<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ TO __________.
Commission File Number:
0-27778
Premiere Technologies, Inc.
(Exact name of registrant as specified in its charter)
Georgia 59-3074176
(State or other jurisdiction of (I.R.S. Employer Identi-
incorporation or organization) fication No.)
3399 Peachtree Road NE
The Lenox Building, Suite 400
Atlanta, Georgia 30326
(Address of principal executive offices, including zip code)
(404) 262-8400
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
(1) Yes X No (2) Yes X No .
---------- ------- ------- -----------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at August 14, 1997
- - ------------------------------ -------------------------------
Common Stock, $0.01 par value 31,652,636 shares
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
PAGE
----
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Consolidated Balance Sheets as of 3
December 31, 1996 and June 30, 1997
Condensed Consolidated Statements of Operations for the
Three and Six Months ended June 30, 1996 and 1997 5
Condensed Consolidated Statements of Cash Flows for the
Six Months ended June 30, 1996 and 1997 6
Notes to Condensed Consolidated Financial Statements 7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3 Quantitative and Qualitative Disclosures About Market Risk 15
PART II OTHER INFORMATION
Item 1 Legal Proceedings 16
Item 2 Changes in Securities 17
Item 3 Defaults Upon Senior Securities 18
Item 4 Submission of Matters to a Vote of Security Holders 18
Item 5 Other Information 18
Item 6 Exhibits and Reports on Form 8-K 19
SIGNATURES 29
EXHIBITS INDEX 30
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND JUNE 30, 1997
<TABLE>
<CAPTION>
December 31, 1996 June 30, 1997
-------------------------- --------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 12,429,115 $147,454,890
Investments 67,333,688 31,795,597
Accounts receivable (less allowance for doubtful
accounts of $1,139,992 and $1,533,272, respectively) 6,605,650 10,844,558
Prepaid expenses and other 8,613,900 5,737,097
Deferred tax asset, net 4,246,938 14,153,592
-------------------------- --------------------------
Total current assets 99,229,291 209,985,734
-------------------------- --------------------------
PROPERTY AND EQUIPMENT, NET 40,912,180 38,407,008
-------------------------- --------------------------
OTHER ASSETS:
Deferred tax asset 7,566,401 7,566,401
Strategic alliance contract intangible, net 29,814,143 29,203,211
Goodwill, net 453,874 15,205,447
Other 6,430,553 12,867,712
-------------------------- --------------------------
$184,406,442 $313,235,513
========================== ==========================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial balance sheets.
3
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND JUNE 30, 1997
<TABLE>
<CAPTION>
December 31, 1996 June 30, 1997
-------------------------- --------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 11,442,832 $ 9,312,024
Other accrued expenses 18,815,377 18,624,585
Unearned revenue 452,618 419,563
Current maturities of long term debt 14,871,650 5,892,194
Accrued restructuring and other special charges 0 23,899,346
-------------------------- --------------------------
Total current liabilities 45,582,477 58,147,712
-------------------------- --------------------------
LONG TERM LIABILITIES:
Convertible subordinated notes, net 0 145,105,109
Long term debt 25,378,750 8,774,112
Deferred tax liability 1,328,588 4,915,932
Other accrued liabilities 1,763,954 511,200
-------------------------- --------------------------
Total long term liabilities 28,471,292 159,306,353
-------------------------- --------------------------
COMMITMENTS AND CONTINGENCIES 0 1,500,000
SHAREHOLDERS' EQUITY
Common Stock, $0.01 par value; 150,000,000 shares authorized,
31,064,579 and 31,645,386 shares issued and outstanding,
respectively 310,646 316,459
Additional paid-in capital 133,072,546 146,468,299
Cumulative translation adjustment (30,730) (2,233)
Accumulated deficit (22,999,789) (52,501,077)
-------------------------- --------------------------
Total shareholders' equity 110,352,673 94,281,448
-------------------------- --------------------------
$184,406,442 $313,235,513
========================== ==========================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial balance sheets.
4
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1997
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------------------- -----------------------------
June 30, June 30, June 30, June 30,
1996 1997 1996 1997
-------------------------------- -----------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Subscriber services $31,170,732 $ 37,461,647 $59,559,956 $ 73,007,667
License fees 2,788,868 6,225,635 5,085,141 12,403,770
Other revenues 360,237 214,649 952,770 524,069
------------- ------------- ----------- ------------
Total revenues 34,319,837 43,901,931 65,597,867 85,935,506
COST OF SERVICES 8,059,338 10,700,588 15,311,849 20,749,750
------------- ------------- ----------- ------------
GROSS MARGIN 26,260,499 33,201,343 50,286,018 65,185,756
------------- ------------- ----------- ------------
OPERATING EXPENSES:
Selling, general and administrative 18,865,425 20,427,164 36,936,457 39,516,972
Depreciation and amortization 2,464,076 3,786,636 5,211,123 6,941,342
Restructuring and other special charges 0 45,423,000 0 45,423,000
Accrued settlement cost 0 1,500,000 0 1,500,000
------------- ------------- ----------- ------------
Total operating expenses 21,329,501 71,136,800 42,147,580 93,381,314
------------- ------------- ----------- ------------
OPERATING INCOME (LOSS) 4,930,998 (37,935,457) 8,138,438 (28,195,558)
------------- ------------- ----------- ------------
OTHER INCOME (EXPENSE):
Interest expense, net (49,854) (51,573) (742,659) (259,161)
Other, net (76,085) 78,049 (146,966) 101,215
------------- ------------- ----------- ------------
Total other income (expense) (125,939) 26,476 (889,625) (157,946)
------------- ------------- ----------- ------------
NET INCOME (LOSS) BEFORE INCOME TAXES 4,805,059 (37,908,981) 7,248,813 (28,353,504)
PROVISION FOR (BENEFIT FROM) INCOME TAXES 645,251 (6,589,403) 1,139,612 (4,748,199)
------------- ------------- ----------- ------------
NET INCOME (LOSS) $ 4,159,808 $(31,319,578) $ 6,109,201 $(23,605,305)
============= ============= =========== ============
PRO FORMA INCOME (LOSS) ATTRIBUTABLE TO COMMON
SHAREHOLDERS FOR PRIMARY EARNINGS PER SHARE $ 4,159,808 $(30,680,824) $ 6,109,201 $(22,331,743)
============= ============= =========== ============
PRO FORMA INCOME (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE (Note 5) $ 0.14 $ (0.92) $ 0.22 $ (0.67)
============= ============= =========== ============
SHARES USED IN COMPUTING EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE: Primary 29,955,470 33,417,242 28,161,969 33,156,250
============= ============= =========== ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 6,109,201 $(23,605,305)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 5,211,123 6,941,342
Deferred taxes, net 683,273 (6,476,520)
Restructuring and other special charges 0 45,423,000
Accrued settlement cost 0 1,500,000
Payments for restructuring and other special charges 0 (12,807,654)
Changes in assets and liabilities:
Accounts receivable, net (1,125,927) (4,040,961)
Prepaid expenses and other (19,878) (1,680,514)
Accounts payable and accrued expenses 1,646,846 (2,734,633)
------------ ------------
Total adjustments 6,395,437 26,124,060
------------ ------------
Net cash provided by operating activities 12,504,638 2,518,755
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (7,456,527) (11,160,852)
(Purchase) redemption of investments, net (75,327,117) 35,538,091
Cash paid for acquired companies 0 (13,679,154)
Other 240,922 0
------------ ------------
Net cash (used in) provided by investing activities (82,542,722) 10,698,085
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net 74,617,048 0
Payments under borrowing arrangements (3,208,847) (15,794,893)
Proceeds from issuance of convertible subordinated notes, net 0 145,105,109
Payment of dividends and other equity transactions (2,183,856) (7,736,710)
Proceeds from payments of subscriptions receivable 2,436,703 0
Proceeds from exercise of stock options 24,040 235,429
------------ ------------
Net cash provided by financing activities 71,685,088 121,808,935
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,647,004 135,025,775
CASH AND CASH EQUIVALENTS, beginning of period 5,779,179 12,429,115
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 7,426,183 $147,454,890
============ ============
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest $ 951,979 $ 939,311
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
6
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements are unaudited and
have been prepared by the management of Premiere Technologies, Inc. (the
"Company") in accordance with the rules and regulations of the Securities and
Exchange Commission ("SEC"). Accordingly, certain information and footnote
disclosures usually found in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted. In the
opinion of the management of the Company, all adjustments (consisting only of
normal recurring adjustments) considered necessary for fair presentation of the
condensed consolidated financial statements have been included, and the
accompanying condensed consolidated financial statements present fairly the
financial position and the results of operations for the interim periods
presented. The condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and related footnotes
included in the Company's Annual Report on Form 10-K, as filed with the SEC on
March 27, 1997, and in various filings made by the Company in Current Reports on
Form 8-K, as filed with the SEC in 1997.
2. RESTRUCTURING AND OTHER SPECIAL CHARGES
In connection with the Voice-Tel Acquisitions (as defined below), the Company
recorded restructuring and other special charges of $45,423,000 during the
quarter ended June 30, 1997 as follows:
<TABLE>
<S> <C>
Transaction costs $16,599,000
Severance and related costs 9,514,000
Asset impairments 8,601,000
Other exit costs 10,709,000
-----------
$45,423,000
===========
</TABLE>
Transaction costs are comprised of professional fees and other costs directly
associated with the Voice-Tel Acquisitions. Such costs were expensed as
required by the pooling of interests method of accounting. Charges for
severance, asset impairments and other exit costs result from management's plan
to restructure the operations of the Voice-Tel Entities (as defined below) under
a consolidated business group model and discontinue franchise operations. This
initiative involves substantial reduction in the administrative workforce,
abandoning duplicate facilities and assets and other costs necessary to
discontinue redundant business activities performed in each of the former
franchise businesses. Cash expenditures of $12,807,654 have been incurred
through June 30, 1997. Such expenditures consisted of $1,200,637 of severance
and related costs associated with the termination of 115 employees and
$11,607,017 of transaction and other exit costs.
3. VOICE-TEL ACQUISITIONS
Overview of Transactions
On June 12, 1997, the Company completed the acquisitions of Voice-Tel
Enterprises, Inc. ("VTE"), its affiliate Voice-Tel Network Limited Partnership
("VTN") and substantially all of the approximately 100 independently owned
Voice-Tel franchise businesses ("Franchisees") (collectively, the "Voice-Tel
Entities" and "Voice-Tel Acquisitions"). In connection with the acquisitions,
the Company issued approximately 7.4 million shares of its common stock, paid
approximately $16.2 million in cash and assumed approximately $21.3 in
indebtedness, net of cash acquired.
Pooling of Interests Transactions
Most of the transactions were structured as tax-free mergers or share exchanges
and were accounted for under the pooling of interests method of accounting.
7
<PAGE>
Accordingly, the financial results of the Company have been restated for all
periods presented to include the results of the Voice-Tel Acquisitions accounted
for using this method. Combined and separate results of the Company and certain
Voice-Tel Entities for periods preceding acquisitions accounted for using the
pooling of interests method of accounting are included in various filings made
by the Company in current reports on Form 8-K, as filed with the SEC in 1997,
and are incorporated by reference herein.
Purchase Transactions
The Company purchased 16 of the Voice-Tel Entities for an aggregate $13.9
million in cash and approximately 94,000 shares of its common stock.
Excess purchase price over the fair value of net assets acquired of $14.8
million has been recorded as goodwill in accordance with the purchase method of
accounting and is being amortized on a straight-line basis over 40 years. The
following unaudited pro forma presentation reflects these acquisitions as though
they occurred at the beginning of each period presented. Such information
reflects adjustments to reflect additional goodwill amortization and reduced
interest expense.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------------------- --------------------------------
June 30, 1996 June 30, 1997 June 30, 1996 June 30, 1997
------------- ------------- ------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues $35,443,595 $ 45,081,887 $67,845,384 $ 88,242,113
=========== ============ =========== ============
Net income (loss) $ 3,892,019 $(30,992,237) $ 5,573,623 $(22,909,501)
=========== ============ =========== ============
Earnings per share $ 0.13 $ (0.93) $ 0.20 $ (0.69)
=========== ============ =========== ============
</TABLE>
4. ISSUANCE OF CONVERTIBLE SUBORDINATED NOTES
On June 30, 1997, the Company sold $150,000,000 of 5-3/4% convertible
subordinated notes due 2004 (the "Notes"). On July 30, 1997, the Company sold
an additional $22,500,000 of 5-3/4% convertible subordinated notes due 2004 (the
"Option Notes", and together with the Notes, the "Convertible Notes") pursuant
to the exercise of an over-allotment option. The total offering price of the
Notes was $150,000,000 with a discount to the underwriters of the Notes of 3.0%,
and the total offering price of the Option Notes was $22,500,000 with a discount
to the underwriters of the Option Notes of 3.0%. The Notes and the Option Notes,
unless previously redeemed or repurchased, are convertible at the option of the
holder at any time through the close of business on the final maturity date into
shares of common stock, at a conversion price of $33.00 per share, subject to
adjustment in certain events.
5. EARNINGS PER SHARE
Primary net income per share is computed under the modified treasury stock
method using the weighted average number of shares of common stock and dilutive
common stock equivalent shares ("CSEs") from stock options outstanding during
the period. Under the modified treasury stock method, proceeds from the
exercise of CSEs consist of the exercise price of the CSEs, as well as the
related income tax benefit to the Company. CSE proceeds are assumed to be
applied first to repurchase up to 20% of the Company's common stock, and then to
repay outstanding long term indebtedness. Any remaining CSE proceeds are assumed
to be invested in U.S. Government securities. The pro forma net interest
adjustment to
8
<PAGE>
primary net income per share under the modified treasury stock method was $0.0
and $638,754 for the three months ended June 30, 1996 and 1997, respectively,
and $0.0 and $1,273,562 for the six months ended June 30, 1996 and 1997,
respectively.
Fully diluted net income per common and common equivalent shares is computed by
including convertible instruments which are not CSEs in the weighted average per
share calculation (using the modified treasury stock method) at period-end
market value of stock prices. To the extent that the convertible securities are
anti-dilutive, they are not included in the fully diluted net income per common
and common equivalent shares. To the extent that period-end market value of
stock prices is less than the average market value for the period, then the
average market value is used for fully diluted net income per common and common
equivalent shares. For all periods presented, the inclusion of convertible
securities in the fully diluted calculation are anti-dilutive. Accordingly,
fully diluted earnings per share data is not presented.
6. COMMITMENTS AND CONTINGENCIES
On January 30, 1996, Eric Bott, E.B. Elliott and Cost Recovery Systems, Inc.
("CRS") filed a complaint against the Company's wholly-owned subsidiary,
Premiere Communications, Inc. ("PCI" or "Premiere Communications") and the
Company's President, Boland T. Jones, in the Superior Court of Fulton County,
Georgia. In the complaint, the plaintiffs allege that: (i) Mr. Bott, a former
employee, is entitled to options to purchase 10,000 shares of common stock of
PCI at $5.00 per share; (ii) Mr. Bott is entitled to a commission equal to 10%
of all revenues that have been and in the future are collected as a result of
the Company's licensing arrangement with one of its customers; (iii) Mr. Bott is
entitled to $7,000 for consulting work allegedly performed for the Company;
(iv) Mr. Bott is entitled to unspecified damages resulting from his sale in June
1995 of 750 shares of common stock of PCI to an unrelated third party for an
unspecified amount; (v) Mr. Elliott or CRS, an affiliate of Mr. Elliott, is
entitled to options to purchase 5,000 or 10,000 shares of common stock of PCI at
an unspecified exercise price arising out of work allegedly performed by CRS for
the Company; and (vi) CRS is owed an unspecified amount of commissions from the
Company relating to sales of the Company's telecommunications services by CRS.
Subsequent to the filing of the complaint, the plaintiffs dismissed without
prejudice count (iv) above. The plaintiffs also seek attorneys' fees and
unspecified amounts of punitive damages. The Company filed an answer and
counterclaim denying all allegations of the complaint and asserting various
affirmative defenses. Assuming that the allegations concerning stock options and
stock sales relate to the common stock of Premiere Technologies, Inc., rather
than PCI, as alleged, the Company believes that the share numbers and exercise
prices have not been adjusted for the 24-to-1 stock split effected in December
1995. In this regard, the plaintiffs filed a motion to add the Company as a
defendant and to amend their complaint to assert their claims against the
Company. Adjusting the share numbers and exercise prices of these options to
reflect the 24-to-1 stock split, the plaintiffs' claims relate to options to
purchase up to a total of 480,000 shares of common stock and the alleged
exercise price of $5.00 per share with regard to a portion of such options
becomes approximately $0.21 per share. The plaintiffs' motion was denied on
December 17, 1996, and the plaintiffs dismissed the case without prejudice on
January 13, 1997. The plaintiffs filed a new complaint against PCI and the
Company on January 21, 1997 setting forth the same allegations as described
above, except that Mr. Bott no longer alleges that he is entitled to unspecified
damages resulting from his sale in June 1995 of 750 shares of common stock of
PCI, and that Mr. Bott and Mr. Elliott allege that the stock options relate to
the common stock of Premiere Technologies, Inc. The Company and PCI have filed
an answer and counterclaim denying all allegations of the complaint and
asserting various affirmative defenses and a motion to dismiss the counts of the
complaint against the Company. The Company believes it has meritorious defenses
to the plaintiffs' allegations, but due to the inherent uncertainties of the
litigation process, the Company is unable to predict the outcome of this
litigation. If the outcome of this litigation is adverse to the Company, it
could have a material adverse effect on the Company's business, operating
results or financial condition.
On August 6, 1996, Communications Network Corporation ("CNC"), a licensing
customer of the Company, was placed into bankruptcy under Chapter 11 of the
United States Bankruptcy Code (the "Bankruptcy Code"). On August 23, 1996, CNC
filed a motion to intervene in a separate lawsuit brought by a CNC creditor in
the United States District Court for the Southern District of New York (the
"Court")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
9
<PAGE>
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 recently reached a tentative
agreement of all issues between the parties, 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 Court. In this
regard, the Company has established a reserve in the second quarter of 1997 for
anticipated legal expenses and settlement costs in an amount of $1.5 million.
Due to the inherent uncertainties of the judicial system, the Company is unable
to predict with certainty whether the settlement will be approved by the Court.
If the settlement is not approved and the trustee successfully pursues possible
litigation against the Company, it could have a material adverse effect on the
Company's business, operating results or financial condition.
On September 20, 1996, Peter Lucina ("Lucina") filed a complaint against
the Company, Donald B. Gasgarth ("Gasgarth") and Patrick G. Jones ("Jones") in
the United States District Court for the Eastern District of Illinois. In the
complaint, Lucina alleges, among other things, that: (i) in November 1995 he
sold 1,563 shares of the Company common stock to Gasgarth, a former director of
the Company, for $31,260; (ii) Jones offered to "facilitate" the sale; (iii) in
December 1995 the Company filed a registration statement relating to the initial
public offering of its common stock; (iv) prior to his sale of stock to
Gasgarth, neither Gasgarth nor Jones told Lucina that the Company planned an
initial public offering; and (v) the 1,563 shares sold to Gasgarth, adjusted for
the 24-to-1 stock split subsequently effected, was worth $675,216 based on the
Company's initial public offering at $18 per share in March, 1996. In his
complaint, Lucina asserts violations of the Securities Exchange Act of 1934 and
the rules promulgated thereunder, the Illinois Consumer Fraud and Deceptive
Business Practices Act and common law fraud. Lucina seeks the return of 37,512
shares of common stock of the Company, or in the alternative, compensatory
damages in the amount of $975,312 with interest thereon, punitive damages in the
amount of $1 million and costs of the suit, including reasonable attorneys' fees
and other associated costs. The Company has filed an answer to the complaint
denying allegations of the complaint and asserting various defenses. Discovery
is in its initial stages, and no trial date has been set. The Company believes
that it has meritorious defenses to the Lucina complaint; however, due to the
inherent uncertainties of the litigation process, the Company is unable to
predict the outcome of this litigation. If the outcome of this litigation is
adverse to the Company, it could have a material adverse effect on the Company's
business, operating results or financial condition.
