as described below. Except as
described below, no adjustment will be made on conversion of any Notes for
interest accrued thereon or for dividends on any Common Stock issued. If Notes
are converted after a record date for the payment of interest and prior to the
next succeeding interest payment date, such Notes, other than Notes called for
redemption pursuant to a redemption notice mailed to the holders by the Company
in accordance with the Indenture, must be accompanied by funds equal to the
interest payable on such succeeding interest payment date on the principal
amount so converted. The Company is not required to issue fractional shares of
Common Stock upon conversion of Notes and, in lieu thereof, will pay a cash
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adjustment based upon the market price of the Common Stock on the last business
day prior to the date of conversion. In the case of Notes called for redemption,
conversion rights will expire at the close of business on the business day
preceding the date fixed for redemption, unless the Company defaults in payment
of the redemption price. A Note for which a holder has delivered a Designated
Event purchase notice exercising the option of such holder to require the
Company to repurchase such Note may be converted only if such notice is
withdrawn by a written notice of withdrawal delivered by the holder to the
Company prior to the close of business on the business day immediately preceding
the date fixed for repurchase.
The right of conversion attaching to any Note may be exercised by the holder
by delivering the Note at the specified office of a conversion agent,
accompanied by a duly signed and completed notice of conversion, together with
any funds that may be required as described in the preceding paragraph. The
conversion date shall be the date on which the Note, the duly signed and
completed notice of conversion, and any funds that may be required as described
in the preceding paragraph shall have been so delivered. A holder delivering a
Note for conversion will not be required to pay any taxes or duties payable in
respect of the issue or delivery of Common Stock on conversion, but will be
required to pay any tax or duty which may be payable in respect of any transfer
involved in the issue or delivery of the Common Stock in a name other than the
holder of the Note. Certificates representing shares of Common Stock will not be
issued or delivered unless all taxes and duties, if any, payable by the holder
have been paid.
The initial conversion price of $33.00 per share of Common Stock is subject to
adjustment (under formulae set forth in the Indenture) in certain events,
including: (i) the issuance of Common Stock as a dividend or distribution on
Common Stock; (ii) certain subdivisions and combinations of the Common Stock;
(iii) the issuance to all holders of Common Stock of certain rights or warrants
to purchase Common Stock at less than the current market price of the Common
Stock; (iv) the dividend or other distribution to all holders of Common Stock of
shares of capital stock of the Company (other than Common Stock) or evidences of
indebtedness of the Company or assets (including securities, but excluding those
rights, warrants, dividends and distributions referred to above or paid
exclusively in cash); (v) dividends or other distributions consisting
exclusively of cash (excluding any cash portion of distributions referred to in
clause (iv)) to all holders of Common Stock to the extent that such
distributions, combined together with (A) all other such all-cash distributions
made within the preceding 12 months in respect of which no adjustment has been
made plus (B) any cash and the fair market value of other consideration payable
in respect of any tender offers by the Company or any of its subsidiaries for
Common Stock concluded within the preceding 12 months in respect of which no
adjustment has been made, exceeds 10% of the Company's market capitalization
(being the product of the then current market price of the Common Stock times
the number of shares of Common Stock then outstanding) on the record date for
such distribution; (vi) the purchase of Common Stock pursuant to a tender offer
made by the Company or any of its subsidiaries to the extent that the same
involves an aggregate consideration that, together with (X) any cash and the
fair market value of any other consideration payable in any other tender offer
by the Company or any of its subsidiaries for Common Stock expiring within the
12 months preceding such tender offer in respect of which no adjustment has been
made plus (Y) the aggregate amount of any such all-cash distributions referred
to in clause (v) above to all holders of Common Stock within the 12 months
preceding the expiration of such tender offer in respect of which no adjustments
have been made, exceeds 10% of the Company's market capitalization on the
expiration of such tender offer; and (vii) payment in respect of a tender offer
or exchange offer by a person other than the Company or any subsidiary of the
Company in which, as the closing of the offer, the Board of Directors is not
recommending rejection of the offer. The adjustment referred to in clause (vii)
above will only be made if the tender offer or exchange offer is for an amount
which increases that person's ownership of Common Stock to more than 25% of the
total shares of Common Stock outstanding, and only if the cash and value of any
other consideration included in such payment per share of Common Stock exceeds
the current market price per share of Common Stock on the business day next
succeeding the last date on which tenders or exchanges may be made pursuant to
such tender or exchange. The adjustment referred to in clause (vii) above will
not be made, however, if, as of the closing of the offer, the offering documents
with respect to such offer disclose a plan or an intention to cause the Company
to engage in any transaction described below in "--Consolidation, Merger or
Assumption."
The Indenture provides that if the Company implements a shareholders' rights
plan, such rights plan must provide that upon conversion of the Notes the
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holders will receive, in addition to the Common Stock issuable upon such
conversion, such rights whether or not such rights have separated from the
Common Stock at the time of such conversion.
In the case of (i) any reclassification or change of the Common Stock (other
than changes in par value or resulting from a subdivision or combination) or
(ii) a consolidation, merger, or combination involving the Company or a sale or
conveyance to another corporation of the property and assets of the Company as
an entirety or substantially as an entirety, in each case as a result of which
holders of Common Stock shall be entitled to receive stock, other securities,
other property or assets (including cash) with respect to or in exchange for
such Common Stock, the holders of the Notes then outstanding will be entitled
thereafter to convert such Notes into the kind and amount of shares of stock,
other securities or other property or assets which they would have owned or been
entitled to receive upon such reclassification, change, consolidation, merger,
combination, sale or conveyance had such Notes been converted into Common Stock
immediately prior to such reclassification, change, consolidation, merger,
combination, sale or conveyance (assuming, in a case in which the Company's
shareholders may exercise rights of election, that a holder of Notes would not
have exercised any rights of election as to the stock, other securities or other
property or assets (including cash) receivable in connection therewith and
received per share the kind and amount received per share by a plurality of non-
electing shares).
In the event of a taxable distribution to holders of Common Stock (or other
transaction) which results in any adjustment of the conversion price, the
holders of Notes may, in certain circumstances, be deemed to have received a
distribution subject to United States income tax as a dividend; in certain other
circumstances, the absence of such an adjustment may result in a taxable
dividend to the holders of Common Stock. See "Certain Federal Income Tax
Considerations."
The Company from time to time may, to the extent permitted by law, reduce the
conversion price of the Notes by any amount for any period of at least 20 days,
in which case the Company shall give at least 15 days' notice of such decrease,
if the Board of Directors has made a determination that such decrease would be
in the best interests of the Company, which determination shall be conclusive.
The Company may, at its option, make such reductions in the conversion price, in
addition to those set forth above, as the Board of Directors deems advisable to
avoid or diminish any income tax to holders of Common Stock resulting from any
dividend or distribution of stock (or rights to acquire stock) or from any event
treated as such for income tax purposes. See "Certain Federal Income Tax
Considerations."
No adjustment in the conversion price will be required unless such adjustment
would require a change of at least l% in the conversion price then in effect;
provided that any adjustment that would otherwise be required to be made shall
be carried forward and taken into account in any subsequent adjustment. Except
as stated above, the conversion price will not be adjusted for the issuance of
Common Stock or any securities convertible into or exchangeable for Common Stock
or carrying the right to purchase any of the foregoing.
OPTIONAL REDEMPTION BY THE COMPANY
The Notes are not redeemable at the option of the Company prior to July 6,
2000. At any time on or after that date the Notes may be redeemed at the
Company's option on at least 20 but not more than 60 days' notice, as a whole
or, from time to time in part, at the following prices (expressed in percentages
of the principal amount), together with accrued interest to, but excluding, the
date fixed for redemption; provided that if a redemption date is an interest
payment date, the semi-annual payment of interest becoming due on such date
shall be payable to the holder of record as of the relevant record date.
If redeemed during the 12-month period beginning July 1 (July 6, 2000 through
June 30, 2001 in the case of the first such period):
Year Redemption Price
---- ----------------
2000................... 103.286%
2001................... 102.464%
2002................... 101.643%
2003................... 100.821%
and 100% at July 1, 2004.
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If fewer than all the Notes are to be redeemed, the Trustee will select the
Notes to be redeemed in principal amounts of $1,000 or multiples thereof by lot
or, in its discretion, on a pro rata basis. If any Note is to be redeemed in
part only, a new Note or Notes in principal amount equal to the unredeemed
principal portion thereof will be issued. If a portion of a holder's Notes is
selected for partial redemption and such holder converts a portion of such
Notes, such converted portion shall be deemed to be taken from the portion
selected for redemption.
No sinking fund is provided for the Notes.
REPURCHASE AT OPTION OF HOLDERS UPON A DESIGNATED EVENT
The Indenture provides that if a Designated Event (as defined) occurs, each
holder of Notes shall have the right, at the holder's option, to require the
Company to repurchase all of such holder's Notes, or any portion thereof that is
an integral multiple of $1,000, on the date (the "repurchase date") that is 40
calendar days after the date of the Company Notice (as defined below), for cash
at a repurchase price equal to 100% of the principal amount of the Notes,
together with accrued interest, if any, to the repurchase date (the "repurchase
price"), provided, however, that if a repurchase date is an interest payment
date, the semi-annual payment of interest becoming due on such date shall be
payable to the holder of record as of the relevant record date.
The Company may, at its option, in lieu of paying the repurchase price in
cash, pay the repurchase price in Common Stock valued at 95% of the average of
the closing prices of the Common Stock for the five consecutive trading days
ending on and including the third trading day preceding the repurchase date.
Payment may not be made in Common Stock unless the Company satisfies certain
conditions with respect to such payment as provided in the Indenture.
Within 15 calendar days after the occurrence of a Designated Event, the
Company is obligated to mail to all holders of record of the Notes a notice (the
"Company Notice") of the occurrence of such Designated Event and of the
repurchase right arising as a result thereof. The Company must deliver a copy of
the Company Notice to the Trustee and cause a copy or a summary of such notice
to be published in a newspaper of general circulation in the City of New York.
To exercise the repurchase right, a holder of such Notes must deliver, on or
before the 35th day after the Company Notice, written notice to the Company (or
an agent designated by the Company for such purpose) and the Trustee of the
holder's exercise of such right, together with the Notes with respect to which
the right is being exercised, duly endorsed for transfer.
"Designated Event" means a Change in Control (as defined below) or a
Termination of Trading (as defined below).
