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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 24, 1997
REGISTRATION NO. 333-36557
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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AMENDMENT NO. 2
TO
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 JURISDICTIONOF (I.R.S. EMPLOYERIDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)
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 FINANCE AND
ONE ATLANTIC CENTER LEGAL
1201 WEST PEACHTREE STREET PREMIERE TECHNOLOGIES, INC.
ATLANTA, GEORGIA 30309-3424 3399 PEACHTREE ROAD,
(404) 881-7000 N.E. LENOX BUILDING, SUITE 400
ATLANTA, GEORGIA 30326
(404) 262-8400
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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: [_]
----------------
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.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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 DECEMBER 24, 1997
PREMIERE TECHNOLOGIES, INC.
$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"). See "Description of
Notes" and "Description of Capital Stock." 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"). See "Selling
Securityholders."
The Notes were issued in a private placement by the Company to certain
institutional investors and non-U.S. investors in June and July of 1997. See
"Description of Notes." 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. See "Description of Notes--Registration Rights."
The Notes will mature on July 1, 2004. Interest on the Notes is payable semi-
annually on January 1 and July 1 of each year, commencing January 1, 1998. See
"Description of Notes--General." 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 sales
price of the Company's Common Stock as reported on the Nasdaq National Market
on December 18, 1997 was $27 1/8 per share.
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 September 30,
1997, the Company had approximately $0 million of indebtedness outstanding that
would have constituted Senior Indebtedness and the Company's subsidiaries had
approximately $24.3 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" BEGINNING ON PAGE 12 FOR INFORMATION THAT SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS.
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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.
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THE DATE OF THIS PROSPECTUS IS , 1997
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This Prospectus includes product names, trade names, service marks and
trademarks of Premiere and its subsidiaries and other companies including,
without limitation, Premiere WorldLink, Orchestrate SM, Voice-Tel(TM),
VoiceCom(TM) and VoiceCom AccessOne SM.
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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. The Commission also makes electronic filings publicly
available on the Internet within 24 hours of acceptance. 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 under the symbol "PTEK."
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.
The Company has filed a Registration Statement on Form S-3 under the
Securities Act with the Commission with respect to the Notes and the
Conversion Shares offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits thereto.
For further information with respect to the Company and the Notes and the
Conversion Shares offered hereby, reference is made to the Registration
Statement and the exhibits thereto. Statements contained in this Prospectus
regarding the contents of any contract or other document to which reference is
made are not necessarily complete, and in each instance reference is made to
the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. A copy of the Registration Statement and the exhibits thereto
may be inspected without charge at the offices of the Commission at Judiciary
Plaza, 450 Fifth Street, Washington, D.C. 20549, and copies of all or any part
of the Registration Statement may be obtained from the Public Reference
Section of the Commission, Washington, D.C. 20549 upon the payment of the fees
prescribed by the Commission.
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, June 30, 1997 and September 30, 1997;
(c) the Company's Current Reports on Form 8-K dated April 2, 1997, June
12, 1997, June 16, 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;
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(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;
(g) the Company's Current Report on Form 8-K, dated November 13, 1997, as
amended by the Company's Current Report on Form 8K/A filed with the
Commission on December 24, 1997; and
(h) 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.
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," "will" 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, the amount of capital expenditures, and the
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
integration of VoiceCom Holdings, Inc. ("VoiceCom") and the completion of the
proposed merger with Xpedite Systems, Inc. ("Xpedite") and the integration of
Xpedite), 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.
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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." Unless otherwise indicated, the terms "Premiere" and the "Company"
refer collectively to Premiere Technologies, Inc. and its subsidiaries.
THE COMPANY
Premiere designs, develops, markets and provides enhanced personal
communications services. The Company's network-based computer telephony
technology links together two or more stand-alone communications services, such
as calling card long distance, voice mail, e-mail, fax mail and paging, and
allows access to these services through telephones or computers. The Company
bundles these stand-alone services to allow users to store, manage, prioritize,
deliver and distribute incoming and outgoing information in an easy, efficient
and economical manner. Although Premiere offers stand-alone communications
services, it primarily targets users who have multiple communications devices
and a need to integrate them for greater functionality and convenience.
Today, many stand-alone communications services are provided through landline
telephone systems, messaging devices and local area networks ("LANs"), that
reside in whole or in part at a customer's location. The architecture of the
customer premises equipment, or "CPE," that comprises such systems is often
closed in nature, which makes integration with other systems and networks
difficult and expensive. However, users are increasingly demanding that their
existing CPE be integrated with more open and intelligent worldwide
communications networks such as the Internet. The Company believes that, due to
the complexity of such integration, users will increasingly outsource their
communications requirements to third parties such as Premiere. Premiere
believes that customers will prefer the Company's network-based service
solution for personal communications to traditional CPE-based product solutions
because the Company's solution reduces customers' costs of equipment ownership
and exposure to technology obsolescence.
The core of the Premiere solution is its "intelligent network" which links,
or integrates, stand-alone communications services using technology developed
by the Company's research and development team. The intelligent network
consists of (i) a state-of-the-art proprietary platform that integrates digital
switching technology with enhanced personal communications features and (ii)
the Company's private telecommunications network which transmits voice and data
utilizing the frame relay packet switching protocol, the "private frame relay
network." The Company's modular and scaleable intelligent network incorporates
an open-system design, which allows the Company to easily expand capacity and
provides the Company with the flexibility to develop and customize its service
offerings. Premiere offers bundled services in a variety of packages and
tailors these packages to meet the requirements of strategic marketing and co-
brand partners. Premiere's private frame relay network, with approximately 210
locations where the Company has voice messaging equipment ("points of presence"
or "POPs"), is accessible via local access in metropolitan and other geographic
areas which include approximately 90% of the United States, Canadian and
Australian populations, and approximately 50% of the New Zealand population.
Premiere anticipates that its private frame relay network will be accessible
via local access by a significant portion of the United Kingdom population via
local access in the near future. The Company plans to invest $40-$50 million in
capital expenditures over the next 12 months as part of its effort to integrate
its proprietary platform with its recently acquired private frame relay
network. Once integration is completed, the Company believes that its
intelligent network will allow the Company to offer its customers enhanced
personal communications services through either local or 800 access via
telephone or computer.
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The Company currently markets its services: (i) directly under the Premiere
WorldLink, Voice-Tel, VoiceCom and VoiceCom Access One names; (ii) indirectly
through strategic partners such as American Express Travel Related Services,
Inc. ("American Express") and CompuServe Incorporated ("CompuServe"); (iii)
indirectly through co-brand relationships with companies such as First Union
National Bank of Georgia ("First Union"), and Discover Card Services, Inc.
("Discover Card") and others; and (iv) indirectly through licensing or
wholesale arrangements with companies including WorldCom, Inc. ("WorldCom"),
NationsBanc Services, Inc. ("NationsBank"), an affiliate of NationsBank
Corporation, UniDial Communications, Inc. ("UniDial") and Cincinnati Bell Long
Distance. Although Premiere has historically focused its direct marketing
efforts on print advertising and direct mailings targeted at mobile
professionals, the Company recently acquired a nationwide direct sales force
with a national accounts program.
CUSTOMER CASE STUDIES
Some examples of Premiere's enhanced personal communications services, which
illustrate the convenience of and benefits provided by Premiere's technology
innovations and intelligent network, include the following:
E-mail Over the Phone. A consultant calls in to hear her voice mail messages.
During the same call, she can have her e-mail messages read to her over the
phone via Premiere's text-to-speech technology and save, delete, forward or
return all of her e-mail messages using one of a list of preprogrammed
responses.
Personal Assistant Services. A field salesperson presents a bid to a project
approval committee. After submitting her proposal, she leaves for her next
meeting. Upon review of the proposal, the committee notices several issues that
need immediate clarification. Rather than trying to track down the salesperson
at multiple locations, the committee calls her personal assistant number, which
automatically locates her by pager, which she had designated as her preferred
method of contact on that day. If she has selected the "call connect" feature,
she can call the Premiere platform and automatically be connected to the
committee's incoming call.
The Company's Orchestrate product, which the Company intends to begin
marketing during the first quarter of 1998, is expected to offer the following
additional features:
Universal Inbox. A busy executive can go to any Internet browser-enabled
computer to check all of his messages--voice mail, e-mail and fax mail. After
looking at a list of incoming voice and text messages, he can choose which
messages to hear or read. He can then choose to save, delete, forward or return
his messages.
Click 'n' Call Conference Calling. A manager with employees in eight
different offices holds weekly staff meetings by conference call. Rather than
going through the time and expense of arranging for a conference bridge with an
outside supplier, he is able to go to his computer, click on his contact
database list with his mouse and initiate the conference call without ever
picking up a telephone. After initiating the conference call, the manager
simply answers the call that the Premiere platform places to his telephone,
enters his account and PIN numbers and presses the "star" key to command the
Premiere platform to add additional parties sequentially. In the future,
features are expected to include muting and addition and deletion of selected
callers.
STRATEGY
Premiere's goal is to become the world's leading provider of network-based
enhanced personal communications services. The Company's strategy to achieve
this goal is to:
Increase Service Offerings and Cross-Media Functionality. The Company
believes that changes in technology continually create new business
opportunities for providers of enhanced personal communications services. The
Company continually strives to make its interfaces more user friendly and its
services functionally equivalent regardless of the customer's chosen access
device or message transport medium. For example, the Company has introduced
such features as text-to-speech e-mail delivery, a unified messaging interface
utilizing
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the World Wide Web ("Web") and an integrated Web-based contact database
manager. Possible future service features include, among others, speech
recognition.
Leverage Network Facilities. To date, the majority of the Company's services
have been accessed by 800 toll free service. The Company recently acquired an
international private frame relay network. Once this network is fully
integrated with the Company's proprietary platform, the Company plans to use
the private frame relay network and local messaging systems to provide users
local access to certain of its enhanced personal communications services, which
access the Company believes will make these services more attractive to a
broader market. In addition, through transitioning more of its subscribers to
local access, Premiere expects to realize a reduction in transmission costs.
Expand Customer Base and Distribution Channels. The Company believes that an
increasing number of businesses will transition their communications systems
from CPE-based products to network-based services. Premiere believes that a
substantial opportunity exists to meet the outsourcing needs of these
companies. The Company intends to use its direct sales force and national
accounts program as part of its effort to expand its customer base and to
improve cross-selling of its services. Premiere also plans to continue to enter
into strategic alliances and wholesale and licensing relationships in order to
reach additional customers that the Company believes are likely to be extensive
users of its services.