7. INITIAL PUBLIC OFFERING
The Company issued 4,570,000 shares of its $0.01 par value common stock in
an initial public offering in March 1996. Proceeds to the Company, net of the
underwriting discount and expenses of the offering, were $74,617,048.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FIANCIAL CONDITION AND RESULTS
OF OPERATIONS
Introduction
On June 12, 1997, the Company announced the completion of the Voice-Tel
Acquisitions. The Voice-Tel Entities provide interactive digital voice and data
messaging products on a service bureau basis through approximately 200 service
centers in the United States, Puerto Rico, Canada, Australia and New Zealand,
reaching approximately 90% of the United States and approximately 100% of the
Canadian, Australian and New Zealand populations with local, toll-free service
access. VTN, an affiliate of VTE acquired by the Company, owns and leases
various components of and operates a digital frame relay network that connects
and provides message transmission capabilities to and from the local voice
messaging centers.
The financial results of the Company discussed below have been restated for
all periods presented to include the results of the Voice-Tel Acquisitions that
were accounted for under the pooling of interests method of accounting. The
16 Voice-Tel Entities that were accounted for under the purchase method of
accounting, and pro forma information reflecting those acquisitions, can be
found in Note 3 to the condensed consolidated financial statements in Item 1.
The Company does not believe that the historical financial performance of
the Voice-Tel Entities as stand alone entities provides a useful indicator of
future performance in view of the anticipated changes to such businesses. The
Company believes that the Voice-Tel Acquisitions will provide important
synergistic benefits to the Company. More details regarding the Voice-Tel
Entities and the Voice-Tel Acquisitions can be found in the Company's Current
Report on Form 8-K, as filed with the SEC, dated June 25, 1997.
11
<PAGE>
Three Months Ended June 30, 1996 Compared to Three Months Ended June 30, 1997
Revenues. Total revenues increased $9.6 million or 28.0% from $34.3 million in
the three months ended June 30, 1996 to $43.9 million in the three months ended
June 30, 1997. Subscriber services revenues increased $6.3 million or 20.2% from
$31.2 million in the three months ended June 30, 1996 to $37.5 million in the
three months ended June 30, 1997. This increase was due primarily to strong
demand for the Company's calling card programs. License fee revenues increased
$3.4 million or 121.4% from $2.8 million in the three months ended June 30, 1996
to $6.2 million in the three months ended June 30, 1997. This increase was due
to the establishment of additional licensing relationships and increased
revenues from existing licensees. Other revenues decreased $145,000 or 40.3%
from $360,000 in the three months ended June 30, 1996 to $215,000 in the three
months ended June 30, 1997. This decrease was attributable primarily to
nonrecurring system design and development revenues in the three months ended
June 30, 1996.
Cost of Services. Cost of services increased $2.6 million or 32.1% from $8.1
million in the three months ended June 30, 1996 to $10.7 million in the three
months ended June 30, 1997. These expenses increased as a percentage of revenues
from 23.6% in the three months ended June 30, 1996 to 24.4% in the three months
ended June 30, 1997.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $1.5 million or 7.9% from $18.9 million in the
three months ended June 30, 1996 to $20.4 million in the three months ended June
30, 1997. This increase was due primarily to increased numbers of employees and
related expenses to support the Company's growth and to greater expenditures on
print advertising and other selling and marketing costs related to the increase
in subscribers and revenues. These expenses decreased as a percentage of
revenues from 55.1% in the three months ended June 30, 1996 to 46.5% in the
three months ended June 30, 1997. This decrease resulted from improved operating
leverage related to increased revenues.
Depreciation and Amortization Expenses. Depreciation and amortization expenses
increased $1.3 million or 52.0% from $2.5 million in the three months ended June
30, 1996 to $3.8 million in the three months ended June 30, 1997. This increase
was due primarily to depreciation of additional equipment acquired by the
Company.
Restructuring and Other Special Charges. Nonrecurring restructuring and other
special charges incurred during the three months ended June 30, 1997 were $45.4
million compared to $0.0 in the three months ended June 30, 1996. See Note 2 to
the condensed consolidated financial statements in Item 1 for further detail.
Accrued Settlement Cost. Nonrecurring CNC settlement charges incurred during
the three months ended June 30, 1997 were $1.5 million compared to $0.0 in the
three months ended June 30, 1996. See Note 6 to the condensed consolidated
financial statements in Item 1 for further detail.
Operating Income (Loss). Operating income decreased $42.8 million from $4.9
million in the three months ended June 30, 1996 to a loss of $37.9 million in
the three months ended June 30, 1997. Excluding the $1.5 million accrued
settlement cost and the effect of the $45.4 million nonrecurring restructuring
12
<PAGE>
and other special charges, operating income increased $4.1 million or 83.7% from
$4.9 million in the three months ended June 30, 1996 to $9.0 million in the
three months ended June 30, 1997.
Interest Expense, Net. Interest expense, net increased $2,000 or 4.0% from
$50,000 in the three months ended June 30, 1996 to $52,000 in the three months
ended June 30, 1997.
Income Taxes. Income taxes decreased $7.2 million from a tax expense of $645,000
in the three months ended June 30, 1996 to a tax benefit of $6.6 million in the
three months ended June 30, 1997. The Company's effective tax rate varied from
the statutory rate during these periods as a result of the tax savings effect of
investing in certain non-taxable and tax-reduced instruments, partially offset
by the effect of certain non-deductible expenses incurred in connection with the
Voice-Tel Acquisitions.
Net Income (Loss). As a result of the foregoing, net income decreased $35.5
million from net income of $4.2 million in the three months ended June 30, 1996
to net loss of $31.3 million in the three months ended June 30, 1997.
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1997
Revenues. Total revenues increased $20.3 million or 30.9% from $65.6 million in
the six months ended June 30, 1996 to $85.9 million in the six months ended June
30, 1997. Subscriber services revenues increased $13.4 million or 22.5% from
$59.6 million in the six months ended June 30, 1996 to $73.0 million in the six
months ended June 30, 1997. This increase was due primarily to strong demand for
the Company's calling card programs. License fee revenues increased $7.3
million or 143.1% from $5.1 million in the six months ended June 30, 1996 to
$12.4 million in the six months ended June 30, 1997. This increase was due to
the establishment of additional licensing relationships and increased revenues
from existing licensees. Other revenues decreased $429,000 or 45.0% from
$953,000 in the six months ended June 30, 1996 to $524,000 in the six months
ended June 30, 1997. This decrease was attributable primarily to nonrecurring
system design and development revenues in the six months ended June 30, 1996.
Cost of Services. Cost of services increased $5.4 million or 35.3% from $15.3
million in the six months ended June 30, 1996 to $20.7 million in the six months
ended June 30, 1997. These expenses increased as a percentage of revenues from
23.3% in the six months ended June 30, 1996 to 24.2% in the six months ended
June 30, 1997.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $2.6 million or 7.0% from $36.9 million in the
six months ended June 30, 1996 to $39.5 million in the six months ended June 30,
1997. This increase was due primarily to increased numbers of employees and
related expenses to support the Company's growth and to greater expenditures on
print advertising and other selling and marketing costs related to the increase
in subscribers and revenues. These expenses decreased as a percentage of
revenues from 56.3% in the six months ended June 30, 1996 to 46.0% in the six
months ended June 30, 1997. This decrease resulted from improved operating
leverage related to increased revenues.
Depreciation and Amortization Expenses. Depreciation and amortization expenses
increased $1.7 million or 32.7% from $5.2 million in the six months ended June
13
<PAGE>
30, 1996 to $6.9 million in the six months ended June 30, 1997. This increase
was due primarily to depreciation of additional equipment acquired by the
Company.
Restructuring and Other Special Charges. Nonrecurring restructuring and other
special charges incurred during the six months ended June 30, 1997 were $45.4
million compared to $0.0 in the six months ended June 30, 1996. See Note 2 to
the condensed consolidated financial statements in Item 1 for further detail.
Accrued Settlement Cost. Nonrecurring CNC settlement charges incurred during
the six months ended June 30, 1997 were $1.5 million compared to $0.0 in the six
months ended June 30, 1996. See Note 6 to the condensed consolidated financial
statements in Item 1 for further detail.
Operating Income (Loss). Operating income decreased $36.3 million from
$8.1 million in the six months ended June 30, 1996 to a loss of $28.2 million
in the six months ended June 30, 1997. Excluding the $1.5 million accrued
settlement cost and the effect of the $45.4 nonrecurring restructuring and
other special charges, operating income increased $10.6 million or 130.9% from
$8.1 million in the six months ended June 30, 1996 to $18.7 million in the six
months ended June 30, 1997.
Interest Expense, Net. Interest expense, net decreased $484,000 or 65.1% from
$743,000 in the six months ended June 30, 1996 to $259,000 in the six months
ended June 30, 1997. This decrease resulted primarily from the repayment of
indebtedness related to the Voice-Tel Acquisitions.
Income Taxes. Income taxes decreased $5.8 million from a tax expense
of $1.1 in the six months ended June 30, 1996 to a tax benefit of $4.7 million
in the six months ended June 30, 1997. The Company's effective tax rate varied
from the statutory rate during these periods as a result of the tax savings
effect of investing in certain non-taxable and tax-reduced instruments,
partially offset by the effect of certain non-deductible expenses incurred in
connection with the Voice-Tel Acquisitions.
Net Income (Loss). As a result of the foregoing, net income decreased $29.7
million from net income of $6.1 million in the six months ended June 30, 1996 to
a net loss of $23.6 million in the six months ended June 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds are from cash and cash equivalents,
investments (including the net proceeds of the Company's initial public
offering and the sale of the Convertible Notes) and operations. The Company's
principal uses of cash are for working capital, capital expenditures and to fund
acquisitions.
The Company's investing activities used cash of $82.5 million and provided
cash of $10.7 million for the six months ended June 30, 1996 and 1997,
respectively.
The Company's financing activities provided cash of $71.7 million and
$121.8 million for the six months ended June 30, 1996 and 1997, respectively.
Cash provided by financing activities for the six months ended June 30, 1997
consisted primarily of net proceeds from the Company's sale of the Convertible
Notes.
In connection with the Company's offering of the Convertible Notes, the
Company issued notes convertible into up to approximately 5,227,000 shares of
common stock. The Company received net proceeds of $166.9 million after the
underwriting discount and related expenses of the Convertible Notes offering.
In October 1996, the Company established a $5.0 million line-of-credit with
NationsBank, N.A. to facilitate interim capital equipment financing needs. As
of August 14, 1997, the Company had no borrowings under the line-of-credit.
14
<PAGE>
In April 1997, the Company established a $30.0 million short term line-of-
credit with NationsBank, N.A. (the "NationsBank Loan") that matured on June 30,
1997. The Company repaid all of the NationsBank Loan with the proceeds of
maturing investments in the Company's investment portfolio.
The Company believes that funds provided by operations, available borrowings
under its line-of-credit, current amounts of cash, cash equivalents and short
term investments, including the net proceeds of the Company's initial public
offering and the net proceeds from the issuance of the Convertible Notes, will
be sufficient to meet its capital requirements for at least the next 12 months.
Restructuring and Other Special Charges
Restructuring and other special charges of $45.4 million consist of transaction
costs and expenses incurred in the Voice-Tel Acquisitions and estimated costs to
execute management's plan to comprehensively restructure Voice-Tel's
post-acquisition operations. Management's plan involves transforming Voice-Tel's
business from a franchise to a consolidated business group model. This
initiative involves eliminating redundant business activities and
infrastructure, closing facilities by centralizing certain administrative and
operations management functions and replacing certain operating assets with more
efficient and effective applications. Management believes the restructuring will
lower its operating costs by reducing employee headcount and associated
compensation costs and improving the utilization of productive assets.
Restructuring and other special charges consist of $16.6 million of transactions
costs and expenses, $9.5 million of severance and associated costs, $8.6 million
of asset impairments and $10.7 million of other exit costs consisting primarily
of costs to terminate lease and other contractual obligations. All costs accrued
as restructuring and other special charges, except charges for asset
impairments, will require cash outlays. Approximately $12.8 million of cash
expenditures associated with these charges were made prior to June 30,1997. Such
expenditures consist of approximately $1.2 million of severance and related
costs associated with terminating 115 employees and $11.6 million of transaction
costs and expenses. Management anticipates this initiative will be completed in
1998 and that remaining cash outlays of approximately $24.0 million will be
funded by existing working capital and will occur ratably over the period this
program is being executed.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains certain statements and projections
(including statements concerning plans and objectives of management for future
operations and services and statements concerning certain revenue expectations),
other than those covering historical information, that should be considered
forward-looking and subject to certain risks and uncertainties. Such forward-
looking statements are based on management's belief as well as assumptions made
by, and information currently available to, management pursuant to "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995. The
Company's actual results might differ materially from the plans envisioned in,
or results projected by, those statements if the Company's assumptions prove to
be incorrect or for a variety of other reasons, including those relating to
factors identified in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996 under the heading "Forward-Looking Statements." The
Company cautions that such factors are not exclusive. The Company does not
undertake to update any forward-looking statement that may be made from time to
time by, or on behalf of, the Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
15
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On January 30, 1996, Eric Bott, E.B. Elliott and CRS filed a complaint against
PCI and the Company's President, Boland T. Jones, in the Superior Court of
Fulton County, Georgia. In the complaint, the plaintiffs allege that: (i) Mr.
Bott, a former employee, is entitled to options to purchase 10,000 shares of
common stock of PCI at $5.00 per share; (ii) Mr. Bott is entitled to a
commission equal to 10% of all revenues that have been and in the future are
collected as a result of the Company's licensing arrangement with one of its
customers; (iii) Mr. Bott is entitled to $7,000 for consulting work allegedly
performed for the Company; (iv) Mr. Bott is entitled to unspecified damages
resulting from his sale in June 1995 of 750 shares of common stock of PCI to an
unrelated third party for an unspecified amount; (v) Mr. Elliott or CRS, an
affiliate of Mr. Elliott, is entitled to options to purchase 5,000 or 10,000
shares of common stock of PCI at an unspecified exercise price arising out of
work allegedly performed by CRS for the Company; and (vi) CRS is owed an
unspecified amount of commissions from the Company relating to sales of the
Company's telecommunications services by CRS. Subsequent to the filing of the
complaint, the plaintiffs dismissed without prejudice count (iv) above. The
plaintiffs also seek attorneys' fees and unspecified amounts of punitive
damages. The Company has filed an answer and counterclaim denying all
allegations of the complaint and asserting various affirmative defenses.
Assuming that the allegations concerning stock options and stock sales relate to
the common stock of Premiere Technologies, Inc., rather than PCI, as alleged,
the Company believes that the share numbers and exercise prices have not been
adjusted for the 24-to-1 stock split effected in December 1995. In this regard,
the plaintiffs filed a motion to add the Company as a defendant and to amend
their complaint to assert their claims against the Company. Adjusting the share
numbers and exercise prices of these options to reflect the 24-to-1 stock split,
the plaintiffs' claims relate to options to purchase up to a total of 480,000
shares of Common Stock and the alleged exercise price of $5.00 per share with
regard to a portion of such options becomes approximately $0.21 per share. The
plaintiffs' motion was denied on December 17, 1996, and the plaintiffs dismissed
the case without prejudice on January 13, 1997. The plaintiffs filed a new
complaint against PCI and the Company on January 21, 1997 setting forth the same
allegations as described above, except that Mr. Bott no longer alleges that he
is entitled to unspecified damages resulting from his sale in June 1995 of 750
shares of common stock of PCI, and that Mr. Bott and Mr. Elliott allege that the
stock options relate to the common stock of Premiere Technologies, Inc. The
Company and PCI have filed an answer and counterclaim denying all allegations of
the complaint and asserting various affirmative defenses and a motion to dismiss
the counts of the complaint against the Company. The Company believes it has
meritorious defenses to the plaintiffs' allegations, but due to the inherent
uncertainties of the litigation process, the Company is unable to predict the
outcome of this litigation. If the outcome of this litigation is adverse to the
Company, it could have a material adverse effect on the Company's business,
operating results and financial condition.
On August 6, 1996, CNC, a licensing customer of the Company, was placed
into bankruptcy under Chapter 11 of 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 (the
"Court") 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 recently reached a
tentative agreement of all issues between the parties, 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 Court. In this
regard, the Company currently anticipates that it will establish a reserve in
the second quarter of 1997 for anticipated legal expenses and settlement costs
in an amount of up to $1.5 million. Due to the inherent uncertainties of the
judicial system, the Company is unable to predict with certainty whether the
settlement will be approved by the Court. If the settlement is not
16
<PAGE>
approved and the trustee successfully pursues possible litigation against the
Company, it could have a material adverse effect on the Company's business,
operating results or financial condition.
On September 20, 1996, Lucina filed a complaint against the Company, Gasgarth
and Jones in the United States District Court for the Eastern District of
Illinois. In the complaint, Lucina alleges, among other things, that: (i) in
November 1995 he sold 1,563 shares of the Company common stock to Gasgarth, a
former director of the Company, for $31,260; (ii) Jones offered to "facilitate"
the sale; (iii) in December 1995 the Company filed a registration statement
relating to the initial public offering of its common stock; (iv) prior to his
sale of stock to Gasgarth, neither Gasgarth nor Jones told Lucina that the
Company planned an initial public offering; and (v) the 1,563 shares sold to
Gasgarth, adjusted for the 24-to-1 stock split subsequently effected, was worth
$675,216 based on the Company's initial public offering at $18 per share in
March, 1996. In his complaint, Lucina asserts violations of the Securities
Exchange Act of 1934 and the rules promulgated thereunder, the Illinois Consumer
Fraud and Deceptive Business Practices Act and common law fraud. Lucina seeks
the return of 37,512 shares of common stock of the Company, or in the
alternative, compensatory damages in the amount of $975,312 with interest
thereon, punitive damages in the amount of $1 million and costs of the suit,
including reasonable attorneys' fees and other associated costs. The Company
has filed an answer to the complaint denying allegations of the complaint and
asserting various defenses. Discovery is in its initial stages, and no trial
date has been set. The Company believes that it has meritorious defenses to the
Lucina complaint; however, due to the inherent uncertainties of the litigation
process, the Company is unable to predict the outcome of this litigation. If
the outcome of this litigation is adverse to the Company, it could have a
material adverse effect on the Company's business, operating results or
financial condition.
ITEM 2. CHANGES IN SECURITIES
On April 29, 1997 the Company filed articles of amendment to its articles of
incorporation that designated a class of Series B Voting Preferred Stock
("Series B Preferred Stock") that consists of one share of Series B Preferred
Stock, par value $.01 per share. The one share of the Company's Series B
Preferred Stock was issued for the benefit of the former shareholders of the
Canadian Voice-Tel Entities that the Company acquired on April 30, 1997.
Pursuant to the terms of the acquisition agreements, the former shareholders of
the Canadian Voice-Tel Entities were issued 436,526 shares of Exchangeable Non-
Voting Shares of Voice-Tel Canada Limited, a wholly owned subsidiary of the
Company (the "Exchangeable Shares"). The Exchangeable Shares may be converted at
any time into a total of 436,526 shares of common stock. For voting purposes,
the holder of record of the Series B Preferred Stock 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 common stock. The Series B Preferred Stock 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
Stock. 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 Stock, the holder of the share of Series B
Preferred Stock 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 Stock. At such
time as the Series B Preferred Stock 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 Stock will be canceled without any action
required by the holder thereof or the Company.
Pursuant to the Voice-Tel Acquisitions, the Company issued an aggregate of
7,422,748 shares of its common stock to the former shareholders or owners of
VTE, its affiliates and franchisees. The shares were issued without
registration under the Securities Act of 1933, as amended (the "Act"), in
transactions exempt under Section 4(2) of the Act and the rules promulgated
thereunder.
On June 30, 1997, the Company closed the sale of the Notes, and on July 30,
1997 the Company closed the sale of the Option Notes, in a Rule 144A offering.
The initial purchasers of the notes were Robertson, Stephens & Company LLC,
Alex. Brown & Sons Incorporated and Donaldson, Lufkin & Jenrette Securities
Corporation (the "Initial Purchasers"). The total offering price of the
Convertible Notes was $172,500,000 with a discount to the underwriters of
3.0%. The Company relied upon the exemption set forth in Section 4(2) of the
17
<PAGE>
Act for the sale of the Convertible Notes to the Initial Purchasers. The
Initial Purchasers resold the Convertible Notes in the United States
to qualified institutional buyers under Rule 144A under the Securities Act and
to a limited number of other institutional "accredited investors" as defined in
Rule 501 of the Act and outside the United States to non-U.S. persons in
reliance upon Regulation S under the Act. The Convertible Notes, unless
previously redeemed or repurchased, are convertible at the option of the holder
at any time through the close of business on the final maturity date into shares
of common stock at a conversion price of $33.00 per share, subject to adjustment
in certain events.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of the Company's shareholders was held on June 11, 1997.