A "Change in Control" will be deemed to have occurred when (i) any
"person" or "group" (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act) of shares representing more than 50% of
the combined voting power of the then outstanding securities entitled to vote
generally in elections of directors of the Company ("Voting Stock"); (ii)
shareholders of the Company approve any plan or proposal for the liquidation,
dissolution or winding up of the Company; (iii) the Company (A) consolidates
with or merges into any other corporation or any other corporation merges into
the Company, and in the case of any such transaction, the outstanding Common
Stock of the Company is changed or exchanged into or for other assets or
securities as a result, unless the shareholders of the Company immediately
before such transaction own, directly or indirectly immediately following such
transaction, at least 51% of the combined voting power of the outstanding voting
securities of the corporation resulting from such transaction in substantially
the same proportion as their ownership of the Voting Stock immediately before
such transaction or (B) conveys, transfers or leases all or substantially all of
its assets to any person; or (iv) at any time Continuing Directors (as defined
below) do not constitute a majority of the Board of Directors of the Company
(or, if applicable, a successor corporation to the Company); provided that a
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Change in Control shall not be deemed to have occurred if either (x) the last
sale price of the Common Stock for any five trading days during the ten trading
days immediately preceding the Change in Control is at least equal to 105% of
the conversion price in effect on such day or (y) in the case of a merger or
consolidation, at least 90% of the consideration (excluding cash payments for
fractional shares) in such merger or consolidation constituting the Change in
Control consists of common stock traded on a United States national securities
exchange or quoted on the Nasdaq National Market (or which will be so traded or
quoted when issued or exchanged in connection with such Change in Control) and
as a result of such transaction or transactions such Notes become convertible
solely into such common stock. A Change of Control also shall not be deemed to
have occurred if Boland T. Jones or a group that includes Boland T. Jones (a
"Permitted Investor") becomes the beneficial owner of more than 50% of the
Voting Stock, provided that, if as a consequence of any transaction involving a
Permitted Investor, or in which a Permitted Investor has an interest, less than
30% of the number of shares of Common Stock outstanding upon the issuance of the
Notes are neither listed for trading upon a national securities exchange nor
approved for trading or quoted for trading on the Nasdaq National Market, then a
Change of Control shall be deemed to have occurred upon the consummation of such
transaction.
"Continuing Director" means at any date a member of the Company's Board of
Directors (i) who was a member of such board on June 30, 1997 or (ii) who was
nominated or elected by at least a majority of the directors who were Continuing
Directors at the time of such nomination or election or whose election to the
Company's Board of Directors was recommended or endorsed by at least a majority
of the directors who were Continuing Directors at the time of such nomination or
election or such lesser number comprising a majority of a nominating committee
if authority for such nominations or elections has been delegated to a
nominating committee whose authority and composition have been approved by at
least a majority of the directors who were continuing directors at the time such
committee was formed. (Under this definition, if the current Board of Directors
of the Company were to approve a new director or directors and then resign, no
Change in Control would occur even though the current Board of Directors would
thereafter cease to be in office.)
The phrase "all or substantially all" of the assets of the Company, as
included in the definition of Change of Control, is likely to be interpreted by
reference to applicable state law at the relevant time, and will be dependent on
the facts and circumstances existing at such time. As a result, there may be a
degree of uncertainty in ascertaining whether a sale or transfer of "all or
substantially all" of the assets of the Company has occurred.
A "Termination of Trading" shall have occurred if the Common Stock (or other
common stock into which the Notes are then convertible) is neither listed for
trading on a United States national securities exchange nor approved for trading
on an established automated over-the-counter trading market in the United
States.
If a Designated Event were to occur, there can be no assurance that the
Company would have sufficient financial resources, or would be able to arrange
financing, to pay the repurchase price for all Notes tendered by holders
thereof. Any future credit agreements or other agreements relating to other
indebtedness (including other Senior Indebtedness) to which the Company becomes
a party may contain restrictions on or prohibitions of such repurchases. In the
event a Designated Event occurs at a time when the Company is prohibited from
purchasing Notes, the Company could seek the consent of its lenders to the
purchase of the Notes or could attempt to refinance the borrowings that contain
such prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company would remain prohibited from purchasing Notes. In such
case, the Company's failure to repurchase the Notes would constitute an Event of
Default under the Indenture whether or not such repurchase is permitted by the
subordination provisions of the Indenture. Any such default may, in turn, cause
a default under Senior Indebtedness of the Company. Moreover, the occurrence of
a Designated Event may in and of itself constitute an event of default under
Senior Indebtedness of the Company. As a result, in each case, any repurchase of
the Notes would, absent a waiver, be prohibited under the subordination
provisions of the Indenture until the Senior Indebtedness is paid in full. See
"--Subordination" below and "Risk Factors--Subordination."
No Notes may be repurchased at the option of holders upon a Designated Event
if there has occurred and is continuing an Event of Default described under
"--Events of Default and Remedies" below (other than a default in the payment
of the repurchase price with respect to such Notes on the repurchase date).
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The foregoing provisions would not necessarily afford holders of the Notes
protection in the event of a highly leveraged transaction, a change in control
of the Company or other transactions involving the Company that may adversely
affect holders. The Company could, in the future, enter into certain
transactions, including certain recapitalizations of the Company, that would not
constitute a Change in Control but that would increase the amount of Senior
Indebtedness (or other indebtedness) outstanding at such time. There are no
restrictions in the Indenture or the Notes on the creation of additional Senior
Indebtedness (or any other indebtedness of the Company or any of its
subsidiaries) and the incurrence of significant amounts of additional
indebtedness could have an adverse impact on the Company's ability to service
its debt, including the Notes. The Notes are subordinate in right of payment to
all existing and future Senior Indebtedness as described under
"--Subordination" below.
Certain leveraged transactions sponsored by the Company's management or an
affiliate of the Company could constitute a Change in Control that would give
rise to the repurchase right. The Indenture does not provide the Company's Board
of Directors with the right to limit or waive the repurchase right in the event
of any such leveraged transaction. The right to require the Company to
repurchase Notes as a result of a Designated Event could have the effect of
delaying, deferring or preventing a Change of Control or other attempts to
acquire control of the Company unless arrangements have been made to enable the
Company to repurchase all of the Notes at the repurchase date. Consequently, the
right may render more difficult or discourage a merger, consolidation or tender
offer (even if such transaction is supported by the Company's Board of Directors
or is favorable to the shareholders), the assumption of control by a holder of a
large block of the Company's shares and the removal of incumbent management. The
Designated Event repurchase right, however, is not the result of management's
knowledge of any specific effort to accumulate shares of Common Stock or to
obtain control of the Company by means of a merger, tender offer, solicitation
or otherwise. Instead, the Designated Event repurchase right is a standard term
contained in other similar debt offerings and the terms of such feature resulted
from negotiations between the Company and the initial purchasers in the initial
private placement.
Rule 13e-4 under the Exchange Act requires, among other things, the
dissemination of certain information to security holders in the event of an
issuer tender offer and may apply in the event that the repurchase option
becomes available to holders of the Notes. The Company will comply with this
rule to the extent applicable at that time.
SUBORDINATION
The indebtedness evidenced by the Notes is, to the extent provided in the
Indenture, subordinate to the prior payment in full of all Senior Indebtedness
(as defined) whether presently outstanding or hereafter incurred or created.
Upon any distribution of assets of the Company upon any dissolution, winding up,
liquidation or reorganization of the Company, the payment of the principal of,
or premium, if any, and interest on the Notes is to be subordinated to the
extent provided in the Indenture in right of payment to the prior payment in
full, in cash or in such other form of payment as may be acceptable to the
holders thereof, of all Senior Indebtedness. Moreover, in the event of any
acceleration of the Notes because of an Event of Default, the holders of any
Senior Indebtedness then outstanding would be entitled to payment in full, in
cash or in such other form of payment as may be acceptable to the holders
thereof, of all obligations in respect of such Senior Indebtedness before the
holders of the Notes are entitled to receive any payment or distribution in
respect thereof.
The Company may also not make any payment upon or in respect of the Notes if
(i) a default in the payment of principal of, premium, if any, interest, or
other payment due on Senior Indebtedness occurs and is continuing beyond any
applicable period of grace or (ii) any other default occurs and is continuing
with respect to Designated Senior Indebtedness (as defined below) that permits
holders of the Designated Senior Indebtedness as to which such default related
to accelerate its maturity and the Trustee and the Company receive a notice of
such default (as "Payment Blockage Notice") from a holder of Designated Senior
Indebtedness. Payments on the Notes may and shall be resumed (a) in case of
payment default, on the date on which such default is cured or waived or ceases
to exist and (b) in case of a nonpayment default, on the earlier of the date on
which such nonpayment default is cured or waived or ceases to exist or 179 days
after the date on which the applicable Payment Blockage Notice is received. No
new period of payment blockage may be commenced pursuant to a Payment Blockage
Notice unless (i) 365 days have elapsed since the first day of the effectiveness
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of the immediately prior Payment Blockage Notice and (ii) all scheduled payments
of principal, premium, if any, and interest on the Notes that have become due
have been paid in full, in cash or in such other form of payment as may be
acceptable to the holders thereof, or the Trustee or the Noteholders shall not
have instituted proceedings to enforce the Noteholders' right to receive such
payments. No default (whether or not such event of default is on the same issue
of Designated Senior Indebtedness) that existed or was continuing on the date of
delivery of any Payment Blockage Notice shall be, or be made, the basis for a
subsequent Payment Blockage Notice.
The term "Senior Indebtedness" means the principal of, premium, if any,
interest on (including any interest accruing after the filing of a petition by
or against the Company under any bankruptcy law, whether or not allowed as a
claim after such filing in any proceeding under such bankruptcy law), and any
other payment (including all fees, indemnities and expense reimbursements) due
pursuant to, any of the following, whether outstanding on the date of the
Indenture or thereafter incurred or created: (a) all indebtedness of the Company
for money borrowed or evidenced by notes, debentures, bonds or other securities
(including, but not limited to, those which are convertible or exchangeable for
securities of the Company) and all other obligations of the Company constituting
the deferred purchase price of property or assets; (b) all indebtedness and
other obligations of the Company due and owing with respect to letters of credit
(including, but not limited to, reimbursement obligations with respect thereto);
(c) all indebtedness or other obligations of the Company due and owing with
respect to interest rate and currency swap agreements, cap, floor and collar
agreements, currency spot and forward contracts and other similar agreements and
arrangements; (d) all obligations consisting of commitment or standby fees due
and payable to lending institutions with respect to credit facilities or letters
of credit available to the Company; (e) all obligations of the Company under
leases required or permitted to be capitalized under generally accepted
accounting principles; (f) all indebtedness or obligations of others of the
kinds described in any of the preceding clauses (a), (b), (c), (d) or (e)
assumed by or guaranteed in any manner by the Company or in effect guaranteed
(directly or indirectly) by the Company through an agreement to purchase,
contingent or otherwise, and all obligations of the Company under any such
guarantee or other arrangements; and (g) all renewals, extensions, refundings,
deferrals, amendments or modifications of indebtedness or obligations of the
kinds described in any of the preceding clauses (a), (b), (c), (d), (e) or (f);
unless in the case of any particular indebtedness, obligation, renewal,
extension, refunding, amendment, modification or supplement, the instrument or
other document creating or evidencing the same or the assumption or guarantee of
the same expressly provides that such indebtedness, obligation, renewal,
extension, refunding, amendment, modification or supplement is subordinate to,
or is not superior to, or is pari passu with, the Notes; provided that Senior
Indebtedness shall not include (i) any indebtedness of any kind of the Company
to any subsidiary of the Company, a majority of the voting stock of which is
owned, directly or indirectly, by the Company, (ii) indebtedness for trade
payables or constituting the deferred purchase price of assets, property or
services incurred in the ordinary course of business, or (iii) the Notes.
