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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year
ended December 31, 1997
COMMISSION FILE NUMBER: 0-27778
PREMIERE TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
59-3074176
GEORGIA
(I.R.S. EMPLOYER
(STATE OR OTHER JURISDICTION IDENTIFICATION NO.)
OF INCORPORATION OR
ORGANIZATION)
3399 PEACHTREE ROAD, N.E., THE LENOX BUILDING, SUITE 600 ATLANTA, GEORGIA 30326
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
(404) 262-8400
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
None None
(TITLE OF EACH CLASS) (NAME OF EACH EXCHANGE ON
WHICH REGISTERED)
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, Par Value $0.01 Per Share
(Title of class)
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.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ((S)229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
registrant, based upon the closing sale price of common stock on March 26, 1998
as reported by The Nasdaq Stock Market's National Market, was approximately
$1,503,320,197.
As of March 26, 1998 there were 45,255,594 shares of the registrant's common
stock outstanding.
List hereunder the documents incorporated by reference and the part of the Form
10-K (e.g., part I. Part II, etc.) into which the document is incorporated:
Portions of the registrant's Proxy Statement for its 1997 meeting of
shareholders are incorporated by reference in Part III.
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INDEX
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PAGE
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PART I
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Item 1. Business......................................................... 1
Item 2. Properties....................................................... 21
Item 3. Legal Proceedings................................................ 21
Item 4. Submission of Matters to a Vote of Security Holders.............. 23
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PART II
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Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.................................................................. 24
Item 6. Selected Financial Data.......................................... 25
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................... 26
Item 8. Financial Statements and Supplementary Data...................... 50
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure..................................................... 71
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PART III
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Item 10. Directors and Executive Officers of the Registrant............... 71
Item 11. Executive Compensation........................................... 71
Item 12. Security Ownership of Certain Beneficial Owners and Management... 71
Item 13. Certain Relationships and Related Transactions................... 71
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PART IV
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Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.. 72
Signatures................................................................ 79
Exhibits.................................................................. 80
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SPECIAL CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS
When used in this Annual Report on Form 10-K, in documents incorporated
herein and elsewhere by management or Premiere Technologies, Inc. ("Premiere"
or the "Company") from time to time, the words "believes," "anticipates,"
"expects" and similar expressions are intended to identify forward-looking
statements concerning the Company's business operations, economic performance
and financial condition, including in particular, the Company's business
strategy and means to implement the strategy, the Company's objectives, the
amount of future capital expenditures, the likelihood of the Company's success
in developing and introducing new products and expanding its business, and the
timing of the introduction of new and modified products or services. For those
statements, the Company claims the protection of the safe harbor for forward
looking statements contained in the Private Securities Litigation Reform Act
of 1995. These statements are based on a number of assumptions and estimates
which are inherently subject to significant risks and uncertainties, many of
which are beyond the control of the Company and reflect future business
decisions which are subject to change. A variety of factors could cause actual
results to differ materially from those anticipated in the Company's forward-
looking statements, including the following factors: (a) those set forth in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Factors Affecting Future Performance" and elsewhere herein; (b)
those set forth from time to time in the Company's press releases and reports
and other filings made with the Securities and Exchange Commission;
(c) expected cost savings from the merger (the "Merger") with Xpedite Systems,
Inc. ("Xpedite") and any other acquisitions may not be fully realized or
realized within the expected time frame; (d) revenues following the Merger and
other acquisitions may be lower than expected, operating costs or customer
loss and business disruption following the Merger and any other acquisitions
may be greater than expected; (e) competitive pressures among enhanced
communications services providers may increase significantly; (f) costs or
difficulties related to the integration of the businesses of Xpedite and
Premiere and other businesses, if any, that may be acquired by Premiere may be
greater than expected; (g) general economic or business conditions,
internationally, nationally or in the local jurisdiction in
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which Premiere is doing business, may be less favorable than expected; (h)
legislative or regulatory changes may adversely affect the business in which
Premiere is engaged; (i) changes may occur in the securities markets; and (j)
the Company's ability to manage the Company's growth and to respond to rapid
technological change and risk of obsolescence of the Company's products,
services and technology. The Company cautions that such factors are not
exclusive. Consequently, all of the forward-looking statements made herein are
qualified by these cautionary statements and readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as
of the date hereof. The Company undertakes no obligation to publicly release
the results of any revisions of such forward-looking statements that may be
made to reflect events or circumstances after the date hereof, or thereof, as
the case may be, or to reflect the occurrence of unanticipated events.
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PART I
ITEM 1. BUSINESS
OVERVIEW
Premiere Technologies, Inc. ("Premiere" or the "Company") is a leading
provider of enhanced communications services. The Company's services include
800-based services, voice messaging, enhanced document distribution (including
e-mail and fax), conference calling and, beginning in mid-1998, Internet-based
communication services. The Company's goal is to become a single source
provider of an integrated suite of enhanced communication services to
businesses and individuals. By becoming a single source provider of these
services, management believes it can eliminate for its customers the
complexity of managing the rapidly evolving enhanced communication services
environment. The Company's network-based computer telephony technology
integrates these services by providing customers the flexibility of access to
its services through a computer or a telephone. The Company believes that this
multiple access provides users ease and flexibility of use and allows users to
efficiently and economically manage their communications regardless of whether
they are at or away from their home base. Further, the Company's network-based
solution allows its customers to avoid the cost of purchasing and maintaining
potentially costly communications equipment. Although Premiere offers stand-
alone communications services, it targets business and individual users who
have multiple communications devices and a need to integrate them for greater
functionality and convenience.
On February 27, 1998, Premiere acquired Xpedite Systems, Inc. ("Xpedite") in
a merger accounted for as a pooling-of-interests. See "--Acquisitions."
Xpedite is a worldwide leader and innovator in the enhanced document
distribution business including fax, e-mail, telex, Internet and mailgram
services. Xpedite serves customers who require high-quality, cost-effective,
rapid, and confirmed communications. Xpedite has developed sophisticated
applications in a wide range of industries that enable customers to deliver
common or customized documents to hundreds or thousands of recipients around
the world via fax or electronic mail using Xpedite's proprietary, private,
world-wide document distribution network (the "Xpedite Network").
The following Description of Business includes product names, trade names,
service marks and trademarks of Premiere Technologies, Inc. and its
subsidiaries and other companies including, without limitation, Premiere
WorldLink, OrchestrateSM, Voice-TelTM, VoiceComTM and VoiceCom Access OneSM.
All references in the following Description of Business to the "Voice-Tel
Acquisitions" refers to the Company's acquisitions of Voice-Tel Enterprises,
Inc. ("VTE"), its affiliate Voice-Tel Network Limited Partnership ("VTN") and
substantially all of its franchisees (the "Franchisees") (VTE, VTN and such
Franchisees are collectively referred to as the "Voice-Tel Entities" or
"Voice- Tel"), which were completed during the second quarter of 1997.
All references in the following Description of Business to the "Xpedite
Merger" refer to the acquisition of Xpedite effective February 27, 1998
pursuant to the Agreement and Plan of Merger (the "Merger Agreement") among
the Company, Xpedite and Nets Acquisition Corp., a wholly-owned subsidiary of
the Company ("Acquisition Sub"). Pursuant to the Merger Agreement, Acquisition
Sub merged with and into Xpedite, which became a wholly-owned subsidiary of
the Company.
Premiere, a Georgia corporation, was incorporated in 1991, and its principal
executive offices are located at 3399 Peachtree Road, N.E., Lenox Building,
Suite 600, Atlanta, Georgia 30326, telephone number (404) 262-8400.
INDUSTRY BACKGROUND
Managing the evolving enhanced communications environment has become more
complex as a result of increased service and device options, rapidly changing
technology standards and shortened product life cycles. The proliferation of
communications devices and multiple messaging platforms has dramatically
increased the average employee's accessibility and the number of messages and
means of communications he or she manages. Both businesses and individuals
face a demanding communications environment today in which they must utilize a
number of communications systems, convert information from one medium to
another and deal with multiple vendors for each of these services. A study by
the Institute for the Future, the Gallup Organization, Pitney-Bowes
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and San Jose State University, based on responses from more than 1,000
employees of Fortune 1000 companies, found that workers send and receive an
average of 178 messages each day.
Today, many stand-alone communications services are provided through legacy
systems, including landline telephone systems, messaging devices and local
area networks ("LANs"), that reside in whole or in part at a customer's
location. The architecture of the customer premises equipment, or "CPE," that
comprises such systems is often closed in nature, which makes integration with
other systems and networks difficult and expensive. Increasingly, users are
demanding that their existing CPE be integrated with more open and intelligent
worldwide communications networks such as the Internet. The Company believes
that, due to the complexity of such integration and current telecommunications
trends, users will increasingly outsource their enhanced communications
requirements to third parties such as Premiere. Premiere believes that
customers will prefer the Company's network-based solution for enhanced
communications to traditional CPE-based product solutions because the
Company's solution reduces customer costs of equipment ownership and exposure
to technology obsolescence. Additionally, future outsourcing partners could
increasingly include other telecommunication carriers, both long distance and
local exchange carriers. Many of these organizations are seeking to address
customer churn created by increased competition by broadening the services
they offer to customers and thereby improve customer loyalty and retention.
The Company already provides services to a number of such carriers under
outsourcing arrangements. Management believes that its single source, network-
based solution to enhanced communication services uniquely positions the
Company to capitalize on these trends.
THE PREMIERE SOLUTION
Premiere's goal is to become a single source provider and integrator of
enhanced communication services. The core of the Premiere solution is its
"intelligent network" which integrates stand-alone communications services
using technology developed by the Company's research and development team. The
intelligent network consists of (i) a state-of-the-art proprietary platform
that integrates digital switching technology with enhanced communications
features and (ii) a private telecommunications network which transmits voice
and data utilizing frame relay switching protocol. The Company's modular and
scaleable intelligent network incorporates an open-system design, which allows
the Company to easily expand capacity and provides the Company with the
flexibility to develop and customize its service offerings. Premiere offers
bundled services in a variety of packages and tailors these packages to meet
the requirements of its customers. Premiere's private data network, with
approximately 219 locations where the Company has voice messaging equipment,
is accessible via local access in metropolitan and other geographic areas
which include approximately 90% of the United States, Canadian and Australian
populations and approximately 50% of the New Zealand population. Premiere
anticipates that its private data network will be accessible via local access
by a significant portion of the United Kingdom population in 1998. The Company
plans to invest in excess of $50 million in capital expenditures over the next
12 months as part of its effort to integrate its proprietary platform with its
private data network. Once integration is completed, the Company believes that
its intelligent network will allow the Company to offer its customers many of
its enhanced communications services through either local or 800 access via
telephone or computer.
THE PREMIERE STRATEGY
Premiere's goal is to become the world's leading provider of enhanced
communications services. In order to achieve this goal, management is striving
to become a single source provider and integrator of enhanced communication
services which utilize proprietary network-based technology. Strategies
employed to achieve this goal is as follows:
Increase Service Offerings and Cross-Media Functionality. The Company
believes that changes in technology continually create new business
opportunities for providers of enhanced communications services. The Company
continually strives to make its interfaces more user friendly and its services
functionally equivalent regardless of the customer's chosen access device or
message transport medium. For example, the Company has introduced such
features as text-to-speech e-mail delivery, a unified messaging interface
utilizing the World Wide Web ("Web") and an integrated Web-based contact
database manager.
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Leverage Network Facilities. At present, a significant amount of the
Company's services are accessible only by 800 toll free service. In connection
with the Voice-Tel Acquisitions, the Company acquired an international private
data network. Once this network is fully integrated with the Company's
proprietary platforms, the Company plans to use the private data network and
local messaging systems to provide users local access to certain of its
enhanced services. Management believes local access will make its services
more attractive to a broader market. In addition, through transitioning more
of its subscribers to local access, Premiere expects to realize a reduction in
transmission costs.
The Company continually seeks new ways to further leverage its network
infrastructure. One such initiative involves studying alternatives to become a
competitive local exchange carrier ("CLEC"). Management believes that by
virtue of the number of local lines currently utilized in its voice messaging
business the Company could become one of the largest CLECs in the United
States upon obtaining requisite regulatory approvals for CLEC status. Further,
management believes that the local access services it could provide as a CLEC
could complement its existing enhanced communications services offering.
Expand Customer Base and Distribution Channels. The Company believes that an
increasing number of businesses will transition their communications systems
from CPE-based products to network-based services. Premiere believes that a
substantial opportunity exists to meet the outsourcing needs of these
companies as well as other telecommunications carriers, both long distance and
local exchange carriers which are increasingly seeking to address churn in
their customer bases by offering value-added products such as those offered by
the Company. Management believes the Company provides a cost-efficient means
for carriers to offer such products to their customers. In addition, the
Company intends to use its direct sales force and national accounts program as
part of its effort to expand its customer base by cross-selling its services
to current customers which use only one of the Company's services on a stand
alone basis. Premiere also plans to continue to pursue wholesale and licensing
relationships in order to reach additional customers that the Company believes
are likely to be extensive users of its services.
Pursue Strategic Alliances, Investments and Acquisitions. Historically, the
Company has engaged in acquisitions in order to obtain new technology and
products, build its infrastructure and increase its sales force and customer
base. During 1997, the Company completed the acquisition of the Voice-Tel
Entities and VoiceCom Holdings, Inc. In February 1998, the Company completed
the acquisition of Xpedite. See "--Acquisitions." In addition to acquisitions,
the Company has and will continue to enter into strategic alliances with and
make investments in organizations engaged in complementary businesses and
emerging technologies aligned with the Company's strategies.
Expand International Presence. Premiere intends to expand internationally
through strategic partnerships, third-party distribution agreements, direct
sales efforts and relationships with existing customers that have
international operations. Management intends to leverage Xpedite's existing
operational presence in 13 countries to accelerate its international
expansion. Premiere opened a data and switching center in London in early 1998
and has begun development of a similar center in Toronto. Targeting the
Pacific Rim, Premiere expects to begin installation of a data and switching
center in that region during 1998. Additionally, the Company expects to
increase the international scope of its private data network by installing
POPs in additional overseas locations, specifically targeting the United
Kingdom for local messaging in the near future. These international centers
will allow Premiere to add 12 additional countries to the voice mail system in
1998 and will broaden the Company's product offerings internationally and will
allow the Company to pursue its strategy in certain markets for enhanced
communications services which are currently experiencing less competition and
are growing at rates faster than the U.S.
PREMIERE SERVICES
The Company is a leading single source provider of enhanced communications
services, which include:
. Voice Messaging;
. Enhanced Document Distribution;
. Conference Calling;
. 800-based Services; and
. Internet-based Communications Services.
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Generally, Premiere customers may subscribe to one or more of these services
and select certain desired features and functionality. Premiere's bundled
service offerings are marketed directly under many names including Premiere
WorldLink, Voice-Tel, VoiceCom and VoiceCom Access One. Enhanced document
distribution services are marketed under the Xpedite name. Premiere
continually strives to develop new services and enhance the functionality of
current services through its internal research and development staff and joint
development efforts with leading hardware and software vendors.
Voice Messaging Services. Premiere's private data network allows subscribers
of enhanced voice messaging services access to one of the largest "voice
intranets" in the world. The Company's intelligent data network offers voice
mail subscribers functionality similar to e-mail and the ability to easily
communicate inside the voice intranet with a touch of a button. Subscribers to
the Company's voice intranet can record messages and send to hundreds of
recipients by entering their mailbox number; answer messages simply by
pressing the number "2" on their telephone keypad; and copy and route received
messages to anyone else on the network. The Company's voice messaging services
are as follows:
VOICE MESSAGING SERVICES
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FEATURE DESCRIPTION
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Voice Mail....................... Subscribers are provided with traditional
voice mail features allowing them to
customize their mailbox greetings and to
receive, save and delete voice mail
messages.
Enhanced Voice Messaging......... Subscribers receive a locally accessed
voice mail box that provides network
messaging to any mailbox on the Company's
worldwide private data network. The robust
messaging platform provides enhanced
features distribution lists, return receipt
and confidential and urgent tagging.
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Enhanced Document Distribution Services. Premiere's enhanced document
distribution services provide customers with a lower cost, more reliable and
more time efficient information delivery method than most other document
distribution alternatives. These services, offered through Xpedite, are
described below.
ENHANCED DOCUMENT DISTRIBUTION SERVICES
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FEATURE DESCRIPTION
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Fax Broadcast.................... Customers rapidly distribute a document to
multiple recipients by a single
transmission through Xpedite's System to a
list of multiple fax addresses.
PC Xpedite....................... Xpedite's proprietary "PC Xpedite" software
enables a customer to transmit a document
to Xpedite for distribution across the
Xpedite Network and enables a customer to
maintain lists of fax addresses by computer
access to the Xpedite System.
Gateway Messaging................ Customers can send information from the
customer's computer through Xpedite's
system to a recipient's fax or telex
machine, or to a recipient via the Internet
or X.400 electronic mail networks. This
service allows a customer to send a large
volume of individual communications (i.e. a
single document to a single recipient or
from a single sender), each of which is in
the same format but contains different
information such as confirmations of
reservations and delivery of invoices.
Fax on Demand.................... Callers can select information using a
touch tone phone and have such information
sent directly to a fax machine.
Enhanced Fax Merging............. Senders may personalize information which
can be inserted into original text at any
point in a standard multi-address document.
Toll-Free Fax Response........... Senders may receive responses by fax to a
toll-free 800 number.
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In addition, Premiere offers Xpedite's discounted international services.
These services allow a customer to use an automatic dialing device attached to
the customer's fax machine (at a cost of less than $100) to direct
international faxes to the Xpedite Network for delivery to the recipient at a
discount of approximately 15% to 25% of standard international toll calls.
Xpedite's initial discounted international service was a "store-and-forward"
service, in which the fax is transmitted by the sender and stored in Xpedite's
system for subsequent delivery. In response to demand in the market for a
discounted international fax service that would enable the sender to obtain
immediate confirmation that the fax had been delivered, Xpedite launched its
"real-time" service in the second half of 1996. With real-time service, the
customer uses the same automatic dialing device as is used in the store-and-
forward service, but rather than store the fax for subsequent delivery,
Xpedite connects the sender's fax machine directly to the recipient's fax
machine, thereby delivering the fax immediately.
Conference Calling. Through its acquisition of VoiceCom Holdings, Inc.
("VoiceCom") in the third quarter of 1997, Premiere also offers full service
conference calling. Conference calling is currently resold under the VoiceCom
name and is provided by a third-party service bureau under an outsourcing
arrangement. Although revenues from full service conference calling were not
significant in 1997, management believes this service is an integral part of
its single source product integration strategy. Accordingly, management
intends to focus on growth in this area of its business in the future,
including pursuing acquisitions, strategic alliances and investments, as well
as internal sales.
800-based Services. 800-based services are communications services which (i)
route incoming calls to predefined locations and (ii) allow users to make
outbound calls while away from their home or office. The Company's 800-based
services are offered on a direct and a wholesale basis. The following table
describes available products and features.
800-BASED SERVICES
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FEATURE DESCRIPTION
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Calling Card Long Distance....... Subscribers can place worldwide long
distance calls at attractive rates.
Call Connect/Call Screening...... Inbound calls are routed to a predetermined
phone number programmed by subscriber.
Platform records announcement of inbound
caller and plays announcement for
subscriber. Subscriber can accept call or
send to voice mail. If programmed phone
number is subscriber's pager, he or she can
call platform and connect with inbound
caller upon receiving page.
Message Notification............. Subscribers can instruct platform to notify
them upon receipt of messages by page or
call to a predesignated number. Special
pager codes identify type of message
(voice, fax or e-mail) received.
Personal 800 Numbers............. Subscribers receive personal 800 number
serving as single point of access for
callers to select various messaging options
or attempt to locate subscriber through
Call Connect feature.
E-mail........................... Subscribers are provided with an e-mail
address. Messages can be read over
telephone using proprietary text-to-speech
functionality or sent to fax machine. In
the near future, subscribers will be able
to respond to e-mail by telephone choosing
from a various standard responses.
Fax Mail......................... Subscribers can receive and store fax
transmissions and later instruct platform
to forward faxes to a specified location.
Callers may also attach a voice
introduction.
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FEATURE DESCRIPTION
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Conference Calling......... Subscribers can initiate conference calls by
commands delivered through a telephone key pad.
Information Services....... Subscribers can access news, weather, sports and
financial and other information updates.
Interactive Voice Response. Various applications using custom voice prompts
and commands from a caller's telephone key pad to
retrieve, process or route certain information or
telephone calls. Typical application includes
financial institutions (NationsBank) in which
Premiere's platform is used to enhance call
processing for checking, savings and other account
information.
Other Services............. Subscribers can pay bills electronically, program
speed dial, access travel and concierge services
including lodging, airline, rental car, dining and
other events.
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Internet-Based Communications Services. Premiere's primary Internet-based
service is Orchestrate, a Web-based interface to the Company's computer
telephony platform. Orchestrate integrates the Company's service offerings by
allowing subscribers to access the Company's services through a computer or
telephone. The Orchestrate product provides users with a contact manager to
manage their communications needs: universal messaging; web-based conference
calling; a virtual receptionist; and their own personal web page. Subscribers'
Web pages are created by the Premiere platform from input provided by
subscribers. Orchestrate operates using an Internet browser in connection with
any PC connected to the Internet and does not require subscribers to purchase
additional specialized hardware or software. The Company intends to begin
marketing Orchestrate to customers in the second quarter of 1998. The Company
believes that its competitors have not yet developed a publicly available
network-based product which incorporates all of the functionality of
Orchestrate.
In addition, the Company is developing Internet-based communications
services and features, including:
. Third-Party PIM Compatibility. Subscribers would be able to transfer
contact information from popular Personal Information Managers ("PIMs")
into Orchestrate. Currently, the Company is testing the integration of the
contact manager feature of Orchestrate with Microsoft Outlook and Lotus
Notes.
. Web-based Conference Calling. Similar to features available to a
conference call bridge operator, subscribers would be able to control
conference calls in session from their PCs. Features are expected to
include muting and addition and deletion of selected callers.
PREMIERE PLATFORM AND NETWORK
Premiere has designed its platform and network to provide its subscribers
with efficient and reliable service and to be easily expandable as network
usage increases. The modular and scaleable design of the platform and related
software allows expansion of network capacity without requiring replacement of
existing hardware or software or interrupting service. Premiere's open systems
design approach enables Premiere to utilize readily available third party
hardware and software in constructing its platform and facilitates the
integration of services and information provided by third parties into the
system. The platform delivers and distributes its services to users through
its voice and data switching centers and is currently being integrated with
the private frame relay
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network and locally deployed voice messaging POPs acquired by the Company.
This delivery infrastructure incorporates both third party and proprietary
equipment as well as leased transmission facilities.
Computer Telephony Platform. The computer telephony platform consists of
digital telecommunications switches which interface with high speed
client/server networks of personal computers, database servers, application
servers and Web servers. High speed client/server networks of personal
computers (called "Telnodes") are controlled by PCs utilizing the Company's
proprietary software (called "Network Managers"). Servers on the network are
responsible for performing functions requested by the Telnodes and Network
Managers and are also responsible for storing and providing access to data.
Web servers connected to the network firewall interface with the Internet and
allow Premiere to offer access to certain of its services from any PC
connected to the Internet. The network architecture is designed to be modular
and scaleable. To increase the capacity of the platform, the Company adds
additional Network Managers, Telnodes and servers and, at certain points, must
add additional modules to the digital switch, but is not required to replace
existing Network Managers, Telnodes and servers. This modular systems approach
also allows Premiere, at the request of licensees and strategic partners, to
provide custom applications for subscribers. The client/server network
utilizes a fault tolerant network operating system, and the network
configuration provides for data on each server to be mirrored on a separate
server, thereby providing redundancy for improved system reliability. Premiere
maintains the ability to generate power in the event of a prolonged power
outage, or if its uninterruptible power supply fails.
The platform is controlled by proprietary application and database access
software that was developed by the Company and is designed to be versatile and
adaptable to meet the demands of strategic partners, licensees or individual
subscribers. Applications written for custom or specific functions can be
quickly developed and implemented across the network and offered to all of the
Company's subscribers. Premiere maintains an internal development program in
order to continually enhance its software.
Switching and Transmission Facilities. Incoming and outgoing communications
to the platform are transmitted via fiber optic trunk lines, which are
provided by interexchange long distance service providers pursuant to
contractual relationships with the Company. Premiere obtains transmission
services from multiple carriers, thus enhancing Premiere's ability to avoid
service interruptions caused by technical problems at a single carrier.
Because each carrier's trunk lines physically terminate at Premiere's
facility, Premiere can readily alter the routing of its transmission traffic
in the event of technical difficulties.
The Company opened an additional domestic switching facility in Dallas,
Texas in September 1996. This facility is designed to provide geographical
redundancy and increased capacity. The Dallas center is capable of handling
300 million transaction minutes per month, which is the same capacity as
Premiere's core hub in Atlanta, Georgia. In addition, the Company established
a data and switching center in London, England during 1996 and began
development of a similar center in Toronto, Canada during 1997. These
international centers are designed to reduce transmission costs associated
with system access from international locations and allow Premiere to more
effectively pursue opportunities with international customers and partners.
The Company intends to establish switching facilities in the New York/New
Jersey and South Florida geographic areas in 1998.
Private Data Network and Local Messaging POPs. Premiere's private data
network connects messaging customers in dispersed locations through a secure
private wide area network that is accessible via local access in metropolitan
and other geographic areas which include approximately 90% of the U.S.,
Canadian and Australian populations and approximately 50% of the New Zealand
population. Messages are captured and digitized at one of approximately 219
local POPs using a Centigram voice processing system. Users access these POPs
through local direct inward dial numbers that are purchased from the
appropriate LEC. Network interface boxes located at the POP then convert the
digitized data from DDCMP protocol (the data processing protocol standard of
Centigram's system) to the TCP/IP protocol. Once converted to TCP/IP format,
the message's path is determined by a router, which directs the data to one of
the 13 network hubs. These network hubs are co-located in sites utilized by
WorldCom, Inc. ("WorldCom"). The Company's Cascade frame relay switches,
placed in the network hubs, then route the message data over leased frame
relay connections to other hub sites or POPs within
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a hub region for delivery to the end user. The Company plans to integrate its
private data network and local messaging POPs with its computer telephony
platforms in order to offer certain of its enhanced personal communications
services on a local access basis.
Billing. Depending on the services to which the customer subscribes,
Premiere bills the customer either by its real-time electronic billing and
information system ("EBIS") or through an invoice. The Company bills customers
at least monthly and in certain instances more frequently if the customer
exceeds certain preset spending limits.
Premiere's EBIS is designed to allow instant activation of subscribers'
accounts, monitor subscribers' activity in real time and, while operating in
the background without interrupting subscribers' service, interface with
multiple financial institutions and electronically bill subscribers' credit
cards or bank accounts. Customers also receive a monthly statement that
provides a detailed accounting of their calling activity. The EBIS is
configurable for the billing requirements of various financial institutions
and currently interfaces electronically with approximately 3,000 banks and
other financial institutions.
Invoices are created by extracting call record data from either the platform
or local voice messaging equipment. This data is collected, consolidated and
processed to produce a customer invoice that can then be billed to either a
business, corporate department or an individual.
SALES, MARKETING AND DISTRIBUTION
Premiere markets its services through multiple distribution channels that
encompass: (i) direct sales through the Company's own dedicated sales force;
(ii) direct marketing efforts where Premiere is responsible for lead
generation and sales; (iii) co-brand relationships in which Premiere offers
its services to the customers of other companies, such as financial
institutions, that are seeking to increase their revenue from and their
goodwill with their customer base by offering value-added services; (iv)
strategic relationships where Premiere may develop custom applications for its
platform and market its services jointly with its strategic partners; and (v)
licensing and wholesale arrangements where other companies market and sell
Premiere's services under their names without significant assistance from
Premiere. In all distribution channels, except licensing arrangements,
Premiere pays commissions to, in the case of employees and agents, or shares
revenues with the parties who assist Premiere in marketing its services. The
Premiere marketing staff is primarily responsible for providing marketing
support to the five channels described above at varying levels of involvement,
depending on the channel. The marketing staff is also responsible for
promoting the Premiere corporate image in the marketplace.
Direct Sales. The direct sales force is organized by the Company into a
regional reporting structure and a centrally managed national and
international accounts program. Regional sales managers and their direct sales
people have the ability to generate sales leads for all of Premiere's products
and services within their defined geographic territories. These sales people
target primarily single location small to medium-sized businesses in the case
of voice messaging, and larger businesses with respect to enhanced document
distribution. Other types of leads generated may be passed on to the
appropriate group or channel (e.g., national accounts program or wholesale
channel). The centrally managed national accounts program focuses on multi-
location businesses that are better served by dedicated representatives with
ultimate responsibility across different geographic regions. If appropriate,
these national accounts sales people form account teams that include regional
sales people when greater geographic coverage is needed or that include
wholesale channel representatives when necessary. Xpedite markets its services
through a full time direct sales force operating from 50 sales office in 13
countries and a significant network of third party distributors. See "--
Xpedite Systems."
Direct Marketing. Premiere markets its services directly under the Premiere
WorldLink, Voice-Tel, VoiceCom Access One and AFCOM names. Direct marketing
and sales efforts have traditionally focused on print advertising and direct
mailings targeted at mobile professionals or, with respect to AFCOM, direct
marketing done in conjunction with financial institutions located on military
bases.
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Co-brand Relationships. Premiere has relationships with a number of other
companies, including First Union National Bank ("First Union") Discover Card
Services, Inc. ("Discover Card") and the Royal Bank of Scotland PLC, under
which Premiere provides its services to customers of those companies. Co-brand
customers generally offer their customers access to Premiere's services, and
Premiere pays subscriber and usage based fees to the other company with
respect to each subscriber who subscribes to a co-branded service. Premiere
believes that companies which enter into co-brand relationships with Premiere
are motivated by the ability to offer additional value to their customers,
reinforce brand equity through custom voice prompts that their customers hear
each time they access the service, communicate with their customers by
broadcasting voice, fax or e-mail messages, and derive additional revenue.
Marketing and fulfillment materials are generally issued under the Premiere
WorldLink name, with the co-brand customers also placing their logo on the
materials.
Strategic Partners. The Company also markets its services by establishing
strategic relationships with companies such as American Express Travel Related
Services, Inc. ("American Express"), whose customers have an anticipated need
for enhanced communications services provided by Premiere. Strategic
relationships are intended to provide the Company's strategic partners with:
(i) an efficient means of communicating with their customers through
Premiere's voice mail, e-mail and fax mail features; (ii) increased visibility
to their customers through customized greetings and a private branded
communications card; (iii) the ability to provide customized services to their
customers over Premiere's platform; and (iv) an additional source of revenue.
These relationships provide the Company with the opportunity to develop
specialized services for the strategic partner's customers which, in certain
circumstances, the Company can later offer to other subscribers. In connection
with these strategic relationships, services are generally issued in the name
of Premiere's strategic partner and bear a logo and design of the strategic
partner's choosing. The fulfillment materials generally state that services
are provided by Premiere.
Licensing and Wholesale Relationships. Companies such as WorldCom,
NationsBanc Services, Inc. ("NationsBank"), UniDial, Incorporated ("UniDial")
and The Telephone Company of Central Florida, Inc. have chosen to outsource
part or all of their enhanced communications services to Premiere. Premiere
licenses use of its platform, voice messaging network and call center
technology to these companies. Such relationships enable these companies to:
(i) provide enhanced services to their customers; (ii) generate additional
revenue without developing or investing in their own infrastructure; and (iii)
reduce costs and improve operational efficiencies through the use of more
advanced technologies than are internally available. The platform's and
network's open architecture allows customization of services for the licensee
or wholesale customer. Premiere generally provides its licensee or wholesale
customers with access to customer and billing records for marketing and
billing purposes. Licensee and wholesale customers generally are responsible
for billing the end user and generally provide their own transmission
facilities for use with Premiere's services. Services are private labeled by
the licensee or wholesale customer with Premiere's contribution transparent to
the end user. Services are also generally provided under agreements with 24 to
48 month terms which require the payment of a minimum monthly fee if specified
minimum targets are not met.
ACQUISITIONS
Premiere has historically engaged in acquisitions in order to obtain new
technology, build its infrastructure and increase its sales force and customer
base. As part of this strategy, Premiere acquired Voice-Tel, VoiceCom and,
most recently, Xpedite.
Voice-Tel Acquisitions. On June 12, 1997, Premiere announced the completion
of the Voice-Tel Acquisitions. The Voice-Tel Entities provide interactive
digital voice messaging products on a service bureau basis through
approximately 219 POPs in the United States, Puerto Rico, Canada, Australia
and New Zealand. In connection with the Voice-Tel Acquisitions, Premiere
acquired Voice-Tel's digital private data network and POPs.
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Premiere believes that the Voice-Tel Acquisitions broadened Premiere's
target market by allowing Premiere to offer local access to certain of its
enhanced communications services. In addition, the Voice-Tel Acquisitions
provided Premiere with a direct sales force of approximately 300 people in
four countries, an expanded subscriber base and the potential for cross-
selling opportunities. In connection with the Voice-Tel Acquisitions, Premiere
recorded a pre-tax charge in the second quarter of 1997 of approximately $45.4
million, consisting of transaction expenses and restructuring and related
costs attributable to the Voice-Tel Acquisitions.
VoiceCom Acquisition. During the third quarter of 1997, Premiere acquired
approximately 97.5% of the outstanding capital stock of VoiceCom in exchange
for approximately 446,000 shares of Premiere Common Stock. In addition,
Premiere converted existing VoiceCom options into options to acquire
approximately 76,000 shares of Premiere Common Stock. VoiceCom is a provider
of personal communications management services and telecommunications
outsourcing solutions to large corporations, government entities and mobile
professionals. Its service offerings include voice messaging, 800-based
services, including interactive voice response products, and full-service
conference calling. In connection with the acquisition of VoiceCom, Premiere
recorded a pre-tax charge in the third quarter of approximately $28.2 million,
consisting of transactions expenses and restructuring and related costs
attributable to the acquisition of VoiceCom.
VoiceCom, which is an operating subsidiary of Premiere as a result of the
acquisition, has a customer base that includes several Fortune 500 companies,
including, among others, Abbott Laboratories ("Abbott Labs"), Beverly
Enterprises, Inc. ("Beverly Enterprises") and ConAgra, Inc. ("ConAgra").
Xpedite. On February 27, 1998 (the "Effective Date"), Premiere, Xpedite and
Nets Acquisition Corp. ("Acquisition Sub") consummated the merger (the
"Xpedite Merger") of Xpedite with and into Acquisition Sub pursuant to which
Xpedite became a wholly-owned subsidiary of Premiere. The Xpedite Merger was
consummated in accordance with the Merger Agreement. Under the terms of the
Merger Agreement, the Xpedite Merger resulted in the issuance of approximately
11 million shares of Premiere Common Stock to the stockholders of Xpedite.
Xpedite stockholders received 1.165 shares of Premiere Common Stock for each
share of Xpedite common stock, par value $0.01 per share, outstanding on the
Effective Date. In addition Premiere converted existing Xpedite options and
warrants into options and warrants to acquire approximately 543,000 shares of
Premiere Common Stock. The Company anticipates that it will record
restructuring and other special charges before income taxes in the range of
$50 million in connection with the Xpedite acquisition. Such amount includes
charges recorded by Xpedite in the fourth quarter of 1997 expected by
management to be in the range of $20 million before income taxes. These
charges result principally from transaction fees which the Company is required
to expense under the pooling of interest method of accounting, including a
$9.5 million transaction "break-up fee" paid by Xpedite to a company which was
party to an unsuccessful attempt to acquire Xpedite. In addition, such costs
result from legal and professional fees and the write-down of impaired assets
and associated costs to exit certain duplicative facilities and business
activities. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Restructuring and Other Special Charges."
RESEARCH AND DEVELOPMENT
Premiere's research and development and engineering personnel are
responsible for developing, testing and supporting proprietary software
applications, as well as creating and improving enhanced system features and
services. Premiere's research and development strategy is to focus its efforts
on enhancing its proprietary software and integrating its software with
readily available software and hardware when feasible. Premiere maintains an
internal software development program pursuant to which the Company introduces
major and minor enhancements of its software.
As of December 31, 1997, Premiere employed approximately 109 people in
engineering and research and development. Premiere's research and development
team continuously monitors and performs necessary improvements to the
operation of the computer telephony platform, the EBIS and other billing
systems and messaging systems and network connections to determine if software
or hardware modifications are necessary. Premiere's research and development
and engineering personnel also engage in joint development efforts with
Premiere's strategic partners and vendors.
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CUSTOMER SERVICE AND TECHNICAL SUPPORT
Premiere believes that effective customer service is essential to attracting
and retaining subscribers. Premiere's customer service department is
responsible for educating and assisting subscribers in using Premiere's
services, for resolving billing related issues and, in consultation with
Premiere's technical support personnel, for resolving technical problems
subscribers may have in using Premiere's services. Premiere provides customer
service through either Atlanta-based call centers or regionally located
representatives. Regionally located representatives are primarily responsible
for supporting Voice-Tel voice messaging customers while Premiere's call
centers provide 24 hours per day, seven days per week coverage to assist
customers using all other services.
Premiere employs separate personnel who are responsible for technical
support functions. These employees are responsible for performing more
technically demanding support activities, such as voice messaging and certain
other types of account provisioning and administration, consulting with
Premiere's strategic partners and licensees regarding technical issues and
resolving technical issues brought to their attention by the customer service
department. As of December 31, 1997, Premiere employed approximately 213
people in customer service and technical support positions, the majority of
which were located in Atlanta.
XPEDITE SYSTEMS
In 1988, Xpedite was formed and began marketing enhanced document delivery
(including fax and messaging) services ("Enhanced Services"). From its
inception, Xpedite's focus was on the provision of value-added fax services
consisting primarily of "fax broadcast" and "gateway messaging" services in
the U.S. market. Xpedite strives to build value-added relationships with its
customers through a sales force of over 250 employees working from 50 sales
offices in 13 countries. Fax broadcast allows a single document to be faxed to
multiple recipients through a single transmission to the Xpedite Network,
while gateway messaging provides high volume transmission of individual
documents, each of which is in the same format, but contains customized
information. Xpedite's Enhanced Services provide customers with rapid, cost-
effective delivery of documents worldwide. Xpedite's second major product
offering utilizes the existing Xpedite Network to provide discounted
international messaging services ("Discounted International Services") which
provide real-time and delayed transmission of documents over the Xpedite
Network at significant savings to Xpedite's customers.
By expanding its sales organization and developing new applications for its
services, Xpedite has become the largest provider of Enhanced Services in the
United States and now offers these services throughout North America, Europe
and the Pacific Rim. Premiere believes that significant opportunities exist
for continued development of these services in international markets. One
strategy for international expansion involves marketing applications which are
established and widely used in the United States but which are only in the
early stages of adoption overseas. Xpedite's sales force continues to identify
new applications as well as to further customize and market established
applications. In addition, Xpedite's ability to leverage (i) its solution-
oriented sales force by developing new and cost-effective document
distribution solutions that stimulate market demand, and (ii) its network
infrastructure through growth in fax traffic resulting from existing
applications, new applications and new products, creates what Xpedite believes
is a platform for future worldwide growth. To further stimulate market demand,
Xpedite has, to date, passed a portion of these benefits to customers through
the form of price reductions.
Premiere's current strategy is for Xpedite to continue to expand from being
primarily a provider of Enhanced Services in North America to become a
provider of both Enhanced Services and Discounted International Services
worldwide and to continue to integrate multiple transmission approaches like
fax, Internet and e-mail in unique ways to meet its customers' needs. The key
elements of the Premiere's strategic plan for Xpedite are to:
(i) leverage Xpedite's proven experience in the Enhanced Services market
by continuing to develop new applications for the Enhanced Services and by
establishing a leadership position in new markets
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through "exporting" proven Enhanced Services to geographic areas in which
Xpedite has not historically offered such services;
(ii) capitalize on the multi-billion dollar market for Discounted
International Services by aggressively marketing both its "store-and-
forward" and "real-time" services through its direct sales force, sales
agents, resellers and Nodal Partners (as defined herein), and by installing
the infrastructure required for the delivery of such services on a
worldwide basis;
(iii) continue to expand and develop its solution-oriented direct sales
force, which Xpedite believes is one of the key factors for its success;
(iv) develop and/or acquire additional technologies and applications to
expand Xpedite's messaging capabilities and leverage its sales force and
market presence;
(v) expand the Xpedite Network by adding new geographic points of
presence ("Nodes") and leased telecommunications lines in order to continue
to lower its fax delivery costs; and
(vi) increase market share, expand geographic coverage, leverage the
Xpedite Network and achieve economies of scale through strategic alliances
and other business relationships.
Customer Base. Applications for Xpedite's messaging services are utilized by
a broad array of customers including those in the publishing, public relations
and investor relations, commercial banking, manufacturing, travel,
electronics, legal and pharmaceutical industries. Xpedite's international
network and capacities have also attracted customers from additional
industries such as the global freight industry. Xpedite's customer base is
broadly diversified, with no single domestic industry group accounting for
greater than 15% of revenues. Xpedite believes that this diversification
limits its susceptibility to the cyclicality of any particular industry or a
general business downturn in any particular sector.
Sales and Marketing. Xpedite's services are marketed through a direct sales
force and third party distributors. Xpedite's full-time direct sales force has
increased from 41 people at the end of 1992 to 273 people as of December 31,
1997. These full-time sales personnel are deployed throughout Xpedite's 50
sales offices in 13 countries today with approximately 171 operating in North
America. Xpedite also utilizes a significant network of third party
distributors (sales agents and resellers) both in countries where it has a
direct sales presence and in locations where it does not currently have such a
presence.
The Xpedite Network. In order to offer high quality Enhanced Services and
Discounted International Services in a cost efficient manner, Xpedite
established the Xpedite Network. The Xpedite Network is able to serve the
electronic messaging needs of its customers through the use of proprietary
software and a document distribution system network of over 14,500 leased
telecommunications lines and its "Nodal Partners." "Nodal Partners" are
independent entities that have purchased an electronic document distribution
system from Xpedite and which sell Discounted International Services. A "Node"
is an element of the Xpedite Network located at a geographically distinct
"point of presence" that allows access to or egress from the Xpedite Network
via a local call.
The proprietary network software that has been developed by Xpedite allows
its Enhanced Services customers access to the Xpedite Network via several
communications options including fax machines, the Internet, mainframe or mini
computers, and Local Area Networks ("LANs"). Customers who use fax machines to
access the Xpedite Network for Enhanced Services or Discounted International
Services are connected to the Xpedite Network through an "autodialer," which
routes the document over a lower-cost telecommunications line leased by
Xpedite.
The low-cost structure of the Xpedite Network is achieved through the use of
leased telecommunications lines and Nodal Partners which allow Xpedite to
transmit a greater number of faxes through inexpensive local
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calls rather than high priced long distance or international calls. The
Xpedite Network is intended to provide Xpedite's Enhanced Services and
Discounted International Services customers with a reliable alternative for
long distance and international document distribution at significant price
discounts and cost savings, particularly in overseas telecommunications
markets that are highly regulated and have limited competition. As it
increases fax messaging traffic over the Xpedite Network, Xpedite is able to
exploit economies of scale which result in lower costs per minute or per page
and then pass a portion of these cost savings on to customers, further
stimulating demand for Xpedite's services.
Xpedite charges for its fax services both on a per minute and a per page
basis, with the bulk of its sales occurring on a per minute basis. A
substantial portion of Xpedite's fax traffic terminates in cities where
Xpedite or its affiliates have Nodes. Xpedite estimates that approximately 40%
of its domestic fax deliveries in 1996 were routed over the Xpedite Network.
Xpedite purchases long-distance services from MCI, Cable & Wireless LDDS
(WorldCom) and a number of PTTs around the world, among others, to carry fax
traffic that is routed to destinations where Xpedite does not have Nodes. In
the future, Xpedite expects its total telecommunications costs per minute of
fax traffic to decrease as an increasing amount of traffic is routed over the
Xpedite Network.
XSL Acquisition. In connection with its international expansion, Xpedite has
also entered into relationships with each of XSL, Xpedite Germany and Xpedite
Systems SA, (collectively the "European Affiliates.") At the time of formation
of each of these entities, Xpedite entered into a System and Marketing
Agreement and a Put and Call Option Agreement (collectively, the "Put/Call
Agreements") with each European Affiliate and, in the case of the Put/Call
Agreements, each affiliate's shareholders. These agreements provided for the
sale by Xpedite to each European Affiliate of Xpedite's document distribution
system, along with a license to the software used to operate such system (for
which the European Affiliate pays royalties on a declining percentage basis),
joint marketing efforts, and put and call rights which, upon the achievement
of specified levels of financial performance by the relevant European
Affiliate and fulfillment of certain other conditions, would enable or require
Xpedite to purchase interests in the relevant European Affiliate.
In December 1997, XSL Acquisition Corp. purchased all the share capital of
XSL for a purchase price of approximately $85.5 million. Pursuant to the XSL
Purchase Agreement, the Put/Call Agreement with respect to XSL has been
terminated. In January 1998, Xpedite acquired, directly or indirectly,
approximately 76.7% of the issued share capital of Xpedite Germany and
indebtedness of Xpedite Germany to its former majority shareholder for an
aggregate purchase price of approximately $13.2 million. Together with the
19.9% of the issued share capital of Xpedite Germany previously owned by
Xpedite, Xpedite currently owns approximately 96.6% of the issued share
capital of Xpedite Germany. In addition, Xpedite exercised an option to
purchase the remaining 3.4% of the issued share capital of Xpedite Germany at
a purchase price of approximately $600,000. Pursuant to the Xpedite Germany
Purchase Agreements, the Put/Call Agreement with respect to Xpedite Germany
has been terminated.
Description of XSL's Business. XSL is a leading provider of Enhanced
Services in the United Kingdom. To capitalize on the market need for the
provision of Enhanced Services, XSL was formed as a start-up company in
January 1993 by certain members of XSL's management and the APAX Funds. Based
in York, England, XSL primarily provides to the U.K. market fax broadcast and
gateway messaging services similar to those provided by Xpedite via XSL's
network with points of presence in five cities located in three countries and
approximately 1,000 fax lines. XSL's customer base has historically been
concentrated in the U.K. financial sector where XSL has a significant market
share.
XSL currently provides a wide range of Enhanced Services. XSL's offering of
fax broadcast and gateway messaging services is substantially similar to those
offered by the Company with the exception that XSL does not offer certain
specialty fax broadcast services such as Xpedite's "Enhanced Fax Merging"
service. Gateway messaging services accounted for approximately 5% of XSL's
net revenues in 1996.
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Approximately 68% of XSL's revenues for the year ended December 31, 1996
were generated by customers in the financial services industry. Accordingly, a
downturn in this industry could have a material adverse impact on XSL's
business.
Since January 1993, XSL and Xpedite have been party to a System and
Marketing Agreement (the "System and Marketing Agreement") whereby, among
other things, XSL agreed to purchase Xpedite's document distribution system
and license Xpedite's software (for which XSL pays royalties to Xpedite of
approximately 8% of XSL's net revenues until December 31, 1998 and 6%
thereafter). As a result, XSL's network architecture essentially mirrors
Xpedite's architecture. The main operations center and system resides in York,
England with remote delivery capability in Leeds, London, Milan, Zurich and
Geneva, all linked by XSL-leased private circuits. XSL's system is then
interconnected with the networks and systems of Xpedite, Xpedite Germany and
XSSA via private circuits owned by Xpedite, Xpedite Germany and XSSA.
Currently XSL has over 1,000 outbound telephone lines operational in the U.K.
and has a dual carrier strategy in the U.K. to provide enhanced fault
protection.
A substantial portion of XSL's fax traffic terminates in major capital
cities where XSL or its affiliates have Nodes. XSL purchases its
telecommunications services in the U.K. primarily from two carriers.
Direct sales by XSL's sales personnel accounted for more than 90% of XSL's
net revenues in 1996.
In addition to XSL's direct sales force, indirect sales are made through
sales agents and resellers. While indirect sales were not a significant
component of XSL's sales efforts in prior years, it is becoming an increasing
focus of XSL's sales program. Sales agents accounted for approximately 7% of
XSL's net revenues in 1996 with resellers representing the remaining 3%.
Another component of XSL's recent growth has been through two several
strategic acquisitions completed by XSL. In July 1995, XSL acquired Transmit
International Ltd. ("Transmit"), and in March 1996 it acquired Connaught
Commercial Services Ltd. ("Connaught"). Both businesses consisted entirely of
fax broadcast services. The customer bases from both of these acquisitions
have been migrated to XSL's network and both of the acquired businesses' U.K.
operations have been closed down.
In addition, XSL has entered into a number of agreements with U.K. companies
which are primarily systems integrators to provide computer to fax
capabilities utilizing the XSL network.
COMPETITION
Premiere's competitive strategy is to seek to gain a competitive advantage
by being among the first companies to offer a network-based integrated
enhanced communications solution, being an innovator in the integrated
enhanced communications services market and offering unique and innovative
services to its subscribers. The Company intends to seek to capitalize on
strategic relationships with WorldCom, American Express and others in order to
build its subscriber base and to maintain and increase subscriber loyalty. The
Company believes that the principal competitive factors affecting the market
for enhanced communications services are price, quality of service,
reliability of service, degree of service integration, ease of use, service
features and name recognition. The Company believes that it competes
effectively in these areas.