At the meeting the following matters were voted upon, with the following
results:
1. Election of Directors. The following directors were elected, for terms
ending at the annual meeting in the year indicated:
<TABLE>
<CAPTION>
Term Votes Votes Votes
Name of Director Ending In Favor Against Withheld Abstentions Nonvotes
- - ------------------------ ------ ---------- ------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Eduard J. Mayer 1998 19,577,600 0 218,100 0 0
D. Gregory Smith 1999 19,577,600 0 218,100 0 0
Raymond H. Pirtle, Jr. 1999 19,577,600 0 218,100 0 0
Boland T. Jones 2000 19,577,600 0 218,100 0 0
George W. Baker, Sr. 2000 19,577,600 0 218,100 0 0
</TABLE>
2. Approval of Amendments to 1995 Stock Plan. The shareholders of the Company
approved the restatement of the Company's 1995 Stock Plan in order to: (i)
permit the grant of options and other performance-based compensatory awards that
will be deductible to the Company for federal income tax purposes without regard
to the limitations of Section 162(m) of the Internal Revenue Code of 1986, as
amended; (ii) make certain other amendments to conform to recent revisions to
the rules and regulations of the SEC under Section 16 of the Securities Exchange
Act of 1934, as amended; and (iii) increase the number of shares of common stock
reserved for issuance from 1,500,000 to 4,000,000 shares of common stock. The
results of the voting with respect to the restatement were as follows:
Votes Votes
In Favor Against Abstentions Nonvotes
- - -------- -------- ----------- --------
14,062,877 4,187,929 129,988 1,414,906
ITEM 5. OTHER INFORMATION
None.
18
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
EXHIBIT NO. EXHIBIT TITLE
- - ----------- -------------
2.1 Agreement and Plan of Merger, together with exhibits, dated as of
April 2, 1997 by and among Premiere Technologies, Inc., PTEK
Merger Corporation and Voice-Tel Enterprises, Inc. and the
Stockholders of Voice-Tel Enterprises, Inc. (incorporated by
reference to Exhibit 2.1 to the Company's Current Report on
Form 8-K dated April 2, 1997 and filed April 4, 1997)
2.2 Agreement and Plan of Merger, together with exhibits, dated as of
April 2, 1997 by and among Premiere Technologies, Inc., PTEK
Merger Corporation II, VTN, Inc. and the Stockholders of VTN,
Inc. (incorporated by reference to Exhibit 2.2 to the Company's
Current Report on Form 8-K dated April 2, 1997 and filed April 4,
1997)
2.3 Purchase and Sale Agreement dated April 2, 1997 by and between
Premiere Technologies, Inc. and Merchandising Productions, Inc.
(incorporated by reference to Exhibit 2.3 to the Company's
Current Report on Form 8-K dated April 2, 1997 and filed April 4,
1997)
2.4 Transfer Agreement dated as of April 2, 1997 by and among
Premiere Technologies, Inc., Continuum, Inc. and Owners of
Continuum, Inc. (incorporated by reference to Exhibit 2.4 to the
Company's Current Report on Form 8-K dated April 30, 1997 and
filed May 14, 1997)
2.5 Transfer Agreement dated as of April 2, 1997 by and among
Premiere Technologies, Inc., DMG, Inc. and Owners of DMG, Inc.
and Transfer Agreement dated as of April 2, 1997 by and among
Premiere Technologies, Inc., VTG, Inc. and Owners of VTG, Inc.
(incorporated by reference to Exhibit 2.5 to the Company's
Current Report on Form 8-K dated April 30, 1997 and filed May 14,
1997)
2.6 Transfer Agreement dated as of April 2, 1997 by and among
Premiere Technologies, Inc., Penta Group, Inc. and Owners of
Penta Group, Inc. and Transfer Agreement dated as of April 2,
1997 by and among Premiere Technologies, Inc. Scepter
Communications, Inc. and Owners of Scepter Communications, Inc.
(incorporated by reference to Exhibit 2.6 to the Company's
Current Report on Form 8-K dated April 30, 1997 and filed May 14,
1997)
2.7 Transfer Agreement dated as of April 2, 1997 by and among
Premiere Technologies, Inc., Premiere Business Services, Inc. and
Owners of Premiere Business Services, Inc. (incorporated by
reference to Exhibit 2.7 to the Company's Current Report on
Form 8-K dated April 30, 1997 and filed May 14, 1997)
19
<PAGE>
2.8 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., Dunes Communications, Inc., Sands Communications,
Inc., Sands Comm, Inc., SandsComm, Inc., and Owner of Dunes
Communications, Inc., Sands Communications, Inc., Sands Comm, Inc.,
and SandsComm, Inc. (incorporated by reference to Exhibit 2.8 to the
Company's Current Report on Form 8-K dated April 30, 1997 and filed
May 14, 1997)
2.9 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc. Shamlin, Inc. and Owner of Shamlin, Inc.
(incorporated by reference to Exhibit 2.9 to the Company's Current
Report on Form 8-K dated April 30, 1997 and filed May 14, 1997)
2.10 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., VT of Ohio, Inc. and Owners of VT of Ohio, Inc.;
Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., Carter Voice, Inc. and Owners of Carter Voice,
Inc.; Transfer Agreement dated as of April 2, 1997 by and among
Premiere Technologies, Inc., Widdoes Enterprises, Inc. and Owners of
Widdoes Enterprises, Inc.; and Transfer Agreement dated as of April 2,
1997 by and among Premiere Technologies, Inc. Dowd Enterprises, Inc.
and Owners of Dowd Enterprises, Inc. (incorporated by reference to
Exhibit 2.10 to the Company's Current Report on Form 8-K dated April
30, 1997 and filed May 14, 1997)
2.11 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., SDVT, Inc. and Owners of SDVT, Inc. (incorporated
by reference to Exhibit 2.11 to the Company's Current Report on Form
8-K dated April 30, 1997 and filed May 14, 1997)
2.12 Amended and Restated Transfer Agreement dated as of April 2, 1997 by
and among Premiere Technologies, Inc., Car Zee, Inc. and Owners of Car
Zee, Inc. (incorporated by reference to Exhibit 2.12 to the Company's
Current Report on Form 8-K dated April 30, 1997 and filed May 14,
1997)
2.13 Transfer Agreement dated as of March 31, 1997 by and among Premiere
Technologies, Inc. and Owners of the VTEC Franchisee: 1086236 Ontario
Inc. (incorporated by reference to Exhibit 2.13 to the Company's
Current Report on Form 8-K dated April 30, 1997 and filed May 14,
1997)
2.14 Transfer Agreement dated as of March 31, 1997 by and among Premiere
Technologies, Inc. and Owners of the Eastern Franchisees: 1139133
Ontario Inc., 1136827 Ontario Inc., 1006089 Ontario Inc., and 1063940
Ontario Inc. (incorporated by reference to Exhibit 2.14 to the
Company's Current Report on Form 8-K dated April 30, 1997 and filed
May 14, 1997)
20
<PAGE>
2.15 Asset Purchase Agreement dated September 18, 1996 by and among
Premiere Technologies, Inc., PTEK Acquisition Corporation, TeleT
Communications LLC and the Members of TeleT Communications LLC
(incorporated by reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K dated September 18, 1996)
2.16 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., Communications Concepts, Inc. and Owners of
Communications Concepts, Inc. (incorporated by reference to Exhibit
2.1 to the Company's Current Report on Form 8-K dated May 16, 1997 and
filed June 2, 1997)
2.17 Transfer Agreement dated as of May 20, 1997 by and among Premiere
Technologies, Inc., DARP, Inc. and Owners of DARP, Inc. (incorporated
by reference to Exhibit 2.2 to the Company's Current Report on Form 8-
K dated May 16, 1997 and filed June 2, 1997)
2.18 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., Hi-Pak Systems, Inc. and Owners of Hi-Pak Systems,
Inc. (incorporated by reference to Exhibit 2.3 to the Company's
Current Report on Form 8-K dated May 16, 1997 and filed June 2, 1997)
2.19 Transfer Agreement dated as of May 29, 1997 by and among Premiere
Technologies, Inc., MMP Communications, Inc. and Owners of MMP
Communications, Inc. (incorporated by reference to Exhibit 2.4 to the
Company's Current Report on Form 8-K dated May 16, 1997 and filed June
2, 1997)
2.20 Transfer Agreement dated as of May 16, 1997 by and among Premiere
Technologies, Inc., Lar-Lin Enterprises, Inc., Lar-Lin Investments,
Inc. and Voice-Mail Solutions, Inc. and Owners of Lar-Lin Enterprises,
Inc., Lar-Lin Investments, Inc. and Voice-Mail Solutions, Inc.
(incorporated by reference to Exhibit 2.5 to the Company's Current
Report on Form 8-K dated May 16, 1997 and filed June 2, 1997)
2.21 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., Voice-Net Communications Systems, Inc. and Owners
of Voice-Net Communications Systems, Inc. and Transfer Agreement dated
as of April 2, 1997 by and among Premiere Technologies, Inc., VT of
Long Island Inc. and Owners of VT of Long Island Inc. (incorporated
by reference to Exhibit 2.6 to the Company's Current Report on Form 8-
K dated May 16, 1997 and filed June 2, 1997)
21
<PAGE>
2.22 Transfer Agreement dated as of May 22, 1997 by and among Premiere
Technologies, Inc. Voice Systems of Greater Dayton, Inc. and Owner of
Voice Systems of Greater Dayton, Inc. and Transfer Agreement dated as
of May 22, 1997 by and among Premiere Technologies, Inc., Premiere
Acquisition Corporation, L'Harbot, Inc. and the Owners of L'Harbot,
Inc. (incorporated by reference to Exhibit 2.7 to the Company's
Current Report on Form 8-K dated May 16, 1997 and filed June 2, 1997)
2.23 Transfer Agreement dated as of May 30, 1997 by and among Premiere
Technologies, Inc., Audioinfo Inc. and Owners of Audioinfo Inc.
(incorporated by reference to Exhibit 2.8 to the Company's Current
Report on Form 8-K dated May 16, 1997 and filed June 2, 1997)
2.24 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., D&K Communications Corporation and Owners of D&K
Communications Corporation (incorporated by reference to Exhibit 2.10
to the Company's Current Report on Form 8-K dated May 16, 1997 and
filed June 2, 1997)
2.25 Transfer Agreement dated as of May 19, 1997 by and among Premiere
Technologies, Inc. Voice-Tel of South Texas, Inc. and Owners of Voice-
Tel of South Texas, Inc. (incorporated by reference to Exhibit 2.11
to the Company's Current Report on Form 8-K dated May 16, 1997 and
filed June 2, 1997)
2.26 Transfer Agreement dated as of May 31, 1997 by and among Premiere
Technologies, Inc. Indiana Communicator, Inc. and Owner of Indiana
Communicator, Inc. (incorporated by reference to Exhibit 2.12 to the
Company's Current Report on Form 8-K dated May 16, 1997 and filed June
2, 1997)
2.27 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., Voice Messaging Development Corporation of
Michigan and the Owners of Voice Messaging Development Corporation of
Michigan (incorporated by reference to Exhibit 2.1 to the Company's
Current Report on Form 8-K/A dated May 16, 1997 and filed June 24,
1997)
2.28 Transfer Agreement dated as of June 13, 1997 by and among Premiere
Technologies, Inc., Voice Partners of Greater Mahoning Valley, Ltd.
and the Owners of Voice Partners of Greater Mahoning Valley, Ltd.
(incorporated by reference to Exhibit 2.2 to the Company's Current
Report on Form 8-K/A dated May 16, 1997 and filed June 24, 1997)
22
<PAGE>
2.29 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc. In-Touch Technologies, Inc. and the Owners of In-
Touch Technologies, Inc. (incorporated by reference to Exhibit 2.3 to
the Company's Current Report on Form 8-K/A dated May 16, 1997 and
filed June 24, 1997)
2.30 Transfer Agreement dated as of March 31, 1997 by and among Premiere
Technologies, Inc. and Owners of the Western Franchisees: 3325882
Manitoba Inc., 601965 Alberta Ltd., 3266622 Manitoba Inc., 3337821
Manitoba Inc. and 3266631 Manitoba Inc. (incorporated by reference to
Exhibit 2.4 to the Company's Current Report on Form 8-K/A dated May
16, 1997 and filed June 24, 1997)
2.31 Uniform Terms and Conditions, Exhibit A to Transfer Agreements by and
among Premiere Technologies, Inc., Wave One Franchisees and Owners of
Wave One Franchisees (incorporated by reference to Exhibit A to
Exhibit 2.4 to the Company's Current Report on Form 8-K dated April 2,
1997 and filed April 4, 1997)
2.32 Uniform Terms and Conditions, Exhibit A to Transfer Agreements by and
among Premiere Technologies, Inc., Wave Two Franchisees and Owners of
Wave Two Franchisees 2.15 Uniform Terms and Conditions, Exhibit A to
Transfer Agreements by and among Premiere Technologies, Inc., Wave One
Franchisees and Owners of Wave One Franchisees (incorporated by
reference to Exhibit 2.14 to the Company's Current Report on Form 8-K
dated May 16, 1997 and filed June 2, 1997)
2.33 Service and Reseller Agreement dated September 28, 1990 by and between
Amway Corporation and Voice-Tel Enterprises, Inc. (Portions of this
exhibit are the subject of a request for confidential treatment.)
3.1 Articles of Incorporation (incorporated by reference to Exhibit 3.1 to
the Registrant's Registration Statement on Form S-1 (No. 33-80547)
3.2 Articles of Amendment to Articles of Incorporation (incorporated 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 (incorporated by reference to Exhibit 3.2
to the Registrant's Registration Statement on Form S-1 (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.
23
<PAGE>
4.2 Indenture, dated as of June 15, 1997, between Premiere Technologies,
Inc. and IBJ Schroder Bank & Trust Company, as Trustee (incorporated
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 Global Convertible Subordinated Note due 2004 (incorporated 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 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)
10.1 Promissory Note dated April 30, 1997 between Premiere Communications,
Inc. and NationsBank, N.A. (South) (incorporated by reference to
Exhibit 2.4 to the Company's Current Report on Form 8-K dated April
30, 1997 and filed May 14, 1997)
10.2 Purchase Agreement, dated June 25, 1997, by and among Premiere
Technologies, Inc., Robertson, Stephens & Company LLC, Alex. Brown &
Sons Incorporated and Donaldson, Lufkin & Jenrette Securities
Corporation (incorporated by reference to Exhibit 10.1 to the
Registrant's Current Report on Form 8-K dated July 25, 1997 and filed
August 5, 1997)
10.3 1991 Non-Qualified and Incentive Stock Option Plan of Voice-Tel
Enterprises, Inc. (assumed by the Registrant) (incorporated by
reference to Exhibit 4.2 to the Registrant's Registration Statement on
Form S-8 (No. 333-29787))
10.4 1991 Non-Qualified and Incentive Stock Option Plan of VTN, Inc.
(assumed by the Registrant) (incorporated by reference to Exhibit 4.3
to the Registrant's Registration Statement on Form S-8 (No. 333-
29787))
10.5 Form of Stock Option Agreement by and between the Registrant and
certain current or former employees of Voice-Tel Enterprises, Inc.
(incorporated by reference to Exhibit 4.4 to the Registrant's
Registration Statement on Form S-8 (No. 333-29787))
10.6 Premiere Technologies, Inc. Second Amended and Restated 1995 Stock
Plan (incorporated by reference to Exhibit A to the Registrant's
Definitive Proxy Statement distributed in connection with the
Registrant's June 11, 1997 annual meeting of shareholders, filed April
30, 1997)
10.7 Voice-Tel Enterprises, Inc. Employment Agreement dated April 30, 1997
by and between Voice-Tel, Inc. and William E. Welsh
24
<PAGE>
11. Statement re computation of per share earnings
27. Financial data schedule
25
<PAGE>
(b) Reports on Form 8-K:
The following reports on Form 8-K were filed during the quarter for which
this report is filed:
<TABLE>
<CAPTION>
Entities for Which
Date of Report Item(s) Reported Financial Statements Filed
- - -------------- ---------------- -----------------------------
<S> <C> <C>
April 2, 1997 Execution of definitive agreements for None
Voice-Tel Acquisitions
April 30, 1997/1/ Completion of certain Voice-Tel Acquisitions TeleT Communications LLC ("TeleT")
Voice-Tel Enterprises, Inc.
VTN, Inc.
Continuum, Inc.
DMG, Inc. and VTG, Inc.
Penta Group, Inc. and Scepter
Communications, Inc.
Premier Business Services, Inc.
Sands Communications, Inc. d.b.a. Voice-Tel
of Arizona, SandsComm, Inc. d.b.a. Voice-Tel
of Organge County, Sands Comm, Inc. d.b.a.
Voice-Tel of New Mexico, and Dunes
Communications, Inc. d.b.a. Voice-Tel of San
Fernando Valley
Shamlin, Inc. d.b.a. Voice-Tel of Colorado
Voice-Tel of Ohio and Subsidiary
SDVT, Inc.
Car Zee, Inc.
1086236 Ontario Inc. d.b.a. Voice-Tel of
Eastern Canada, Inc.
</TABLE>
26
<PAGE>
<TABLE>
<S> <C> <C>
Flanagan/Allan Inc.
Pro Forma Financial Information relating to
the Company and TeleT
Pro Forma Financial Information relating to
the Company, TeleT, VTE, VTN and certain
significant franchisees
May 16, 1997/2/ Acquisition of additional independently owned Voice-Tel Enterprises, Inc.
and operated franchisees of VTE
Lar-Lin Enterprises, Inc. d.b.a. Voice-Tel
of Kansas City, Lar-Lin Investments, Inc.
d.b.a. Voice-Tel of Wichita and Voice-Tel of
Springfield and Voice Mail Solutions, Inc.
d.b.a. Voice-Tel of Kansas City Acquisition
Voice-Tel of South Texas, Inc.
MMP Communications Inc. d.b.a. Voice-Tel of
Southern California
Communication Concepts, Inc. d.b.a.
Voice-Tel of Boston
Hi-Pak Systems, Inc. d.b.a. Voice-Tel of
Michigan and Voice Messaging Development
Corporation of Michigan d.b.a. Voice-Tel of
Central Michigan
Voice-Net Communications Systems, Inc.
d.b.a. Voice-Tel of New York
Dowd Enterprises, Inc. and Subsidiary
D&K Communications Corporation d.b.a.
Voice-Tel of Memphis and Voice-Tel of
Nashville
AudioInfo, Inc.
Voice Partners of Greater Mahoning Valley,
Ltd.
DARP, Inc. d.b.a. Voice-Tel of New Jersey
Indiana Communicator, Inc. d.b.a. Voice-Tel
of Indiana
In-Touch Technologies, Inc. d.b.a. Voice-Tel
of California
</TABLE>
27
<PAGE>
<TABLE>
<S> <C> <C>
125976 Canada Ltd. d.b.a. Voice-Tel of
Manitoba and Subsidiaries
L'Harbot, Inc. d.b.a. Voice-Tel Tri-State
and Voice Systems of Greater Dayton, Inc.
Pro Forma Financial information relating to
the Company, TeleT, certain other
significant Voice-Tel Acquisitions and
certain significant franchisees
June 12, 1997 Announcement of pending completion of None
Voice-Tel Acquisitions and associated charge
to earnings
June 16, 1997 Rule 135c announcement of offering of None
convertible subordinated notes
June 25, 1997 Closing of Rule 144A offering of convertible None
subordinated notes
</TABLE>
/1/ As amended by 8-K/A dated June 16, 1997 filed to amend certain financial
statements.
/2/ As amended by 8-K/A dated June 24, 1997 filed to supply the required
financial statements.
28
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
August 14, 1997 PREMIERE TECHNOLOGIES, INC.
- - --------------------
Date
/s/ Boland T. Jones
-----------------------------------
Boland T. Jones
Chairman of the Board and President
August 14, 1997 /s/ Patrick G. Jones
- - -------------------- -----------------------------------
Date Patrick G. Jones
Senior Vice President
Finance and Legal
29
<PAGE>
EXHIBITS INDEX
EXHIBIT NO. EXHIBIT TITLE
- - ----------- -------------
2.1 Agreement and Plan of Merger, together with exhibits, dated as of
April 2, 1997 by and among Premiere Technologies, Inc., PTEK
Merger Corporation and Voice-Tel Enterprises, Inc. and the
Stockholders of Voice-Tel Enterprises, Inc. (incorporated by
reference to Exhibit 2.1 to the Company's Current Report on
Form 8-K dated April 2, 1997 and filed April 4, 1997)
2.2 Agreement and Plan of Merger, together with exhibits, dated as of
April 2, 1997 by and among Premiere Technologies, Inc., PTEK
Merger Corporation II, VTN, Inc. and the Stockholders of VTN,
Inc. (incorporated by reference to Exhibit 2.2 to the Company's
Current Report on Form 8-K dated April 2, 1997 and filed April 4,
1997)
2.3 Purchase and Sale Agreement dated April 2, 1997 by and between
Premiere Technologies, Inc. and Merchandising Productions, Inc.