The term "Designated Senior Indebtedness" means all Senior Indebtedness with
respect to which the instrument creating or evidencing the same or the
assumption or guarantee thereof (or related agreements or documents to which the
Company is a party) expressly provides that such Senior Indebtedness shall be
"Designated Senior Indebtedness" for purposes of the Indenture (provided that
such instrument, agreement or other document may place limitations and
conditions on the right of holders of such Senior Indebtedness to exercise the
rights of Designated Senior Indebtedness).
In the event that, notwithstanding the foregoing, the Trustee or any holder of
Notes receives any payment or distribution of assets of the Company of any kind
in contravention of any of the terms of the Indenture, whether in cash, property
or securities, including, without limitation, by way of set-off or otherwise, in
respect of the Notes before all Senior Indebtedness is paid in full, in cash or
in such other form of payment as may be acceptable to the holders thereof, then
such payment or distribution will be held by the recipient in trust for the
benefit of the holders of Senior Indebtedness of the Company, and will be
immediately paid over or delivered to the holders of Senior Indebtedness of the
Company or their representative or representatives to the extent necessary to
make payment in full, in cash or in such other form of payment as may be
acceptable to the holders thereof, of all Senior Indebtedness of the Company
remaining unpaid, after giving effect to any concurrent payment or distribution,
or provision therefor, to or for the holders of Senior Indebtedness of the
Company.
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The Company is a holding company with no business operations of its own. The
Company therefore is dependent upon payments, loans, dividends and distributions
from its subsidiaries for funds to pay its obligations, including payment of
principal of and interest on the Notes. The Notes are not guaranteed by the
Company's subsidiaries. The subsidiaries of the Company are separate and
distinct legal entities and have no obligation, contingent or otherwise, to pay
any amounts due pursuant to the Notes or to make any funds available therefor,
whether by dividends, loans or other payments. In addition, the payment of
dividends and the making of loans and other payments to the Company by any such
subsidiaries are subject to statutory and contractual restrictions, are
dependent upon the earnings of such subsidiaries and are subject to various
business considerations. Any right of the Company to receive assets of its
subsidiaries upon their liquidation or reorganization (and the consequent right
of the holders of the Notes to participate in these assets) will be effectively
subordinated to the claims of that subsidiary's creditors (including trade
creditors), except to the extent that the Company is itself recognized as a
creditor of such subsidiary, in which case the claims of the Company would still
be subordinate to any security interests in the assets of such subsidiary and
any indebtedness of such subsidiary senior to that held by the Company.
As of June 30, 1997, the Company had approximately $24.0 million of
indebtedness outstanding (excluding accrued interest) that would have
constituted Senior Indebtedness (which amount includes subsidiary indebtedness
guaranteed directly or indirectly by the Company). As of June 30, 1997, there
was also outstanding approximately $24.0 million of indebtedness and other
liabilities of subsidiaries of the Company (excluding intercompany liabilities
and liabilities of a type not required to be reflected as liabilities on the
balance sheet of such subsidiaries in accordance with generally accepted
accounting principals). The Indenture does not limit the amount of additional
indebtedness, including Senior Indebtedness, which the Company can create,
incur, assume or guarantee, nor does the Indenture limit the amount of
indebtedness which any subsidiary of the Company can create, incur, assume or
guarantee.
No provision contained in the Indenture or the Notes will affect the
obligation of the Company, which is absolute and unconditional, to pay, when
due, principal of, premium, if any, or interest on, the Notes. The subordination
provisions of the Indenture and the Notes will not prevent the occurrence of any
default or Event of Default or limit the rights of any holder of Notes to pursue
any other rights or remedies with respect to the Notes.
As a result of these subordination provisions, in the event of the
liquidation, bankruptcy, reorganization, insolvency, receivership or similar
proceedings or an assignment for the benefit of the creditors of the Company or
a marshaling of assets or liabilities of the Company and its subsidiaries,
holders of the Notes may receive ratably less than other creditors.
EVENTS OF DEFAULT AND REMEDIES
An Event of Default is defined in the Indenture as being: (i) a default in
payment of the principal of, or premium, if any, on the Notes (whether or not
such payment is prohibited by the subordination provisions of the Indenture);
(ii) default for 30 days in payment of any installment of interest on the Notes
(whether or not such payment is prohibited by the subordination provisions of
the Indenture); (iii) default by the Company for 45 days after notice given in
accordance with the Indenture in the observance or performance of any other
covenants in the Indenture; (iv) default in the payment of the repurchase price
in respect of the Notes on the repurchase date therefor (whether or not such
payment is prohibited by the subordination provisions of the Indenture); (v)
failure to provide timely notice of a Designated Event; (vi) failure of the
Company or any Significant Subsidiary (as defined) to make any payment at
maturity, including any applicable grace period, in respect of Indebtedness
(which term as used in the Indenture means obligations (other than non-recourse
obligations) of, or guaranteed or assumed by, the Company or any Significant
Subsidiary for borrowed money), in an amount in excess of $10,000,000 and
continuance of such failure for 30 days after notice given in accordance with
the Indenture; (vii) default by the Company or any Significant Subsidiary with
respect to any Indebtedness, which default results in the acceleration of
Indebtedness in an amount in excess of $10,000,000 without such Indebtedness
having been discharged or such acceleration having been cured, waived,
rescinded, or annulled for 30 days after notice given in accordance with the
Indenture; or (viii) certain events involving bankruptcy, insolvency or
reorganization of the Company or any Significant Subsidiary.
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The Indenture provides that the Trustee shall, within 90 days after the
occurrence of a default, give to the registered holders of the Notes notice of
all uncured defaults known to it, but the Trustee shall be protected in
withholding such notice if it in good faith determines that the withholding of
such notice is in the best interest to such registered holders, except in the
case of a default in the payment of the principal of, or premium, if any, or
interest on, any of the Notes when due or in the payment of any redemption or
repurchase obligation.
The Indenture provides that if any Event of Default shall have occurred and be
continuing, the Trustee or the holders of not less than 25% in principal amount
of the Notes then outstanding may declare the principal of and accrued interest,
if any, on the Notes to be due and payable immediately, but if the Company shall
cure all defaults (except the nonpayment of interest on, premium, if any, and
principal of any Notes which shall have become due by acceleration) and certain
other conditions are met, such declaration may be canceled and past defaults may
be waived by the holders of a majority in principal amount of Notes then
outstanding. If an Event of Default resulting from certain events of bankruptcy,
insolvency or reorganization were to occur, all unpaid principal of and accrued
interest on the outstanding Notes will become due and payable immediately
without any declaration or other act on the part of the Trustee or any holders
of Notes, subject to certain limitations.
The Indenture provides that the holders of a majority in principal amount of
the outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee, subject to certain limitations specified in the
Indenture. Before proceeding to exercise any right or power under the Indenture
at the direction of such holders, the Trustee shall be entitled to receive from
such holders reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in complying with any such direction.
The right of a holder to institute a proceeding with respect to the Indenture is
subject to certain conditions precedent, including the written notice by such
holder of an Event of Default and an offer to indemnify to the Trustee, along
with the written request by the holders of not less than 25% in principal amount
of the outstanding Notes that such a proceeding be instituted, but the holder
has an absolute right to institute suit for the enforcement of payment of the
principal of, and premium, if any, and interest on, such holder's Notes when due
and to convert such Notes.
The holders of not less than a majority in principal amount of the outstanding
Notes may on behalf of the holders of all Notes waive any past defaults, except
(i) a default in payment of the principal of, or premium, if any, or interest
on, any Note when due, (ii) a failure by the Company to convert any Notes into
Common Stock or (iii) in respect of certain provisions of the Indenture which
cannot be modified or amended without the consent of the holder of each
outstanding Note affected thereby.
The Company will be required to furnish to the Trustee annually within 120
days of the end of the fiscal year a statement of certain officers of the
Company stating whether or not to the best of their knowledge the Company is in
default in the performance and observation of certain terms of the Indenture
and, if they have knowledge that the Company is in default, specifying such
default. The Company is also required, upon becoming aware of any default or
Event of Default, to deliver to the Trustee a statement specifying such default
or Event of Default and the action the Company has taken, is taking or proposes
to take with respect thereto.
CONSOLIDATION, MERGER OR ASSUMPTION
The Indenture provides that the Company may not, directly or indirectly,
consolidate with or merge with or into another person or sell, lease, convey or
transfer all or substantially all of its assets (computed on a consolidated
basis), whether in a single transaction or a series of related transactions, to
another person or group of affiliated persons, unless (i) either (a) the Company
is the surviving entity or (b) the resulting, surviving or transferee entity is
a corporation organized under the laws of the United States, any state thereof
or the District of Columbia and expressly assumes by written agreement all of
the obligations of the Company in connection with the Notes and the Indenture;
(ii) no default or Event of Default shall exist or shall occur immediately after
giving effect on a pro forma basis to such transaction; and (iii) certain other
conditions are satisfied.
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MODIFICATIONS OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Trustee, with
the consent of the holders of not less than a majority in principal amount of
the Notes at the time outstanding, to modify the Indenture or any supplemental
indenture or the rights of the holders of the Notes, except that no such
modification shall (i) extend the fixed maturity of any Note, reduce the rate or
extend the time or payment of interest thereon, reduce the principal amount
thereof or premium, if any, thereon, reduce any amount payable upon redemption
or repurchase thereof, impair, or change in any respect adverse to the holders
of Notes, the obligation of the Company to repurchase any Note upon the
happening of a Designated Event, impair or adversely affect the right of a
holder to institute suit for the payment thereof, change the currency in which
the Notes are payable, or impair, or change in any respect adverse to the holder
of the Notes, the right to convert the Notes into Common Stock subject to the
terms set forth in the Indenture or modify the provisions of the Indenture with
respect to the subordination of the Notes in a manner adverse to the holders of
the Notes, without the consent of the holder of each Note so affected, or (ii)
reduce the aforesaid percentage of Notes, without the consent of the holders of
all of the Notes then outstanding.