Pursue Strategic Acquisitions. Historically, the Company has engaged in
acquisitions in order to obtain new technology, build its infrastructure and
increase its sales force and customer base. The Company intends to continue to
examine acquisition and joint venture opportunities, which may accelerate its
growth, add new customers, develop new technologies or penetrate new geographic
markets. See "--Recent Developments."
Expand International Presence. Premiere intends to deliver its services to
more international users through strategic partnerships, third-party
distribution agreements, direct sales efforts and relationships with existing
customers that have international operations. To accommodate these prospective
users, Premiere has opened a data and switching center in London and has also
begun development of a similar center in Toronto. Targeting the Pacific Rim,
Premiere expects to begin installation of a data and switching center in New
Zealand during 1998. These international centers are designed to reduce
transmission costs associated with system access from international locations
and to allow Premiere to more effectively pursue opportunities with
international customers and strategic partners. Additionally, the Company
expects to increase the international scope of its private frame relay network
by installing POPs in additional overseas locations, specifically targeting the
United Kingdom for local messaging in the near future.
RECENT DEVELOPMENTS
VOICE-TEL ACQUISITIONS
On June 12, 1997, the Company announced the completion of the acquisitions of
Voice-Tel Enterprises, Inc. ("VTE"), its affiliate Voice-Tel Network Limited
Partnership ("VTN") and substantially all of VTE's 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
approximately 210 POPs in the United States, Puerto Rico, Canada, Australia and
New Zealand. In connection with the Voice-Tel Acquisitions, Premiere acquired
various components of, and now operates, VoiceTel's digital private frame relay
network and POPs.
Premiere believes that the Voice-Tel Acquisitions will broaden the Company's
customer base by allowing the Company to offer local access to certain of its
enhanced personal communications services. While the Company's measured 800
access products have appealed primarily to a mobile customer base, Premiere
believes
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that a local access product will appeal to a broader base of customers. In
addition to the anticipated 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
the potential for greater cross-selling opportunities. The Company is currently
consolidating these separate businesses by eliminating duplicative and
unnecessary costs, merging them under common management and integrating Voice-
Tel's service offerings, operations and systems with those of the Company. In
connection with the Voice-Tel Acquisitions, the Company took a pre-tax charge
in the second quarter of 1997 of approximately $45.4 million, consisting of
transaction expenses and restructuring and related costs attributable to the
Voice-Tel Acquisitions. See "Risk Factors--Integration of Voice-Tel
Acquisitions" and "--Ability to Manage Growth; Acquisition Risks."
VOICECOM ACQUISITION
During the third quarter of 1997, Premiere acquired approximately 97.5% of
the outstanding capital stock of VoiceCom Holdings, Inc. ("VoiceCom") in
exchange for approximately 445,737 shares of Premiere Common Stock. In
addition, Premiere converted existing VoiceCom options into options to acquire
approximately 76,054 shares of Premiere Common Stock. VoiceCom, based in
Atlanta, Georgia, is a provider of personal communications management services
and telecommunication outsourcing solutions to large corporations, government
entities and mobile professionals. Its service offerings include voice
messaging, mobile communications, full-service conference calling and voice
response programming.
VoiceCom, which is an operating subsidiary of Premiere as a result of the
acquisition, has a customer base that includes several Fortune 500 companies,
including, among others, Abbott Laboratories ("Abbott Labs"), Beverly
Enterprises, Inc. ("Beverly Enterprises") and ConAgra, Inc. ("ConAgra"). The
Fortune 500 companies in VoiceCom's customer base account for a significant
portion of VoiceCom's revenue. The Company plans to cross-sell its product
offerings to VoiceCom's customer base. In connection with the VoiceCom
acquisition, the Company took a pre-tax charge in the third quarter of 1997 of
approximately $28.2 million, consisting of transaction expenses and
restructuring and related costs attributable to the VoiceCom acquisition. See
"Risk Factors--Ability to Manage Growth; Acquisition Risks."
XPEDITE SYSTEMS, INC.
On November 13, 1997, Premiere entered into an Agreement and Plan of Merger
(the "Merger Agreement") with Xpedite Systems, Inc. ("Xpedite") and Nets
Acquisition Corp., a wholly-owned subsidiary of Premiere ("Acquisition Sub").
Subject to the terms and conditions of the Merger Agreement, Acquisition Sub
will merge with and into Xpedite (the "Xpedite Merger"), which will be the
surviving corporation in the Merger and, as a result thereof, will become a
wholly-owned subsidiary of Premiere. Under the terms of the Merger Agreement,
shares of Xpedite common stock, par value $.01 per share (the "Xpedite Common
Stock"), will be exchanged for a number of shares of Premiere Common Stock
based on an exchange ratio equal to $34 divided by the average trading price of
Premiere Common Stock prior to closing. The maximum exchange ratio under the
Merger Agreement is 1.25 shares of Premiere Common Stock for each share of
Xpedite Common Stock, and the minimum exchange ratio is 0.867 shares of
Premiere Common Stock for each share of Xpedite Common Stock. The Merger
Agreement may be terminated under certain circumstances by the board of
directors of Xpedite if the actual average trading price of Premiere Common
Stock is less than $24 per share, unless Premiere elects to increase the
exchange ratio as provided in the Merger Agreement. Assuming no adjustment to
the exchange ratio and the exercise of all outstanding Xpedite options, the
maximum number of shares of Premiere Common Stock to be issued in the Xpedite
Merger is approximately 12,380,000 shares, and the minimum number of shares is
approximately 8,590,000. Consummation of the Xpedite Merger is conditioned on,
among other things, approval of the shareholders of both Xpedite and Premiere
and compliance with applicable anti-trust notification requirements. See "Risk
Factors--Risk That Xpedite Merger Will Not Close."
8
<PAGE>
During December 1997, Xpedite consummated the acquisition of Xpedite Systems
Limited, an English corporation ("XSL"), pursuant to a Share Purchase Agreement
(the "XSL Purchase Agreement"), among Xpedite, Xpedite Systems Holdings (UK)
Limited, a newly formed and wholly owned subsidiary of Xpedite ("XSL
Acquisition Corp."), and the shareholders of XSL, pursuant to which XSL
Acquisition Corp. purchased all the share capital of XSL for a purchase price
of $87.0 million (the "XSL Acquisition"). The closing of the XSL Acquisition
was a condition to the closing of the Xpedite Merger.
Additional information with respect to the Xpedite Merger and the XSL
Acquisition is set forth in Premiere's Current Report on Form 8-K dated
November 13, 1997, filed with the Securities and Exchange Commission (the
"Commission") on December 5, 1997, including: the (i) Merger Agreement; (ii)
XSL Purchase Agreement; (iii) consolidated financial statements of Xpedite and
XSL required by Rule 3-05 of Regulation S-X promulgated by the Commission; and
(iv) pro forma financial information required by Article 11 of Regulation S-X
promulgated by the Commission.
ADDITIONS AND CHANGES TO MANAGEMENT
To support its growth, the Company has recently added new management
personnel. These additions have included Jeffrey A. Allred, Executive Vice
President of Strategic Development; Curtis L. Garner, Jr., President of
Premiere Communications, Inc., a subsidiary of the Company ("PCI"); William E.
Welsh, President of VTE; and Randolph W. Salisbury, Senior Vice President of
Marketing of PCI. In addition, D. Gregory Smith, a co-founder of the Company,
recently resigned as director, Executive Vice President and Assistant Secretary
of the Company and as a director and officer of PCI and certain other
subsidiaries of the Company, and Leonard A. DeNittis recently resigned as the
Vice President of Engineering and Operations of PCI. See "Risk Factors--
Dependence on Key Management and Personnel."
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."
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<PAGE>
REPURCHASE AT OPTION OF
HOLDERS UPON A DESIGNATED In the event that a Designated Event (as defined)
EVENT....................... 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
September 30, 1997, the Company had approximately
$24.3 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
$24.3 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, 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."
10
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
---------------------------- --------------
1992 1993 1994 1995 1996 1996 1997
----- ---- ----- ---- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges(1)....................... (0.50) 0.11 (1.38) 1.50 1.67 0.99 (4.80)
</TABLE>
- --------
(1) In computing the ratio of earnings to fixed charges (i) earnings are based
on income before taxes, plus fixed charges included in income before taxes,
and (ii) fixed charges consist of interest expense, preferred dividends and
the portion of rent expense under operating leases deemed by the Company to
be representative of the interest factor.
11
<PAGE>
RISK FACTORS
Prospective purchasers of the Notes and Conversion Shares 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 and the
Conversion Shares. 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
In June 1997, the Company completed the acquisitions of the Voice-Tel
Entities. Prior to the acquisitions, the Voice-Tel Entities operated
approximately 210 POPs in five countries. VTE operated as a franchisor, and
each of the approximately 100 Franchisees was independently owned and
operated. The Company is in the process of consolidating these separate
businesses by eliminating duplicative and unnecessary costs and merging them
under common management. Potential challenges to the successful consolidation
of the Voice-Tel Entities include, but are not limited to: (i) centralization
and consolidation of financial, operational and administrative functions; (ii)
consolidation of the service centers, network and work force; (iii)
elimination of unnecessary costs; and (iv) realization of economies of scale.
The Company is in the process of integrating Voice-Tel's service offerings,
operations and systems with those of the Company, and therefore, the Voice-Tel
integration plans may materially change in the future. Challenges to the
successful integration of the Voice-Tel Entities include, but are not limited
to: (i) localization of Premiere products; (ii) integration of the Premiere
platform with the Voice-Tel network; (iii) cross-selling of products and
services to the combined Company's customer base; (iv) integration of new
personnel; and (v) compliance with regulatory requirements.
Because of 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 is
particularly complex and will place significant demands on the Company's
management, engineering, financial and other resources. 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 sufficient net sales or earnings to
justify the Company's investment therein or the expenses related thereto, or
that operational synergies will develop. The successful consolidation of the
Voice-Tel Entities and their integration into the Company's operations are
critical to the Company's future performance, especially because the combined
revenues for the Voice-Tel Entities approximated 45.0% and 42.0% of the
Company's revenues in fiscal year 1996 and the nine months ended September 30,
1997, respectively. Failure to successfully consolidate and 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 pre-tax
charge in the second quarter of 1997 of approximately $45.4 million,
consisting of transaction expenses and restructuring and related costs
attributable to the Voice-Tel Acquisitions. The amount of the charge is based
on the Company's current estimate as to the amount of the costs and expenses
that will be incurred. There can be no assurance that the actual amount of the
costs and expenses incurred will not exceed such estimate. If the actual
amount of the costs and expenses exceeds the Company's estimate, the Company
may take additional charges in the future. In addition, the Company has
recorded approximately $14.8 million of goodwill and other intangible assets
in connection with the Voice-Tel Acquisitions. The Company is amortizing the
goodwill on a straight-line basis over 40 years, and 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
business, financial condition and results of operations.