The market for the Company's services is intensely competitive, rapidly
evolving and subject to rapid technological change. The Company expects
competition to increase in the future. Many of the Company's current and
potential competitors have longer operating histories, greater name
recognition, larger customer bases and substantially greater financial,
personnel, marketing, engineering, technical and other resources than the
Company. Although the Company is aware of several companies that are marketing
enhanced calling cards, it is
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not aware of any major competitor that is marketing an integrated personal
communications service identical to the service marketed by the Company. Many
of the Company's competitors have substantial resources and technical
expertise and could likely develop such a service if they chose to expend
sufficient resources. The Company believes that existing competitors are
likely to expand their service offerings and that new competitors are likely
to enter the personal communications market and to attempt to integrate such
services, resulting in greater competition for the Company. Such competition
could materially adversely affect the Company's business, financial condition
and results of operations.
The Company attempts to differentiate itself from its competitors in part by
offering an integrated suite of enhanced personal communications services that
are network-based. Other providers currently offer each of the individual
services and certain combinations of the services offered by the Company. The
Company's worldwide long distance services and features compete directly with
services provided by companies such as AT&T Corp. ("AT&T"), MCI Communications
Corp. ("MCI") and Sprint Corp. ("Sprint") as well as smaller interexchange
long distance providers. The Company's voice messaging services compete with
voice mail services provided by AT&T, certain regional Bell Operating
Companies ("RBOCs") and other service bureaus as well as by equipment
manufacturers, such as Octel Communications Corporation ("Octel"), Northern
Telecom, Inc. ("Northern Telecom"), Siemens Business Communications Systems,
Inc. ("Siemens"), Centigram Communications Corporation ("Centigram"), Boston
Technology, Inc. ("Boston Technology") and Digital Sound Corporation ("Digital
Sound"). The Company's enhanced travel, concierge, news and e-mail services
compete with services provided by America Online, Inc., Prodigy Services Co.
and numerous Internet service providers. The Company's paging services compete
with paging services offered by companies such as AT&T and MCI.
The Company's Orchestrate service, which the Company intends to begin
marketing during the second quarter of 1998, is expected to compete with
products offered by companies such as Octel, Microsoft Corp. ("Microsoft"),
Novell, Inc. ("Novell"), Lucent Technologies, Inc. ("Lucent") and numerous
smaller entities. For example, in 1997, Octel and Microsoft announced a
service, called "Unified Messenger," which places all voice mail, e-mail and
fax messages in a single mailbox accessible by computer or telephone. These
competing products incorporate some, but not all, of the bundled services
offered through Orchestrate. In addition, over the past few years, the number
of companies offering call center technology, including AT&T, MCI and Lucent,
has grown dramatically, primarily in response to major outsource initiatives
as well as significantly lower technology costs. The Company expects that
other parties will develop and implement information and telecommunications
service platforms similar to its platform, thereby increasing competition for
the Company's services.
Xpedite's services currently compete with services provided by each of AT&T,
MCI and Sprint, and many of the PTTs around the world. Neither Premiere nor
Xpedite can predict whether AT&T, MCI, Sprint, any Internet service provider
or PTT or any other competitor will expand its enhanced document distribution
services business, and there can be no assurance that these or other
competitors will not commence or expand their businesses. Moreover, Xpedite's
receiving queuing, routing and other systems logic and architecture are not
proprietary to Xpedite, and as a result, there can be no assurance that such
information will not be acquired or duplicated by Xpedite's existing and
potential competitors. Generally, Xpedite does not typically have long-term
contractual agreements with its customers, and there can be no assurance that
its customers will continue to transact business with Premiere in the future.
In addition, even if there is continued growth in the use of electronic
document distribution services, there can be no assurance that potential
customers will not elect to use their own equipment to fulfill their needs for
electronic document distribution services. There also can be no assurance that
customers will not elect to use alternatives to Xpedite's electronic document
distribution services, including the Internet, to carry such customers'
communications or that companies offering such alternatives will not develop
product features or pricing which are more attractive to customers than those
currently offered by Xpedite.
In addition, the Telecommunications Act of 1996, (the "1996 Act") allows the
RBOCs to immediately provide long distance telephone service between Local
Access and Transport Areas ("LATAs") located outside of their local service
territories, which will likely significantly increase competition for long
distance services. The 1996 Act also grants the Federal Communications
Commission (the "FCC") the authority to deregulate
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certain aspects of the telecommunications industry, which in the future may,
if authorized by the FCC, facilitate the offering of an integrated suite of
personal communications services by regulated entities, including the RBOCs,
in competition with the Company. Such increased competition could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Telecommunications companies compete for consumers based on price, with
major long distance carriers conducting extensive advertising campaigns to
capture market share. There can be no assurance that a decrease in the rates
charged for communications services by the major long distance carriers or
other competitors, whether caused by general competitive pressures or the
entry of the RBOCs and other LECs into the long distance market, would not
have a material adverse effect on the Company's business, financial condition
and results of operations.
The Company expects that information and telecommunications services markets
will continue to attract new competitors and new technologies, possibly
including alternative technologies that are more sophisticated and cost
effective than the Company's technology. The Company does not have the right,
contractually or otherwise, to prevent its subscribers from changing to a
competing network, and the Company's subscribers may generally terminate their
service with the Company at will.
LEGISLATIVE MATTERS
The 1996 Act was intended to increase competition in the long distance and
local telecommunications markets. The 1996 Act opens competition in the local
services market and, at the same time, contains provisions intended to protect
consumers and businesses from unfair competition by incumbent LECs, including
the RBOCs. The 1996 Act allows RBOCs to provide long distance service outside
of their local service territories but bars them from immediately offering in
region, inter-LATA, long distance services until certain conditions are
satisfied. An RBOC must apply to the FCC to provide in-region inter-LATA long
distance services and must satisfy a set of pro-competitive criteria intended
to ensure that RBOCs open their own local markets to competition before the
FCC will approve such application. Further, while the FCC has final authority
to grant or deny such RBOC application, the FCC must consult with the
Department of Justice to determine if, among other things, the entry of the
RBOC would be in the public interest, and with the relevant state to determine
if the pro-competitive criteria have been satisfied. While the FCC has yet to
grant any RBOC inter-LATA application, the Company is unable to determine how
the FCC will rule on any such applications in the future.
In response to a constitutional challenge filed by SBC Communications Inc.,
the United States District Court for the Northern District of Texas found the
1996 Act's restrictions on RBOC interLATA services to be an unconstitutional
bill of attainder, but stayed the effect of its decision pending further
appeal. If the interLATA restrictions are ultimately struck down, the Company
may experience increased competition from RBOCs in the long distance industry.
The 1996 Act provides a framework for the Company's operating subsidiaries
that provide long distance telecommunication services ("Operating
Subsidiaries") and other long distance carriers to compete with LECs by
reselling local telephone service, by interconnecting to LEC network
facilities at various points in the network, or by building new local service
facilities. In the future, the Operating Subsidiaries may decide to lease
unbundled network elements, which could also be used as a platform to provide
access to the Company's services, or to build local service facilities. The
Operating Subsidiaries' decision to enter the local services market in one or
more states depends on the economic viability of the options and on the
regulatory environment, which will likely vary by state.
GOVERNMENT REGULATION
The Operating Subsidiaries provide both telecommunications and information
services. Consequently, the Operating Subsidiaries are subject to extensive
federal and state regulation in the United States. Various international
authorities may also seek to regulate the services provided by the Operating
Subsidiaries.
Tariffs and Detariffing. The Operating Subsidiaries are classified by the
FCC as non-dominant carriers for their domestic interstate and international
common carrier telecommunications services. Common carriers that
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provide domestic interstate and international telecommunications services must
maintain tariffs on file with the FCC describing rates, terms and conditions
of service. While the tariffs of non-dominant carriers, such as the Operating
Subsidiaries, are subject to FCC review, they are presumed to be lawful upon
filing with the FCC. Currently, the Operating Subsidiaries either have applied
for and received, or are in the process of applying for and receiving, all
necessary authority from the FCC to provide domestic interstate and
international telecommunications services. However, at this time, only
Premiere Communications Inc. ("PCI") has been granted authority by the FCC to
provide domestic interstate and international telecommunications services.
In October 1996, the FCC issued an order detariffing long distance services
which prohibited non-dominant long distance carriers from filing tariffs for
domestic, interstate, long distance services in the future. The FCC's
scheduled detariffing rules were to become effective September 22, 1997. The
detariffing rules were appealed by several parties, and in February 1997, the
U.S. Court of Appeals for the District of Columbia Circuit issued a temporary
stay preventing the rules from taking effect pending judicial review. The
Company and the Operating Subsidiaries are currently unable to predict what
impact the outcome of the FCC's detariffing proceeding will have on the
Company or the Operating Subsidiaries.
Local Interconnection and Resale. In August 1996, the FCC adopted an order
(the "Interconnection Order") which established a minimum set of rules
relating to the manner in which all telecommunications carriers would be able
to interconnect with the LECs' networks. The Interconnection Order addressed
several important interconnection issues, including the purchase of unbundled
network elements, resale of local services at wholesale discounts, and
interconnection negotiation and arbitration procedures.
The RBOCs, several states, various carriers, associations and other entities
appealed the Interconnection Order. On July 18, 1997, the U.S. Court of
Appeals for the Eighth Circuit overturned many of the rules established by the
FCC's Interconnection Order governing, among other things, the pricing of
interconnection, resale and unbundled network elements. On October 14, 1997,
the Court further overturned FCC rules requiring that LECs provide unbundled
network elements on a combined basis. The Court's decisions substantially
limit the FCC's jurisdiction and expand the state regulators' jurisdiction to
set and enforce rules governing local competition. The Company is currently
considering entering the local exchange market as a so-called competitive
local exchange carrier ("CLEC"). If the Company becomes a CLEC, it will face
rules that are likely to vary substantially from state to state. A patchwork
of state regulations could make competitive entry by the Operating
Subsidiaries in some markets more difficult and expensive than in others and
could increase the costs of regulatory compliance associated with local entry.
The U.S. Solicitor General, on behalf of the FCC, has appealed the Court's
ruling to the U.S. Supreme Court. Due to the legal uncertainty over the
Interconnection Order, the Company and the Operating Subsidiaries are unable
to predict what impact the Court's decisions will have on the Operating
Subsidiaries' ability to offer competitive local service, and no assurance can
be given that the Court's decisions will not have a material adverse effect on
the Company's business, financial condition and results of operations.
Universal Service Reform. On May 8, 1997, the FCC released an order
establishing a significantly expanded federal telecommunications subsidy
regime. For example, the FCC established new subsidies for schools and
libraries with an annual cap of $2.25 billion and for rural health care
providers with an annual cap of $400 million. Providers of interstate
telecommunications service, such as the Operating Subsidiaries, as well as
certain other entities, must pay for the federal programs. The Operating
Subsidiaries' contributions to the federal subsidy funds will be based on
their share of total interstate (including certain international)
telecommunications services and on certain defined telecommunications end user
revenues. Several parties have appealed the May 8, 1997 order, and those
appeals have been consolidated in the U.S. Court of Appeals for the Fifth
Circuit. No assurance can be given that the FCC's universal service order will
not have a material adverse effect on the Company's business, financial
condition and results of operations.
Access Charge Reform. On May 16, 1997, the FCC released an Access Charge
Reform Order, which revised rules governing the interstate switched access
charge rate structure. Switched access charges are assessed by the LECs on
long distance carriers and others for use of the local loop and local access
facilities to originate and terminate long distance calls. The new rules are
intended to eliminate implicit subsidies and to establish rate
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structures that better reflect the manner in which costs are incurred. The new
rules substantially increase the costs that price cap LECs recover through
monthly, non-traffic sensitive access charges and substantially decrease the
costs that price cap LECs recover through traffic sensitive access charges.
The manner in which the FCC implements its approach to lowering access charge
levels will have an effect on the prices the Operating Subsidiaries pay for
originating and terminating interstate traffic. Portions of the Access Charge
Reform Order have been appealed. In light of the uncertainty regarding
ultimate disposition of the Access Charge Reform proceeding by the FCC and the
courts, the Company is unable to predict what impact the FCC's revised access
charge scheme will have on the Operating Subsidiaries' access charge cost
structure.
Payphone Compensation. In September 1996, the FCC issued an order adopting
rules to implement the 1996 Act's requirements establishing "a per call
compensation plan to ensure all payphone service providers are fairly
compensated for each and every completed call using their payphone." This
order included a specific fee to be paid to each payphone service provider by
long distance carriers and intra-LATA toll providers (including LECs) on all
"dial around" calls, including debit card and calling card calls. In decisions
released on July 1, 1997, and September 16, 1997, the U.S. Court of Appeals
for the D.C. Circuit vacated and remanded some of the FCC rules for the
implementation plan.
In response to these decisions, on October 7, 1997, the FCC issued a second
order, revising the per-call, compensation amount to be paid to payphone
service providers. Specifically, the FCC decreased the compensation amount to
$0.284 per call. The Operating Subsidiaries began paying this per-call amount
in 1997. This compensation amount will remain in effect until October 6, 1999,
when a market-based rate will become effective. Although the Operating
Subsidiaries expect to incur additional costs to receive "dial around" calls
that originate from payphones, the FCC has permitted long distance carriers,
such as the Operating Subsidiaries, to pass such costs through to their
customers.
In addition, the Court found unlawful both the methodology used to determine
the long distance carriers' payment obligations and the absence of any
compensation for some types of payphones and services. These issues have been
remanded to the FCC. Although the Operating Subsidiaries expect to incur
additional costs to receive "dial around" calls that originate from payphones,
the Company is unable to predict what impact the payphone rules will have on
the Operating Subsidiaries' costs for such calls until the FCC adopts revised
payphone compensation rates based on the Court's rulings.
State Regulation. Most state public service and public utility commissions
("PUCs") require carriers that wish to provide intrastate, common carrier
services to be authorized to provide such services. The Operating Subsidiaries
either have applied for and received, or are in the process of applying for
and receiving, all necessary authorizations to provide intrastate, long
distance services.
The Operating Subsidiaries are generally not subject to price regulation or
to rate of return regulation for their intrastate services. In most states,
however, the Operating Subsidiaries are required to file tariffs setting forth
the terms, conditions and prices for their intrastate services. In some state
jurisdictions, the tariff can list a range of rates for intrastate services.
The Operating Subsidiaries may be subject to additional regulatory burdens in
some states, such as compliance with quality of service requirements or
remittance of contributions to support state sponsored universal service. The
Operating Subsidiaries' ability to incur long-term indebtedness is subject to
prior PUC approval in some state jurisdictions. In addition, some state PUCs
regulate the issuance of securities and the transfer of control of entities
subject to their jurisdiction. Currently, the Company is reviewing whether and
to what extent additional regulatory compliance is required in this regard.
Other. In conducting its business, the Company is subject to various laws
and regulations relating to commercial transactions generally, such as the
Uniform Commercial Code and is also subject to the electronic funds transfer
rules embodied in Regulation E promulgated by the Federal Reserve. Congress
has held hearings regarding, and various agencies are considering, whether to
regulate providers of services and transactions in the electronic commerce
market. For example, the Federal Reserve recently completed a study, directed
by Congress, regarding the propriety of applying Regulation E to stored value
cards. The Department of Treasury recently promulgated proposed rules applying
record keeping, reporting and other requirements to a wide variety of entities
involved in electronic commerce. It is possible that Congress, the states or
various government agencies
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could impose new or additional requirements on the electronic commerce market
or entities operating therein. If enacted, such laws, rules and regulations
could be imposed on the Company's business and industry and could have a
material adverse effect on the Company's business, financial condition or
results of operations. The Company's proposed international activities also
will be subject to regulation by various international authorities and the
inherent risk of unexpected changes in such regulation.
PROPRIETARY RIGHTS AND TECHNOLOGY
The Company's ability to compete is dependent in part upon its proprietary
technology. The Company relies primarily on a combination of intellectual
property laws and contractual provisions to protect its proprietary rights and
technology. These laws and contractual provisons provide only limited
protection of the Company's proprietary rights and technology. The Company's
proprietary rights and technology include confidential information and trade
secrets which the Company attempts to protect through confidentiality and
nondisclosure provisions in its licensing, services, reseller and distribution
agreements. The Company typically attempts to protect its confidential
information and trade secrets through these contractual provisions for the
terms of the applicable agreement and, to the extent permitted by applicable
law, for some negotiated period of time following termination of the
agreement, typically one to two years at a minimum. In addition, Premiere has
three patent applications pending and nine trademark or service mark
registrations pending. Premiere has two registered service marks. Voice-Tel
has been issued two U.S. patents and has one U.S. patent application pending.
Voice-Tel also has five registered U.S. trademarks or service marks and
approximately 40 foreign trademark or service mark registrations or pending
applications. VoiceCom has two registered U.S. trademarks and one registered
foreign trademark. Despite the Company's efforts to protect its proprietary
rights and technology, through intellectual property laws and contractual
provisions, there can be no assurance that others will not be able to copy or
otherwise obtain and use the Company's proprietary technology without
authorization, or independently develop technologies that are similar or
superior to the Company's technology. However, the Company believes that, due
to the rapid pace of technological change in the information and
telecommunications service industry, factors such as the technological and
creative skills of its personnel, new product developments, frequent product
enhancements and the timeliness and quality of support services are more
important to establishing and maintaining a competitive advantage in the
industry.
Many patents, copyrights and trademarks have been issued in the general
areas of information and telecommunications services and computer telephony.
The Company believes that in the ordinary course of its business third parties
will claim that the Company's current or future products or services infringe
the patent, copyright or trademark rights of such third parties. The Company
is aware of other companies that use the terms "WorldLink" or "Premiere" in
describing their products and services, including telecommunications products
and services. Certain of those companies hold registered trademarks which
incorporate the names "WorldLink" or "Premiere." The Company has received
correspondence from a provider of prepaid calling cards which claims that the
Company's use of the term "WorldLink" infringes upon its trademark rights. In
addition, the Company has received correspondence from a major bank, which is
among the holders of registered trademarks incorporating the term "WorldLink,"
inquiring as to the nature of the Company's use of the term "WorldLink" as
part of its mark "Premiere WorldLink." Based on, among other things, the types
of businesses in which the other companies are engaged and the low likelihood
of confusion, the Company believes these claims to be without merit.
In October 1996, VTE received a letter from a third party claiming that
certain aspects of VTE's products and services may be infringing upon one or
more of the third party's patents. The Company has reviewed the patent claims
of the third party and does not believe that the Company's products or
services infringe on the claims of the third party. No patent infringement
claims against the Company have been filed by the third party at this time.
Should the third party file patent infringement claims against the Company,
the Company believes that it would have meritorious defenses to any such
claims. However, due to the inherent uncertainties of litigation, the Company
is unable to predict the outcome of any potential litigation with the third
party, and any adverse outcome could have a material adverse effect on the
Company's business, results of operations or financial condition. Even if the
Company were to ultimately prevail, the Company's business could be adversely
affected by the diversion of management attention and litigation costs.
Because of this risk, the Company
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withheld in escrow approximately 123,000 shares of Common Stock from the
purchase price of VTE and VTN. This escrow arrangement terminates in April
2000. There can be no assurance that such escrow will be sufficient to fully
cover the Company's exposure in the event of litigation or an adverse outcome
to the potential infringement claims.
In February 1997, the Company entered into a long-term nonexclusive license
agreement with AudioFAX IP LLC ("AudioFax") settling a patent infringement
suit filed by AudioFAX in June 1996. In the third quarter of 1996, the Company
took a one-time charge for the estimated legal fees and other costs that the
Company expected to incur to resolve this matter. In September 1997, VoiceCom
also entered into a long-term non-exclusive license agreement with AudioFAX.
In July 1996, Xpedite received a letter from counsel for AudioFAX, which
informed Xpedite that AudioFAX is the owner of certain U.S. and Canadian
patents relevant to the fax processing business, and inquired as to Xpedite's
interest in licensing these patents. The Company is currently negotiating with
AudioFAX with respect to entering into a long-term, non-exclusive license for
use of these patents by Xpedite. In the event Premiere is unable to enter into
a license agreement with AudioFAX, the Company cannot predict the outcome of
this matter, including but not limited to whether or not AudioFAX will
commence a lawsuit against Xpedite. There can be no assurance that the
resolution of such matter will not have a material adverse effect on
Premiere's business, financial condition and results of operations.
In May 1997, Premiere received a letter from a manufacturer and marketer of
certain telecommunications equipment asserting that Premiere is offering
certain "calling card and related enhanced services," "single number service"
and "call connecting services" covered by three patents held by that company
and inviting Premiere to obtain a license. Premiere has preliminarily reviewed
the subject patents and, based on that review, presently believes that its
products and services currently being marketed do not infringe these patents.
Premiere intends, however, to conduct a further review of these two patents in
order to determine whether it would be helpful to its future products and
services to license the patents. If Premiere ultimately determines that it is
infringing these patents, or any one of them, it could seek to license the
technology or discontinue using it and employ an alternate technology. There
can be no assurance that Premiere would be able to license the technology on
commercially reasonable terms or that it could easily and inexpensively
migrate to a new call reorigination technology. Premiere's call reorigination
service is only one service that it offers, and management does not believe
that this service is critical to the marketing of Premiere's overall suite of
services. Consequently, Premiere does not believe that its inability to
license the technology or migrate to a new technology would have a material
adverse effect on its business, financial condition and results of operations.
No claim has been asserted beyond this letter, but no assurance can be given
that the third party will not commence an infringement action against
Premiere. If a patent infringement claim is brought against Premiere, there
can be no assurance that Premiere would prevail and any adverse outcome could
have a material adverse effect on Premiere's business, financial condition and
results of operations.
In May 1997, the Company received a letter from counsel for a provider of
goods and services in the telecommunications field objecting to the Company's
use of the phrase "personal assistant" based on that company's federally
registered "personal assistant" service mark. On June 18, 1997, counsel for
the Company responded to the objections, noting that the Company did not
intend to use, nor would it use in the future, the words "personal assistant"
as a trademark or service mark, but instead would merely use these words to
describe the nature of its product. The Company has not heard anything further
from the potential claimant and believes that the matter has been resolved.
In July 1997, the Company received a letter from counsel for a French
publishing company objecting to the Company's use of the "Premiere" trademark.
Based on, among other things, the type of business in which the French company
is engaged and the unlikelihood that the Company will engage in competitive
activities using the Premiere mark in France, the Company believes that no
action will be brought. Due to the inherent uncertainties of litigation,
however, the Company is unable to predict the outcome of any potential
litigation with
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the French company, and any adverse outcome could have a material effect on
the Company's business, financial condition and results of operations. Even if
the Company were to prevail in such a challenge, the Company's business could
be adversely affected by the diversion of management attention and litigation
costs.
No assurance can be given that actions or claims alleging patent, copyright
or trademark infringement will not be brought against the Company with respect
to current or future products or services, or that, if such actions or claims
are brought, the Company will ultimately prevail. Any such claiming parties
may have significantly greater resources than the Company to pursue litigation
of such claims. Any such claims, whether with or without merit, could be time
consuming, result in costly litigation, cause delays in introducing new or
improved products and services, require the Company to enter into royalty or
licensing agreements, or cause the Company to discontinue use of the
challenged technology, tradename or service mark at potentially significant
expense to the Company associated with the marketing of a new name or the
development or purchase of replacement technology, all of which could have a
material adverse effect on the Company's business, financial condition and
results of operation.
EMPLOYEES
As of December 31, 1997, the Company employed approximately 928 persons,
substantially all of whom were employed on a full-time basis. Of these
employees, 398 were engaged in sales and marketing; 109 in engineering and
research and development; 213 in customer service and technical support; and
208 were in general and administrative activities. None of the Company's
employees are members of a labor union or are covered by a collective
bargaining agreement.
Xpedite employed approximately 763 persons as of December 31, 1997,
substantially all of whom were full-time employees, and none of whom was
covered by a collective bargaining arrangement. Of these employees, 427 were
engaged in sales and marketing; 208 in operations; 51 in research and
development; and 77 in general and administrative activities.
ITEM 2. PROPERTIES
Premiere's corporate headquarters occupy approximately 103,400 square feet
of office space in Atlanta, Georgia under a lease expiring August 31, 2007.
Voice-Tel's headquarters occupy approximately 30,000 square feet of office
space in Cleveland, Ohio under a lease expiring in October 1999. VoiceCom's
headquarters occupy approximately 26,400 square feet of office space in
Atlanta, Georgia under a lease expiring April 30, 2001. Xpedite's headquarters
facility is located in approximately 49,000 square feet of leased space in
Eatontown, New Jersey under a lease expiring on September 30, 1998 (excluding
a five-year renewal option exercisable by Xpedite).
Xpedite also maintains approximately 20,000 square feet of leased space for
the principal administrative, sales, and management information systems
offices and operations center of its international division in Glen Head, New
York. The lease covering approximately 75% of this space expires on December
30, 1999, and the lease covering the remaining space expires on September 30,
2001, subject, in each case, to extension or earlier termination in certain
circumstances. Xpedite also has a development facility located in
approximately 9,000 square feet of leased space in Ft. Lauderdale, Florida
which expires in December 2001. Xpedite also owns a 4,000 square foot office
building in London.
The Company also has data and switching centers in Atlanta, Georgia, Dallas,
Texas, London, England and has begun development of a similar center in
Toronto, Canada. The Company believes that its current office space is
sufficient to meet its present needs and does not anticipate any difficulty
securing additional space, as needed, on terms acceptable to the Company.
ITEM 3. LEGAL PROCEEDINGS
On January 21, 1997, Eric Bott, E.B. Elliott and Cost Recovery Systems, Inc.
("CRS") filed a complaint against the Company, PCI and the Company's
president, Boland T. Jones, in the Superior Court of Fulton County, Georgia
("Civil Action"). In December 1997, the Company, PCI and Mr. Jones entered
into a
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settlement agreement with Mr. Bott which settled and disposed of Mr. Bott's
claims in connection with this litigation. The remaining plaintiffs are
seeking an accounting of commissions allegedly due to them, options to
purchase 72,000 shares of Premiere Common Stock or damages, and reasonable
attorneys' fees. The Company believes it has meritorious defenses to Mr.
Elliott's and CRS' remaining allegations, but due to the inherent
uncertainties of the litigation process, the Company is unable to predict the
outcome of this litigation. If the outcome of this litigation is adverse to
the Company, it could have a material adverse effect on the Company's
business, financial condition and results of operations. The settlement with
Mr. Bott will not have a material adverse effect on the Company's business
financial condition and results of operations.
On August 6, 1996, Communications Network Corporation ("CNC"), a licensing
customer of the Company, was placed into bankruptcy (the "Bankruptcy Case")
under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code").
On August 23, 1996, CNC filed a motion to intervene in a separate lawsuit
brought by a CNC creditor in the United States District Court for the Southern
District of New York against certain guarantors of CNC's obligations and to
file a third-party action against numerous entities, including such CNC
creditor and Premiere Communications, Inc. ("PCI") for alleged negligent
misrepresentations of fact in connection with an alleged fraudulent scheme
designed to damage CNC (the "Intervention Suit"). The District Court has
denied CNC's request to intervene and has transferred the remainder of the
Intervention Suit to the Bankruptcy Judge presiding over the Bankruptcy Case.
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 of an amount up to approximately
$950,000, the bankruptcy trustee (the "Trustee") and PCI reached a tentative
settlement 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 (the "Plan") filed by the Trustee, which is
also subject to Bankruptcy Court approval. Based upon hearings before the
Bankruptcy Court, the Trustee filed on November 18, 1997, a motion requesting
approval of the settlement to accompany the Plan. If only the settlement is
approved, PCI will obtain a release from the Trustee and the Trustee will
dismiss the Intervention Suit in consideration of PCI making a cash payment of
$1,200,000 to the Trustee. If the Plan is subsequently approved by the Court,
PCI will make an additional cash payment of up to $300,000 to the Trustee in
consideration of PCI obtaining certain allowed subordinated claims and the
Court granting an injunction in Premiere's favor against possible nuisance
suits relating to the CNC business. The Company has previously taken a reserve
for the settlement and Plan payments. If the outcome of this matter is adverse
to PCI, 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 November 26, 1997, Wael Al-Khatib ("Al-Khatib"), the sole shareholder and
former president of CNC, and his company, Platinum Network, Corp. ("Platinum")
(Al-Khatib and Platinum are collectively referred to herein as "Plaintiffs"),
filed a complaint against PCI, WorldCom Network Services, Inc. f/k/a WilTel,
Inc., Bernard J. Ebbers, David F. Meyers, Robert Vetera, Joseph Cusick,
William Trower, Don Wilmouth, Digital Communications of America, Inc., Boland
Jones, Patrick Jones, and John Does I-XX in the Eastern District of New York,
United States District Court. Plaintiffs contend that, during 1996, PCI,
certain officers of PCI and the other defendants engaged in a fraudulent
scheme to restrain trade in the debit card market nationally and in the New
York debit card sub-market and made misrepresentations of fact in connection
with the alleged scheme. The Plaintiffs are seeking at least $250 million in
compensatory damages and $500 million in punitive damages from PCI and the
other defendants. Pursuant to the local rules of the District Court, PCI has
filed a letter stating the reasons it believes the lawsuit should be
dismissed. PCI has also filed a motion for sanctions under Rule 11 of the
Federal Rules of Civil Procedure. PCI believes that it has meritorious
defenses to the Plaintiffs' allegations and will vigorously defend the same.
Due to the inherent uncertainties of the judicial system, the Company is not
able to predict the outcome of this lawsuit. If this lawsuit is not resolved
in PCI's favor, 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. As of
December 3, 1997, the Company, Gasgarth and Jones entered into a settlement
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agreement with Lucina which settled and disposed of Lucina's claims in
connection with this litigation, and this settlement was approved by the Court
on December 15, 1997. This settlement will not have a material adverse effect
on the Company's business, financial condition and results of operations.
On July 8, 1997, various limited partners purporting to act on behalf of
Telentry Research Limited Partnership, Telentry Development Limited
Partnership, Telentry XL Limited Partnership, Telentry Research Limited
Partnership II and Telentry Development Limited Partnership II (collectively,
the "Telentry Partnerships") filed a complaint in the Superior Court of New
Jersey for Morris County against Xpedite and two other defendants. The
complaint alleges, inter alia, that Xpedite is in breach of its obligations to
make royalty payments under a series of license agreements between Xpedite and
the Telentry Partnerships. In this action, the plaintiff's seek, inter alia,
damages of $2,030,040 and an accounting of royalties. On September 29, 1997.
Xpedite filed a motion to dismiss the complaint. The court subsequently
elected to treat this motion as a motion for summary judgment. The motion has
been fully briefed by both parties, and oral argument is currently scheduled
for April 3, 1998. To date, no discovery has been taken in this action.
On February 23, 1998, Rudolf R. Nobis and Constance Nobis filed a complaint
in the Superior Court of Union County, New Jersey against 15 named defendants
including Xpedite Systems, Inc. ("Xpedite") and certain of its alleged current
and former officers, directors, agents and representatives. The lawsuit is
styled Rudolf R. Nobis and Constance Nobis v. Edward Angrisani, et al., Civil
Action File No. UNN-L-113698, Superior Court of New Jersey Law Division: Union
County. The plaintiffs allege that the 15 named defendants and certain
unidentified "John Doe defendants" engaged in wrongful activities in
connection with the management of the plaintiffs' investments with Equitable
Life Assurance Society of the United States and/or Equico Securities, Inc.
(collectively "Equitable"). More specifically, the complaint asserts
wrongdoing in connection with the plaintiffs' investment in securities of
Xpedite and in unrelated investments involving insurance-related products. The
defendants include Equitable and certain of its current or former
representatives. The allegations in the complaint against Xpedite are limited
to plaintiffs' investment in Xpedite. The plaintiffs have alleged that two of
the named defendants, allegedly acting as officers, directors, agents or
representatives of Xpedite, induced the plaintiffs to make certain investments
in Xpedite but that the plaintiffs failed to receive the benefits that they
were promised. The plaintiffs allege that Xpedite knew or should have known of
alleged wrongdoing on the part of other defendants. The plaintiffs' claims
against Xpedite include breach of contract, breach of fiduciary duty, unjust
enrichment, conversion, fraud, conspiracy, interference with economic
advantage and liability for ultra vires acts. The plaintiffs seek an
accounting of the corporate stock in Xpedite, compensatory damages of
$4,845,953.13, plus $200,000 in "lost investments," interest and/or dividends
that have accrued and have not been paid, punitive damages in an unspecified
amount, and for certain equitable relief, including a request for Xpedite to
issue 139,430 shares of common stock in the plaintiffs' names, attorneys' fees
and costs and such other and further relief as the Court deems just and
equitable. Xpedite intends to file and answer denying the material allegations
of the complaint and asserting various affirmative defenses and a motion to
dismiss the counts of the complaint against it. Premiere believes that Xpedite
has meritorious defenses to the plaintiffs' allegations, but due to the
inherent uncertainties of the litigation process, Premiere is unable to
predict the outcome of this litigation. If the outcome of this litigation is
adverse to Xpedite, it could have a material adverse effect on Xpedite's
business, operating results and financial condition.
Due to the inherent uncertainties of the litigation process and the judicial
system, the Company is unable to predict the outcome of the foregoing
litigation matters. If the outcome of one or more of such matters is adverse
to the Company, it could have a material adverse effect on the Company's
business, financial condition and results of operations. See also "Proprietary
Rights and Technology." The Company is also involved in various other legal
proceedings which the Company does not believe will have a material adverse
effect upon the Company's business, financial condition or results of
operations, although no assurance can be given as to the ultimate outcome of
any such proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Company's security holders during
the fourth quarter of the fiscal year covered by this report.
23
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock, $.01 par value per share (the "Common Stock"),
has traded on the Nasdaq National Market under the symbol "PTEK" since its
initial public offering on March 5, 1996. The following table sets forth the
high and low sales prices of the Common Stock as reported on the Nasdaq
National Market for the periods indicated. Such prices are based on inter-
dealer bid and asked prices without markup, markdown, commissions or
adjustments and may not represent actual transactions.
<TABLE>
<CAPTION>
1997 HIGH LOW
---- ------- -------
<S> <C> <C>
First Quarter............................................. $27.500 $16.500
Second Quarter............................................ 30.500 19.250
Third Quarter............................................. 34.500 22.875
Fourth Quarter............................................ 38.500 22.875
<CAPTION>
1996 HIGH LOW
---- ------- -------
<S> <C> <C>
First Quarter............................................. 27.750 18.000
Second Quarter............................................ 50.000 23.625
Third Quarter............................................. 35.750 16.000
Fourth Quarter............................................ 31.250 14.500
</TABLE>
The closing price of the Common Stock as reported on the Nasdaq National
Market on March 26,1998 was $35.375. As of March 26, 1998 there were
approximately 600 record holders of the Company's Common Stock.
The Company has never paid cash dividends on its Common Stock, and the
current policy of the Company's Board of Directors is to retain any available
earnings for use in the operation and expansion of the Company's business.
Therefore, the payment of cash dividends on the common stock is unlikely in
the foreseeable future. Any future determination to pay cash dividends will be
at the discretion of the Board of Directors and will depend upon the Company's
earnings, capital requirements, financial condition and any other factors
deemed relevant by the Board of Directors.
During the year ended December 31, 1997, certain current and former
employees, directors and investors exercised options to purchase an aggregate
of 328,190 shares of Common Stock at prices ranging from $0.41 to $1.61 per
share in transactions exempt from registration pursuant to Section 4(2) and
Rule 701 of the Securities Act.
On June 12, 1997, in connection with its acquisition of the Voice-Tel
Entities, the Company issued approximately 7.4 million shares of its Common
Stock to the stockholders of the Voice-Tel Entities in transactions exempt
from registration pursuant to Rule 4(2) of the Securities Act and the
regulations thereunder.
On June 30, 1997, the Company sold $172.5 million of 5 3/4% Convertible
Subordinated notes due 2004. The notes, unless previously redeemed or
repurchased, are convertible at the option of the holder at any time through
the close of business on the final maturity date into shares of Common Stock
at a conversion price of $33.00 per share, subject to adjustment in certain
events to certain stockholders of Voice-Com in transactions exempt from
registration pursuant to Rule 4(2) of the Securities Act and the regulations
thereunder.
During the third quarter of 1997, in connection with its acquisition of
VoiceCom, the Company issued approximately 446,000 shares of its Common Stock
to certain stockholders of Voice-Com in transactions exempt from registration
pursuant to Rule 4(2) of the Securities Act and the regulations thereunder.
24
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated statement of operations data for the
years ended December 31, 1997, 1996 and 1995, and the consolidated balance
sheet data as of December 31, 1997 and 1996, have been derived from the
audited consolidated financial statements of the Company included in this
Annual Report on Form 10-K, which give retroactive effect to the mergers with
Voice-Tel and VoiceCom, both of which were accounted for as poolings of
interests, and are qualified by reference to such consolidated financial
statements including the related notes thereto. The unaudited consolidated
statement of operations data for the years ended December 31, 1994 and 1993
and the unaudited consolidated balance sheet data at December 31, 1994 and
1993 are derived from unaudited consolidated financial statements of the
Company which give retroactive effect to the mergers with Voice-Tel and
VoiceCom, both of which were accounted for as poolings-of-interests, and
include all adjustments, consisting only of normal recurring adjustments,
which the company considers necessary for a fair presentation thereof. The
selected consolidated financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's consolidated financial statements and the notes
thereto.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- ----------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues............... $229,352 $197,474 $147,543 $119,136 $100,055
Gross margin........... 165,378 141,873 103,675 85,229 59,111
Operating income
(loss)(1)............. (28,998) 6,806 7,003 (13,232) (754)
Net income (loss)(1)... (25,375) 3,458 4,171 (15,519) (5,116)
Net income (loss)
attributable to common
shareholders for
--basic net income
(loss) per share...... $(25,375) $ 3,429 $ 3,863 $(15,839) $ (5,116)
--diluted net income
(loss) per share...... (25,375) 3,429 3,863 (15,839) (5,116)
Net income (loss) per
common and common
equivalent shares for
--basic(1)(2).......... $ (0.78) $ 0.12 $ 0.19 $ (1.18) $ (0.51)
--diluted(1)(2)........ $ (0.78) $ 0.11 $ 0.17 $ (1.18) $ (0.51)
Shares used in computing
net income (loss) per
common and common
equivalent shares for
--basic................ 32,443 27,670 19,868 13,468 9,947
--diluted.............. 32,443 31,288 24,312 13,468 9,947
BALANCE SHEET DATA (AT
PERIOD END):
Cash, cash equivalents
and investments....... $176,339 $ 83,836 $ 11,759 $ 7,849 $ 5,663
Working capital........ 136,182 45,377 (16,093) (12,521) (17,742)
Total assets........... 375,878 201,541 78,131 60,051 54,953
Total debt............. 176,468 47,975 52,650 49,203 35,112
Total shareholders'
equity (deficit)...... 100,814 104,533 (11,639) (14,921) (1,711)
</TABLE>
- --------
(1) Excluding charges for purchased research and development, accrued
settlement costs and restructuring and other special charges incurred by
Premiere in the amounts of approximately $0, $2.5 and $0 million,
respectively, in 1995, and approximately $11.0, $1.3 and $0 million,
respectively, in 1996, and approximately $0, $1.5 and $73.6 million
respectively, in 1997, operating income, net income, basic net income per
share and diluted net income per share would have been approximately $9.5
million, $5.7 million, $0.29 and $0.23, respectively, for 1995, and
approximately $19.2 million, $11.0 million, $0.38 and $0.35, respectively,
for 1996 and approximately $46.1 million, $28.5 million, $0.88 and $0.79
respectively, for 1997.
(2) Basic net income (loss) per share is computed using the weighted average
number of shares of common stock. Diluted net income (loss) per share is
computed using the weighted average number of shares of common stock and
dilutive common stock equivalents from convertible preferred stock and
convertible subordinated notes (using the if-converted method) and from
stock options (using the treasury stock method).
25
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company operates in one industry segment, enhanced communications
services. The Company's services include 800-based services for mobile
individuals, voice messaging, full service conference calling and, in 1998,
enhanced document distribution services (Xpedite) and internet based
communications. The Company's principal competitive advantage is that it
integrates these services through its intelligent network and provides its
customers a single source solution for enhanced communications. By offering a
network-based solution, the Company's customers can access and use its
services through a telephone or computer anywhere in the world and avoid costs
associated with purchasing and maintaining technology and equipment
themselves.
Revenues from 800-based services consist of usage fees from individual
subscribers which are generally based on per minute rates. Revenues from 800-
based services also include license fees from corporations, primarily
telecommunication carriers, under outsourcing arrangements. License fees are
also generally based on per minute rates. Voice messaging revenues generally
consist of fixed monthly fees and usage fees based on the number of messages
initiated by a subscriber. Although the Company does not currently derive any
revenues for its Internet-based services, management anticipates that revenues
from these products will consist of both fixed monthly and usage based
components.
Cost of services consists primarily of transmission costs. License customers
generally arrange for, and directly bear the cost of, transmission.
Consequently, while the per minute fees for licensee platform usage are lower
than those for individual subscriber services, the gross margin from license
arrangements is considerably higher than for subscriber services.
Selling, general and administrative expenses include direct and indirect
commissions, the cost of print advertisements, salaries and benefits, travel
and entertainment expenses, bad debt expense, rent and facility expense,
accounting and audit fees, legal fees, property taxes and other administrative
expenses.
Depreciation and amortization include depreciation of computer and
telecommunications equipment and amortization of intangible assets. The
Company provides for depreciation using the straight-line method of
depreciation over the estimated useful lives of the assets, which range from
five to ten years, with the exception of leasehold improvements which are
depreciated on a straight-line basis over the shorter of the term of the lease
or the estimated useful life of the assets. Amortization of intangible assets
includes deferred software development costs, goodwill and strategic
investments and alliances, which are amortized over lives ranging from five to
40 years.
26
<PAGE>
The preparation of financial statements in conformity with generally
accepted accounting principles ("GAAP") requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from the estimates. The following
discussion and analysis provides information which management believes is
relevant to an assessment and understanding of the Company's consolidated
results of operations and financial condition. This discussion should be read
in conjunction with the consolidated financial statements and notes thereto.
RESULTS OF OPERATIONS
The following table presents, for the periods indicated, the percentage
relationship of certain statements of operations items to total revenues.
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES................................ 100.0% 100.0% 100.0%
COST OF SERVICES........................ 27.9 28.2 29.7
----- ----- -----
GROSS MARGIN............................ 72.1 71.8 70.3
----- ----- -----
OPERATING EXPENSES
Selling, general and administrative... 44.2 55.0 56.7
Depreciation and amortization......... 7.8 7.2 7.1
Restructuring and other special
changes.............................. 32.1 5.6 0.0
Accrued settlement costs.............. 0.7 0.6 1.7
----- ----- -----
Total operating expenses............ 84.8 68.4 65.5
----- ----- -----
OPERATING INCOME (LOSS)................. (12.7) 3.4 4.8
----- ----- -----
OTHER INCOME (EXPENSE)
Interest, net......................... 0.0 (0.9) (3.0)
Gain on contract termination.......... -- -- 0.8
Other, net............................ 0.1 (0.1) 0.2
----- ----- -----
Total other income (expense)........ 0.1 (1.0) (2.0)
----- ----- -----
NET INCOME (LOSS) BEFORE INCOME TAXES... (12.6) 2.4 2.8
PROVISION FOR (BENEFIT FROM) INCOME
TAXES................................... (1.5) 0.7 0.0
----- ----- -----
NET INCOME (LOSS)....................... (11.1)% 1.7% 2.8%
===== ===== =====
</TABLE>
27
<PAGE>
Overview
The Company has achieved substantial growth particularly since its initial
public offering during the first quarter of 1996. Excluding restatement
effects in prior years from pooling of interests acquisitions, revenues grew
from $22.3 million in 1995 to $229.4 million in 1997, a compounded annual
growth rate of 220.7%. Similarly, operating profits before restructuring and
other special charges grew from $2.3 million to $46.1 million, a compounded
annual growth rate of 347.7% over the same period. The Company has achieved
growth in revenues and operating profits before restructuring and other
special charges by pursuing its strategy to become the leading provider of
enhanced communication services. During 1996 and 1997 the Company did the
following:
. Pursued an aggressive acquisition strategy to expand its service offerings
to encompass all services comprising enhanced communications. In 1997, the
Company acquired Voice-Tel (voice messaging) and VoiceCom (voice messaging
and 800-based services) thereby acquiring technology necessary to offer
voice messaging on a local access basis and one of the largest private
networks in the world utilizing frame relay and internet protocols. During
1996, the Company acquired TeleT, an enterprise engaged in computer
telephony software development, which provided it with the foundation of
its Orchestrate service offering which integrates the Company's enhanced
communication services by allowing users the flexibility to utilize these
services through a computer or telephone.
. Continued strong internal growth in the Company's 800-based business.
. Reduced costs by efficiently integrating its acquisitions and containing
growth in other operating costs thereby enabling it to improve operating
leverage from increased revenues.
Analysis
The Company's financial statements for all periods presented have been
restated to include the operations of the Voice-Tel Acquisitions and VoiceCom
which were accounted for as poolings of interests. The following discussion
and analysis is prepared on that basis.
Revenues increased 16.1% to $229.4 million in 1997 and 33.8% to $197.5
million in 1996. Revenue growth was due principally to growth in the following
areas:
. Strategic partner programs, particularly new programs such as American
Express, DeltaTel and First USA, which experienced significant increases
in new subscribers,
. License programs, both from growth in revenue from existing customers and
new license customers, and
. New 800-based services, including prepaid and enhanced feature calling
cards which offer new features such as voice messaging through local
access, call connect and call screening services and text-to-voice e-mail.
Revenues from the Company's 800-based services grew 53.0% in 1997 and 74.4%
in 1996.
Gross profit margins were 72.1%, 71.8% and 70.3% in 1997, 1996 and 1995,
respectively. Improving gross margins result primarily from changes in revenue
mix toward higher margin products, primarily license arrangements for 800-
based services and voice messaging products. In addition, the Company has been
able to obtain more favorable transmission rates from carriers as a result of
volume discounts obtained by leveraging increasing minute volumes. Gross
margins have also benefitted from general industry trends in which long
distance transport and the cost of local access service costs have decreased
as a result of increased capacity and competition among long distance and
local exchange carriers.
Selling, general and administrative costs as a percent of revenues were
44.2%, 55.0% and 56.7% in 1997, 1996 and 1995. These costs declined as a
percent of revenues due to aggressive restructuring of acquired businesses
(Voice-Tel and VoiceCom) in 1997. These activities included substantially
reducing the workforce of acquired businesses, exiting duplicative facilities,
eliminating redundant business activities and general spending reductions.
Operating leverage during 1997 and 1996 has also been improved by increased
revenues as the Company's administrative cost structure is highly fixed in
nature.
28
<PAGE>
Depreciation and amortization was $18.0 million or 7.8% of revenues in 1997,
$14.2 million or 7.2% of revenues in 1996 and $10.5 million or 7.1% of
revenues in 1995. Increased depreciation and amortization expense results
mainly from depreciation associated with increased purchases of computer
telephony equipment to support new business growth, amortization of goodwill
and other intangibles acquired in connection with the Voice-Tel acquisitions
in 1997 and the WorldCom strategic investment entered into in 1996.
Net interest expense decreased to $0.02 million in 1997, from $1.7 million
in 1996 and $4.3 million in 1995. Net interest expense decreased primarily
from investment of excess proceeds from the Company's initial public offering
in March 1996. Interest expense in 1996 and 1995 resulted mainly from
indebtedness of Voice-Tel and VoiceCom. The majority of these obligations were
retired in connection with the acquisitions.
Accrued settlement costs for the year ended December 31, 1997 were $1.5
million compared to $1.3 million for the year ended December 31, 1996. See
Note 13--Commitments and Contingencies of the Notes to the Consolidated
Financial Statements and "Legal Proceedings" under Item 1 of Part II of this
document for further information about this matter.
Restructuring and other special charges incurred in 1997 were $73.6 million
compared to $11.0 million in the year ended December 31, 1996. See Note 3--
Acquisitions and Note 15--Restructuring and Other Special Charges in the Notes
to Consolidated Financial Statements and "Restructuring and Other Special
Charges" which follows in this discussion.
In the years ended December 31, 1997 and 1996 the Company's effective income
tax rate was less than the statutory rate due to certain non-taxable
investment income and income of Voice-Tel Entities which had elected to be
treated as S-Corporations under U.S. tax law prior to their acquisition by the
Company. See Note 14-- Income Taxes in the Notes to Consolidated Financial
Statements for additional information.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its growth through cash generated by operations,
proceeds from its initial public offering in March 1996 and by issuing
convertible indebtedness in 1997. Cash provided by operations was $27.2
million or 11.8% of revenues in 1997, $36.9 million or 18.7% of revenues in
1996 and $13.6 million or 9.2% of revenues in 1995. Excluding payments made
for restructuring, accrued settlement costs and other special charges, cash
provided by operations was $57.7 million or 25.2% of revenues in 1997.
Improving operating cash flow margins, excluding restructuring and special
charges, resulted mainly from the Company's integration and cost reduction
initiatives associated with the Voice-Tel and VoiceCom acquisitions in 1997
which reduced operating costs of these businesses. Also, the Company's
increasing revenue base which, because of the Company's relatively fixed cost
structure, improved operating leverage and profits. In addition, operating
cash flows have not been burdened by significant investment in working
capital. This is largely because a significant portion of the Company's
revenues are billed and collected electronically in the case of its 800-based
service customers or billed and collected in advance in the case of its voice
messaging customers. As a result, the Company carried only 24.5 days sales in
receivables at December 31, 1997 as compared with approximately 77.9 days of
expenses in accounts payable and accrued liabilities.