REGISTRATION RIGHTS
Pursuant to the Registration Rights Agreement dated June 15, 1997 (the
"Registration Rights Agreement"), the Company agreed to file, at its expense,
with the Commission on or prior to the date 90 days after the earliest date of
original issuance of any of the Notes, subject to certain conditions set forth
below, the registration statement which includes this Prospectus (the "Shelf
Registration Statement") to cover resales of Transfer Restricted Securities.
For purposes of the foregoing, "Transfer Restricted Securities" means each
Note and share of Common Stock issued upon conversion thereof until the date on
which such Note or share of Common Stock has been effectively registered under
the Securities Act and disposed of in accordance with the Shelf Registration
Statement or the date on which such Note or share of Common Stock is distributed
to the public pursuant to Rule 144 under the Securities Act or is salable
pursuant to Rule 144(k) under the Securities Act (or any similar provisions then
in force).
The Registration Rights Agreement provides that (i) the Company will cause the
Shelf Registration Statement to be declared effective by the Commission on or
prior to 180 days after June 30, 1997 (the "Closing Date"). If the Shelf
Registration Statement has not been declared effective by the Commission within
180 days after the Closing Date or the Shelf Registration Statement is filed and
declared effective but shall thereafter cease to be effective or usable (without
being succeeded immediately by an additional Shelf Registration Statement filed
and declared effective) for a period of time which shall exceed 90 days in the
aggregate in any period of 365 consecutive days (each such event, a
"Registration Default"), the Company will pay liquidated damages to each
holder of Securities, during the first 90-day period immediately following the
occurrence of such Registration Default in an amount equal to $0.05 per week per
$1,000 principal amount of Notes and, if applicable, on an equivalent basis per
share (subject to adjustment in the event of stock splits, stock recombinations,
stock dividends and the like) of Common Stock constituting Transfer Restricted
Securities held by such holder. The rate of accrual of the liquidated damages
will increase by an additional $0.05 per week per $1,000 principal amount of
Notes and, if applicable, by an equivalent amount per week per share (subject to
adjustment as set forth above) of Common Stock constituting Transfer Restricted
Securities for each subsequent 90-day period until the applicable Registration
Statement is filed, the applicable Registration Statement is declared effective
and becomes available for effecting sales of securities, or the Shelf
Registration Statement again becomes effective and becomes available for
effecting sales of securities, as the case may be, up to a maximum amount of
liquidated damages of $0.25 per week per $1,000 principal amount of Notes or, if
applicable, an equivalent amount per week per share (subject to adjustment as
set forth above) of Common Stock constituting Restricted Securities. Following
the cure of a Registration Default, liquidated damages will cease to accrue with
respect to such Registration Default. All accrued liquidated damages shall be
paid to the holders of Notes or shares of Common Stock (as applicable) in the
same manner as interest payments on the Notes on semiannual payment dates which
correspond to interest payment dates for the Notes. The use of the Shelf
Registration Statement for effecting resales of Transfer Restricted Securities
may be suspended in certain circumstances described in the Registration Rights
Agreement upon notice by the Company to the holders of the Transfer Restricted
Securities, subject to the rights of the holders of Transfer Restricted
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Securities to receive liquidated damages if the aggregate number of days of such
suspensions in any year exceeds the periods described above.
The Company will provide to each registered holder copies of such prospectus,
notify each registered holder when the Shelf Registration Statement has become
effective and take certain other actions as are required to permit unrestricted
resales of the Transfer Restricted Securities. A holder who sells the Transfer
Restricted Securities pursuant to the Shelf Registration Statement generally
will be required to be named as a selling shareholder in the related prospectus
and to deliver a prospectus to purchasers and will be bound by the provisions of
the Registration Rights Agreement which are applicable to such holder (including
certain indemnification provisions).
Certain holders of registration rights with respect to the Company's
securities (the "Existing Registration Rights Holders") are permitted pursuant
to the terms of their respective registration rights agreements to include their
shares of Common Stock ("Piggyback Shares") in the Shelf Registration
Statement. Under such circumstances, certain provisions of these registration
rights agreements (the "Existing Registration Rights Agreements") may conflict
with various provisions of the Registration Rights Agreement. For example, if
Existing Registration Rights Holders were to include shares of Common Stock in
the Shelf Registration Statement, the notice provisions concerning amendments
and supplements to the Shelf Registration Statement could delay the time period
with respect to amendments or supplements as contemplated in the Registration
Rights Agreement and, therefore, could delay settlement of trades. See
"Description of Capital Stock--Registration Rights."
Under the terms of the Registration Rights Agreement, the Company has agreed
to use all commercially reasonable efforts to obtain waivers from Existing
Registration Rights Holders of any rights to include any of their shares of
Common Stock in the Shelf Registration Statement and any other rights they
otherwise would have with respect to actions required to be taken by the Company
under the Registration Rights Agreement. Such efforts may include, to the extent
required to obtain such waivers, an offer by the Company to file, prior to or
contemporaneously with the filing of the Shelf Registration Statement, a shelf
registration statement with respect to the Existing Registration Rights Holders'
Piggyback Shares with substantially the same terms that such Existing
Registration Rights Holders would otherwise have with respect to the Shelf
Registration Statement. The Registration Rights Agreement also provides that the
Company will use all commercially reasonable efforts to eliminate or minimize
any adverse effects on the rights of the holders of Transfer Restricted
Securities under the Registration Rights Agreement as a result of the Existing
Registration Rights Agreements. The Company is currently seeking, but has not
yet obtained, such waivers. There can be no assurance that the Company will be
successful in obtaining such waivers or otherwise eliminating or minimizing any
adverse effects resulting from the rights of Existing Registration Rights
Holders and, accordingly, there can be no assurance that the ability of holders
of Transfer Restricted Securities to sell Transfer Restricted Securities
pursuant to a registration statement filed pursuant to the Registration Rights
Agreement will not be adversely affected by the assertion or existence of rights
by one or more Existing Registration Rights Holders.
TAXATION OF NOTES
See "Certain Federal Income Tax Considerations" for a discussion of certain
federal tax aspects which will apply to holders of Notes.
SATISFACTION AND DISCHARGE
The Company may discharge its obligations under the Indenture while Notes
remain outstanding if (i) all outstanding Notes will become due and payable at
their scheduled maturity within one year or (ii) all outstanding Notes are
scheduled for redemption within one year, and, in either case, the Company has
deposited with the Trustee an amount sufficient to pay and discharge all
outstanding Notes on the date of their scheduled maturity or the scheduled date
of redemption.
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GOVERNING LAW
The Indenture and the Notes will be governed by and construed in accordance
with the laws of the State of New York.
CONCERNING THE TRUSTEE
IBJ Schroder Bank & Trust Company, the Trustee under the Indenture, has been
appointed by the Company as the initial paying agent, conversion agent,
registrar and custodian with regard to the Notes. The Company may maintain
deposit accounts and conduct other banking transactions with the Trustee or its
affiliates in the ordinary course of business, and the Trustee and its
affiliates may from time to time in the future provide banking and other
services to the Company in the ordinary course of their business.
During the existence of an Event of Default, the Trustee will exercise such
rights and powers vested in it under the Indenture and use the same degree and
care and skill in its exercise as a prudent person would exercise under the
circumstances in the conduct of such person's own affairs. The Indenture and the
Trust Indenture Act of 1939, as amended (the "TIA"), will contain certain
limitations on the rights of the Trustee, should it become a creditor of the
Company, to obtain payment of claims in certain cases or to realize on certain
property received in respect of any such claim as security or otherwise. Subject
to the TIA, the Trustee will be permitted to engage in other transactions,
provided, however, that if it acquires any conflicting interest (as described in
the TIA), it must eliminate such conflict or resign.
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DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 150,000,000 shares of
Common Stock, par value $.01 per share, and 5,000,000 shares of Preferred Stock,
par value $.01 per share. The following summary does not purport to be complete
and is subject to and qualified in its entirety by the provisions of the
Company's Articles of Incorporation (the "Articles") and Amended and Restated
Bylaws (the "Bylaws"), and by the provisions of applicable law.
COMMON STOCK
As of June 30, 1997, there were 31,645,386 shares of Common Stock outstanding
(including 436,526 shares of Exchangeable Non-Voting Shares of Voice-Tel Canada
Limited, a subsidiary of the Company, issued to the former shareholders of the
Canadian Voice-Tel Entities, which are convertible at any time into 436,526
shares of Common Stock), held of record by approximately 268 shareholders. The
holders of Common Stock are entitled to one vote for each share held of record
for matters on which Common Stock shareholders are entitled to vote. There are
neither sinking fund provisions nor cumulative voting, preemptive, redemption,
or conversion rights applicable to the Common Stock. The rights, preferences
and privileges of holders of Common Stock are subject to, and may be adversely
affected by, the rights of holders of any shares of any series of Preferred
Stock which may be issued by the Company's Board of Directors from time to time
in the future. Subject to the preference rights of the holders of any
outstanding shares of Preferred Stock, holders of Common Stock are entitled to
receive ratably such dividends, if any, as may be declared by the Board of
Directors out of funds legally available therefor and, upon the liquidation,
dissolution or winding up of Company, are entitled to share ratably in all
assets of the Company after the payment of its debts and other liabilities. The
outstanding shares of Common Stock are, and the shares issuable upon conversion
of the Notes will be, when issued and paid for, fully paid and non-assessable.
PREFERRED STOCK
The Board of Directors has the authority pursuant to the Articles, without the
approval of or any action by the shareholders, to issue up to 5,000,000 shares
of Preferred Stock in such series and with such preferences, powers, limitations
and relative rights as may be determined by the Board from time to time. The
terms of the voting, conversion, dividend, liquidation, preemptive and
redemption rights and preferences, and other qualifications, powers and
privileges conferred upon the holders of any such Preferred Stock, may be more
favorable than those, if any, granted to holders of Common Stock. The
designation of any Preferred Stock with greater rights, privileges and
preferences than those applicable to the Common Stock may adversely affect the
voting power, market price and other rights and privileges of the Common Stock,
and may hinder or delay the removal of directors, attempted tender offers, proxy
contests or takeovers, or other attempts to change control of the Company, some
or all of which may be desired by holders of the Common Stock.