12
<PAGE>
COMPETITION
The market for the Company's services is intensely competitive, rapidly
evolving and subject to rapid technological change. The Company expects
competition to increase in the future. Many of the Company's current and
potential competitors have longer operating histories, greater name
recognition, larger customer bases and substantially greater financial,
personnel, marketing, engineering, technical and other resources than the
Company. The Company believes that existing competitors are likely to expand
their service offerings and that new competitors are likely to enter the
personal communications market and to attempt to integrate such services,
resulting in greater competition for the Company. Such competition could have
a material adverse effect on the Company's business, financial condition and
results of operations.
The Company attempts to differentiate itself from its competitors by
offering an integrated suite of enhanced personal communications services.
Other providers currently offer each of the individual services and certain
combinations of the services offered by the Company. The Company's worldwide
mobile communications services and features compete with services provided by
companies such as AT&T Corp. ("AT&T"), MCI Communications Corp. ("MCI") and
Sprint Corp. ("Sprint") as well as smaller interexchange long distance
providers. The Company's voice mail services, including those acquired in the
Voice-Tel Acquisitions and the VoiceCom acquisition, compete with voice mail
services provided by AT&T, certain regional Bell Operating Companies ("RBOCs")
and other service bureaus as well as by equipment manufacturers, such as Octel
Communications Corporation ("Octel"), Northern Telecom, Inc. ("Northern
Telecom"), Siemens Business Communications Systems, Inc. ("Siemens"),
Centigram Communications Corporation ("Centigram"), Boston Technology, Inc.
("Boston Technology") and Digital Sound Corporation ("Digital Sound"). The
Company's enhanced travel, concierge, news and e-mail services compete with
services provided by America Online, Inc. ("America Online"), Prodigy Services
Co. ("Prodigy") and numerous Internet service providers. The Company's paging
services compete with paging services offered by companies such as AT&T and
MCI.
The Company's Orchestrate service, which the Company intends to begin
marketing during the first quarter of 1998, is expected to compete with
products offered by companies such as Octel, Microsoft Corp. ("Microsoft"),
Novell, Inc. ("Novell"), Lucent Technologies, Inc. ("Lucent") and numerous
other entities. For example, Octel and Microsoft recently announced a service,
called "Unified Messenger," which places all voice mail, e-mail and fax
messages in a single mailbox accessible by computer or telephone. In addition,
the number of companies offering call center technology, including AT&T, MCI
and Lucent, has grown dramatically over the past few years, primarily in
response to major outsource initiatives and significantly lower technology
costs. 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.
Premiere recently entered into the Merger Agreement with Xpedite and
Acquisition Sub. Through the proposed Xpedite Merger, Premiere plans to offer
enhanced fax and message delivery services ("Enhanced Fax Services"). See
"Prospectus Summary--Recent Developments--Xpedite Systems, Inc.," "--Risks
That Xpedite Merger Will Not Close" and "--Risks Associated with Expansion of
Enhanced Fax Services." Xpedite's fax communication services currently compete
with services provided by each of AT&T, MCI and Sprint, and many of the
national postal, telephone and telegraph companies ("PTTs") around the world.
Neither Premiere nor Xpedite can predict whether AT&T, MCI, Sprint, any
Internet service provider or PTT or any other competitor will expand its fax
communications services business, and there can be no assurance that these or
other competitors will not commence or expand their businesses. Moreover,
Xpedite's receiving, queuing, routing and other systems logic and architecture
are not proprietary to Xpedite, and as a result, there can be no assurance
that such information will not be acquired or duplicated by Xpedite's existing
and potential competitors. Xpedite does not typically have long-term
contractual agreements with its customers, and there can be no assurance that
its customers will continue to transact business with Premiere in the future.
In addition, even if there is continued growth in the use of electronic
document distribution services, there can be no assurance that potential
customers will not elect to use their own equipment to fulfill their needs for
electronic document distribution services. There also can be no assurance that
customers will not elect to use alternatives to Xpedite's electronic document
distribution services, including the Internet, to carry such customers'
13
<PAGE>
communications or that companies offering such alternatives will not develop
product features or pricing which are more attractive to customers than those
currently offered by Xpedite.
Furthermore, on February 8, 1996, President Clinton signed into law the
Telecommunications Act of 1996, as amended (the "1996 Act"), which allows
local exchange carriers ("LECs"), including the RBOCs, to provide long
distance telephone service between Local Access and Transport Areas ("LATAs"),
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, financial condition and results of
operations.
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 LECs into the long distance market, would not
have a material adverse effect on the Company's business, financial condition
and results of operations.
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. The Company does not have
the contractual right to prevent its Premiere WorldLink 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. Mr. Jones
has entered into an employment agreement with the Company which expires in
December 1999, and the Company maintains key man life insurance on Mr. Jones
in the amount of $3.0 million. D. Gregory Smith, a co- founder of the Company,
recently resigned as director, Executive Vice President and Assistant
Secretary of the Company and as a director and officer of PCI and certain
other subsidiaries of the Company, and Leonard A. DeNittis recently resigned
as the Vice President of Engineering and Operations of PCI. See "Prospectus
Summary --Recent Developments--Additions and Changes to Management."
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 continually evaluates acquisition opportunities and, as a
result, frequently engages in acquisition discussions, conducts due diligence
activities in connection with possible acquisitions, and, where appropriate,
engages in acquisition negotiations. The Company has experienced substantial
growth in revenue and personnel in recent years, particularly in 1997. A
substantial portion of such growth has been accomplished through acquisitions,
including the Voice-Tel Acquisitions and the VoiceCom acquisition. The
Company's 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, including the
proposed
14
<PAGE>
Xpedite Merger, 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 its private frame relay network, thus
requiring the Company continuously to attempt to predict growth in its network
usage and add capacity accordingly. Difficulties in managing continued growth,
including difficulties in predicting the growth in network usage, could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Acquisitions, including the proposed Xpedite Merger, 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, entry into
markets in which Premiere has little or no direct prior experience and the
potential loss of key employees of the acquired company. Premiere is unable to
predict whether or when any prospective acquisition candidate will become
available or the likelihood that any acquisition will be completed.
Future 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,
financial condition and results of operations. For example, the Voice-Tel
Entities and VoiceCom established reserves for certain potential tax
liabilities that management believes to be adequate based on certain
assumptions which management believes are reasonable. If, however, such
assumptions prove to be incorrect and the potential liabilities ultimately
exceed established reserves, the Company's business, financial condition and
results of operations could be materially adversely affected. The Company has
taken, and in the future may take, charges in connection with acquisitions. In
connection with the Voice-Tel Acquisitions and the VoiceCom acquisition, the
Company took pre-tax charges of approximately $45.4 million during the second
quarter of 1997 and $28.2 million during the third quarter of 1997,
respectively. The Company may take additional charges in connection with
future acquisitions, including the Xpedite Merger. There can be no assurance
that the costs and expenses incurred will not exceed the estimates upon which
such charges are based.
RISK THAT XPEDITE MERGER WILL NOT CLOSE
The Company recently entered into the Merger Agreement with Xpedite and
Acquisition Sub. Subject to the terms and conditions of the Merger Agreement,
Acquisition Sub will merge with and into Xpedite, which will be the surviving
corporation in the Merger and, as a result thereof, will become a wholly-owned
subsidiary of Premiere. Under the terms of the Merger Agreement, shares of
Xpedite Common Stock will be exchanged for a number of shares of Premiere
Common Stock based on an exchange ratio equal to $34 divided by the average
trading price of Premiere Common Stock prior to closing. The maximum exchange
ratio under the Merger Agreement is 1.25 shares of Premiere Common Stock for
each share of Xpedite Common Stock and the minimum exchange ratio is 0.867
shares of Premiere Common Stock for each share of Xpedite Common Stock.
Consummation of the Xpedite Merger is subject to various conditions,
including, among other matters: (i) adoption of the Merger Agreement by the
requisite vote of the holders of Xpedite Common Stock; (ii) approval of the
issuance of shares of Premiere Common Stock pursuant to the Merger Agreement
by the requisite vote of the holders of Premiere Common Stock and Premiere
Preferred Stock, voting as a single class; (iii) satisfaction of applicable
antitrust requirements; (iv) receipt by Premiere and Xpedite of an opinion of
Alston & Bird dated as of the effective time of the Xpedite Merger relating to
certain tax matters; and (v) satisfaction of certain other usual and customary
closing conditions. In addition, the Merger Agreement may be terminated under
certain circumstances by the board of directors of Xpedite if the actual
average trading price of Premiere Common Stock
15
<PAGE>
is less than $24 per share, unless Premiere elects to increase the exchange
ratio as provided in the Merger Agreement. Premiere cannot predict whether the
Merger Agreement will be acceptable to Xpedite's or Premiere's shareholders,
whether it will be necessary to renegotiate or amend the terms of the Xpedite
Merger or whether necessary approvals will be obtained or any other condition
precedent to such transaction will be satisfied. There can be no assurance
that the conditions to closing the Xpedite Merger will be fulfilled or that
the Company will complete the Xpedite Merger on terms currently contemplated
or at all. See "Prospectus Summary--Recent Developments--Xpedite Systems,
Inc."
RELIANCE ON AMWAY AND CERTAIN OTHER RELATIONSHIPS
Historically, the Voice-Tel Entities have relied on sales through Amway
Corporation ("Amway") for a substantial portion of their revenue. Such sales
accounted for approximately 27.5%, 23.7% and 21.9% of the Company's revenue
for 1995, 1996 and the nine months ended September 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
later invested in the development of the private frame relay digital messaging
network through VTN. As a result of these transactions, Amway also became the
single largest equity holder in VTE and VTN. VTE and Amway have entered into a
service and reseller agreement (the "Amway Agreement") providing, among other
things, for the sale by VTE of voice messaging and network transmission
services on an exclusive basis to Amway in the United States, Canada, New
Zealand and Australia 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. Amway intends to sell a significant portion of
the Common Stock that it acquired in the Voice-Tel Acquisitions in an offering
pursuant to a demand registration by certain former owners of the Voice-Tel
Entities. Such sale will decrease Amway's interest in the Company and may
increase the possibility that Amway will recommend a voice messaging and
network transmission services provider other than the Company. There can be no
assurance that the Company's relationship with Amway and the Amway
distributors will continue at historical levels or at all, nor can there be
any assurance of long-term price protection for services provided to Amway.
Loss or 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 Company's business, financial condition and results of
operations.