The Company used cash in investing activities of approximately $160.0
million in 1997, $96.1 in 1996 and $13.2 million in 1995. Investment of $86.7
million of excess proceeds from the issuance of convertible subordinated notes
in 1997 and $67.2 million from the Company's initial public offering in 1996
accounted for a majority of the Company's investing activities in 1997 and
1996. The Company purchased property and equipment, primarily computer and
telecommunications equipment, of approximately $33.4 million in 1997, $21.9
million in 1996 and $12.2 million in 1995. These expenditures were made
primarily to expand operational infrastructure to support new business growth.
Management anticipates that these expenditures will continue to increase in
the future as the Company upgrades and expands the operational infrastructure
of both its existing computer telephony network and integrates the network of
its recent acquisition, Xpedite. The Company made investments of approximately
$23.8 million in 1997 in various companies engaged in emerging technologies,
such as telemedicine and the internet, as well as in marketing alliances and
outsourcing programs designed to reduce costs and develop new markets and
distribution channels for the Company's products. Management will
29
<PAGE>
continue to make such investments in the future in complementary businesses
and other initiatives that further its strategic business plan. The Company
paid approximately $16.2 million of cash in connection with the acquisition of
the Voice-Tel Franchisees in 1997 and $2.9 million in the acquisition of TeleT
in 1996. See Note 3 -- Acquisitions in Notes to Consolidated Financial
Statements.
The Company utilized proceeds from the issuance of convertible subordinated
notes of $172.5 million in 1997 and its initial public offering proceeds of
$74.6 million in 1996 to support growth in its existing businesses and also to
make acquisitions and other strategic investments. In addition to cash paid to
purchase certain Voice-Tel Franchisees in 1997, the Company also repaid
approximately $29.5 million of indebtedness in 1997 assumed in connection with
the Voice-Tel acquisitions. Cash distributions to shareholders of VoiceCom and
certain Voice-Tel companies, primarily S Corporations, used $9.4 million, $3.6
million and $1.5 million in 1997, 1996 and 1995, respectively. Such
distributions were made in periods prior to the Voice-Tel and VoiceCom
acquisitions and were made primarily to reimburse S Corporation shareholders
for taxes paid on the proportionate share of taxable income of such companies
they were required to report in their individual income tax returns.
At December 31, 1997, the Company's principal commitments involve certain
indebtedness, lease obligations and minimum purchase requirements under supply
agreements with telecommunications providers. The Company is in compliance
under all such agreements at this date. See also Note 6--Long-Term Debt and
Note 13--Contingencies and Commitments in Notes to Consolidated Financial
Statements.
Management believes that cash and marketable securities on-hand of
approximately $176.3 million and cash generated by operating activities will
be adequate to fund growth in the Company's existing businesses for the
forseeable future. However, the Company will be required to repay or refinance
certain indebtedness assumed in connection with its acquisition on February
27, 1998 of Xpedite. Such indebtedness approximates $140 million and
management is currently evaluating alternatives in this regard.
RESTRUCTURING AND OTHER SPECIAL CHARGES
On February 27, 1998, the Company acquired Xpedite in a transaction to be
accounted for as a pooling of interests. The Company anticipates that it will
record restructuring and other special charges before income taxes in the
range of $50 million in connection with the Xpedite acquisition. Such amount
includes charges recorded by Xpedite in the fourth quarter of 1997 expected by
management to be in the range of $20 million before income taxes. These
charges result principally from transaction fees which the Company is required
to expense under the pooling of interests method of accounting, including a
$9.5 million transaction "break-up fee" paid by Xpedite to a company which was
party to an unsuccessful attempt to acquire Xpedite. In addition, such costs
result from legal and professional fees and the write-down of impaired assets
and associated costs to exit certain duplicative facilities and business
activities.
In connection with the VoiceCom Acquisition, the Company recorded
restructuring and other special charges of approximately $28.2 million in the
third quarter of 1997. Such amounts consisted of transaction costs, asset
impairments, costs to terminate or restructure certain contractual obligations
and other costs.
Transaction costs associated with the Voicecom acquisition were expensed as
required by the pooling-of-interests method of accounting. Other restructuring
and special charges recorded in the third quarter result principally from
management's plan to restructure VoiceCom's operations by reducing its
workforce, exiting certain facilities, discontinuing duplicative product
offerings and terminating or restructuring certain contractual obligations.
The Company recorded approximately $45.4 million of restructuring and other
special charges in the second quarter of 1997 in connection with the Voice-Tel
Acquisitions. Those charges result from management's plan to restructure the
operations of the Voice-Tel Entities under a consolidated business group model
and discontinue its franchise operations. This initiative involves substantial
reduction in the administrative workforce, abandoning duplicative facilities
and assets and other costs necessary to discontinue redundant business
activities. See Note 15--Restructuring and Other Special Charges of Notes to
Consolidated Financial Statements.
30
<PAGE>
During the third quarter of 1996 in connection with the acquisition of
TeleT, the Company allocated approximately $11.0 million of the purchase price
to incomplete research and development projects. Accordingly, this cost was
expensed as of the acquisition date. This allocation represents the estimated
value related to the incomplete projects determined by an independent
appraisal. The development of these projects had not yet reached technological
feasibility and the technology had no alternative future use.
OTHER MATTERS
It is possible that a significant portion of the Company's currently
installed computer systems, software products, billing systems, telephony
platforms, networks, database or other business systems (hereinafter referred
to collectively as "Systems"), or those of the Company's customers, vendors or
resellers, working either alone or in conjunction with other software or
systems, will not accept input of, store, manipulate and output dates for the
years 1999, 2000 or thereafter without error or interruption (commonly known
as the "Year 2000" problem). The Company is currently in the process of
evaluating its Systems to determine whether or not modifications will be
required to prevent problems related to the Year 2000. There can be no
assurance that the Company will identify all such Year 2000 problems in its
Systems or those of its customers or vendors, including network transmission
providers, in advance of their occurrence or that the Company will be able to
successfully remedy any problems that are discovered. In addition, the Company
is dependent upon third parties for transmission of its calls and other
communications. There can be no assurance that these third party providers
will identify and remedy any Year 2000 problems in their transmission
facilities. The expenses of the Company's efforts to identify and address such
problems, the expenses or liabilities to which the Company may be subject as a
result of such problems, or the failure of third party providers of
transmission facilities, could have a material adverse effect on the Company's
business, financial condition and results of operations. The financial
stability of existing customers may be adversely impacted by Year 2000
problems which could have a material adverse impact on the Company's revenues.
In addition, failure of the Company to identify and remedy Year 2000 problems
could put the Company at a competitive disadvantage relative to companies that
have corrected Year 2000 problems.
NEW ACCOUNTING PRONOUNCEMENTS
In 1997 the FASB has issued SFAS No. 130, "Reporting Comprehensive Income"
and SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information." Management is currently studying the impact the new Standards
will have on its financial statement disclosures.
FACTORS AFFECTING FUTURE PERFORMANCE
When used in this Annual Report on Form 10-K, in documents incorporated
herein and elsewhere by management or the Company from time to time, the words
"believes," "anticipates," "expects" and similar expressions are intended to
identify forward-looking statements concerning the Company's business
operations, economic performance and financial condition, including in
particular, the Company's business strategy and means to implement the
strategy, the Company's objectives, the amount of future capital expenditures,
the likelihood of the Company's success in developing and introducing new
products and expanding its business, and the timing of the introduction of new
and modified products or services. For these statements, the Company claims
the protection of the safe harbor for forward looking statements contained in
the Private Securities Litigation Reform Act of 1995. These statements are
based on a number of assumptions and estimates which are inherently subject to
significant risks and uncertainties, many of which are beyond the control of
the Company and reflect future business decisions which are subject to change.
A variety of factors could cause actual results to differ materially from
those anticipated in the Company's forward-looking statements, including the
factors set forth in the section captioned "Special Cautionary Notice
Regarding Forward Looking Statements" and those set forth below.
Ability to Manage Growth; Acquisition Risks. Premiere continually evaluates
acquisition opportunities and, as a result, frequently engages in acquisition
discussions, conducts due diligence activities in connection with
31
<PAGE>
possible acquisitions, and, where appropriate, engages in acquisition
negotiations. Premiere has experienced substantial growth in revenue and
personnel in recent years, particularly in 1997. A substantial portion of such
growth has been accomplished through acquisitions, including the Voice-Tel
Acquisitions, the acquisition of VoiceCom and the Xpedite Merger. Premiere's
growth has placed significant demands on all aspects of Premiere's business,
including its administrative, technical and financial personnel and systems.
Additional expansion by Premiere, including the Xpedite Merger, may further
strain Premiere's management, financial and other resources. There can be no
assurance that Premiere's systems, procedures, controls and existing space are
or will be adequate to support expansion of Premiere's operations. Premiere's
future operating results will substantially depend on the ability of its
officers and key employees to manage changing business conditions and to
implement and improve its administrative, technical and financial control and
reporting systems. If Premiere is unable to respond to and manage changing
business conditions, then the quality of Premiere's services, its ability to
retain key personnel and its results of operations could be materially
adversely affected. At certain stages of growth in network usage, Premiere
will be required to add capacity to its computer telephony platform and its
digital central office switches and will need to continually add capacity to
its private frame relay network, thus requiring Premiere continuously to
attempt to predict growth in its network usage and add capacity accordingly.
Difficulties in managing continued growth, including difficulties in
predicting the growth in network usage, could have a material adverse effect
on Premiere's business, financial condition and results of operations.
Acquisitions, including the Xpedite Merger, also involve numerous additional
risks, including difficulties in the assimilation of the operations, services,
products and personnel of the acquired company, the diversion of Premiere's
management's attention from other business concerns, entry into markets in
which Premiere has little or no direct prior experience and the potential loss
of key employees of the acquired company. Premiere is unable to predict
whether or when any prospective acquisition candidate will become available or
the likelihood that any acquisition will be completed.
Future acquisitions by Premiere may result in potentially dilutive issuances
of equity securities, the incurrence of additional debt, the assumption of
known and unknown liabilities, the write-off of software development costs and
the amortization of expenses related to goodwill and other intangible assets,
all of which could have a material adverse effect on Premiere's business,
financial condition and results of operations. For example, the Voice-Tel
Entities and VoiceCom established reserves for certain potential tax
liabilities that Premiere's management believes to be adequate based on
certain assumptions which Premiere's management believes are reasonable. If,
however, such assumptions prove to be incorrect and the potential liabilities
ultimately exceed established reserves, Premiere's business, financial
condition and results of operations could be materially adversely affected.
Premiere has recorded approximately $14.8 million of goodwill and other
intangible assets in connection with the Voice-Tel Acquisitions. Premiere is
amortizing the goodwill on a straight-line basis over 40 years, and Premiere
believes the useful life of the Voice-Tel Entities to be at least 40 years. If
the amortization period is accelerated due to a reevaluation of the useful
life of the Voice-Tel Entities or otherwise, amortization expense may
initially increase on a quarterly basis or require a write-down of the
goodwill. An increase in the rate of amortization of goodwill or future write-
downs and restructuring charges could have a material adverse effect on
Premiere's business, financial condition and results of operations.
Premiere has taken, and in the future may take, charges in connection with
acquisitions. During the second quarter of 1997, Premiere took a pre-tax
charge of approximately $45.4 million in connection with the Voice-Tel
Acquisitions and during the third quarter of 1997, Premiere took a pre-tax
charge of approximately $28.2 million in connection with the acquisition of
VoiceCom. In connection with the Xpedite Merger, Premiere and Xpedite are
expected to take additional charges. See "Management's Discussion and Analysis
of Financial Condition" or "Results of Operations--Restructuring and Other
Special Charges." Moreover, Premiere may take additional charges in connection
with future acquisitions. There can be no assurance that the costs and
expenses incurred will not exceed the estimates upon which such charges are
based.
In June 1997, Premiere completed the Voice-Tel Acquisitions. Prior to the
Voice-Tel Acquisitions, the Voice-Tel Entities operated approximately 210 POPs
in five countries. VTE operated as a franchisor, and each of the approximately
100 Franchisees was independently owned and operated. Premiere is in the
process of
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consolidating these separate businesses by attempting to eliminate duplicative
and unnecessary costs and to operate them under common management. Potential
challenges to the successful consolidation of the Voice-Tel Entities include,
but are not limited to: (i) centralization and consolidation of financial,
operational and administrative functions; (ii) consolidation of the service
centers, network and work force; (iii) elimination of unnecessary costs; and
(iv) realization of economies of scale. Premiere is in the process of
integrating Voice-Tel's service offerings, operations and systems with those
of Premiere, and therefore, the Voice-Tel integration plans may materially
change in the future. Challenges to the successful integration of the Voice-
Tel Entities include, but are not limited to: (i) localization of Premiere
products; (ii) integration of the Premiere platform with the Voice-Tel
network; (iii) cross-selling of products and services to the customer base of
Voice-Tel and Premiere; (iv) integration of new personnel; and (v) compliance
with regulatory requirements.
Because of the size and fragmented nature of the facilities and businesses
of the Voice-Tel Entities and the technical complexity of integrating
Premiere's products with those of Voice-Tel, the integration process is
particularly complex and will place significant demands on Premiere's
management, engineering, financial and other resources. There can be no
assurance that the Voice-Tel Entities will be successfully consolidated or
integrated with Premiere's operations on schedule or at all, that the Voice-
Tel Acquisitions will result in sufficient net sales or earnings to justify
Premiere's investment therein or the expenses related thereto, or that
operational synergies will develop. The successful consolidation of the Voice-
Tel Entities and their integration into Premiere's operations are critical to
Premiere's future performance. Failure to successfully consolidate and
integrate the Voice-Tel Entities or to achieve operating synergies would have
a material adverse effect on Premiere's business, financial condition and
results of operations.
Competition. The market for the Company's services is intensely competitive,
rapidly evolving and subject to rapid technological change. The Company
expects competition to increase in the future. Many of the Company's current
and potential competitors have longer operating histories, greater name
recognition, larger customer bases and substantially greater financial,
personnel, marketing, engineering, technical and other resources than the
Company. The Company believes that existing competitors are likely to expand
their service offerings and that new competitors are likely to enter the
personal communications market and to attempt to integrate such services,
resulting in greater competition for the Company. Such competition could have
a material adverse effect on the Company's business, financial condition and
results of operations.
The Company attempts to differentiate itself from its competitors by
offering an integrated suite of enhanced personal communications services.
Other providers currently offer each of the individual services and certain
combinations of the services offered by the Company. The Company's worldwide
mobile communications services and features compete with services provided by
companies such as AT&T Corp. ("AT&T"), MCI Communications Corp. ("MCI") and
Sprint Corp. ("Sprint") as well as smaller interexchange long distance
providers. The Company's voice mail services, including those acquired in the
Voice-Tel Acquisitions and the VoiceCom acquisition, compete with voice mail
services provided by AT&T, certain regional Bell Operating Companies ("RBOCs")
and other service bureaus as well as by equipment manufacturers, such as Octel
Communications Corporation ("Octel"), Northern Telecom, Inc. ("Northern
Telecom"), Siemens Business Communications Systems, Inc. ("Siemens"),
Centigram Communications Corporation ("Centigram"), Boston Technology, Inc.
("Boston Technology") and Digital Sound Corporation ("Digital Sound"). The
Company's enhanced travel, concierge, news and e-mail services compete with
services provided by America Online, Inc. ("America Online"), Prodigy Services
Co. ("Prodigy") and numerous Internet service providers. The Company's paging
services compete with paging services offered by companies such as AT&T and
MCI.
The Company's Orchestrate service, which the Company anticipates beginning
marketing during the second quarter of 1998, is expected to compete with
products offered by companies such as Octel, Microsoft Corp. ("Microsoft"),
Novell, Inc. ("Novell"), Lucent Technologies, Inc. ("Lucent") and numerous
other entities. For example, Octel and Microsoft recently announced a service,
called "Unified Messenger," which places all voice mail, e-mail and fax
messages in a single mailbox accessible by computer or telephone. In addition,
the number of companies offering call center technology, including AT&T, MCI
and Lucent, has grown dramatically over the past few years, primarily in
response to major outsource initiatives and significantly lower technology
costs.
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The Company expects that other parties will develop and implement information
and telecommunications service platforms similar to its platform, thereby
increasing competition for the Company's services.
Through the recently completed Xpedite Merger, Premiere offers enhanced
document distribution services ("Enhanced Services"). Xpedite's fax
communication services currently compete with services provided by each of
AT&T, MCI and Sprint, and many of the national postal, telephone and telegraph
companies ("PTTs") around the world. Neither Premiere nor Xpedite can predict
whether AT&T, MCI, Sprint, any Internet service provider or PTT or any other
competitor will expand its fax communications services business, and there can
be no assurance that these or other competitors will not commence or expand
their businesses. Moreover, Xpedite's receiving, queuing, routing and other
systems logic and architecture are not proprietary to Xpedite, and as a
result, there can be no assurance that such information will not be acquired
or duplicated by Xpedite's existing and potential competitors. Xpedite does
not typically have long-term contractual agreements with its customers, and
there can be no assurance that its customers will continue to transact
business with Premiere in the future. In addition, even if there is continued
growth in the use of electronic document distribution services, there can be
no assurance that potential customers will not elect to use their own
equipment to fulfill their needs for electronic document distribution
services. There also can be no assurance that customers will not elect to use
alternatives to Xpedite's electronic document distribution services, including
the Internet, to carry such customers' communications or that companies
offering such alternatives will not develop product features or pricing which
are more attractive to customers than those currently offered by Xpedite.
Furthermore, on February 8, 1996, President Clinton signed into law the
Telecommunications Act of 1996, as amended (the "1996 Act"), which allows
local exchange carriers ("LECs"), including the RBOCs, to provide long
distance telephone service between Local Access and Transport Areas ("LATAs"),
which will likely significantly increase competition for long distance
services. The new legislation also grants the Federal Communications
Commission (the "FCC") the authority to deregulate other aspects of the
telecommunications industry, which in the future may, if authorized by the
FCC, facilitate the offering of an integrated suite of information and
telecommunications services by regulated entities, including the RBOCs, in
competition with the Company. Such increased competition could have a material
adverse effect on the Company's business, financial condition and results of
operations.
Telecommunications companies compete for consumers based on price, with
major long distance carriers conducting extensive advertising campaigns to
capture market share. There can be no assurance that a decrease in the rates
charged for communications services by the major long distance carriers or
other competitors, whether caused by general competitive pressures or the
entry of the RBOCs and other LECs into the long distance market, would not
have a material adverse effect on the Company's business, financial condition
and results of operations.
The Company expects that the information and telecommunications services
markets will continue to attract new competitors and new technologies,
possibly including alternative technologies that are more sophisticated and
cost effective than the technology of the Company. The Company does not have
the contractual right to prevent its Premiere WorldLink subscribers from
changing to a competing network, and the Company's subscribers may generally
terminate their service with the Company at will.
Dependence on Key Management and Personnel. The Company's success is largely
dependent upon its executive officers and other key personnel, the loss of one
or more of whom could have a material adverse effect on the Company. The
Company believes that its continued success will depend to a significant
extent upon the efforts and abilities of Boland T. Jones, Chairman and
President, and certain other key executives. Mr. Jones has entered into an
employment agreement with the Company which expires in December 1999, and the
Company maintains key man life insurance on Mr. Jones in the amount of $3.0
million. During the fourth quarter of 1997, D. Gregory Smith, a co-founder of
the Company, resigned as a director, Executive Vice President and Assistant
Secretary of the Company and as a director and officer of PCI and certain
other subsidiaries, and Leonard A. DeNittis resigned as the Vice President of
Engineering and Operations of PCI.
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The Company also believes that to be successful it must hire and retain
highly qualified engineering and product development personnel. Competition in
the recruitment of highly qualified personnel in the information and
telecommunications services industry is intense. The inability of the Company
to locate, hire and retain such personnel may have a material adverse effect
on the Company. No assurance can be given that the Company will be able to
retain its key employees or that it will be able to attract qualified
personnel in the future.
Reliance on Amway and Certain other Relationships. Historically, the Voice-
Tel Entities have relied on sales through Amway Corporation ("Amway") for a
substantial portion of their revenue. Such sales accounted for approximately
27.5%, 23.7% and 17.5% of the Company's revenue for 1995, 1996 and 1997,
respectively. Amway's relationship with VTE commenced in 1990 when VTE began
managing the voice messaging operations previously conducted by Amway's
subsidiary, Amvox, Inc. ("Amvox"). VTE subsequently acquired and franchised
the former Amvox service centers from Amway in exchange for an equity interest
in VTE. Amway later invested in the development of the private frame relay
digital messaging network through VTN. As a result of these transactions,
Amway also became the single largest equity holder in VTE and VTN. VTE and
Amway have entered into a service and reseller agreement (the "Amway
Agreement") providing, among other things, for the sale by VTE of voice
messaging and network transmission services on an exclusive basis to Amway in
the United States, Canada, New Zealand and Australia for resale by Amway to
its independent distributors under the "Amvox" tradename. The Amway Agreement
does not bind the Amway distributors, who are free to acquire messaging
services from alternative vendors. The Amway Agreement may be canceled by
either party upon 180 days prior written notice or upon shorter notice in the
event of a breach. The Amway Agreement does not prohibit VTE from continuing
to provide voice messaging and network transmission services to Amway's
distributors following termination of the Amway Agreement. However, in the
event that Amway recommended a voice messaging and network transmission
services provider other than the Company, there can be no assurance that
Amway's distributors would not follow such recommendation. Amway sold a
significant portion of the Common Stock that it acquired in the Voice-Tel
Acquisitions in an offering pursuant to a demand registration by certain
former owners of the Voice-Tel Entities. Such sale decreased Amway's interest
in the Company and may increase the possibility that Amway will recommend a
voice messaging and network transmission services provider other than the
Company. There can be no assurance that the Company's relationship with Amway
and the Amway distributors will continue at historical levels or at all, nor
can there be any assurance of long-term price protection for services provided
to Amway. Loss or diminution in the Amway relationship, or a decrease in
average sales price without an offsetting increase in volume, could have a
material adverse effect on the Company's business, financial condition and
results of operations.
In September 1997, Premiere entered into an agreement with Digitec 2000,
Inc. ("Digitec") pursuant to which Digitec will act as a distributor to market
and sell prepaid telephone cards. Under the terms of such agreement, Digitec
agreed, starting January 1, 1998, to sell cards with a minimum retail value
each month. In the event that Digitec has not sold all of the cards by August
31, 1998, Digitec will be obligated to pay Premiere an amount equal to the
retail value of the unsold cards less commissions that would have been payable
on such cards. Digitec is not currently selling the monthly minimum amount and
no assurance can be given that Digitec will be able to sell the amount of
cards that it is obligated to sell under the terms of such agreement. In the
event that Digitec is unable to do so, the Company believes that it is
unlikely that Digitec would have the financial resources available to it to
make the payment required on August 31, 1998 under such agreement.
Technological Change; Risk of Obsolescence; Dependence on New Services. The
market for the Company's services is characterized by rapid technological
change, frequent new product introductions and evolving industry standards.
The Company's future success will depend in significant part on its ability to
anticipate industry standards, continue to apply advances in technologies,
enhance its current services, develop and introduce new services in a timely
fashion, enhance its software and its computer telephony platform and compete
successfully with products and services based on evolving or new technologies.
The Company expects new products and services, and enhancements to existing
products and services, to be developed and introduced which will compete with
the services offered by the Company. Among the new and evolving technologies
with which the Company expects to compete are notebook computers equipped with
sound cards, fax modems and
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cellular modems, portable Internet appliances which would allow connection to
the Internet over wireless networks and personal digital assistants with
enhanced communications features. In addition, aspects of the Company's
Orchestrate product line, which has been marketed to customers during the
first quarter of 1998, is expected to compete within markets where larger
companies are working to provide a unified messaging solution. The Company is
also aware that products currently exist which provide text-to-voice e-mail
conversion and "call connect/call screening" services.
Through the recently completed Xpedite Merger, Premiere offers Enhanced
Services. See "--Risks Associated with Expansion of Enhanced Document
Distribution Services." Technological advances may result in the availability
of new services, products or methods of electronic document delivery that
could compete with the electronic document distribution services currently
provided by Premiere and Xpedite or decrease the cost of existing products or
services which could enable Premiere's and/or Xpedite's established or
potential customers to meet their own needs for electronic document
distribution services more cost efficiently than through the use of Premiere
or Xpedite or in the future through the use of the combined company's
services. In addition, Premiere may experience difficulty integrating
incompatible systems of acquired businesses into its network. There can be no
assurance that Premiere will not be materially adversely affected in the event
of such technological change or difficulty, or that changes in technology will
not enable additional companies to offer services which could replace, or be
more cost-effective than, some or all of the services offered now by Premiere
or Xpedite or in the future by the combined company.
The Voice-Tel Acquisitions constitute a significant investment by the
Company in a private frame relay network architecture. Alternative
architectures currently exist, and technological advances may result in the
development of additional network architectures. There can be no assurance
that the telecommunications industry will not standardize on a protocol other
than frame relay or that the Company's frame relay architecture will not
become obsolete. Such events would require the Company to invest significant
capital in upgrading or replacing its private frame relay network and could
have a material adverse effect on the Company's business, financial condition
and results of operations.
The Company must continually introduce new products in response to evolving
industry standards and customer demands for enhancements to the Company's
existing products. One such new product is Orchestrate, which is operational
and has been available in limited release. The Company anticipates commencing
marketing of the Orchestrate product during the second quarter of 1998. The
Company believes that its competitors have not yet developed a publicly
available network-based product which incorporates all of the functionalities
of Orchestrate, although the Company's competitors have developed products
which the Company believes offer some, but not all, of the bundled services
offered through Orchestrate . There can be no assurance that: (i) the Company
will be successful in developing and marketing service enhancements or new
services that respond to these or other technological changes or evolving
industry standards; (ii) the Company will not experience difficulties that
could delay or prevent the successful development, introduction and marketing
of its services, including Orchestrate; or (iii) its new services and the
enhancements thereto, including Orchestrate, will adequately meet the
requirements of the marketplace and achieve market acceptance. Delays in the
introduction of new services, the inability of the Company to develop such new
services or the failure of such services to achieve market acceptance could
have a material adverse effect on the Company's business, financial condition
and results of operations.
Uncertainty of Market Acceptance of Computer Telephony. The Company's future
success depends upon the market acceptance of its existing and future computer
telephony product lines and services. Computer telephony integrates the
functionality of telephones and computers and thus represents a departure from
standards for information and telecommunications services. Market acceptance
of computer telephony products and services generally requires that
individuals and enterprises accept a new way of exchanging information. The
Company believes that broad market acceptance of its computer telephony
product lines and services will depend on several factors, including ease of
use, price, reliability, access and quality of service, system security,
product functionality and the effectiveness of strategic marketing and
distribution relationships. There can be no assurance that the Company's
computer telephony products and services will achieve broad market acceptance
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or that such market acceptance will occur at the rate which the Company
currently anticipates. A decline in the demand for, or the failure to achieve
broad market acceptance of, the Company's computer telephony product lines and
services would have a material adverse effect on the Company's business,
financial condition and results of operations.
Limited Protection of Proprietary Rights and Technology. The Company relies
primarily on a combination of intellectual property laws and contractual
provisions to protect its proprietary rights and technology. These laws and
contractual provisions provide only limited protection of the Company's
proprietary rights and technology. The Company's proprietary rights and
technology include confidential information and trade secrets which the
Company attempts to protect through confidentiality and nondisclosure
provisions in its licensing, services, reseller and distribution agreements.
The Company typically attempts to protect its confidential information and
trade secrets through these contractual provisions for the term of the
applicable agreement and, to the extent permitted by applicable law, for some
negotiated period of time following termination of the agreement, typically
one to two years at a minimum. Although the Company is not aware of any
current or previous infringement of its proprietary rights and technology,
there can be no assurance that the Company's means of protecting its
proprietary rights and technology will be adequate or that the Company's
competitors will not independently develop similar technology. In addition,
the laws of some foreign countries do not protect the Company's proprietary
rights to as great an extent as the laws of the U.S.
Risks of Infringement Claims. Many patents, copyrights and trademarks have
been issued in the general areas of information and telecommunications
services and computer telephony. The Company believes that in the ordinary
course of its business third parties will claim that the Company's current or
future products or services infringe the patent, copyright or trademark rights
of such third parties. No assurance can be given that actions or claims
alleging patent, copyright or trademark infringement will not be brought
against the Company with respect to current or future products or services, or
that, if such actions or claims are brought, the Company will ultimately
prevail. Any such claiming parties may have significantly greater resources
than the Company to pursue litigation of such claims. Any such claims, whether
with or without merit, could be time consuming, result in costly litigation,
cause delays in introducing new or improved products and services, require the
Company to enter into royalty or licensing agreements, or cause the Company to
discontinue use of the challenged technology, tradename or service mark at
potentially significant expense to the Company associated with the marketing
of a new name or the development or purchase of replacement technology, all of
which could have a material adverse effect on the Company's business,
financial condition and results of operations.
The Company is aware of other companies that use the terms "WorldLink" or
"Premiere" in describing their products and services, including
telecommunications products and services. Certain of those companies hold
registered trademarks which incorporate the names "WorldLink" or "Premiere."
The Company has received correspondence from a provider of prepaid calling
cards which claims that the Company's use of the term "WorldLink" infringes
upon its trademark rights. In addition, the Company has received
correspondence from a major bank, which is among the holders of registered
trademarks incorporating the term "WorldLink," inquiring as to the nature of
the Company's use of the term "WorldLink" as part of its mark "Premiere
WorldLink." Based on, among other things, the types of businesses in which the
other companies are engaged and the low likelihood of confusion, the Company
believes these claims to be without merit.
In October 1996, VTE received a letter from a third party claiming that
certain aspects of VTE's products and services may be infringing upon one or
more of the third party's patents. The Company has reviewed the patent claims
of the third party and does not believe that the Company's products or
services infringe on the claims of the third party. No patent infringement
claims against the Company have been filed by the third party at this time.
Should the third party file patent infringement claims against the Company,
the Company believes that it would have meritorious defenses to any such
claims. However, due to the inherent uncertainties of litigation, the Company
is unable to predict the outcome of any potential litigation with the third
party, and any adverse outcome could have a material adverse effect on the
Company's business, results of operations or financial condition. Even if the
Company were to ultimately prevail, the Company's business could be adversely
affected by the diversion of management attention and litigation costs.
Because of this risk, the Company
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withheld in escrow approximately 123,000 shares of Common Stock from the
purchase price of VTE and VTN. This escrow arrangement terminates in April
2000. There can be no assurance that such escrow will be sufficient to fully
cover the Company's exposure in the event of litigation or an adverse outcome
to the potential infringement claims.
In May 1997, Premiere received a letter from a manufacturer and marketer of
certain telecommunications equipment asserting that Premiere is offering
certain "calling card and related enhanced services," "single number service"
and "call connecting services" covered by three patents held by that company
and inviting Premiere to obtain a license. Premiere has preliminarily reviewed
the subject patents and, based on that review, presently believes that its
products and services currently being marketed do not infringe these patents.
Premiere intends, however, to conduct a further review of these two patents in
order to determine whether it would be helpful to its future products and
services to license the patents. If Premiere ultimately determines that it is
infringing these patents, or any one of them, it could seek to license the
technology or discontinue using it and employ an alternate technology. There
can be no assurance that Premiere would be able to license the technology on
commercially reasonable terms or that it could easily and inexpensively
migrate to a new call reorganization technology. Premiere's call
reorganization service is only one service that it offers, and management does
not believe that this service is critical to the marketing of Premiere's
overall suite of services. Consequently, Premiere does not believe that its
inability to license the technology or migrate to a new technology would have
a material adverse effect on its business, financial condition and results of
operations. No claim has been asserted beyond this letter, but no assurance
can be given that the third party will not commerce an infringement action
against Premiere. If a patent infringement claim is brought against Premiere,
there can be no assurance that Premiere would prevail and any adverse outcome
could have a material adverse effect on Premiere's business, financial
condition and results of operations.
In May 1997, the Company received a letter from counsel for a provider of
goods and services in the telecommunications field objecting to the Company's
use of the phrase "personal assistant" based on that company's federally
registered "personal assistant" service mark. On June 18, 1997, counsel for
the Company responded to the objections, noting that the Company did not
intend to use, nor would it use in the future, the words "personal assistant"
as a trademark or service mark, but instead would merely use these words to
describe the nature of its product. The Company has not heard anything further
from the potential claimant and believes that the matter has been resolved.
In July 1997, the Company received a letter from counsel for a French
publishing company objecting to the Company's use of the "Premiere" trademark.
Based on, among other things, the type of business in which the French company
is engaged and the unlikelihood that the Company will engage in competitive
activities using the Premiere mark in France, the Company believes that no
action will be brought. Due to the inherent uncertainties of litigation,
however, the Company is unable to predict the outcome of any potential
litigation with the French company, and any adverse outcome could have a
material effect on the Company's business, financial condition and results of
operations. Even if the Company were to prevail in such a challenge, the
Company's business could be adversely affected by the diversion of management
attention and litigation costs.
In February 1997, the Company entered into a long-term nonexclusive license
agreement with AudioFAX settling a patent infringement suit filed by AudioFAX
in June 1996. In the third quarter of 1996, the Company took a one-time charge
for the estimated legal fees and other costs that the Company expected to
incur to resolve this matter. In September 1997, VoiceCom also entered into a
long-term nonexclusive license agreement with AudioFAX.
In July 1996, Xpedite received a letter from counsel for AudioFAX, which
informed Xpedite that AudioFAX is the owner of certain U.S. and Canadian
patents relevant to the fax processing business, and inquired as to Xpedite's
interest in obtaining a license to use these patents. The Company is currently
negotiating with AudioFAX with respect to entering into a long-term, non-
exclusive license for use of these patents by Xpedite. In the event Premiere
is unable to enter into a license agreement with Audio FAX, the Company cannot
predict the outcome of this matter, including but not limited to whether or
not AudioFAX will commence a
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lawsuit against Xpedite. There can be no assurance that the resolution of such
matter will not have a material adverse effect on Premiere's business,
financial condition and results of operations.
Uncertainty of Strategic Relationships. A principal element of the Company's
strategy is the creation and maintenance of strategic relationships that will
enable the Company to offer its services to a larger customer base than the
Company could otherwise reach through its direct marketing efforts. The
Company has experienced growth in its existing strategic relationships during
1996 and 1997 and has entered into or initiated new strategic relationships
with several companies, including WorldCom, American Express and CompuServe.
Although the Company intends to continue to expand its direct marketing
channels, the Company believes that strategic partner relationships may offer
a potentially more effective and efficient marketing channel. Consequently,
the Company's success depends in part on the ultimate success of these
relationships and on the ability of these strategic partners to market the
Company's services effectively. Failure of one or more of the Company's
strategic partners to successfully develop and sustain a market for the
Company's services, or the termination of one or more of the Company's
relationships with a strategic partner, could have a material adverse effect
on the Company's overall performance. The telecommunications industry is
experiencing rapid consolidation. Recently WorldCom, which is a strategic
partner of the Company, entered into an agreement to acquire MCI, which
competes with the Company with respect to certain services. Consolidation in
the communications industry, including consolidations involving the Company's
customers and strategic partners, could have a material adverse effect on the
Company's business, financial condition and results of operations.
In November 1996, the Company entered into a strategic alliance agreement
with WorldCom, whereby WorldCom is required, among other things, to provide
the Company with the right of first opportunity to provide certain enhanced
computer telephony services for a period of at least 25 years. In connection
with this agreement, the Company issued to WorldCom 2,050,000 shares of Common
Stock valued at approximately $25.2 million (based on an independent
appraisal) and paid WorldCom $4.7 million in cash. The Company recorded the
value of this agreement as an intangible asset. While the Company believes
that the intangible asset will be recovered over the life of the agreement,
this recoverability is dependent upon the success of the strategic
relationship. The Company will continually evaluate the realizability of the
intangible asset recorded, and there can be no assurance that future
evaluations will not require a write-down of this asset.
Although the Company views its strategic relationships as a key factor in
its overall business strategy and in the development and commercialization of
its services, there can be no assurance that its strategic partners view their
relationships with the Company as significant for their own businesses or that
they will not reassess their commitment to the Company in the future. The
Company's arrangements with its strategic partners do not always establish
minimum performance requirements for the Company's strategic partners, but
instead rely on the voluntary efforts of these partners in pursuing joint
goals. Certain of these arrangements prevent the Company from entering into
strategic relationships with other companies in the same industry as the
Company's strategic partners, either for specified periods of time or while
the arrangements remain in force. In addition, even when the Company is
without contractual restriction, it may be restrained by business
considerations from pursuing alternative arrangements. The ability of the
Company's strategic partners to incorporate the Company's services into
successful commercial ventures will require the Company, among other things,
to continue to successfully enhance its existing services and develop new
services. The Company's inability to meet the requirements of its strategic
partners or to comply with the terms of its strategic partner arrangements
could result in its strategic partners failing to market the Company's
services, seeking alternative providers of communications and information
services or canceling their contracts with the Company, any of which could
have a material adverse impact on the Company's business, financial condition
and results of operations.
Dependence on Licensing and Strategic Relationships. The Company has
licensing relationships with companies that have chosen to outsource part or
all of their communications card services to Premiere. License fees accounted
for approximately 7.0% of Premiere's revenues in 1996 and 11.8% of Premiere's
revenues during 1997. One licensee, Communications Network Corporation
("CNC"), accounted for approximately 19.6% of Premiere's 1996 license fees and
approximately 1.4% of the Company's total 1996 revenues. On August 6, 1996,
CNC was placed into bankruptcy under Chapter 11 of the United States
Bankruptcy Code. CNC owed the
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Company approximately $627,000 as of December 31, 1996. However, CNC's
transmission provider, WorldCom Network Services, Inc., d/b/a WilTel, is also
obligated to pay this amount to the Company. In addition, WorldCom accounted
for approximately 43.5% of the Company's 1996 license fees and approximately
3.0% of the Company's total 1996 revenues, and approximately 66.8% of the
Company's license fees and 7.8% of the Company's total 1997 revenues. The
Company believes that through a combination of new licensing agreements, the
strategic alliance agreement with WorldCom and increased revenues from
existing licensees, the Company has replaced all of the anticipated CNC
revenue.
The Company intends to increase its number of licensees and its licensee
transaction volume in the future. The Company's success depends in part upon
the ultimate success or failure of its licensees. The telecommunications
industry is intensely competitive and rapidly consolidating. The majority of
companies that have chosen to outsource communications card services to
Premiere are small or medium-sized telecommunications companies that may be
unable to withstand the intense competition in the telecommunications
industry. Licensees that ceased doing business with Premiere due to financial
difficulties contributed in the aggregate approximately $2.9 million of
Premiere's 1996 revenues. Although the Company was able to add new licensees
in 1996 and the first three quarters of 1997, there can be no assurance that
the failure of one or more of the Company's licensees to develop and sustain a
market for the Company's services, or termination of one or more of the
Company's licensing relationships, will not have a material adverse effect on
the Company's business, financial condition and results of operations.
Year 2000 Problem. It is possible that a significant portion of the
Company's currently installed computer systems, software products, billing
systems, telephony platforms, networks, database or other business systems
(hereinafter referred to collectively as "Systems"), or those of the Company's
customers, vendors or resellers, working either alone or in conjunction with
other software or systems, will not accept input of, store, manipulate and
output dates for the years 1999, 2000 or thereafter without error or
interruption (commonly known as the "Year 2000" problem). The Company is
currently in the process of evaluating its Systems to determine whether or not
modifications will be required to prevent problems related to the Year 2000.
There can be no assurance that the Company will identify all such Year 2000
problems in its Systems or those of its customers or vendors, including
network transmission providers, in advance of their occurrence or that the
Company will be able to successfully remedy any problems that are discovered.
In addition, the Company is dependent upon third parties for transmission of
its calls and other communications. There can be no assurance that these third
party providers will identify and remedy any Year 2000 problems in their
transmission facilities. The expenses of the Company's efforts to identify and
address such problems, the expenses or liabilities to which the Company may be
subject as a result of such problems, or the failure of third party providers
of transmission facilities, could have a material adverse effect on the
Company's business, financial condition and results of operations. The
financial stability of existing customers may be adversely impacted by Year
2000 problems which could have a material adverse impact on the Company's
revenues. In addition, failure of the Company to identify and remedy Year 2000
problems could put the Company at a competitive disadvantage relative to
companies that have corrected Year 2000 problems.
Risks of Leverage. In connection with the issuance of its convertible notes
to the public on June 30 and July 30, 1997 (the "Convertible Notes"), Premiere
incurred $172.5 million in indebtedness. As a result of this increased
leverage, Premiere's principal and interest obligations have increased
substantially. The degree to which Premiere is leveraged could adversely
affect Premiere's ability to obtain additional financing for working capital,
acquisitions or other purposes and could make it more vulnerable to economic
downturns and competitive pressures. Premiere's increased leverage could also
adversely affect its liquidity, as a substantial portion of available cash
from operations may have to be applied to meet debt service requirements, and
in the event of a cash shortfall, Premiere could be forced to reduce other
expenditures and forego potential acquisitions to be able to meet such
requirements. The indenture related to the Convertible Notes does not contain
any financial covenants or any other agreements restricting the payments of
dividends, the repurchase of securities of Premiere, the issuance of
additional equity or the incurrence of additional indebtedness. In December
1997, Xpedite entered into a credit agreement with certain banks which
provides a $150 million revolving credit
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facility, a $70 million portion of which is available for pound sterling
borrowings. All borrowing under this Credit Agreement becomes due and payable
on December 16, 1998. Substantially all of the assets of Xpedite collateralize
the revolving credit facility. The credit agreement also contains certain
financial covenant provisions.
Shares Eligible for Future Sale; Registration Rights. As of March 26, 1998,
the Company had approximately 45,260,000 shares of Common Stock outstanding
(including 329,840 Exchangeable Non-Voting Shares of Voice-Tel Canada Limited,
a subsidiary of the Company (the "Exchangeable Shares"), which are convertible
at any time into a like number of shares of Common Stock and approximately
10,984,000 shares issued or issuable in connection with the Xpedite Merger. Of
these shares, approximately 31,348,000 shares of Common Stock are freely
transferable without restriction or limitation under the Securities Act. The
remaining shares (approximately 13,912,000 shares) are "restricted securities"
("the Restricted Shares") within the meaning of Rule 144 ("Rule 144") adopted
under the Securities Act. Approximately 7,032,000 Restricted Shares are
immediately eligible for sale in the public market pursuant to Rule 144.
Beginning on April 30, 1998 and September 30, 1998, approximately 6,434,000
additional shares and approximately 446,000 additional shares, respectively,
will be eligible for sale pursuant to Rule 144, subject to the volume, manner
of sale and notice requirements of Rule 144. The Company is aware that Mr. D.
Gregory Smith, the beneficial owner of approximately 1.8 million shares,
executed a letter agreement with a third party broker that restricts his
ability to sell or offer for sale any shares of Common Stock of Premiere until
December 5, 1998 without the consent of the third party. There can be no
assurance such third party will not give its consent to the sale of shares of
Common Stock by Mr. Smith or will enforce its rights under such agreement.
As of December 31, 1997 options and warrants to purchase an aggregate of
approximately 7,413,000 shares of Common Stock were outstanding, of which
options and warrants to purchase approximately 3,302,000 shares of Common
Stock are vested and immediately exercisable. Substantially all of the shares
issuable upon the exercise of outstanding options and warrants will be
eligible for immediate resale, if and when issued, under Rule 701 adopted
under the Securities Act or pursuant to Registration Statements on Form S-8.
In addition, an aggregate of approximately 543,000 shares of Common Stock are
issuable upon the exercise of options and warrants previously granted by
Xpedite and converted into the right to acquire Premiere Common Stock in the
Merger. The Company intends to file a Registration on Form S-8 to register the
share issuable upon the exercise of the options and warrants assumed in the
Merger.
The Convertible Notes are convertible into a maximum of approximately
3,227,000 shares of Common Stock at any time prior to final maturity at a
conversion price of $33.00 per share, subject to adjustment. The Convertible
Notes and the Common Stock issuable upon conversion of the Convertible Notes
are currently registered for resale under the Securities Act and may be resold
pursuant to such registration statement.
Excluding certain holders of shares of Common Stock issued in connection
with the Xpedite Merger discussed below, the holders of approximately
10,641,494 shares of Common Stock and their permitted transferees are entitled
to certain rights with respect to the registration of such shares under the
Securities Act.
Prior to the Company's initial public offering in March 1996, the Company
granted certain registration rights to holders of convertible preferred stock
and warrants. Although these contractual rights remain in force, the shares
subject to such registration rights may be freely disposed of pursuant to Rule
144 under the Securities Act.
Subsequent to the Company's initial public offering, the Company has granted
registration rights in connection with the Company's execution of a strategic
alliance agreement with WorldCom, and the Company's acquisitions of TeleT
Communications, LLC ("TeleT"), the Voice-Tel Entities and VoiceCom. In each of
these instances, the Company is required to notify the holders of the
Company's intent to register any of its Common Stock under the Securities Act
and allow such holders an opportunity to include their shares of Common Stock
in the Company's registration; provided, however, that (i) with respect to
WorldCom and VoiceCom such notice
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must be given only if the Company intends to register and sell newly issued
shares; (ii) with respect to CMG@Ventures, L.P. ("CMG"), such notice must be
given only if 20% of the shares held by CMG remain outstanding; and (iii) with
respect to the former owners of the Voice-Tel Entities, such notice must be
given only until April 30, 1998. These registration rights are subject to
certain limitations and restrictions, including the right of the underwriters
of an underwritten offering to limit the number of shares offered in such
registration if such underwriter determines that the number of shares
requested to be registered cannot be underwritten. In addition, the Company
agreed to file a shelf registration statement for the former holders of
VoiceCom within 30 days after the filing of this Annual Report on Form 10-K,
and use reasonable commercial efforts to have the registration statement
declared effective as soon as practicable thereafter.
WorldCom has a one-time right to require the Company to file a registration
statement under the Securities Act, provided that such request is made: (i)
between November 13, 1998 and November 13, 1999; or (ii) within 60 days from
the date of a change in control of Premiere, the termination of Boland T.
Jones as an executive officer or the termination of the strategic alliance
agreement with WorldCom if the events described in clause (ii) occur prior to
November 13, 1999. In addition, the registration must be with respect to such
minimum number of shares of Common Stock having an aggregate proposed offering
price equal to $10.0 million.
With respect to the former owners of the Voice-Tel Entities, the Company
agreed to file a shelf registration statement (the "Voice-Tel Shelf") as soon
as practicable following December 15, 1997 to include any shares of Common
Stock then held by the former owners of the Voice-Tel Entities. The Company
exercised certain contractual rights to postpone this requirement for up to 90
days. The Company has received requests to register approximately 4.5 million
shares of Common Stock and is using its commercially reasonable efforts to
file the Voice-Tel Shelf as soon as practicable.
The shares of Premiere Common Stock issued in connection with the Xpedite
Merger were registered under the Securities Act and, unless issued to
affiliates of Xpedite as of the date of the Xpedite stockholders meeting to
consider the Xpedite Merger, are freely transferable without restriction or
limitation under the Securities Act.
For a period of three months commencing 30 days after financial results
covering at least 30 days of combined operations of Premiere and Xpedite have
been published, each person who is precluded by the Securities Act from
selling or disposing of all of their shares of Premiere Common Stock received
in the Xpedite Merger within one calendar quarter (a "Large Stockholder") will
have a one-time right to require Premiere to file a registration statement
under the Securities Act relating to all or part of their registrable
securities (an "Xpedite Demand Registration"). Premiere is obligated to use
its commercially reasonable efforts to effect an Xpedite Demand Registration
as soon as reasonably practical after the request is made, except that
Premiere has the right, under certain circumstances, to delay the effective
date of a registration statement or any sales thereunder for a period not to
exceed 120 days from the date of the request for registration. In addition,
Premiere is not obligated to effect an Xpedite Demand Registration (i) for
less than one million shares or (ii) within three months of a Large
Stockholder selling any registrable securities pursuant to an Xpedite
Piggyback Registration (defined below). Unless Premiere shall otherwise
consent, any offering pursuant to an Xpedite Demand Registration shall be
underwritten and Premiere shall select the underwriters and any additional
investment bankers to be used.
If Premiere proposes to file a registration statement under the Securities
Act with respect to an offering for Premiere's own account (other than for
offerings pursuant to certain acquisitions or employee benefit plans, non-
underwritten offerings or offerings of certain convertible securities), or for
the account of any holders of Premiere Common Stock other than the Large
Stockholders (other than for non-underwritten offerings), any Large
Stockholder may request registration under the Securities Act of all or part
of its Registrable Securities on the same terms and conditions as Premiere or
such other holders of Premiere Common Stock (an "Xpedite Piggyback
Registration"). In the case of an Xpedite Piggyback Registration, Premiere has
the right to terminate or withdraw any registration undertaken by it prior to
the effectiveness of such registration whether or not any Large Stockholder
has elected to include registrable securities in such registration.
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No prediction can be made as to the effect, if any, that the availability of
additional shares for sale will have on the market prices of the Common Stock
prevailing from time to time. Nevertheless, sales of substantial amounts of
the Common Stock in the public market could adversely affect prevailing market
prices of the Common Stock and the ability of the Company to raise equity
capital in the future.
Potential Adverse Impact of Pending Litigation. In the ordinary course of
its business, the Company is subject to claims and litigation from third
parties alleging that the Company's products and services infringe the
patents, trademarks and copyrights of such third parties. See "--Risk of
Infringement Claims." The Company has several litigation matters pending not
involving infringement claims, as described below, which the Company is
defending vigorously. Due to the inherent uncertainties of the litigation
process and the judicial system, the Company is unable to predict the outcome
of such litigation matters. If the outcome of one or more of such matters is
adverse to the Company, it could have a material adverse effect on the
Company's business, financial condition and results of operations.