Of the 5,000,000 authorized shares of Preferred Stock, one share has been
designated "Series B Voting Preferred Stock," par value $.01 per share (the
"Series B Preferred"). The one share of the Company's Series B Preferred was
issued for the benefit of the former shareholders of the Canadian Voice-Tel
Entities that the Company acquired on April 30, 1997. Pursuant to the terms of
the acquisition agreements, the former shareholders of the Canadian Voice-Tel
Entities were issued 436,526 shares of Exchangeable Non-Voting Shares of Voice-
Tel Canada Limited, a wholly owned subsidiary of the Company (the "Exchangeable
Shares"). The Exchangeable Shares may be converted at any time into a total of
436,526 shares of the Company's Common Stock. Upon conversion, such shares of
Common Stock are subject to the same registration rights that are applicable to
the other shares of Common Stock issued in connection with the Voice-Tel
Acquisitions.
For voting purposes, the holder of record of the Series B Preferred is
entitled to have a number of votes equal to the number of votes that the holders
of the outstanding Exchangeable Shares (other than those held by the Company or
its affiliates) would be entitled if all such Exchangeable Shares were exchanged
by the holders thereof for shares of the Company's Common Stock. The Series B
Preferred and the Common Stock of the Company vote as a single class. The
Company's transfer agent, SunTrust Bank, Atlanta, serves as the voting trustee
for the Series B Preferred.
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In the event of the liquidation, dissolution or winding up of the Company, and
subject to any prior rights of holders of preferred stock ranking senior to the
Series B Preferred, the holder of the share of Series B Preferred will be paid
in an amount equal to $1.00, together with payment to any class of stock ranking
equally with the Series B Preferred. At such time as the Series B Preferred has
no votes attached to it because there are no Exchangeable Shares outstanding
which are not owned, directly or indirectly, by the Company and no options or
other agreements which could give rise to the issuance of Exchangeable Shares to
any person other than the Company, the Series B Preferred will be canceled
without any action required by the holder thereof or the Company.
REGISTRATION RIGHTS
The holders of approximately 11,440,259 shares of Common Stock and their
permitted transferees (the "Holders") are entitled to certain rights with
respect to the registration of such shares under the Securities Act.
Registration Rights Granted Prior to IPO. Prior to the Company's initial
public offering in March 1996, the Company granted registration rights to
holders of convertible preferred stock and warrants. Pursuant to these
registration rights agreements, the Company is required to notify the Holders of
the Company's intent to register any of its Common Stock under the Securities
Act and allow such Holders an opportunity to include their shares of Common
Stock in the Company's registration. These registration rights are subject to
certain limitations and restrictions, including the right of the underwriters of
an underwritten offering to limit the number of shares offered in such
registration if such underwriter determines that the number of shares requested
to be registered cannot be underwritten.
Certain of the Holders have the right to require the Company, no more than
two times, and with respect to a minimum percentage of the shares of Common
Stock held by such Holders at such times, to file a registration statement under
the Securities Act (other than on Form S-3). In addition, these same Holders are
entitled to require the Company, no more than one time after the Company becomes
eligible to effect a registration thereunder and provided such offering is for
not less than $1.0 million, to use all reasonable efforts to register such
Holders' shares on Form S-3 (or a successor form). Subject to certain
limitations and conditions, including provisions granting such Holders
preferences over the rights of other parties, both of such registrations may
include other securities of the Company with respect to which registration
rights have been granted, and may include securities sold for the account of the
Company. The Company is not required to file either of such registration
statements prior to the expiration of 90 days following any other registration
statement initiated by the Company. In this regard, these Holders are permitted
under the terms of their registration rights agreements to include their shares
in the Shelf Registration unless waived. The holders of some of such shares
have expressed a desire for the shares held by them to be registered for sale
pursuant to the Shelf Registration Statement (as defined above). However,
pursuant to the Registration Rights Agreement (as defined above), the Company is
required to use all commercially reasonable efforts to obtain waivers from such
holders of any rights to include any of their shares of Common Stock in the
Shelf Registration Statement and any other rights they would otherwise have with
respect to actions required to be taken by the Company under the Registration
Rights Agreement. The Company is currently seeking, but has not yet obtained,
such waivers. See "Description of Notes--Registration Rights."
Notwithstanding the fact that the contractual rights described above still
exist, the Holders of registration rights granted prior to the Company's initial
public offering may freely dispose of all of their shares of Common Stock
pursuant to Rule 144 under the Securities Act.
Registration Rights Granted Subsequent to IPO. Subsequent to the Company's
initial public offering, the Company granted registration rights in connection
with the Company's execution of a strategic alliance with WorldCom and the
Company's acquisitions of TeleT and the Voice-Tel Entities. In each of these
instances, the Company is required to notify the Holders of the Company's intent
to register any of its Common Stock under the Securities Act and allow such
Holders an opportunity to include their shares of Common Stock in the Company's
registration; provided, however, that (i) with respect to WorldCom such notice
must be given only if the Company intends to register and sell newly issued
shares; (ii) with respect to CMG@Ventures, L.P. ("CMG"), such notice must be
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given only if 20% of the shares held by CMG remain outstanding; and (iii) with
respect to the former owners of the Voice-Tel Entities, such notice must be
given only until April 30, 1998. These registration rights are subject to
certain limitations and restrictions, including the right of the underwriters of
an underwritten offering to limit the number of shares offered in such
registration if such underwriter determines that the number of shares requested
to be registered cannot be underwritten. CMG and the Voice-Tel Entities are
permitted under the terms of their respective registration rights agreements to
include their shares of Common Stock in the Shelf Registration Statement
covering resales by holders of the Notes and Common Stock. Furthermore, to the
extent that holders of the Notes and Common Stock sought to effect an
underwritten offering under the Shelf Registration Statement, certain
circumstances could arise where CMG and the Voice-Tel Entities could cause,
pursuant to the terms of their respective registration rights agreements, the
number of shares of Common Stock proposed to be sold by the holders of the Notes
and Common Stock to be reduced (i.e., a "cut-back"). WorldCom, however, is not
so permitted to include its shares of Common Stock in the Shelf Registration
Statement. See "Description of Notes--Registration Rights."
WorldCom has the one-time right to require the Company to file a registration
statement under the Securities Act, provided that such request is made between
November 13, 1998 and November 13, 1999 or within three years from the date of
an Extraordinary Transaction (as defined) or the termination of either Boland T.
Jones or D. Gregory Smith or the termination of the strategic alliance with
WorldCom. In addition, the registration must be with respect to such minimum
number of shares of Common Stock having an aggregate proposed offering price
equal to $10.0 million. With respect to the former owners of the Voice-Tel
Entities, such persons collectively have the one-time right to require the
Company to use all reasonable efforts to file a registration statement under the
Securities Act, provided that (i) such request must be initiated by an Amway
entity or Holders of 10% or more of the Registrable Securities (as defined) and
(ii) such one-time demand must be made after July 15, 1997 and before the nine-
month anniversary of the closing of the VTE Acquisitions. The holders of some of
such shares have expressed a desire for the shares held by them to be registered
for sale pursuant to the Shelf Registration Statement. However, pursuant to the
Registration Rights Agreement, the Company is required to use all commercially
reasonable efforts to obtain waivers from such holders of any rights to include
any of their shares of Common Stock in the Shelf Registration Statement and any
other rights they would otherwise have with respect to actions required to be
taken by the Company under the Registration Rights Agreement. The Company is
currently seeking, but has not yet obtained, such waivers.
In each of the above instances, subject to certain limitations and conditions,
including provisions granting certain preferences, such registrations may
include securities sold for the account of the Company or other shareholders, or
both.
With a few exceptions, the Company generally is required to bear the expense
relating to the sale of the Holders' securities under registrations, except for
underwriting discounts and commissions, and in certain cases the fees and
expenses of the Holders' counsel and filing fees related to the registration
statement. The Company also is obligated to indemnify the Holders whose shares
are included in any of the Company's registrations against certain losses and
liabilities, including liabilities under the Securities Act and state securities
laws.
COSALE RIGHTS
Pursuant to contractual agreement, some of the Holders and their transferees
have a right to participate in any sale of Common Stock by certain other
shareholders (other than sales to certain related parties of such shareholders).
The percentage of shares of Common Stock owned by such Holder which can be put
by such Holder as its participation interest in such sale is obtained by
dividing the number of shares of Common Stock owned or obtainable by such Holder
by the number of shares of all Common Stock owned or obtainable by both the
Holder and the selling shareholder.
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION, BYLAWS AND GEORGIA LAW
Certain provisions of the Georgia Business Corporation Code (the "Georgia
Code") and the Company's Articles and Bylaws, summarized in the following
paragraphs, may be considered to have anti-takeover effects and may hinder,
delay, deter or prevent a tender offer, proxy contest or other attempted
takeover that a shareholder may deem to be in such shareholder's best interest,
including such an attempted transaction as might result in payment of a premium
over the market price for shares held by such shareholder.
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Number, Term and Removal of Directors. The Company's Bylaws provide that the
size of the Company's Board of Directors shall be comprised of three to seven
members as determined from time to time by resolution of the Board (provided
that the term of an incumbent director may not be shortened by a reduction in
the number of directors constituting the Board). The Board is divided into three
classes of directors, each serving for staggered three year terms. Directors may
be removed from the Board only for cause and only upon the affirmative vote of
at least 75% of the shareholders entitled to vote thereon taken at a duly held
shareholders' meeting for which notice of the removal action was properly given.
Unless at the same meeting the shareholders vote to appoint a successor director
for the remainder of the removed director's term, upon a vacancy created in the
Board of Directors pursuant to such removal action or for any other reason
(including an increase in the size of the Board pursuant to resolution of the
Board), a successor or new director may be appointed only by the affirmative
vote of a majority of the directors then in office.
Call of and Notices Relating to Shareholder Meetings; Actions by Written
Consent of Shareholders. The Company's Bylaws provide that special meetings of
shareholders or a class or series of shareholders may be called at any time by
the Board of Directors, the Chairman of the Board, or the President of the
Company, and that such meetings shall be called upon the written request of the
holders of shares representing at least 75% of the votes entitled to be cast on
each issue presented at such meeting (25% at any time the Company has fewer than
100 shareholders of record). The Bylaws also provide that shareholders seeking
to bring business before a meeting of shareholders or to nominate candidates for
election as directors at a meeting of shareholders, must provide notice thereof
not less than 60 nor more than 90 days prior to the meeting, and, in such
notice, provide to the Company certain information concerning the proposal or
nominee. Actions required to be taken at a shareholder meeting may be taken
without a meeting only if the unanimous written consent of the shareholders
entitled to vote at such meeting is obtained and delivered to the Company for
inclusion in its minute book or other corporate records.