In September 1997, Premiere entered into an agreement with Digitec 2000,
Inc. ("Digitec") pursuant to which Digitec will act as a distributor to market
and sell prepaid telephone cards. Under the terms of such agreement, Digitec
agreed, starting January 1, 1998, to sell cards with a retail value of at
least $4 million each month. In the event that Digitec has not sold all of the
cards by August 31, 1998, Digitec will be obligated to pay Premiere an amount
equal to the retail value of the unsold cards less commissions that would have
been payable on such cards. No assurance can be given that Digitec will be
able to sell the amount of cards that it is obligated to sell under the terms
of such agreement or, in the event that Digitec is unable to do so, that
Digitec will have the financial resources available to it to make the payment
required on August 31, 1998 under such agreement.
TECHNOLOGICAL CHANGE; RISK OF OBSOLESCENCE; DEPENDENCE ON NEW SERVICES
The market for the Company's services is 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
in a timely fashion, enhance its software and its computer telephony
16
<PAGE>
platform and compete successfully with products and services based on evolving
or new technologies. 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 with which the Company expects to compete 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,
which will be marketed to customers during the first quarter of 1998, is
expected to compete within markets where larger companies are working to
provide a unified messaging solution. The Company is also aware that products
currently exist which provide text-to-voice e-mail conversion and "call
connect/call screening" services.
Premiere recently entered into the Merger Agreement with Xpedite and
Acquisition Sub. Through the proposed Xpedite Merger, Premiere plans to offer
Enhanced Fax Services. See "Prospectus Summary--Recent Developments--Xpedite
Systems, Inc.", "--Risk that Xpedite Merger Will Not Close" and "--Risks
Associated with Expansion of Enhanced Fax Services." Technological advances
may result in the availability of new services, products or methods of
electronic document delivery that could compete with the electronic document
distribution services currently provided by Premiere and Xpedite or decrease
the cost of existing products or services which could enable Premiere's and/or
Xpedite's established or potential customers to meet their own needs for
electronic document distribution services more cost efficiently than through
the use of Premiere or Xpedite or in the future through the use of the
combined company's services. In addition, Premiere may experience difficulty
integrating incompatible systems of acquired businesses into its network.
There can be no assurance that Premiere will not be materially adversely
affected in the event of such technological change or difficulty, or that
changes in technology will not enable additional companies to offer services
which could replace, or be more cost-effective than, some or all of the
services offered now by Premiere or Xpedite or in the future by the combined
company.
The Voice-Tel Acquisitions constitute a significant investment by the
Company in a private 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 a protocol other
than frame relay or that the Company's frame relay architecture will not
become obsolete. Such events would require the Company to invest significant
capital in upgrading or replacing its private 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 the Company's
existing products. One such new product is Orchestrate, which is operational
and has been available in limited release. The Company intends to begin
marketing Orchestrate to customers through certain of the Company's strategic
partners such as CompuServe and USA.NET, Inc. ("USA.NET") in the first quarter
of 1998. The Company anticipates commencing direct marketing of the
Orchestrate product through print advertising and other channels during the
second quarter of 1998. The Company believes that its competitors have not yet
developed a publicly available network-based product which incorporates all of
the functionalities of Orchestrate, although the Company's competitors have
developed products which the Company believes offer some, but not all, of the
bundled services offered through Orchestrate . There can be no assurance that:
(i) 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; (ii) the Company will not experience
difficulties that could delay or prevent the successful development,
introduction and marketing of its services, including Orchestrate; or (iii)
its new services and the enhancements thereto, including Orchestrate, 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, financial condition and results of operations.
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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 and services 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 RIGHTS AND TECHNOLOGY
The Company relies primarily on a combination of intellectual property laws
and contractual provisions to protect its proprietary rights and technology.
These laws and contractual provisions provide only limited protection of the
Company's proprietary rights and technology. The Company's proprietary rights
and technology include confidential information and trade secrets which the
Company attempts to protect through confidentiality and nondisclosure
provisions in its licensing, services, reseller and distribution agreements.
The Company typically attempts to protect its confidential information and
trade secrets through these contractual provisions for the term of the
applicable agreement and, to the extent permitted by applicable law, for some
negotiated period of time following termination of the agreement, typically
one to two years at a minimum. In addition, Premiere has three patent
applications pending and nine trademark or service mark registrations pending.
Premiere has two registered service marks. 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. VoiceCom has
two registered U.S. trademarks and one registered foreign trademark. Despite
the Company's efforts to protect its proprietary rights and technology through
intellectual property laws and contractual provisions, 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 of its
proprietary rights and technology, there can be no assurance that the
Company's means of protecting its proprietary rights and technology 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 U.S.
RISKS OF INFRINGEMENT CLAIMS
Many patents, copyrights and trademarks 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 actions or claims alleging patent, copyright or trademark
infringement will not be brought against the Company with respect to current
or future products or services, or that, if such actions or claims are
brought, the Company will ultimately prevail. Any such claiming parties may
have significantly greater resources than the Company to pursue litigation of
such claims. Any such claims, whether with or without merit, could be time
consuming, result in costly litigation, cause delays in introducing new or
improved products and services, require the Company to enter into royalty or
licensing agreements, or cause the Company to discontinue use of the
challenged technology, tradename or service mark 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's business, financial condition and
results of operations.
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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 "WorldLink" infringes
upon its trademark rights. In addition, the Company has received
correspondence from a major bank, which is among the holders of registered
trademarks incorporating the term "WorldLink," inquiring as to the nature of
the Company's use of the term "WorldLink" as part of its mark "Premiere
WorldLink." Based on, among other things, the types of businesses in which the
other companies are engaged and the low likelihood of confusion, the Company
believes these claims to be without merit.
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.
In May 1997, Premium 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 reorigination technology. Premiere is conducting a further review
of this patent to determine if its call reorigination system would infringe
any valid rights under 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 reorganization technology. Premiere's call
reorganization 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 migrate to a new technology would have
a material adverse effect on its business, financial condition and results of
operations. No claim has been asserted beyond this letter, but no assurance
can be given that the third party will not commerce 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.
In May 1997, the Company received a letter from counsel for a provider of
goods and services in the telecommunications field objecting to the Company's
use of the phrase "personal assistant" based on that company's federally
registered "personal assistant" service mark. On June 18, 1997, counsel for
the Company responded to the objections, noting that the Company did not
intend to use, nor would it use in the future, the words "personal assistant"
as a trademark or service mark, but instead would merely use these words to
describe the nature of its product. The Company has not heard anything further
from the potential claimant and believes that the matter has been resolved.
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In July 1997, the Company received a letter from counsel for a French
publishing company objecting to the Company's use of the "Premiere" trademark.
Based on, among other things, the type of business in which the French company
is engaged and the low likelihood of confusion, the Company believes that
these claims are without merit. Due to the inherent uncertainties of
litigation, however, the Company is unable to predict the outcome of any
potential litigation with the French company, and any adverse outcome could
have a material effect on the Company's business, financial condition and
results of operations. Even if the Company were to prevail in such a
challenge, the Company's business could be adversely affected by the diversion
of management attention and litigation costs.
In February 1997, the Company entered into a long-term nonexclusive license
agreement with AudioFAX IP LLC ("AudioFAX") settling a patent infringement
suit filed by AudioFAX in June 1996. 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. In September 1997, VoiceCom
also entered into a long-term nonexclusive license agreement with AudioFAX.
In July 1996, Xpedite received a letter from counsel for AudioFAX, which
informed Xpedite that AudioFAX is the owner of certain U.S. and Canadian
patents relevant to the fax processing business entitled "Facsimile
Telecommunications Systems and Methods" (the "Patents"), and inquired as to
Xpedite's interest in obtaining a license to use the Patents. Xpedite has
reviewed the Patents, obtained certain legal opinions with respect to the
Patents and concluded that it is not necessary to obtain a license to the
Patents. AudioFAX has continued to pursue the licensing of the Patents by
Xpedite. Xpedite's management cannot predict the outcome of this matter,
including but not limited to whether or not AudioFAX will commence a lawsuit
against Xpedite in order to induce Xpedite to enter into a license to use the
Patents. There can be no assurance that the resolution of such matter will not
have a material adverse effect on Xpedite's or 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, American Express and CompuServe. 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 the Company's services effectively. 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. The telecommunications
industry is experiencing rapid consolidation. Recently WorldCom, which is a
strategic partner of the Company, entered into an agreement to acquire MCI,
which competes with the Company with respect to certain services.
Consolidation in the communications industry, including consolidations
involving the Company's customers and strategic partners, could have a
material adverse effect on the Company's business, financial condition and
results of operations.
In November 1996, the Company entered into a strategic alliance agreement
with WorldCom, the fourth largest long distance carrier in the United States,
whereby WorldCom is required, among other things, to provide the Company with
the right of first opportunity to provide certain 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
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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's business, financial condition
and results of operations.
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 7.0% of Premiere's revenues in 1996
and 11.6% of Premiere's revenues during the nine months ended September 30,
1997. One licensee, Communications Network Corporation ("CNC"), accounted for
approximately 19.6% of Premiere's 1996 license fees and approximately 1.4% 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, WorldCom Network Services, Inc., d/b/a WilTel, is also
obligated to pay this amount to the Company. In addition, WorldCom accounted
for approximately 43.5% of the Company's 1996 license fees and approximately
3.0% of the Company's total 1996 revenues, and approximately 69.5% of the
Company's license fees and 8.1% of the Company's total revenues for the nine
months ended September 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. 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 three 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, financial condition and results of operations.
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
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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 September 30, 1997, the Company had
approximately $24.3 million of outstanding indebtedness which would have
constituted Senior Indebtedness (which amount includes subsidiary indebtedness
guaranteed directly or indirectly by the Company), and the subsidiaries of the
Company had approximately $24.3 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 68.8% as of September 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. The indenture related to the Notes does not
contain any financial covenants or any other agreements restricting the
payment of dividends, the repurchase of securities of the Company, the
issuance of additional equity or the incurrence of additional indebtedness.
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
As of December 15, 1997, the Company had 33,960,277 shares of Common Stock
outstanding (including 402,748 Exchangeable Non-Voting Shares of Voice-Tel
Canada Limited, a subsidiary of the Company (the "Exchangeable Shares"), which
are convertible at any time into a like number of shares of Common Stock. Of
these shares, approximately 20,049,000 shares of Common Stock are freely
transferable without restriction or limitation under the Securities Act. The
remaining shares (approximately 13,912,000 shares) are "restricted securities"
("the Restricted Shares") within the meaning of Rule 144 ("Rule 144") adopted
under the Securities Act. Approximately 7,032,000 Restricted Shares are
immediately eligible for sale in the public market pursuant to Rule 144.