(incorporated by reference to Exhibit 2.3 to the Company's
Current Report on Form 8-K dated April 2, 1997 and filed April 4,
1997)
2.4 Transfer Agreement dated as of April 2, 1997 by and among
Premiere Technologies, Inc., Continuum, Inc. and Owners of
Continuum, Inc. (incorporated by reference to Exhibit 2.4 to the
Company's Current Report on Form 8-K dated April 30, 1997 and
filed May 14, 1997)
2.5 Transfer Agreement dated as of April 2, 1997 by and among
Premiere Technologies, Inc., DMG, Inc. and Owners of DMG, Inc.
and Transfer Agreement dated as of April 2, 1997 by and among
Premiere Technologies, Inc., VTG, Inc. and Owners of VTG, Inc.
(incorporated by reference to Exhibit 2.5 to the Company's
Current Report on Form 8-K dated April 30, 1997 and filed May 14,
1997)
2.6 Transfer Agreement dated as of April 2, 1997 by and among
Premiere Technologies, Inc., Penta Group, Inc. and Owners of
Penta Group, Inc. and Transfer Agreement dated as of April 2,
1997 by and among Premiere Technologies, Inc. Scepter
Communications, Inc. and Owners of Scepter Communications, Inc.
(incorporated by reference to Exhibit 2.6 to the Company's
Current Report on Form 8-K dated April 30, 1997 and filed May 14,
1997)
2.7 Transfer Agreement dated as of April 2, 1997 by and among
Premiere Technologies, Inc., Premiere Business Services, Inc. and
Owners of Premiere Business Services, Inc. (incorporated by
reference to Exhibit 2.7 to the Company's Current Report on
Form 8-K dated April 30, 1997 and filed May 14, 1997)
30
<PAGE>
2.8 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., Dunes Communications, Inc., Sands Communications,
Inc., Sands Comm, Inc., SandsComm, Inc., and Owner of Dunes
Communications, Inc., Sands Communications, Inc., Sands Comm, Inc.,
and SandsComm, Inc. (incorporated by reference to Exhibit 2.8 to the
Company's Current Report on Form 8-K dated April 30, 1997 and filed
May 14, 1997)
2.9 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc. Shamlin, Inc. and Owner of Shamlin, Inc.
(incorporated by reference to Exhibit 2.9 to the Company's Current
Report on Form 8-K dated April 30, 1997 and filed May 14, 1997)
2.10 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., VT of Ohio, Inc. and Owners of VT of Ohio, Inc.;
Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., Carter Voice, Inc. and Owners of Carter Voice,
Inc.; Transfer Agreement dated as of April 2, 1997 by and among
Premiere Technologies, Inc., Widdoes Enterprises, Inc. and Owners of
Widdoes Enterprises, Inc.; and Transfer Agreement dated as of April 2,
1997 by and among Premiere Technologies, Inc. Dowd Enterprises, Inc.
and Owners of Dowd Enterprises, Inc. (incorporated by reference to
Exhibit 2.10 to the Company's Current Report on Form 8-K dated April
30, 1997 and filed May 14, 1997)
2.11 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., SDVT, Inc. and Owners of SDVT, Inc. (incorporated
by reference to Exhibit 2.11 to the Company's Current Report on Form
8-K dated April 30, 1997 and filed May 14, 1997)
2.12 Amended and Restated Transfer Agreement dated as of April 2, 1997 by
and among Premiere Technologies, Inc., Car Zee, Inc. and Owners of Car
Zee, Inc. (incorporated by reference to Exhibit 2.12 to the Company's
Current Report on Form 8-K dated April 30, 1997 and filed May 14,
1997)
2.13 Transfer Agreement dated as of March 31, 1997 by and among Premiere
Technologies, Inc. and Owners of the VTEC Franchisee: 1086236 Ontario
Inc. (incorporated by reference to Exhibit 2.13 to the Company's
Current Report on Form 8-K dated April 30, 1997 and filed May 14,
1997)
2.14 Transfer Agreement dated as of March 31, 1997 by and among Premiere
Technologies, Inc. and Owners of the Eastern Franchisees: 1139133
Ontario Inc., 1136827 Ontario Inc., 1006089 Ontario Inc., and 1063940
Ontario Inc. (incorporated by reference to Exhibit 2.14 to the
Company's Current Report on Form 8-K dated April 30, 1997 and filed
May 14, 1997)
31
<PAGE>
2.15 Asset Purchase Agreement dated September 18, 1996 by and among
Premiere Technologies, Inc., PTEK Acquisition Corporation, TeleT
Communications LLC and the Members of TeleT Communications LLC
(incorporated by reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K dated September 18, 1996)
2.16 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., Communications Concepts, Inc. and Owners of
Communications Concepts, Inc. (incorporated by reference to Exhibit
2.1 to the Company's Current Report on Form 8-K dated May 16, 1997 and
filed June 2, 1997)
2.17 Transfer Agreement dated as of May 20, 1997 by and among Premiere
Technologies, Inc., DARP, Inc. and Owners of DARP, Inc. (incorporated
by reference to Exhibit 2.2 to the Company's Current Report on Form 8-
K dated May 16, 1997 and filed June 2, 1997)
2.18 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., Hi-Pak Systems, Inc. and Owners of Hi-Pak Systems,
Inc. (incorporated by reference to Exhibit 2.3 to the Company's
Current Report on Form 8-K dated May 16, 1997 and filed June 2, 1997)
2.19 Transfer Agreement dated as of May 29, 1997 by and among Premiere
Technologies, Inc., MMP Communications, Inc. and Owners of MMP
Communications, Inc. (incorporated by reference to Exhibit 2.4 to the
Company's Current Report on Form 8-K dated May 16, 1997 and filed June
2, 1997)
2.20 Transfer Agreement dated as of May 16, 1997 by and among Premiere
Technologies, Inc., Lar-Lin Enterprises, Inc., Lar-Lin Investments,
Inc. and Voice-Mail Solutions, Inc. and Owners of Lar-Lin Enterprises,
Inc., Lar-Lin Investments, Inc. and Voice-Mail Solutions, Inc.
(incorporated by reference to Exhibit 2.5 to the Company's Current
Report on Form 8-K dated May 16, 1997 and filed June 2, 1997)
2.21 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., Voice-Net Communications Systems, Inc. and Owners
of Voice-Net Communications Systems, Inc. and Transfer Agreement dated
as of April 2, 1997 by and among Premiere Technologies, Inc., VT of
Long Island Inc. and Owners of VT of Long Island Inc. (incorporated
by reference to Exhibit 2.6 to the Company's Current Report on Form 8-
K dated May 16, 1997 and filed June 2, 1997)
32
<PAGE>
2.22 Transfer Agreement dated as of May 22, 1997 by and among Premiere
Technologies, Inc. Voice Systems of Greater Dayton, Inc. and Owner of
Voice Systems of Greater Dayton, Inc. and Transfer Agreement dated as
of May 22, 1997 by and among Premiere Technologies, Inc., Premiere
Acquisition Corporation, L'Harbot, Inc. and the Owners of L'Harbot,
Inc. (incorporated by reference to Exhibit 2.7 to the Company's
Current Report on Form 8-K dated May 16, 1997 and filed June 2, 1997)
2.23 Transfer Agreement dated as of May 30, 1997 by and among Premiere
Technologies, Inc., Audioinfo Inc. and Owners of Audioinfo Inc.
(incorporated by reference to Exhibit 2.8 to the Company's Current
Report on Form 8-K dated May 16, 1997 and filed June 2, 1997)
2.24 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., D&K Communications Corporation and Owners of D&K
Communications Corporation (incorporated by reference to Exhibit 2.10
to the Company's Current Report on Form 8-K dated May 16, 1997 and
filed June 2, 1997)
2.25 Transfer Agreement dated as of May 19, 1997 by and among Premiere
Technologies, Inc. Voice-Tel of South Texas, Inc. and Owners of Voice-
Tel of South Texas, Inc. (incorporated by reference to Exhibit 2.11
to the Company's Current Report on Form 8-K dated May 16, 1997 and
filed June 2, 1997)
2.26 Transfer Agreement dated as of May 31, 1997 by and among Premiere
Technologies, Inc. Indiana Communicator, Inc. and Owner of Indiana
Communicator, Inc. (incorporated by reference to Exhibit 2.12 to the
Company's Current Report on Form 8-K dated May 16, 1997 and filed June
2, 1997)
2.27 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc., Voice Messaging Development Corporation of
Michigan and the Owners of Voice Messaging Development Corporation of
Michigan (incorporated by reference to Exhibit 2.1 to the Company's
Current Report on Form 8-K/A dated May 16, 1997 and filed June 24,
1997)
2.28 Transfer Agreement dated as of June 13, 1997 by and among Premiere
Technologies, Inc., Voice Partners of Greater Mahoning Valley, Ltd.
and the Owners of Voice Partners of Greater Mahoning Valley, Ltd.
(incorporated by reference to Exhibit 2.2 to the Company's Current
Report on Form 8-K/A dated May 16, 1997 and filed June 24, 1997)
33
<PAGE>
2.29 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc. In-Touch Technologies, Inc. and the Owners of In-
Touch Technologies, Inc. (incorporated by reference to Exhibit 2.3 to
the Company's Current Report on Form 8-K/A dated May 16, 1997 and
filed June 24, 1997)
2.30 Transfer Agreement dated as of March 31, 1997 by and among Premiere
Technologies, Inc. and Owners of the Western Franchisees: 3325882
Manitoba Inc., 601965 Alberta Ltd., 3266622 Manitoba Inc., 3337821
Manitoba Inc. and 3266631 Manitoba Inc. (incorporated by reference to
Exhibit 2.4 to the Company's Current Report on Form 8-K/A dated May
16, 1997 and filed June 24, 1997)
2.31 Uniform Terms and Conditions, Exhibit A to Transfer Agreements by and
among Premiere Technologies, Inc., Wave One Franchisees and Owners of
Wave One Franchisees (incorporated by reference to Exhibit A to
Exhibit 2.4 to the Company's Current Report on Form 8-K dated April 2,
1997 and filed April 4, 1997)
2.32 Uniform Terms and Conditions, Exhibit A to Transfer Agreements by and
among Premiere Technologies, Inc., Wave Two Franchisees and Owners of
Wave Two Franchisees 2.15 Uniform Terms and Conditions, Exhibit A to
Transfer Agreements by and among Premiere Technologies, Inc., Wave One
Franchisees and Owners of Wave One Franchisees (incorporated by
reference to Exhibit 2.14 to the Company's Current Report on Form 8-K
dated May 16, 1997 and filed June 2, 1997)
2.33 Service and Reseller Agreement dated September 28, 1990 by and between
Amway Corporation and Voice-Tel Enterprises, Inc. (Portions of this
exhibit are the subject of a request for confidential treatment.)
3.1 Articles of Incorporation (incorporated by reference to Exhibit 3.1 to
the Registrant's Registration Statement on Form S-1 (No. 33-80547)
3.2 Articles of Amendment to Articles of Incorporation (incorporated 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 (incorporated by reference to Exhibit 3.2
to the Registrant's Registration Statement on Form S-1 (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.
34
<PAGE>
4.2 Indenture, dated as of June 15, 1997, between Premiere Technologies,
Inc. and IBJ Schroder Bank & Trust Company, as Trustee (incorporated
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 Global Convertible Subordinated Note due 2004 (incorporated 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 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)
10.1 Promissory Note dated April 30, 1997 between Premiere Communications,
Inc. and NationsBank, N.A. (South) (incorporated by reference to
Exhibit 2.4 to the Company's Current Report on Form 8-K dated April
30, 1997 and filed May 14, 1997)
10.2 Purchase Agreement, dated June 25, 1997, by and among Premiere
Technologies, Inc., Robertson, Stephens & Company LLC, Alex. Brown &
Sons Incorporated and Donaldson, Lufkin & Jenrette Securities
Corporation (incorporated by reference to Exhibit 10.1 to the
Registrant's Current Report on Form 8-K dated July 25, 1997 and filed
August 5, 1997)
10.3 1991 Non-Qualified and Incentive Stock Option Plan of Voice-Tel
Enterprises, Inc. (assumed by the Registrant) (incorporated by
reference to Exhibit 4.2 to the Registrant's Registration Statement on
Form S-8 (No. 333-29787))
10.4 1991 Non-Qualified and Incentive Stock Option Plan of VTN, Inc.
(assumed by the Registrant) (incorporated by reference to Exhibit 4.3
to the Registrant's Registration Statement on Form S-8 (No. 333-
29787))
10.5 Form of Stock Option Agreement by and between the Registrant and
certain current or former employees of Voice-Tel Enterprises, Inc.
(incorporated by reference to Exhibit 4.4 to the Registrant's
Registration Statement on Form S-8 (No. 333-29787))
10.6 Premiere Technologies, Inc. Second Amended and Restated 1995 Stock
Plan (incorporated by reference to Exhibit A to the Registrant's
Definitive Proxy Statement distributed in connection with the
Registrant's June 11, 1997 annual meeting of shareholders, filed April
30, 1997)
10.7 Voice-Tel Enterprises, Inc. Employment Agreement dated April 30, 1997
by and between Voice-Tel, Inc. and William E. Welsh
11. Statement re computation of per share earnings
27. Financial data schedule
35
<PAGE>
EXHIBIT 2.33
SERVICE AND RESELLER AGREEMENT
------------------------------
THIS AGREEMENT is made and entered into as the 28th day of September, 1990
by and between AMWAY CORPORATION, a Michigan corporation ("Amway"), having its
principal place of business at 7575 East Fulton Road, Ada, Michigan, 49365, and
Voice-Tel ENTERPRISES, INC., a Delaware corporation ("Voice-Tel"), having its
principal place of business at 77 Milford Drive, Hudson, Ohio, 44236.
RECITALS:
---------
A. Voice-Tel has developed expertise in the provision of certain telephone
services such as a voice messaging services and digital network services.
Voice-Tel provides these services both directly and through its system of
independent franchisees (the "Franchisees").
B. Amway is a world wide network sales organization that distributes
products and services through its independent distributors (the "Distributors").
C. The parties desire to enter into a relationship under which (i) Voice-
Tel and/or its Franchisees will provide certain products and services to Amway
and its Distributors for ultimate use by them and/or for resale to their
customers under Amway owned tradenames and trademarks, and (ii) Amway through
certain of its Distributors will act as the representatives of Voice-Tel and its
Franchisees for the sale of certain other telephone products and services under
Voice-Tel owned tradenames and trademarks.
AGREEMENTS
----------
NOW, THEREFORE, the parties agree as follows:
<PAGE>
ARTICLE I
---------
AMWAY PRODUCTS AND SERVICES
---------------------------
1.1 Sales to Amway and Distributors. Voice-Tel and its Franchisees will
-------------------------------
sell to Amway for ultimate use by it, and/or for resale by Amway to its
Distributors services described on Schedule 1.1(a) (the "Amway Products and
Services"). Such products and services, when used or sold by Amway and/or its
Distributors, will be identified to the public under Amway owned tradenames and
trademarks. Amway will pay for such services pursuant to the price schedule set
forth on Schedule 1.1(b). The parties agree that the terms and conditions of
Schedule 1.1(b) shall be reviewed and re-evaluated at least annually. Failure
of the parties to reach an agreement during such annual review and re-evaluation
shall give Amway certain rights as specified in Article VIII.
ARTICLE 11
----------
Voice-Tel PRODUCTS AND SERVICES
-------------------------------
2.1 Representation. Amway through certain of its Distributors will act as
--------------
representatives of Voice-Tel and its Franchisees for the sale of the telephone
products and services described on Schedule 2.1 (Voice-Tel/Amway Leads Program).
Such services will be sold under Voice-Tel owned trademarks. The commissions to
be paid by Voice-Tel to Amway for such services we set forth on Schedule 2.1.
The Amway Products and Services and the Voice-Tel/Amway Leads Program are
collectively referred to as "this program". The services referred to in
Schedule 1.1(a) and Schedule 2.1 are collectively referred to as "Services".
<PAGE>
ARTICLE III
-----------
ADMINISTRATIVE RELATIONSHIP
---------------------------
Amway and Voice-Tel shall jointly administer this program under the terms
and conditions set forth and mutually agreed upon in the following schedules:
Schedule 3.1 Order Processing Procedures
Schedule 3.2 Billing Procedures
Schedule 3.3 Collection Procedures
Schedule 3.4 Payment Procedures
Schedule 3.6 Credit/Refund Procedures
Schedule 3.6 Price Change Procedures
Schedule 3.7 Product/Services Change procedures
Schedule 3.8 Distributor/Franchisee Relationship
No changes shall be made in the above schedules without written mutual
consent of both Amway and Voice-Tel.
ARTICLE IV
----------
MARKETING RELATIONSHIP
----------------------
Amway and Voice-Tel shall jointly provide marketing and sales support of
this program under the terms and conditions set forth and mutually agreed upon
in the following schedules:
Schedule 4.1 Selling Channels
Schedule 4.2 Training Seminars
Schedule 4.3 Marketing Seminars
<PAGE>
Schedule 4.4 Customer Service
Schedule 4.5 Literature and Marketing Materials
Schedule 4.6 Press Releases
No changes shall be made in the above schedules without written mutual
consent of both Amway and Voice-Tel.
ARTICLE V
---------
COVENANTS OF Voice-Tel
----------------------
5.1 Provision of Services. Voice-Tel will use its reasonable best efforts
---------------------
to provide Services of high quality on a consistent basis in accordance with the
following schedules:
Schedule 5.1(a) Equipment Standards
Schedule 5.1(b) Equipment Service Level Standards
Schedule 5.1(c) Customer Service Standards
Voice-Tel will use its reasonable best efforts to obtain and secure the
participation and cooperation of all present and future Franchisees in the
provision of Amway Products and Services. The parties agree that the geographic
scope and time table for availability of Amway Products and Services shall be as
set forth in Schedule 5.1(d) Geographic Scope; Time Table. Further, Voice-Tel
represents and warrants that execution of this Agreement and performance by
Voice-Tel of its obligations under this Agreement does not and will not breach
any other agreement to which Voice-Tel is or will be a party, including but not
limited to, any agreements with its Franchisees.
<PAGE>
5.2 Compliance. Voice-Tel will comply with all federal, state and local
----------
statutes and regulations ("Laws") relating to the performance of this Agreement
by Voice-Tel.
5.3 Information as to Regulations. Voice-Tel will inform Amway of any
-----------------------------
known federal, state and local communications statutes and regulations
("Communications Laws") applicable to the marketing of the Services, including
all known licenses and/or permits needed for performance of this Agreement by
Amway.
5.4 Trademarks and Tradenames. Amway will not sell the Services under any
-------------------------
trademark or tradename other than those owned by Amway or Voice-Tel. Amway will
take all reasonable steps to investigate any complaints by Voice-Tel relating to
practices or activities of Distributors and Amway will advise Voice-Tel of the
results of any such investigation including any actions being taken by Amway
based upon the results of such investigation.
Each party grants to the other a non-exclusive license to use the
trademarks and tradenames owned or licensed by such party, the term of such
license to run as long as this Agreement remains in effect. Any proposed use by
a party of the trademarks or tradenames owned or licensed by the other party
shall be subject to the terms and provisions of Schedule 4.5. Neither party
will contest the validity of or otherwise challenge the trademarks or tradenames
owned or licensed by the other party. Any use by a party of the trademarks or
tradenames owned or licensed by the other party shall inure solely and
exclusively to the benefit of the owner or licensor, as the case may be. The
parties agree that upon termination of this Agreement, neither party will use
any trademarks or tradenames owned or licensed by the other party and neither
party shall be indebted or be required to pay any sums to the other party based
upon use of trademarks or tradenames prior to termination of this Agreement.
<PAGE>
ARTICLE VI
----------
COVENANTS OF AMWAY
------------------
6.1 Sale of Services. Amway will make reasonable best efforts to (i)
----------------
promote the sale and distribution of the Services and (ii) encourage and give
assistance to its Distributors to sell the Services to their existing and new
customers.