Georgia Business Combination Statute. Pursuant to its Bylaws, the Company, a
Georgia corporation, is subject to the provisions of the Georgia Code, including
provisions prohibiting various "business combinations" involving "interested
shareholders" for a period of five years after the shareholder becomes an
interested shareholder of the Company. Such provisions prohibit any business
combination with an interested shareholder unless either (i) prior to such time,
the Board of Directors approves either the business combination or the
transaction by which such shareholder became an interested shareholder, (ii) in
the transaction that resulted in the shareholder becoming an interested
shareholder, the interested shareholder became the beneficial owner of at least
90% of the outstanding voting stock of the Company which was not held by
directors, officers, affiliates thereof, subsidiaries or certain employee stock
option plans of the Company, or (iii) subsequent to becoming an interested
shareholder, such shareholder acquired additional shares resulting in such
shareholder owning at least 90% of the outstanding voting stock of the Company
and the business combination is approved by a majority of the disinterested
shareholders' shares not held by directors, officers, affiliates thereof,
subsidiaries or certain employee stock option plans of the Company. Under the
relevant provisions of the Georgia Code, a "business combination" is defined
to include, among other things, (i) any merger, consolidation, share exchange or
any sale, transfer or other disposition (or series of related sales or
transfers) of assets of the Company having an aggregate book value of 10% or
more of the Company's net assets (measured as of the end of the most recent
fiscal quarter), with an interested shareholder of the Company or any other
corporation which is or, after giving effect to such business combination,
becomes an affiliate of any such interested shareholder, (ii) the liquidation or
dissolution of the Company, (iii) the receipt by an interested shareholder of
any benefit from any loan, advance, guarantee, pledge, tax credit or other
financial benefit from the Company, other than in the ordinary course of
business and (iv) certain other transactions involving the issuance or
reclassification of securities of the Company which produce the result that 5%
or more of the total equity shares of the Company, or of any class or series
thereof, is owned by an interested shareholder. An "interested shareholder" is
defined by the Georgia Code to include any person or entity that, together with
its affiliates, beneficially owns or has the right to own 10% or more of the
outstanding voting shares of the Company, or any person that is an affiliate of
the Company and has, at any time within the preceding two-year period, been the
beneficial owner of 10% or more of the outstanding voting shares of the Company.
The restrictions on business combinations shall not apply to any person who was
an interested shareholder before the adoption of the Bylaw which made the
provisions applicable to the Company nor to any persons who subsequently become
interested shareholders inadvertently, subsequently divest sufficient shares so
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that the shareholder ceases to be an interested shareholder and would not, at
any time within the five-year period immediately before a business combination
involving the shareholder have been an interested shareholder but for the
inadvertent acquisition.
Constituency Provisions. In addition to considering the effects of any
action on the Company and its shareholders, the Company's Articles permit the
Board of Directors and the committees and individual members thereof to consider
the interests of various constituencies, including employees, customers,
suppliers, and creditors of the Company, communities in which the Company
maintains offices or operations, and other factors which such directors deem
pertinent, in carrying out and discharging the duties and responsibilities of
such positions and in determining what is believed to be in the best interests
of the Company.
Supermajority Provisions. The Board of Directors or the holders of 75% or
more of the outstanding shares may alter, amend or repeal the Company's Bylaws
and adopt new Bylaws. The shareholders also have the power to specify that any
Bylaw adopted by the shareholders may not be altered, amended or repealed by the
Board of Directors.
DIRECTOR EXCULPATION AND INDEMNIFICATION
The Company's Articles provide that no director shall be personally liable to
the Company or any of its shareholders for any breach of the duties of such
position, except that such elimination of liability does not apply to (i)
appropriations of business opportunities from the Company in violation of such
director's duties, (ii) knowing or intentional misconduct or violation of law,
(iii) liability for assent to distributions which are illegal or improper under
the Georgia Code or the Company's Articles and (iv) liability for any
transaction in which an improper personal benefit is derived. In addition, the
Articles state that if the Georgia Code is ever amended to allow for greater
exculpation of directors than presently permitted, the directors shall be
relieved from liabilities to the fullest extent provided by the Georgia Code, as
so amended, without further action by the Board or the shareholders of the
Company, unless the Georgia Code provides otherwise. No modification or repeal
of this provision will adversely affect the elimination or reduction in
liability provided thereby with respect to any alleged act occurring before the
effective date of such modification or repeal. The Company has entered into
indemnification agreements with each of the directors that provide the directors
similar rights to indemnification and contribution.
TRANSFER AGENT
The transfer agent and registrar for the Company's Common Stock is SunTrust
Bank, Atlanta.
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<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain United States federal income
tax considerations relevant to holders of the Notes. This discussion is based
upon the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations, Internal Revenue Service ("IRS") rulings and judicial decisions
now in effect, all of which are subject to change (possibly with retroactive
effect) or different interpretations. This discussion does not purport to deal
with all aspects of federal income taxation that may be relevant to a particular
investor's decision to purchase the Notes, and it is not intended to be wholly
applicable to all categories of investors, some of which, such as dealers in
securities, banks, insurance companies, tax-exempt organizations and non-United
States persons, may be subject to special rules. In addition, this discussion is
limited to persons that purchase the Notes in this offering and hold the Notes
as a "capital asset" within the meaning of Section 1221 of the Code.
ALL PROSPECTIVE PURCHASERS OF THE NOTES ARE ADVISED TO CONSULT THEIR OWN TAX
ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES AND THE COMMON STOCK.
CONVERSION OF NOTES INTO COMMON STOCK
In general, no gain or loss will be recognized for federal income tax purposes
on a conversion of the Notes into shares of Common Stock. However, cash paid in
lieu of a fractional share of Common Stock will likely result in taxable gain
(or loss), which will be capital gain (or loss), to the extent that the amount
of such cash exceeds (or is exceeded by) the portion of the adjusted basis of
the Note allowable to such fractional share. The adjusted basis of shares of
Common Stock received on conversion will equal the adjusted basis of the Note
converted, reduced by the portion of adjusted basis allocated to any fractional
share of Common Stock exchanged for cash. The holding period of an investor in
the Common Stock received on conversion will include the period during which the
converted Notes were held.
The conversion price of the Notes is subject to adjustment under certain
circumstances. See "Description of Notes--Conversion." Section 305 of the Code
and the Treasury Regulations issued thereunder may treat the holders of the
Notes as having received a constructive distribution, resulting in ordinary
income (subject to a possible dividends received deduction in the case of
corporate holders) to the extent of the Company's current earnings and profits
as of the end of the taxable year to which the constructive distribution relates
and/or accumulated earnings and profits, if and to the extent that certain
adjustments in the conversion price that may occur in limited circumstances
(particularly an adjustment to reflect a taxable dividend to holders of Common
Stock) increase the proportionate interest of a holder of Notes in the fully
diluted Common Stock, whether or not such holder ever exercises its conversion
privilege. Moreover, if there is not a full adjustment to the conversion price
of the Notes to reflect a stock dividend or other event increasing the
proportionate interest of the holders of outstanding Common Stock in the assets
or earnings and profits of the Company, then such increase in the proportionate
interest of the holders of the Common Stock generally will be treated as a
distribution to such holders, taxable as ordinary income (subject to a possible
dividends received deduction in the case of corporate holders) to the extent of
the Company's current earnings and profits as of the end of the taxable year to
which the constructive distribution relates and/or accumulated earnings and
profits.
MARKET DISCOUNT
Investors acquiring Notes pursuant to this Prospectus should note that the
resale of those Notes may be adversely affected by the market discount
provisions of sections 1276 through 1278 of the Code. Under the market discount
rules, if a holder of a Note purchases it at market discount (i.e., at a price
below its stated redemption price at maturity) in excess of a statutorily-
defined de minimis amount and thereafter recognizes gain upon a disposition or
retirement of the Note, then the lesser of the gain recognized or the portion of
the market discount that accrued on a ratable basis (or, if elected, on a
constant interest rate basis) generally will be treated as ordinary income at
the time of the disposition. Moreover, any market discount on a Note may be
taxable to an investor to the extent of appreciation at the time of certain
otherwise non-taxable transactions (e.g., gifts). Any accrued market discount
-41-
<PAGE>
not previously taken into income prior to a conversion of a Note, however, is
likely to carry over to the Common Stock received on conversion and be treated
as ordinary income upon a subsequent disposition of such Common Stock to the
extent of any gain recognized on such disposition. In addition, absent an
election to include market discount in income as it accrues, a holder of a
market discount debt instrument may be required to defer a portion of any
interest expense that otherwise may be deductible on any indebtedness incurred
or maintained to purchase or carry such debt instrument until the holder
disposes of the debt instrument in a taxable transaction.
SALE, EXCHANGE OR RETIREMENT OF NOTES AND COMMON STOCK
Each holder of Notes generally will recognize gain or loss upon the sale,
exchange, redemption, repurchase, retirement or other disposition of those Notes
measured by the difference (if any) between (i) the amount of cash and the fair
market value of any property received (except to the extent that such cash or
other property is attributable to the payment of accrued interest not previously
included in income, which amount will be taxable as ordinary income) and (ii)
the holder's adjusted tax basis in those Notes (including any market discount
previously included in income by the holder). Each holder of Common Stock into
which the Notes are converted, in general, will recognize gain or loss upon the
sale, exchange, redemption, or other disposition of the Common Stock measured
under rules similar to those described in the preceding sentence for the Notes.
Special rules may apply to redemptions of Common Stock which may result in
different treatment. Any such gain or loss recognized on the sale, exchange,
redemption, repurchase, retirement or other disposition of a Note or share of
Common Stock should be capital gain or loss (except as discussed under "--Market
Discount" above), and would be long-term capital gain or loss if the Note or
the Common Stock had been held for more than one year at the time of the sale or
exchange. An investor's initial basis in a Note will be the cash price paid
therefor.
BACK-UP WITHHOLDING
A holder of Notes or Common Stock may be subject to "back-up withholding"
from a reportable payment at a rate of 31 percent if, among other things, (i)
the holder fails to furnish a social security number or other taxpayer
identification number ("TIN") to the Company certified under penalties of
perjury within a reasonable time after the request therefor; (ii) the IRS
notifies the Company that the TIN furnished by the holder is incorrect; (iii)
the IRS notifies the Company that backup withholding should be commenced because
the holder has failed to properly report interest or dividends; or (iv) when
required to do so, the holder fails to certify under penalties of perjury that
such holder is not subject to backup withholding or that the TIN provided to the
Company is correct. Reportable payments include interest payments, dividend
payments and, under certain circumstances, principal payments on the Notes. A
holder who does not provide the Company with its correct TIN also may be subject
to penalties imposed by the IRS. Any amount withheld from a payment to a holder
under the back-up withholding rules is creditable against the holder's federal
income tax liability, provided the required information is furnished to the IRS.