Beginning on April 30, 1998 and September 30, 1998, an approximately 6,434,000
additional shares and approximately 446,000 additional shares, respectively,
will be eligible for sale pursuant to Rule 144, subject to the volume, manner
of sale and notice requirements of Rule 144. The Conversion Shares will be
registered under the Securities Act and will be, if and when issued, freely
tradeable.
As of December 15, 1997, options and warrants to purchase an aggregate of
approximately 7,154,000 shares of Common Stock were outstanding, of which
options and warrants to purchase approximately 3,389,000 shares of Common
Stock are vested and immediately exercisable. Substantially all of the shares
issuable upon the exercise of outstanding options and warrants will be
eligible for immediate resale, if and when issued, under Rule 701 adopted
under the Securities Act or pursuant to Registration Statements on Form S-8.
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The Notes offered hereby are convertible into a maximum of approximately
5,227,000 shares of Common Stock at any time prior to final maturity at a
conversion price of $33.00 per share, subject to adjustment. The Common Stock
issuable upon conversion of the Convertible Notes will be registered under the
Securities Act and will be, if and when issued, freely tradeable.
The holders of approximately 10,614,494 shares of Common Stock and their
permitted transferees are entitled to certain rights with respect to the
registration of such shares under the Securities Act.
Prior to the Company's initial public offering in March 1996, the Company
granted certain registration rights to holders of convertible preferred stock
and warrants. Although these contractual rights remain in force, the shares
subject to such registration rights may be freely disposed of pursuant to Rule
144 under the Securities Act.
Subsequent to the Company's initial public offering, the Company has granted
registration rights in connection with the Company's execution of a strategic
alliance agreement with WorldCom, and the Company's acquisitions of TeleT
Communications, LLC ("TeleT"), the Voice-Tel Entities and VoiceCom. 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 and VoiceCom 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 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.
WorldCom has a one-time right to require the Company to file a registration
statement under the Securities Act, provided that such request is made: (i)
between November 13, 1998 and November 13, 1999; or (ii) within 60 days from
the date of a change in control of Premiere, the termination of either Boland
T. Jones or D. Gregory Smith as executive officers or the termination of the
strategic alliance agreement with WorldCom if the events described in clause
(ii) occur prior to November 13, 1999. WorldCom currently has the right to
require the Company to file a registration statement under the Securities Act
as a result of Mr. Smith's resignation. 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 demand 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. A registration statement
has been filed pursuant to the exercise of such rights by the Voice-Tel
holders. In addition, the Company has agreed to file a shelf registration
statement (the "Voice-Tel Shelf") as soon as practicable following December
15, 1997 to include any shares of Common Stock then held by the former owners
of the Voice-Tel Entities. These shareholders may include up to approximately
6.4 million shares in the Voice-Tel Shelf. The Company has exercised certain
contractual rights to postpone this requirement for up to 90 days.
The shares of Premiere Common Stock to be issued in connection with the
Xpedite Merger will be registered under the Securities Act and, unless issued
to affiliates of Xpedite as of the date of the Xpedite stockholders meeting to
consider the Xpedite Merger, will be freely transferable without restriction
or limitation under the Securities Act.
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For a period of three months commencing 30 days after financial results
covering at least 30 days of combined operations of Premiere and Xpedite have
been published, each person who is precluded by the Securities Act from
selling or disposing of all of their shares of Premiere Common Stock received
in the Xpedite Merger within one calendar quarter (a "Large Stockholder") will
have a one-time right to require Premiere to file a registration statement
under the Securities Act relating to all or part of their registrable
securities (an "Xpedite Demand Registration"). Premiere is obligated to use
its commercially reasonable efforts to effect an Xpedite Demand Registration
as soon as reasonably practical after the request is made, except that
Premiere has the right, under certain circumstances, to delay the effective
date of a registration statement or any sales thereunder for a period not to
exceed 120 days from the date of the request for registration. In addition,
Premiere is not obligated to effect an Xpedite Demand Registration (i) for
less than one million shares or (ii) within three months of a Large
Stockholder selling any registrable securities pursuant to an Xpedite
Piggyback Registration (defined below). Unless Premiere shall otherwise
consent, any offering pursuant to an Xpedite Demand Registration shall be
underwritten and Premiere shall select the underwriters and any additional
investment bankers to be used.
If Premiere proposes to file a registration statement under the Securities
Act with respect to an offering for Premiere's own account or for the account
of any holders of Premiere Common Stock other than the Large Stockholders, any
Large Stockholder may request registration under the Securities Act of all or
part of its Registrable Securities on the same terms and conditions as
Premiere or such other holders of Premiere Common Stock (an "Xpedite Piggyback
Registration"). In the case of an Xpedite Piggyback Registration, Premiere has
the right to terminate or withdraw any registration undertaken by it prior to
the effectiveness of such registration whether or not any Large Stockholder
has elected to include registrable securities in such registration.
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
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 ability of the Company to raise equity
capital in the future. See "Description of Capital Stock--Registration
Rights."
POTENTIAL ADVERSE IMPACT OF PENDING LITIGATION
In the ordinary course of its business, the Company is subject to claims and
litigation from third parties alleging that the Company's products and
services infringe the patents, trademarks and copyrights of such third
parties. See "Risk Factors--Risk of Infringement Claims." The Company has
several litigation matters pending not involving infringement claims, as
described below, 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, financial condition
and results of operations.
On January 21, 1997, Eric Bott, E.B. Elliott and Cost Recovery Systems, Inc.
("CRS") filed a complaint against the Company, PCI and the Company's
president, Boland T. Jones, in the Superior Court of Fulton County, Georgia
("Civil Action"). As of December 2, 1997, the Company, PCI and Mr. Jones
entered into a settlement agreement with Mr. Bott which settled and disposed
of Mr. Bott's claims in connection with this litigation. On December 12, 1997,
Mr. Elliott and CRS filed a Second Amended Complaint against Premiere and
Boland T. Jones in the Civil Action. The first count seeks an accounting of
commissions that Mr. Elliott and CRS allege may be due to them under a sales
commission agreement between CRS and Premiere. The second count seeks options
for 72,000 shares of Premiere Common Stock that Mr. Elliott and CRS claim are
due to them, or damages in the alternative. The third count seeks to recover
the Plaintiffs' reasonable attorneys' fees. In the Second Amended Complaint,
the remaining plaintiffs have dropped their prior request for punitive
damages. The Company believes it has meritorious defenses to Mr. Elliott's and
CRS' remaining allegations, but due to the inherent uncertainties of the
litigation process, the company is unable to predict the outcome of this
litigation. If the outcome of this litigation is adverse to the Company, it
could have a material adverse effect on the Company's business, financial
condition and results of operations. The settlement with Mr. Bott will not
have a material adverse effect on the Company's business, financial condition
and results of operations.
24
<PAGE>
On August 6, 1996, CNC, a licensing customer of the Company, was placed into
bankruptcy under Chapter 11 of the United States Bankruptcy Code (the
"Bankruptcy Code"). On August 23, 1996, CNC filed a motion to intervene in a
separate lawsuit brought by a CNC creditor in the United States District Court
for the Southern District of New York against certain guarantors of CNC's
obligations and to file a third-party action against numerous entities,
including such CNC creditor and PCI for alleged negligent misrepresentations
of fact in connection with an alleged fraudulent scheme designed to damage
CNC. The court has not ruled on CNC's request. Based upon the bankruptcy
examiner's findings and the subsequently appointed bankruptcy trustee's
investigation of potential actions directed at PCI, including an avoidable
preference claim under the Bankruptcy Code of an amount up to approximately
$950,000, the trustee and PCI have reached a tentative agreement on all issues
between the parties, including dismissal of the above referenced lawsuit,
subject to Bankruptcy Court approval. The terms of the proposed settlement
have been incorporated into a proposed plan of reorganization filed by the
trustee with the Bankruptcy Court. Based upon hearings before the Bankruptcy
Court, the trustee filed a motion requesting approval of the settlement on
November 18, 1997. Due to the inherent uncertainties of the judicial system,
the Company is not able to predict with certainty whether the above-described
settlement will be approved by the Bankruptcy Court. If the settlement is not
approved and the trustee successfully pursues possible litigation against the
Company, it could have a material adverse effect on the Company's business,
financial condition and results of operations.
On November 26, 1997, Wael Al-Khatib ("Al-Khatib"), the sole shareholder and
former president of CNC, and his company, Platinum Network, Corp. ("Platinum")
(Al-Khatib and Platinum are collectively referred to herein as "Plaintiffs"),
filed a complaint against PCI, WorldCom Network Services, Inc. f/k/a WilTel,
Inc., Bernard J. Ebbers, David F. Meyers, Robert Vetera, Joseph Cusick,
William Trower, Don Wilmouth, Digital Communications of America, Inc., Boland
Jones, Patrick Jones, and John Does I-XX (the "Defendants") in the Eastern
District of New York, United States District Court (the "Al-Khatib lawsuit").
In their complaint, Plaintiffs contend that, during 1996, PCI, certain
officers of PCI and the other Defendants engaged in a fraudulent scheme to
restrain trade in the debit card market nationally and in the New York debit
card sub-market. The Plaintiffs' complaint alleges that by engaging in the
aforementioned scheme and by making misrepresentations of fact in connection
with the scheme, PCI and the other Defendants caused the Plaintiffs to suffer
harm. The Plaintiffs are seeking at least $250 million in compensatory damages
and $500 million in punitive damages from PCI and the other Defendants. PCI
has not yet filed its response to the complaint in the Al-Khatib lawsuit. PCI
believes that it has meritorious defenses to the Plaintiffs' allegations and
will vigorously defend the same. Due to the inherent uncertainties of the
judicial system, the Company is not able to predict the outcome of the
Al-Khatib lawsuit. If the Al-Khatib lawsuit is not resolved in the Company's
favor, it could have a material adverse effect on the Company's business,
financial condition and results of operations.
On September 20, 1996, Peter Lucina ("Lucina") filed a complaint against the
Company, Donald B. Gasgarth ("Gasgarth") and Patrick G. Jones ("Jones") in the
United States District Court for the Eastern District of Illinois. As of
December 3, 1997, the Company, Gasgarth and Jones entered into a settlement
agreement with Lucina which settled and disposed of Lucina's claims in
connection with this litigation, and this settlement was approved by the Court
on December 15, 1997. This settlement will not have a material adverse effect
on the Company's business, financial condition and results of operations.