6.2 Compliance. Amway will comply with all Laws relating to the
----------
performance of this Agreement by Amway. Further, Amway represents and warrants
that execution of this Agreement and performance by Amway of its obligations
under this Agreement does not and will not breach any other agreement to which
Amway is or will be a party, including but not limited to any agreements with
its Distributors.
ARTICLE VII
-----------
TRADE SECRETS
-------------
7.1 Trade Secrets of Amway. Voice-Tel acknowledges that the names, ADA
----------------------
numbers and addresses of Distributors, any information about Amway customers and
any information either relating to the internal management/operations of Amway
or designated by Amway as confidential and/or proprietary ("Amway information")
is the sole property and trade secret of Amway. Amway Information shall not be
used, sold, disclosed or assigned by Voice-Tel for any purpose, except to the
extent necessary to the performance of this Agreement. Upon termination of the
Agreement, Voice-Tel shall return all Amway information to Amway. The
prohibitions contained in this paragraph shall survive such termination, except
that Voice-Tel may contact customers and Distributors who are existing customers
of the Services in order to continue to provide the Services to such customers
or Distributors.
<PAGE>
7.2 Trade Secrets of Voice-Tel. Amway acknowledges that all information
--------------------------
relating to the development, design and operation of the Services and any
information either relating to the internal management/operations of Voice-Tel
or designated by Voice-Tel as confidential and/or proprietary ("Voice-Tel
Information") is the sole property and trade secret of Voice-Tel. Voice-Tel
Information will not be used, sold, disclosed or assigned by Amway for any
purpose, except to the extent necessary to the performance of this Agreement.
Upon termination of this Agreement, Amway will return all Voice-Tel Information
to Voice-Tel. The prohibitions contained in this paragraph shall survive such
termination.
7.3 Confidentiality. The parties agree that the terms and conditions of
---------------
this Agreement, including all current and formerly effective Schedules, are
strictly confidential and will not be disclosed by either party to any third
party except that Voice-Tel may disclose all or any portion of this Agreement to
any existing or prospective Franchisee provided that such existing or potential
Franchisee agrees to and is bound to maintain such disclosures in strict
confidence.
The parties agree that any information which is either in the public domain
or obtained from a third party without breach by such third party of any
confidentiality or secrecy obligations of such third party shall not be subject
to the provisions of Sections 7.1 or 7.2 regardless of whether such information
is designated confidential and/or proprietary by either party.
ARTICLE VIII
------------
EXCLUSIVITY
-----------
During the term of this Agreement and any renewals, Amway will not directly
or indirectly represent any party in respect of the sale or distribution of any
voice managing services competitive with the Services, except that Amway and any
Distributor currently acting as distributor for Amvox, Inc., a California
corporation ("Amvox"), may continue to so act in any
<PAGE>
area where Voice-Tel is not operating until such time as Voice-Tel begins
franchise operations and assumes responsibilities for operations of Amvox sites
in such area. The parties agree that Amway may terminate exclusivity under this
Agreement by written notice to Voice-Tel if i) Voice-Tel commits any material
breach of any provision of this Agreement, including failure to meet any of the
terms and conditions contained in any of the Schedules, and such material breach
is not cured in accordance with Section 9.2(a) or ii) Amway and Voice-Tel are
unable to reach agreement during the annual review of the terms and Conditions
of Schedule 1.1(b)
ARTICLE IX
----------
TERM AND TERMINATION
--------------------
9.1 Term. The initial term of this Agreement shall be a period of five
----
years beginning on the date of execution of this Agreement. The Agreement shall
be automatically renewable for an indefinite number of one year renewal periods
if neither party gives written notice of termination at least 180 days prior to
the end of the initial term of this Agreement or any renewal period.
9.2 Termination. Either party may terminate this Agreement at any time in
-----------
the event that:
(a) the other party breaches any provision of this Agreement in any
material respect and falls to take curative steps or actions within 30
days of receipt of written notice of such breach, such curative steps
or actions to be effective in remedying such breach no later than 60
days after receipt of written notice of such breach except in the case
where the breach relates to equipment failures and/or malfunctions in
the provision of the Services where the curative steps or actions
shall be effective in remedying such breach no later than 120 days
after receipt of written notice of such breach.
<PAGE>
(b) the other party shall make a general assignment for the benefit
of creditors, shall admit in writing its inability to pay its debts as
they become due, shall file a petition in bankruptcy, be adjudicated a
bankrupt or insolvent, shall file a petition seeking any arrangement,
composition, readjustment or similar relief under any present or
future federal or state statute, law or regulation, shall file an
answer admitting or not contesting the material allegations of a
petition against such other party in any such proceeding, or shall
seek consent to or acquiesce in the appointment of any trustee or
receiver of such other party or any material part of its assets; or
(c) any proceeding against the other party seeking an arrangement,
composition, readjustment or similar relief under any present or
future federal or state statute, law or regulation shall not have been
dismissed within 60 days after the commencement thereof, or the
appointment of any trustee or receiver of such other party or of any
material part of its assets without the consent of acquiescence of
such other party shall not have been vacated within 60 days after such
appointment.
ARTICLE X
---------
INDEMNIFICATION
---------------
10.1 Amway's Indemnification. Amway will indemnify and hold harmless
-----------------------
Voice-Tel and its Franchisees, shareholders, directors, officers, employees and
agents from any and all costs, expenses, losses, damages and liabilities
incurred or suffered, directly or indirectly, by any of them (including, without
limitation, reasonable legal fees and expenses) resulting from or attributable
to (a) the breach of, or misstatement in, any one or more of the
<PAGE>
representations, warranties, covenants or agreements of Amway contained in this
Agreement, (b) the breach by Amway of any Laws, (c) any claims by Distributors
due to the alleged failure of Amway to pay commissions or bonuses allegedly
payable to such Distributors, (d) any tax liability resulting from the failure
of Amway or its Distributors to report, collect or pay applicable withholding,
payroll or similar taxes arising out of the payment of such commissions and
bonuses, (e) any tortious or unlawful conduct of Amway, (f) any claims by any
Distributors based upon any agreement or contract between Amway and the
Distributor, or (g) any claims based upon use by VoiceTel or Amway of Amway-
owned or licensed trademarks or tradenames.
10.2 Voice-Tel's Indemnification. Voice-Tel will indemnify and hold
---------------------------
harmless Amway and its Distributors, shareholders, directors, officers,
employees and agents from any and all costs, expenses, losses, damages and
liabilities incurred or suffered, directly or indirectly by any of them
(including, without limitation, reasonable legal fees and expenses) resulting
from or attributable to (a) the breach of, or misstatement in, any one or more
of the representations, warranties, covenants or agreements of Voice-Tel
contained in this Agreement, (b) the breach by Voice-Tel of any Laws, (c) any
tortious or unlawful conduct of Voice-Tel, (d) any claims by any Franchisees
based upon any agreement or contract between Voice-Tel and the Franchisee, (e)
any tax liability resulting from the failure of Voice-Tel or its Franchisees to
report, collect or pay applicable withholding, payroll or similar taxes arising
out of any agreements or contracts between Voice-Tel and its Franchisees, or (f)
any claims based upon use by Amway or VoiceTel of Voice-Tel owned or licensed
trademarks or tradenames.
10.3 Defense Against Asserted Claims. If any claim or assertion of
-------------------------------
liability is made or asserted by a third party against a party indemnified
pursuant to this Article ("Indemnified Party") based on any liability or
obligation which, if established, would entitle the indemnified Party to
indemnification by an indemnifying Party pursuant to this Article ("Indemnifying
Party"), the Indemnified Party shall with reasonable promptness give to the
<PAGE>
Indemnifying Party written notice of the claim or assertion of liability and
request the Indemnifying Party to defend the same. Failure so to notify the
Indemnifying Party shall not relieve the Indemnifying Party of any liability
that the Indemnifying Party might have to the Indemnified Party unless such
failure materially prejudices the Indemnifying Party's position. The
Indemnifying Party shall have the right to defend against such liability or
assertion, in which event the Indemnifying Party, shall give written notice to
the Indemnified Party of acceptance of the defense of such claim and the
identity of counsel selected by the Indemnifying Party with respect to such
matters. The Indemnified Party shall be entitled to participate with the
Indemnifying Party in such defense and also shall be entitled at its option to
employ separate counsel for such defense at the expense of Indemnified Party.
In the event the Indemnifying Party does not accept the defense of the matter a
provided above or in the event the Indemnifying Party or its counsel fails to
use reasonable care in maintaining such defense, the Indemnified Party shall
have the full right to employ counsel for such defense at the expense of the
Indemnifying Party. Amway and Voice-Tel will cooperate with each other in the
investigation and in the defense of any such action, and the relevant records of
each shall be available to the other with respect to such defense.
ARTICLE XI
----------
NOTICES
-------
All notices, requests, demands and other communications under this
Agreement shall be in writing and signed an behalf of the party giving the same
and shall be deemed duly given (i) when personally delivered, (ii) upon receipt
of a telephonic facsimile transmission with a confirmed telephonic transmission
answer back, (iii) three days after having been deposited in first class United
States mail, certified or registered, return receipt requested and postage
prepaid, or (iv) one business day after having been dispatched by a nationally
recognized overnight courier service providing guaranteed delivery on the next
business day to the parties at the following respective addresses (or such other
<PAGE>
address as any party may subsequently provide to the other parties by notice
given in accordance with this Article):
If to Amway: Amway Corporation
7575 East Fulton Road
Ada, Michigan 49355
Attention: Mr. James Harper
With a copy to: Amway Corporation
7676 East Fulton Road
Ada, Michigan 49355
Attention: Mr. Michael S. Callahan, Esq.
If to Voice-Tel: Voice-Tel Enterprises, Inc.
77 Milford Drive
Hudson, Ohio 44236
Attention: Alan J. Carter
With a copy to: Deanna C. Kursh, Esq.
Benesch, Friedlander, Coplan & Aronoff
1100 Citizens Building
850 Euclid Avenue
Cleveland, Ohio 44114
provided that insofar as any provision of the Agreement requires that any notice
or other communication be given by a specified date or time, such notice shall
be effective and timely only if actually received by the date and time
specified.
ARTICLE XII
-----------
ASSIGNMENT, THIRD PARTIES, BINDING EFFECT
------------------------------------------
The rights under this Agreement are not assignable nor are the duties
delegable by a party without the written consent of the other party first having
been obtained, and any attempted assignment or delegation without such consent
will be null and void; provided, however, that Voice-Tel may assign its rights
and delegate its duties under this Agreement to its Franchisees. Voice-Tel
<PAGE>
acknowledges that any assignment or delegation of its rights and/or duties under
this Agreement to its Franchisees does not relieve or otherwise release Voice-
Tel from any of its obligations under this Agreement. Nothing contained in this
Agreement is intended to convey upon any person or entity, other than the
parties and their successors in interest and permitted assigns, any rights or
remedies under or by reason of this Agreement unless expressly stated. All
covenants, agreements, representations and warranties of the parties contained
in this Agreement are binding on and will inure to the benefit of Amway and
Voice-Tel, respectively, and their respective successors and permitted assigns.
ARTICLE XIII
------------
MISCELLANEOUS
-------------
13.1 Completion of Schedules; Amendments to Schedules. The parties
------------------------------------------------
acknowledge that, as of the date of execution of this Agreement, none of the
Schedules referred to in this Agreement have been reduced to writing but that
substantial negotiations and discussions have taken place and that certain
activities have in fact been implemented The parties agree that all initial
Schedules to this Agreement shall be completed and approved by the parties
within sixty (60) days of the date of execution of this Agreement. The parties
agree that all completed and approved Schedules including any subsequently
approved amendments, are incorporated into this Agreement by reference as if
fully set forth in this Agreement. Failure to complete and approve all initial
Schedules within the sixty (60) day time limit shall entitle either party, upon
written notice to the other, to render this Agreement null and void. The sixty
(60) day time limit may be extended upon the mutual written consent of the
parties. The parties contemplate that from time to time, Schedules will be
amended by written agreement of the parties or pursuant to the amendment
procedure described in those Schedules. Upon amendment of any such Schedule,
such amended Schedule shall be substituted for the prior Schedule for all
purposes of this Agreement.
<PAGE>
13.2 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which will be deemed to be an original but all of which
together will constitute one and the same document.
13.3 Captions and Section Headings. Captions and section headings are for
-----------------------------
convenience only, are not a part of this Agreement and may not be used on
construing it.
13.4 Waivers. Any failure by any of the parties to comply with any of the
-------
obligations, agreements or conditions set forth in this Agreement may be waived
by the other party or parties, but any such waiver will not be deemed a waiver
of any other obligation, agreement or condition contained herein.
13.5 No Agency, etc. Neither party shall or shall be deemed to be an
--------------
agent, employee or partner of, or joint venturer with, the other party.
13.6 Governing Law. This Agreement shall be governed by, and construed
-------------
and enforced in accordance with the laws of the State of Michigan applicable to
agreements made and to be performed therein, without regard to any conflicts or
choice of law rules.
13.7 Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties relative to the use and/or resale of the products and
services provided. There are no verbal agreements, representations, warranties,
undertakings or agreements between the parties, and this Agreement may not be
amended or modified in any respect, except by a written instrument signed by the
parties to this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
date first above written.
AMWAY CORPORATION
By: /s/ James J. Rosloniec
-------------------------------------------
James J. Rosloniec
Its: Vice President-Finance, Treasurer
VOICE-TEL ENTERPRISES, INC.
By: /s/ Alan J. Carter
-------------------------------------------
Alan J. Carter
Its: Chairman
<PAGE>
SCHEDULE 1.1(a)
AMWAY PRODUCTS AND SERVICES DESCRIPTION
(In these schedules referred to as "AMVOX by Voice-Tel.")
The following service levels will be offered with AMVOX by Voice-Tel.
<TABLE>
<CAPTION>
AMVOX AMVOX AMVOX
STANDARD ENHANCED PREMIER
-------------------------------------- ---------------------------- ---------------------------
<S> <C> <C> <C>
Greeting Length 30 seconds 60 seconds 90 seconds
Message Length 30 seconds 2 minutes 2 minutes
Retention 5 days 5 days 7 days
Number of Messages 10 20 30
Other Features: - Answer Only - Distribution List - All enhanced features
- No group communication features - Networking - Pause Activation
- Make and give private - Multiple Make & Give
- Pager enable/disable - Urgent Message
- Activate receipt time
- New message notification
Maximum Limits 1000 messages 1000 messages 1500 messages
1500 greetings 1500 greetings 2000 greetings
</TABLE>
ResponsePlus
- - ------------
- - - 2-minute greeting
- - - 20 messages
- - - No group communication features
- - - Basic monthly charge allows up to 1000 calls per month. Calls in excess of
1000 are subject to surcharge.
- - - Maximum of 5000 calls per month. Box is subject to cancellation if calls
exceed 5000.
VoiceCast
- - ---------
- - - 3-minute greeting only
- - - Basic monthly charge allows up to 1000 calls per month. Calls in excess of
1000 are subject to surcharge.
<PAGE>
- - - Maximum of 5000 calls per month. Box is subject to cancellation if calls
exceed 5000.
Approvals: /s/ James J. Rosloniec 11/28/90 /s/ Alan J. Carter 11/28/90
------------------------------- ---------------------------
<PAGE>
SCHEDULE 1.1(a)
AMWAY PRODUCTS AND SERVICES DESCRIPTION (Cont.)
MenuBox
- - -------
- - - 1-minute greeting only
- - - Can branch to any number of regular service boxes.
- - - Must have a minimum of one other regular box in addition to menubox.
- - - Basic monthly charge allows up to 2000 calls per month. Calls in excess of
2000 are subject to surcharge.
- - - Maximum of 5000 calls per month. Box is subject to cancellation if calls
exceed 5000.
MenuMax
- - -------
- - - 3-minute greeting only.
- - - Can branch to any number of regular service boxes.
- - - Must have a minimum of one other regular box in addition to menubox.
- - - Basic monthly charge allows up to 1000 calls per month. Calls in excess of
1000 are subject to surcharge.
- - - Maximum of 5000 calls per month. Box is subject to cancellation if calls
exceed 5000.
Service Initiation Fee
- - ----------------------
A one-time, non-refundable, service initiation fee will be charged for each
mailbox utilizing any of the basic AMVOX Service Levels.
Pager Outdial
- - -------------
- - - Equipment will outdial from a voice mailbox to activate a customer-owned
pager.
- - - One (1) pager outdial per message received.
- - - Basic monthly charge allows up to 100 pager outdials per month. Pages in
excess of 100 are subject to surcharge.
Approvals: /s/ James J. Rosloniec 11/28/90 /s/ Alan J. Carter 11/28/90
------------------------------- ---------------------------
<PAGE>
SCHEDULE 1.1(B)
[REVISED EFFECTIVE AUGUST 1, 1997]
AMWAY PRODUCTS AND SERVICES PRICING
MAILBOX PRODUCTS AND SPECIALTY MAILBOX PRODUCTS PRICING STRUCTURE
MONTHLY SUBSCRIPTION SERVICE
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
ONE TIME CALL
AMVOX AMVOX RESPONSE PAGER SCV INIT MINI CAST ANSWERING
ENHANCED PREMIER MENUBOX PLUS VOICECAST MENUMAX OUTDIAL FEE BOX TEST BOX
- - ---------------------------------------------------------------------------------------------------------------------------------
SKU# E-1012 E-1013 E-1016 E-1014 E-1015 E-1017 E-1129 E-1130 E-1699 E-2726
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Voice-Tel Monthly Fees [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]
Maximum number of Messages 1,000 1,500 N/A 1,000 N/A N/A 100 N/A 1,500
per month
Calls allowed Per month -
Greeting 1,500 2,000 2,000 1,500 1,000 1,000 N/A N/A 2,000 2,000
Calls in excess of the
limitation are subject
to charges
Excess of Limitation Charge [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]
up to 5,000 calls
Excess of Limitation Charge [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]
5,001 calls and above
Aggregate number of calls or 5,000 5,000 5,000 5,000 5,000 5,000 N/A N/A 5,000 10,000
messages at which service is
subject to cancellation
- - ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
***Confidential information omitted and filed separately with the Securities
Exchange Commission.
<PAGE>
<TABLE>
<CAPTION>
BASIC DIRECTOR PREMIER
ANSWER DIALOGUE MENU PLUS BROADCAST
SKU# E-2211 E-2212 E-2213 E-2214 E-2215
- - ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Voice-Tel Monthly Fees [***] [***] [***] [***] [***]
Maximum number of Messages 500 500 N/A 1,500 N/A
Calls Allowed Per Month - Greeting 750 750 750 2,000 N/A
Calls in excess of the limitation are
subject to charges
Excess of Limitation Charge [***] [***] [***] [***] [***]
Aggregate number of calls or
messages at which service is subject
to cancellation 5,000 5,000 5,000 5,000 N/A
- - ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MONTHLY NETWORK MESSAGING SERVICE
- - -----------------------------------------------------------------------------------------------------------------------------------
NETWORKING NETWORKING NETWORKING NETWORKING NETWORKING NETWORKING
REGULAR URGENT REGULAR URGENT URGENT REGULAR REGULAR URGENT REGULAR URGENT REGULAR URGENT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- - -----------------------------------------------------------------------------------------------------------------------------------
PER BOX PER MONTH 0-100 Messages 101-400 Messages 401-800 Messages 801-1,250 Messages 1,251-2,500 Messages 2,501+ Messages
- - -----------------------------------------------------------------------------------------------------------------------------------
Per Message Charge Per Message Charge Per Message Charge Per Message Charge Per Message Charge Per Message Charge
Voice-Tel Fees [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]
"Network Messaging" means any messages sent across the telecommunications network owned and operated by Voice-Tel Network
Limited Partnership between mailboxes that are not on the same local system.
***Confidential information omitted and filed separately with the Securities Exchange Commission.
</TABLE>
<PAGE>
SCHEDULE 2.1
LEADS PROGRAMS
(including Account Executive Program)
It is felt that Amway distributors can be competitive in marketing AMVOX to
accounts requiring less than 50 mailboxes that do not require custom
applications.
In order to give distributors appropriate alternatives when confronted with
custom applications, and/or accounts exceeding 50 boxes, the following
alternatives are proposed.