On January 21, 1997, Eric Bott, E.B. Elliott and Cost Recovery Systems, Inc.
("CRS") filed a complaint against the Company, PCI and the Company's
president, Boland T. Jones, in the Superior Court of Fulton County, Georgia
("Civil Action"). As of December 2, 1997, the Company, PCI and Mr. Jones
entered into a settlement agreement with Mr. Bott which settled and disposed
of Mr. Bott's claims in connection with this litigation. On December 12, 1997,
Mr. Elliott and CRS filed a Second Amended Complaint against Premiere and
Boland T. Jones in the Civil Action. The first count seeks an accounting of
commissions that Mr. Elliott and CRS allege may be due to them under a sales
commission agreement between CRS and Premiere. The second count seeks options
for 72,000 shares of Premiere Common Stock that Mr. Elliott and CRS claim are
due to them, or damages in the alternative. The third count seeks to recover
the Plaintiffs' reasonable attorneys' fees. In the Second Amended Complaint,
the remaining plaintiffs have dropped their prior request for punitive
damages. The Company believes it has meritorious defenses to Mr. Elliott's and
CRS' remaining allegations, but due to the inherent uncertainties of the
litigation process, the Company is unable to predict the outcome of this
litigation. If the outcome of this litigation is adverse to the Company, it
could have a material adverse effect on the Company's business, financial
condition and results of operations. The settlement with Mr. Bott will not
have a material adverse effect on the Company's business, financial condition
or results of operations.
On August 6, 1996, CNC, a licensing customer of the Company, was placed into
bankruptcy (the "Bankruptcy Case") under Chapter 11 of the United States
Bankruptcy Code (the "Bankruptcy Code"). On August 23, 1996, CNC filed a
motion to intervene in a separate lawsuit brought by a CNC creditor in the
United States District Court for the Southern District of New York against
certain guarantors of CNC's obligations and to file a third-party action
against numerous entities, including such CNC creditor and PCI for alleged
negligent misrepresentations of fact in connection with an alleged fraudulent
scheme designed to damage CNC (the "Intervention Suit"). The District Court
has denied CNC's request to intervene and has transferred the remainder of the
Intervention Suit to the Bankruptcy Case. 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
bankruptcy trustee (the "Trustee") and PCI have reached a tentative settlement
on 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 (the "Plan") filed by the Trustee with the Bankruptcy Court,
which is also subject to Bankruptcy Court approval. Based upon hearings before
the Bankruptcy Court, the Trustee filed on November 18, 1997, a motion
requesting approval of the settlement to accompany the Plan. If only the
settlement is approved, PCI will obtain a release from the Trustee and the
Trustee will dismiss the Intervention Suit in consideration of PCI making a
cash payment of $1,200,000 to the Trustee. If the Plan is subsequently
approved by the Court, PCI will make an additional cash payment of up to
$300,000 to the Trustee in consideration of PCI obtaining certain allowed
subordinated claims and the Court granting an injunction in Premiere's favor
against possible nuisance suits relating to the CNC business. The Company has
previously taken a reserve for the settlement and Plan payments. If the
outcome of this matter is adverse to PCI, the settlement is not approved
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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 November 26, 1997, Wael Al-Khatib ("Al-Khatib"), the sole shareholder and
former president of CNC, and his company, Platinum Network, Corp. ("Platinum")
(Al-Khatib and Platinum are collectively referred to herein as "Plaintiffs"),
filed a complaint against PCI, WorldCom Network Services, Inc. f/k/a WilTel,
Inc., Bernard J. Ebbers, David F. Meyers, Robert Vetera, Joseph Cusick,
William Trower, Don Wilmouth, Digital Communications of America, Inc., Boland
Jones, Patrick Jones, and John Does I-XX (the "Defendants") in the Eastern
District of New York, United States District Court (the "Al-Khatib lawsuit").
Plaintiffs contend that, during 1996, PCI, certain officers of PCI and the
other Defendants engaged in a fraudulent scheme to restrain trade in the debit
card market nationally and in the New York debit card sub-market and made
misrepresentations of fact in connection with the scheme. The Plaintiffs are
seeking at least $250 million in compensatory damages and $500 million in
punitive damages from PCI and the other Defendants. Pursuant to the local
rules of the District Court, PCI has filed a letter stating the reaons it
believes the lawsuit should be dismissed. PCI has also filed a motion for
sanctions under Federal Rule of Civil Procedure 11. PCI believes that it has
meritorious defenses to the Plaintiffs' allegations and will vigorously defend
the same. Due to the inherent uncertainties of the judicial system, the
Company is not able to predict the outcome of the Al-Khatib lawsuit. If the
Al-Khatib lawsuit is not resolved in the Company's favor, it could have a
material adverse effect on the Company's business, financial condition and
results of operations.
On July 8, 1997, various limited partners purporting to act on behalf of
Telentry Research Limited Partnership, Telentry Development Limited
Partnership, Telentry XL Limited Partnership, Telentry Research Limited
Partnership II and Telentry Development Limited Partnership II (collectively,
the "Telentry Partnerships") filed a complaint in the Superior Court of New
Jersey for Morris County against Xpedite and two other defendants. The
complaint alleges, inter alia, that Xpedite is in breach of its obligations to
make royalty payments under a series of license agreements between Xpedite and
the Telentry Partnerships. In this action, the plaintiff's seek, inter alia,
damages of $2,030,040 and an accounting of royalties. On September 29, 1997.
Xpedite filed a motion to dismiss the complaint. The court subsequently
elected to treat this motion as a motion for summary judgment. The motion has
been fully briefed by both parties, and oral argument is currently scheduled
for April 3, 1998. To date, no discovery has been taken in this action.
On February 23, 1998, Rudolf R. Nobis and Constance Nobis filed a complaint
in the Superior Court of Union County, New Jersey against 15 named defendants
including Xpedite Systems, Inc. ("Xpedite") and certain of its alleged current
and former officers, directors, agents and representatives. The lawsuit is
styled Rudolf R. Nobis and Constance Nobis v. Edward Angrisani, et al., Civil
Action File No. UNN-L-113698, Superior Court of New Jersey Law Division: Union
County. The plaintiffs allege that the 15 named defendants and certain
unidentified "John Doe defendants" engaged in wrongful activities in
connection with the management of the plaintiffs' investments with Equitable
Life Assurance Society of the United States and/or Equico Securities, Inc.
(collectively "Equitable"). More specifically, the complaint asserts
wrongdoing in connection with the plaintiffs' investment in securities of
Xpedite and in unrelated investments involving insurance-related products. The
defendants include Equitable and certain of its current or former
representatives. The allegations in the complaint against Xpedite are limited
to plaintiffs' investment in Xpedite. The plaintiffs have alleged that two of
the named defendants, allegedly acting as officers, directors, agents or
representatives of Xpedite, induced the plaintiffs to make certain investments
in Xpedite but that the plaintiffs failed to receive the benefits that they
were promised. The plaintiffs allege that Xpedite knew or should have known of
alleged wrongdoing on the part of other defendants. The plaintiffs' claims
against Xpedite include breach of contract, breach of fiduciary duty, unjust
enrichment, conversion, fraud, conspiracy, interference with economic
advantage and liability for ultra vires acts. The plaintiffs seek an
accounting of the corporate stock in Xpedite, compensatory damages of
$4,845,953.13, plus $200,000 in "lost investments," interest and/or dividends
that have accrued and have not been paid, punitive damages in an unspecified
amount, and for certain equitable relief, including a request for Xpedite to
issue 139,430 shares of common stock in the plaintiffs' names, attorneys' fees
and costs and such other and further relief as the Court deems just and
equitable. Xpedite intends to file and answer denying the material allegations
of the complaint and asserting various affirmative defenses and a motion to
dismiss the counts of the complaint against it. Premiere believes that Xpedite
has meritorious
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defenses to the plaintiffs' allegations, but due to the inherent uncertainties
of the litigation process, Premiere is unable to predict the outcome of this
litigation. If the outcome of this litigation is adverse to Xpedite, it could
have a material adverse effect on Xpedite's business, operating results and
financial condition.
Dependence on Switching Facilities and Computer Telephony Platforms; Damage,
Failure and Downtime. The Company currently maintains switching facilities and
computer telephony platforms in Atlanta, Georgia, Dallas, Texas and London,
England. The Company's network service operations are dependent upon its
ability to protect the equipment and data at its switching facilities against
damage that may be caused by fire, power loss, technical failures,
unauthorized intrusion, natural disasters, sabotage and other similar events.
The Company has taken precautions to protect itself and its subscribers from
events that could interrupt delivery of the Company's services. These
precautions include physical security systems, uninterruptible power supplies,
on-site power generators, upgraded backup hardware and fire protection
systems. The Company's network is further designed such that the data on each
network server is duplicated on a separate network server. Notwithstanding
such precautions, and although the Company has not experienced any significant
downtime of its network in the last three years due to technical failures,
natural disasters or similar events, there can be no assurance that a fire,
act of sabotage, technical failure, natural disaster or a similar event would
not cause the failure of a network server and its backup server, other
portions of the Company's network or one of the switching facilities as a
whole, thereby resulting in an interruption of the Company's services. Such an
interruption could have a material adverse effect on the Company's business,
financial condition and results of operations. Although the Company maintains
business interruption insurance providing for aggregate coverage of
approximately $10.8 million per policy year, there can be no assurance that
the Company will be able to maintain its business interruption insurance, that
such insurance will continue to be available at reasonable prices or that such
insurance will be sufficient to compensate the Company for losses it
experiences due to the Company's inability to provide services to its
subscribers.
Factors Affecting Operating Results; Potential Fluctuations in Quarterly
Results. The Company's operating results have varied significantly in the past
and may vary significantly in the future. Special factors that may cause the
Company's future operating results to vary include: (i) the unique nature of
strategic relationships into which the Company may enter in the future; (ii)
changes in operating expenses resulting from such strategic relationships and
other factors; (iii) the continued acceptance of the Company's licensing
program; (iv) the financial performance of the Company's licensees; (v) the
timing of new service announcements; (vi) market acceptance of new and
enhanced versions of the Company's services; (vii) potential acquisitions;
(viii) changes in legislation and regulation that may affect the competitive
environment for the Company's communications services; and (ix) general
economic and seasonal factors.
In the future, revenues from the Company's strategic relationships may
become an increasingly significant portion of the Company's total revenues.
Due to the unique nature of each strategic relationship, these relationships
may change the Company's mix of expenses relative to revenues.
Quarterly revenues are difficult to forecast because the market for the
Company's services is rapidly evolving. The Company's expense levels are
based, in part, on its expectations as to future revenues. If revenue levels
are below expectations, the Company may be unable or unwilling to reduce
expenses proportionately and operating results would likely be adversely
affected. As a result, the Company believes that period-to-period comparisons
of its results of operations are not necessarily meaningful and should not be
relied upon as indications of future performance. Due to all of the foregoing
factors, it is likely that in some future quarter the Company's operating
results will be below the expectations of public market analysts and
investors. In such event, the market price of the Company's Common Stock will
likely be materially adversely affected.
Risk of Software Failures or Errors. The software developed and utilized by
the Company in providing its services, including the Orchestrate software, may
contain undetected errors. Although the Company generally engages in extensive
testing of its software prior to introducing the software onto its network,
there can be no assurance that errors will not be found in the software after
the software goes into use. Any such error may result in partial or total
failure of the Company's network, additional and unexpected expenses to fund
further product development or to add programming personnel to complete a
development project, and loss of revenue because of the inability of
subscribers to use Premiere's network or the cancellation by subscribers of
their service with
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Premiere, any of which could have a material adverse effect on the Company.
The Company maintains technology errors and omissions insurance coverage of
$10.0 million per policy aggregate. However, there can be no assurance that
the Company will be able to maintain its technology errors and omissions
insurance, that such insurance will continue to be available at reasonable
prices or will be sufficient to compensate the Company for losses it
experiences due to the Company's inability to provide services to its
subscribers.
Dependence upon Telecommunication Providers; No Guaranteed Supply. The
Company does not own a transmission network and, accordingly, depends on
WorldCom, LCI International Telecom Corp. ("LCI"), MCI, Sprint, The Telephone
Company of Central Florida and other facilities-based and non-facilities based
carriers for transmission of its subscribers' long distance calls. These long
distance telecommunications services generally are procured pursuant to supply
agreements for terms of three to five years, subject to earlier termination in
certain events. Certain of these agreements provide for minimum purchase
requirements. Further, the Company is dependent upon LECs for call origination
and termination. If there is an outage affecting one of the Company's
terminating carriers, the Company's platform automatically switches calls to
another terminating carrier if capacity is available. The Company has not
experienced significant losses in the past due to interruptions of service at
terminating carriers, but no assurance can be made in this regard in the
future. The Company's ability to maintain and expand its business depends, in
part, on its ability to continue to obtain telecommunication services on
favorable terms from long distance carriers and the cooperation of both
interexchange and LECs in originating and terminating service for its
subscribers in a timely manner. The partial or total loss of the ability to
receive or terminate calls would result in a loss of revenues by the Company
and could lead to a loss of subscribers, which could have a material adverse
effect on the Company.
The Company leases capacity on the WorldCom backbone to provide connectivity
and data transmission within the Company's private data network. The lease
agreement expires in September 2000. The Company's hub equipment is collocated
at various WorldCom sites pursuant to co-location agreements that are
terminable by either party upon 30 days written notice. The Company's ability
to maintain network connectivity is dependent upon its access to transmission
facilities provided by WorldCom or an alternative provider. The Company has no
assurance that it will be able to continue such relationship with WorldCom
beyond the terms of its current agreements with WorldCom or that it will be
able to find an alternative provider on terms as favorable as those offered by
WorldCom or on any other terms. If the Company were required to relocate its
hub equipment or change its network transmission provider, it could experience
shutdowns in its service and increase costs which could have a material
adverse effect on its customer relationships and customer retention and,
therefore, its business, financial condition and results of operations.
Reliance on Supplier of Voice Messaging Equipment. The Company does not
manufacture voice messaging equipment used at its voice messaging service
centers, and such equipment is currently available from a limited number of
sources. Although the Company has not historically experienced any significant
difficulty in obtaining equipment required for its operations and believes
that viable alternative suppliers exist, no assurance can be given that
shortages will not arise in the future or that alternative suppliers will be
available. The inability of the Company to obtain this equipment could result
in delays or reduced delivery of messages which would materially and adversely
affect the Company's business, financial condition and results of operations.
Regulation. Various regulatory factors affect the Company's financial
performance and its ability to compete. The Company's operating subsidiaries
that provide regulated long distance telecommunications services ("Operating
Subsidiaries") are subject to regulation by the FCC and by various state
public service and public utility commissions ("PUCs"), and are otherwise
affected by regulatory decisions, trends and policies made by these agencies.
FCC rules currently require interexchange carriers to permit resale of their
transmission services. FCC rules also require LECs to provide all
interexchange carriers with equal access to local exchange facilities for
purposes of origination and termination of long distance calls. If either or
both of these requirements were eliminated, the Company could be adversely
affected. Moreover, the underlying carriers that provide services to the
Operating Subsidiaries or that originate or terminate the Operating
Subsidiaries' traffic may increase rates or experience disruptions in service
due to factors outside the Company's control, which could cause the Operating
Subsidiaries to experience increases in rates for telecommunications services
or disruptions in transmitting their subscribers' long distance calls.
46
<PAGE>
PCI, one of the Operating Subsidiaries, has made the requisite filings with
the FCC to provide interstate and international long distance services.
VoiceCom Systems, Inc. ("VCOM"), another Operating Subsidiary, is in the
process of making the requisite filings with the FCC to provide interstate and
international long distance services. There can be no assurance that the FCC
will approve VCOM's filings. Failure by VCOM to comply with FCC requirements
in connection with its provision of interstate and international long distance
services could have a material adverse effect on the Company's or on VCOM's
business, financial condition and results of operation.
In order to provide intrastate long distance service, the Operating
Subsidiaries generally are required to obtain certification from state PUCs,
to register with such state PUCs or to be found exempt from registration by
such state PUCs. Each of PCI and VCOM has either filed the applications
necessary to provide intrastate long distance telecommunications services
throughout the United States or is in the process of filing such applications.
To date, PCI is authorized to provide long distance telecommunications
services in 46 states and in the District of Columbia and is seeking
authorization to provide long distance telecommunications services in four
states. With the exception of three states, Colorado, Michigan and Arizona, in
which PCI's applications to provide operator service (i.e., "0+") are pending,
PCI is authorized to provide operator service in each state where PCI provides
long distance telecommunications service. VCOM, on the other hand, is
authorized to provide long distance telecommunications services in 13 states
and in the District of Columbia and is in the process of filing applications
for certificates to provide long distance telecommunications services in 37
states. The Operating Subsidiaries' facilities do not prevent subscribers from
using the facilities to make long distance calls in any state, including
states in which the Operating Subsidiaries currently are not authorized to
provide intrastate telecommunications services and operator services. There
can be no assurance that the Operating Subsidiaries' provision of long
distance telecommunications and operator services in states where the
Operating Subsidiaries are not authorized to provide such services will not
have a material adverse effect on the Company's or on the Operating
Subsidiaries' business, financial condition and results of operations.
The 1996 Act is intended to increase competition in the long distance and
local telecommunications markets. The 1996 Act opens competition in the local
services market and, at the same time, contains provisions intended to protect
consumers and businesses from unfair competition by incumbent LECs, including
the RBOCs. The 1996 Act allows RBOCs to provide long distance service outside
of their local service territories but bars them from immediately offering in-
region interLATA long distance services until certain conditions are
satisfied. An RBOC must apply to the FCC to provide in-region interLATA long
distance services and must satisfy a set of pro-competitive criteria intended
to ensure that RBOCs open their own local markets to competition before the
FCC will approve such application. Further, while the FCC has final authority
to grant or deny such RBOC application, the FCC must consult with the
Department of Justice to determine if, among other things, the entry of the
RBOC would be in the public interest, and with the relevant state to determine
if the pro-competitive criteria have been satisfied. While the FCC has yet to
grant any RBOC inter-LATA application, the Company is unable to determine how
the FCC will rule on any such applications in the future.
In response to a constitutional challenge filed by SBC Communications Inc.,
the United States District Court for the Northern District of Texas found the
1996 Act's restrictions on RBOC interLATA services to be an unconstitutional
bill of attainder, but stayed the effect of its decision pending further
appeal. As a result of the 1996 Act and if the interLATA restrictions are
ultimately struck down, the Company may experience increased competition from
others, including the RBOCs. In addition, the Operating Subsidiaries may be
subject to additional regulatory requirements and fees, including universal
service assessments and payphone compensation surcharges resulting from the
implementation of the 1996 Act.
In conducting its business, the Company is subject to various laws and
regulations relating to commercial transactions generally, such as the Uniform
Commercial Code and is also subject to the electronic funds transfer rules
embodied in Regulation E promulgated by the Board of Governors of the Federal
Reserve System (the "Federal Reserve"). Congress has held hearings regarding,
and various agencies are considering, whether to regulate providers of
services and transactions in the electronic commerce market. For example, the
Federal
47
<PAGE>
Reserve recently completed a study, directed by Congress, regarding the
propriety of applying Regulation E to stored value cards. The Department of
Treasury recently promulgated proposed rules applying record keeping,
reporting and other requirements to a wide variety of entities involved in
electronic commerce. It is possible that Congress, the states or various
government agencies could impose new or additional requirements on the
electronic commerce market or entities operating therein. If enacted, such
laws, rules and regulations could be imposed on the Company's business and
industry and could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company's proposed
international activities also will be subject to regulation by various
international authorities and the inherent risk of unexpected changes in such
regulation.
Risks Associated with International Expansion. A key component of the
Premiere strategy is its planned expansion into international markets. In
1996, the Company opened a POP site in London, England which is currently
being upgraded to a full switching facility and computer telephony platform.
In addition, the Company intends to pursue long term strategic relationships
with European partners. Premiere also intends to establish high speed
client/server networks of personal computers (called "Telnodes") and PCs
utilizing the Company's proprietary software (called "Network Managers") in
Canada, New Zealand and potentially other countries in 1998. The Company
currently has voice messaging service centers in Canada, Australia, New
Zealand and Puerto Rico, If international revenues are not adequate to offset
the expense of establishing and maintaining these international operations,
Premiere's business, financial condition and results of operations could be
materially adversely affected. To date, Premiere has only limited experience
in marketing and distributing its services internationally. There can be no
assurance that Premiere will be able to successfully establish the proposed
international Telnodes and Network Managers or to market, sell and deliver its
services in international markets. In addition to the uncertainty as to
Premiere's ability to expand its international presence, there are certain
difficulties and risks inherent in doing business on an international level,
such as burdensome regulatory requirements and unexpected changes in these
requirements, export restrictions, export controls relating to technology,
tariffs and other trade barriers, difficulties in staffing and managing
international operations, longer payment cycles, problems in collecting
accounts receivable, political instability, fluctuations in currency exchange
rates, seasonal reductions in business activity during the summer months in
Europe and certain other parts of the world and potentially adverse tax
consequences. The Company denominates foreign transactions in foreign currency
and does not engage in hedging transactions. The Company has not experienced
any material losses from fluctuations in currency exchange rates, but there
can be no assurance that the Company will not incur material losses due to
currency exchange rate fluctuations in the future.
Premiere recently completed the Xpedite Merger. A significant portion of
Xpedite's business is conducted outside the United States and a significant
portion of its revenues and expenses are derived in foreign currencies.
Accordingly, Xpedite's results of operations may be materially affected by
fluctuations in foreign currencies. Many aspects of Xpedite's international
operations and business expansion plans are subject to foreign government
regulations, currency fluctuations, political uncertainties and differences in
business practices. There can be no assurance that foreign governments will
not adopt regulations or take other actions that would have a direct or
indirect adverse impact on the business or market opportunities of Xpedite
within such governments' countries, including increased tariffs. Furthermore,
there can be no assurance that the political, cultural and economic climate
outside the United States will be favorable to Xpedite's operations and growth
strategy.
Risks Associated with Expansion of Enhanced Document Distribution
Services. Premiere intends to accelerate growth of Enhanced Document
Distribution Services throughout the world by expansion of Xpedite's
proprietary private world-wide document distribution network (the "Xpedite
Network"), the integration of the Xpedite Network with Premiere's private
frame relay network and computer telephony platform and the acquisition of
entities engaged in the business of Enhanced Document Distribution Services.
There can be no assurance that Premiere will be able to expand its ability to
provide services at a rate or in a manner satisfactory to meet the demands of
existing or future customers, including, but not limited to, increasing the
capacity of the Xpedite Network to process increasing amounts of document
traffic, integrating and increasing the capability of the Xpedite Network to
perform tasks required by Premiere's customers or identifying and establishing
alliances
48
<PAGE>
with new partners in order to enable Premiere to expand its network in new
geographic regions. Such inability may adversely affect customer relationships
and perceptions of Premiere in the markets in which it provides services,
which could have a material adverse effect on Premiere's business, financial
condition or results of operations. In addition, such growth will involve
substantial investments of capital, management and other resources. There can
be no assurance that Premiere will generate sufficient cash for future growth
of the Enhanced Document Distribution Services business through earnings or
external financings, or that such external financings will be available on
terms acceptable to Premiere or that Premiere will be able to employ any such
resources in a manner that will result in accelerated growth.
Risk of loss from Returned Transactions; Fraud; Bad Debt; Theft of
Services. Premiere uses two principal financial payment clearance systems: the
Federal Reserve's Automated Clearing House for electronic fund transfers; and
the national credit card systems for electronic credit card settlement. In its
use of these established payment clearance systems, Premiere generally bears
credit risks similar to those normally assumed by other users of these systems
arising from returned transactions caused by insufficient funds, stop payment
orders, closed accounts, frozen accounts, unauthorized use, disputes, theft or
fraud. From time to time, persons have gained unauthorized access to
Premiere's network and obtained services without rendering payment to Premiere
by unlawfully using the access numbers and Personal Identification Numbers
("PINs") of authorized users. In addition, in connection with Premiere's
wholesale prepaid telephone card relationships, Premiere has experienced
unauthorized activation of prepaid telephone cards. No assurance can be given
that losses due to unauthorized use of access numbers and PINs, unauthorized
activation of prepaid calling cards or activation of prepaid calling cards in
excess of the prepaid amount, or theft of prepaid calling cards will not be
material. Premiere attempts to manage these risks through its internal
controls and proprietary billing system. Premiere's computer telephony
platform is designed to prohibit a single access number and PIN from
establishing multiple simultaneous connections to the platform, and Premiere
establishes preset spending limits for each subscriber. Premiere also
maintains reserves for such risks. Past experience in estimating and
establishing reserves and Premiere's historical losses are not necessarily
accurate indicators of Premiere's future losses or the adequacy of the
reserves established by Premiere in the future. Although Premiere believes
that its risk management and bad debt reserve practices are adequate, there
can be no assurance that Premiere's risk management practices, including its
internal controls, or reserves will be sufficient to protect Premiere from
unauthorized or returned transactions or thefts of services which could have a
material adverse effect on Premiere's business, financial condition and
results of operations.
Anti-Takeover Effects of Certain Provisions of Articles of Incorporation,
Bylaws and Georgia Law. The Board of Directors of the Company is empowered to
issue preferred stock without shareholder action. The existence of this
"blank-check" preferred could render more difficult or discourage an attempt
to obtain control of the Company by means of a tender offer, merger, proxy
contest or otherwise. The Company's Articles of Incorporation, as amended (the
"Articles"), divide the Board of Directors into three classes, as nearly equal
in size as possible, with staggered three-year terms. One class will be
elected each year. The classification of the Board of Directors could have the
effect of making it more difficult for a third party to acquire control of the
Company. The Company is also subject to certain provisions of the Georgia
Business Corporation Code which relate to business combinations with
interested shareholders. In addition to considering the effects of any action
on the Company and its shareholders, the Company's Articles permit the Board
of Directors and the committees and individual members thereof to consider the
interests of various constituencies, including employees, customers,
suppliers, and creditors of the Company, communities in which the Company
maintains offices or operations, and other factors which such directors deem
pertinent, in carrying out and discharging the duties and responsibilities of
such positions and in determining what is believed to be in the best interests
of the Company. See "Description of Capital Stock."
49
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants................................... 51
Consolidated Balance Sheets, December 31, 1997 and 1996.................... 52
Consolidated Statements of Operations, Three Years Ended December 31, 1997. 53
Consolidated Statements of Shareholders' Equity (Deficit), Three Years
Ended December 31, 1997................................................... 54
Consolidated Statements of Cash Flows, Three Years Ended December 31, 1997. 55
Notes to Consolidated Financial Statements................................. 56
</TABLE>
50
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Premiere Technologies, Inc.:
We have audited the accompanying consolidated balance sheets of PREMIERE
TECHNOLOGIES, INC. (a Georgia corporation) AND SUBSIDIARIES as of December 31,
1997 and 1996 and the related consolidated statements of operations,
shareholders' equity (deficit) and cash flows for the years ended December 31,
1997, 1996 and 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Premiere Technologies,
Inc. and subsidiaries as of December 31, 1997 and 1996 and the results of
their operations and their cash flows for the years ended December 31, 1997,
1996 and 1995 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 3, 1998, except with respect
to Note 17, which is dated
February 27, 1998
51
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents..................................... $ 21,770 $ 15,936
Marketable securities.................................... 154,569 67,900
Accounts receivable (less allowances of $3,303 and
$1,435, respectively)................................... 20,719 14,604
Prepaid expenses and other............................... 6,941 8,719
Deferred income taxes, net............................... 25,715 4,168
-------- --------
Total current assets................................... 229,714 111,327
-------- --------
PROPERTY AND EQUIPMENT, NET................................ 63,577 46,181
-------- --------
OTHER ASSETS
Deferred income taxes, net............................... 3,963 5,346
Strategic alliances and investments, net................. 51,895 29,814
Goodwill, net............................................ 18,104 4,213
Intangibles and other.................................... 8,625 4,660
-------- --------
$375,878 $201,541
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable......................................... $ 30,704 $ 16,999
Deferred revenue......................................... 7,139 419
Accrued taxes............................................ 9,745 10,472
Accrued liabilities...................................... 20,192 18,073
Current maturities of long-term debt..................... 2,849 16,168
Current portion of capital lease obligations............. 3,058 3,819
Accrued restructuring and other special charges.......... 19,845 --
-------- --------
Total current liabilities.............................. 93,532 65,950
-------- --------
LONG-TERM LIABILITIES
Long-term debt........................................... 854 20,539
Obligations under capital lease.......................... 2,437 7,449
Convertible subordinated notes, net of issue costs....... 167,270 --
Other accrued liabilities................................ 10,971 3,070
-------- --------
Total long-term liabilities............................ 181,532 31,058
-------- --------
COMMITMENTS AND CONTINGENCIES.............................. -- --
SHAREHOLDERS' EQUITY
Common stock, $.01 par value; 150,000,000 shares
authorized, 34,100,018 and 31,645,386 shares issued and
outstanding, respectively............................... 341 316
Additional paid-in capital............................... 180,084 147,029
Note receivable, shareholder............................. (973) --
Accumulated deficit...................................... (78,638) (42,812)
-------- --------
Total shareholders' equity............................. 100,814 104,533
-------- --------
$375,878 $201,541
======== ========
</TABLE>
Accompanying notes are integral to these financial statements.
52
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE YEARS ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
REVENUES.......................................... $229,352 $197,474 $147,543
COST OF SERVICES.................................. 63,974 55,601 43,868
-------- -------- --------
GROSS PROFIT...................................... 165,378 141,873 103,675
-------- -------- --------
OPERATING EXPENSES
Selling, general and administrative............. 101,308 108,603 83,719
Depreciation and amortization................... 17,971 14,184 10,453
Restructuring and other special charges......... 73,597 11,030 --
Accrued settlement costs........................ 1,500 1,250 2,500
-------- -------- --------
Total operating expenses...................... 194,376 135,067 96,672
-------- -------- --------
OPERATING INCOME (LOSS)........................... (28,998) 6,806 7,003
-------- -------- --------
OTHER INCOME (EXPENSE)
Interest, net................................... (15) (1,690) (4,323)
Gain on contract termination.................... -- -- 1,193
Other, net...................................... 226 (286) 313
-------- -------- --------
Total other income (expense).................. 211 (1,976) (2,817)
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES................. (28,787) 4,830 4,186
PROVISION FOR (BENEFIT FROM) INCOME TAXES......... (3,412) 1,372 15
-------- -------- --------
NET INCOME (LOSS)................................. $(25,375) $ 3,458 $ 4,171
======== ======== ========
BASIC NET INCOME (LOSS) PER SHARE................. $ (0.78) $ 0.12 $ 0.19
======== ======== ========
DILUTED NET INCOME (LOSS) PER SHARE............... $ (0.78) $ 0.11 $ 0.17
======== ======== ========
</TABLE>
Accompanying notes are integral to these financial statements.
53
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
THREE YEARS ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
SERIES A TOTAL
(FORMERLY ADDITIONAL STOCK NOTE STOCK SHAREHOLDERS'
SERIES 1994) COMMON PAID-IN- SUBSCRIPTIONS RECEIVABLE WARRANTS ACCUMULATED EQUITY
PREFERRED STOCK STOCK CAPITAL RECEIVABLE SHAREHOLDER OUTSTANDING DEFICIT (DEFICIT)
--------------- ------ ---------- ------------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31,
1994................. $ 3,907 $134 $ 24,046 $ (75) $ -- $ 244 $(45,069) $(16,813)
Common stock issued on
subscription......... -- 56 2,306 (2,362) -- -- -- --
Exercise of stock
options.............. -- 8 350 -- -- -- -- 358
Income tax benefit
from exercise of
stock options........ -- -- 2,622 -- -- -- -- 2,622
Other equity
transactions,
primarily S-
corporation
distributions ....... -- -- (178) -- -- -- (1,799) (1,977)
Net income............ -- -- -- -- -- -- 4,171 4,171
------- ---- -------- ------- ----- ----- -------- --------
BALANCE, DECEMBER 31,
1995................. $ 3,907 $198 $ 29,146 $(2,437) $ -- $ 244 $(42,697) $(11,639)
Conversion of Series A
Preferred Stock ..... (3,907) 31 3,876 -- -- -- -- --
Conversion of stock
warrants............. -- 6 238 -- -- (244) -- --
Payment of
subscriptions
receivable........... -- -- -- 2,437 -- -- -- 2,437
Issuance of common
stock:
Initial public
offering............ -- 46 74,571 -- -- -- -- 74,617
Acquisition (TeleT).. -- 5 7,495 -- -- -- -- 7,500
Strategic investment
(WorldCom).......... -- 21 25,174 -- -- -- -- 25,195
Exercise of stock
options............. -- 9 308 -- -- -- -- 317
Income tax benefit
from exercise of
stock options........ -- -- 6,886 -- -- -- -- 6,886
Other equity
transactions,
primarily S-
corporation
distributions ....... -- -- (665) -- -- -- (3,573) (4,238)
Net income............ -- -- -- -- -- -- 3,458 3,458
------- ---- -------- ------- ----- ----- -------- --------
BALANCE, DECEMBER 31,
1996................. $ -- $316 $147,029 $ -- $ -- $ -- $(42,812) $104,533
Payment of debt in
common stock (Voice-
Tel Acquisitions).... -- 5 11,577 -- -- -- -- 11,582
Issuance of common
stock:
Voice-Tel
Acquisitions........ -- 2 789 -- -- -- -- 791
Exercise of stock
options............. -- 18 4,692 -- -- -- -- 4,710
Income tax benefit
from exercise of
stock options........ -- -- 15,262 -- -- -- -- 15,262
Issuance of
shareholder note
receivable........... -- -- -- -- (973) -- -- (973)
Recapitalization of S-
corporation
accumulated earnings. -- -- 735 -- -- -- (735) --
Other equity
transactions,
primarily S-
corporation
distributions ....... -- -- -- -- -- -- (9,716) (9,716)
Net loss.............. -- -- -- -- -- -- (25,375) (25,375)
------- ---- -------- ------- ----- ----- -------- --------
BALANCE, DECEMBER 31,
1997................. $ -- $341 $180,084 $ -- $(973) $ -- $(78,638) $100,814
======= ==== ======== ======= ===== ===== ======== ========
</TABLE>
Accompanying notes are integral to these financial statements.
54
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE YEARS ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
--------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)............................... $ (25,375) $ 3,458 $ 4,171
Adjustments to reconcile net income (loss) to
net cash provided by operating activities
Depreciation and amortization.................. 17,971 14,184 10,453
Payments for restructuring, accrued settlement
costs and other special charges............... (30,586) -- --
Restructuring, accrued settlement costs and
other special charges......................... 75,097 12,280 2,500
Provision for (benefit from) income taxes ..... (3,412) 1,372 15
Changes in assets and liabilities:
Accounts receivable, net...................... (6,467) (1,668) (3,696)
Prepaid expenses and other.................... (1,330) (2,525) (5,314)
Accounts payable and accrued expenses......... 1,261 9,788 5,430
--------- -------- --------
Total adjustments............................ 52,534 33,431 9,388
--------- -------- --------
Net cash provided by operating activities.... 27,159 36,889 13,559
--------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of marketable securities, net......... (86,669) (67,182) (1,655)
Strategic alliances and investments............ (23,801) (4,777) --
Purchase of property and equipment............. (33,387) (21,905) (12,183)
Acquisitions................................... (16,198) (2,870) --
Other ......................................... -- 622 652
--------- -------- --------
Net cash used in investing activities........ (160,055) (96,112) (13,186)
--------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Initial public offering, net................... -- 74,617 --
Payment of stock subscriptions receivable...... -- 2,437 --
Exercise of stock options...................... 13,823 317 358
Shareholder distributions, primarily S-
corporation distributions..................... (9,360) (3,550) (1,480)
Principal payments under borrowing
arrangements.................................. (29,469) (9,547) (8,571)
Proceeds from convertible subordinated notes... 172,500 -- --
Debt issue costs, convertible subordinated
notes......................................... (6,028) -- --
Issuance of debt............................... -- 3,985 13,421
Issuance of shareholder note receivable........ (973) -- --
Other ......................................... (1,763) (1,343) (205)
--------- -------- --------
Net cash provided by financing activities.... 138,730 66,916 3,523
--------- -------- --------
NET INCREASE IN CASH AND EQUIVALENTS............ 5,834 7,693 3,896
CASH AND EQUIVALENTS, beginning of period....... 15,936 8,243 4,347
--------- -------- --------
CASH AND EQUIVALENTS, end of period............. $ 21,770 $ 15,936 $ 8,243
========= ======== ========
</TABLE>
Accompanying notes are integral to these financial statements.
55
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY AND ITS BUSINESS
Premiere Technologies, Inc. and subsidiaries ("Company") is a leading
provider of enhanced communications services that simplify communications for
businesses and individuals. The Company's enhanced communication services
include 800-based services, voice and data messaging and internet-based
communications which the Company delivers through its state of the art
network. The Company's private network integrates these enhanced communication
services by utilizing digital switching technology, frame relay and internet
protocols. Management believes a network-based solution provides the Company's
customers the flexibility of accessing and utilizing the Company's services
through a computer or telephone and to avoid costly investment in equipment.
The Company markets its services globally through its direct sales force,
direct marketing and direct response campaigns and strategic partner programs.
The Company's operation centers consist of points of presence in over 200
locations in the United States, Canada, Australia and New Zealand allowing it
to provide both local access and long-distance-based enhanced communication
services to substantially all of these populations. The Company began
operations in 1991 and came public in March 1996.
In June 1997, the Company completed the acquisitions of Voice-Tel
Enterprises, Inc. ("VTE"), its affiliate Voice-Tel Network Limited Partnership
("VTNLP"), VTN, Inc. ("VTN"), the general partner of VTNLP and substantially
all of the approximately 100 independently owned and operated Voice-Tel
franchise businesses (Franchisees). The acquisitions of VTE, VTNLP, VTN and
the Franchisees are sometimes referred to collectively as the "Voice-Tel
Acquisitions". The Voice-Tel entities are engaged in interactive data and
voice messaging utilizing a digital frame relay network with points of
presence allowing to offer enhanced communications services through local
access in the United States, Canada, Australia and New Zealand. The majority
of the Voice-Tel Acquisitions were accounted for as pooling-of-interests. The
financial statements have been restated for all periods presented to include
the operations of the acquired entities accounted for as pooling-of-interests.
See Note 3--Acquisitions.
In September 1997, the Company acquired VoiceCom Holdings, Inc.
("VoiceCom"), a provider of 800-based and voice messaging communication
services. This transaction has been accounted for as a pooling-of-interests,
and the Company's financial statements have been restated for all periods
presented to include the operations of VoiceCom. See Note 3--Acquisitions.
2. SIGNIFICANT ACCOUNTING POLICIES
Accounting Estimates
Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Principles of Consolidation
The financial statements include the accounts of the Company and its
subsidiaries. All significant intercompany balances and transactions have been
eliminated in consolidation.
Cash and Equivalents
Cash and equivalents include cash on hand and highly liquid investments with
a maturity of three months or less.
56
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Marketable Securities
The Company follows Financial Accounting Standards Board ("FASB") Statement
of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." SFAS No. 115 mandates that a
determination be made of the appropriate classification for debt and equity
securities at the time of purchase and a reevaluation of such designation as
of each balance sheet date. At December 31, 1997 and 1996, investments
consisted of commercial paper, United States Treasury bills, municipal bonds,
coupon municipals, auction rate preferred investments with various maturities
and equity instruments. Management considers all debt instruments as "held to
maturity" and all equity instruments as "available for sale." Debt instruments
are carried at cost, and equity instruments are carried at the lower of cost
or market. As cost approximates market, there were no unrealized gains or
losses at December 31, 1997 or 1996.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided under
the straight-line method over the estimated useful lives of the assets,
commencing when the assets are placed in service. The estimated useful lives
are ten years for furniture and fixtures, seven years for office equipment and
five to ten years for computer and telecommunications equipment. The cost of
installed equipment includes expenditures for installation. Assets recorded
under capital leases and leasehold improvements are depreciated over the
shorter of their useful lives or the term of the related lease. The Company
has capitalized costs related to the development of proprietary software
utilized to provide enhanced communications services. All costs in the
software development process that are classified as research and development
are expensed as incurred until technological feasibility has been established.
Once technological feasibility has been established, such costs are considered
for capitalization. The Company's policy is to amortize these costs by the
greater of (a) the ratio that current gross revenues for a service offering
bear to the total of current and anticipated future gross revenues for that
service offering or (b) the straight-line method over the remaining estimated
life of the service offering.
Goodwill
Goodwill represents excess of the cost of businesses acquired over fair
value of net identifiable assets at the date of acquisition and is amortized
using the straight line method over lives ranging from 20 to 40 years.
Valuation of Long-Lived Assets
Management periodically evaluates carrying values of long-lived assets,
including property and equipment, strategic investments, goodwill and other
intangible assets, to determine whether events and circumstances indicate that
these assets have been impaired. An asset is considered impaired when
undiscounted cash flows to be realized from such asset are less than its
carrying value. In that event, a loss is determined based on the amount the
carrying value exceeds the fair market value of such asset.
Strategic Alliances and Investments
The Company has entered into alliances with and made investments in various
companies that are engaged in telecommunications and emerging technologies
that are complementary with the Company's core businesses and which further
the Company's strategic plan. These alliances and investments involve
outsourcing initiatives, equity investments and innovative marketing programs.
Each of the equity investments represent less than a twenty percent ownership
interest and are therefore carried at cost. Intangible assets representing
strategic alliances are amortized over the term of the arrangement and such
investments are carried net of accumulated amortization. See Note 5--Strategic
Alliances and Investments.
Stock-Based Compensation Plans
The Company recognizes stock based compensation using the intrinsic value
method as permitted by SFAS No. 123. Accordingly, no compensation expense is
recorded for stock based awards issued at market value at the
57
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
date such awards are granted. The Company makes pro forma disclosures of net
income and net income per share as if the market value method was followed.
See Note 10--Stock Based Compensation Plans.
Revenue Recognition
The Company recognizes revenues when services are provided. Revenues consist
of fixed monthly fees, usage fees generally based on per minute rates and
service initiation fees as well as license fees earned from companies which
have license arrangements for the use of the Company's computer telephony
platform. Deferred revenue consists of billings made to customers in advance
of the time services are rendered.
Income Taxes
Deferred income taxes are recorded using enacted tax laws and rates for the
years in which income taxes are expected to be paid. Deferred income taxes are
provided when there is a temporary difference between the recognition of items
in income for financial reporting and income tax purposes.
Net Income (Loss) Per Share
In 1997, the Company adopted SFAS No. 128, "Earnings per Share." That
statement requires the disclosure of basic net income (loss) per share and
diluted net income (loss) per share. Basic net income (loss) per share is
computed by dividing net income (loss) available to common shareholders by the
weighted-average number of common shares outstanding during the period and
does not include any other potentially dilutive securities. Diluted net income
(loss) per share gives effect to all potentially dilutive securities. The
Company's convertible subordinated notes and stock options are potentially
dilutive securities. In 1997, both potentially dilutive securities were anti-
dilutive and therefore are not included in diluted net income (loss) per
share. A reconciliation of basic net income (loss) per share to diluted net
income (loss) per share follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
--------------------------------------------------------------------------------
1997 1996 1995
---------------------------- ------------------------- -------------------------
WEIGHTED WEIGHTED NET WEIGHTED NET
AVERAGE NET LOSS NET AVERAGE INCOME NET AVERAGE INCOME
NET LOSS SHARES PER SHARE INCOME SHARES PER SHARE INCOME SHARES PER SHARE
-------- -------- --------- ------ -------- --------- ------ -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net income (loss)............... $(25,375) -- -- $3,458 -- -- $4,171 -- --
Less: Preferred stock dividends. -- -- -- 29 -- -- 308 -- --
-------- ------ ------- ------ ------ ----- ------ ------ -----
Basic net income (loss)......... $(25,375) 32,443 $ (0.78) $3,429 27,670 $0.12 $3,863 19,868 $0.19
======== ====== ======= ====== ====== ===== ====== ====== =====
Dilutive Securities
Stock options................... -- -- -- -- 3,618 -- -- 1,348 --
Series A convertible redeemable
8% cumulative preferred stock.. -- -- -- -- -- -- 350 3,096 --
-------- ------ ------- ------ ------ ----- ------ ------ -----
Diluted net income (loss)....... $(25,375) 32,443 $ (0.78) $3,429 31,288 $0.11 $4,213 24,312 $0.17
======== ====== ======= ====== ====== ===== ====== ====== =====
</TABLE>
Concentration of Credit Risk
Revenues from one customer of the Company represented approximately $40.1
million, $46.8 million and $40.6 million of the Company's consolidated
revenues for 1997, 1996 and 1995, respectively.
New Accounting Pronouncements
During 1997 the FASB issued SFAS No. 130, "Reporting Comprehensive Income,"
and SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information." Both are effective for fiscal years beginning after December 15,
1997. Management is currently studying the impact the new standards will have
on its financial statement disclosures.
Reclassifications
Certain prior year amounts have been reclassified to conform to the 1997
presentation. These changes had no impact on previously reported results of
operations.
58
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. ACQUISITIONS
VoiceCom Acquisition
During the third quarter of 1997, the Company acquired VoiceCom through the
issuance of approximately 446,000 shares of its common stock. This transaction
was accounted for as a pooling-of-interests and the Company's financial
statements have been restated for all periods presented to include the
operations of VoiceCom.
Voice-Tel Acquisitions
In June 1997, the Company completed the Voice-Tel 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 million in
indebtedness, net of cash acquired.
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. Accordingly, the financial results of the Company have been
restated for all periods presented to include the results of operations of the
Voice-Tel Acquisitions that were accounted for as pooling-of-interests.
The Company purchased 15 of the Franchisees and the limited partner interest
in VTNLP for an aggregate of approximately $15.5 million in cash and
approximately 94,000 shares of its common stock. The excess of the purchase
price over the fair value of the net assets acquired is recorded as an
intangible asset.
A reconciliation of previously reported operating results to those restated
for pooling-of-interests transactions is as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(IN THOUSANDS,
EXCEPT PER SHARE
DATA)
<S> <C> <C>
Revenue:
Premiere, as previously reported.......................... $ 52,079 $ 22,326
Voice-Tel Acquisitions.................................... 90,075 68,690
VoiceCom.................................................. 55,320 56,527
-------- --------
Premiere, as restated................................... $197,474 $147,543
-------- --------
Net income (loss):
Premiere, as previously reported.......................... $ (956) $ 1,918
Voice-Tel Acquisitions.................................... 3,972 3,006
VoiceCom.................................................. 442 (753)
-------- --------
Premiere, as restated................................... $ 3,458 $ 4,171
-------- --------
Net income (loss) per share:
Premiere, as previously reported
Basic.................................................... $ (0.05) $ 0.13
======== ========
Diluted.................................................. $ (0.05) $ 0.12
======== ========
Premiere, as restated
Basic.................................................... $ 0.12 $ 0.19
======== ========
Diluted.................................................. $ 0.11 $ 0.17
======== ========
</TABLE>
59
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TeleT Acquisition
On September 18, 1996, the Company purchased substantially all of the assets
and business operations of TeleT Communications LLC ("TeleT") for 498,187
shares of the Company's common stock and approximately $2,870,000 in cash.
TeleT was an Internet-based technology development company focused on the
integration of computers and telephones.
In connection with this acquisition, the Company allocated approximately
$11.0 million of the purchase price to research and development projects which
had not yet reached technological feasibility and had no alternate future use.
This allocation was based on values determined by an independent appraisal.
See also Note 15--Restructuring and Other Special Charges.
The following unaudited pro forma consolidated results of operations for the
years ended December 31, 1997 and 1996 assume the acquisitions of the Voice-
Tel Entities accounted for as purchases and TeleT occurred as of January 1,
1996 (in thousands, except per share data).
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Revenues.............................................. $231,659 $202,220
Net income (loss)..................................... $(25,730) $ 9,177
Basic net income (loss) per share..................... $ (0.79) $ 0.33
Diluted net income (loss) per share................... $ (0.79) $ 0.29
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment at December 31 is as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
Computer and telecommunications equipment............... $ 92,137 $75,993
Furniture and fixtures.................................. 2,123 2,733
Office equipment........................................ 5,476 3,570
Leasehold improvements.................................. 7,199 5,068
Construction in progress................................ 13,926 1,450
-------- -------
120,861 88,814
Less accumulated depreciation........................... 57,284 42,633
-------- -------
Property and equipment, net............................. $ 63,577 $46,181
======== =======
</TABLE>
Assets under capital leases included in property and equipment at December
31 are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Telecommunications equipment............................. $18,345 $17,305
Less accumulated depreciation............................ 10,867 7,202
------- -------
Property and equipment, net.............................. $ 7,478 $10,103
======= =======
</TABLE>
60
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. STRATEGIC ALLIANCES AND INVESTMENTS
Strategic alliances and investments at December 31 is as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
WorldCom................................................. $ 29,972 $29,972
Intangible assets........................................ 18,500 --
Less accumulated amortization............................ 1,878 158
-------- -------
46,594 29,814
Equity investments....................................... 5,301 --
-------- -------
$ 51,895 $29,814
======== =======
</TABLE>
In November 1996, the Company entered into a strategic alliance agreement
with WorldCom, Inc. (WorldCom), the fourth largest long-distance carrier in
the United States. Under the agreement, WorldCom is required, among other
things, to provide the Company with the right of first opportunity to provide
enhanced computer telephony products for a period of at least 25 years. In
connection with this agreement, the Company issued to WorldCom 2,050,000
shares of common stock valued at approximately $25.2 million (based on an
independent appraisal), and paid WorldCom approximately $4.7 million in cash.