DEPENDENCE ON SWITCHING FACILITIES AND COMPUTER TELEPHONY PLATFORMS; DAMAGE,
FAILURE AND DOWNTIME
The Company currently maintains switching facilities and computer telephony
platforms in Atlanta, Georgia, Dallas, Texas and London, England. The
Company's network service operations are dependent upon its ability to protect
the equipment and data at its switching facilities against damage that may be
caused by fire, power loss, technical failures, unauthorized intrusion,
natural disasters, sabotage and other similar events. The Company has taken
precautions to protect itself and its subscribers from events that could
interrupt delivery of the Company's services. These precautions include
physical security systems, uninterruptible power supplies, on-site power
generators, 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, and although the Company has not experienced any significant
downtime of its network in the last three years due to technical failures,
natural disasters or similar events, there can be no assurance that a fire,
25
<PAGE>
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's business,
financial condition and results of operations. 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 will continue to be available at reasonable prices or that such
insurance will 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; 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: (i) the unique nature of
strategic relationships into which the Company may enter in the future; (ii)
changes in operating expenses resulting from such strategic relationships and
other factors; (iii) the continued acceptance of the Company's licensing
program; (iv) the financial performance of the Company's licensees; (v) the
timing of new service announcements; (vi) market acceptance of new and
enhanced versions of the Company's services; (vii) potential acquisitions;
(viii) changes in legislation and regulation that may affect the competitive
environment for the Company's communications services; and (ix) general
economic and seasonal factors.
In the future, revenues from the Company's strategic relationships may
become an increasingly significant portion of the Company's total revenues.
Due to the unique nature of each strategic relationship, these relationships
may change the Company's mix of expenses relative to revenues.
Quarterly revenues are difficult to forecast because the market for the
Company's 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 will
likely be materially adversely affected.
RISK OF SOFTWARE FAILURES OR ERRORS
The software developed and utilized by the Company in providing its
services, including the Orchestrate software, may contain undetected errors.
Although the Company generally 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. However, there can be no assurance that the Company will
be able to maintain its technology errors and omissions insurance, that such
insurance will continue to be available at reasonable prices or will be
sufficient to compensate the Company for losses it experiences due to the
Company's inability to provide services to its subscribers.
DEPENDENCE UPON TELECOMMUNICATION PROVIDERS; NO GUARANTEED SUPPLY
The Company does not own a transmission network and, accordingly, depends on
WorldCom, LCI International Telecom Corp. ("LCI"), MCI, 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
26
<PAGE>
is dependent upon LECs 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 LECs 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.
The Company leases capacity on the WorldCom backbone to provide connectivity
and data transmission within the Company's private frame relay network. The
lease agreement expires in September 2000. The Company's hub equipment is
collocated at various WorldCom sites pursuant to co-location agreements that
are terminable by either party upon 30 days written notice. The Company's
ability to maintain network connectivity is dependent upon its access to
transmission facilities provided by WorldCom or an alternative provider. The
Company has no assurance that it will be able to continue such relationship
with WorldCom beyond the terms of its current agreements with WorldCom or that
it will be able to find an alternative provider on terms as favorable as those
offered by WorldCom or on any other terms. If the Company 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, financial condition and results of operations.
RELIANCE ON 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. Although the Company has not historically
experienced any significant difficulty in obtaining equipment required for its
operations and believes that viable alternative suppliers exist, no assurance
can be given that shortages will not arise in the future or that alternative
suppliers will be available. 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 business, financial condition
and results of operations.
REGULATION
Various regulatory factors affect the Company's financial performance and
its ability to compete. The Company's operating subsidiaries that provide
regulated long distance telecommunications services ("Operating Subsidiaries")
are subject to regulation by the FCC and by various state public service and
public utility commissions ("PUCs"), and are otherwise affected by regulatory
decisions, trends and policies made by these agencies. FCC rules currently
require interexchange carriers to permit resale of their transmission
services. FCC rules also require LECs to provide all interexchange carriers
with equal access to local exchange facilities for purposes of origination and
termination of long distance calls. If either or both of these requirements
were eliminated, the Company could be adversely affected. Moreover, the
underlying carriers that provide services to the Operating Subsidiaries or
that originate or terminate the Operating Subsidiaries' traffic may increase
rates or experience disruptions in service due to factors outside the
Company's control, which could cause the Operating Subsidiaries to experience
increases in rates for telecommunications services or disruptions in
transmitting their subscribers' long distance calls.
PCI, one of the Operating Subsidiaries, has made the requisite filings with
the FCC to provide interstate and international long distance services.
VoiceCom Systems, Inc. ("VCOM"), another Operating Subsidiary, is in the
process of making the requisite filings with the FCC to provide interstate and
international long distance services. There can be no assurance that the FCC
will approve VCOM's filings. Failure by VCOM to comply with FCC requirements
in connection with its provision of interstate and international long distance
services
27
<PAGE>
could have a material adverse effect on the Company's or on VCOM's business,
financial condition and results of operation.
In order to provide intrastate long distance service, the Operating
Subsidiaries generally are required to obtain certification from state PUCs,
to register with such state PUCs or to be found exempt from registration by
such state PUCs. Each of PCI and VCOM has either filed the applications
necessary to provide intrastate long distance telecommunications services
throughout the United States or is in the process of filing such applications.
To date, PCI is authorized to provide long distance telecommunications
services in 46 states and in the District of Columbia and is seeking
authorization to provide long distance telecommunications services in four
states. With the exception of three states, Colorado, Michigan and Arizona, in
which PCI's applications to provide operator service (i.e., "0+") are pending,
PCI is authorized to provide operator service in each state where PCI provides
long distance telecommunications service. VCOM, on the other hand, is
authorized to provide long distance telecommunications services in 13 states
and in the District of Columbia and is in the process of filing applications
for certificates to provide long distance telecommunications services in 37
states. The Operating Subsidiaries' facilities do not prevent subscribers from
using the facilities to make long distance calls in any state, including
states in which the Operating Subsidiaries currently are not authorized to
provide intrastate telecommunications services and operator services. There
can be no assurance that the Operating Subsidiaries' provision of long
distance telecommunications and operator services in states where the
Operating Subsidiaries are not authorized to provide such services will not
have a material adverse effect on the Company's or on the Operating
Subsidiaries' business, financial condition and results of operations.
The 1996 Act is intended to increase competition in the long distance and
local telecommunications markets. The 1996 Act opens competition in the local
services market and, at the same time, contains provisions intended to protect
consumers and businesses from unfair competition by incumbent LECs, including
the RBOCs. The 1996 Act allows RBOCs to provide long distance service outside
of their local service territories but bars them from immediately offering in-
region interLATA long distance services until certain conditions are
satisfied. An RBOC must apply to the FCC to provide in-region interLATA long
distance services and must satisfy a set of pro-competitive criteria intended
to ensure that RBOCs open their own local markets to competition before the
FCC will approve such application. The Company is unable to determine how the
FCC will rule on any such application. Moreover, as a result of the 1996 Act,
the Company may experience increased competition from others, including the
RBOCs. In addition, the Operating Subsidiaries may be subject to additional
regulatory requirements and fees, including universal service assessments and
payphone compensation surcharges resulting from the implementation of 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 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,
financial condition and results of operations. The Company's proposed
international activities also will be subject to regulation by various
international authorities and the inherent risk of unexpected changes in such
regulation.
RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION
A key component of the Premiere strategy is its planned expansion into
international markets. In 1996, the Company opened a POP site in London,
England which is currently being upgraded to a full switching facility
28
<PAGE>
and computer telephony platform. In addition, the Company intends to pursue
long term strategic relationships with European partners. Premiere 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 Canada, New Zealand and potentially other
countries in 1998. The Company currently has voice messaging service centers
in Canada, Australia, New Zealand and Puerto Rico, If international revenues
are not adequate to offset the expense of establishing and maintaining these
international operations, Premiere's business, financial condition and results
of operations could be materially adversely affected. To date, Premiere has
only limited experience in marketing and distributing its services
internationally. There can be no assurance that Premiere will be able to
successfully establish the proposed international Telnodes and Network
Managers or to market, sell and deliver its services in international markets.
In addition to the uncertainty as to Premiere'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. The Company denominates
foreign transactions in foreign currency and does not engage in hedging
transactions. The Company has not experienced any material losses from
fluctuations in currency exchange rates, but there can be no assurance that
the Company will not incur material losses due to currency exchange rate
fluctuations in the future.
Premiere recently entered into the Merger Agreement with Xpedite and
Acquisition Sub. See "Prospectus Summary--Recent Developments--Xpedite
Systems, Inc." and "--Risk That Xpedite Merger Will Not Close." A significant
portion of Xpedite's business is conducted outside the United States and a
significant portion of its revenues and expenses are derived in foreign
currencies. Accordingly, Xpedite's results of operations may be materially
affected by fluctuations in foreign currencies. Many aspects of Xpedite's
international operations and business expansion plans are subject to foreign
government regulations, currency fluctuations, political uncertainties and
differences in business practices. There can be no assurance that foreign
governments will not adopt regulations or take other actions that would have a
direct or indirect adverse impact on the business or market opportunities of
Xpedite within such governments' countries, including increased tariffs.
Furthermore, there can be no assurance that the political, cultural and
economic climate outside the United States will be favorable to Xpedite's
operations and growth strategy. As a result of the XSL Acquisition, a higher
proportion of Xpedite's business will be conducted outside the United States
and, accordingly, Xpedite may be subject, to a greater degree, to the
foregoing risks.
RISKS ASSOCIATED WITH EXPANSION OF ENHANCED FAX SERVICES
In the event the Xpedite Merger is consummated, Premiere intends to
accelerate growth of Enhanced Fax Services throughout the world by expansion
of Xpedite's proprietary private world-wide document distribution network (the
"Xpedite Network"), the integration of the Xpedite Network with Premiere's
private frame relay network and computer telephony platform and the
acquisition of entities engaged in the business of Enhanced Fax Services.
There can be no assurance that Premiere will be able to expand its ability to
provide services at a rate or in a manner satisfactory to meet the demands of
existing or future customers, including, but not limited to, increasing the
capacity of the Xpedite Network to process increasing amounts of document
traffic, integrating and increasing the capability of the Xpedite Network to
perform tasks required by Premiere's customers or identifying and establishing
alliances with new partners in order to enable Premiere to expand its network
in new geographic regions. Such inability may adversely affect customer
relationships and perceptions of Premiere in the markets in which it provides
services, which could have a material adverse effect on Premiere's business,
financial condition or results of operations. In addition, such growth will
involve substantial investments of capital, management and other resources.
There can be no assurance that Premiere will generate sufficient cash for
future growth of the Enhanced Fax Services business through earnings or
external financings, or that such external financings will be available on
terms acceptable to Premiere or that Premiere will be able to employ any such
resources in a manner that will result in accelerated growth.