LEADS PROGRAM - Distributor has large customer contact, but not an
- - -------------
interest/expertise/"certification" to sell personally. Distributor interests;
customer in voicemail and completes an AMVOX Lead form (customer information;
address, key contact, number of employees, communication needs, etc.), and an
"invitation" (on company letterhead) for a Voice-Tel representative to do a
presentation. The form and invitation should be mailed to the AMVOX department
at Amway. Copies would be retained and originals forwarded to the National
Operations Center, then on to the franchises. Immediate turnaround is essential
in each case. This would be treated entirely as a Voice-Tel sale, with the
following compensation to Amway for generating this "hot lead":
10% of all account revenues generated and collected for service provided
during the first 12 months.
ACCOUNT EXECUTIVE PROGRAM - Distributor wants to present, sell and service large
- - -------------------------
account with custom applications, and have competitive pricing to do so.
Distributors interested in this program must undergo "certification training."
Training and acceptance standards will be mutually agreed upon by Voice-Tel and
Amway. Once approved, the distributor is an account executive capable of the
most complex presentations and application of voicemail services. The
distributor would work with the franchisee to determine appropriate product
offerings and pricing to be offered to each prospective customer. The
distributor would then be responsible for the presentation, sale, customer
training and support. Voice-Tel will handle the billing and collection. Amway
will be compensated under the following criteria:
- 20% of all account revenues generated and collected for service provided
during the first 12 months on all new boxes.
---
<PAGE>
- 4% of all account revenues generated and collected for service provided
an all boxes on a monthly basis beginning with the thirteenth month and
continuing for as long as the Agreement or successor agreement regarding
AMVOX Service is in place between Amway and Voice-Tel, and the selling
distributor passes annual recertification as judged by Amway and
Voice-Tel.
Approvals: /s/ James J. Rosloniec 11/28/90 /s/ Alan J. Carter 11/28/90
------------------------------- ---------------------------
<PAGE>
SCHEDULE 2.1
LEADS PROGRAM (Cont.)
COMPENSATION - Voice-Tel will monitor Leads and Account Executive Program
- - ------------
accounts for compensation by identifying them as "Amway," and identifying also
via ADA number. A monthly report with detail broken down by franchise location
will be generated to Amway giving account status (presented, pending disposition
or sold with monies due to Amway). Payment will be "netted out" of Amway's
monthly check to Voice-Tel.
Approvals: /s/ James J. Rosloniec 11/28/90 /s/ Alan J. Carter 11/28/90
------------------------------- ---------------------------
<PAGE>
SCHEDULE 3.1
ORDER PROCESSING PROCEDURES
Amway will be responsible for receiving all orders for Amway Products and
Services. Orders will be received and processed as follows.
1. Orders will be accepted via the Amway Personal Shoppers Catalog Telephone
Ordering number, 1-800-253-6500, 7 a.m. to 12:00 midnight Eastern time
Monday through Friday, Saturday 8:30 a.m. to 5 p.m. Eastern Time. Mailers
will be accepted on form SA-285, sent to 7575 Fulton Street East, Ada, MI
49355-0001. Orders will be accepted with bankdraft, VISA or MasterCard or
consolidated billing as forms of payment.
2. Orders accepted will be transmitted to the Voice-Tel National Operations
Center four times daily for initialization. The information to be
transmitted will be sufficient to properly activate the class of service
desired and support necessary subsequent billing and reconciliation.
3. Amway will send a fulfillment letter to the ordering distributor/customer
for each box ordered. The fulfillment letters will contain all information
necessary to allow the customer to begin using the service, as well as
other fulfillment literature describing the terms and conditions under
which the service is provided.
Approvals: /s/ James J. Rosloniec 11/28/90 /s/ Alan J. Carter 11/28/90
------------------------------- ---------------------------
<PAGE>
SCHEDULE 3.2
BILLING PROCEDURES
Amway will be responsible for billing for all services offered as part of the
Amway Products and Services. Billings will include all basic monthly charges as
well as any peripheral services available to box holders. There will be three
types of payment mechanisms available for Amway Products and Services as
outlined below.
1. Credit Cards
------------
A. Credit cards will be authorized and billed on the billing date for the
AMVOX box.
B. Refused authorizations:
-- A letter will go out immediately from Amway to the party
responsible for payment on the box saying the authorization on the
credit card was not accepted by the bank and requesting an
alternate form of payment be supplied immediately.
-- A service interrupt will be set to occur on the box in question 15
days from the billing date. This will stop the owner from entering
the box for messages which will prompt them to call for help.
-- The box will be cancelled automatically 30 days from the billing
date if no alternate payment is received.
C. Amway will institute collection procedures for appropriate amounts
(see Schedule 3.3).
D. Voice-Tel will be paid only for boxes on which Amway collects payment
provided Amway follows collection procedures as outlined in Schedule
3.3. Parties acknowledge that Amway will also be making periodical
payments to AMVOX for service provided on non-transferred sites.
Approvals: /s/ James J. Rosloniec 11/28/90 /s/ Alan J. Carter 11/28/90
------------------------------- ---------------------------
<PAGE>
SCHEDULE 3.2
BILLING PROCEDURES (Cont.)
2. Bank Drafts
-----------
A. Boxes set up for bank draft billing must be set up as follows:
1. The customer/distributor must send in a Bank Draft Order Form
(SA-5596) along with a sample check and payment for the first
month's service.
2. Payment via bank draft will begin on the box for the second 30
days of service. Bank Drafts will be submitted to the specified
banks on the billing date.
B. Returned Bank Drafts will be handled as follows;
1. The box owner will be immediately contacted in writing by Amway's
Accounts Receivable department and asked for payment via credit
card or check.
2. Boxes for which payment is not received within 14 days will be
cancelled by Accounts Receivable.
3. Depending an the amount involved, Amway will institute
appropriate collection procedures (see Schedule 3.3).
C. Voice-Tel will be paid up front as the draft is sent to the bank.
Amway will be responsible for collections on bank drafts.
Approvals: /s/ James J. Rosloniec 11/28/90 /s/ Alan J. Carter 11/28/90
------------------------------- ---------------------------
<PAGE>
SCHEDULE 3.2
BILLING PROCEDURES (Cont.)
3. Consolidated Billing Accounts
-----------------------------
Accounts may be set up to receive a monthly statement from Amway for Amway
Products and Services provided they have five boxes or more. Amway will
use its reasonable best effort to assure that accounts established under
consolidated billing meet all minimum necessary requirements established by
Amway. These accounts are set up and billed as follows:
A. The customer/distributor must fill out a Corporate Profile which
provides information such as name, address, billing address, statement
format, person responsible for the bill, and contact's telephone
number. The profile must be received and input at Amway for the
account to be activated. A Corporate I.D. will be assigned based on
the Corporate Profile.
B. All orders for a consolidated customer will be placed using the
assigned Corporate I.D. Orders may be placed using the normal order
methods (See schedule 3.1).
C. The Billing Cycle
-----------------
1. Statements will be sent approximately 25 days in advance of the
billing date for next month's service. The first month, two
statements will be sent. One for the first 30 days of service
(due upon receipt), the other for the next 30 days of service.
2. Incremental statements will be generated for any changes in
service prior to the due date. These statements will cover only
changes in service and will be due on receipt. A separate
statement will be sent during the month to cover the billing for
usage and will be due upon receipt.
3. On accounts where payment is not received by five days past the
due date, an interrupt will be placed on the box. When payment
is received for a box, the interrupt will be removed.
4. If payment is not received by 15 days after the due date, the box
will be cancelled.
5. Payments received prior to the due date will be invoiced (i.e.,
distributors given credit, AMVOX/Voice-Tel paid) on the due date.
Payments received after the due date will be invoiced when
received.
<PAGE>
6. Amway Accounts Receivable department will monitor accounts with
consistent payment records and have the flexibility to mark such
accounts to keep them from automatic cancellation where
warranted.
D. Payment to AMVOX/Voice-Tel will be triggered at the time of invoicing;
i.e., when payment is received.
Approvals: /s/ James J. Rosloniec 11/28/90 /s/ Alan J. Carter 11/28/90
------------------------------- ---------------------------
<PAGE>
SCHEDULE 3.3
COLLECTION PROCEDURES
Amway will be responsible for all reasonable best efforts to collect on all
accounts for which payment has not been received. The extent of the collection
effort will be based on the amount to be collected and the length of time
outstanding and will be determined by the Amway Accounts Receivable department.
The collection effort to be made in the normal course of business by type of
payment will be as follows:
1. Credit Card
-----------
A. Credit cards used for new orders will be authorized at the time of
order. Orders will be refused for credit cards that are rejected.
B. Each month on the billing date, Amway will seek authorization for each
credit card prior to invoicing for the monthly payment. For credit
cards that are rejected, a letter will be generated systematically
requesting an alternate form of payment be given to Amway immediately.
The box will be set for a service interrupt 15 days from the billing
date. If no alternate payment is received, the box will be cancelled
at 30 days.
C. Collection from Distributors--Amway will collect from distributors for
----------------------------
amounts due for their service by processing a credit (Code 9) on their
Direct Distributor Summary. This will take place immediately after
the box is cancelled.
D. Collection from Customers
-------------------------
1. For amounts owed by customers of less than $100, the letter at
the time of the rejected authorization will be the only effort
made. The amount owed will be written off.
2. Amounts of $100 and up will be given to a collection agency to
follow up with a series of three demand letters.
3. For amounts in excess of $600, the agency may send a
representative in person to attempt to collect. If unsuccessful,
Amway will be given the option to use an attorney and file suit.
The decision to file suit will be made on an individual basis by
the Amway Accounts Receivable department.
<PAGE>
2. Bank Draft
----------
Bank drafts are sent to the bank on the billing date. Of the bank drafts
that are going to be returned for various reasons, 90% are returned within
two weeks. The collection procedures for returned drafts are identical to
those outlined above for credit cards.
Approvals: /s/ James J. Rosloniec 11/28/90 /s/ Alan J. Carter 11/28/90
------------------------------- ---------------------------
<PAGE>
SCHEDULE 3.3
COLLECTION PROCEDURES (Cont.)
3. Consolidated Billing
--------------------
A. Consolidated statements are sent out 25 days in advance of the due
date. The statements cover the next 30 days of service (see Schedule
----
3.2). If payment is not received by five days after the due date, the
account is set for service interrupt. If payment is not received by
15 days after the due date, the account is cancelled.
B. The collection procedures are identical to those outlined above for
credit cards.
C. The Accounts Receivable department has the flexibility within the
system to inhibit the automatic cancellation of an account if the
payment history shows the account to be reliable and payment is
expected.
Approvals: /s/ James J. Rosloniec 11/28/90 /s/ Alan J. Carter 11/28/90
------------------------------- ---------------------------
<PAGE>
SCHEDULE 3.4
PAYMENT PROCEDURES
Amway will pay Voice-Tel or its assigns for service provided based on the
amounts shown in Schedule 1.1(b). The payment will be made by check(s) on the
10th of the month following the month of service. The amount to be paid will
be divided into three checks as follows:
1. One check to AMVOX, Inc., for AMVOX service provided by non-transferred,
AMVOX-owned systems.
2. One check to Voice-Tel for AMVOX service provided by Voice-Tel franchise
systems as designated by Voice-Tel.
3. One check for Network revenues to be paid to Voice-Tel or its assigns.
The amounts paid will be based on the type of service and the checks will be
accompanied by a reconciliation report which shows service by type and by
system.
The timing and amounts to be paid have been addressed in Schedules 3.2 (Billing
Procedures) and 3.3 (Collection Procedures).
Approvals: /s/ James J. Rosloniec 11/28/90 /s/ Alan J. Carter 11/28/90
------------------------------- ---------------------------
<PAGE>
[missing a page]
<PAGE>
SCHEDULE 3.5
CREDIT/REFUND PROCEDURES (Cont.)
7. Voice-Tel agrees to document all Service Level Challenges in accordance
with the definitions of Schedule 5.1(b) and to keep a record of the same at
the Voice-Tel National Operations Center. This documentation shall be used
to ascertain the applicability of any credit/refund condition.
8. Any conflicts relative to the applicability of a credit/refund condition
are to be handled between the Voice-Tel Director of Franchise Operations
and the Amway Marketing and Programs and Services personnel responsible for
the AMVOX by Voice-Tel program with the consultation and approval of the
affected franchise service center location.
9. The parties agree that this schedule shall be subject to review at least
every 90 days, the first such review within 90 days of the date of
execution shown below. Any changes to this schedule shall require mutual
agreement of both parties.
Approvals: /s/ James J. Rosloniec 11/28/90 /s/ Alan J. Carter 11/28/90
------------------------------- ---------------------------
<PAGE>
SCHEDULE 3.6
PRICE CHANGE PROCEDURE
Amway agrees to pay to Voice-Tel the amounts for Amway Products and Services
purchased hereunder until 12 months from the official relaunch date of the
program, at the prices set forth on Schedule 1.1(b). Schedules 1.1(a) and
1.1(b) will be reviewed and reevaluated annually, the first such review to be
completed on or before February 1, 1992. Amway and Voice-Tel will develop for
review proposals addressing pricing, terms, conditions and margin and profit
requirements needed to meet distributor/franchises and Amway/Voice-Tel
objectives.
Amway distributors and Voice-Tel franchisees will be provided 90 days notice
before new pricing can become effective. Price changes made necessary as a
result of agreed upon changes to Amway Products and Services or the program will
also require a 90-day notice to Amway distributors and Voice-Tel franchisees.
Pricing, terms and conditions for any products for services added to the Amway
Products and Services will be subject to the annual review set forth above.
Approvals: /s/ James J. Rosloniec 11/28/90 /s/ Alan J. Carter 11/28/90
------------------------------- ---------------------------
<PAGE>
SCHEDULE 3.7
PRODUCT/SERVICE CHANGE PROCEDURES
Voice-Tel and its franchisees will sell to Amway for ultimate use by it and/or
for resale by Amway to its distributors products and services described on
Schedule 1.1(a). Amway and Voice-Tel agree that market changes, challenges,
opportunities, etc., may require that product/service/program changes be made.
Requests for product/service program changes must be submitted in writing to the
appropriate Amway/Voice-Tel personnel for evaluation and consideration. Both
parties will keep each other informed as to who the appropriate individuals are.
Amway and Voice-Tel must mutually agree to any requested product/service/program
change before any change can be made.
Any products/services/programs added to the Amway Products and Services offering
-----
will be subject to the above change requirements upon addition to the program.
New product/service/program offerings or requests must be submitted to the AMVOX
Relaunch/Task Force for evaluation and consideration. Amway and Voice-Tel must
mutually agree to add the new product/service/program before additions can be
made.
Amway distributors and Voice-Tel franchisees will be provided a minimum of 90-
days notice before products/services/programs revisions or additions can become
effective.
Approvals: /s/ James J. Rosloniec 11/28/90 /s/ Alan J. Carter 11/28/90
------------------------------- ---------------------------
<PAGE>
SCHEDULE 3.8
DISTRIBUTOR/FRANCHISEE RELATIONSHIP
Both Amway distributors and Voice-Tel franchisees are independent contractors.
A such, they are entitled to run their own businesses as they see fit, as long
as they stay within the guidelines of their company's code of ethics and
operating procedures. It is understood, however, that both Amway and Voice-Tel
will utilize their reasonable best efforts to foster a positive working
relationship between their distributors and franchisees, respectively, in the
following areas:
1. No External Business Relationship--Distributors and franchisees should only
---------------------------------
be involved together in the voicemail industry to the extent of
distributors marketing the services described on Schedules 1.1(a), and
2.1. Franchisees will provide this voicemail service in their local area
for distributors to sell.
2. Avoidance of direct Competition--Since distributors and franchisees should
-------------------------------
have consistent goals, in the marketing of voicemail, and both will benefit
from this activity, direct competition should be avoided at all costs.
This goal will be further addressed through the selling channels described
in Schedule 4.1.
3. Pricing/Commission Confidentiality--Franchisees should not share
----------------------------------
information with distributors regarding their commission splits, AMVOX
profits or payments, or how much they are paying on the Leads or Account
Executive Programs.
4. Conflict Resolution--In the event of conflict between a distributor and
-------------------
franchisee, Amway and Voice-Tel each agree to take all reasonable steps to
ascertain and resolve such conflicts to the mutual satisfaction of all
parties involved. In the event of conflict between a distributor and
franchisee, the following communication channels are preferred to evaluate
each situation in a case-by-case manner.
Voice-Tel----------------------Amway
| |
Franchisee Distributor
|
Customer
Approvals: /s/ James J. Rosloniec 11/28/90 /s/ Alan J. Carter 11/28/90
------------------------------- ---------------------------
<PAGE>
SCHEDULE 4.1
SELLING CHANNELS
Amway Targeted Channel
- - ----------------------
The primary focus of Amway and Amway distributors will be in marketing AMVOX by
Voice-Tel to individual and small business users. Distributors should primarily
target accounts that are less than 50 boxes in size and do not require custom
applications. Franchisees should not undercut known distributor pricing in this
targeted market.
Activity Outside Targeted Channel
- - ---------------------------------
Distributor sales activity/interest outside the targeted channel should be
------
directed through the "Leads Program" or "Account Executive Program" detailed on
Schedule 2.1.
Sales and Focus to Support Selling Channels
- - -------------------------------------------
Support literature for distributors will be created per Schedule 4.5 to support
the above selling channels.
Conflict Resolution
- - -------------------
In the event of conflict between a distributor and franchisee, Amway and Voice-
Tel each agree to take all reasonable steps to ascertain and resolve such
conflicts to the mutual satisfaction of all parties involved. In the event of
conflict between a distributor and franchisee, the following communication
channels will be used to evaluate each situation in a case-by-case manner.
Voice-Tel----------------------Amway
| |
Franchisee Distributor
|
Customer
Approvals: /s/ James J. Rosloniec 11/28/90 /s/ Alan J. Carter 11/28/90
------------------------------- ---------------------------
<PAGE>
SCHEDULE 4.2
TRAINING SEMINARS
Training seminars will be planned, organized and conducted by Amway with
approval by Voice-Tel. These in-depth, AMVOX by Voice-Tel workshops will be
offered in cities that will provide adequate distributor participation/cost
recovery. The seminars will be conducted after Voice-Tel franchisees have
assumed operation of AMVOX by Voice-Tel in their areas and after the Marketing
Seminars (see Schedule 4.3) have been conducted. Specialized sales materials
will be provided to attendees at these sessions which will be conducted by
trained Amway Workshop Advisors. Local franchisees will be notified by Amway of
the dates, times, and locations, and will be included in these presentations
where applicable.
Amway will assume the cost for these events and will attempt to offset this
through collection of a "workshop registration fee" from participating Amway
distributors. Costs incurred by Voice-Tel or its franchisees in attending these
events are their own.
Approvals: /s/ James J. Rosloniec 11/28/90 /s/ Alan J. Carter 11/28/90
------------------------------- ---------------------------
<PAGE>
SCHEDULE 4.3
MARKETING SEMINARS
Amway will plan, organize, and conduct re-introduction meetings for distributors
in every AMVOX location as soon as possible after the product is relaunched and
the Voice-Tel franchisee has assumed operation/responsibility for the AMVOX
machine and customer base. Where possible, multiple AMVOX locations may have
one re-introduction meeting if they are within a reasonable proximity of each
other. Voice-Tel and its franchisees will be informed of meeting plans in order
to be included in the presentation. Personal meetings between franchisees and
key local distributor leadership is also encouraged and will be planned whenever
possible.
Costs for conducting the Marketing/Relauch seminars and participation by Amway
staff will be assumed by Amway. Expenses incurred by Voice-Tel staff and
franchisees in attending these events are their responsibility.
Approvals: /s/ James J. Rosloniec 11/28/90 /s/ Alan J. Carter 11/28/90
------------------------------- ---------------------------
<PAGE>
SCHEDULE 4.4
CUSTOMER SERVICE
Amway Provided
- - --------------
1. Answer General Information Questions
- Service availability
- Different levels of service and cost associated with each
- Enhancements
- Methods of payment accepted
- Ordering procedures
2. Institute All Changes To An Account
- Name changes
- Level of service including enhancements
- Correct any input errors
- Change in method of payment/address
- Cancellations--order level or mailbox level
- Transfer of service
3. Answer all questions regarding PV/BV, Accounts Receivable, interruption
of service, billing questions, and other related questions.
4. Apply interruption of service, cancellations, reinstates, and
removal of interrupts.
5. Respond to any correspondence regarding problems experienced by the
user; however, if the problem is related to challenges with the service
provided on the mailbox, Amway may need to request assistance from
either Voice-Tel or its franchisee.
6. Handle all refunds charges, etc., for any distributor or distributor
generated account.