The Company periodically reviews this asset for impairment. Based on such
reviews, management believes that this intangible asset is appropriately
valued. Management will continue to review this intangible periodically, and
there can be no assurance that future reviews will not require a write down of
this asset.
Intangible assets and equity investments classified as strategic alliances
and investments consist of initiatives funded by the Company to further its
strategic plan. These investments and alliances involve emerging technologies,
such as telemedicine and the internet, as well as marketing alliances and
outsourcing programs designed to reduce costs and develop new markets and
distribution channels for the Company's products. Costs classified as
intangible assets are being amortized over seven years which management
believes matches the revenues produced from and periods benefited by the
related programs. All equity investments held by the Company in other
organizations represent a less than 20 percent ownership and are being
accounted for under the cost method.
6. LONG-TERM DEBT
Long-term debt at December 31 is as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
----- -------
<S> <C> <C>
Notes payable to banks, interest ranging from 7% to 9%........... $ 573 $16,796
Notes payable to shareholders and individuals, interest ranging
from 5% to 16%.................................................. 3,130 19,911
----- -------
3,703 36,707
Less current portion............................................. 2,849 16,168
----- -------
$ 854 $20,539
===== =======
</TABLE>
Notes payable to shareholders and individuals consist principally of
indebtedness assumed by the Company in connection with the Voice-Tel and
VoiceCom acquisitions. A majority of these obligations were repaid in 1997 in
connection with the acquisitions. The Company issued approximately 484,000
shares to redeem approximately $11,582,000 of such indebtedness in connection
with the acquisitions.
The Company has lines of credit with two banks that provide committed
borrowing facilities aggregating up to $11 million. Interest rates on these
lines of credit are prime and prime plus 2%. Commitment fees under
61
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
these arrangements are not significant. There were no borrowings outstanding
under these arrangements at December 31, 1997.
Maturities of long-term debt are as follows (in thousands):
<TABLE>
<S> <C>
1998.................................. $2,849
1999.................................. 515
2000.................................. 160
2001.................................. 120
2002.................................. 59
------
$3,703
======
</TABLE>
7. CONVERTIBLE SUBORDINATED NOTES
In July 1997, the Company issued convertible subordinated notes
("Convertible Notes") of $172,500,000 which mature in 2004 and bear interest
at 5 3/4%. The Convertible Notes are convertible at the option of the holder
into common stock at a conversion price of $33 per share, through the date of
maturity, subject to adjustment in certain events. The Convertible Notes are
redeemable by the Company beginning in July 2000 at a price of 103% of the
conversion price declining to 100% at maturity with accrued interest. Issue
costs consisting of investment banking, legal and other fees of approximately
$6,028,000 incurred in connection with the Convertible Notes are being
amortized on a straight-line basis over the life of the note.
8. FINANCIAL INSTRUMENTS
The carrying amount of cash and equivalents, marketable securities, accounts
receivable and payable and accrued liabilities approximates fair value due to
the short maturity of these instruments.
The carrying amounts of notes payable and capital lease obligations does not
vary materially from fair value at December 31, 1997 and 1996.
9. SHAREHOLDERS' EQUITY
On January 18, 1996, the holder of the Series A Preferred Stock elected to
convert all of the shares of the Series A Preferred Stock into 3,095,592
shares of the Company's common stock at $93 per share (presplit). The Series A
Preferred Stock was fully cumulative, and the holders of the shares were
entitled to receive dividends at a rate of 8%. The Company accrued $308,419
and $29,337 of dividends payable, plus accrued interest, if applicable, during
the years ended December 31, 1995 and 1996, respectively. No dividends were
paid during the year ended December 31, 1995, and $676,981 in dividends was
paid during the year ended December 31, 1996.
During 1997 and 1996, stock options were exercised under the Company's stock
option plans. None of the options exercised qualified as incentive stock
options, as defined in Section 422 of the Internal Revenue Code (the "Code").
Approximately $15,262,000 and $6,886,000 were recorded as increases in
additional paid-in capital reflecting tax benefits to be realized by the
Company as a result of the exercise of such options during the years ended
December 31, 1997 and 1996, respectively.
The Company made distributions to shareholders of approximately $9,360,000,
$3,550,000 and $1,480,000 in the years ended December 31, 1997, 1996 and 1995.
These distributions were made to shareholders of Voice-Tel and VoiceCom in
periods prior to their acquisition by the Company. Such distributions
consisted principally of amounts paid to shareholders of S-Corporations in
connection with their responsibility to pay income tax on
62
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
the proportionate share of taxable income they were required to include in
their individual income tax return. Upon acquisition by the Company, these S-
Corporations became subject to income tax. Accumulated earnings of S-
Corporations at the date of acquisition have been reclassified as additional
paid-in capital representing the recapitalization of these entities.
In 1995, the Company declared a 24-to-1 stock split on its common stock. In
addition, each outstanding share of Series 1994 Preferred Stock was converted
into one share of Series A Preferred Stock.
10. STOCK BASED COMPENSATION PLANS
The Company has two stock based compensation plans, 1994 Stock Option Plan
and 1995 Stock Plan, which provide for the issuance of options, warrants or
stock appreciation rights to directors, key employees and non-employee
consultants of the Company. These plans are administered by a committee
consisting of members of the board of directors of the Company.
Options for all 960,000 shares of common stock available under the 1994
Stock Option Plan have been granted. Generally, all such options are non-
qualified, provide for an exercise price equal to fair market value at date of
grant, vest ratably over three years and expire eight years from date of
grant.
The 1995 Stock Plan provides for the issuance of stock options, stock
appreciation rights (SARs) and restricted stock to employees. A total of
1,500,000 shares of common stock have been reserved in connection with the
plan. Options issued under the plan may be either incentive stock options,
which permit income tax deferral upon exercise of options, or nonqualified
options not entitled to such deferral.
As permitted by SFAS No. 123, the Company recognizes stock based
compensation using the intrinsic value method. Accordingly, no compensation
expense has been recognized for awards issued under the Company's stock based
compensation plans since the exercise price of such awards is generally the
market price of the underlying common stock at date of grant. Had compensation
cost been determined under the market value method using Black-Scholes
valuation principles, net income (loss) and net income (loss) per share would
have been reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
1997 1996
----------- ----------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Net income (loss):
As Reported........................................... $ (25,375) $ 3,458
Pro forma............................................. (32,399) 2,077
Net income (loss) per share:
As Reported -- Basic.................................. $ (0.78) $ 0.12
-- Diluted............................................ (0.78) 0.11
Pro forma -- Basic.................................... (1.02) 0.07
-- Diluted............................................ (1.02) 0.07
</TABLE>
Significant assumptions used in the Black-Scholes option pricing model
computations are as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Risk-free interest rate........................... 6.30% 6.26%
Dividend yield.................................... 0% 0%
Volatility factor................................. .46 .42
Weighted average expected life.................... 2.10 years 2.34 years
</TABLE>
The pro forma amounts reflect options granted since January 1, 1995. Pro
forma compensation cost may not be representative of that expected in future
years.
63
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A summary of the status of the Company's stock plans is as follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
FIXED OPTIONS SHARES EXERCISE PRICE
------------- ---------- ----------------
<S> <C> <C>
Options outstanding at December 31, 1994.... 8,470,461 $ 0.39
Granted................................... 5,292,447 1.44
Exercised................................. (5,832,170) 0.43
Forfeited................................. (395,347) 0.45
---------- ------
Options outstanding at December 31, 1995.... 7,535,391 $ 1.07
Granted................................... 1,332,088 18.89
Exercised................................. (1,372,369) 0.51
Forfeited................................. (88,778) 18.03
---------- ------
Options outstanding at December 31, 1996.... 7,406,332 $ 4.27
Granted................................... 3,484,092 23.38
Exercised................................. (2,221,244) 2.06
Forfeited................................. (1,256,432) 8.81
---------- ------
Options outstanding at December 31, 1997.... 7,412,748 $13.29
========== ======
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1997:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE
WEIGHTED EXERCISE PRICE EXERCISE PRICE
RANGE OF OPTIONS AVERAGE OF OPTIONS OPTIONS OF OPTIONS
EXERCISE PRICES OUTSTANDING REMAINING LIFE OUTSTANDING EXERCISABLE EXERCISABLE
- --------------- ----------- -------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$ 0--$10 3,236,096 7.48 $ 1.46 1,978,096 $ 1.46
$11--$20 1,286,130 6.95 18.39 543,273 18.54
$21--$30 2,867,250 7.34 24.20 771,416 24.26
$31--$40 23,272 8.73 34.33 8,772 36.86
--------- ---- ------ --------- ------
7,412,748 7.50 $13.29 3,301,557 $ 9.69
========= ==== ====== ========= ======
</TABLE>
11. EMPLOYEE BENEFIT PLANS
The Company sponsors three defined contribution retirement plans covering
substantially all full-time employees. These plans allow employees to defer a
portion of their compensation and associated income taxes pursuant to Section
401(k) of the Internal Revenue Code. The Company may make discretionary
contributions for the benefit of employees under each of these plans. The
Company has not made any contributions to the discretionary plans for any of
the periods disclosed in the accompanying financial statements.
12. RELATED-PARTY TRANSACTIONS
The Company has in the past entered into agreements and arrangements with
certain officers, directors and principal shareholders of the Company
involving loans of funds, grants of options and warrants and the acquisition
of a business. Certain of these transactions may be on terms more favorable to
officers, directors and principal shareholders than they could acquire in a
transaction with an unaffiliated party. The Company follows a policy that
requires all material transactions between the Company and its officers,
directors or other affiliates (i) be approved by a majority of the
disinterested members of the board of directors of the Company and (ii) be on
terms no less favorable to the Company than could be obtained from
unaffiliated third parties.
In November 1995, the Company loaned $90,000 with recourse to a certain
officer in connection with the officer's transition from his previous employer
to the Company. This unsecured loan is evidenced by a promissory note bearing
interest at 6.11%, the interest on which is payable beginning in November 1997
and continuing each year until November 1999. Principal is to be repaid in
five equal annual installments, with
64
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
accrued interest, commencing in November 2000; however, pursuant to the
officer's employment agreement, the officer may be required to make earlier
payments from certain bonus compensation paid to the officer under such
employment agreement.
In November 1995, the Company loaned a total of $2,338,000 with recourse to
three officers to fund the exercise of stock warrants and options. These loans
were repaid in full in 1996. These loans were evidenced by recourse promissory
notes bearing interest at 6.55%, which were secured by a pledge of the common
stock acquired upon the exercise of the warrants and options. All principal
and accrued interest were to be paid in November 2005; however, if any of the
common stock securing the promissory notes was sold, the net proceeds of such
sale were to be applied to the outstanding principal and interest due under
that promissory note. Additionally, the Company loaned such officers an
additional total amount of $168,220 to assist the officers in paying the
federal and state income taxes associated with the exercise of the warrants
and options which were repaid in full in 1996.
In September 1996, the Company loaned $75,000 with recourse to a certain
officer in connection with the officer's transition from his previous employer
to the Company. This unsecured loan is evidenced by a promissory note bearing
interest at 6.64%, the interest on which is payable beginning in September
1998 and continuing each year until September 2000. Principal is to be repaid
in five equal annual installments, with accrued interest, commencing in
September 2001; however, pursuant to the officer's employment agreement, the
officer may be required to make earlier payments from certain bonus
compensation paid to the officer under such employment agreement.
During 1997, an officer of the Company exercised an option to purchase
100,000 shares of the Company's common stock at an exercise price of $0.27 a
share. The Company loaned the officer $973,000 to pay taxes associated with
the exercise of the options. The loan is evidenced by a recourse promissory
note which bears interest at 6% and is secured by the common stock purchased
by the officer.
13. COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company leases computer and telecommunications equipment, office space
and other equipment under noncancelable lease agreements. The leases generally
provide that the Company pay the taxes, insurance and maintenance expenses
related to the leased assets. Future minimum operating and capital lease
payments as of December 31, 1997 are as follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
1998................................................... $3,701 $ 6,584
1999................................................... 1,914 4,933
2000................................................... 613 3,998
2001................................................... 175 3,129
2002................................................... 13 2,437
Thereafter............................................. -- 10,929
------ -------
Net minimum lease payments............................. 6,416 $32,010
=======
Less amount representing interest...................... 921
------
Present value of net minimum lease payments............ 5,495
Less current portion................................... 3,058
------
Obligations under capital lease, net of current
portion............................................... $2,437
======
</TABLE>
65
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Rent expense under operating leases was approximately $7,516,000, $8,275,000
and $7,869,000 for the years ended December 31, 1997, 1996 and 1995,
respectively. Future minimum payments for facilities rent are reduced by
scheduled sublease income of approximately $700,000 in 1998. During 1997, 1996
and 1995, additions of computer and telecommunications equipment resulted in
an increase in capital lease obligations of approximately $829,000, $85,000
and $984,000, respectively.
Supply Agreements
The Company obtains long-distance telecommunications services pursuant to
supply agreements with suppliers of long-distance telecommunications
transmission services. These contracts generally provide fixed transmission
prices for terms of three to five years, but are subject to early termination
in certain events. No assurance can be given that the Company will be able to
obtain long-distance services in the future at favorable prices or at all, and
the unavailability of long-distance service, or a material increase in the
price at which the Company is able to obtain long-distance service, would have
a material adverse effect on the Company's business, financial condition and
results of operations. Certain of these agreements provide for minimum
purchase requirements. The Company is currently a party to five long-distance
telecommunications services contracts that require the Company to purchase a
minimum amount of services each month.
Litigation
On January 21, 1997, two former employees and an affiliate of one of the
former employees filed a complaint against the Company seeking remuneration
for alleged work performed on behalf of the Company. In December 1997, the
Company reached a settlement with one of the claimants. The amount of this
settlement was not material to the Company's financial position. The remaining
plaintiffs are seeking an accounting of commissions allegedly due to them,
options to purchase 72,000 shares of the Company's common stock and reasonable
attorney's fees. Management of the Company believes it has meritorious
defenses to the remaining allegations, but due to the inherent uncertainties
of the litigation process, the Company is unable to predict the outcome of
this litigation and the effect, if any, on its financial position or results
of operations.
On June 28, 1996, AudioFAX IP LLC ("AudioFAX") filed a lawsuit against the
Company alleging that the Company infringed certain patents held by AudioFAX
for enhanced facsimile products. In the third quarter of 1996, the Company
recorded a charge to operations of $1,500,000 for the estimated legal fees and
other costs to resolve this matter. On February 11, 1997, the Company entered
into a long-term, non-exclusive license agreement with AudioFAX settling this
litigation. Costs accrued in the third quarter of 1996 were adequate to cover
the actual costs of litigation. The cost of the license is not expected to
have a material effect on the Company's future results of operations.
On August 6, 1996, Communications Network Corporation ("CNC"), a licensing
customer of the Company, was placed into bankruptcy (the "Bankruptcy Case")
under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code").
On August 23, 1996, CNC filed a motion to intervene in a separate lawsuit
brought by a CNC creditor in the United States District Court for the Southern
District of New York against certain guarantors of CNC's obligations and to
file a third-party action against numerous entities, including such CNC
creditor and Premiere Communications, Inc. ("PCI") for alleged negligent
misrepresentations of fact in connection with an alleged fraudulent scheme
designed to damage CNC (the "Intervention Suit"). The District Court has
denied CNC's request to intervene and has transferred the remainder of the
Intervention Suit to the Bankruptcy Judge presiding over the Bankruptcy Case.
Based upon the findings of the bankruptcy examiner and an investigation by the
bankruptcy trustee (the "Trustee") of potential actions directed at PCI,
including an avoidable preference claim of approximately $950,000, the Trustee
and PCI reached a tentative settlement of all
66
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
issues, subject to Bankruptcy Court approval. The terms of the proposed
settlement have been incorporated into a proposed plan of reorganization (the
"Plan") filed by the Trustee, which is also subject to Bankruptcy Court
approval. If only the settlement is approved, PCI will obtain a release from
the Trustee and the Trustee will dismiss the Intervention Suit in
consideration of PCI making a cash payment of $1,200,000 to the Trustee. If
the Plan is subsequently approved, PCI will make an additional cash payment of
up to $300,000 to the Trustee in consideration of PCI obtaining, among other
things, an injunction against possible nuisance suits relating to the CNC
business. The Company has previously taken a reserve for the settlement and
Plan payments. 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 November 26, 1997, Wael Al-Khatib ("Al-Khatib"), the sole shareholder and
former president of CNC, and his company, Platinum Network, Corp. ("Platinum")
(Al-Khatib and Platinum are collectively referred to herein as "Plaintiffs"),
filed a complaint against PCI, WorldCom Network Services, Inc. f/k/a WilTel,
Inc., Bernard J. Ebbers, David F. Meyers, Robert Vetera, Joseph Cusick,
William Trower, Don Wilmouth, Digital Communications of America, Inc., Boland
Jones, Patrick Jones, and John Does I-XX in the Eastern District of New York,
United States District Court. Plaintiffs contend that PCI, certain officers of
PCI and the other defendants engaged in a fraudulent scheme to restrain trade
in the debit card market nationally and in the New York debit card sub-market
and made misrepresentations of fact in connection with the alleged scheme. The
Plaintiffs are seeking at least $250 million in compensatory damages and $500
million in punitive damages from PCI and the other defendants. Pursuant to the
local rules of the District Court, PCI has filed a letter stating the reasons
it believes the lawsuit should be dismissed. PCI has also filed a motion for
sanctions under Rule 11 of the Federal Rules of Civil Procedure. PCI believes
that it has meritorious defenses to the Plaintiffs' allegations and will
vigorously defend the same. Due to the inherent uncertainties of the judicial
system, the Company is not able to predict the outcome of this lawsuit. If
this lawsuit is not resolved in PCI's favor, 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. As of
December 3, 1997, the Company, Gasgarth and Jones have entered into a
settlement agreement with Lucina for an immaterial amount settling and
disposing of Lucina's claims in connection with this litigation.
67
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. INCOME TAXES
The difference between the statutory federal income tax rate and the
Company's effective income tax rate applied to income before income taxes was
as follows for the years ended December 31, 1997, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Income taxes at federal statutory rate.............. $(9,787) $ 1,951 $ 2,100
State taxes, net of federal benefit................. 276 229 263
Non-deductible merger costs......................... 8,390 -- --
Change in valuation allowance....................... -- 940 (1,123)
S-corporation earnings not subject to corporate
level taxes........................................ (3,117) (1,462) (1,420)
Non-taxable investment income....................... (1,265) (723) --
Establish deferred taxes for non-taxable predecessor
entities........................................... 1,207 -- --
Other, primarily non-deductible expenses............ 884 437 195
------- ------- -------
Income taxes at the Company's effective rate........ $(3,412) $ 1,372 $ 15
======= ======= =======
Components of the Company's income tax provision
(benefit) are as follows:
Current:
Federal........................................... $ -- $ 3,247 $ 208
State............................................. 1,000 598 99
International..................................... 490 42 25
------- ------- -------
1,490 3,887 332
------- ------- -------
Deferred:
Federal........................................... (4,405) (3,303) 100
State............................................. (582) (553) 47
International..................................... 85 1,341 (464)
------- ------- -------
(4,902) (2,515) (317)
------- ------- -------
$(3,412) $ 1,372 $ 15
======= ======= =======
</TABLE>
68
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Differences between financial accounting and tax bases of assets and
liabilities which give rise to deferred tax assets and liabilities are as
follows at December 31 (in thousands):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards......................... $17,715 $ 6,880
In-process research and development...................... 4,302 4,218
Deferred revenue......................................... 1,832 174
Intangibles.............................................. 3,826 3,929
Restructuring and other special charges.................. 11,489 --
Accrued liabilities...................................... 3,082 3,521
Other assets............................................. 449 2,466
------- -------
42,695 21,188
Deferred tax liabilities:
Depreciation and amortization............................ (4,242) (2,097)
Other.................................................... (20) (822)
------- -------
38,433 18,269
Valuation allowance........................................ (8,755) (8,755)
------- -------
Net deferred tax assets.................................... $29,678 $ 9,514
======= =======
</TABLE>
The issuances of stock by the Company have resulted in an ownership change
under the Internal Revenue Code. Therefore, the Company's net operating loss
carryforwards could be subject to limitations. Management of the Company has
recorded valuation allowances for deferred tax assets amounts based on their
estimate regarding the realization of such assets.
Most Voice-Tel Franchises acquired in transactions accounted for as pooling-
of-interests had elected to be treated as S-Corporations or partnerships for
income tax and other purposes. Income taxes were not provided on income of
these entities for any year presented because S-Corporations and partnerships
are generally not subject to income tax. Rather, shareholders or partners of
such entities are taxed on their proportionate shares of these entities'
taxable income in their individual income tax returns.
At December 31, 1997, the Company had net operating loss carryforwards for
state and federal income tax purposes of approximately $46,000,000 expiring in
2008 through 2011. Deferred tax benefits of approximately $15 million in 1997
are associated with nonqualified stock option exercises, the benefit of which
was credited directly to additional paid-in capital.
15. RESTRUCTURING AND OTHER SPECIAL CHARGES
In connection with the VoiceCom acquisition, the Company recorded
restructuring and other special charges of approximately $28.2 million in the
third quarter of 1997. Such amounts consisted of transaction costs, asset
impairments, costs to terminate or restructure certain contractual obligations
and other costs. Transaction costs associated with the VoiceCom acquisition
were expensed as required by the pooling-of-interests method of accounting.
Other restructuring and special charges recorded in the third quarter result
principally from management's plan to restructure VoiceCom's operations by
reducing its workforce, exiting certain facilities, discontinuing duplicative
product offerings and terminating or restructuring certain contractual
obligations.
The Company recorded approximately $45.4 million of restructuring and other
special charges in the second quarter of 1997 in connection with the Voice-Tel
Acquisitions. Those charges result from management's plan to restructure the
operations of the Voice-Tel Entities under a consolidated business group model
and discontinue its 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.
69
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Restructuring and other special charges against operations for the year
ended December 31, 1997 are as follows (in thousands):
<TABLE>
<CAPTION>
ACCRUED
COSTS
CHARGES TO COSTS DECEMBER 31,
OPERATIONS INCURRED 1997
---------- -------- ------------
<S> <C> <C> <C>
Severance............................... $11,881 $ 5,680 $ 6,201
Asset impairments....................... 13,401 2,570 10,831
Restructure or terminate contractual
obligations............................. 17,911 4,557 13,354
Transaction costs....................... 20,015 15,075 4,940
Other costs, primarily to exit
facilities and certain activities...... 10,389 6,601 3,788
------- ------- -------
$73,597 $34,483 $39,114
======= ======= =======
</TABLE>
16. STATEMENT OF CASH FLOW INFORMATION
Supplemental Disclosure of Cash Flow Information (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Cash paid during the year for:
Interest........................................ $ 7,100 $ 4,516 $ 4,570
Income taxes.................................... $ 840 $ 309 $ 61
Cash paid for acquisitions accounted for as purchases are as follows:
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Fair value of assets acquired................... $19,833 $11,030 $ --
Less liabilities assumed........................ 2,124 100 --
Less common stock issued to sellers............. 2,255 8,060 --
------- ------- -------
Net cash paid................................... $15,454 $ 2,870 $ --
======= ======= =======
</TABLE>
17. SUBSEQUENT EVENTS
On February 27, 1998, the Company completed the acquisition of Xpedite
Systems, Inc. In connection the acquisition, the Company issued approximately
11 million shares of its common stock. This transaction will be accounted for
as a pooling-of-interests. Xpedite is a worldwide leader and innovator in the
enhanced fax services business and also provides discounted fax, e-mail,
telex, Internet and mailgram services. Xpedite serves customers who require
high-quality, cost-effective, rapid, and confirmed communications. Xpedite has
developed sophisticated applications in a wide range of industries that enable
customers to deliver common or customized documents to hundreds or thousands
of recipients around the world via fax or electronic mail using Xpedite's
proprietary, private, world-wide document distribution network (the "Xpedite
Network"). Based in Eatontown, New Jersey, Xpedite delivers its document
distribution services over the Xpedite Network, with points of presence in
over 70 cities in approximately 29 countries around the world. The Xpedite
Network includes over 14,500 dedicated lines in addition to complete Internet
access and compatibility to allow for the ability to receive and deliver
messages in whatever format is optimal to ensure timely delivery.
The Company anticipates that it will record restructuring and other special
charges before income taxes in the range of $50 million in connection with the
Xpedite acquisition. Such amount includes charges recorded by Xpedite in the
fourth quarter of 1997 expected by management to be in the range of $20
million before income taxes. These charges result principally from transaction
fees which the Company is required to expense under the pooling of interests
method of accounting, including a $9.5 million transaction "break-up fee" paid
by Xpedite to a company which was party to an unsuccessful attempt to acquire
Xpedite. In addition, such costs result from legal and professional fees and
the write-down of impaired assets and associated costs to exit certain
duplicative facilities and business activities.
70
<PAGE>
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
There have been no disagreements with or change in the registrant's
independent accountant since the Company's inception.
PART III
Certain information required by Part III is omitted from this report in that
the Registrant will file a Definitive Proxy Statement pursuant to Regulation
14A ("Proxy Statement") not later than 120 days after the end of the fiscal
year covered by this report.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated herein by reference to
the Company's Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by reference to
the Company's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated herein by reference to
the Company's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by reference to
the Company's Proxy Statement.
71
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The financial statements listed in the index set forth in Item 8 of this
report are filed as part of this report.
2. Financial Statement Schedules
Financial statement schedules required to be included in this report are
either shown in the financial statements and notes thereto, included in Item 8
of this report or have been omitted because they are not applicable.
3. Exhibits
<TABLE>
<CAPTION>
<C> <S>
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 Registrant'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 Registrant'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 Registrant'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 Registrant'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 Registrant'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
Registrant'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 Registrant's Current Report on Form 8-K dated April 30, 1997
and filed May 14, 1997).
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
Registrant'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 Registrant's Current
Report on Form 8-K dated April 30, 1997 and filed May 14, 1997).
</TABLE>
72
<PAGE>
<TABLE>
<CAPTION>
<C> <S>
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 Registrant'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 Registrant'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
Registrant'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 Registrant'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., 1116827 Ontario Inc., 1006089 Ontario Inc., and 1063940
Ontario Inc. (incorporated by reference to Exhibit 2.14 to the
Registrant's Current Report on Form 8-K dated April 30, 1997 and filed
May 14, 1997).
2.15 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 Registrant's Current Report on Form 8-K dated May 16, 1997 and
filed June 2, 1997).
2.16 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 Registrant's Current Report on Form
8-K dated May 16, 1997 and filed June 2, 1997).
2.17 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 Registrant's
Current Report on Form 8-K dated May 16, 1997 and filed June 2. 1997).
2.18 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
Registrant's Current Report on Form 8-K dated May 16, 1997 and filed
June 2, 1997).
2.19 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 Registrant's Current
Report on Form 8-K dated May 16, 1997 and filed June 2, 1997).
2.20 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 Registrant's Current Report on Form 8-K
dated May 16, 1997 and filed June 2, 1997).
2.21 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
<CAPTION>
</TABLE>
73
<PAGE>
<TABLE>
<C> <S>
Corporation, L'Harbot, Inc. and the Owners of L'Harbot, Inc.
(incorporated by reference to Exhibit 2.7 to the Registrant's Current
Report on Form 8-K dated May 16, 1997 and filed June 2, 1997).
2.22 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 Registrant's Current
Report on Form 8-K dated May 16, 1997 and filed June 2, 1997).
2.23 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 Registrant's Current Report on Form 8-K dated May 16, 1997 and
filed June 2, 1997).
2.24 Transfer Agreement dated as of May 19, 1997 by and among Premiere
Technologies, Inc. Voice-Tel of South Texas, Inc. and Owners of
VoiceTel of South Texas, Inc. (incorporated by reference to
Exhibit 2.11 to the Registrant's Current Report on Form 8-K dated May
16, 1997 and filed June 2, 1997).
2.25 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
Registrant's Current Report on Form 8-K dated May 16, 1997 and filed
June 2, 1997).
2.26 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 Registrant's Current
Report on Form 8-K/A dated May 16, 1997 and filed June 24, 1997).
2.27 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 Registrant's Current
Report on Form 8-K/A dated May 16, 1997 and filed June 24, 1997).
2.28 Transfer Agreement dated as of April 2, 1997 by and among Premiere
Technologies, Inc. In-Touch Technologies, Inc. and the Owners of
InTouch Technologies, Inc. (incorporated by reference to Exhibit 2.3 to
the Registrant's Current Report on Form 8-K/A dated May 16, 1997 and
filed June 24, 1997).
2.29 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 Registrant's Current Report on Form 8-K/A dated May
16, 1997 and filed June 24, 1997).
2.30 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 Registrant's Current Report on Form 8-K dated April 2, 1997
and filed April 4, 1997).
2.31 Uniform Terms and Conditions, Exhibit A to Transfer Agreements by and
among Premiere Technologies, Inc., Wave Two Franchisees and owners of
Wave Two Franchisees (incorporated by reference to Exhibit 2.14 to the
Registrant's Current Report on dated May 16, 1997 and filed June 2,
1997).
2.32 Stock Purchase Agreement, together with exhibits, dated as of September
12, 1997, by and among Premiere Technologies, Inc., VoiceCom Holdings,
Inc. and the Shareholders of VoiceCom Holdings, Inc. (incorporated by
reference to Exhibit 2.1 to the Registrant's Quarterly Report on Form
10-Q for the Quarter Ended September 30, 1997).
2.33 Agreement and Plan of Merger, dated as of November 13, 1997, together
with exhibits, by and among Premiere Technologies, Inc., Nets
Acquisition Corp. and Xpedite Systems, Inc. (incorporated by reference
to Exhibit 99.2 to the Registrant's Current Report on Form 8-K dated
November 13, 1997 and filed December 5, 1997, as amended by Form 8-K/A
filed December 23, 1997).
</TABLE>
74
<PAGE>
<TABLE>
<C> <S>
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
and Bylaws defining the rights of the holders of common stock of the
Registrant.
4.2 Specimen Stock Certificate (incorporated by reference to Exhibit 4.2 to
the Registrant's Registration Statement on Form S-1 (No. 33-80547)).
4.3 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).
4.4 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).
4.5 Registration Rights Agreement, dated as of June 15, 1997, by and among
the Registrant, 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).
4.6 Registration Rights Agreement, dated as of April 30, 1997, by and among
the Registrant, those stockholders of Voice-Tel Enterprises, Inc.
("VTE") appearing as signatories thereto, those shareholders of VTN,
Inc. appearing as signatories thereto and those stockholders or other
equity owners of franchisees of VTE that executed adoption agreements
(incorporated by reference to Exhibit 4 to Exhibit 2.1 to the
Registrant's Current Report on Form 8-K dated April 2, 1997 and filed
April 4, 1997).
4.7 Stock Restriction and Registration Rights Agreement dated as of
September 30, 1997, by and among the Registrant and those shareholders
of VoiceCom Holdings, Inc. appearing as signatories thereto
(incorporated by reference to Exhibit 3 to Exhibit 2.1 to the
Registrant's Quarterly Report on Form 10-Q for the Quarter Ended
September 30, 1997).
10.1 Shareholder Agreement dated as of January 18, 1994 among the
Registrant, NationsBanc Capital Corporation, Boland T. Jones, D.
Gregory Smith, Leonard A. DeNittis and Andrea L. Jones (incorporated by
reference to Exhibit 10.12 to the Registrant's Registration Statement
on Form S-1 (No. 33-80547)).
10.2 Amended and Restated Employment and Incentive Option Agreement dated
November 6, 1995 between the Registrant and Leonard A. DeNittis
(incorporated by reference to Exhibit 10.13 to the Registrant's
Registration Statement on Form S-1 (No. 33-80547)).***
10.3 Amended and Restated Employment Agreement dated November 6, 1995
between Premiere Communications, Inc. and Leonard A. DeNittis
(incorporated by reference to Exhibit 10.14 to the Registrant's
Registration Statement on Form S-1 (No. 33-80547)).***
10.4 Amended and Restated Executive Employment Agreement and Incentive
Option Agreement dated November 6, 1995 between the Registrant and
David Gregory Smith (incorporated by reference to Exhibit 10.15 to the
Registrant's Registration Statement on Form S-1 (No. 33-80547)).***
10.5 Amended and Restated Executive Employment Agreement dated November 6,
1995 between Premiere Communications, Inc. and David Gregory Smith
(incorporated by reference to Exhibit 10.16 to the Registrant's
Registration Statement on Form S-1 (No. 33-80547)).***
10.6 Mutual Release dated December 5, 1997 by and among the Registrant,
Premiere Communications, Inc. and David Gregory Smith.
<CAPTION>
</TABLE>
75
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10.7 Amended and Restated Executive Employment and Incentive Option
Agreement dated November 6, 1995 between the Registrant and Boland T.
Jones (incorporated by reference to Exhibit 10.17 to the Registrant's
Registration Statement on Form S-1 (No. 33-80547)).***
10.8 Amended and Restated Executive Employment Agreement dated November 6,
1995 between Premiere Communications, Inc. and Boland T. Jones
(incorporated by reference to Exhibit 10.18 to the Registrant's
Registration Statement on Form S-1 (No. 33-80547)).***
10.9 Executive Employment and Incentive Option Agreement dated November 1,
1995 between the Registrant and Patrick G. Jones (incorporated by
reference to Exhibit 10.19 to the Registrant's Registration Statement
on Form S-1 (No. 33-80547)).***
10.10 Executive Employment Agreement dated November 1, 1995 between Premiere
Communications, Inc. and Patrick G. Jones (incorporated by reference
to Exhibit 10.20 to the Registrant's Registration Statement on Form S-
1 (No. 33-80547)).***
10.11 Promissory Note dated November 17, 1995 payable to the Registrant made
by Patrick G. Jones (incorporated by reference to Exhibit 10.27 to the
Registrant's Registration Statement on Form S-1 (No. 33-80547)).***
10.12 Voice-Tel Enterprises, Inc. Employment Agreement dated April 30, 1997
between Voice-Tel, Inc. and William Welsh (incorporated by reference
to Exhibit 10.7 to the Registrant's Quarterly Report on Form 10-Q for
the Quarter Ended June 30, 1997).***
10.13 Premiere Communications, Inc. 401(k) Profit Sharing Plan (incorporated
by reference to Exhibit 10.30 to the Registrant's Registration
Statement on Form S-1 (No. 33-80547)).***
10.14 Form of Director Indemnification Agreement between the Registrant and
Non-employee Directors (incorporated by reference to Exhibit 10.31 to
the Registrant's Registration Statement on Form S-1 (No. 33-
80547)).***
10.15 55 Park Place Office Lease dated May 31, 1993 between Premiere
Communications, Inc. and Mara-Met Venture, as amended by First
Amendment dated December 15, 1995 (incorporated by reference to
Exhibit 10.34 to the Registrant's Registration Statement on Form S-1
(No. 33-80547)).
10.16 Second and Third Amendment to 55 Park Place Office Lease dated
November 5, 1996 between Premiere Communications, Inc. and Mara-Met
Venture (incorporated by reference to Exhibit 10.49 to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1996).
10.17 Office Lease Agreement dated May 12, 1996 between Premiere
Communications, Inc. and Beverly Hills Center LLC, as amended by the
First Amendment dated August 1, 1996 (incorporated by reference to
Exhibit 10.50 to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1996).
10.18 Second Amendment of Lease dated July 1, 1997, between Premiere
Communications, Inc. and Beverly Hills Center LLC.
10.19 Agreement of Lease between Corporate Property Investors and Premiere
Communications, Inc., dated as of March 3, 1997, as amended by
Modification of Lease dated August 4, 1997, as amended, by Second
Modification of Lease, dated October 30, 1997.
10.20 Sublease Agreement dated as of December 16, 1997, by and between
Premiere Communications, Inc. and Endeavor Technologies, Inc.
10.21 Form of Officer Indemnification Agreement between the Registrant and
each of the executive officers (incorporated by reference to Exhibit
10.36 to the Registrant's Registration Statement on Form S-1 (No. 33-
80547)).***
10.22 Carrier Agreement dated January 1, 1996 between Premiere
Communications, Inc. and Communications Network Corporation
(incorporated by reference to Exhibit 10.37 to the Registrant's
Registration Statement on Form S-1 (No. 33-80547)).*
</TABLE>
76
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10.23 Carrier Service Agreement dated August 4, 1995 between Premiere
Communications, Inc. and Cherry Communications Incorporated, as
amended (incorporated by reference to Exhibit 10.38 to the
Registrant's Registration Statement on Form S-1 (No. 33-80547)).*
10.24 Carrier Services Agreement Dated July 12, 1995 between Premiere
Communications, Inc. and Corporate Telemanagement Group, Inc., as
amended (incorporated by reference to Exhibit 10.39 to the
Registrant's Registration Statement on Form S-1 (No. 33-80547)).*
10.25 Telecommunications Services Agreement dated December 1, 1995 between
Premiere Communications, Inc. and WorldCom Network Services, Inc.
d/b/a WilTel (incorporated by reference to Exhibit 10.40 to the
Registrant's Registration Statement on Form S-1 (No. 33-80547)).*
10.26 Amended and Restated Program Enrollment Terms dated September 30, 1997
by and between Premiere Communications, Inc. and WorldCom Network
Services, Inc., d/b/a WilTel, as amended by Amendment No. 1 dated
November 1, 1997.**
10.27 Service Agreement dated September 30, 1997, by and between VoiceCom
Systems, Inc. and AT&T Corp. (incorporated by reference to Exhibit
10.1 to the Registrant's Quarterly Report on Form 10-Q for the Quarter
Ended September 30, 1997).**
10.28 Strategic Alliance Agreement dated November 13, 1996 by and between
the Registrant and WorldCom, Inc. (incorporated by reference to
Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated
November 13, 1996).*
10.29 Investment Agreement dated November 13, 1996 by and between the
Registrant and WorldCom, Inc. (incorporated by reference to Exhibit
10.2 to the Registrant's Current Report on Form 8-K dated November 13,
1996).
10.30 Service and Reseller Agreement dated September 28, 1990 by and between
Amway Corporation and Voice-Tel Enterprises, Inc. (incorporated by
reference to Exhibit 2.33 to the Registrant's Quarterly Report on Form
10-Q for the Quarter Ended June 30, 1997).*
10.31 Independent Distributor Agreement dated September 26, 1997, by and
between Registrant and Digitec 2000, Inc. (incorporated by reference
to Exhibit 10.2 to the Registrant's Quarterly Report as Form 10-Q for
the Quarter ended September 30, 1997).
10.32 Form of Stock Purchase Warrant Agreement (incorporated by reference to
Exhibit 4.3 to the Registrant's Registration Statement on Form S-8
(No. 333-11281)).
10.33 Form of Warrant Transaction Statement (incorporated by reference to
Exhibit 4.4 to the Registrant's Registration Statement on Form S-8
(No. 333-11281)).
10.34 Form of Director Stock Purchase Warrant (incorporated by reference to
Exhibit 4.3 to the Registrant's Registration Statement on Form S-8
(No. 333-17593)).***
<CAPTION>
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10.35 Promissory Note dated October 18, 1996 between Premiere
Communications, Inc. and NationsBank, N.A. (South) (incorporated by
reference to Exhibit 10.51 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1996).
10.36 Continuing and Unconditional Guaranty Agreement dated October 18,
1996, between Premiere Communications, Inc. and NationsBank, N.A.
(South) (incorporated by reference to Exhibit 10.52 to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1996).
10.37 Promissory Note dated April 30, 1997 between Premiere Communications,
Inc. and NationsBank, N.A. (South) (incorporated by reference to
Exhibit 2.4 to the Registrant's Current Report on Form 8-K dated April
30, 1997 and filed May 14, 1997).
10.38 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).
</TABLE>
77
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10.39 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)).
10.40 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)).
10.41 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)).
10.42 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).
10.43 First Amendment to Premiere Technologies, Inc. Second Amended and
Restated 1995 Stock Plan.
10.44 VoiceCom Holdings, Inc. 1995 Stock Option Plan (assumed by the
Registrant).
10.45 VoiceCom Holdings, Inc. Amended and Restated 1985 Stock Option Plan
(assumed by the Registrant).
11.1 Statement re: Computation of Per Share Earnings.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
27.1 Financial Data Schedule for the year ended December 31, 1997.
27.2 Restated Financial Data Schedule for the years ended December 31, 1996
and 1995.
</TABLE>
- --------
*Confidential treatment has been granted. The copy on file as an exhibit
omits the information subject to the confidentiality request. Such omitted
information has been filed separately with the Commission.
**Confidential treatment has been requested. The copy on file as an exhibit
omits the information subject to the confidentiality request. Such omitted
information has been filed separately with the Commission.
*** Management contracts and compensatory plans and arrangements required to
be filed as exhibits pursuant to Item 14(c) of this report.
78
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
PREMIERE TECHNOLOGIES, INC.
BY: /s/ Boland T. Jones
_________________________________
BOLAND T. JONES
CHAIRMAN OF THE
BOARD OF DIRECTORS
AND PRESIDENT
Date: March 27, 1998
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant in the capacities and on the dates
indicated.
<TABLE>
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SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Boland T. Jones Chairman of the Board and March 27, 1998
_________________________________ President (principal
BOLAND T. JONES executive officer)
/s/ Patrick G. Jones Senior Vice President of March 27, 1998
_________________________________ Finance and Legal and
PATRICK G. JONES Secretary (principal
financial and accounting
officer)
/s/ George W. Baker, Sr. Director March 27, 1998
_________________________________
GEORGE W. BAKER, SR.
/s/ Eduard J. Mayer Director March 27, 1998
_________________________________
EDUARD J. MAYER
/s/ Raymond H. Pirtle, Jr. Director March 27, 1998
_________________________________
RAYMOND H. PIRTLE, JR.
/s/ Roy B. Andersen, Jr. Director March 27, 1998
_________________________________
ROY B. ANDERSEN, JR.
</TABLE>
79
<PAGE>
EXHIBIT INDEX
<TABLE>
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EXHIBIT
NUMBER DESCRIPTION PAGE
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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 Registrant'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
Registrant'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 Registrant'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 Registrant'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 Registrant'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 Registrant'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 Registrant's Current Report on
Form 8-K dated April 30, 1997 and filed May 14, 1997).
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 Registrant'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
Registrant's Current Report on Form 8-K dated April 30, 1997
and filed May 14, 1997).
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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 Registrant's Current Report on Form 8-K dated
April 30, 1997 and filed May 14, 1997).
</TABLE>
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EXHIBIT
NUMBER DESCRIPTION PAGE
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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
Registrant'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 Registrant'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 Registrant'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., 1116827 Ontario Inc.,
1006089 Ontario Inc., and 1063940 Ontario Inc. (incorporated by
reference to Exhibit 2.14 to the Registrant's Current Report on
Form 8-K dated April 30, 1997 and filed May 14, 1997).
2.15 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 Registrant's Current Report on
Form 8-K dated May 16, 1997 and filed June 2, 1997).
2.16 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
Registrant's Current Report on Form 8-K dated May 16, 1997 and
filed June 2, 1997).
2.17 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 Registrant's Current Report on Form 8-K dated May 16,
1997 and filed June 2. 1997).
2.18 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 Registrant's Current Report on Form 8-K
dated May 16, 1997 and filed June 2, 1997).
2.19 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 Registrant's Current Report on Form 8-K dated May 16,
1997 and filed June 2, 1997).
2.20 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 Registrant's Current Report on Form 8-K dated May
16, 1997 and filed June 2, 1997).
2.21 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 Registrant's Current Report
on Form 8-K dated May 16, 1997 and filed June 2, 1997).
</TABLE>
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NUMBER DESCRIPTION PAGE
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2.22 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
Registrant's Current Report on Form 8-K dated May 16, 1997 and
filed June 2, 1997).
2.23 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 Registrant's Current Report on
Form 8-K dated May 16, 1997 and filed June 2, 1997).
2.24 Transfer Agreement dated as of May 19, 1997 by and among
Premiere Technologies, Inc. Voice-Tel of South Texas, Inc. and
Owners of VoiceTel of South Texas, Inc. (incorporated by
reference to Exhibit 2.11 to the Registrant's Current Report on
Form 8-K dated May 16, 1997 and filed June 2, 1997).
2.25 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 Registrant's Current Report on Form 8-K
dated May 16, 1997 and filed June 2, 1997).
2.26 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 Registrant's Current Report on Form 8-K/A
dated May 16, 1997 and filed June 24, 1997).
2.27 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 Registrant's Current Report on Form 8-K/A dated May 16,
1997 and filed June 24, 1997).
2.28 Transfer Agreement dated as of April 2, 1997 by and among
Premiere Technologies, Inc. In-Touch Technologies, Inc. and the
Owners of InTouch Technologies, Inc. (incorporated by reference
to Exhibit 2.3 to the Registrant's Current Report on Form 8-K/A
dated May 16, 1997 and filed June 24, 1997).
2.29 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
Registrant's Current Report on Form 8-K/A dated May 16, 1997
and filed June 24, 1997).
2.30 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 Registrant's Current Report
on Form 8-K dated April 2, 1997 and filed April 4, 1997).
2.31 Uniform Terms and Conditions, Exhibit A to Transfer Agreements
by and among Premiere Technologies, Inc., Wave Two Franchisees
and owners of Wave Two Franchisees (incorporated by reference
to Exhibit 2.14 to the Registrant's Current Report on dated May
16, 1997 and filed June 2, 1997).
2.32 Stock Purchase Agreement, together with exhibits, dated as of
September 12, 1997, by and among Premiere Technologies, Inc.,
VoiceCom Holdings, Inc. and the Shareholders of VoiceCom
Holdings, Inc. (incorporated by reference to Exhibit 2.1 to the
Registrant's Quarterly Report on Form 10-Q for the Quarter
Ended September 30, 1997).
</TABLE>
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EXHIBIT
NUMBER DESCRIPTION PAGE
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2.33 Agreement and Plan of Merger, dated as of November 13, 1997,
together with exhibits, by and among Premiere Technologies,
Inc., Nets Acquisition Corp. and Xpedite Systems, Inc.
(incorporated by reference to Exhibit 99.2 to the Registrant's
Current Report on Form 8-K dated November 13, 1997 and filed
December 5, 1997, as amended by Form 8-K/A filed December 23,
1997).
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 and Bylaws defining the rights of the holders of
common stock of the Registrant.
4.2 Specimen Stock Certificate (incorporated by reference to
Exhibit 4.2 to the Registrant's Registration Statement on Form
S-1 (No. 33-80547)).
4.3 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).
4.4 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).
4.5 Registration Rights Agreement, dated as of June 15, 1997, by
and among the Registrant, 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).
4.6 Registration Rights Agreement, dated as of April 30, 1997, by
and among the Registrant, those stockholders of Voice-Tel
Enterprises, Inc. ("VTE") appearing as signatories thereto,
those shareholders of VTN, Inc. appearing as signatories
thereto and those stockholders or other equity owners of
franchisees of VTE that executed adoption agreements
(incorporated by reference to Exhibit 4 to Exhibit 2.1 to the
Registrant's Current Report on Form 8-K dated April 2, 1997 and
filed April 4, 1997).
4.7 Stock Restriction and Registration Rights Agreement dated as of
September 30, 1997, by and among the Registrant and those
shareholders of VoiceCom Holdings, Inc. appearing as
signatories thereto (incorporated by reference to Exhibit 3 to
Exhibit 2.1 to the Registrant's Quarterly Report on Form 10-Q
for the Quarter Ended September 30, 1997).
10.1 Shareholder Agreement dated as of January 18, 1994 among the
Registrant, NationsBanc Capital Corporation, Boland T. Jones,
D. Gregory Smith, Leonard A. DeNittis and Andrea L. Jones
(incorporated by reference to Exhibit 10.12 to the Registrant's
Registration Statement on Form S-1 (No. 33-80547)).
10.2 Amended and Restated Employment and Incentive Option Agreement
dated November 6, 1995 between the Registrant and Leonard A.
DeNittis (incorporated by reference to Exhibit 10.13 to the
Registrant's Registration Statement on Form S-1 (No. 33-
80547)).
10.3 Amended and Restated Employment Agreement dated November 6,
1995 between Premiere Communications, Inc. and Leonard A.
DeNittis (incorporated by reference to Exhibit 10.14 to the
Registrant's Registration Statement on Form S-1 (No. 33-
80547)).
</TABLE>
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EXHIBIT
NUMBER DESCRIPTION PAGE
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10.4 Amended and Restated Executive Employment Agreement and
Incentive Option Agreement dated November 6, 1995 between the
Registrant and David Gregory Smith (incorporated by reference
to Exhibit 10.15 to the Registrant's Registration Statement on
Form S-1 (No. 33-80547)).
10.5 Amended and Restated Executive Employment Agreement dated
November 6, 1995 between Premiere Communications, Inc. and
David Gregory Smith (incorporated by reference to Exhibit 10.16
to the Registrant's Registration Statement on Form S-1 (No. 33-
80547)).
10.6 Mutual Release dated December 5, 1997 by and among the
Registrant, Premiere Communications, Inc. and David Gregory
Smith.
10.7 Amended and Restated Executive Employment and Incentive Option
Agreement dated November 6, 1995 between the Registrant and
Boland T. Jones (incorporated by reference to Exhibit 10.17 to
the Registrant's Registration Statement on Form S-1 (No. 33-
80547)).
10.8 Amended and Restated Executive Employment Agreement dated
November 6, 1995 between Premiere Communications, Inc. and
Boland T. Jones (incorporated by reference to Exhibit 10.18 to
the Registrant's Registration Statement on Form S-1 (No. 33-
80547)).
10.9 Executive Employment and Incentive Option Agreement dated
November 1, 1995 between the Registrant and Patrick G. Jones
(incorporated by reference to Exhibit 10.19 to the Registrant's
Registration Statement on Form S-1 (No. 33-80547)).