29
<PAGE>
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 is designed to prohibit 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,
financial condition and results of operations.
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 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; Holding Company Structure."
30
<PAGE>
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.
31
<PAGE>
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.
The following table sets forth certain information as of the date of this
Prospectus concerning the principal amount of the Notes beneficially owned and
offered hereby by each Selling Securityholder and the number of shares of
Common Stock beneficially owned and offered hereby that may be offered from
time to time pursuant to this Prospectus. As of the date of this Prospectus,
and except as noted below, none of the Selling Securityholders has had a
material relationship with Premiere or any of its affiliates within the past
three years. The table has been prepared on the basis of information furnished
to the Company by the Trustee, the Depository Trust Company and by or on
behalf of the Selling Securityholders.
<TABLE>
<CAPTION>
NUMBER OF SHARES
PRINCIPAL AMOUNT OF OF COMMON STOCK
NOTES BENEFICIALLY --------------------
OWNED AND BENEFICIALLY OFFERED
NAME OFFERED HEREBY OWNED(1) HEREBY
- ---- ------------------- ------------ -------
<S> <C> <C> <C>
Donaldson, Lufkin & Jenrette
Securities Corporation............... 17,420,000 527,878 527,878
The TCW Group, Inc.(2)................ 10,340,000 397,433 313,333
CFW--C, L.P........................... 13,250,000 401,515 401,515
Associated Electric & Gas Insurance
Services, Ltd........................ 13,250,000 401,515 410,515
General Motors Employees Domestic
Group Trust.......................... 11,060,000 335,151 335,151
Shephard Investments International
Ltd.................................. 7,082,000 214,606 214,606
HBK Offshore Fund, Ltd................ 6,355,000 192,575 192,575
Bankers Trust International........... 6,200,000 187,878 187,878
HBK Finance, Ltd...................... 5,210,000 157,878 157,878
Societe Generale Secs. CP............. 5,000,000 151,515 151,515
FMR Corp.(3).......................... 5,000,000 629,315 151,515
J.P. Morgan & Co. Incorporated(4)..... 4,000,000 1,133,112 121,212
State of Oregon Equity................ 4,000,000 121,212 121,212
OCM Convertible Trust................. 3,600,000 109,090 109,090
Delaware State Employees Retirement
Fund ................................ 3,085,000 93,484 93,484
Phoenix Convertible Fund.............. 3,000,000 90,090 90,909
BancAmerica Robertson Stephens........ 2,840,000 86,060 86,060
State of Connecticut Combined
Investment Funds..................... 2,710,000 82,121 82,121
Chrysler Corporation Master Retirement
Trust................................ 2,500,000 75,757 75,757
Allstate Insurance Company............ 2,250,000 68,181 68,181
BNY Hamilton Equity Income Fund....... 2,000,000 60,606 60,606
Vanguard Convertible Securities Fund,
Inc.................................. 1,940,000 58,787 58,787
Natwest Securities Corporation........ 1,772,800 53,721 53,721
Delta Air Lines Master Trust.......... 1,750,000 53,030 53,030
HBK Securities, Ltd................... 1,460,000 44,242 44,242
Q Investments, L.P.................... 1,400,000 42,424 42,424
Lincoln National Convertible
Securities Fund...................... 1,345,000 40,757 40,757
Lincoln National Life Insurance....... 1,285,000 38,939 38,939
Hughes Aircraft Company Master
Retirement Trust..................... 1,135,000 34,393 34,393
Retail Clerks Pension Trust........... 1,000,000 30,303 30,303
Decleration of Trust for the Defined
Benefit Plan of ICI American
Holdings, Inc........................ 965,000 29,242 29,242
State Employees' Retirement Fund of
the State of Delaware................ 870,000 26,363 26,363
Thermo Electron Balanced Investment
Fund................................. 800,000 24,242 24,242
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES
PRINCIPAL AMOUNT OF OF COMMON STOCK
NOTES BENEFICIALLY --------------------
OWNED AND BENEFICIALLY OFFERED
NAME OFFERED HEREBY OWNED(1) HEREBY
- ---- ------------------- ------------ -------
<S> <C> <C> <C>
Phoenix Home Life General Account..... 700,000 21,212 21,212
Merril Lynch Convertible Fund, Inc.... 650,000 19,696 19,696
Decleration of Trust for the Defined
Benefit Plan of
Zeneca Holdings, Inc................. 640,000 19,393 19,393
The J. W. McConnell Family Foundation. 605,000 18,333 18,333
R2 Investments, LDC................... 600,000 18,181 18,181
Forest Fulorum Fund, L.P.............. 530,000 16,060 16,060
Lazard Freres & Co.................... 500,000 15,151 15,151
Merril Lynch World Income Fund, Inc... 500,000 15,151 15,151
St. Albans Partners................... 500,000 15,151 15,151
Yield Strategies Fund II, L.P......... 500,000 15,151 15,151
Bancroft Convertible Fund, Inc........ 500,000 15,151 15,151
Ellsworth Convertible Growth & Income
Fund................................. 500,000 15,151 15,151
Stark International................... 500,000 15,151 15,151
J. M. Hull Associates, L.P............ 500,000 15,151 15,151
Forest Global Convertible Fund Series
A-5.................................. 400,000 12,121 12,121
Starvest Discretionary................ 400,000 12,121 12,121
Weirton Trust......................... 400,000 12,121 12,121
Hillside Capital Incorporated......... 280,000 8,484 8,484
OCM Convertible Limited Partnership... 250,000 7,575 7,575
Christian Science Trustees for Gifts &
Endowments........................... 245,000 7,424 7,424
First Church of Christian Scientist--
Endowment............................ 245,000 7,424 7,424
Partner Reinsurance Company, Ltd...... 240,000 7,272 7,272
Kapiolani Medical Systems............. 200,000 6,060 6,060
Walker Art Center..................... 155,000 4,696 4,696
Retirement Plan for Pilots of Hawaiian
Airlines............................. 100,000 3,030 3,030
UNC Foundation, Inc................... 100,000 3,030 3,030
Westcore Growth & Income Fund......... 100,000 3,030 3,030
Hawaiian Airlines Pension Plan--IAM... 75,000 2,272 2,272
Summer Hill Global Partners L.P....... 75,000 2,272 2,272
LLT Limited........................... 70,000 2,121 2,121
United National Insurance............. 65,000 1,969 1,969
Gilbert J. Mueller FBO Cornelia
Gibson............................... 40,000 1,212 1,212
Hawaiian Airlines Pension for Salaried
Employees............................ 15,000 454 454
Jamestown College Endowment Fund...... 10,000 303 303
</TABLE>
- --------
(1) Includes the Conversion Shares issuable upon conversion of the Notes.
Assumes conversion of the full amount of Notes held by such holder at the
initial conversion price of 33.00 per share; such conversion price is
subject to adjustment as described under "Description of the Notes--
Conversion." Accordingly, the number of shares of Common Stock issuable
upon conversion of the Notes may increase or decrease from time to time.
Under the terms of the Indenture, fractional shares will not be issued
upon conversion of the Notes; cash will be paid in lieu of fractional
shares, if any.
(2) Includes 84,100 shares of Common Stock beneficially owned by the Selling
Securityholder in addition to the Conversion Shares.
(3) Includes 477,800 shares of Common Stock beneficially owned by the Selling
Securityholder in addition to the Conversion Shares. This number includes
475,800 shares beneficially owned by Fidelity Management & Research
Company, as a result of its serving as investment adviser to various
investment companies registered under Section 8 of the Investment Company
Act of 1940 and serving as investment adviser to certain other funds; and
2,000 shares beneficially owned by Fidelity Management Trust Company, as a
result of its serving as trustee or managing agent for various private
investment accounts.
(4) The Selling Securityholder holds the Notes in a fiduciary capacity through
its various subsidiaries, including J.P. Morgan Investment Management,
Inc. and Morgan Guaranty Trust Company of New York. The Selling
Shareholder has sole power to dispose of the Notes. Includes 1,011,900
shares of Common Stock beneficially owned by the Selling Securityholder in
addition to the Conversion Shares.
33
<PAGE>
The Selling Securityholders identified above may have sold, transferred or
otherwise disposed of, in transactions exempt from the registration
requirements of the Securities Act, all or a portion of their Notes since the
date on which the information in the preceding table is presented. Information
concerning the Selling Securityholders may change from time to time and any
such changed information will be set forth in supplements to this Prospectus
if and when necessary. Because the Selling Securityholders may offer all or
some of the Notes that they hold and/or Conversion Shares pursuant to this
Offering, no estimate can be given as to the amount of the Notes or Conversion
Shares that will be held by the Selling Securityholders upon the termination
of this offering. See "Plan of Distribution."
Information concerning the Selling Securityholders may change from time to
time. As of the date of this Prospectus, the aggregate principal amount of
Notes outstanding is $172,500,000.
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.
34
<PAGE>
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 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
35
<PAGE>
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 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
36
<PAGE>
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 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
37
<PAGE>
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
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.
38
<PAGE>
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):
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2000............................................................ 103.286%
2001............................................................ 102.464%
2002............................................................ 101.643%
2003............................................................ 100.821%
</TABLE>
and 100% at July 1, 2004.
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
39
<PAGE>
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
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
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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).
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.
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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 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
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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.
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 September 30, 1997, the Company had approximately $24.3 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 September 30, 1997,
there was also outstanding approximately $24.3 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.
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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.
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.
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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.
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 Statement of which this Prospectus
forms a part has been filed with the Commission pursuant to the Registration
Rights Agreement.
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
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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
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
securityholder 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).
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.
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
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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, as amended, (the "Articles"), and
Amended and Restated Bylaws (the "Bylaws"), and by the provisions of
applicable law.
COMMON STOCK
As of December 15, 1997, there were 33,960,277 shares of Common Stock
outstanding (including 402,748 Exchangeable Shares), held of record by
approximately 450 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 the
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 402,748 Exchangeable Shares. The Exchangeable Shares may
be converted at any time into a like number of 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 10,641,494 shares of Common Stock and their
permitted transferees 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 these
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.
Although these contractual rights remain in force, the shares subject to
such registration rights may be freely disposed of 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, the Voice-Tel Entities and VoiceCom. 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 and VoiceCom 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 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.