<PAGE>
7. Administer the Lead Program.
Approvals: /s/ James J. Rosloniec 11/28/90 /s/ Alan J. Carter 11/28/90
------------------------------- ---------------------------
<PAGE>
SCHEDULE 4.4
CUSTOMER SERVICE (Cont.)
Voice-Tel and/or Franchisee Provided
- - ------------------------------------
It is understood that service is intended to be provided primarily to Amway and
its distributors. It is recognized that occasional end-user assistance may be
necessary and will be accommodated. Referrals of customers back to distributors
will be practiced whenever possible.
1. Handle all questions regarding the setting up and operation of the mailbox.
2. Handle all questions regarding service related problems; i.e., busies, dead
air, clipped messages, purged messages, lack of inventory, etc.
3. Provide appropriate system-wide messages regarding significant downtime
either for anticipated maintenance or system failure.
4. Ability to have personnel to handle questions during normal business hours
Monday through Friday.
5. Emergency number to call after normal business hours (nights, weekends, and
holidays) will be provided by the Voice-Tel National Operations Center.
6. Voice-Tel National Operations Center will have the ability to handle
questions and to bring mailboxes into operation after normal business hours
(for non-transferred sites). They will also provide 800 number backup to
Voice-Tel Customer Service.
Conflict Resolution
- - -------------------
All conflicts should be resolved after Voice-Tel and Amway have heard both
sides. Voice-Tel and Amway will then discuss the situation and reach a mutual
agreement which is satisfactory to all parties involved. The diagram below will
represent appropriate channels of communication.
Voice-Tel----------------------Amway
| |
Franchisee Distributor
|
Customer
Approvals: /s/ James J. Rosloniec 11/28/90 /s/ Alan J. Carter 11/28/90
------------------------------- ---------------------------
<PAGE>
SCHEDULE 4.5
LITERATURE--MARKETING MATERIALS
Amway will be responsible for the development and printing of all literature and
marketing materials to be sold or provided in any manner to Amway distributors
concerning the AMVOX by Voice-Tel program. AMVOX/Voice-Tel will review and
approve all materials developed prior to printing. No materials referring to
the AMVOX program for distribution to Amway distributors or customers may be
developed or distributed without mutual approval of Amway and Voice-Tel.
Amway will design all materials to be sold to distributors and make them
available as standard literature through the Amway Regional Distribution
Centers. Amway will set the cost of the literature which will be based on costs
and Amway required margins and will be in line with the prices for similar
literature available for other Amway programs. No revenues will be shared with
Voice-Tel for the sale of this literature. The literature will be publicized in
the Amway Wholesale Price List (SA-13).
Voice-Tel may submit to Amway additional proposals for the design and
development of literature and of marketing materials. Any cost incurred by
Voice-Tel in submitting such additional proposals shall be Voice-Tel's sole
responsibility.
Use of trademarks in any literature shall be consistent with any licensing
agreements in effect between the parties.
Approvals: /s/ James J. Rosloniec 11/28/90 /s/ Alan J. Carter 11/28/90
------------------------------- ---------------------------
<PAGE>
SCHEDULE 4.6
PRESS RELEASES
1. News Releases
-------------
A. Drafts of all news releases, whether originated by Voice-Tel or Amway,
must be mutually approved by Voice-Tel and Amway Public Relations
prior to release in a timely fashion.
B. Drafts mutually approved by Voice-Tel and Amway Public Relations must
also be sent to Amway's in-house approval route. Revisions
incorporated by the approval route must be included prior to release.
2. Media Inquiries
---------------
All media inquiries concerning Away Corporation or its independent
distributors must be referred to Amway Public Relations for response. All
media inquiries concerning Voice-Tel or its independent franchisees must be
referred to Voice-Tel for response.
3. Amway Publications
------------------
Amway will be responsible for creating AMVOX articles and the cost for them
to be used in Amway publications. Amway will make its reasonable best
effort to include Voice-Tel in the design, review, and approval of these
articles.
4. Voice-Tel Publications
----------------------
Voice-Tel will be responsible for the cost and creation of any articles on
AMVOX to be used in its publications. Voice-Tel will make its reasonable
best effort to include Amway in the design, review, and approval of these
articles. Copy mentioning Amway or Amway distributors must be approved by
----
Amway prior to printing.
Approvals: /s/ James J. Rosloniec 11/28/90 /s/ Alan J. Carter 11/28/90
------------------------------- ---------------------------
<PAGE>
SCHEDULE 5.1(a)
EQUIPMENT STANDARDS
1. As of the official relaunch date, all Voice-Tel, franchisee-owned locations
will have a minimum equipment standard of 5.0 Rev. G or higher software and
will have the ability to provide all of the service levels agreed upon in
Schedule 1.1(a).
2. As of the official relaunch date, not all AMVOX-owned locations will be at
the minimum Voice-Tel equipment standard. Therefore, not all service
levels agreed upon in Schedule 1.1(a) will be available in all areas.
3. Upon transfer of an AMVOX-owned location to a Voice-Tel franchisee, all
equipment at the site will be upgraded within 30 days of the transfer date
to the minimum Voice-Tel standards and all Schedule 1.1(a) service levels
will be made available at that time.
4. Selected AMVOX, Inc.-owned locations may be upgraded to the minimum Voice-
Tel equipment standards prior to transfer to a Voice-Tel franchisee based
upon the mutual agreement of Amway and Voice-Tel and the availability of
necessary funding for the same.
5. For future product offerings (additions to Schedule 1.1(a), all Voice-Tel
franchisee-owned locations will be equipped to offer the new service prior
to the launch and promotion of the service at Amway. AMVOX locations will
be equipped as able.
Approvals: /s/ James J. Rosloniec 11/28/90 /s/ Alan J. Carter 11/28/90
------------------------------- ---------------------------
<PAGE>
SCHEDULE 5.1(b)
EQUIPMENT SERVICE LEVEL STANDARDS
1. Message Storage Capacity
------------------------
Voice-Tel agrees to use its reasonable best efforts to maintain at its
locations sufficient message storage capacity to provide the maximum number
of messages allowed and the number of days retained for all Amway Products
and Services sold or available on the system at service levels agreed upon
in Schedule 1.1(a).
In order to assure these levels, Voice-Tel agrees that message storage
capacity will be incrementally increased when either of the following
conditions exist within an individual system.
A. It becomes necessary to prematurely purge messages to protect a
system's integrity greater than 5 times within a 30-day period.
B. Message storage capacity utilization exceeds 90% for 10 days out of
30.
The above noted incremental capacity increase shall be initiated within 10
days of the documentation of the qualifying condition as reflected on the
Total System Statistics Report available through the Centigram system. It
Is further understood that in the case of AMVOX locations which have not
yet been transferred, the above time limit for increase shall be flexible
based upon available resources and the status of current transfer
negotiations on the system in question.
2. Incoming Call Throughput
------------------------
Voice-Tel agrees to use its reasonable best efforts to maintain at its
locations sufficient incoming call throughput capacity to maintain a hybrid
P.02 level of service.
In order to assure these levels, Voice-Tel agrees that incoming call
throughput capacity shall be incrementally increased at the time the all
Trunks Busy (ATB) condition on an individual system exceeds 2% during the
normal business day of 8 a.m. to 5 p.m, Monday through Friday for 10 days
out of 30. This condition shall be determined by using the ATB Summary
Report available through the Centigram system.
<PAGE>
The above noted incremental capacity increase shall be initiated within 10
days of the documentation of the qualifying condition. It is further
understood that in the case of AMVOX locations which have not yet been
transferred, the above time limit for increase shall be flexible based upon
available resources and the status of current transfer negotiations on the
system in question.
Approvals: /s/ James J. Rosloniec 11/28/90 /s/ Alan J. Carter 11/28/90
------------------------------- ---------------------------
<PAGE>
SCHEDULE 5.1(b)
SERVICE LEVEL CHALLENGES AND RESPONSE TIMES (Cont.)
3. Service Level Challenges and Response Times
-------------------------------------------
Amway and Voice Tel agree that the following list shall define the various
Service Level Challenges which may occur within an individual system and
Voice-Tel agrees to use its reasonable best efforts to clear the reported
challenges within the time frame allotted on the accompanying chart from
the time the challenge is reported.
SERVICE LEVEL CHALLENGES
Catastrophic --No service to greater than 30% of the customers
------------
Emergency --No service to 30% or less customers
---------
Major --Impaired service to greater than 30% of the customers
-----
Minor --Impaired service to 30% or less customers
-----
Individual --No service to one customer
----------
Inquiry --Impaired service to one customer
-------
CHALLENGE RESPONSE TIMES
Catastrophic 12 hours
------------
Emergency 18 hours.
---------
Major 24 hours
-----
Minor 72 hours
-----
Individual 24 hours
----------
Inquiry 48 hours
-------
Approvals: /s/ James J. Rosloniec 11/28/90 /s/ Alan J. Carter 11/28/90
------------------------------- ---------------------------
<PAGE>
SCHEDULE 5.1(c)
CUSTOMER SERVICE STANDARDS
Amway Staffing Requirements
- - ---------------------------
1. All calls should be answered on the average of 90 seconds.
2. All correspondence should be handled within 10 working days (there may be
exceptions).
3. All staffing requirements will be determined based on call volume and
workload.
Voice-Tel Staffing Requirements
- - -------------------------------
1. Sufficient Customer Service available within 60 days (preferably 30 days)
after site transfer.
2. Customer Service Representatives to work during normal business hours
Monday through Friday.
3. Holiday, after-hour emergencies, and weekends to be handled by either Los
Gatos Customer Service or through franchisee provided local emergency
number with reasonable response time.
4. All calls need to be answered in a reasonable period of time.
Business Line Requirements
- - --------------------------
Inbound Calling
1.5 business lines per available staff person
Conflict Resolution
- - -------------------
Amway and Voice-Tel will hear all sides of the situation and reach a mutual
agreement which will satisfy all parties concerned.
Voice-Tel----------------------Amway
| |
Franchisee Distributor
|
Customer
Approvals: /s/ James J. Rosloniec 11/28/90 /s/ Alan J. Carter 11/28/90
------------------------------- ---------------------------
<PAGE>
SCHEDULE 5.1(c)
CUSTOMER SERVICE STANDARDS (Cont.)
Reporting Procedures
- - --------------------
1. Voice-Tel franchisee will notify Voice-Tel National Account Representative
anytime significant system downtime occurs or is anticipated.
2. The Voice-Tel National Account Representative will notify Amway via phone
or a message in the AMVOX Supervisor's or Customer Service Representative's
mailbox of any system challenge--including what the challenge is and the
anticipated time of resolution. The Voice-Tel National Account
Representative will also notify same when the challenge has been resolved.
3. Voice-Tel National Account Representative will provide Amway with a report
by AMVOX System ID number giving AMVOX NPA/NXX, city, state, and zone, and
update the same whenever a change occurs in any of the above information.
Approvals: /s/ James J. Rosloniec 11/28/90 /s/ Alan J. Carter 11/28/90
------------------------------- ---------------------------
<PAGE>
SCHEDULE 5.1(d)
GEOGRAPHIC SCOPE AND TIMETABLE
The growth and development of the Voice-Tel franchise system not only includes
the transfer of 70 AMVOX sites to a combination of both new and existing
franchisees, but also includes the development of new franchise territories
throughout the United States. Although future International development is
envisioned, for the purposes of this Service and Reseller Agreement, the
geographic scope is limited only to development within the United States.
Voice-Tel will employ its reasonable best efforts to sell and open operating
franchise units in each of the top 100 SMSA's within the United States with the
express goal of having 149 operating service center locations by the end of
calendar year 1992. As envisioned in the Voice-Tel Comprehensive Business Plan,
these service locations will provide local calling access to Voice-Tel voice
messaging services to in excess of 5000 cities, towns and communities.
In addition, Voice-Tel will use its reasonable best efforts to provide
functional networking capability to a minimum of 35% of the combined Voice-
Tel/AMV0X existing service center locations by the end of June, 1991; to 70% of
the combined service center locations by the end of calendar year 1991; with the
anticipation of complete networking access by all combined and newly developed
service center locations by the end of June, 1992.
The official relaunch date of AMVOX by Voice-Tel is February 1. 1991.
Approvals: /s/ James J. Rosloniec 11/28/90 /s/ Alan J. Carter 11/28/90
------------------------------- ---------------------------
<PAGE>
FIRST AMENDMENT TO
SERVICE AND RESELLER AGREEMENT
------------------------------
THIS FIRST AMENDMENT TO SERVICE AND RESELLER AGREEMENT ("Amendment") is
entered into this 19th day of March, 1996 by and between AMWAY CORPORATION, a
Michigan corporation ("Amway") having its principal place of business at 7575
Fulton Street East, Ada, Michigan 49355 and VOICE-TEL ENTERPRISES, INC., a
Delaware corporation, ("Voice-Tel") having its principal place of business at
23200 Chagrin Blvd., Suite 800, Beachwood, Ohio 44122.
WHEREAS Amway and Voice-Tel entered into a Service and Reseller Agreement
dated September 28, 1990 ("Agreement");
WHEREAS Amway and Voice-Tel desire to amend the Agreement in order to
extend the initial term of the Agreement.
NOW, THEREFORE, in consideration of the mutual obligations and promises of
the parties as set forth below, IT IS AGREED as follows:
1. Section 9.1 of the Agreement is hereby amended and restated to read in its
entirety as follows:
"9.1. Term. The initial term of this Agreement will expire at 12:01 a.m.
----
on January 1, 1997. This Agreement shall be automatically renewable
for an indefinite number of one-year renewal periods if neither party
gives written notice of termination at least one hundred eighty (180)
days prior to the end of the initial term of this Agreement or any
renewal period."
2. Voice-Tel acknowledges that Amway is free to discuss and negotiate and to
enter into agreements or transactions with any third parties for the
provision of voice-messaging services which may be in whole or partial
substitution of the voice-messaging services currently provided through
Voice-Tel under the Agreement provided that Amway will continue to abide by
the provisions of Article VIII of the Agreement (which addresses the sale
or distribution of competitive services) during the term of the Agreement.
3. Other than the changes to the Agreement set forth in Section 1 above of
this Amendment, the Agreement is and will be in full force and effect in
accordance with its terms.
<PAGE>
SECOND AMENDMENT TO
SERVICE AND RESELLER AGREEMENT
------------------------------
THIS SECOND AMENDMENT TO SERVICE AND RESELLER AGREEMENT ("Second
Amendment") is entered into this 25th day of June, 1996 by and between AMWAY
CORPORATION, a Michigan corporation ("Amway") having its principal place of
business at 7575 Fulton Street East, Ada, Michigan 49355 and VOICE-TEL
ENTERPRISES, INC., a Delaware corporation, ("Voice-Tel") having its principal
place of business at 23200 Chagrin Blvd., Suite 800, Beachwood, Ohio 44122.
WHEREAS Amway and Voice-Tel entered into a Service and Reseller Agreement
dated September 28, 1990 ("Agreement");
WHEREAS Amway and Voice-Tel entered into a First Amendment to Service and
Reseller Agreement dated March 19, 1996 ("First Amendment").
WHEREAS Amway and Voice-Tel desire to amend the Agreement and the First
Amendment in order to change the initial term and termination provisions of the
Agreement.
NOW, THEREFORE, in consideration of the mutual obligations and promises of
the parties as set forth below, IT IS AGREED as follows:
1. Section 9.1 of the Agreement and Section 1 of the First Amendment are
hereby amended and restated to read in their respective entirety as
follows:
"9.1. Term. "Either party may terminate this Agreement at any time upon
----
issuance of a written notice not less than one hundred eighty (180)
days prior to the effective date of such termination, such notice to,
among other things, specify the termination date which the parties
agree can only be the last day of a calendar month that falls at
least one hundred eighty (180) days from the issuance of the
termination notice."
2. Other than the changes to the Agreement and First Amendment set forth in
Section 1 above of this Second Amendment, the Agreement and First Amendment
are and will be in full force and effect in accordance with their
respective terms.
<PAGE>
EXHIBIT 10.7
VOICE-TEL ENTERPRISES, INC.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into by and between VOICE-TEL
ENTERPRISES, INC., a Delaware corporation (the "Company"), and WILLIAM E. WELSH
(the "Employee").
BACKGROUND STATEMENT
The Company provides interactive voice messaging services throughout the
United States and several foreign countries. The Employee has substantial
knowledge of the Company's business; the Company considers it to be in its best
interest to have the benefit of the Employee's services as provided in this
Agreement; and the Employee is willing to render such services to the Company in
accordance with the provisions of this Agreement.
THEREFORE, in consideration of and reliance upon the foregoing background
statement and the representations and warranties contained in this Agreement,
the Company and the Employee agree to the following provisions:
TERMS
SECTION 1. DUTIES. The Company hereby employs the Employee as President.
The Employee will have the powers, duties and responsibilities from time to time
assigned to him by the Company's Board of Directors or its Chief Executive
Officer, including rendering services on behalf of Premiere Technologies, Inc.
("Premiere") or any of Premiere's other subsidiaries. During the term of his
employment under this Agreement, the Employee will perform such duties and
exercise such authority as are customarily performed and exercised by the
president of a corporation, subject to the ultimate direction and control of the
Board of Directors and Chief Executive Officer of the Company. The Employee
will devote substantially all of his business time to faithfully and
industriously perform his duties and promote the business and best interests of
the Company. The Employee's duties hereunder are to be performed (subject to
such travel as may be required in the conduct of his duties hereunder) at the
Company's corporate offices, which are currently located in the Cleveland, Ohio
metropolitan area; provided, however, in the event that the Company's Board of
Directors determines that it is in the best interest of the Company that the
Employee's duties hereunder be performed (subject to such travel as may be
required in the conduct of his duties hereunder) at Premiere's corporate
offices, which are currently located in the Atlanta, Georgia metropolitan area,
then the Employee shall perform his duties hereunder (subject to such travel as
may be required in the conduct of his duties hereunder) at Premiere's corporate
offices; provided, that the employee shall not be required to relocate his
<PAGE>
personal residence to the Atlanta, Georgia metropolitan area. Except as
provided in the preceding sentence, the Employee's place of employment hereunder
shall not be moved to a location outside of the Cleveland, Ohio metropolitan
area or the Atlanta, Georgia metropolitan area without the Employee's consent.
SECTION 2. COMPENSATION.
SECTION 2.1. BASE SALARY. During the term of the Employee's employment
under this Agreement, the Company will pay the Employee an annual base salary of
$200,000.00, payable in accordance with the Company's standard payroll
practices. At the beginning of each calendar year after 1997 during the term of
this Agreement, the Employee shall receive an increase in his base salary equal
to 5% of the previous year's base salary.
SECTION 2.2. BONUS COMPENSATION. In addition to his base salary and
subject to the limitations and exceptions set forth below, the Employee shall be
entitled to earn an annual bonus based on the Company's "Adjusted Net Income
Before Interest and Taxes." For the purposes of this Agreement, Adjusted Net
Income Before Interest and Taxes means the net income of the Company, before
interest expense and income taxes, determined in accordance with generally
accepted accounting principles ("GAAP"), consistently applied, and adjusted to
exclude the following items: (i) gains or losses arising from any material
extraordinary, non-recurring transactions; (ii) gains or losses arising from
sales or dispositions of capital assets; and (iii) any expense resulting from
the issuance or exercise of stock options or warrants; provided, however, in
determining Adjusted Net Income Before Interest and Taxes, the amount of the
Employee's bonus under this Section 2.2, plus any other bonuses payable to
other employees of the Company that are based primarily upon the Company's
revenues or net income (or any substantially similar measurement base), shall be
deducted. In the event that the business and operations of Voice-Tel Network
Limited Partnership ("VTE") are not acquired by the Company on the date hereof,
then until such time as the Company acquires the business and operations of VTE,
the Company's Adjusted Net Income Before Interest and Taxes shall be calculated
as if the Company had acquired the business and operations of VTE as of the date
hereof. For calendar year 1997, the bonus shall be earned if the cumulative
Adjusted Net Income Before Interest and Taxes for the third and fourth quarters
is equal to at least twenty-eight percent (28%) of the Company's total revenues
for the third and fourth quarters of 1997, in which event the Employee shall
earn a bonus equal to $50,000.00. For each calendar year thereafter during the
term of this Agreement, the bonus shall be earned if (i) the Adjusted Net Income
Before Interest and Taxes for such calendar year is equal to at least thirty
percent (30%) of the Company's total revenues for such calendar year, and (ii)
the total revenues for such calendar year are at least twenty-five percent (25%)
greater than the Company's total revenues for the preceding calendar year, in
which event the Employee shall earn a bonus equal to $50,000.00. In addition,
if the Adjusted Net Income Before Interest and Taxes is equal to at least
-2-
<PAGE>
thirty-one percent (31%) of the Company's total revenues for a calendar year,
the Employee shall earn a bonus equal to $10,000.00 for each full percentage
point above thirty percent (30%), up to a total of $50,000.00 per calendar year.