10.10 Executive Employment Agreement dated November 1, 1995 between
Premiere Communications, Inc. and Patrick G. Jones
(incorporated by reference to Exhibit 10.20 to the Registrant's
Registration Statement on Form S-1 (No. 33-80547)).
10.11 Promissory Note dated November 17, 1995 payable to the
Registrant made by Patrick G. Jones (incorporated by reference
to Exhibit 10.27 to the Registrant's Registration Statement on
Form S-1 (No. 33-80547)).
10.12 Voice-Tel Enterprises, Inc. Employment Agreement dated April
30, 1997 between Voice-Tel, Inc. and William Welsh
(incorporated by reference to Exhibit 10.7 to the Registrant's
Quarterly Report on Form 10-Q for the Quarter Ended June 30,
1997).
10.13 Premiere Communications, Inc. 401(k) Profit Sharing Plan
(incorporated by reference to Exhibit 10.30 to the Registrant's
Registration Statement on Form S-1 (No. 33-80547)).
10.14 Form of Director Indemnification Agreement between the
Registrant and Non-employee Directors (incorporated by
reference to Exhibit 10.31 to the Registrant's Registration
Statement on Form S-1 (No. 33-80547)).
10.15 55 Park Place Office Lease dated May 31, 1993 between Premiere
Communications, Inc. and Mara-Met Venture, as amended by First
Amendment dated December 15, 1995 (incorporated by reference to
Exhibit 10.34 to the Registrant's Registration Statement on
Form S-1 (No. 33-80547)).
10.16 Second and Third Amendment to 55 Park Place Office Lease dated
November 5, 1996 between Premiere Communications, Inc. and
Mara-Met Venture (incorporated by reference to Exhibit 10.49 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1996).
10.17 Office Lease Agreement dated May 12, 1996 between Premiere
Communications, Inc. and Beverly Hills Center LLC, as amended
by the First Amendment dated August 1, 1996 (incorporated by
reference to Exhibit 10.50 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1996).
10.18 Second Amendment of Lease dated July 1, 1997, between Premiere
Communications, Inc. and Beverly Hills Center LLC.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
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<C> <S> <C>
10.19 Agreement of Lease between Corporate Property Investors and
Premiere Communications, Inc., dated as of March 3, 1997, as
amended by Modification of Lease dated August 4, 1997, as
amended, by Second Modification of Lease, dated October 30,
1997.
10.20 Sublease Agreement dated as of December 16, 1997, by and
between Premiere Communications, Inc. and Endeavor
Technologies, Inc.
10.21 Form of Officer Indemnification Agreement between the
Registrant and each of the executive officers (incorporated by
reference to Exhibit 10.36 to the Registrant's Registration
Statement on Form S-1 (No. 33-80547)).
10.22 Carrier Agreement dated January 1, 1996 between Premiere
Communications, Inc. and Communications Network Corporation
(incorporated by reference to Exhibit 10.37 to the Registrant's
Registration Statement on Form S-1 (No. 33-80547)).*
10.23 Carrier Service Agreement dated August 4, 1995 between Premiere
Communications, Inc. and Cherry Communications Incorporated, as
amended (incorporated by reference to Exhibit 10.38 to the
Registrant's Registration Statement on Form S-1 (No. 33-
80547)).*
10.24 Carrier Services Agreement Dated July 12, 1995 between Premiere
Communications, Inc. and Corporate Telemanagement Group, Inc.,
as amended (incorporated by reference to Exhibit 10.39 to the
Registrant's Registration Statement on Form S-1 (No. 33-
80547)).*
10.25 Telecommunications Services Agreement dated December 1, 1995
between Premiere Communications, Inc. and WorldCom Network
Services, Inc. d/b/a WilTel (incorporated by reference to
Exhibit 10.40 to the Registrant's Registration Statement on
Form S-1 (No. 33-80547)).*
10.26 Amended and Restated Program Enrollment Terms dated September
30, 1997 by and between Premiere Communications, Inc. and
WorldCom Network Services, Inc., d/b/a WilTel, as amended by
Amendment No. 1 dated November 1, 1997.**
10.27 Service Agreement dated September 30, 1997, by and between
VoiceCom Systems, Inc. and AT&T Corp. (incorporated by
reference to Exhibit 10.1 to the Registrant's Quarterly Report
on Form 10-Q for the Quarter Ended September 30, 1997).**
10.28 Strategic Alliance Agreement dated November 13, 1996 by and
between the Registrant and WorldCom, Inc. (incorporated by
reference to Exhibit 10.1 to the Registrant's Current Report on
Form 8-K dated November 13, 1996).*
10.29 Investment Agreement dated November 13, 1996 by and between the
Registrant and WorldCom, Inc. (incorporated by reference to
Exhibit 10.2 to the Registrant's Current Report on Form 8-K
dated November 13, 1996).
10.30 Service and Reseller Agreement dated September 28, 1990 by and
between Amway Corporation and Voice-Tel Enterprises, Inc.
(incorporated by reference to Exhibit 2.33 to the Registrant's
Quarterly Report on Form 10-Q for the Quarter Ended June 30,
1997).*
10.31 Independent Distributor Agreement dated September 26, 1997, by
and between Registrant and Digitec 2000, Inc. (incorporated by
reference to Exhibit 10.2 to the Registrant's Quarterly Report
as Form 10-Q for the Quarter ended September 30, 1997).
10.32 Form of Stock Purchase Warrant Agreement (incorporated by
reference to Exhibit 4.3 to the Registrant's Registration
Statement on Form S-8 (No. 333-11281)).
10.33 Form of Warrant Transaction Statement (incorporated by
reference to Exhibit 4.4 to the Registrant's Registration
Statement on Form S-8 (No. 333-11281)).
10.34 Form of Director Stock Purchase Warrant (incorporated by
reference to Exhibit 4.3 to the Registrant's Registration
Statement on Form S-8 (No. 333-17593)).
<CAPTION>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
10.35 Promissory Note dated October 18, 1996 between Premiere
Communications, Inc. and NationsBank, N.A. (South)
(incorporated by reference to Exhibit 10.51 to Registrant's
Annual Report on Form 10-K for the year ended December 31,
1996).
10.36 Continuing and Unconditional Guaranty Agreement dated October
18, 1996, between Premiere Communications, Inc. and
NationsBank, N.A. (South) (incorporated by reference to Exhibit
10.52 to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1996).
10.37 Promissory Note dated April 30, 1997 between Premiere
Communications, Inc. and NationsBank, N.A. (South)
(incorporated by reference to Exhibit 2.4 to the Registrant's
Current Report on Form 8-K dated April 30, 1997 and filed May
14, 1997).
10.38 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).
10.39 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)).
10.40 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)).
10.41 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)).
10.42 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).
10.43 First Amendment to Premiere Technologies, Inc. Second Amended
and Restated 1995 Stock Plan.
10.44 VoiceCom Holdings, Inc. 1995 Stock Option Plan (assumed by the
Registrant).
10.45 VoiceCom Holdings, Inc. Amended and Restated 1985 Stock Option
Plan (assumed by the Registrant).
11.1 Statement re: Computation of Per Share Earnings.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
27.1 Financial Data Schedule for the year ended December 31, 1997.
27.2 Restated Financial Data Schedule for the years ended December
31, 1996 and 1995.
</TABLE>
- --------
* Confidential treatment has been granted. The copy on file as an exhibit
omits the information subject to the confidentiality request. Such omitted
information has been filed separately with the Commission.
** Confidential treatment has been requested. The copy on file as an exhibit
omits the information subject to the confidentiality request. Such omitted
information has been filed separately with the Commission.
<PAGE>
EXHIBIT 10.6
MUTUAL RELEASE
THIS MUTUAL RELEASE ("Release") dated this 5th day of December, 1997, is by
and among PREMIERE TECHNOLOGIES, INC., a Florida corporation, and PREMIERE
COMMUNICATIONS, INC., a Florida corporation (collectively, "Premiere"), and D.
GREGORY SMITH ("Smith").
WHEREAS, Smith has served as a director, officer and employee of Premiere;
and
WHEREAS, Premiere and Smith have agreed to terminate their business
relationship; and
WHEREAS, Premiere and Smith desire to resolve certain differences arising
out of their business relationship.
NOW, THEREFORE, in consideration of the premises, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Premiere and Smith agree as follows:
1. ACKNOWLEDGMENT OF TERMINATION. Premiere and Smith hereby acknowledge
that Smith resigned as a director and officer of Premiere Technologies, Inc.
effective September 4, 1997, but that Smith continued as an employee of Premiere
Technologies, Inc., and as an employee, officer and director of Premiere
Communications, Inc. and certain affiliates, through November 29, 1997, and
resigned from such positions effective as of such date.
2. EXECUTION OF VOTING AGREEMENT. Concurrently with the execution of this
Release by Premiere, Smith will execute a copy of the Voting Agreement provided
by Premiere in the form attached hereto as Exhibit A.
3. STOCK OPTIONS. Premiere agrees that Smith shall retain 360,000 of the
480,000 options to purchase shares of Premiere Technologies, Inc. common stock
which are attributable to Smith's services to Premiere for 1997, which vested on
November 5, 1997, pursuant to that certain Amended and Restated Executive
Employment and Incentive Option Agreement dated November 6, 1995 (the "Option
Agreement"). In compromise of the dispute between the parties, Smith hereby
waives any right to the remaining 120,000 options attributable to his services
to Premiere for 1997, and waives any right to the 250,000 options granted in
June 1997 in lieu of bonus compensation, and agrees that all such options shall
be deemed cancelled.
4. ACKNOWLEDGMENT OF RESTRICTIVE COVENANTS. Smith hereby acknowledges and
agrees to comply with the restrictive covenants contained in Section 5 of that
<PAGE>
certain Amended and Restated Executive Employment Agreement by and between
Premiere Communications, Inc. and Smith dated November 6, 1995 (the "Employment
Agreement"), and Section 6 of the Option Agreement by and between Premiere
Technologies, Inc. and Smith dated November 6, 1995. Smith further agrees that
such restrictive covenants shall be enforceable (to the full extent that such
covenants are enforceable) under the laws of the State of Florida, without
regard to Florida choice of law rules.
5. RELEASE OF CLAIMS BY SMITH. Smith, on behalf of himself and the "Smith
Parties" (as defined below), hereby releases, forgives and discharges Premiere,
its affiliates and their respective directors, officers, agents, attorneys,
servants, representatives, and employees, past and present, and each of them
(hereinafter individually and collectively, the "Smith Releasees") from and
against any and all claims, demands, and causes of action, whether fixed or
contingent, matured or unmatured, whether known or unknown, suspected or
unsuspected, including, without limitation, any claims for any benefit,
compensation, equity interest, bonus or otherwise under the Option Agreement or
the Employment Agreement, except as described in Section 3 of this Release, by
Smith or his agents, attorneys, servants, representatives, and employees, past
and present, and each of them (hereinafter individually and collectively, the
"Smith Parties"). The Smith Parties further expressly waive and relinquish all
rights afforded them by any law, rule, regulation or court decision of the
United States, the State of Florida, the State of Georgia, or any other
governmental authority, which rule, regulation or court decision otherwise acts
to preserve any such claims or other legal rights being released hereby of which
the Smith Parties do not know or suspect to exist in their favor at the time of
executing this Release.
6. RELEASE OF CLAIMS BY PREMIERE. Premiere, on behalf of itself, and the
"Premiere Parties" (as defined below), hereby releases, forgives and discharges
Smith, his affiliates and their respective agents, attorneys, servants,
representatives and employees, past and present, and each of them (hereinafter
individually and collectively, the "Premiere Releasees") from any and all
claims, demands, and causes of actions, whether matured or unmatured, fixed or
contingent, whether known or unknown, suspected or unsuspected by Premiere, its
affiliates or their respective directors, officers, agents, attorneys, servants,
representatives and employees, past and present, and each of them (hereinafter
individually and collectively, the "Premiere Parties"). The Premiere Parties
further expressly waive and relinquish all rights afforded to them by any law,
rule, regulation or court decision of the United States, the State of Florida,
the State of Georgia or any other governmental authority, which rule, regulation
or decision otherwise acts to preserve any such claims or any other legal rights
being released hereby of which the Premiere Parties do not know or suspect to
exist in their favor at the time of executing this Release. This Section 6
shall not be construed to release Smith from the operation of the restrictive
covenants described in Section 4 hereof from and after the date hereof.
7. NO ASSIGNMENT OR TRANSFER OR RELEASE OF CLAIMS. Premiere and Smith
hereby expressly warrant and represent that no portion of any claim, right,
demand, action or cause of action that they have, might have, or had against any
-2-
<PAGE>
of the parties released herein, nor any portion of any recovery or settlement to
which they might be entitled, has been assigned, transferred to any person or
corporation in any manner whatsoever, including by way of subrogation, operation
of law or otherwise. In the event that any claim, right, demand, action or
cause of action shall be made or instituted against the parties released herein
because of any such purported assignment or transfer, the parties hereto agree
to indemnify one another and hold harmless the parties so released herein from
and against such claim, right, demand, action or cause of action.
8. NO ADMISSIONS. This Release, and the transactions contemplated hereby,
are a compromise and settlement of disputed claims and in no way constitute an
admission by any party of any fault whatsoever or any liability whatsoever in
connection with any matter or thing.
9. SOLE CONSIDERATION. Premiere and Smith understand and agree that the
consideration recited in this Release is the sole and exclusive consideration
for this Release. Further, Premiere and Smith agree that no promise,
inducement, representation or agreement not contained in this Release has been
made by any party on any subject in connection with the negotiation, execution,
delivery, or performance of this Release.
10. REPRESENTATION BY COUNSEL. Premiere and Smith hereby acknowledge that
they have been fully represented by legal counsel in connection with the
negotiation, execution, and delivery of this Release. Each party represents and
warrants that he/it has been afforded the opportunity to ask questions of,
request documentation and information from and conduct any required inquiry with
respect to, the other party hereto and that each such party has received all
requested answers, documentation and information and completed all inquiries
which such party has, in its sole judgment, deemed necessary or appropriate.
11. FURTHER ASSURANCES. Premiere and Smith hereby agree to take all
actions and to execute all documents reasonably required to effectuate the
purposes of this Release.
12. GOVERNING LAW; JURISDICTION AND ATTORNEY'S FEES. Actions brought in
Florida under this Release shall be governed by and construed in accordance with
the internal laws of the State of Florida, without regard to Florida choice of
law rules. Actions brought in Georgia under this Release shall be governed by
and construed in accordance with the internal laws of the State of Georgia,
without regard to Georgia choice of law rules, except as to any claim based on
the restrictive covenants referred to in Section 4 above. Premiere and Smith
hereby agree that any litigation (a) instituted by Premiere shall be resolved
exclusively in the federal or state courts located in Tampa, Florida and (b)
instituted by Smith shall be resolved exclusively in the federal or state courts
located in Atlanta, Georgia. Premiere and Smith hereby irrevocably consent to
the personal jurisdiction of such courts. In the event of any litigation
arising hereunder, the prevailing party therein shall be entitled to an award of
legal fees and costs incurred therein.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereby have executed this Release as of the
date first above written.
PREMIERE TECHNOLOGIES, INC.
By: /s/ Patrick G. Jones
------------------------
Title: Senior Vice President
---------------------
PREMIERE COMMUNICATIONS, INC.
By: /s/ Patrick G. Jones
------------------------
Title: Senior Vice President
---------------------
/s/ D. Gregory Smith
-----------------------------
D. GREGORY SMITH
-4-
<PAGE>
EXHIBIT A TO THE MUTUAL RELEASE BY AND AMONG
PREMIERE TECHNOLOGIES, INC., PREMIERE COMMUNICATIONS, INC.
AND D. GREGORY SMITH
VOTING AGREEMENT
<PAGE>
VOTING AGREEMENT
VOTING AGREEMENT dated as of December __, 1997, between David Gregory Smith
(the "STOCKHOLDER") and Premiere Technologies, Inc., a Georgia corporation
("COMPANY").
WHEREAS, the Stockholder and Company have entered into a mutual release as
of the date hereof (the "MUTUAL RELEASE");
WHEREAS, as of the date hereof, the Stockholder beneficially owns shares of
common stock, par value $.01 per share, of the Company ("COMPANY COMMON STOCK");
and
WHEREAS, as a condition to the willingness of Company to enter into the
Mutual Release, Company has requested that the Stockholder agree, and in order
to induce Company to enter into the Mutual Release, the Stockholder has agreed,
to enter into this Agreement with respect to all the shares of Company Common
Stock now beneficially owned and of which the Stockholder may hereafter acquire
beneficial ownership (the "SHARES") and any other securities, if any, which the
Stockholder is entitled to vote at any meeting of stockholders of the Company
(the "OTHER SECURITIES").
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. VOTING AGREEMENT. The Stockholder hereby agrees that, at any meeting
of the stockholders of the Company, however called, or in connection with any
written consent of the holders of shares of Company Common Stock, the
Stockholder shall vote (or cause to be voted) the Shares and the Other
Securities: (i) in favor of the approval of the issuance of shares of Company
Common Stock pursuant to an Agreement and Plan of Merger, dated as of November
13, 1997 (the "MERGER AGREEMENT") by and among the Company, Nets Acquisition
Corp., a wholly owned subsidiary of Company, and Xpedite Systems, Inc., which
provides for the merger of Nets Acquisition Corp. with and into Xpedite Systems,
Inc.; (ii) in favor of the approval of an amendment to Company's Second Amended
and Restated 1995 Stock Plan, which will increase the number of shares of Common
Stock reserved for issuance from 4,000,000 to 8,000,000; and (ii) against any
action, any failure to act, or agreement that would result in a breach in any
respect of any covenant, representation or warranty or any other obligation or
agreement of the Company under the Merger Agreement or this Agreement (before
giving effect to any materiality or similar qualifications contained therein).
The Stockholder agrees that the Stockholder shall not enter into any agreement
or understanding with any person or entity the effect of which would be to
violate the provisions and agreements contained in this Section 1.
2. IRREVOCABLE PROXY. The Stockholder hereby irrevocably appoints Company
and each of its officers, as the Stockholder's attorney and proxy pursuant to
the provisions of Section 14-2-722 of the Georgia Business Corporation Code,
with full power of substitution, to vote and otherwise act (by written consent
or otherwise) with respect to the Shares and the Other Securities, which the
Stockholder is entitled to vote at any meeting of stockholders of the Company
(whether annual or special and whether or not an adjourned or postponed meeting)
or consent in lieu of any such meeting or otherwise, on the matters and in the
manner specified in Section 1. THIS PROXY AND POWER OF ATTORNEY IS IRREVOCABLE
AND COUPLED WITH AN INTEREST. The Stockholder hereby revokes all other proxies
and powers of attorney with respect to the Shares and the Other Securities that
A-1
<PAGE>
the Stockholder may have heretofore appointed or granted, and no subsequent
proxy or power of attorney shall be given or written consent executed (and if
given or executed, shall not be effective) by the Stockholder with respect
thereto. All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the Stockholder and any obligation of the Stockholder
under this Agreement shall be binding upon the heirs, personal representatives,
successors and assigns of the Stockholder. The Shareholder hereby affirms that
the irrevocable proxy set forth in this Section 2 is given in connection with
the execution of this Agreement and the Mutual Release of even date hereof, and
that such irrevocable proxy is given to secure the performance of the duties of
the Stockholder under this Agreement. The Stockholder hereby ratifies and
confirms all that such irrevocable proxy may lawfully do or cause to be done by
virtue hereof.
3. TERMINATION. This Agreement shall terminate upon the earlier of (a)
the termination of the Merger Agreement for any reason whatsoever and (b) the
effective time of the Merger and, except as set forth below, the parties hereto
shall have no further rights or obligations with respect thereto, except as a
result of any prior breach thereof.
4. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof.
5. COUNTERPARTS. This Agreement may be executed and delivered (including
by facsimile transmission) in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed and
delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same instrument.
6. AMENDMENTS. This Agreement may not be amended, supplemented, waived or
otherwise modified or terminated, except upon the execution and delivery of a
written agreement executed by the parties hereto.
7. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, facsimile
transmission, mail (registered or certified mail, postage prepaid, return
receipt requested), or courier service providing proof of delivery. All
communications hereunder shall be delivered to the respective parties at the
following addresses:
If to Stockholder, to
David Gregory Smith
1907 Oakmont Avenue
Tampa, Florida 33629
with a copy to:
Foley & Lardner
100 North Tampa Street
Suite 2700
Tampa, Florida 33602
Attn: Russell T. Alba, Esq.
A-2
<PAGE>
If to the Company, to the address set forth below:
Premiere Technologies, Inc.
The Lenox Building, Suite 400
3399 Peachtree Road NE
Atlanta, Georgia 30326
Attn: President and CEO
with a copy delivered to:
Premiere Technologies, Inc.
The Lenox Building, Suite 400
3399 Peachtree Road NE
Atlanta, Georgia 30326
Attn: General Counsel
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
8. SPECIFIC PERFORMANCE. Each of the parties hereto acknowledges that a breach
by it of any agreement contained in this Agreement will cause the other parties
to sustain damage for which they would not have an adequate remedy at law for
money damages, and therefore each of the parties hereto agrees that in the event
of any such breach the aggrieved parties shall be entitled to the remedy of
specific performance of such agreement and injunctive and other equitable relief
in addition to any other remedy to which they may be entitled, at law or in
equity.
9. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Georgia, without giving effect to the
principles of conflicts of law thereof.
10. RESTRICTIVE LEGEND. The Stockholder and the Company hereby agree that the
Stockholder's Shares, and options or warrants to acquire shares of Company
Common Stock ("OPTIONS"), whether now owned or hereafter acquired, shall be
certificated by the Company, and that the Company shall place the following
legend on any new or existing certificate representing the Stockholder's Shares
or Options:
"Transfer and voting of the securities represented by this certificate
are subject to restrictions set forth in a Voting Agreement dated
December 5, 1997, a copy of which may be obtained from the Company at
its principal executive offices."
A-3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
-----------------------------
Name: David Gregory Smith
PREMIERE TECHNOLOGIES, INC.
By:
-------------------------
Name: Patrick G. Jones
Title: Senior Vice President
A-4
<PAGE>
EXHIBIT 10.18
SECOND AMENDMENT OF LEASE
-------------------------
THIS SECOND AMENDMENT OF LEASE (this "Amendment") is entered into on this
1st day of July, 1997, by and between BEVERLY HILLS CENTER, LLC ("Landlord") and
PREMIERE COMMUNICATIONS, INC. ("Tenant").
W I T N E S S E T H :
WHEREAS, Landlord and Tenant entered into that certain Office Lease
Agreement (the "Lease Agreement") dated May 12, 1996 covering approximately
6,952 square feet of rentable area on the eighth (8th) floor in the building
(the "Building") commonly known as Allianz Financial Centre in Dallas, Texas;
WHEREAS, Landlord and Tenant entered into that certain First Amendment to
Lease Agreement dated as of August 1, 1996, (the Lease Agreement, as so amended,
being hereinafter referred to as the "Lease"); and
WHEREAS, Landlord and Tenant desire (i) to expand the Leased Premises to
include an additional 2,016 square feet of rentable area (the "Expansion Space")
on the eighth (8th) floor of the Building as outlined and hatched on the floor
plan attached hereto as Exhibit A and incorporated herein for all purposes, and
---------
(ii) to further modify the terms of the Lease as provided herein.
NOW, THEREFORE, for and in consideration of the sum of Ten Dollars ($10.00)
and other good and valuable consideration paid by each party hereto to the
other, the receipt and sufficiency of which are hereby mutually acknowledged,
Landlord and Tenant hereby agree as follows:
1. Leased Premises. Effective as of the earlier date (the "Expansion
---------------
Commencement Date") to occur of (i) July 1, 1997, or (ii) the date upon which
Tenant occupies the Expansion Space with the prior written consent of Landlord,
the Leased Premises shall be expanded to include the Expansion Space so that the
Leased Premises shall consist of approximately 8,968 square feet of rentable
area located on the eighth (8th) floor of the Building, as outlined and hatched
on Exhibit A attached hereto. As of the Expansion Commencement Date, Exhibit A
---------
to the Lease Agreement shall be superseded in its entirety by Exhibit A attached
---------
hereto.
2. Base Rental. Tenant's Base Rental with respect to the Expansion Space
-----------
for the period commencing on the Expansion Commencement Date shall be
$50,820.00, representing rental of $40,320.00 per year with respect to the
Expansion Space and a riser fee (the "Riser Fee") of $10,500.00 per year (based
upon Tenant's installation of seven and one-half (7-1/2) diameter inches of
conduits or equivalent cable runs in the riser facilities of the Building,
consisting of one and one-half diameter inches of grounding cable and two (2)
water circulating pipes having a diameter of three (3) inches each) payable in
equal monthly installments of $4,235.00 each; each such monthly installment
shall be due and
<PAGE>
payable on the first day of each calendar month, monthly in advance without
demand and without setoff or deduction whatsoever. In the event at Tenant's
request Landlord permits Tenant to install additional conduits or equivalent
cable runs, including any conduit required to be run in the air shafts or other
building risers for generator, grounding, interconnection, HVAC and rooftop
connections, Tenant shall pay an additional Riser Fee with respect to such
additional installations in an amount equal to $250.00 per month per diameter
inch during the term which expires on July 31, 2001, and thereafter at the then
prevailing market riser fee rate.
3. Separate Meter. The Expansion Space shall be separately metered, at
--------------
Tenant's sole cost and expense, to measure Tenant's electrical consumption in
the Expansion Space.
4. Base Operating Expenses Rate. The Base Operating Expense Rate with
----------------------------
respect to the Expansion Space shall be equal to the Actual Operating Expense
Rate for the 1997 calendar year.
5. Parking. Effective as of the Expansion Commencement Date the Lease
-------
shall be amended to reflect that (i) Tenant shall be entitled to one (1)
additional reserved, covered parking space for the parking of one (1) vehicle,
and (ii) Tenant's rental obligations with respect to such one (1) additional
parking space shall be $120.00 (plus applicable taxes) per month.
6. Tenant Finish.
-------------
A. Tenant shall construct or have constructed in a first class and
workmanlike manner the tenant finish improvements (the "Tenant Finish Work") to
be constructed and installed in the Expansion Space. The Tenant Finish Work
shall be constructed in accordance with plans and specifications (the "Plans")
prepared or caused to be prepared by Tenant, at Tenant's sole cost and expense,
and approved in advance, in writing, by Landlord, such approval not to be
unreasonably withheld or delayed; provided, however, that Landlord shall be
deemed to have reasonably withheld its consent if Landlord withholds its consent
because any proposed tenant finish improvements negatively impacts any system of
the Building, including without limitation, the Building's floor load-bearing
requirements or its mechanical, electrical, plumbing or HVAC systems. The
Tenant Finish Work shall be constructed in accordance with all applicable
building laws and ordinances and all covenants, conditions and restrictions
affecting the Project.
B. Tenant shall not commence the construction of any portion of the Tenant
Finish Work until Landlord has approved, in writing, the contractors who shall
perform the Tenant Finish Work, including, without limitation, the mechanical,
electrical and plumbing contractors, such approval not to be unreasonably
withheld or delayed.
C. Landlord shall permit Tenant and Tenant's agents to enter the Expansion
Space prior to the Expansion Commencement Date in order that Tenant may perform
the
-2-
<PAGE>
Tenant Finish Work through Tenant's own contractors. The foregoing license to
enter prior to the Expansion Commencement Date is conditioned upon Tenant's
workmen and mechanics working in harmony and not materially interfering with the
labor employed by Landlord, Landlord's mechanics or contractors or with any
other tenant or their contractors. Such license is further conditioned upon
workers' compensation and public liability insurance and property damage
insurance, all in amounts and with companies and on forms reasonably
satisfactory to Landlord, being provided and at all times maintained by Tenant's
contractors engaged in the performance of the Tenant Finish Work, and
certificates of such insurance being furnished to Landlord prior to proceeding
with the work. If at any time such entry shall cause material disharmony or
interference to other tenants, contractors or labor for any reason whatsoever
including, without limitation, strikes or other work stoppages and if Tenant has
not caused such disharmony or interference to promptly cease following notice
thereof to Tenant, then this license may be immediately revoked by Landlord
until such disharmony or interference ceases. Such entry shall be deemed to be
under all of the terms, covenants, provisions and conditions of the Lease.
Landlord shall not be liable in any way for any injury, loss or damage which may
occur to any of the Tenant Finish Work prior to or after the Expansion
Commencement Date, the same being solely at Tenant's risk.
D. Tenant shall indemnify and hold Landlord harmless from and against any
and all demands, liability, liens, claims, losses, costs and expenses (including
reasonable attorneys' fees) relating to or arising from the design, construction
and installation of the Tenant Finish Work. Notwithstanding the fact that
Landlord may, from time to time, review all applicable plans and specifications
and monitor the progress of the Tenant Finish Work, Landlord shall have no
obligation or liability to Tenant relating to or arising from the workmanship or
materials employed in the construction and preparation of the Tenant Finish Work
and the related space planning and architectural services.
E. The costs and expenses of installing and constructing the Tenant Finish
Work shall be borne solely by Tenant; provided, however, that Landlord shall
provide to Tenant an allowance (the "Finish Allowance") with respect to the
construction of the Tenant Finish Work in an amount equal to the product of
Three and No/100 Dollars ($3.00) multiplied by the number of rentable square
feet of area located in the Expansion Space. The Finish Allowance shall be
disbursed to Tenant as follows:
(i) One-half (1/2) of the Finish Allowance shall be paid to Tenant within
thirty (30) days following (a) the completion of one-half (1/2) of the
Tenant Finish Work, as reasonably determined by a representative of
Landlord, and (b) Tenant's delivery to Landlord of the paid bills or
invoices for such work and unconditional releases or waivers of mechanic's
and materialmen's liens from all parties who have furnished materials or
services or performed labor of any kind in connection with the Tenant
Finish Work; and
(ii) The remainder of the Finish Allowance shall be paid to Tenant within
thirty (30) days following (a) the final completion of the Tenant Finish
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<PAGE>
Work, as reasonably determined by a representative of Landlord, and (b)
Tenant's delivery to Landlord of the paid bills or invoices for such work
and final unconditional releases or waivers of mechanic's and materialmen's
liens from all parties who have furnished materials or services or
performed labor of any kind in connection with the Tenant Finish Work.
Tenant shall be entitled only to that portion of the Finish Allowance which is
evidenced by paid bills or invoices for Tenant Finish Work actually performed by
third parties, and any unused portion of the Finish Allowance as of the
Expansion Commencement Date shall be the sole and exclusive property of
Landlord.
8. Miscellaneous.
-------------
(a) Any capitalized term or phrase used in this Amendment shall have the
same meaning as the meaning ascribed to such term or phrase in the Lease unless
expressly otherwise defined in this Amendment.
(b) In the event that the terms of the Lease conflict or are inconsistent
with those of this Amendment, the terms of this Amendment shall govern.
(c) Except as amended by this Amendment, the terms of the Lease remain in
full force and effect.
(d) Submission of this Amendment for examination does not constitute an
offer, right of first refusal, reservation of, or option for, the Expansion
Space or any other premises in the Building. This Amendment shall become
effective only upon execution and delivery by both Landlord and Tenant.
IN WITNESS WHEREOF,.the parties hereto have caused this Amendment to be
executed on the day and year first written above.
LANDLORD:
--------
BEVERLY HILLS CENTER, LLC
By: /s/
-----------------------------
Name:
---------------------------
Title:
--------------------------
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<PAGE>
TENANT:
------
PREMIERE COMMUNICATIONS, INC.,
a Florida corporation
By: /S/ Patrick G. Jones
---------------------
Name: Patrick G. Jones
-----------------
Title: Sr. V.P.
---------
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<PAGE>
EXHIBIT A
Floor Plan
<PAGE>
EXHIBIT 10.19
as of 3-3-97
AGREEMENT OF LEASE
BETWEEN
CORPORATE PROPERTY INVESTORS
AND
PREMIERE COMMUNICATIONS, INC.
<PAGE>
AGREEMENT OF LEASE made as of __________________, 1996 between CORPORATE
PROPERTY INVESTORS, a Massachusetts business trust, having its principal place
of business at 3 Dag Hammarskjold Plaza (305 East 47th Street), New York, N. Y.
10017 (Landlord) and Premiere Communications, Inc., a Georgia Corporation,
having its principal place of business at 3399 Peachtree Road, N.E., Atlanta,
Georgia (Tenant).
R E C I T A L
-------------
Landlord hereby leases to Tenant and Tenant hereby hires and takes from
Landlord, the Premises, located in the Building known as The Lenox Building,
3399 Peachtree Road, N.E., Atlanta, Georgia 30326, for the Term commencing on
the Commencement Date, subject to the terms, covenants, conditions and
provisions of this Lease. If the Commencement Date is not the first day of a
month, Rent for the month in which the Commencement Date occurs shall be
prorated to the end of the month, the first full monthly installment of Rent
shall be due on the first day of the next month and after the expiration of the
number of years in the Term, the Term shall expire on the last day of the same
month in which the Commencement Date occurred.
ARTICLE 1. DEFINITIONS
Whenever used in this Lease, the following terms shall have the meanings
indicated below.
<TABLE>
<CAPTION>
<S> <C> <C>
Premises - Suite No. 300 and 400, Third (3rd) and
Fourth (4th) Floors as shown on Exhibit B
Term - Seven (7) years, expiring on August 31,
2004
Commencement Date - September 1, 1997
Size of the Premises - 40,886 square feet of rentable floor space
Tenant's Pro Rata Share - 11.17 percent
Fixed Rent - $858,606.00 per year from September 1,
1997 through March 31, 2001; $899,492.00
per year from April 1, 2001 through
August 31, 2004.
Guarantor - None
</TABLE>
-2-
<PAGE>
<TABLE>
<S> <C> <C>
Broker - Tramell Crow Company, 3101 Tower Creek Parkway,
Suite 400, Atlanta, Georgia 30339
Permitted Use - Only for executive, administrative and/or
general office use.
Security Deposit - None, except that Tenant shall deposit with
Landlord the first (lst) months' Fixed Rent,
upon execution and delivery of this Lease.
Additional Rent - All amounts, except Fixed Rent, payable by
Tenant under Articles 3, 5, 7 and 9 of this
Lease.
Affiliate - Any Person which controls or in controlled by
the Person in question or is controlled by the
same Persons which shall then control the Person
in question and any Person which is a member
with the Person in question in a relationship of
joint venture, partnership or other form of
business association; the term "control" means,
with respect to a corporation, the ownership of
stock possessing, or the right to exercise, at
least twenty-five (25%) percent of the total
combined voting power of all classes of the
controlled corporation, issued, outstanding and
entitled to vote for the election of directors,
whether such ownership be direct ownership or
indirect ownership through control of another
corporation or corporations.
Auxiliary Areas - The Entry Plaza, the Lobby Court, the Loop
System and the Promenade, as shown on Exhibit A.
Building - The Lenox Building, Atlanta, Georgia, as shown
on Exhibit A.
Building Parcel - The area designated as such on Exhibit A.
Entry Plaza - The area designated as such on Exhibit A.
Event of Default - As defined in section 9.1
</TABLE>
-3-
<PAGE>
<TABLE>
<S> <C>
Governmental Authority - The United States, the State of Georgia, the City
of Atlanta, and any political subdivision thereof
or any local public or quasi-public authority,
agency, department, commission, board, bureau or
instrumentality of any of them including, with
respect to matters pertaining to insurance, boards
of fire underwriters to the extent they have power
to impose conditions on the issuance of policies
or the coverage thereof.
Governmental Requirements - Any law, ordinance, code, order, rule or
regulation of any Governmental Authority.
Landlord - The party named as Landlord herein until a sale,
transfer or lease, and thereafter the Person or
Persons who shall, for the time being, be liable
for the obligations of Landlord under the
provisions of Section 6.2 of this Lease.
Landlord's Additional Work - None.
Landlord's Standard Work - None.
Landlord's Work - None
Lobby Court - The area designated as such on Exhibit A.
Loop System - The area designated as such on Exhibit A.
Necessary Approvals - Any permit, license, certificate or approval or
other evidence of compliance with any requirement
necessary to the lawful occupancy of the Premises
and the issuance of the insurance required to be
carried hereunder for the Permitted Uses.
Operating Costs - As defined in Section 3.2 H.
Parking Garage - The decked parking structure located on the
Building Parcel, as shown on Exhibit A.
Person - A natural person, firm, partnership, association
or corporation, as the case may be.
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
Promenade - The area designated as such on Exhibit A.
Rent - The Fixed Rent and the Additional Rent.
Standard Building Hours - 8:00 AM to 6:00 PM Monday and Days through Friday
and 8:00 AM to 1:00 PM on Saturdays, or any
combination thereof of days and hours selected by
Landlord but in no event to exceed 55 hours in the
aggregate from Monday through Saturday. Standard
Building Hours and Days shall be deemed to exclude
holidays, curfews or other restricted days
designated as such by Governmental Authority.
Taxes - An defined in Section 3.2 D.
Tenant Improvement - As set forth in Exhibit C.
Agreement
Tenant's Plan - As defined in the Tenant Improvement Agreement.
Exhibit A - Site Plan
Exhibit B - Floor Plan
Exhibit C - None
Exhibit D - Parking Space Exhibit
Exhibit E - Commencement Date and Ratification of Lease
Agreement.
Exhibit F - Cleaning Schedule
Exhibit G - Building Rules and Regulations
</TABLE>
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<PAGE>
ARTICLE 2. CONSTRUCTION - COMMENCEMENT DATE
Section 2.1 Preparation of the Premises.
-------------- ------------
(A) Landlord shall perform Landlord's Work, as set forth in the Tenant
Improvement Agreement annexed hereto as Exhibit C. Tenant agrees to comply with
all of the terms and provisions of the Tenant Improvement Agreement.
(B) Landlord shall not be required to commence Landlord's Work unless (i)
the parties shall have agreed upon the cost of Landlord's Additional Work, and
(ii) said cost, less Landlord's Allowance, as defined in the Tenant Improvement
Agreement, is paid to Landlord.
(C) Landlord shall give Tenant ten (10) days' written notice of the
anticipated date of substantial completion of Landlord's Work, and Tenant shall
have the right during said ten-day period to enter into the Premises for the
purpose of installing its personal property and equipment and otherwise
preparing the Premises for its occupancy. During said ten-day period, (i)
neither Tenant nor its agents or employees shall interfere with Landlord's Work
or with any other work being done by Landlord and Landlord's agents and
employees in other parts of the Building, (ii) Tenant shall comply with all
reasonable rules and regulations promulgated by Landlord, its agents or
employees, (iii) the labor employed by Tenant shall be harmonious and compatible
with the labor employed by Landlord in the Building, it being agreed that if in
Landlord's judgment such labor is incompatible, Tenant shall forthwith upon
Landlord's demand withdraw Tenant's labor from the Premises, (iv) Tenant shall
procure and deliver to Landlord workmen's compensation, public liability,
property damage and such other insurance policies, in such amounts, as shall be
reasonably acceptable to Landlord in connection with the preparation work being
done by Tenant in the Premises, and shall cause Landlord to be named as an
insured thereunder, and (v) all the terms, provisions and agreements of this
Lease, except for the obligation to pay Rent, shall apply.
Section 2.2 Commencement Date.
-----------------
(A) The Term of this Lease shall commence on the date that Landlord
notifies Tenant that it has substantially completed Landlord's Work. Within ten
(10) days after the Commencement Date, Landlord's representative and Tenant's
representative shall jointly examine the Premises and shall compile a list of
any remaining items of work which Landlord may be obligated to complete ("punch
list items"). The taking of possession of the Premises by Tenant shall be
deemed an acceptance of the Premises and an acknowledgment that Landlord's Work
has been substantially completed, but Landlord shall thereafter complete the
punch list items.
-6-
<PAGE>
(B) If Tenant takes possession of the Premises prior to the Commencement
Date, Tenant's obligation to pay Rent hereunder and to observe and perform all
other conditions and agreements hereunder shall commence on such earlier date of
possession, but the Term of the Lease shall not be affected thereby.
(C) In the event that substantial completion of Landlord's Work is delayed
by reason of delays caused or occasioned by Tenant, then at Landlord's option
the Term of this Lease shall commence on the date that this Lease would have
commenced had not the completion of Landlord's Work been so delayed by Tenant
(or as reasonably determined by Landlord) or such occurrence shall constitute a
default on the part of Tenant hereunder entitling Landlord to exercise all
rights and remedies provided for herein in the event of Tenant's default.
(D) Landlord's Work shall be deemed to have been substantially completed
when the Premises may be lawfully occupied and the heating, ventilation, air
conditioning, mechanical and elevator systems serving the Premises are operable.
(E) Tenant shall, upon the demand of Landlord, promptly execute,
acknowledge and deliver to Landlord an instrument substantially similar to that
annexed hereto as Exhibit E, confirming the dates of commencement and expiration
of the Term of this Lease and such other matters as are set forth on Exhibit E.
Section 2.3 Ownership of Improvements.
-------------------------
All installations, alterations, additions, improvements and fixtures now or
at any time hereafter attached to or located upon the Premises, made or
installed by either party, shall be the property of Landlord and shall, unless
Landlord otherwise elects by giving Tenant notice at least thirty (30) days
prior to the expiration or sooner termination of the Term, remain upon and be
surrendered with the Premises at the expiration or sooner termination of the
Term. None of the foregoing shall be deemed to include any of Tenant's
furniture and personal property which is removable without damage to the
Premises.
ARTICLE 3. RENT
Section 3.1 Payment.
-------
All Rent shall be paid in the lawful money of the United States which shall
be legal tender in payment of all debts and dues, public and private, at the
time of payment, at the address of Landlord set forth in this Lease or at such
other place as Landlord in writing may designate, without any set-off or
deduction whatsoever and without any prior demand
-7-
<PAGE>
therefor. Tenant shall pay the annual Fixed Rent in equal monthly installments
in advance on the first day of each calendar month included in the Term. Unless
another time shall be herein expressly provided, Additional Rent shall be due
and payable on demand or together with the next succeeding installment of Fixed
Rent, whichever shall first occur. For any portion of a calendar month included
at the beginning or end of the Term, Tenant shall pay 1/30th of each monthly
installment of Rent for each day of such portion, payable in advance at the
beginning of such portion.
Section 3.2 Additional Rent.
---------------
(A) Tenant shall pay to Landlord, as Additional Rent, Tenant's Pro Rata
Share of Taxes which in any calendar year exceed the actual Taxes for the 1997
calendar year. Said amount shall be prorated if the Commencement Date does not
coincide with the beginning or the expiration date does not coincide with the
end of a calendar year.
(B) Commencing on the Commencement Date, Tenant shall pay, with each
monthly Installment of Fixed Rent, one-twelfth (1/12) of the amount reasonably
estimated by Landlord to be due as Tenant's Pro Rata Share of excess Taxes for
the following calendar year. If Taxes for the following calendar year are not
known, monthly installments shall be based on the current calendar year with
immediate adjustment as soon as said Taxes become known. If at the time any
Taxes or installments thereof are required to be paid the total amount of
Tenant's monthly payments on account of excess Taxes are insufficient to pay
Tenant's Pro Rata Share thereof, Tenant shall pay such deficiency within five
(5) days after demand therefor. If any payment on account of excess Taxes shall
be due for the calendar year in which the Commencement Date occurs, Tenant shall
pay said amount to Landlord within thirty (30) days following Landlord's demand
therefor.
(C) Should any taxing authority impose any separate additional taxes on the
value of any improvements made by Tenant, or include machinery, equipment,
fixtures, inventory or other personal property or assets of Tenant, then Tenant
shall pay the entire tax attributable to such items. Tenant shall pay any
sales, use, occupancy, value added (if the value added is not in lieu of Taxes
as described in Section 3.2D) or similar tax hereafter levied or imposed in
connection with the Fixed or Additional Rent payable by Tenant.
(D) The term Taxes shall mean (i) the total amount of Taxes payable with
respect to the Building and the Building Parcel and all improvements thereon,
including the Parking Garage, plus (ii) one-quarter (1/4) of the total amount of
Taxes payable with respect to or attributable to the Auxiliary Areas. Taxes
shall include all real estate taxes, assessments, water and sewer rents and
other governmental impositions and charges of every kind and nature whatsoever,
extraordinary as well as ordinary, foreseeable and unforeseeable, including any
and all fees or expenses incurred in connection with the
-8-
<PAGE>
institution, prosecution, conduct and maintenance of negotiations, settlements,
actions or proceedings with respect to the amount of any Taxes, and each and
every installment thereof which shall or may during the Term of this Lease be
levied, assessed, imposed, become due and payable or a lien upon or arise in
connection with the use, occupancy or possession of or grow due or payable out
of or for, the Building, the Parking Garage, the land constituting the Building
Parcel or any part thereof or improvements thereon, and the Auxiliary Areas or
any part thereof or improvements thereon, but excluding, however, any of the
foregoing relating to any charge which is measured by the consumption by the
actual user of the item or service for which the charge is made. A Tax bill or
copy thereof submitted by Landlord to Tenant shall be conclusive evidence of the
amount of Taxes or installments thereof.
(E) Nothing herein contained shall be construed to include as part of the
Taxes described in Section 3.2 D any inheritance, estate, succession, transfer,
gift, franchise, corporation income or profit tax or capital levy that is or may
be imposed upon Landlord provided, however, that if, at any time during the
Term, the method of taxation prevailing at the time of the execution of this
Lease shall be altered so that in lieu of or as a substitute for the whole or
any part of the Taxes now levied, assessed or imposed on real estate as such,
there shall be levied, assessed or imposed (i) a tax on the rents received from
real estate, or (ii) a license fee measured by the rents receivable by Landlord
for the Building or the Parking Garage or any portion thereof or (iii) a tax or
license fee imposed on Landlord which is otherwise measured by or based, in
whole or in part, upon the Building or the Parking Garage or any portion thereof
or (iv) any other tax or levy imposed in lieu of or as a supplement to Taxes
which are in existence as of the date of the execution of this Lease, then the
same shall be included in the determination of Tenant's Pro Rata Share of excess
Taxes, computed as if the amount of such tax or fee so payable were that due if
the Building, the Parking Garage, the Building Parcel and Auxiliary Areas were
the only property of Landlord subject thereto.
(F) In the event Landlord shall obtain a Tax refund as a result of tax
reduction proceedings, then, after the final conclusion of all appeals or other
remedies, Tenant shall, provided Tenant is not then in default, be entitled to
its Pro Rata Share of the net refund obtained, based upon any amount paid by
Tenant which is the subject of the refund. As used herein, the term "net
refund" means the refund plus interest thereon, if any, paid by the Governmental
Authority less appraisal, administrative, engineering, expert testimony,
attorney, printing and filing fees and all other costs and expenses of the
proceeding. Tenant shall not have the right to institute or participate in any
such proceedings, it being understood that the commencement, maintenance,
settlement, or conduct thereof shall be in the sale discretion of Landlord.
(G) Tenant shall pay to Landlord, as Additional Rent, Tenant's Pro Rata
Share of Operating Costs which in any calendar year exceed the actual Operating
Costs for the
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<PAGE>
1997 calendar year. Said amount shall be pro-rated if the Commencement Date does
not coincide with the beginning or the expiration date does not coincide with
the end of a calendar year. An soon an practicable after the end of the calendar
year in which the Commencement Date occurs, Landlord shall notify Tenant as to
the amount, if any, payable by Tenant as its Pro Rata Share of excess Operating
Costs, and Tenant shall pay said amount to Landlord within thirty (301 days
thereafter. Commencing with the next calendar year and for each succeeding
calendar year (or portion thereof) during the Term of this Lease, Tenant shall
pay its Pro Rata Share of excess operating Costs, as reasonably estimated by
Landlord, in equal monthly installments along with Tenant's monthly Installments
of Fixed Rent. Estimates of operating Costs shall be revised annually by
Landlord.
(H) The term Operating Costs shall mean (i) the total cost and expense
incurred by Landlord in operating and maintaining the Building and the land
constituting the Building Parcel and all improvements thereon, specifically
excluding the Parking Garage, plus (ii) one-quarter (1/4) of the total cost and
expense incurred by Landlord in operating and maintaining the Auxiliary Areas.
Operating Costs shall include, without limitation, costs for: (i) operation,
maintenance and repair of the Building and Auxiliary Areas, including the
equipment and machinery used in conjunction therewith and the costs of
inspection and depreciation thereof; (ii) maintenance, repair and replacement of
paved areas, curbs, walkways, landscaping, drainage and other outdoor facilities
on the Building Parcel and Entry Plaza; (iii) painting and redecorating; (iv)
security services and the regulation of automobile and pedestrian traffic; (v)
insurance, including, without limitation, public liability, property damage,
sign, casualty and rent insurance; (vi) utilities, including ordinary usage of
electricity, heat, air conditioning, ventilation, domestic water and sewer
facilities in tenant areas; (vii) refuse collection and removal; (viii)
janitorial and cleaning services, including ordinary cleaning of tenant areas
and janitorial supplies and equipment; (ix) sanitary control and extermination;
(x) capital improvements made to the Building and/or Auxiliary Areas which can
reasonably be expected to reduce Operating Costs, as well as capital
improvements made in order to comply with any statutes, rules, regulations or
directives hereafter promulgated by any Governmental Authority relating to
energy, conservation, public safety or security, as amortized by Landlord over
the useful life of the improvements; (xi) personnel to implement all of the
aforementioned, including fringe benefits and workmen's compensation insurance
covering such personnel (xii) contractual management fees and other expenses
directly related to the on-site management of the Building and Auxiliary Areas;
and (xiii) other similar costs of the type incurred in the operation of
comparable properties.