WorldCom has a one-time right to require the Company to file a registration
statement under the Securities Act, provided that such request is made: (i)
between November 13, 1998 and November 13, 1999; or (ii) within 60 days from
the date of a change in control of Premiere, the termination of either Boland
T. Jones or D. Gregory Smith as executive officers or the termination of the
strategic alliance with WorldCom if the events described in
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clause (ii) occur prior to November 13, 1999. WorldCom currently has the right
to require the Company to file a registration statement under the Securities
Act as a result of Mr. Smith's resignation. See "Prospectus Summary--Recent
Developments--Additions and Changes to Management." 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 demand 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. A registration statement
has been filed pursuant to the exercise of such rights by the Voice-Tel
holders. In addition, the Company has agreed to file a shelf registration
statement (the "Voice-Tel Shelf") as soon as practicable following December
15, 1997 to include any shares of Common Stock then held by the former owners
of the Voice-Tel Entities. These shareholders may include up to approximately
6.4 million shares in the Voice-Tel Shelf. The Company has exercised certain
contractual rights to postpone this requirement for up to 90 days.
The shares of Premiere Common Stock to be issued in connection with the
Xpedite Merger will be registered under the Securities Act and, unless issued
to affiliates of Xpedite as of the date of the Xpedite stockholders meeting to
consider the Xpedite Merger, will be freely transferable without restriction
or limitation under the Securities Act.
For a period of three months commencing 30 days after financial results
covering at least 30 days of combined operations of Premiere and Xpedite have
been published, each person who is precluded by the Securities Act from
selling or disposing of all of their shares of Premiere Common Stock received
in the Xpedite Merger within one calendar quarter (a "Large Stockholder") will
have a one-time right to require Premiere to file a registration statement
under the Securities Act relating to all or part of their registrable
securities (an "Xpedite Demand Registration"). Premiere is obligated to use
its commercially reasonable efforts to effect an Xpedite Demand Registration
as soon as reasonably practical after the request is made, except that
Premiere has the right, under certain circumstances, to delay the effective
date of a registration statement or any sales thereunder for a period not to
exceed 120 days from the date of the request for registration. In addition,
Premiere is not obligated to effect an Xpedite Demand Registration (i) for
less than one million shares or (ii) within three months of a Large
Stockholder selling any registrable securities pursuant to an Xpedite
Piggyback Registration (defined below). Unless Premiere shall otherwise
consent, any offering pursuant to an Xpedite Demand Registration shall be
underwritten and Premiere shall select the underwriters and any additional
investment bankers to be used.
If Premiere proposes to file a registration statement under the Securities
Act with respect to an offering for Premiere's own account or for the account
of any holders of Premiere Common Stock other than the Large Stockholders, any
Large Stockholder may request registration under the Securities Act of all or
part of its Registrable Securities on the same terms and conditions as
Premiere or such other holders of Premiere Common Stock (an "Xpedite Piggyback
Registration"). In the case of an Xpedite Piggyback Registration, Premiere has
the right to terminate or withdraw any registration undertaken by it prior to
the effectiveness of such registration whether or not any Large Stockholder
has elected to include registrable securities in such registration.
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 registration rights holders' securities under
registrations, except for underwriting discounts and commissions, and in
certain cases the fees and expenses of the registration rights holders'
counsel and filing fees related to the registration statement. The Company
also is obligated to indemnify the registration rights holders whose shares
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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 registration rights 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
registration rights 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.
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
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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 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 in Atlanta, Georgia.
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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 allocable 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
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 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
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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. Legislation enacted August 5, 1997
reduced to 20% the maximum rate of tax on long-term capital gains on most
assets held by an individual more than 18 months. Gain on most capital assets
held by an individual more than one year and up to 18 months is subject to tax
at a maximum rate of 28%.
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.
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PLAN OF DISTRIBUTION
Pursuant to a Registration Rights Agreement, 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 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 Notes and/or Conversion Shares 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 Notes or Conversion Shares 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.
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.
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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 has been passed upon for the Company by Alston & Bird
LLP, Atlanta, Georgia, counsel to the Company.
EXPERTS
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 November
13, 1997 and the financial statements of VTE, VTN and the Significant
Franchisees 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 filed
with the Commission on 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 filed with the Commission on 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.
The consolidated financial statements of Xpedite as of December 31, 1995 and
1996, and for the years ended December 31, 1994, 1995 and 1996 included in the
Company's Current Report on Form 8-K dated November 13, 1997, incorporated by
reference in this prospectus, have been audited by Ernst & Young LLP,
independent auditors, as indicated in their report with respect thereto, and
is incorporated herein in reliance upon the authority of said firm as experts
in accounting and auditing.
The consolidated financial statements of XSL as of December 31, 1995 and
1996, and for the years ended December 31, 1994, 1995 and 1996 included in the
Company's Current Report on Form 8-K dated November 13, 1997, have been so
incorporated by reference in this prospectus in reliance on the report of
Price Waterhouse, independent accountants, given on the authority of said firm
as experts in accounting and auditing.
56
<PAGE>
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- -------------------------------------------------------------------------------
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 IN-
CORPORATED BY REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFOR-
MATION 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 SOLIC-
ITATION 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 INFORMA-
TION CONTAINED IN THIS PROSPECTUS OR ANY DOCUMENT INCORPORATED BY REFERENCE
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF OR THEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 3
Incorporation of Certain Documents by Reference............................ 3
Forward Looking Statements................................................. 4
Prospectus Summary......................................................... 5
The Offering............................................................... 9
Ratio of Earnings to Fixed Charges......................................... 11
Risk Factors............................................................... 12
Use of Proceeds............................................................ 31
Selling Securityholders.................................................... 32
Description of Notes....................................................... 34
Description of Capital Stock............................................... 48
Certain Federal Income Tax Considerations.................................. 53
Plan of Distribution....................................................... 55
Legal Matters.............................................................. 56
Experts.................................................................... 56
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$172,500,000
PREMIER TECHNOLOGIES, INC.
5 3/4% CONVERTIBLE SUBORDINATED NOTES DUE 2004
----------------
PROSPECTUS
----------------
, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<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.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............... $52,273
Printing Expenses................................................. 5,000
Accountants' Fees and Expenses.................................... 10,000
Legal Fees and Expenses........................................... 20,000
Miscellaneous..................................................... 2,727
-------
Total........................................................... $90,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Georgia Business Corporation Code permits a corporation to eliminate or
limit the personal liability of a director to the corporation or its
shareholders for monetary damages for breach of duty of care or other duty as
a director, provided that no provision shall eliminate or limit the liability
of a director: (i) for an appropriation, in violation of his duties, of any
business opportunity of the corporation; (ii) for acts or omissions which
involve intentional misconduct or a knowing violation of law; (iii) for
unlawful corporate distributions; or (iv) for any transaction from which the
director received an improper personal benefit. This provision related only to
breaches of duty by directors in their capacity as directors (and not in any
other corporate capacity, such as officers) and limits liability only for
breaches of fiduciary duties under Georgia corporate law (and not for
violation of other laws, such as the federal securities laws). The Company's
Articles of Incorporation, as amended, exonerate the Company's directors from
monetary liability to the extent described above.
In addition to such rights as may be provided by law, the Company's Bylaws
provide broad indemnification rights to the Company's directors and such
officers, employees and agents as may be selected by such directors, with
respect to various civil and criminal liabilities and losses which may be
incurred by such director, officer, agent or employee pursuant to any pending
or threatened litigation or other proceedings, except that such
indemnification does not apply in the same situations described above with
respect to the exculpation from liability of the Company's directors. The
Company is also obligated to reimburse such directors and other parties for
expenses, including legal fees, court costs and expert witness fees, incurred
by such person in defending against any such liabilities and losses, as long
as such person in good faith believes that he or she acted in accordance with
the applicable standard of conduct with respect to the underlying accusations
giving rise to such liabilities or losses and agrees to repay to the Company
any advances made under the Bylaws. Any amendment or other modification to the
Bylaws which limits or otherwise adversely affects the rights to
indemnification currently provided therein shall apply only to proceedings
based upon actions and events occurring after such amendment and delivery of
notice thereof to the indemnified parties. Such amendments can only be made
upon the affirmative vote of (i) the holders of at least 75% of the shares
entitled to vote to alter, amend or repeal the provisions of the Bylaws or
(ii) a majority of the Board of Directors present at the meeting at which the
votes are taken.
The Company has entered into separate indemnification agreements with each
of its directors and certain of its officers and employees, whereby the
Company agreed, among other things, to provide for indemnification and
advancement of expenses in a manner and subject to terms and conditions
similar to those set forth in the Bylaws. These agreements may not be
abrogated by action of the shareholders. In addition, the Company holds
II-1
<PAGE>
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.
The Company believes that the above protections are necessary in order 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.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
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).
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).
5.1 Opinion of Alston & Bird.*
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
12.1 Statement of computation of ratios.*
23.1 Consent of Arthur Andersen LLP.*
23.2 Consent of Alston & Bird (Included in Exhibits 5.1 and 8.1 above).*
23.3 Consent of Ernst & Young LLP*
23.4 Consent of Price Waterhouse*
24.1 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.*
</TABLE>
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* Previously filed.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any required by section 10(a)(3) of the Securities Act
of 1933 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in the volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the Effective Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this Section
do not apply if the Registration Statement is on Form S-3, Form S-8 or Form
F-3 and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with
or furnished to the Commission by the registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
II-3
<PAGE>
(h) 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-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 AMENDMENT NO. 2
TO REGISTRATION STATEMENT (NO. 333-36557) TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF ATLANTA, AND STATE OF
GEORGIA, ON DECEMBER 23, 1997.
Premiere Technologies, Inc.
/s/ Boland T. Jones
By: _________________________________
BOLAND T. JONES
President and Chief Executive
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 2 TO REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS
IN THE CAPACITIES INDICATED ON DECEMBER 23, 1997.
SIGNATURE TITLE
/s/ Boland T. Jones Chairman of the Board of Directors
- ------------------------------------- and Chief Executive Officer
BOLAND T. JONES (Principal Executive Officer)
/s/ Patrick G. Jones Senior Vice President of Finance and
- ------------------------------------- Legal and Secretary (Principal
PATRICK G. JONES Financial and Accounting 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.
/s/ Patrick G. Jones
*By: ________________________________
PATRICK G. JONES, ATTORNEY-IN-FACT
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER EXHIBIT DESCRIPTION NO.
------- ------------------- ----
<C> <S> <C>
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).
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).
5.1 Opinion of Alston & Bird.*
12.1 Statement of computation of ratios.*
23.1 Consent of Arthur Andersen LLP.*
23.2 Consent of Alston & Bird (Included in Exhibit 5.1 above).*
23.3 Consent of Ernst & Young LLP.*
23.4 Consent of Price Waterhouse.*
24.1 Powers of Attorney.*
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.*
</TABLE>
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* Previously filed.