Back-up withholding will not apply, however, with respect to payments made to
certain holders, including corporations, tax-exempt organizations and certain
foreign persons, provided their exemption from back-up withholding is properly
established.
The Company will report to the holders of Notes and Common Stock and to the
IRS the amount of any "reportable payments" for each calendar year and the
amount of tax withheld, if any, with respect to such payments.
-42-
<PAGE>
PLAN OF DISTRIBUTION
Pursuant to a Registration Rights Agreement dated as of June 15, 1997 (the
"Registration Rights Agreement") between the Company and the initial purchasers
named therein entered into in connection with the initial offering of the Notes,
the Registration Statement of which this Prospectus forms a part was filed with
the Commission covering the resale of the Notes and the Conversion Shares (the
"Securities"). The Company has agreed to use all reasonable efforts to keep the
Registration Statement effective until July 30, 1999 (or such earlier date when
the holders of the Securities are able to sell all such Securities immediately
without restriction pursuant to Rule 144(k) under the Securities Act or any
successor rule thereto or otherwise). The Company will be permitted to suspend
the use of this Prospectus (which is a part of the Registration Statement) in
connection with sales of Securities by holders during certain periods of time
under certain circumstances relating to pending corporate developments and
public filings with the Commission and similar events. The specific provisions
relating to the registration rights described above are contained in the
Registration Rights Agreement, and the foregoing summary is qualified in its
entirety by reference to the provisions of such agreement.
Sales of the Notes and the Conversion Shares may be effected by or for the
account of the Selling Securityholders from time to time in transactions (which
may include block transactions in the case of the Conversion Shares) on any
exchange or market on which such securities are listed or quoted, as applicable,
in negotiated transactions, through a combination of such methods of sale, or
otherwise, at fixed prices that may be changed, at market prices prevailing at
the time of sale, at prices related to prevailing market prices, or at
negotiated prices. The Selling Securityholders may effect such transactions by
selling the Notes or Conversion Shares directly to purchasers, through broker-
dealers acting as agents for the Selling Securityholders, or to broker-dealers
who may purchase Notes or Conversion Shares as principals and thereafter sell
the Notes or Conversion Shares from time to time in transactions (which may
include block transactions in the case of the Conversion Shares) on any exchange
or market on which such securities are listed or quoted, as applicable, in
negotiated transactions, through a combination of such methods of sale, or
otherwise. In effecting sales, broker dealers engaged by Selling
Securityholders may arrange for other broker-dealers to participate. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Securityholders and/or the
purchasers of the Notes or Conversion Shares for whom such broker-dealers may
act as agents or to whom they may sell as principals, or both (which
compensation as to a particular broker-dealer might be in excess of customary
commissions).
The Selling Securityholders and any broker-dealers, agents or underwriters
that participate with the Selling Securityholders in the distribution of the
Notes or Conversion Shares may be deemed to be "underwriters" within the meaning
of the Securities Act. Any commissions paid or any discounts or concessions
allowed to any such persons, and any profits received on the resale of the Notes
or Conversion Shares offered hereby and purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
At the time a particular offering of the Notes and/or the Conversion Shares
is made and to the extent required, the aggregate principal amount of Notes and
number of Conversion Shares being offered, the name or names of the Selling
Securityholders, and the terms of the offering, including the name or names of
any underwriters, broker-dealers or agents, any discounts, concessions or
commissions and other terms constituting compensation from the Selling
Securityholders, and any discounts, concessions or commissions allowed or
reallowed or paid to broker-dealers, will be set forth in an accompanying
Prospectus Supplement.
Pursuant to the Registration Rights Agreement, the Company has agreed to
pay all expenses incident to the offer and sale of the Notes and/or the
Conversion Shares offered by the Selling Securityholders hereby, except that the
Selling Securityholders will pay all underwriting discounts and selling
commissions, if any. The Company has agreed to indemnify the Selling
Securityholders against certain liabilities, including liabilities under the
Securities Act, and to contribute to payments the Selling Securityholders may be
required to make in respect thereof.
-43-
<PAGE>
To comply with the securities laws of certain jurisdictions, if applicable,
the Notes and Conversion Shares offered hereby will be offered or sold in such
jurisdictions only through registered or licensed brokers or dealers. Under
applicable rules and regulations under the Exchange Act, any person engaged in a
distribution of the Notes or the Conversion Shares may be limited in its ability
to engage in market activities with respect to such Notes or Conversion Shares.
In addition to and without limiting the foregoing, each Selling Securityholder
will be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, which provisions may limit the timing of purchase and
sales of any of the Notes and Conversion Shares by the Selling Securityholders.
The foregoing may affect the marketability of the Notes and the Conversion
Shares.
LEGAL MATTERS
The validity of the Notes and the Common Stock deliverable upon the conversion
of the Notes have been passed upon for the Company by Alston & Bird LLP,
Atlanta, Georgia, counsel to the Company.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated financial statements of the Company as of December 31, 1995
and 1996, and for the years ended December 31, 1994, 1995 and 1996 as contained
in the Company's Annual Report on Form 10-K for the year ended December 31, 1996
and the Company's Current Report on Form 8-K dated September 26, 1997 and the
financial statements of VTE, VTN and certain of the Franchisees that met the
significance tests under Rule 3-05 of Regulation S-X as contained in the
Company's Current Report on Form 8-K dated April 30, 1997 as amended by the
Company's Current Report on Form 8-K/A dated June 16, 1997 and the Company's
Current Report on Form 8-K dated May 16, 1997 as amended by the Company's
Current Report on Form 8-K/A dated June 26, 1997 for the periods included
therein, incorporated by reference in this prospectus have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
reports.
-44-
<PAGE>
[BACK COVER PAGE]
TABLE OF CONTENTS
Page
----
Available Information...................................................
Incorporation of Certain Documents by Reference.........................
Forward Looking Statements..............................................
Prospectus Summary......................................................
The Offering............................................................
Ratio of Earnings to Fixed Charges......................................
Risk Factors............................................................
Use of Proceeds.........................................................
Selling Securityholders.................................................
Description of Notes....................................................
Description of Capital Stock............................................
Certain Federal Income Tax Considerations...............................
Plan of Distribution....................................................
Legal Matters...........................................................
Independent Accountants.................................................
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED HEREBY BY ANY
PERSON IN ANY JURISDICTION IN WHICH OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE SUCH AN OFFERING OR SOLICITATION, NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES, IMPLY THAT THE
INFORMATION CONTAINED IN THIS PROSPECTUS OR ANY DOCUMENT INCORPORATED BY
REFERENCE HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF OR
THEREOF.
__________________________________
$172,500,000
PREMIER TECHNOLOGIES, INC.
5 3/4% CONVERTIBLE SUBORDINATED
NOTES DUE 2004
__________________________________
PROSPECTUS
, 1997
-1-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The expenses in connection with the registration of the Securities are set
forth in the following table. All amounts except the Securities and Exchange
Commission registration fee are estimated.
Securities and Exchange Commission Registration Fee............... $52,273
Printing Expenses................................................. *
Accountants' Fees and Expenses.................................... *
Legal Fees and Expenses........................................... *
Transfer Agent and Registrar Fees................................. *
Miscellaneous..................................................... *
--------
Total........................................................ $ *
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to the Company's Amended and Restated Bylaws and indemnification
agreements between the Company and each of its officers and directors, the
Company is obligated to indemnify each of its directors and officers to the
fullest extent permitted by law with respect to all liability and loss suffered
and reasonable expense incurred by such person in any action, suit or proceeding
in which such person was or is made or threatened to be made a party or is
otherwise involved by reason of the fact that such person is or was a director
or officer of the Company. The Company is also obligated to pay the reasonable
expenses of the directors and officers incurred in defending such proceeding if
the indemnified party agrees to repay all amounts advanced if it is ultimately
determined that such person is not entitled to indemnification.
In addition, the Company's Amended and Restated Articles of Incorporation
provide that the Company's directors shall not be liable to the Company or its
shareholders for monetary damages for breach of a director's fiduciary duty as a
director to the Company and its shareholders, except to the extent such
exemption from liability or limitation thereof is not permitted under the
Georgia Business Corporation Code. This provision in the Company's Amended and
Restated Articles of Incorporation does not eliminate the duty of care, and in
appropriate circumstances, equitable remedies such as injunctive or other forms
of non-monetary relief will remain available under Georgia law. In addition,
each director continues to be subject to liability for monetary damages for
misappropriation of any corporate opportunity in violation of the director's
duties, for acts or omissions involving intentional misconduct, for knowing
violations of law, for actions leading to improper personal benefit to the
director and for distributions (including payment of dividends, stock
repurchases or redemptions) that are unlawful under Georgia law. This provision
also does not affect a director's responsibilities under any other law, such as
the federal securities laws or state or federal environmental laws.
The Company holds an insurance policy covering directors and officers under
which the insurer agrees to pay, subject to certain exclusions, for any claim
made against the directors and officers of the Company for a wrongful act that
they may become legally obligated to pay or for which the Company is required to
indemnify the directors or officers, including liabilities under the Securities
Act. The Company believes that these provisions of its Amended and Restated
II-1
<PAGE>
Articles of Incorporation, Bylaws and indemnification agreements are necessary
to attract and retain qualified persons as directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------ -------------------
3.1 Articles of Incorporation of the Registrant (Incorporated herein by
reference to Exhibit 3.1 to the Registrant's Registration Statement No.
33-80547).
3.2 Articles of Amendment to Articles of Incorporation (Incorporated herein
by reference to Exhibit 3.2 to the Registrant's Registration Statement
on Form S-8 (No. 333-29787))
3.3 Amended and Restated Bylaws of the Registrant (Incorporated herein by
reference to Exhibit 3.02 to Registration Statement No. 33-80547).
4.1 See Exhibits 3.1-3.3 for provisions of the Articles of Incorporation,
as amended, and Amended and Restated Bylaws defining the rights of the
holders of common stock of the Registrant.
4.2 Indenture, dated as of June 15, 1997, between Premiere Technologies,
Inc. and IBJ Schroder Bank & Trust Company, as Trustee (Incorporated
herein by reference to Exhibit 4.1 to the Registrant's Current Report
on Form 8-K dated July 25, 1997 and filed August 5, 1997).
4.3 Form of 5 3/4% Convertible Subordinated Note due 2004 (Incorporated
herein by reference to Exhibit 4.2 to the Registrant's Current Report
on Form 8-K dated July 25, 1997 and filed August 5, 1997).