(i) Not later than one hundred eighty (180) days after the end of each
calendar year, Landlord shall furnish to Tenant a statement showing in
reasonable detail the information necessary for the calculation and
determination of Landlord's actual operating Costs. If the total of all monthly
charges paid by Tenant on account of excess Operating
-10-
<PAGE>
Costs during such calendar year shall be less than Tenant's Pro Rata Share
thereof for such calendar year, as shown by such statement, Tenant shall pay to
Landlord the difference within thirty (30). days after receipt of such
statement.
Section 3.3 Late Payments.
-------------
From and after the due date of any payment of Rent, interest shall accrue
thereon at the rate of the lesser of 1 1/2% per month or the maximum rate
permitted by law.
ARTICLE 4. COMMON AREAS
Section 4.l Common Areas. Landlord hereby grants to Tenant a non-
------------
exclusive license to use (a) the hallways, elevators, lobby and other public
conveniences of the Building, (b) such other areas in or adjoining the Building
as may from time to time be designated by Landlord for use in common by Landlord
and the tenants of the Building, and (c) the Auxiliary Areas, individually and
collectively referred to as "common areas". Except for the Auxiliary Areas and
such other areas as may be specifically designated by Landlord, Tenant shall
have no rights whatsoever with respect to the use of adjacent property now or
hereafter owned or operated by Landlord.
(A) No schedule, exhibit, plan, drawing, rendering, brochure, or the like
shall be deemed to create a warranty, representation or agreement on the part of
Landlord that the Building or common areas will be or will continue to be
exactly as indicated thereon. Landlord reserves the right to (i) increase,
reduce or change the number, type, size, location, elevation, nature and use of
any of the common areas and (ii) to make changes, additions, alterations, or
improvements in or to the Building and common areas. Except as herein provided,
Tenant shall have no rights with respect to the land or improvements below
exterior floor slab level or above the interior surface of the finished ceiling
of the Premises or air rights or any easements, in, on, about, below or above
the Premises. This Lease grants no parking rights to Tenant. Such rights, if
any, shall be created and governed by a separate written agreement.
(B) The common areas shall be subject to such reasonable rules and
regulations as Landlord may, from time to time, adopt. Landlord reserves the
right to close all or any portion of the common areas for the minimum length of
time as may, in the opinion of Landlord's counsel, be legally sufficient to
prevent a dedication thereof or the accrual of any rights of the public therein,
and to do and perform such other acts in and to the common areas as in the use
of Landlord's good business judgment will improve the use thereof.
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<PAGE>
ARTICLE 5. UTILITIES - SERVICES
Section 5.1 Electricity. Landlord will furnish electricity to the
-----------
Premises, subject to the restrictions and limitations herein set forth. Except
as otherwise provided herein, the furnishing of electricity shall be included in
Operating Costs.
Section 5.2 Other Utilities. Except for electricity, domestic water and
---------------
sewer services as provided herein and included in Operating Costs, Tenant shall
be solely responsible and shall pay separately for all charges for telephone and
for any other utilities used in the Premises.
Section 5.3 Practices. The following practices shall apply in connection
---------
with Landlord's obligation to furnish electricity and in connection with
Tenant's use thereof:
(A) Electricity shall be made available to Tenant during Standard Building
Hours and Days.
(B) Subject to Section 5.10 and paragraph (C) of this Section 5.3, it is
understood that Tenant shall use electricity only during Standard Building Hours
and Days, only for Building standard lighting and ordinary office. equipment,
and not in excess of 5.0 watts per square foot of floor space.
(C) Landlord or Landlord's consultants shall have the right to inspect the
Premises in order to determine whether Tenant's use of electricity deviates from
or exceeds the conditions herein set forth. Each such inspection shall be
conducted in such a manner as to minimize interference with Tenant's operations
at the Premises. If Tenant's use of electricity deviates from or exceeds the
conditions set forth in this Lease, Tenant shall reimburse Landlord for the cost
of such inspection and Landlord shall have the right to require Tenant to pay,
from the date the condition first exists, the costs of excess electricity
consumption, as reasonably estimated by Landlord or Landlord's consultants or an
determined based on the consumption shown on an electric metering device
installed by Landlord at Tenant's expense, and/or to require Tenant to provide,
at Tenant's expense, all remedial action or equipment required to conform
Tenant's installations and operations to the conditions set forth in this Lease.
Any such charges payable by Tenant shall be deemed Additional Rent, payable to
Landlord within ten (10) days after demand.
Section 5.4 Elevator Service.
----------------
Landlord shall furnish elevator facilities during Standard Building Hours
and Days and at other times as reasonably required to provide access to the
Premises. Landlord may designate hours of use and elevators in the Building for
use for shipping and delivery,
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and Tenant agrees to use (and to cause any Persons claiming through or under
Tenant to use) only the elevator or elevators so designated for all shipments
and deliveries.
Section 5.5 Heat. When necessary, Landlord shall furnish heat to the
----
Premises during Standard Building Hours and Days.
Section 5.6 Air Conditioning. During the Term of this Lease, Landlord
----------------
shall furnish to the Premises (i) conditioned air at reasonable temperatures and
pressures and in reasonable volumes and velocities during Standard Building
Hours and Days, when considered necessary by Landlord for the comfortable
occupancy of the Premises, and (ii) mechanical ventilation during Standard
Business Hours and Days when conditioned air or heat is not being furnished.
Landlord shall not be responsible if the normal operation of the Building
air conditioning or heating system shall fail to provide heat or conditioned air
at reasonable temperatures and pressures or in reasonable volumes or velocities
in any portions of the Premises (a) if any machinery or equipment installed by
or on behalf of Tenant or any Person claiming through or under Tenant, shall
have an electrical load in excess of the electric load per square foot of floor
space of the Premises for which the HVAC system was designed, or by reason of a
human occupancy factor in excess of one person per 100 square feet of floor
space or (b) because of any rearrangement of partitioning or other alterations
made or performed by or on behalf of Tenant or any Person claiming through or
under Tenant. Whenever the air conditioning or heating systems are in
operation, Tenant shall cause all windows in the Premises to be kept closed and
cause all window blinds in the Premises to be kept down. Tenant shall cooperate
fully with Landlord and abide by all regulations and requirements which Landlord
may reasonably prescribe for the proper functioning and protection of the
ventilation, air conditioning and heating systems.
In the event the Premises shall contain a supplemental air conditioning
unit(s) (the "AC Unit"), Tenant shall, at its sole cost and expense, be
responsible for all maintenance, repair and replacement of the AC Unit. Tenant
shall throughout the Term of this Lease, maintain with a responsible company,
approved by Landlord, a service contract for the AC Unit.
Section 5.7 Cleaning.
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Landlord shall cause the Premises, (excluding any portions thereof used for
the storage, preparation, service or consumption of food or beverages) to be
cleaned and shall cause Tenant's ordinary office waste paper refuse to be
removed, all at regular intervals, in accordance with standards and practices
adopted from time to time by Landlord for the Building. Tenant understands that
the cost of ordinary cleaning is included in Operating Costs. Tenant shall pay
as Additional Rent, within five days after Landlord's billing,
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Landlord's regularly established rates or, if there are no such rates, at
reasonable rates, for the removal of any of Tenant's refuse or rubbish other
than ordinary office waste paper refuse, and Tenant, at Tenant's expense, shall
cause all portions of the Premises used for the storage, preparation, service or
consumption of food or beverages to be cleaned daily and to be regularly
exterminated against infestation by vermin or insects.
Section 5.8 Water. Landlord shall furnish Tenant with domestic water for
-----
ordinary lavatory or drinking purposes and Tenant understands that the cost of
domestic water service is included in Operating Costs. If Tenant requires or
consumes water for any purpose in addition to ordinary lavatory and drinking
purposes, Tenant shall pay as Additional Rent the cost thereof as reasonably
estimated by Landlord, or Landlord may install, at Tenant's expense, hot and
cold water meters and thereby measure Tenant's consumption of water for all
purposes. Tenant shall keep any such meters and installation equipment in good
working order and repair, at Tenant's expense, and shall pay for water consumed
as shown on said meters and sewer charges thereon, as and when bills are
rendered.
Section 5.9 Directory. Tenant shall be allotted Tenant's Pro Rata Share
---------
of the number of directory lines on the Building directory. The Building
directory shall list only the names of Persons who occupy the Premises in
compliance with this Lease.
Section 5.10 Extra Services. If Tenant requests Landlord to furnish or
--------------
uses any electricity, elevator services, heat, conditioned air, mechanical
ventilation, cleaning, water or other services during hours or days other than
Standard Building Hours and Days, Tenant shall pay an Additional Rent, for such
services at the standard rates then fixed by Landlord for the Building or, if no
such rates are then fixed, at reasonable rates. Landlord shall not be required
to furnish any such services during such periods unless Landlord has received
reasonable advance notice from Tenant and Landlord is able to provide same.
Section 5.11 Interruption of Services. Landlord reserves the right to
------------------------
temporarily stop any service or facility provided by Landlord when necessary by
reason of construction in other parts of the Building, accident or emergency, or
for repairs, alterations, replacements or improvements, which, in Landlord's
judgment, are desirable or necessary, or required to be made by Landlord or
Tenant pursuant to this Lease, until said repairs, alterations, replacements or
improvements shall have been completed. The exercise of such right by Landlord
shall not constitute an actual or constructive eviction, in whole or in part, or
entitle Tenant to any abatement or diminution of Rent, or relieve Tenant from
any of its obligations under this Lease. Landlord shall prosecute such work
with continuity, diligence and dispatch and shall not be liable to any extent to
Tenant if any of said services or facilities is interrupted or otherwise
impaired.
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Section 5.12 Security. Landlord reserves the right to lock all entrances
--------
to the Building at such times, other than Standard Building Hours, as Landlord
may deem advisable for the protection of the Building and its occupants.
Persons entering or leaving the Building at times when it is locked may be
required to sign the Building register, and the lobby attendant, if any, may
refuse to admit to the Building, while it is so locked, any person not
displaying satisfactory identification evidencing his or her right of access to
the Building. Landlord assumes no responsibility and shall not be liable for
any damages resulting from an error with respect to such identification, or from
admission to the Building of any unauthorized individual.
ARTICLE 6. LANDLORD'S ADDITIONAL COVENANTS
Section 6.1 Repairs by Landlord. Landlord shall keep the exterior,
-------------------
foundations, finish, downspouts, gutters, and roof of the Building and the
Building's plumbing, electrical, heating, ventilating, elevator and air
conditioning systems (except the components of such systems which exclusively
serve or operate within the Premises) in good order, condition and repair and
shall make necessary structural repairs to the exterior walls of the Building,
the dividing walls between the Premises and adjoining space occupied or to be
occupied by others, and the load-bearing walls and load-bearing columns, if any,
within the Premises; provided that Landlord shall not be obligated hereby to do
any work required to be done because of any damage caused by any act, misuse,
omission or negligence of Tenant and its invitees or licensees, their respective
officers, agents and employees or their visitors. Landlord shall not be
required to commence any such repair until after notice from Tenant that the
same in necessary, which notice, except in the case of an emergency, shall be in
writing and shall allow Landlord a reasonable time in which to commence such
repair.
Section 6.2 Landlord's Liability.
--------------------
(A) In the event of a sale or transfer of all or any portion of the
Building or any undivided interest therein, or in the event of the making of a
lease of all or substantially all of the Building, or in the event of a sale or
transfer of the Landlord's fee or leasehold estate, the grantor, transferor or
lessor, as the case may be, shall thereafter be entirely relieved of all terms,
covenants and obligations thereafter to be performed by Landlord under this
Lease to the extent of the interest or portion so sold, transferred or leased,
provided that (i) any amount then due and payable to Tenant or for which
Landlord or the then grantor, transferee or lessor would otherwise then be
liable to pay to Tenant (it being understood that the owner of an undivided
interest in the fee or any such lease shall be liable only for his or its
proportionate share of such amount) shall be paid to Tenant, (ii) the interest
of the grantor, transferee or lessor, as Landlord, in any funds then in the
hands of Landlord or the then grantor, transferee or lessor in which Tenant has
an interest, shall
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be turned over, subject to such interest, to the then grantee, transferee or
lessee, and (iii) notice of such sale, transfer or lease shall be delivered to
Tenant. Upon the termination of any such lease, the lessor thereunder shall
become and remain liable as Landlord hereunder only so long as there shall not
be made another such lease.
(B) Tenant agrees that it shall look solely to the estate and property of
Landlord in the Building and the land constituting the Building Parcel (subject
to prior rights, if any, of holders of superior interests) for the collection of
any judgment (or other judicial process) requiring the payment of money by
Landlord in the event of any default or breach by Landlord with respect to any
of the terms, covenants and conditions of this Lease to be observed or performed
by Landlord; and no other assets of Landlord or any Person having any interest
in Landlord shall be subject to levy, execution or other procedures for the
satisfaction of Tenant's remedies.
(C) Corporate Property Investors is the designation of the Trustees under a
Declaration of Trust dated June 24, 1971, as amended, and neither the
shareholders nor the Trustees, officers, employees or agents of the Trust
created thereby shall be liable hereunder and, subject to Section 6.2B, all
persons shall look solely to the trust estate for the payment of any claims
hereunder or for the performance hereof.
ARTICLE 7. TENANT'S ADDITIONAL COVENANTS
Section 7.1 Affirmative Covenants.
---------------------
Tenant covenants that at all times during the Term Tenant, at its sole cost
and expense, shall:
(A). Use the Premises only for the Permitted Use and for no other purpose
and in no event shall Tenant permit the use of the Premises in violation of any
Governmental Requirements;
(B) Take good care of the Premises and the fixtures therein and make all
improvements, repairs and replacements to the Premises not required to be made
by Landlord as and when needed to preserve the Premises in good working order
and condition, except that Tenant shall not be required to make any structural
repairs or structural replacements to, the Premises unless necessitated by the
acts or omissions of Tenant or any Persons claiming through or under Tenant, or
by the use or occupancy or manner of use or occupancy of the Premises by Tenant
or any such Person. All repairs and replacements made by or on behalf of Tenant
or any Person claiming through or under Tenant shall be at least equal in
quality and class to the original work or installation.
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(C) Make all repairs, alterations, additions or replacements to the
Premises, including appurtenances, equipment, facilities and fixtures therein,
arising out of Tenant's use or occupancy of the Premises necessary to satisfy
any Governmental Requirement and otherwise comply with the orders and
regulations of any Governmental Authority.
(D) Pay promptly when due the cost of any work in or to the Premises, so
that the Premises and Building shall, at all times, be free of liens for labor
and materials; procure all Necessary Approvals before undertaking such work; do
all such work in a good and workmanlike manner acceptable to Landlord, employing
materials of good quality; comply with any Governmental Requirement relating
thereto. Tenant shall not, at any time prior to or during the Term, directly or
indirectly employ, or permit the employment of, any contractor, mechanic or
laborer in the Premises if such employment will interfere or cause conflict with
other contractors, mechanics, or laborers engaged in the construction,
maintenance or operation of the Building by Landlord, Tenant or others. In the
event of any such Interference or conflict, Tenant, upon demand of Landlord,
shall cause all contractors, mechanics or laborers causing such interference or
conflict to leave the Building immediately.
(E) Indemnify and save Landlord harmless of and from all loss, cost,
liability, damage and expense, including, but not limited to, reasonable counsel
fees, penalties and fines, incurred in connection with or arising from (i) any
default by Tenant in the observance or performance of any of the terms,
covenants or conditions of this Lease on Tenant's part to be observed or
performed, or (ii) the use or occupancy or manner of use or occupancy of the
Building or Premises by Tenant or any Person claiming through or under Tenant,
or (iii) any acts, omissions or negligence of Tenant or any such Person, or the
contractors, agents, servants, employees, visitors or licensees of Tenant or any
such Person, in or about the Premises or the Building either prior to, during or
after the expiration of the Term, or (iv) any claims by any Persons by reason of
injury to persons or damage to property occasioned by any use, occupancy, act,
omission or negligence referred to herein.
(F) Maintain with responsible companies approved by Landlord (i)
comprehensive liability insurance, with contractual liability endorsement
covering the matters set forth in paragraph E above, against all claims, demands
or actions for injury to or death of person and damage to property, to the limit
of not less than $3,000,000 per occurrence and/or in the aggregate, arising
from, related to, or in any way connected with Tenant's use or occupancy of the
Premises, or caused by actions or omissions of Tenant, its agents, servants and
contractors, which insurance shall name Landlord and its agents as additional
insureds; and (ii) fire insurance, with such extended coverage, vandalism,
malicious mischief and sprinkler leakage endorsements attached as Landlord
reasonably may, from time to time, require, covering all trade fixtures and
equipment, furniture, furnishings, improvements or betterments installed or made
by Tenant in, on or about the
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Premises to the extent of at least 80% of their replacement value, without
deduction for depreciation, but in any event in an amount sufficient to prevent
Tenant from becoming a co-insurer under provisions of applicable policies.
Tenant's insurance shall be in form satisfactory to Landlord and shall provide
that it shall not be subject to cancellation, termination or change except after
at least ten (10) days, prior written notice to Landlord. All policies required
pursuant to this paragraph For duly executed certificates for the same shall be
deposited with Landlord not less than ten (10) days prior to the day Tenant is
expected to take occupancy and any renewals of said policies not less than
fifteen (15) days prior to the expiration of the term of such coverage. Landlord
and Tenant mutually agree that with respect to any loss which is covered by
insurance then being carried by them respectively, or required to be carried, or
as to any coverage which Landlord agrees need not be carried, the party
suffering a loss releases the other of and from any and all claims with respect
to such loss; and they further mutually agree that their respective insurance
companies shall have no right of subrogation against the other on account
thereof.
(G) Landlord and its agents and employees shall not be liable for, and
Tenant waives all claims for, loss or damage to person or property sustained by
Tenant resulting from any accident or occurrence (unless caused by the
negligence of Landlord, its agents, servants or employees other than accidents
or occurrences against which Tenant is insured) in or upon the Premises or the
Building, including, but not limited to, claims for damage resulting from: (i)
equipment or appurtenances becoming out of repair; (ii) injury occasioned by
wind; (iii) any defect in or failure of plumbing, heating, air conditioning or
ventilation equipment, electric wiring, gas, water, steam or other pipes,
stairs, porches, railings or walks; (iv) broken glass; (v) the backing up of any
pipe or downspout; (vi) the bursting, leaking or running of any pipe, drain or
tank in, upon or about the Building or the Premises; (vii) the escape of steam
or hot water; (viii) water, snow or ice upon or coming through the roof or
windows, walks or otherwise; (ix) the falling of any fixture, plaster, concrete,
glass, metal, tile or stucco; and (x) any act, omission or negligence of other
occupants of the Building.
(H) Permit Landlord and its agents to have access in and about the Premises
including, without limitation, the right (i) to enter the Premises to examine
the Premises and/or to perform any obligation of Landlord under this Lease or
any other lease to which Landlord is party and/or to exercise any right or
remedy reserved to Landlord in this Lease, (ii) to erect, install, use and
maintain in concealed locations columns, beams, pipes, ducts and conduits in and
through the Premises, (iii) to exhibit the Premises to others; (iv) to make such
repairs, alterations, improvements or additions, or to perform such maintenance
as Landlord may deem necessary or desirable; and (v) to take all materials into
and upon the Premises that may be required in connection with any such
decorations, repairs, alterations, improvements, additions or maintenance. All
parts (except surfaces facing the interior of the Premises) of all walls,
windows and doors bounding the Premises
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(including exterior Building walls, core corridor walls, doors and entrances),
all balconies, terraces and roofs adjacent to the Premises, all space in or
adjacent to the Premises used for shafts, stairways, chutes, pipes, conduits,
ducts, fan rooms, mechanical facilities, service closets and other Building
facilities, and the use thereof, an well as access thereto through the Premises
for the purposes of operation, maintenance, alteration and repair, are hereby
reserved to Landlord. Landlord also reserves the right at any time to change the
arrangement or location of entrances, passageways, doors, doorways, corridors,
elevators, stairs, toilets and other public parts of the Building, provided any
such change does not permanently and unreasonably obstruct Tenant's access to
the Premises. The exercise by Landlord or its agents of any right reserved to
Landlord in this paragraph shall not constitute an actual or constructive
eviction, in whole or in part, or entitle Tenant to any abatement or diminution
of Rent, or relieve Tenant from any of its obligations under this Lease.
(I) Pay on demand Landlord's expenses, including reasonable attorneys'
fees, resulting from the breach by Tenant of, or incurred in enforcing any
obligation of Tenant under this Lease, or in curing any default by Tenant
hereunder.
(J) Forthwith cause to be discharged of record, by payment, bonding or
otherwise, any mechanics lien at any time filed against the Premises or the
Building for any work, labor, services or materials claimed to have been
performed at or furnished to the Premises for or on behalf of Tenant or anyone
holding the Premises through or under Tenant. Nothing contained in this Lease
shall be construed as a consent on the part of Landlord to subject Landlord's
estate in the Premises to any lien or liability under applicable law.
(K) Upon the expiration or other termination of the Term, quit and
surrender the Premises to Landlord, broom clean, in good order and condition,
ordinary wear and tear and casualty covered by Landlord's a insurance excepted,
and at Tenant's expense, remove all property of Tenant and each alteration,
addition or improvement made by Tenant as to which Landlord shall have made the
election provided for in Section 2.3 hereof. Tenant shall repair all damages to
the Premises caused by such removal and restore the Premises to the same
condition as existed prior to the installation of the items so removed. Any
improvements or installations required to be but not so removed shall be deemed
to have been abandoned by Tenant and may be retained or disposed of, as Landlord
shall desire. However, Tenant shall be responsible for the cost of removal and
disposal and for restoration of the Premises.
(L) This Lease is and all of Tenant's rights hereunder are subject and
subordinate to any mortgages, security deeds or deeds of trust (collectively,
Mortgages) that now exist or may hereafter be placed upon the Building, the
Building Parcel or any part thereof and all advances made under any such
Mortgages and the interest thereon and
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all renewals, replacements, amendments, modifications, consolidations and
extensions thereof. If any mortgagee succeeds to Landlord's interest under this
Lease by foreclosure or otherwise, Tenant will attorn to such mortgagee and will
recognize such mortgagee as Tenant's landlord under this Lease. Tenant shall
execute and deliver, in recordable form, whatever instruments may be required to
acknowledge or further effectuate the provisions of this paragraph. This Lease
shall also be subject and subordinate to any ground or underlying (including
operating) lease that may hereafter be placed on the Building Parcel or the
Building and all renewals, replacements, modifications and extensions thereof,
and Tenant shall attorn to the lessee thereunder and recognize such lessee as
Tenant's landlord under this Lease. However, termination of any such lease shall
not result in the termination of this Lease nor of Tenant's obligations
hereunder.
(M) Conform and cause its employees to conform to all reasonable rules and
regulations promulgated by Landlord for the management and use of the Building
and Auxiliary Areas. Such rules and regulations shall be uniform and shall not
discriminate against Tenant or its employees.
Section 7.2 Negative Covenants.
------------------
Tenant covenants at all times during the Term and such further time as
Tenant occupies the Premises or any part thereof:
(A) Tenant shall not use or occupy, or permit the use or occupancy of, the
Premises or any part thereof for any purpose other than for office purposes, nor
in any manner which shall adversely affect any services furnished by Landlord to
Tenant or to any other occupant of the Building. Tenant shall not injure,
overload, deface or otherwise harm the Premises or any part thereof or any
equipment or installation therein.
(B) Tenant shall not make or perform, or permit the making or performance
of, any alterations, subdivisions, installations, decorations, improvements,
additions or other physical changes in or about the Premises, including those
necessary to satisfy any Governmental Requirement (referred to collectively as
"alterations"), without Landlord's prior consent. Landlord agrees not
unreasonably to withhold its consent to any nonstructural alterations proposed
to be made by Tenant to adapt the Premises for Tenant's business purposes. All
alterations shall be made at Tenant's sole cost and expense and at such time and
in such manner as Landlord may, from time to time, designate alterations shall
be made only by contractors or mechanics approved by Landlord, such approval not
unreasonably to be withhold; all business machines and mechanical equipment
shall be placed and maintained by Tenant in settings sufficient to absorb and
prevent vibration, noise and annoyance to other occupants of the Building;
Tenant shall submit to Landlord detailed plans and specifications for each
proposed alteration and shall not commence any such alteration without first
obtaining Landlord's approval of such
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plans and specifications; all permits, approvals and certificates required by
all Governmental Authorities shall be timely obtained by Tenant and submitted to
Landlord; notwithstanding Landlord's approval of plans and specifications for
any alteration, alterations shall be made and performed in full compliance with
all Governmental Requirements; all materials and equipment to be incorporated in
the Premises as a result of all alterations shall be new and first quality, no
such materials or equipment shall be subject to any lien, encumbrance, chattel
mortgage or title retention or security agreement. In the event the cost of an
alteration exceeds the amount of three monthly installments of Fixed Rent,
Landlord shall have the right to require Tenant to obtain performance and labor
and material payment bonds from surety companies and in such forms as Landlord
shall require in amounts at least equal to the cost of the proposed work.
(C) Not to assign, sell, mortgage, pledge, or in any manner transfer this
Lease or any interest therein, or sublet the Premises or parts thereof or grant
"desk space" privileges or any concession. A transfer or change in the
ownership of Tenant's or the Guarantor's stock or a change in the composition of
any noncorporate Tenant without, in either case, a legitimate business purposes
shall, unless such stock is publicly traded, be deemed an assignment. Consent
by Landlord to an assignment, subletting, concession or license shall not be
construed to relieve Tenant from obtaining the express consent of Landlord to
any further assignment or subletting or to the granting of any concession or
license for the use of any part of the Premises, nor shall the collection of
Rent by Landlord from any assignee, subtenant or other occupant, after default
by Tenant, be deemed a waiver of this covenant or the acceptance of the
assignee, subtenant or occupant as Tenant or a release of Tenant from the
further performance by Tenant of the covenants of this Lease on Tenant's part to
be performed.
Tenant may, in writing, request Landlord's consent to an assignment of this
Lease or a subletting of all (but not less than all) of the Premises provided
however, that (i) the proposed assignee or subtenant is not then (a) an existing
tenant or an Affiliate of an existing tenant in the Building or (b) a person
with whom Landlord is then negotiating, or has entered into negotiations within
the six months prior to Tenant's request for Landlord's consent, for space in
the Building and (ii) the rental rate for any subletting is no less than the
then going market rental rate (including Fixed Rent and Additional Rent) for
space in the Building which Landlord is then offering to Lease. Such request
shall include the name of the proposed assignee or subtenant, a copy of the
proposed instruments relating to the transaction, certified financial statements
of the proposed assignee or subtenant and its officers, directors and
stockholders, and such information as to the financial responsibility, business
and standing of the proposed assignee or subtenant as Landlord may reasonably
require. Upon receipt of such request and information from Tenant, Landlord
shall have the right, to be exercised in writing within thirty (30) days after
such receipt, to terminate this Lease, as of the date set forth in Landlord's
notice of its exercise
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of such right, which date of termination shall be not less than sixty (60) nor
more than one hundred twenty (120) days following the service of Landlord's
notice.
(i) In the event Landlord shall exercise such cancellation right, Tenant
shall surrender possession of the Premises on the date set forth in such notice
in accordance with the provisions of this Lease relating to surrender of the
Premises at the expiration of the Term. In no event shall the Premises be
subdivided or partially sublet nor any request made for permission to do so.
(ii) In the event that Landlord shall not exercise its right to cancel this
Lease as above provided, Landlord's consent to such request shall not be
unreasonably withheld, provided such sublease or assignment is effected by a
legal document in form and substance satisfactory to Landlord, and subparagraph
(iii) of this paragraph shall apply with respect to possible adjustment of
rentals. In no event shall any assignment or subletting to which Landlord may
have consented relieve Tenant from its obligations to perform all of the term,
covenants and conditions of this Lease on its part to be performed.
(iii) If under an assignment or sublease consented to by Landlord the
rent, additional rent, other charges, and/or other consideration, money or thing
of value payable thereunder or payable in connection with the transaction exceed
the Rent provided in this Lease, Tenant or, at Landlord's option, the sublessee
or assignee shall pay said excess rent or other consideration to Landlord as
Additional Rent hereunder as and when the same becomes due under said assignment
or sublease.
(iv) If Tenant is a corporation, Tenant shall have the right, without the
consent of Landlord, to assign its interest in this Lease to a parent or wholly
owned subsidiary of Tenant or any corporation which is a successor to Tenant
either by merger or consolidation, or in connection with a public offering of
Tenant's stock, provided that the successor shall have a tangible net worth,
determined in accordance with accepted accounting standards, at least equal to
the tangible net worth of Tenant at the time of the transaction. However, no
such assignment shall be valid unless within ten (10) days prior to the
effective date thereof Tenant shall deliver to Landlord (a) a duplicate original
instrument of assignment, in form and substance satisfactory to Landlord, duly
executed by Tenant, (b) an instrument in form and substance satisfactory to
Landlord, duly executed by the assignee, in which such assignee shall assume
observance and performance of and agree to be personally bound by, all of the
terms, covenants and conditions of this Lease on Tenant's part to be observed
and performed and (c) evidence of compliance with the conditions of this
paragraph.
(D) Tenant shall have no right to affix any sign to the Premises or its
windows, or to any part of the common area or the Building unless and until the
sign has been
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approved by Landlord. Landlord shall have the right, at Tenant's expense, to
remove any sign affixed by Tenant prior to such approval.
(E) Not to obstruct or encumber or use the common areas for any purpose
other than ingress and egress to and from the Premises. Tenant shall not commit
or allow to be committed any waste upon the Premises, or any public or private
nuisance or other act or thing which disturbs the quiet enjoyment of any other
tenant in the Building.
ARTICLE 8. DESTRUCTION: CONDEMNATION
Section 8.1 Fire or Other Casualty.
----------------------
(A) Tenant shall give prompt notice to Landlord in case of fire or other
damage to the Premises or the Building.
(B) If the Premises or the Building shall be damaged by fire or other
casualty, Landlord, at Landlord's expense, but only to the extent of the net
insurance proceeds available for such purpose, shall repair such damage.
However, Landlord shall have no obligation to repair any damage to, or to
replace, Tenant's leasehold improvements or betterments, furniture, furnishings,
decorations or any other installations made by Tenant. if the Premises shall be
rendered untenantable by reason of any such damage, the Fixed Rent only shall
abate for the period from the date of such damage to the date when such damage
shall have been repaired by Landlord, and if only a part of the Premises shall
be so rendered untenantable, the Fixed Rent for such period shall abate in the
proportion which the part of the Premises rendered untenantable bears to the
total Premises. However, if, prior to the date when all of such damage shall
have been repaired by Landlord, any part of the Premises so damaged shall be
rendered tenantable and shall be used or occupied by Tenant or Persons claiming
through or under Tenant, then the amount by which the Fixed Rent shall abate
shall be equitably apportioned for the period from the date of any such use or
occupancy to the date when Landlord shall have repaired all such damage.
Notwithstanding the foregoing provisions of this paragraph, if prior to or
during the Term, (i) the Premises shall be rendered wholly untenantable by fire
or other casualty and Landlord shall decide not to restore the Premises, or (ii)
the Building shall be so damaged by fire or other casualty that, in Landlord's
opinion, substantial alteration, demolition, or reconstruction of the Building
shall be required (whether or not the Premises shall have been rendered
untenantable), then, in either of such events, Landlord, at Landlord's option,
may give to Tenant, within ninety (90) days after such fire or other casualty, a
five (5) day notice of termination and, if such notice is given, this Lease and
the Term hereof shall come to an end (whether or not said Term shall have
commenced) upon the expiration of said five (5) days with the same effect as if
the date of expiration of said five (5) days were the expiration date of this
Lease. In such event, the Rent shall be apportioned as of such
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date and any prepaid portion of Rent for any period after such date shall be
refunded to Tenant.
(C) If this Lease shall not be terminated as above provided, Landlord
shall, at its expense, repair or restore the Premises with reasonable diligence
and dispatch to the condition obtaining immediately prior to the casualty,
except that Landlord shall not be required to repair or restore any of Tenant's
furniture, furnishings, decorations or any installations or alterations, as
defined in paragraph 7.2B, made by Tenant. All insurance proceeds payable to
Tenant for such items shall be held in trust by Tenant and upon the completion
by Landlord of repair or restoration, Tenant shall prepare the Premises for
occupancy by Tenant in the manner obtaining immediately prior to the damage or
destruction, in accordance with the provisions of paragraph 7.2B.
Section 8.2 Eminent Domain.
--------------
(A) If all or substantially all of the Building or the Premises shall be
acquired or condemned by eminent domain for any public or quasi-public use or
purpose, then this Lease and all rights of Tenant shall terminate as of the date
of title vesting in such proceeding.
(B) If part of the Building shall be acquired or condemned by eminent
domain for any public or quasi-public use or purpose, and such acquisition shall
affect a portion of the Premises or the access to same, then Landlord shall have
the option (i) to terminate this Lease as of the date of title vesting or (ii)
to repair and alter the Building, including the area leased to Tenant, and this
Lease shall not be affected thereby, except for proportional reduction of the
Fixed Rent if the leased area shall be diminished by such vesting.
(C) In case of any taking or condemnation, whether or not the Term of this
Lease shall terminate, the entire award shall be the property of Landlord, and
Tenant hereby assigns to Landlord all its right, title and interest in and to
any such award. However, Tenant shall be entitled to claim, prove and receive
in the condemnation proceeding such awards as may be allowed for fixtures and
other equipment installed by Tenant, relocation and loss of Lease, but only if
such awards shall be made by the condemnation court in addition to the award
made by it for the land and the Building or part thereof so taken.
(D) In the case of any taking or condemnation, the current Fixed Rent and
Additional Rent shall be apportioned as of the date of vesting of title and, if
the Term of this Lease shall not have been terminated as of said date, Tenant
shall be entitled to a pro rata reduction in the Fixed Rent payable hereunder
based on the proportion which the
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floor area so taken bears to the entire floor area of the Premises immediately
prior to such taking.
(E) If this Lease is not terminated pursuant to the provisions of this
Section 8.2, Landlord shall, at its expense, but only to the extent of an
equitable proportion of the net award or other compensation (after deducting
legal and all other fees in connection with obtaining said award) for the
portion of the Building taken or conveyed (excluding any award for land), make
such repairs of alterations as are in Landlord's reasonable judgment necessary
to constitute the Building a complete architectural and tenantable unit.
ARTICLE 9. DEFAULTS AND REMEDIES
Section 9.1 Default. The occurrence, at any time prior to or during the
-------
Term, of any one of the following events shall constitute an "Event of Default":
(A) If Tenant shall default in the payment when due of any installment of
Fixed Rent or in the payment when due of any Additional Rent, and such default
shall continue for a period of ten (10) days after notice by Landlord to Tenant
of such default; or
(B) If Tenant shall default in the observance or performance of any other
term, covenant or condition of this Lease on Tenant's part to be observed or
performed and Tenant shall fail to remedy such default within twenty (20) days
after notice by Landlord to Tenant of such default; or if such default is not
capable of being cured within said twenty (20) day period, then if Tenant shall
fail to commence the cure within said period or shall not thereafter diligently
prosecute to completion all steps necessary to remedy such default; or if the
Premises shall become vacant, deserted or abandoned; or if Tenant shall assign
or sublet the Premises in violation of Section 7.2C.
Upon the occurrence of any one or more such Events of Default, Landlord
may, at any time thereafter, give Tenant a five (5) day notice of termination of
this Lease and, in the event such notice is given, this Lease and the Term shall
come to an end (whether or not the Term shall have commenced) upon the
expiration of said five (5) days with the same effect as if the date of
expiration of said five (5) days were the expiration date of this Lease, but
Tenant shall remain liable for damages as herein provided.
Section 9.2 Remedies of Landlord.
--------------------
(A) If this Lease shall have been terminated, or if Tenant shall default in
the payment of Rent or in the observance of any other term, condition or
covenant and such default is continuing, then, in any of such events, Landlord
may without notice, institute, in accordance with the laws and service of
process requirements of the State of Georgia,
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dispossess or unlawful detainer proceedings, dispossess Tenant or other
occupants of the Premises, and remove their effects and hold the Premises as if
this Lease had not been made. Nothing herein shall be deemed to require Landlord
to give the notices herein provided for prior to the commencement of a
dispossess or unlawful detainer proceeding for non-payment of Rent or a plenary
action for the recovery of Rent on account of any default in the payment of
Rent, it being intended that such notices are for the sole purpose of creating a
conditional limitation hereunder pursuant to which this Lease shall terminate
and Tenant shall become a holdover Tenant.
(B) In case of any such default, re-entry, expiration and/or dispossess or
unlawful detainer proceedings or otherwise, in addition to any other remedy now
or hereafter available to Landlord, (i) the Rent shall become due thereupon and
be paid up to the time of such re-entry, dispossess and/or expiration; (ii)
Landlord may relet the Premises or any part thereof for a term which may be
less. than or exceed the period which would otherwise have constituted the
balance of the Term, and may grant concessions of free rent; and (iii) Tenant or
the legal representative of Tenant shall also pay Landlord, as damages for the
failure of Tenant to observe and perform Tenant's covenants herein contained,
for each month of the period which would otherwise have constituted the balance
of the Term, any deficiency between (x) the sum of (a) one monthly installment
of Fixed Rent and (b) any Additional Rent that would have been payable for the
month in question but for such re-entry or termination and (y) the net amount,
if any, of the rents collected on account of the lease or leases of the Premises
for each month of the period which would otherwise have constituted the balance
of the Term. The reasonable refusal or failure of Landlord to relet the
Premises or any part thereof shall not release or affect Tenant's liability for
damages provided Landlord shall have made the same effort and on the same terms
to relet the Premises as with respect to other vacant space in the Building;
however, Landlord shall not be required to prefer the reletting of the Premises
over any other space in the Building. in computing such damages there shall be
added to the said deficiency all expenses actually incurred by Landlord in
connection with the reletting, including court costs, attorneys' fees and
disbursements, the cost of alterations for a now tenant, brokerage fees, and the
cost of putting the Premises in good order and otherwise preparing same for
reletting. Damages shall be paid in monthly installments by Tenant on the rent
day specified in this Lease and any suit brought to collect the amount of the
deficiency for any month shall not prejudice the rights of Landlord to collect
the deficiency for any subsequent or prior month by a similar proceeding.
Landlord, at Landlord's option, may make such alterations, repairs, replacements
and/or decorations in the Premises as Landlord considers advisable for the
purpose of reletting the Premises; and the making of such alterations and/or
decorations shall not release Tenant from liability hereunder as aforesaid.
(C) In the event of a breach or threatened breach by Tenant of any of the
covenants or provisions hereof, Landlord shall have the right of injunction and
the right to
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invoke any remedy allowed at law or in equity an if re-entry, summary
proceedings and other remedies were not herein provided for. Mention in this
Lease of any particular remedy shall not preclude Landlord from any other
remedy.
Section 9.3 Landlord's Right to Cure Defaults.
---------------------------------
Landlord may cure, after notice of default is served, any default by Tenant
under this Lease; and whenever Landlord so elects, all costs and expenses
incurred by Landlord in curing a default, including, without limitation,
reasonable attorneys' fees, together with interest on the amount of costs and
expenses so incurred at the rate provided in Section 3.3 hereof, shall be paid
by Tenant to Landlord on demand as Additional Rent.
Section 9.4 Waiver of Default. No consent or waiver, express or implied,
-----------------
by Landlord or Tenant to or of any breach of any covenant, condition or duty of
the other shall be construed as a consent or waiver to or of any other breach of
the same or any other covenant, condition or duty of the other, unless in
writing signed by the party against whom such waiver is sought.
Section 9.5 Security Deposit. Tenant has deposited with Landlord the
----------------
Security Deposit as security for the punctual performance by Tenant of each and
every obligation of Tenant under this Lease. In the event of any default by
Tenant, Landlord may apply or retain all or any part of the security to cure the
default or to reimburse Landlord for any sum which Landlord may spend by reason
of the default. In the case of every such application or retention, Tenant
shall, on demand, pay to Landlord the sum so applied or retained, which sum
shall be added to the Security Deposit so that the same shall be restored to its
original amount. If at the end of the Term Tenant shall not be in default under
this Lease, the Security Deposit, or any balance thereof, shall be returned, to
Tenant within thirty (30) days. If Landlord shall sell the Building or shall
lease the Building, in either case subject to this Lease, or shall otherwise
assign or dispose of this Lease, Landlord may assign and turn over the Security
Deposit or any balance thereof to Landlord's grantee, lessee or assignee, and
Tenant hereby releases and relieves Landlord from any and all liability for the
return of said deposit and shall look solely to said grantee, lessee or
assignee; it being expressly agreed that this provision shall apply to each and
every sale, conveyance or lease of the Building or assignment or disposition of
this Lease.
ARTICLE 10. MISCELLANEOUS PROVISIONS
Section 10.1 Notices. Any notice or demand from Landlord to Tenant or
-------
from Tenant to Landlord shall be in writing and shall be deemed duly served if
mailed by registered or certified mail, return receipt requested, addressed, if
to Tenant, at the Building, or to such other address as Tenant shall have last
designated by notice in writing to Landlord, and if to Landlord, at the address
of Landlord set forth herein or such other
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address as Landlord shall have last designated by notice in writing to Tenant.
Notice shall be deemed served when mailed.
Section 10.2 Brokerage. Tenant and Landlord warrant that they have had no
---------
dealings with any broker or agent in connection with this Lease other than the
Broker, if any, named herein, and each covenants to pay, hold harmless and
indemnify the other from and against any and all cost, expense or liability for
any compensation, commissions and/or charges claimed by any other broker or
agent with whom they hid dealings with respect to this Lease or the negotiation
thereof.
Section 10.3 Estoppel Certificates. Each of the parties agrees that it
---------------------
will, at any time and from time to time, within ten (10) business days following
written notice by the other party, execute, acknowledge and deliver to the other
party a statement in writing certifying that this Lease is unmodified and in
full force and effect (or if there have been modifications, that the same is in
full force and effect as modified and stating the modifications), and the dates
to which Rent and any other payments due hereunder from Tenant have been paid
and stating whether or not to the best of knowledge of the signer of such
certificate the other party is in default in performance of any covenant,
agreement or condition contained in this Lease, and, if so, specifying each such
default of which the signer may have knowledge.
Section 10.4 Applicable Law and Construction. The laws of the State of
-------------------------------
Georgia shall govern the validity, performance and enforcement of this Lease.
The invalidity or unenforceability of any provision of this Lease shall not
affect or impair any other provision. The submission of this document to Tenant
for examination does not constitute an offer to lease, or a reservation of or
option to lease, and becomes effective only upon execution and delivery thereof
by Landlord and Tenant. All negotiations, considerations, representations and
understandings between the parties are incorporated in this Lease. Landlord or
Landlord's agents have made no representations or promises with respect to the
Building or the Premises, except as herein expressly set forth. The headings of
the several articles and sections contained herein are for convenience only and
do not define, limit or construe the contents of such articles or sections.
Whenever herein the singular number is used, the same shall include the plural,
and the neuter gender shall include the masculine and feminine genders.
Section 10.5 Transfer of Tenants. Landlord hereby reserves the right, at
-------------------
its sole option and upon giving at least sixty (60) calendar days advance
written notice to Tenant, to transfer and remove Tenant from the Premises (and
from any other space to which Tenant was relocated pursuant to this Section
10.5) at any time prior or after occupancy of the Premises to any other
available space in the Building of substantially equal area. Landlord hereby
agrees to bear the expense of such transfer and removal, as well as the expense
of any renovations or alteration which are necessary to make the new space
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conform substantially in layout and appointment with the Premises. If Landlord
moves Tenant to such new space, every term and condition of this Lease shall
remain in full force and effect, except that the Fixed Rent and Tenant's Pro
Rata Share shall be adjusted to reflect any change in the rentable floor area of
the new space, and such now space shall thereafter be deemed to be the Premises
as though Tenant had entered into an express written amendment of this Lease
with respect thereto. Failure of Tenant to cooperate with Landlord pursuant to
this provision and to remove itself from the Premises shall permit Landlord (i)
to enter the Premises and to remove Tenant and its property therefrom, by force
if necessary, and to relocate Tenant and its property in the new space provided
by Landlord pursuant to this provision, all without being liable to Tenant in
any manner whatsoever for such acts except for the expenses which are provided
in this Section 10.5 to be paid by Landlord or (ii) to cancel and terminate this
Lease effective ninety (90) days from the date of original notification by
Landlord.
Section 10.6 Construction on Adjacent Premises or Buildings. Tenant
----------------------------------------------
understands that while the Building is under construction and until it is fully
occupied, both Landlord and other occupants of the Building will be performing
work, aspects of which may involve areas in close proximity to the Premises. If
any excavation or other building operation shall be about to be made or shall be
made on any premises adjoining or above or below the Premises or on any other
portion of the Building, Tenant shall permit Landlord or the adjoining owner,
and their respective agents, employees, licensees and contractors, to enter the
Premises and to shore the foundations and/or walls thereof, and to erect
scaffolding and/or protective barricades around and about the Premises (but not
so as to preclude, entry thereto) and to do any act or thing necessary for the
safety or preservation of the Premises. Tenant's obligations under this Lease
shall not be affected by any such construction or excavation work, shoring-up,
scaffolding or barricading. Landlord shall not be liable in any such case for
any inconvenience, disturbance, loss of business or any other annoyance arising
from any such construction, excavation, shoring-up, scaffolding or barricades,
but Landlord shall use its best efforts so that such work will cause as little
inconvenience, annoyance and disturbance to Tenant as possible, consistent with
accepted construction practices in the vicinity, and so that such work shall be
expeditiously completed.
Section 10.7 Mortgagee Protection. Tenant agrees to give any mortgagee
--------------------
and/or trust deed holder, by registered mail, a copy of any notice served upon
Landlord with respect to Landlord's default hereunder, provided that prior to
such notice Tenant has been notified, in writing, of the address of such
mortgagees and/or trust deed holders. If Landlord shall have failed to cure
such default within the time provided for in this Lease, then the mortgagees
and/or trust deed holders shall have an additional thirty (30) days within which
to cure such default or if such default cannot be cured within such period, then
such additional time as may be necessary if within such thirty (30) days, any
mortgagee and/or trust deed holder has commenced and is diligently pursuing the
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remedies necessary to cure such default (including, but not limited to,
commencement of foreclosure proceedings, if necessary to effect such cure), in
which event this Lease shall not be terminated by Tenant while remedies are
being so diligently pursued.
Section 10.8 Financing. If any lending institution with which Landlord
---------
has negotiated interim or long-term financing for the Building shall require
changes in this Lease as a condition of its approval of this Lease for such
financing, and if within thirty (30) days after notice from Landlord Tenant
fails or refuses to execute the amendment to this Lease accomplishing the
changes which are needed in connection with approval of this Lease for purposes
of such financing, then provided such amendment does not alter the business
terms herein set forth, detract from Tenant's rights hereunder, or impose
additional obligations upon Tenant, Landlord shall have the right to cancel this
Lease at any time prior to the commencement of Landlord's Additional Work. In
the event of cancellation by Landlord hereunder, this Lease shall be null and
void with no further liability on the part of either party hereto.
Section 10.9 Recording. Tenant agrees not to record this Lease.
---------
Section 10.10 Binding Effect of Lease. The covenants, agreements and
-----------------------
obligations herein contained shall extend to, bind and inure to the benefit of
the parties hereto and their respective personal representatives, heirs,
successors and permitted assigns. Each covenant, agreement, obligation or other
provision herein contained shall be deemed and construed as a separate and
independent covenant, not dependent on any other provision of this Lease unless
otherwise expressly provided.
Section 10.11 Effect of Unavoidable Delays. The provisions of this
----------------------------
Section shall be applicable if there shall occur, during the Term or prior to
the commencement thereof, any (i) strikes(s), lockout(s) or labor dispute(e);
(ii) inability to obtain labor, materials, or reasonable substitutes therefore;
or (iii) acts of God, governmental restrictions, regulations or controls, enemy
or hostile governmental action, civil commotion, fire or other casualty, or
other conditions similar or dissimilar to those enumerated in this item (iii)
beyond the reasonable control of the party obligated to perform. If Landlord or
Tenant shall, as the result of any of the above-described events, fail
punctually to perform any obligation on its part to be performed under this
Lease, then such failure shall be excused and not be a breach of this Lease by
the party in question, but only to the extent occasioned by such event.
Notwithstanding anything herein contained, however, the provisions of this
Section shall not be applicable to Tenant's obligations to pay Rent or its
obligations to pay any other moneys, costs, charges or expenses required to be
paid by Tenant hereunder.
Section 10.12 No Oral Changes. Neither this Lease nor any provision
---------------
hereof may be changed, waived, discharged or terminated orally, but only by an
instrument in writing
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signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought.
Section 10.13 Landlord's Consent. Whenever in this Lease express
------------------
provision is made that Landlord shall not unreasonably withhold or delay its
consent, Tenant's sole and only remedy for Landlord's breach of such agreement
shall be limited to an action for injunction or declaratory judgment and in no
event shall Landlord be liable for any damages to Tenant.
Section 10.14 Invalid Provisions. If any provision of this Lease is held
------------------
unlawful or invalid, then this Lease shall continue in full force and effect but
such unlawful or invalid provision shall be deemed omitted. If any portion of
Fixed or Additional Rent shall at any time be held to be higher than the amount
which Landlord may lawfully reserve, then the amount thereof shall be reduced to
the highest lawful amount.
Section 10.15 Usufruct Only. This Lease shall create the relationship of
-------------
landlord and tenant between Landlord and Tenant; no estate shall pass out of
Landlord, and Tenant has a usufruct which is not subject to levy and sale.