For purposes of this Section 2.2, revenues shall be determined under GAAP. The
Employee's bonus for a calendar year described in this Section 2.2 will be due
ninety (90) days after the end of such calendar year; provided, however, the
Company may make advance payments of bonus compensation to the Employee based on
the Company's good faith estimate of his bonus compensation for such calendar
year. Each such payment shall constitute a non-interest bearing advance from
the Company to the Employee until his bonus compensation for such calendar year
is finally determined. In the event that the advance payments to the Employee
during a calendar year exceed his bonus compensation for such calendar year, as
finally determined, the Employee shall repay to the Company the amount of such
excess, promptly upon receipt of written notice thereof from the Company. If
the Employee's employment under this Agreement is terminated pursuant to Section
3 or 4.1 hereof, is terminated by the Company without "Cause" (as defined in
Section 4.2 hereof), or if the Employee terminates his employment under this
Agreement with "Adequate Justification" (as defined in Section 4.3 hereof), then
the Employee will be entitled to a pro rata portion of the bonus compensation
described in this Section 2.2 for the calendar year in which his employment is
terminated (based on the number of days the Employee is employed by the Company
during such calendar year). If the Employee's employment under this Agreement
is terminated for any other reason, he shall not be entitled to any bonus
compensation for the year of termination. Notwithstanding anything else
contained in this Agreement, the Employee will be entitled to any other bonus
compensation provided for by resolution of the Board of Directors of the
Company.
SECTION 2.3. EMPLOYEE BENEFITS. During the term of his employment under
this Agreement, the Employee will be entitled to participate in all employee
benefit programs, including pension and profit-sharing plans, and any medical,
health, dental, disability and other insurance programs generally available to
other officers of the Company.
SECTION 2.4. SEVERANCE PAY. If the Company terminates the Employee's
employment under this Agreement without Cause, then in addition to any other
rights or remedies the Employee may have, the Employee will be entitled to
receive severance pay equal to the Employee's base salary in effect at the date
of termination, payable in accordance with the Company's standard payroll
practices over the twelve (12) month period following the date of termination.
SECTION 2.5. DISABILITY OF EMPLOYEE. If during the term of the Employee's
employment under this Agreement, the Employee, in the opinion of a majority of
the Board of Directors of the Company (excluding the Employee if he is a
director), as confirmed by competent medical evidence, becomes physically or
mentally unable to perform his duties hereunder ("Disabled"), then for the first
six (6) months of his Disability the Employee will receive his full base salary
and for the next six (6) months of his Disability he will receive one-half (1/2)
of his base salary. (The Company may satisfy this obligation in whole or in
part by payments to the Employee provided through disability insurance.) The
-3-
<PAGE>
Company will not, however, be obligated to pay any salary to the Employee under
this Section beyond expiration of his term of employment hereunder. Nor will
the Company be obligated to pay bonus compensation with respect to the period of
Disability. Bonus compensation in this circumstance will be a pro rata portion
of the bonus the Employee would have earned absent the period of Disability
based upon the number of days during the fiscal year the Employee was not
Disabled. When the Employee is again able to perform his duties he will be
entitled to resume his full position and salary; provided, if the Employee's
Disability endures for a continuous period of at least twelve (12) months, then
the Company may terminate the Employee's employment under this Agreement after
delivery of ten (10) days written notice. The Employee hereby agrees to submit
himself for appropriate medical examination by a physician selected by the
Company for the purposes of this Section 2.5.
SECTION 2.6. DEATH OF EMPLOYEE. Within forty-five (45) days after the
Employee's death during the term of this Agreement, the Company will pay to the
Employee's estate, or his heirs, the amount of any accrued and unpaid base
salary (determined as of the date of death). In addition, the Company will pay
to the Employee's spouse (or if she is not alive, to his estate or heirs) a
death benefit of $5,000.
SECTION 2.7. REIMBURSEMENT OF EXPENDITURES. The Company will reimburse
the Employee for all reasonable expenditures incurred by the Employee in the
course of his employment in promoting the interests of the Company, including
expenditures for (i) transportation, lodging and meals during overnight business
trips, (ii) business meals and entertainment, (iii) supplies and business
equipment, and (iv) long-distance telephone calls. Notwithstanding the
foregoing, the Company will have no obligation to pay reimbursements under this
Section 2.8 unless the Employee submits timely reports of his expenditures to
the Company in the manner prescribed by the Company.
SECTION 2.8. VACATION. The Employee will be entitled to three (3) weeks
paid vacation annually. Unused vacation time will accumulate and carryover to
subsequent years. Any unused vacation time at the date of termination of the
Employee's employment under this Agreement will be paid to the Employee, unless
such employment is terminated by the Company with Cause or by the Employee
without Adequate Justification, in which case no unused vacation time will be
paid to the Employee.
SECTION 3. TERM OF EMPLOYMENT. Subject to Section 4 hereof, the Employee's
initial term of employment under this Agreement will begin on April 30, 1997 and
will expire on April 30, 2000. The initial term of employment will
automatically renew for an additional one-year period upon the foregoing
expiration, and thereafter upon the expiration of any renewal term provided by
this Section 3, unless the Company or the Employee provides written notice to
the other party at least ninety (90) days prior to the expiration date that such
party does not want this Agreement to renew.
SECTION 4. TERMINATION OF EMPLOYMENT.
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<PAGE>
SECTION 4.1. AUTOMATIC TERMINATION. The Employee's employment hereunder
will terminate automatically upon the death of the Employee.
SECTION 4.2. TERMINATION BY THE COMPANY. The Company may terminate the
Employee's employment under this Agreement for Cause or for Disability as
provided in Section 2.5 hereof. "Cause" shall consist of any of the following:
(i) the commission by the Employee of a willful act (including, without
limitation, a dishonest or fraudulent act) or a grossly negligent act, or the
willful or grossly negligent omission to act by the Employee, which is intended
to cause, causes or is reasonably likely to cause material harm to the Company,
Premiere or any of Premiere's subsidiaries (including harm to the business
reputation of the Company, Premiere or any of Premiere's subsidiaries); (ii) the
indictment of the Employee for the commission or perpetration of any felony or
any crime involving dishonesty, moral turpitude or fraud; (iii) the breach by
the Employee of any material term or covenant of this Agreement that remains
uncured ten (10) days following the expiration of the thirty (30) day period
described in the next sentence; or (iv) the failure of the Employee to devote
substantially all of his business time to the Company's business and affairs as
provided in Section 1 hereof. Termination for Cause will not be effective
unless the Company delivers to the Employee thirty (30) days advance written
notice setting forth in reasonable detail the allegations of Cause, and the
Employee does not convince the Board of Directors of Premiere within such 30-day
period that Cause does not exist. The final determination for the Company of
whether a termination of the Employee was with or without Cause shall rest with
the Board of Directors of Premiere, which shall act by a majority of the
directors, with the Employee abstaining from the consideration of and vote on
the matter if he is a director. From the date of notice through the date of
decision, the Company may place the Employee on administrative leave with pay,
and in such event restrict the authority and activities of the Employee in any
manner the Company deems appropriate.
SECTION 4.3. TERMINATION BY THE EMPLOYEE. The Employee may terminate his
employment under this Agreement by giving the Company at least thirty (30) days
prior written notice. If the Employee terminates his employment under this
Agreement, then he will be entitled to pro rata portions of his base salary and
bonus compensation with respect to the fiscal year in which the termination
occurs (based on the number of days the Employee is employed by the Company
during such fiscal year); provided, however, that the Employee will not be
entitled to any bonus compensation if he terminates his employment without
"Adequate Justification," which shall consist of a material breach by the
Company of this Agreement, including the failure by the Company to make any
payments due to the Employee hereunder, and such breach is not cured by the
Company within thirty (30) days following receipt of written notice from the
Employee, which notice specifies in reasonable detail the events which the
Employee believes constitute Adequate Justification. The final determination
for the Company of whether the Employee terminated his employment with or
without Adequate Justification shall rest with the Board of Directors of
Premiere, which shall act by a majority of the directors, with the Employee
abstaining from the consideration of and vote on the matter if he is a director.
-5-
<PAGE>
SECTION 5. RESTRICTIVE COVENANTS.
SECTION 5.1. PROHIBITED ACTIVITIES. The Company and Premiere currently
engage in the interactive voice messaging business, telecommunications business,
and the computer telephony business, including Internet related services,
throughout the world (collectively the "Premiere Business"). Except as
necessary to perform his duties hereunder, during the term of his employment
under this Agreement and for a period of one (1) year thereafter, the Employee
will not, as a shareholder, owner, operator, employee, partner, independent
contractor, consultant, lender, financier, officer, director or by any other
means whatsoever participate in any of the following activities:
(i) engage in or be associated with any business that competes
directly or indirectly with the Premiere Business or any part thereof;
(ii) induce any person who is an employee, officer, agent, affiliate,
supplier, client or customer of the Company to terminate such relationship
or refuse to do business with the Company; or
(iii) solicit, direct, take away, interfere with, or endeavor to
entice away from the Company any person, company, firm, institution, or
other entity that has purchased products or services from the Company.
The foregoing notwithstanding, nothing herein shall prohibit the Employee from
owning a passive investment of not more than one percent (1%) of the outstanding
capital stock of any publicly traded company engaged in the Premiere Business or
any part thereof.
SECTION 5.2. TRADE SECRETS.
(i) The Employee agrees to maintain in strict confidence, and not use
or disclose except pursuant to written instructions from the Company, any
Trade Secret (as hereinafter defined) of the Company, for so long as the
pertinent data or information remains a Trade Secret, provided that the
obligation to protect the confidentiality of any such information or data
shall not be excused if such information or data ceases to qualify as a
Trade Secret as a result of the acts or omissions of the Employee.
(ii) The Employee agrees to maintain in strict confidence and, except
as necessary to perform his duties hereunder, not to use or disclose any
Confidential Business Information (as hereinafter defined) during his
employment hereunder and for a period of one (1) year thereafter.
(iii) Upon termination of his employment, the Employee shall leave
with the Company all business records, contracts, calendars, telephone
lists, rolodexes, and other materials or business records relating to the
Company, its business or customers, including all physical and electronic
copies thereof, whether or not the Employee prepared such materials or
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<PAGE>
records himself; provided that the Employee shall have the right to retain
any personal property (including personal records) maintained at the
Company's offices or otherwise.
(iv) The Employee may disclose Trade Secrets or Confidential Business
Information pursuant to any order or legal process requiring him (in his
legal counsel's reasonable opinion) to do so, provided that the Employee
shall first have notified the Company in writing of the request or order to
so disclose the Trade Secrets or Confidential Business Information in
sufficient time to allow the Company to seek an appropriate protective
order.
(v) "Trade Secret" shall mean any information, including, but not
limited to, technical or non-technical data, a formula, a pattern, a
compilation, a program, a plan, a device, a method, a technique, a drawing,
a process, financial data, financial plans, product plans, or a list of
actual or potential customers or suppliers which (A) derives economic
value, actual or potential, from not being generally known to, and not
being readily ascertainable by proper means by, other persons who can
obtain economic value from its disclosure or use, and (B) is the subject of
efforts that are reasonable under the circumstances to maintain its
secrecy. "Confidential Business Information" shall mean any non-public
information of a competitively sensitive or personal nature, other than
Trade Secrets, acquired by the Employee, directly or indirectly, in
connection with the Employee's employment (including his employment with
the Company and Voice-Tel Network Limited Partnership prior to the date of
this Agreement, including (without limitation) oral and written information
concerning the Company's financial positions and results of operations
(revenues, margins, assets, net income, etc.)), annual and long-range
business plans, marketing plans and methods, account invoices, oral or
written customer information, and personnel information.
SECTION 5.3. REMEDIES. In the event the Employee violates or threatens to
violate the provisions of this Section 5, damages at law will be an insufficient
remedy and the Company will be entitled to equitable relief in addition to any
other remedies or rights available to the Company and no bond or security will
be required in connection with such equitable relief.
SECTION 5.4. COUNTERCLAIMS. The existence of any claim or cause of action
the Employee may have against the Company will not at any time constitute a
defense to the enforcement by the Company of the restrictions or rights provided
by this Section 5.
SECTION 5.5. COMPANY. For purposes of this Section 5, "Company" shall
include Premiere and all of its subsidiaries.
SECTION 5.6. MODIFICATION. The Employee and the Company agree that they
will negotiate in good faith to amend this Agreement from time to time to modify
the terms of this Section 5, including the definition of the terms "Premiere
Business," "Trade Secrets" and "Confidential Business Information," to reflect
changes in the Company's business and affairs so that the scope of the
limitations placed on the Employee's activities by this Section 5 accomplish the
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<PAGE>
parties' intent in relation to the then current facts and circumstances. Any
such amendment shall be effective only when embodied in a written document
signed by the Employee and the Company.
SECTION 6. COMPLIANCE WITH OTHER AGREEMENTS. The Employee represents and
warrants to the Company that he is free to enter this Agreement and that the
execution of this Agreement and the performance of his obligations under this
Agreement will not, as of the date of this Agreement or with the passage of
time, conflict with, cause a breach of or constitute a default under any
agreement to which the Employee is a party or may be bound.
SECTION 7. SEVERABILITY. Every provision of this Agreement is intended to be
severable. If any provision or portion of a provision is illegal or invalid,
then the remainder of this Agreement will not be affected. Moreover, any
provision of this Agreement which is determined to be unreasonable, arbitrary or
against public policy will be modified as necessary so that it is not
unreasonable, arbitrary or against public policy.
SECTION 8. WAIVER. A waiver by a party to this Agreement of any breach of this
Agreement by the other party will not operate or be construed as a waiver of any
other breach or a waiver of the same breach on a future occasion. No delay or
omission by either party to enforce any rights it may have under this Agreement
will operate or be construed as a waiver.
SECTION 9. MODIFICATION. This Agreement may not be modified or amended except
by a writing signed by both parties.
SECTION 10. HEADINGS. The various headings contained in this Agreement are
inserted only as a matter of convenience and in no way define, limit or extend
the scope or intent of any of the provisions of this Agreement.
SECTION 11. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which will be deemed an original, but all of which taken
together will constitute one and the same instrument.
SECTION 12. NUMBER AND PRONOUNS. Wherever from the context it appears
appropriate, each term stated in either the singular or the plural will include
the singular and the plural and pronouns stated in the masculine, feminine or
neuter gender will include the masculine, feminine and neuter genders.
SECTION 13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations and warranties of the parties to this Agreement will survive the
execution of this Agreement and continue without limitation.
SECTION 14. ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any right
or interest hereunder shall be assignable by either the Employee or the Company
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<PAGE>
without the other party's prior written consent; provided, however, that nothing
in this Section 14 shall preclude (i) the Employee from designating a
beneficiary to receive any benefits payable hereunder upon his death, or (ii)
the executors, administrators or other legal representatives of the Employee or
his estate from assigning any rights hereunder to the person or persons entitled
thereto. Except as otherwise provided herein, this Agreement will be binding
upon and inure to the benefit of the parties hereto and their respective legal
representatives, administrators, executors, successors and assigns.
SECTION 15. WAIVER OF JURY. With respect to any dispute which may arise in
connection with this Agreement each party to this Agreement hereby irrevocably
waives all rights to demand a jury trial.
SECTION 16. ENTIRE AGREEMENT. With respect to its subject matter, this
Agreement constitutes the entire understanding of the parties superseding all
prior agreements, understandings, negotiations and discussions between them,
whether written or oral, and there are no other understandings, representations,
warranties or commitments with respect thereto.
SECTION 17. GOVERNING LAW; VENUE. This Agreement will be governed by and
interpreted in accordance with the substantive laws of the State of Georgia
without reference to conflicts of law. Venue for the purposes of any litigation
in connection with this Agreement will lie solely in the state court in and for
Fulton County, Georgia or the United States District Court in and for the
Northern District of Georgia.
SECTION 18. NOTICES. Any notices or other communications required or permitted
under this Agreement shall be in writing and shall be deemed to have been duly
given and delivered when delivered in person, two (2) days after being mailed
postage prepaid by certified or registered mail with return receipt requested,
or when delivered by overnight delivery service or by facsimile to the recipient
at the following address or facsimile number, or to such other address or
facsimile number as to which the other party subsequently shall have been
notified in writing by such recipient:
If to the Company:
Voice-Tel Enterprises, Inc.
Four Commerce Park Square, No. 800
23200 Chagrin Boulevard
Cleveland, Ohio 44122
Attn: President
Facsimile: (216) 360-4410
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<PAGE>
With a copy to:
Premiere Technologies, Inc.
3399 Peachtree Road
The Lenox Building
Suite 400
Atlanta, GA 30326
Attn: Patrick G. Jones
Senior Vice President
Facsimile: (404) 262-8540
If to the Employee:
William E. Welsh
922 Mayfair Road
Akron, Ohio 44303
Facsimile: (330) 864-9177
IN WITNESS WHEREOF, the parties have executed this Agreement as of the 30th
day of April, 1997.
VOICE-TEL ENTERPRISES, INC.
By: /s/ Boland T. Jones
----------------------
Boland T. Jones
Chief Executive Officer
EMPLOYEE
/s/ William E. Welsh
--------------------
William E. Welsh
-10-
<PAGE>
<TABLE>
<CAPTION>
Exhibit 11.1
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1997
(in 000's)
Three Months Ended Six Months Ended
--------------------------- ----------------------------
June 30 June 30 June 30 June 30
1996 1997 1996 1997
------------ ------------ ------------ -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
PRIMARY (3)
Earnings applicable to common stock:
Net income (loss) $ 4,160 $ (31,320) $ 6,109 $ (23,605)
Interest income (1) 0 639 0 1,273
---------- ---------- --------- -----------
Net income (loss) applicable to common stock $ 4,160 $ (30,681) $ 6,109 $ (22,332)
========== ========== ========= ===========
Weighted average shares outstanding for primary:
Weighted average shares outstanding 28,064 31,578 25,821 31,492
Other shares upon assumed exercise of stock
options and warrants, net (2) 1,891 1,839 2,341 1,664
---------- ---------- --------- -----------
Weighted average shares 29,955 33,417 28,162 33,156
========== ========== ========= ===========
Primary net income (loss) per share $ 0.14 $ (0.92) $ 0.22 $ (0.67)
========== ========== ========= ===========
</TABLE>
_________________
(1) Reflects adjustment to interest expense, net of related income tax effect,
on excess proceeds due to 20% limitation on assumed acquisition of shares
under the modified treasury stock method. Assumed proceeds from stock
options include an income tax benefit as the options are not qualified
options under the Internal Revenue Code.
(2) Options and warrants are assumed exercised using the modified treasury stock
method, except where the effect is anti-dilutive.
(3) Fully diluted net income per share is anti-dilutive. Accordingly, fully
diluted net income per share is not presented for all periods.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> APR-01-1997 JAN-01-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<CASH> 147,455 147,455
<SECURITIES> 31,796 31,796
<RECEIVABLES> 12,378 12,378
<ALLOWANCES> 1,533 1,533
<INVENTORY> 0 0
<CURRENT-ASSETS> 209,986 209,986
<PP&E> 43,387 43,387
<DEPRECIATION> 4,980 4,980
<TOTAL-ASSETS> 313,236 313,236
<CURRENT-LIABILITIES> 58,148 58,148
<BONDS> 0 0
0 0
0 0
<COMMON> 316 316
<OTHER-SE> 93,965 93,965
<TOTAL-LIABILITY-AND-EQUITY> 313,236 313,236
<SALES> 43,902 85,936
<TOTAL-REVENUES> 43,902 85,936
<CGS> 10,701 20,750
<TOTAL-COSTS> 10,701 20,750
<OTHER-EXPENSES> 71,137 93,381
<LOSS-PROVISION> 752 1,637
<INTEREST-EXPENSE> (52) (259)
<INCOME-PRETAX> (37,909) (28,354)
<INCOME-TAX> (6,589) (4,748)
<INCOME-CONTINUING> (31,320) (23,605)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (31,320) (23,605)
<EPS-PRIMARY> (0.92) (0.67)
<EPS-DILUTED> (0.88) (0.60)
</TABLE>