II-2
<PAGE>
4.4 Registration Rights Agreement, dated as of June 15, 1997, by and among
Premiere Technologies, Inc. and Robertson, Stephens & Company LLC,
Alex. Brown & Sons Incorporated and Donaldson, Lufkin & Jenrette
Securities Corporation (Incorporated herein by reference to Exhibit 4.3
to the Registrant's Current Report on Form 8-K dated July 25, 1997 and
filed August 5, 1997).
12 Statement of computation of ratios
* Opinion of Alston & Bird.
* Consent of Alston & Bird (Included in Exhibit 5 above).
23.1 Consent of Arthur Andersen LLP.
24 Powers of Attorney (see Page II-5).
25.1 Statement of Eligibility and Qualification Under the Trust Indenture
Act of 1939 of IBJ Schroder Bank & Trust Company, as Trustee, on
Form T-1.
- ---------
* To be filed by amendment.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE>
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Atlanta, and state of Georgia, on September 26, 1997.
PREMIERE TECHNOLOGIES, INC.
By: /s/ Boland T. Jones
--------------------------------------
Boland T. Jones
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Boland T. Jones, Patrick G. Jones and Jeffrey A.
Allred and each of them, with the power to act without the other, as his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities indicated on September 26, 1997.
SIGNATURE
---------
/s/ Boland T. Jones Chairman of the Board of Directors
- --------------------------------- and Chief Executive Officer
Boland T. Jones (Principal Executive Officer)
/s/ George W. Baker, Sr. Director
- ---------------------------------
George W. Baker, Sr.
/s/ Eduard J. Mayer Director
- ---------------------------------
Eduard J. Mayer
/s/ Raymond H. Pirtle, Jr. Director
- ---------------------------------
Raymond H. Pirtle, Jr.
II-5
<PAGE>
Exhibit 12
Premiere Technoligies, Inc. and Subsidiaries
Computation of Ratio of Earnings to Fixed Charges
(in thousands, except ratio data)
<TABLE>
<CAPTION>
Six-Months Ended
Year Ended December 31 30-Jun
------------------------------------------------ -------------------
1992 1993 1994 1995 1996 1996 1997
------------------------------------------------ -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income (Loss) From Continuing
Operations Before Income Taxes (2,879) (3,042) (7,402) 4,968 4,435 7,248 (28,354)
Add: Interest Charges 3,450 6,100 2,960 4,033 3,943 1,845 1,685
Interest Component of Rent
Expense 55 80 6,435 8,813 11,056 5,113 5,931
---------------------------------------------- ------------------
Income Available for Fixed Charges 626 3,138 1,993 17,814 19,434 14,206 (20,738)
============================================== ==================
Fixed Charges Interest Expense 3,450 6,100 2,960 4,033 3,943 1,845 1,685
Interest Component of Rent Expense 55 80 6,435 8,813 11,056 5,113 5,931
---------------------------------------------- ------------------
Total Fixed Charges 3,505 6,180 9,395 12,846 14,999 6,958 7,616
---------------------------------------------- ------------------
Ratio of Earnings to Fixed Charges 0.18 0.51 0.21 1.39 1.30 2.04 (2.72)
Income Needed to Cover Fixed Charges 2,879 3,042 7,402 28,354
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports included in this Registration Statement on Form S-3 into Premiere
Technologies, Inc.'s previously filed Registration Statements (File Nos. 333-
17593, 333-11281 and 333-29787).
/s/ Arthur Andersen LLP
Atlanta, Georgia
September 25, 1997
<PAGE>
__________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
--------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2)__
---------------------
IBJ SCHRODER BANK & TRUST COMPANY
(Exact name of trustee as specified in its charter)
New York 13-5375195
(Jurisdiction of incorporation (I.R.S. employer
or organization if not a U.S. national bank) identification No.)
One State Street, New York, New York 10004
(Address of principal executive offices) (Zip code)
BARBARA McCLUSKEY
IBJ SCHRODER BANK & TRUST COMPANY
One State Street
New York, New York 10004
(212) 858-2000
(Name, address and telephone number of agent for service)
PREMIERE TECHNOLOGIES, INC.
(Exact name of obligor as specified in its charter)
Georgia 59-3074176
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
3399 Peachtree Road, N.E.
The Lenox Building, Suite 400
Atlanta, Georgia 30326
(Address of principal executive offices) (Zip code)
5 3/4% Convertible Subordinated Notes due 2004
--------------------
(Title of indenture securities)
<PAGE>
Item 1. General information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department,
Two Rector Street, New York, New York
Federal Deposit Insurance Corporation, Washington, D.C.
Federal Reserve Bank of New York Second District,
33 Liberty Street, New York, New York
(b) Whether it is authorized to exercise corporate
trust powers.
Yes
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee.
Item 13. Defaults by the Obligor.
(a) State whether there is or has been a default with respect to the
securities under this indenture. Explain the nature of any such
default.
None
2
<PAGE>
(b) If the trustee is a trustee under another indenture under which
any other securities, or certificates of interest or participation in
any other securities, of the obligors are outstanding, or is trustee
for more than one outstanding series of securities under the
indenture, state whether there has been a default under any such
indenture or series, identify the indenture or series affected, and
explain the nature of any such default.
None
Item 16. List of exhibits.
List below all exhibits filed as part of this statement of
eligibility.
*1. A copy of the Charter of IBJ Schroder Bank & Trust Company as
amended to date. (See Exhibit 1A to Form T-1, Securities and
Exchange Commission File No. 22-18460).
*2. A copy of the Certificate of Authority of the trustee to Commence
Business (Included in Exhibit 1 above).
*3. A copy of the Authorization of the trustee to exercise corporate
trust powers, as amended to date (See Exhibit 4 to Form T-1,
Securities and Exchange Commission File No. 22-19146).
*4. A copy of the existing By-Laws of the trustee, as amended to date
(See Exhibit 4 to Form T-1, Securities and Exchange Commission
File No. 22-19146).
5. Not Applicable
6. The consent of United States institutional trustee required by
Section 321(b) of the Act.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority.
* The Exhibits thus designated are incorporated herein by reference as
exhibits hereto. Following the description of such Exhibits is a reference
to the copy of the Exhibit heretofore filed with the Securities and
Exchange Commission, to which there have been no amendments or changes.
3
<PAGE>
NOTE
----
In answering any item in this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor and its directors or
officers, the trustee has relied upon information furnished to it by the
obligor.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
trustee of all facts on which to base responsive answers to Item 2, the
answer to said Item is based on incomplete information.
Item 2, may, however, be considered as correct unless amended by an
amendment to this Form T-1.
Pursuant to General Instruction B, the trustee has responded to Items 1, 2
and 16 of this form since to the best knowledge of the trustee as indicated
in Item 13, the obligor is not in default under any indenture under which
the applicant is trustee.
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<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, IBJ Schroder Bank & Trust Company, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 24th day
of September, 1997.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Barbara McCluskey
____________________________
Barbara McCluskey
Vice President
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<PAGE>
EXHIBIT 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the issuance by PREMIERE
TECHNOLOGIES, INC. of its 5 3/4% Convertible Subordinated Notes due 2004, we
hereby consent that reports of examinations by Federal, State, Territorial, or
District authorities may be furnished by such authorities to the Securities and
Exchange Commission upon request therefor.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/Barbara McCluskey
---------------------------
Barbara McCluskey
Vice President
Dated: September 24, 1997
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<PAGE>
EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION OF
IBJ SCHRODER BANK & TRUST COMPANY
OF NEW YORK, NEW YORK
AND FOREIGN AND DOMESTIC SUBSIDIARIES
REPORT AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
IN THOUSANDS
----------------
ASSETS
------
<S> <C>
Cash and balance due from depository institutions:
Noninterest-bearing balances and currency and coin.................................. $ 41,319
Interest-bearing balances........................................................... $ 314,579
Securities: Held-to-maturity securities................................................. $ 180,111
Available-for-sale securities............................................... $ 47,600
Federal funds sold and securities purchased under
agreements to resell in domestic offices of the bank
and of its Edge and Agreement subsidiaries and in IBFs:
Federal Funds sold and Securities purchased under agreements to resell.............. $ 694,859
Loans and lease financing receivables:
Loans and leases, net of unearned income................................ $1,955,686
LESS: Allowance for loan and lease losses............................... $ 62,876
LESS: Allocated transfer risk reserve................................... $ -0-
Loans and leases, net of unearned income, allowance, and reserve.................... $1,892,810
Trading assets held in trading accounts................................................. $ 603
Premises and fixed assets (including capitalized leases)................................ $ 3,709
Other real estate owned................................................................. $ 202
Investments in unconsolidated subsidiaries and associated companies..................... $ -0-
Customers' liability to this bank on acceptances outstanding............................ $ 81
Intangible assets....................................................................... $ -0-
Other assets............................................................................ $ 67,092
TOTAL ASSETS............................................................................ $3,242,965
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES
-----------
<S> <C>
Deposits:
In domestic offices................................................................. $1,694,675
Noninterest-bearing................................................. $ 263,641
Interest-bearing.................................................... $1,431,034
In foreign offices, Edge and Agreement subsidiaries, and IBFs....................... $1,121,075
Noninterest-bearing................................................. $ 17,535
Interest-bearing.................................................... $1,103,540
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of the bank and
of its Edge and Agreement subsidiaries, and in IBFs:
Federal Funds purchased and Securities sold under agreements to repurchase.......... $ 25,000
Demand notes issued to the U.S. Treasury................................................ $ 60,000
Trading Liabilities..................................................................... $ 140
Other borrowed money:
a) With a remaining maturity of one year or less.................................... $ 38,369
b) With a remaining maturity of more than one year.................................. $ 1,763
c) With a remaining maturity of more than three years............................... $ 2,242
Bank's liability on acceptances executed and outstanding................................ $ 81
Subordinated notes and debentures....................................................... $ -0-
Other liabilities....................................................................... $ 69,908
TOTAL LIABILITIES....................................................................... $3,013,253
Limited-life preferred stock and related surplus........................................ $ -0-
EQUITY CAPITAL
--------------
Perpetual preferred stock and related surplus........................................... $ -0-
Common stock............................................................................ $ 29,649
Surplus (exclude all surplus related to preferred stock)................................ $ 217,008
Undivided profits and capital reserves.................................................. $ (17,000)
Net unrealized gains (losses) on available-for-sale securities.......................... $ 55
Cumulative foreign currency translation adjustments..................................... $ -0-
TOTAL EQUITY CAPITAL.................................................................... $ 229,712
TOTAL LIABILITIES AND EQUITY CAPITAL.................................................... $3,242,965
</TABLE>
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