IN WITNESS WHEREOF, Landlord and Tenant have hereunto executed this Lease
as of the day and year first above written.
CORPORATE PROPERTY INVESTORS
By: /s/ J. Michael Maloney
----------------------
Senior Vice President
PREMIERE COMMUNICATIONS, INC.
By /s/ Julianne F. Vaio
----------------------
ATTEST:
By: /s/ Patrick G. Jones
----------------------
Secretary
[SEAL]
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STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On this ____ day of _________, 19__, before me personally came J. MICHAEL
MALONEY, to me known, who being by me duly sworn, did depose and say that he
resides at 48 Remsen Street, Brooklyn, New York 11201 that he is the Senior Vice
President of CORPORATE PROPERTY INVESTORS, one of the Parties described in and
which executed the foregoing instrument; that he knows the seal of the said
Corporate Property Investors that the seal affixed to the said instrument in
such seal; that it was so affixed by order of the Board of Trustees of the said
Corporate Property Investors and that he signed his name thereto by like order.
-----------------------------------------
Notary Public
STATE OF GEORGIA )
) ss:
COUNTY OF FULTON )
On this 3rd day of March, 1998, before me personally came JULIANNE F. VAIO,
to me known, who being by me duly sworn, did depose and say that she resides at
3399 Peachtree Rd., N.E., Suite 400, Atlanta, GA 30326 that she is the Treasurer
of PREMIERE COMMUNICATIONS, INC., the Corporation described in and which
executed the foregoing instrument; that he knows the seal of the said
Corporation that the seal affixed to the said instrument in such Corporate seal;
that it was so affixed by order of the Board of Trustees of the said Corporation
and that he signed her name thereto by like order.
/s/
--------------------------------------
Notary Public
Notary Public, Fulton County, Georgia
My Commission Expires May 18, 1999
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<PAGE>
RIDERS TO LEASE between CORPORATE PROPERTY INVESTORS, as Landlord, and PREMIERE
COMMUNICATION as Tenant for Suite No. 300 and 400 at The Lenox Building,
Atlanta, Georgia.
- -------------------------------------------------------------------------------
Notwithstanding the foregoing, anything to the contrary contained in the
printed form of the lease to which these Riders are attached, the following
terms are hereby added and incorporated. In the event of a conflict or
inconsistencies between these Riders and the printed form of this Lease, the
Riders shall be deemed to control.
Rider #1 - amending Article I, Definitions
- --------
(A) The Premises Section is hereby amended by inserting the following
language at the end of the section:
In addition to the Leased Premises, the Tenant shall also have the
following non-exclusive rights as appurtenances to the Leased Premises:
(a) The right of reasonable access to and from the Building and Premises,
and to and from any parking facilities located on the Property, twenty-four (24)
hours per day, seven (7) days per week, and parking privileges as may be agreed
from time to time;
(b) The right of reasonable access to and from, and the right to use,
designated common areas in the Building and the Property as is reasonably
afforded to all tenants of the Building;
(c) The right to riser space for HVAC and other equipment which service the
Premises; and
(d) The right to do, possess, exercise and enjoy, as to the Premises, any
and all rights and privileges appertaining to a leasehold tenancy under existing
and future laws applicable thereto, to the extent not inconsistent with any
reserved rights and privileges of Landlord pursuant to this Lease; and
(e) The right to control access and use of the halls and restrooms on all
floors in which Tenant is the only tenant served on that elevator bank on that
floor;
(f) Tenant may use the existing stairway between Tenant's floors for travel
between floors. Tenant's use of the stairway shall be conditioned upon the
following:
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(1) Tenant's use shall not interfere with the emergency operations of
the door locking, unlocking, or monitoring system; and
(2) No smoking will be allowed in the stairway.
(B) The Size of the Premises Section is hereby amended by inserting the
following language at the end of the section:
The Parties agree that the Leased Premises are measured in accordance
with the standards of the Building Owners and Managers Association
International ("BOMA") as follows:
For the purposes of this Lease, the Leased Premises shall be deemed to
comprise 35,553 square feet of usable area and 40,886 square feet of
rentable area, and the Building shall be deemed to comprise 348,152 square
feet of rentable area, subject to adjustment as provided herein. Whenever
any space is added to or deleted from the Leased Premises pursuant to any
provision of this Lease, the usable and rentable areas of such space shall
be agreed upon by Landlord and Tenant, or failing such agreement, shall be
determined in accordance with the American National Standard Method of
Measuring Floor Area in Office Buildings of BOMA.
(C) The Tenant's Pro Rata Share Section is hereby amended by inserting the
following language at the beginning of the section in front of the phrase "11.74
percent":
Tenant's Pro Rata Share is a percentage which is calculated by dividing a
numerator, consisting of the total rentable area of the Premises by a
denominator consisting of the total rentable area contained in the
Building, which percentage, subject to adjustment as provided herein, is
estimated to be
(D) The "Additional Rent" provision is hereby amended by deleting the
phrase "7 and 9" and by inserting the word "and" between the numbers "3" and
"5".
(E) The "Exhibit C" provision is hereby amended by deleting the word "None"
and by inserting the phrase "Lenox Building Rules and Regulations" in its place.
(F) Following Exhibit G - Building Rules and Regulations, the following
reference to Exhibits H and I is hereby inserted:
Exhibit H Subordination, Non-disturbance and Attornment Agreement
Exhibit I Certified Floor Plan Verifying Premises Rentable and Useable
Space
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Rider #2 - amending Recital
- --------
Tenant is currently in possession of the Premises under a sublease with
Sales Technologies, which expires on August 31, 1997 (the "Sublease").
Rider #3 - amending Article 2
- --------
(A) Section 2.1 and 2.2 are hereby deleted in their entirety.
(B) Tenant is currently in possession of the Premises pursuant to the
Sublease. Tenant is familiar with the Premises and accepts same "as is" and
"where is" condition, and Landlord shall not be obligated to do any further
construction or make any additional improvements in the Premises, except as may
otherwise be expressly provided herein.
(C) So long as Tenant leases the entire floor of the Building, it may,
subject to Landlord approval of plans, incorporate the Common Area corridors
located on such floor into its Premises.
(D) Landlord has budgeted to refurbish the elevator lobbies and restrooms
in the Building during the 1997-1998 Calendar Years. Landlord agrees to
refurbish the restrooms and elevator lobbies of the third (3rd) and fourth (4th)
floors between September 1, 1997 and March 31, 1998, which work shall be
consistent with the materials and design of the elevator lobbies and restrooms
located on the other floors in the Building.
Rider #4 Signage and Exterior Signage
- --------
(A) Tenant shall have the right to erect signage in the elevator lobbies
located on the third (3rd) and (4th) floor, provided, however, Tenant obtains
Landlord's prior written approval for the signs, which approval shall not be
unreasonably withheld or delayed.
(B) Landlord has erected a monument in the Entry Plaza adjacent to the
Building, which monument bears the logos or other identification signs of
tenants of the Building which, from time to time occupy rentable floor space in
the Building. Landlord hereby grants Tenant the right, at its sole cost and
expense, to have its name on said monument, so long as the Tenant named on the
recital page personally occupies not less than two (2) full floors in the
Building. In the event Tenant subleases or assigns any portion of the Premises,
such that it occupies less than two (2) full floors of the Building, Landlord
may remove Tenant's name from the monument.
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Rider #5 - Adding - Furniture
- --------
(A) Landlord purchased certain trade fixtures including but not limited
to, moveable work stations, furniture and the like which were designed for use
by Sales Technologies, Inc. in the Sublease space and which are currently being
utilized by Tenant under the Sublease. At the expiration of such Sublease,
Landlord agrees that Tenant, subject to Sales Technologies right to purchase
same if said right is not exercised,. Tenant may utilize such trade fixtures
throughout the Term of this Lease. Tenant is familiar with the aforedescribed
trade fixtures, and accepts same in "as is" condition.
(B) The aforedescribed trade fixtures shall be the property of Landlord;
however, Tenant shall have the right, at Tenant's option, at the expiration or
sooner termination of the Term, to purchase the trade fixtures from Landlord for
an amount equal to the then existing fair market value, as mutually agreed upon
by Landlord and Tenant; failing which, fair market value shall be determined by
an appraiser designated by Tenant and reasonably acceptable to Landlord, the
cost of such appraiser to be borne by Tenant. During the term, the ongoing
maintenance and repair of the trade fixtures shall be Tenant's responsibility.
Rider #6 - amending Section 2.3
- --------
(A) Section 2.3, Line 1, after "additions" add "and" delete the words "and
fixtures".
(B) Section 2.3, Line 2, delete "or located upon".
(C) Section 2.3, Line 7, after "furniture" add "trade fixtures" and "floor
mounted, free standing (Liebert type units) supplemental air units".
(D) Section 2.3, Line 8, add a period after "property" and delete the
remainder of the sentence and substitute the following in lieu thereof. Tenant
shall repair any and all damage to the Premises, caused by Tenant in removing
the aforementioned property, which may include sheet rocking, holes and walls
which were damaged as a result of removal of the supplemental air units and the
like. However, Tenant shall not remove the HVAC air handlers or supplemental
air units located above the ceiling.
Rider #7 - amending Section 3.1
- --------
Section 3.1, Line 8, delete "on demand" and substitute "from and after five
(5) days of demand".
Rider #8 - amending Section 3.2(A)
- --------
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(A) Notwithstanding anything to the contrary contained in this Section 3.2
A, Tenant's Pro Rata Share of Taxes shall not include an increase in Taxes which
is as a result of improvements made to the Building by any other tenant therein.
(B) In the event of an expansion of the Building, Tenant's Pro Rata share
shall be ratable adjusted by any increase in the rentable square feet of the
Building as a result of said expansion.
Rider #9 - amending section 3.2(B), (C), (E)
- --------
(A) Section 3.2(B),Line 9, delete "five (5)" and substitute "thirty (30) ".
(B) Section 3.2(C), Line 4, insert the following language in front of the
word "Tenant": "Upon receipt of notice that Taxes will change,"
(C) Section 3.2(E), Line 16, delete the remainder of the section following
the word "Taxes" and insert a period.
Rider #10 - amending Section 3.2 H
- ----------
(A) Notwithstanding anything to the contrary set forth in Section 3.2 (H),
Operating Costs shall not include any of the following:
(1) Ground rents payable by Landlord;
(2) Payments of principal, amortization payments and interest charges
in connection with Landlord's mortgage financing or any other
borrowings;
(3) Brokerage commissions and leasing fees;
(4) The costs of decorations installed in the public areas of the
Building, but only to the extent such costs materially exceed the
sums expended for decorating the public areas of other class "A"
Office Buildings in the Buckhead Area of Atlanta, Georgia.
(5) The cost of correcting defects in the construction of the
Building, Parking Garage and Auxiliary Area;
(6) To the extent that Landlord receives insurance proceeds or
condemnation awards with respect thereto (or would have received
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same but for Landlord's default under an insurance policy or
failure to diligently prosecute a condemnation claim), the cost
of repairs made by Landlord as a result of damage, destruction
orcondemnation, reimbursed or compensated;
(7) The cost of any items for which Landlord is reimbursed by
insurance or otherwise reimbursed or compensated (or would have
been reimbursed or compensated but for Landlord's default under
its insurance policy or failure to take reasonable action);
(8) Except for capital expenditures expressly set .forth in the
printed portion of Section 3.2 (H), the cost of any alteration,
addition, replacement or other item which, under generally
accepted accounting principles, is properly classified as a
capital expenditure;
(9) Advertising and promotion expenditures in connection with the
Building;.
(10) To the extent that any employee of the Building performs services
for any other building owned by Landlord or an Affiliate of
Landlord, the portion of such employee's compensation which is
reasonably allocable to services with respect to such other
building;
(11) The cost of preparing space in the Building for occupancy by
tenants;
(12) Professional fees incurred by Landlord in the preparation of
leases;
(13) The cost of statements and reports rendered to other tenants of
the Building or shareholders of Landlord;
(14) Depreciation: Depreciation of the Building;
(15) The cost of Landlord's litigation with other tenants of the
Building, including damages .payable by Landlord in connection
therewith;
(16) Any cost representing an amount paid to any entity related to
Landlord which is in excess of the amount which would have been
paid in the absence of such relationship;
(17) Expenses incurred in connection with the initial construction of
the Building, Parking Garage and Auxiliary Areas;
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(18) To the extent such Article 5 services exceed those provided to
Tenant under this Lease, the cost of Article 5 services provided
by Landlord to any other tenant in the Building;
(19) Charitable or Political Contributions: costs resulting from
charitable or political contributions;
(20) Environmental and Other Compliance, Any costs or expenses
relating to asbestos removal or encapsulation or any fines,
costs, expenses or damages relating to any violation of any
environmental law in effect as of the date of installation of the
substance violating such law (as the same distinguished from
expenses incurred in complying with any environmental laws),
unless the condition giving rise to such violation or fines arose
out of, or is caused by, acts or omissions of Tenant, its
employees, contractors or agent;
(21) Art Objects. Costs and expenses relating to the acquisition,
repair, replacement and insurance of sculptures, paintings,
tapestries or other objects of art (normal cleaning, maintenance
and replacement of light fixtures .excepted);
(22) Salaries, wages, or fringe benefits payable to the executives or
principals of Landlord or of any general partner or other
component entity of Landlord;
(23) Costs related to the operations of Corporate Property Investors
(or any successor thereto as Landlord), as the same are
distinguished from the costs of operation and maintenance of the
Building and its supporting facilities, including, without
limitation, Landlord's accounting and legal fees, costs of
defending any lawsuits with any mortgage (except as the actions
of Tenant may be at issue), direct costs of selling, syndicating,
financing, mortgaging or hypothecating any of Landlord's interest
in the Building, costs of any disputes between Landlord and its
employees (if any) not engaged in the management, operation or
maintenance of the Building, or disputes of Landlord with the
Building management (unless such disputes arise out of or in
relation to this Lease);
(24) Costs of any repair or replacement made in accordance with
Article Eight of this Lease entitled "Destruction; Condemnation";
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(25) Any bad debt loss, rent loss, or reserves for bad debts or rent
loss;
(26) Costs of services performed by Landlord specifically for other
tenants in the Building to the extent such work or services. are
in excess of Building standard services, and the costs of
alterations or improvements to other space in the Building which
are not available for all tenants of the Building.
(27) Any compensation paid to clerks, attendants, or other persons in
commercial concessions (i.e., concession in which the customer
directly pays for the provision of goods or services) operated by
Landlord, and other expenses related the cost of any work
performed or service provided (such as electricity) for any
facility other than the Building (such as a garage facility) or
shuttle service for which fees are charged or other compensation
received;
(28) Costs of any new items not included as Operating Expenses for the
1997 calendar year or material changes or additions to the
Operating Expenses generated by such changes or additions made
after the date of this Lease.
(29) Costs of overtime or other costs incurred by Landlord to cure its
default hereunder or the default of a tenant, or incurred by
reason of the misconduct or negligence of Landlord or a tenant or
their respective agents, invitees, employees or contractors
including costs associated with death or injury to persons,
damage to or loss of property, or use of deficient building
materials;
(30) Damages or costs or expenses paid or payable by Landlord in
connection with claims, actions or counterclaims as a result of
Landlord's gross negligence or willful malfeasance or willful
misfeasance;
(31) Fines or penalties resulting from violation of laws, rules or
regulations and any interest costs associated therewith, unless
such fines, penalties or late charges are due to an act of Tenant
or Tenant's failure to timely pay any amounts due under this
Lease;
(32) Costs of constructing, installing, operating and maintaining any
specialty service or facility, such as an observatory,
broadcasting facility, restaurant, luncheon club, retain space,
sundry shop, newsstand, concession or athletic or recreational
club or the costs associated with services or benefits (such as
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beautifying or maintaining a plaza, cafeteria or dining facility,
parking area, terrace or balcony) not offered or available to
Tenant;
(B) It is understood that no individual above the level of Building manager
shall be included in (xi) of the main body of Section 3.2 (H).
(C) It is understood that Operating Costs shall be net of all rebates,
reimbursements, credits and similar items received by Landlord.
(D) Section 3.2(H) is amended as follows:
(1) Line 1, insert the following after the word "mean":
reasonable expenses, costs and disbursements computed on the
accrual basis in accordance ,with generally accepted accounting
principles, relating to or incurred or paid in connection with:
(2) Line 8, add "on-site" before "equipment".
(3) Line 9, delete "and depreciation thereof".
(4) Line 18, after "improvements" add "to the extent the cost of same
exceeds $200,000.00, they shall be amortized or depreciated over
a period of not less than three (3) or more than ten (10) years
as reasonably determined by Landlord in accordance with generally
accepted accounting practices for office buildings."
(5) Line 24, insert after the word "Areas" the phrase "not to exceed
three percent (3%), so long as building is managed by Landlord
affiliate".
(6) Line 28, in phrase (xiii) after "comparable properties", insert a
comma and add "Class A Office Buildings in the area of Atlanta,
Georgia".
Rider #11 - amending Section 3.2 I
- ---------
Section 3.2(I) is hereby amended by inserting the following at the end of
the section:
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(A) Provided Tenant is not then in default, Tenant shall have the right, to
be exercised not more than once during any calendar or fiscal year adopted by
Landlord, to audit Common Area Operating Costs, subject to the following
conditions:
(i) Any such audit shall be conducted during the normal business hours
of Landlord's office and only upon a minimum of thirty (30) days prior written
notice; and
(ii) Tenant, its employees and auditors shall at all times keep the
results of any such audit in complete confidence and in connection therewith,
Tenant, its employees and auditors agree not to disclose the results of such
audit to any person whatsoever except in the event of litigation or arbitration;
and
(iii) Tenant agrees to pay Landlord all Fixed Rent and Additional
Rent theretofore and thereafter coming due, including the Additional Rent which
is the subject of the audit, in the amount billed by Landlord and when due and
payable as provided under this Lease, subject, however, to the right of
reimbursement in the event Tenant's position in the audit is upheld.
(B) The cost of such audit shall be borne by Tenant unless such audit
discloses an error of more than ten (10%) percent of the total audited amount
for the year in dispute which favors Landlord, in which event Landlord shall
bear the cost of such audit. If such audit reveals that the amount previously
determined by Landlord was incorrect, a correction shall be made and either
Landlord shall promptly (not to exceed 45 days) return to Tenant (or Credit
Tenant's account) or Tenant shall promptly (not to exceed 45 days) pay any
underpayment to Landlord. Notwithstanding the pendency of any dispute
hereunder, Tenant shall make payments based upon Landlord's determination or
calculation until such determination or calculation has been established
hereunder to be incorrect. In the event that Landlord is in error, then the
amount overpaid by Tenant shall be returned to Tenant.
(C) In the event the total monthly charges paid by Tenant on account of
excess Operating Costs during such Calendar Year shall be greater than Tenant's
Pro Rata share of the actual excess Operating Costs for such Calendar Year, as
shown by such statement, then Landlord shall credit the difference to Tenant's
account, or pay Tenant the difference within thirty (30) days after it sends
Tenant such statement.
Rider #12 - amending Section 3.3
- ---------
Section 3.3, Line 1, delete "the due date of any payment of Rent" and
substitute "from and after five (5) days notice from Landlord that any
installment of Rent is past due".
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Rider #13 - amending Section 4.1
- ---------
(A) Section 4.1(A), Line 7, delete the remainder of the Section following
the word "areas".
(B) Notwithstanding the rights reserved by Landlord pursuant to Section 4.1
(A), Landlord shall not exercise said rights in such a manner as to:
(i) Change the size or configuration of the rentable floor space of
the Premises or of any common facilities located on a floor of
the Building which is wholly leased to Tenant;
(ii) Materially interfere with the rights granted to Tenant pursuant
to this Lease; or
(iii) Materially interfere with Tenant's use of the
Premises for the conduct of its business.
Rider #14 - amending Section 5.1
- ---------
(A) Landlord agrees to comply with Governmental Requirements insofar as
they apply to Landlord's maintenance and repair obligations hereunder.
(B) Line 1, insert the word "and HVAC" after the word "electricity".
Rider #15 - amending Section 5.3
- ---------
(A) Section 5.3(A), lines I and 2, delete the phrase "Standard Building
Hours and Days" and substitute "twenty-four (24) hours a day, seven (7) days a
week".
(B) Section 5.3(B), lines 2 and 3, delete the phrase "only during Standard
Building Hours and Days".
(C) Section 5.3(B), Line 4, insert the phrase "of measured actual
electrical usage" after the word "watts".
(D) Section 5.3(C), Line 1, insert the following language at the beginning
of the paragraph:
Tenant shall have a base amount for electrical charge expense of $1.60
per rentable square foot per year which is included as Fixed Rent.
Landlord shall endeavor to install new electric meters for the
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Premises before the 1997 year end. In the event that Tenant shall use
more electricity than $1.60 per rentable square foot of office space
per year, Tenant shall be charged for the cost of such electricity as
Additional Rent.
(E) Section 5.3(C), Lines 6 and 7, delete the phrase "Tenant shall
reimburse Landlord for the cost of such inspection and".
(F) Section 5.3(C), Line 11, delete the word "Tenant" and insert the word
"Landlord" in its place.
(G) Section 5.3(C), Line 15, delete the number "ten (10)" and insert the
word "thirty (30)" in its place.
Rider #16 - amending Section 5.4
- ---------
Section 5.4, Line 2, delete the phrase "Standard Building Hours and Days
and at other times" and substitute "one elevator to provide service twenty-four
(24) hours per day, seven (7) days per week access to the Premises".
Rider #17 - amending Section 5.5
- ---------
Landlord hereby represents to Tenant that as of the date of execution
and delivery of this lease the temperature specifications for the HVAC system
serving the Building are as follows:
Winter - at least 68 degrees
Summer - the higher of 78 degrees or 20 degrees less than the
outside temperature.
Rider #18 - amending Section 5.6 and 5.7
- ---------
(A) Section 5.6, Paragraph 1, Line 4, delete the phrase "when considered
necessary by the Landlord for the comfortable occupancy" and insert the phrase
"as needed for the comfortable use and occupancy" in its place.
(B) Section 5.6, Paragraph 1, Line 6, insert the following language at the
end of the section:
Landlord shall provide additional or after-hours HVAC service at Tenant's
reasonable request and at Buckhead office building market costs to Tenant.
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(D) Section 5.6, Paragraph 3, Line 3, delete the phrase "Premises shall
contain" and insert the phrase "Tenant shall install".
(E) Section 5.7, Line 3, after the word "cleaned", add "(according to the
cleaning schedule set forth as Exhibit F, which may change from time to time in
Landlord's sole, but commercially reasonable judgment in keeping with comparable
Class A Office Buildings in the Buckhead Area of Atlanta, Georgia)".
(F) With regard to Section 5.7, the cleaning of any portions of the
Premises which are used for the storage, preparation, service or consumption of
food or beverages shall be limited to the cleaning of external surfaces.
Rider #19 amending Section 5.10
- ---------
(A) Section 5.10, Lines 5 and 6, insert the phrase "which rates shall not
exceed the actual cost of such service, plus Landlord's reasonable overhead"
after the word "rates".
(B) Section 5.10, Lines 2 and 3, delete "heat, and mechanical ventilation".
Rider #20 - amending Section 5.11
- ---------
If, as a result of the exercise by Landlord of its rights under Section
5.11, services are interrupted to the extent that Tenant is unable to conduct
its business in any portion of the Premises for more than five (5) consecutive
Standard Building Days, then Tenant shall be entitled to a proportionate (based
on the ratio that the affected portions of the premises bear to the entire
Premises) abatement of Rent for each day after the fifth (5th) such day during
which the condition continues.
Rider #21 - amending Section 5.12
- ---------
Tenant shall have the access to the Premises twenty-four (24) hours a day,
seven (7) days a week, subject to Landlord's reasonable rules and regulations.
Rider #22 - amending Section 6.1
- ---------
(A) Section 6.1, Line 3, add "sprinkler" after "elevator".
(B) Landlord shall operate the Building in a manner substantially similar
to other class "A" office buildings located in the Buckhead area of Atlanta,
Georgia".
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(C) Landlord shall, in exercising its rights and in performing its
obligations under this Section, perform its work with continuity, diligence and
dispatch and in such a manner (consistent with prudent practice) as will cause
the least possible interference with Tenant's business.
(D) If, as a result of the exercise by Landlord of its rights under Section
6.1, there is created a substantial and material interference with Tenant's
ability to conduct its business in any portion of the Premises and Tenant closes
for business in such portion for more than five (5) consecutive Standard
Building Days, Tenant shall be entitled to a proportionate (based on the ratio
that the affected portions of the Premises bear to the entire Premises)
abatement of Rent for each day after the fifth (5th) business day during which
the condition continues.
Rider #23 - amending Section 6.1 - Tenant's Right of Self-Help
- ---------
(A) If Landlord fails to make or commence to make any required repair or
replacement in or at or exclusively affecting the Premises (however, if
Landlord shall attempt to make a repair and Tenant is not satisfied, or it
is ineffectual, Tenant shall be required to give notice (i.e. notice again)
pursuant to this paragraph before it exercises self help), then, after ten
(10).business days' written notice (in emergency, reasonable notice shall
suffice), Tenant shall have the right (but no obligation) to make the
repair or replacement for Landlord, and Landlord shall promptly pay Tenant
for the cost incurred.
However, in the event Landlord disputes the necessity of the repair,
its obligations to make same, or the cost thereof, Tenant's remedy shall be
an action at law to recover all costs and attorneys' fees, and Tenant shall
not be entitled to any offsets or deductions from Rent.
(B) Section 6.1, Line 12, delete the word "not".
(C) Section 6.1, Line 13, delete the word "until".
(D) Section 6.1, Line 15 delete the phrase "a reasonable time" and
insert the phrase "ten (10) business days".
(E) Section 6.1, Line 15, insert at the end of the section:
Landlord shall, if required to do so as provided under Section 7.1(C),
and Rider 25, shall bring Premises into compliance with Government
Requirements.
(F) Section 6.2(A), Line 7, delete the word "provided" after the word
"leased" and by insert in its place the phrase "on the condition".
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(G) Section 6.2(A), Line 12, delete the words "shall be" and insert
the words "has been" in their place.
(H) Section 6.2(A), Line 16, insert the phrase "and (iv) the
transferee Landlord has expressly agreed to assume all of the duties and
obligations of Landlord under the Lease" after the word "Tenant".
Rider #24 - amending Article 6
- ---------
(A) Add the following as Section 6.3 - Quiet Enjoyment
Section 6.3 Quiet Enjoyment
Landlord warrants that it has full right to execute and to perform
this Lease and that Tenant, upon payment in full of the required
monthly Rent and performance of the terms, conditions, covenants and
agreements contained in this Lease on behalf of Tenant to be
performed, shall peaceably and quietly have, hold and enjoy the
Premises and the appurtenances thereto set forth in this Lease during
the Term.
(B) Add the following as Section 6.4 - Landlord's Insurance
Section 6.4 Landlord's Insurance
--------------------
Landlord shall carry comprehensive general liability insurance against
claims arising in connection with Landlord's operation of the public
areas of the Building and Auxiliary Areas and fire insurance with
extended coverage covering, to the extent of at least eighty (80%)
percent of replacement value, the Building and all improvements
therein which are or upon installation become part of the realty
(except for tenants' or other occupants' improvements which are
required to be insured or self-insured by such tenants or occupants);
provided, however, that so long as Landlord has a net worth of at
least $500,000,000.00, Landlord shall have the right to self-insure
for any loss or damage which could be covered by such insurance.
Rider #25 - amending Section 7.1
- ---------
(A) Section 7. 1 (C) , Line 5, insert the following after the word
"Authority":
; provided however, that in the event a condition exists as of the
Commencement Date which is not in compliance with Government Regulations in
existence on the Commencement Date and any Governmental Authority requires
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repairs, alterations, additions, replacements or improvements to be
performed in the Premises to bring such condition into compliance, then the
same shall be Landlord's responsibility under Section 6.1 herein.
(B) Section 7. 1 (E) , Line 9, delete the word "visitors".
(C) Section 7.1(F), Line 2, delete the phrase "with contractual liability
endorsement".
Rider #26 - amending Section 7.1 G
- ---------
(A) Section 7. 1 (G) , Line 1, insert the phrase "Except as provided
herein" in front of the word "Landlord."
(B) Section 7.1(G), Line 3, add "or willful misconduct" after "negligence".
(C) Section 7. 1 (G) , Lines 4 and 5, delete the phrase "(other than
accidents or occurrences against which Tenant is insured)".
Rider #27 - amending Section 7.1 H
- ---------
(A) In exercising its rights under Section 7.1 (H), Landlord shall not
materially change the size or configuration of the Premises.
(B) in performing work pursuant to this Section 7.1 (H), Landlord shall
take or cause to be taken all reasonable steps to minimize inconvenience to
Tenant and interference with Tenant's business operations. If Landlord shall
cause any damage to the Premises while performing work hereunder, Landlord shall
promptly repair all such damage.
(C) If, as a result of the exercise by Landlord of its rights under Section
7.1 (H), Tenant is unable to conduct its business in any portion of the Premises
for more than five (5) consecutive Standard Building Days, then Tenant shall be
entitled to a proportionate (based on the ratio that the affected portions of
the Premises bear to the entire Premises) abatement of Rent for each day after
the fifth (5th) such day that Tenant continues to be unable to operate in such
portions.
Except in the case of an emergency, Landlord shall not enter the Premises
except on reasonable prior notice to Tenant (which may be oral).
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(D) Section 7.1(H), Line 6, after "others" add "such as prospective
lenders, purchasers, investors and the like, however, with respect to
prospective lessees of the Premises, such entry shall be limited to the
last year of the Term".
Rider #28 - amending Section 7.1 I and J
- ---------
Delete Section 7.1 (I) in its entirety and substitute the following in lieu
thereof:
(A) In the event of any action or proceeding arising out of or
pursuant to the Lease, the successful party shall be entitled to recover its
reasonable attorneys' fees and all other costs and expenses incurred in
connection with the action or proceeding.
(B) Section 7.1(J), Line 4, delete the remainder of the first sentence
after the word "Tenant", and insert the following phrase in lieu thereof:
; provided, however, that Tenant shall not be required to discharge such
lien so long as Tenant is defending against such lien and such lien is not
capable of levy.
Rider #29 - amending Section 7.1 K
- ---------
(A) Section 7.1(K), Line 4, after "Tenant" add "and including all
trade fixtures, supplemental air units, and or equipment specific to
Tenant's business."
(B) Section 7.1(K), delete the second sentence of the section.
(C) Section 7.1(K), Lines 8 and 9, delete the phrase "improvements
or".
(D) Section 7.1(K), Line 12, delete the phrase "restoration of" and
insert the phrase "damages caused by removal in" in its place.
Rider #30 - amending Section 7.1 L
- ---------
(A) Section 7.1(L), Line 9, delete the period after the word "Lease"
and insert the following language in its place:
; provided, however, that Tenant shall not be obligated to attorn to
any mortgagee, holder of security deeds or deeds of trust, or lessee
of the Building, the Building Parcel, or any part thereof unless such
mortgagee or lessee has delivered to Tenant a nondisturbance
agreement, substantially similar to and imposing no additional burdens
than the form attached hereto as Exhibit H. Following the delivery of
such nondisturbance agreement,
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(B) Section 7.1(L), Line 15, delete the period after the word "Lease" and
insert the following language:
provided, however, that Tenant shall not be obligated to attorn to any
lessee of any ground or underlying lease or any part thereof unless such
lessee has delivered to Tenant, a nondisturbance agreement substantially
similar to and imposing no additional burdens than the form attached hereto
as Exhibit H.
(C) At present there are no mortgages on the Office Building. The
subordination of this Lease to mortgages hereafter placed on the Office Building
shall be effective only to mortgages made to a "Lending Institution" (as defined
below). As to any mortgage hereafter placed not made to a Lending Institution,
such subordination shall be conditioned on the receipt by Tenant from the
mortgagee of a non-disturbance agreement, in recordable form, providing in
substance that in the event of a foreclosure of such mortgage and provided
Tenant is not in default, this Lease and Tenant's possession shall not be
disturbed and Tenant shall attorn to such mortgagee. As used in this Rider, the
term "Lending Institution" shall mean a savings bank, a savings and loan
association, a commercial bank or trust company (whether acting individually, or
in any fiduciary capacity), an insurance company, a real estate investment
trust, an educational institution, or a state, municipal or similar public
employees' welfare or other pension or retirement fund or system or a private
pension, retirement or profit sharing trust or fund, or a corporate, private or
union pension trust or fund, or any other corporation or entity entitled to
exemption from income tax under the Internal Revenue Code of the United States,
as amended from time to time.
Rider #31 - amending Section 7.1 M
- ----------
(A) Section 7.1(M), Line 3, after the word "areas" insert "attach hereto as
Exhibit G".
(B) Section 71.(M), Line 3, delete the word "uniform" and substitute
"uniformly applied to all tenants".
Rider #32 - amending Section 7.2 B
- ---------
Section 7.2(B), Line 24, delete the last sentence of the section in its
entirety.
Rider #33 - amending Section 7.2 (C)
- ----------
(A) Section 7.2(C), Paragraph 1, Line 3, after "concession" add "without
obtaining Landlord's prior consent".
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(B) Section 7.2(C), Paragraph 2, line 2, delete "(but not less than all)"
and substitute "no more than four (4) partial subleases, per floor and provided
there are no more than four (4) occupants of a floor at any given time (i.e. (i)
four subtenants or (ii) Tenant and three subtenants)".
(C) Section 7 .2 (C) , Paragraph 2, line 3, delete the remainder of the
sentence after the word "however," and insert the following in lieu thereof:
that the proposed assignee or subtenant is not then an existing tenant with
whom Landlord is then negotiating.
(D) (DELETED)
(E) Section 7.2 (C), Paragraph 2, line 17, insert the following language
after the word "Lease":
with regard to such proposed space to be subleased or assigned
(F) Delete Section 7.2 (C) (i) , (Paragraph 3), in its entirety.
(G) Section 7.2(C)(ii), (Paragraph 4), Lines 1 and 2 delete "In the event
that Landlord shall not exercise its right to cancel this lease as above
provided,".
(H) Section 7.2 (C) (iii) , (Paragraph 5) , Line 4, delete the phrase
"Tenant or, at Landlord's option."
Rider #34 - amending Section 8.1 2
- ---------
(A) in the event the Premises shall be damaged to the extent of more than
fifty (50%) percent of the costs of replacement thereof during the last Year of
the Term or the last year of any renewal period, Tenant shall have the right to
terminate this Lease by written notice to the Landlord served within sixty (60)
days after the fire or casualty, such termination to be effective on the
thirtieth (30th) day following the date of said notice.
(B) In the event this Lease has not been terminated pursuant to Section
8.1 (a) and Landlord has failed to (i) commence restoration or rebuilding within
three (3) months from the date of the casualty or (ii) substantially complete
such restoration within nine (9) months after the date of the casualty, Tenant
may give Landlord notice of Tenant's intention to terminate this Lease. If
Landlord fails within thirty (30) days thereafter to commence or substantially
complete such restoration, an the case may be, this Lease shall terminate
without the necessity for any further notice from Tenant; provided, however,
that the aforesaid time limits shall be tolled for a period not to exceed four
(4) months in
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the event Landlord fails to commence or complete restoration by reason of
Unavoidable Delay, as not forth in Section 10.11. Tenant's sole remedy in the
event Landlord shall fail to timely commence or substantially complete such
restoration shall be to terminate this Lease.
(C) Notwithstanding anything above, Tenant shall have a reasonable time to
quit the premises in the event of a termination under the provisions of this
Section 8.1 and this Rider #34, not to exceed forty-five (45) days.
Rider #35 - amending 8.1 B and C
- ---------
(A) Section 8.1(B), Lines 7, Line 10, and Line 14, delete the word "Fixed".
(B) Section 8.1(B), Line 7, delete the word "only".
(C) Section 8.1(C), Lines 6 through 10, delete the last sentence of the
section.
Rider #36 - amending Section 8.2 B
- ---------
(A) In the event that more than thirty (30%) percent of the rentable floor
space of the Premises shall be acquired or condemned by eminent domain or shall
be rendered inaccessible or untenantable as the result of such a taking, Tenant
shall have the right to terminate this Lease as of the date of title vesting in
the Governmental Authority.
(B) In the event this Lease has not been terminated pursuant to Section 8.2
(B) and Landlord has failed to (i) commence repairs or alterations
("restoration") within three (3) months from the date of the taking or (ii)
substantially complete such restoration within nine (9) months after the date of
the taking, Tenant may give Landlord notice of Tenant's intention to terminate
this Lease. If Landlord fails within thirty (30) days thereafter to commence or
substantially complete such restoration, as the case may be, this Lease shall
terminate without the necessity for any further notice from Tenant; provided,
however, that the aforesaid time limits shall be tolled for a period not to
exceed four (4) months in the event Landlord fails to commence or complete
restoration by reason of Unavoidable Delay, as set forth in Section 10.11.
Tenant's sole remedy in the event Landlord shall fail to timely commence or
substantially complete such restoration shall be to terminate this Lease.
(C) Notwithstanding anything above, Tenant shall have a reasonable time to
quit the premises in the event of a termination under the provisions of this
Section 8.2 and this Rider #37, not to exceed 45 days.
Rider #37 - amending Section 9.1
- ---------
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<PAGE>
(A) Section 9.1(A), Line 3, insert the words "Tenant's receipt or refusal
of" after the word "after."
(B) Section 9.1(B), Line 4, insert the words "Tenant's receipt or refusal
of" after the word "after."
(C) Section 9.1(B), Line 7 and 8, delete "or if the Premises shall become
vacant, deserted or abandoned".
(D) Section 9.1(B), Paragraph 2, Line 1, insert the phrase "and failure to
cure or commence cure" after the word "occurrence".
Rider #38 - amending Section 9.2
- ---------
(A) Section 9.2(A), Line 4, after "notice" add "(except as otherwise set
forth in the Lease)".
(B) Section 9.2(B), Line 7, insert a period after the word "Term" and
delete the remainder of the sentence.
(C) Section 9.2(B), Lines 15 through 17, delete the phrase "The reasonable
refusal or failure of Landlord to relet the Premises or any part thereof shall
not release or affect Tenant's liability for damages" and insert the following
language in lieu thereof: "Landlord shall have an affirmative obligation to
attempt to relet the Premises, and"
Rider #39 - amending Section 9.5
- ---------
Section 9.5, Line 2, delete the remainder of the section after the word
"as" and insert the phrase "the first month's rent" in its place.
Rider #40 - amending Section 10.1
- ---------
(A) Last sentence of the paragraph, delete "mailed" and substitute
"received or refused".
(B) Notwithstanding anything contained herein to the contrary any notice or
demand to Tenant from Landlord, or Landlord to Tenant shall be duly served by
"receipted" hand delivery or sent by "receipted" overnight courier to the
address at which notices are to be mailed.
Rider #41 - amending Section 10.5
- ---------
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<PAGE>
Delete Section 10.5 in its entirety.
Rider #42 - amending Section 10.6
- ---------
Delete Section 10.6 in its entirety.
Rider #43 - amending Section 10.13
- ---------
Delete Section 10.13 in its entirety.
Rider #44 - amending Article 10 - add the following as Section 10.16 -- Parking
- ---------
Section 10.16 Parking
-------------
(A) Landlord has constructed a parking garage adjacent to the building (the
"Parking Garage"). Tenant and its employees shall be permitted to use said
facility in common with the general public. Tenant shall be entitled to
purchase the equivalent of 2.2 parking cards per 1,000 square feet of rentable
floor space demised under this Lease. It is understood that the Parking Garage
shall operate under a shared parking methodology with other property.
(B) Tenant understands the Landlord may designate an independent contractor
to operate the Parking Garage pursuant to a lease operating agreement or the
like, which instrument shall be subject to all of the terms and provisions of
this Rider. Tenant's arrangements for monthly parking permits shall be made
with Landlord, or if Landlord has, designated such an operator, directly with
the operator of the Parking Garage. Parking permit fees shall be payable to
Landlord or the operator, as Landlord shall direct. Subsequent to the execution
and delivery of this Lease, Tenant shall be provided with and shall promptly
execute and deliver a parking agreement, which agreement shall incorporate the
term set forth in this Rider. Tenant's use of the Parking Garage shall be at
Tenant's own risk, it being specifically understood that Landlord shall not be
liable in any way for any injury to Person or property or loss by theft or
damage or otherwise resulting from the use of the Parking Garage by any Person.
(C) Landlord shall designate (or cause to be so designated) five (5)
parking spaces, of Tenant's aforementioned allocation of parking permits, for
use by officers of Tenant on Mondays through Fridays, from 7:00 a.m. to 6:00
p.m. The location of said parking spaces is set forth on Exhibit D, however the
location of said parking spaces is subject to change for reasons of safety and
governmental compliance on three (3).days, prior written notice to Tenant.
Tenant shall provide Landlord with a list of names, car models, and license
plates of those officers which Tenant has designated to use said
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<PAGE>
spaces. In the event the parking spaces are not utilized as intended, Landlord
shall have the right to revoke the designated parking spaces on ten (10) days
notice to Tenant.
(D) Tenant shall have reasonable access to and from the Parking Garage
twenty-four (24) hours a day, seven (7) days a week, subject to the reasonable
rules and regulations of the operator of the Parking Garage.
Rider #45 - amending Telephone - adding Section 10.17
- ---------
Tenant shall have the right to utilize the telecommunications service
provider of its choice. Such telecommunications provider shall only be
permitted to run wire through Building risers to Tenant's space, and is not
permitted to run wires from the Premises to other tenant space (other than
Tenant's) in the Building; provided, however, that Tenant shall have no
affirmative obligation to monitor such telecommunications provider and assumes
no responsibility or liability for its actions.
Rider #46 - Tenant's Rights with Respect to 9th and 10th Floors
- ---------
(A) So long as this Lease is in full force and effect and there has not
occurred any Event of Default hereunder, Tenant shall have a one time right of
first refusal with respect to the ninth (9th) and tenth (10th) floors of the
Building, said right of first refusal to be exercisable as hereinafter set
forth.
(B) If Landlord or its agent shall deliver a proposal regarding space on
the ninth (9th) and tenth (10th) floors of the Building (the Proposal) to a
Person interested in leasing such space, Landlord shall deliver (or shall cause
to be delivered) to Tenant a true and exact copy of the Proposal, and Tenant
shall have the right to be exercised not later than ten (10) business days
following receipt by Tenant of the Proposal to hire the space which is the
subject of the Proposal on the same terms and conditions as are therein set
forth, including, without limitation, the same Fixed Rent, Commencement Date,
Additional Rent and construction terms and provisions, provided, however, that
notwithstanding the length of the term which is set forth in the Proposal (the
Proposed Term). Tenant shall hire the space which is the subject of the
Proposal for a term which expires simultaneously with the initial Term of this
Lease, as extended as provided for in this Lease. If the Proposed Term would
expire prior to the expiration date of the initial Term of this Lease, then
Fixed Rent for the period from the expiration of the Proposed Term through the
expiration date of the initial Term of this Lease (the tack-on period) shall be
determined in accordance with paragraph C of this Rider #46.
(C) From the first (1st) day of the tack-on period through the December 31
next ensuing, Fixed Rent shall be at the same annual rate as was payable during
the last year of the Proposed Term. Thereafter, on each subsequent January 1
during the tack-on
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<PAGE>
period, Fixed Rent shall be increased by the percentage increase, it any,
between the Consumer Price Index (as hereinafter defined) in affect (as
hereinafter defined) on the immediately preceding January 1 and the Consumer
Price Index in effect on the January I of the year for which the Fixed Rent
determination is being made. All references herein to the Consumer Price Index
shall be deemed to mean the Consumer Price Index for Urban Wage Earners and
Clerical Workers, all Items, Series A, 1967 equal 100, as published by the
United States Department of Labor (or, if not published, the most closely
comparable index then published). The Consumer Price Index in effect on a
particular date shall be deemed to mean the index published for the month in
which such date occurs) or if not published for such month, the Index published
the month next succeeding.
(D) All leases executed by Landlord and Tenant with respect to space on the
ninth (9th) and tenth (10th) floors which is hired by Tenant pursuant to its
right of first refusal shall contain one (1) renewal option, each for a five (5)
year period. All such leases shall provide that each renewal option may be
exercised by Tenant only if exercised contemporaneously with Tenant's exercise
of the corresponding option set forth in Rider 40 hereto, paragraphs (ii)
through (vi) of which shall be incorporated, in substance, into each such lease;
it being understood that during each renewal period, (i) the Fixed Rent payable
under each such lease shall be the same, on a per square foot basis, an the
Fixed Rent payable under this Lease and (ii) the sums deemed substituted in
paragraphs 3.2 (A) and 3.2 (G) of this Lease.
(E) In the event Tenant shall fail to timely exercise its right of first
refusal, Tenant shall be deemed to have waived such right with respect to the
space which is the subject of the Proposal, and Landlord shall have the
unencumbered right to let such space to the Person to whom the Proposal was made
(or to any other Person).
(F) The aforementioned Right of First Refusal shall be personal to Premiere
Communications, Inc. and shall not be assignable or exercisable by any other
Person.
Rider #47 - Tenant's Right of First Offer with Respect to Space in Excess of
- ---------
10,000 Rentable Square Feet on a Floor
(A) During the initial Term of this Lease, Tenant shall have a one (1) time
right of first offer with respect to any leasing of an excess of 10,000 square
feet of rentable floor space contained on one (1) floor in the Building, said
right of first offer is subject to and subordinate to any rights of renewal,
expansion or First Refusal of existing tenants in the Building or any offer by
Landlord to extend or renew the then existing tenant(s) of such space in the
Building.
(B) If Landlord or its agent shall have identified space on a floor in the
Building in excess of 10,000 rentable square feet, that it intends to offer for
lease, then Landlord
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shall advise Tenant of the terms it proposes to offer to lease the space
including Fixed Rent, Commencement Date, Additional Rent and construction terms
and provisions (the "Offer"), and Tenant shall have the right to be exercised
not later than ten (10) business days following receipt by Tenant of the offer,
to. hire the space which is the subject of the Offer, on the same terms and
conditions as are therein set forth, including, without limitation, the same
Fixed Rent, Commencement Date, Additional Rent and construction terms and
provisions, except the Term which shall expire simultaneously with the initial
Term of this Lease.
(C) In the event Tenant shall fail to timely exercise its right of First
Offer, Tenant shall be deemed to have waived such right with respect to the
space which is the subject of the Offer, and Landlord shall have the
unencumbered right to let such space to any Person.
(D) The rights granted pursuant to this Rider shall be personal to Premiere
Communications, Inc., and shall not be assignable to or exercisable by any other
Persons.
(E) It is understood that time is of essence with respect to Tenant's
exercise of its rights hereunder.
Rider #48 - amending Term - Renewal Rights
- ---------
Landlord hereby grants Tenant the right to extend the Term of this Lease
for a period of five (5) years (the "Extension Term") subject to the following
terms and conditions:
(i) Tenant shall not be in default under the Lease beyond any
applicable notice or cure period at the time of exercise of such
right or at the commencement of the Extension Term, and the
Lease shall, at each such time, be in full force and effect.
(ii) Tenant shall give Landlord three hundred sixty (360) days prior
written notice of its desire to extend the Lease. Within forty-
five (45) days following receipt of Tenant's notice, Landlord
shall advise Tenant of Landlord's Estimate of the Fair Market
Value Rent (the "Landlord's Estimate") for the Premises for the
Extension Term.
(iii) The Fair Market Value Rent ("FMVR") shall be .based
upon the rental rates for which comparable space in the Building
is then being leased; however, such rates shall be adjusted for
comparability with respect to the following factors: (a)
location (i.e., floor, view, access); (b) improvements (i.e.
quantity and
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quality of buildouts and customization for a particular tenant)
; (c) renewals or relocations of existing tenants; (d) size and
configuration; and (e) any discounts, allowances and any periods
of free rent. In the event that Tenant does not agree with
Landlord's Estimate as to the FMVR, the parties may each choose
a real estate broker with at least ten years' experience and a
familiarity with the Buckhead submarket who will determine the
FMVR. In the event the two brokers cannot come to an agreement
as to the FMVR, the brokers will choose a third broker with at
least ten years' experience and a familiarity with the Buckhead
submarket, whose decision will be final and binding upon the
parties.
(iv) Tenant shall notify Landlord within fifteen (15) days after
receipt of Landlord's determination of FMVR of whether Tenant
elects to extend the Term of this Lease, it being understood
that failure of Tenant to so notify Landlord within said fifteen
(15) day period shall be deemed a waiver of Tenant's right to
extend the Lease. If Tenant exercises its right to extend, as
aforesaid, then Landlord shall so notify Tenant and the
Extension Term shall commence as of the expiration of the
original Term, and shall be on the same terms and conditions of
the Lease except:
(a) fixed Rent shall be the FMVR as determined according to
section (iii) of this Rider 48, above.
(b) The base calendar year set forth in section 3.2 (A) and
(G) shall be the calendar year preceding than calendar
year in which the Extension Term commences.
(c) There shall be no obligation on the part of Landlord or
Tenant to perform any work in or at the Premises to
prepare the Premises for Tenant's occupancy during the
Extension Term.
(v) The aforesaid right to extend the Term of this Lease shall be
personal to Premiere Communications, Inc. and shall not be
assignable to, or exercisable by any other Person.
(vi) It is understood that time in of the essence with respect to
Tenant's exercise of its rights hereunder.
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EXHIBIT A
[SITE PLAN]
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<PAGE>
EXHIBIT B
[FLOOR PLANS]
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<PAGE>
EXHIBIT C & G
THE LENOX BUILDING
RULES AND REGULATIONS
The sidewalks and Public Portions of The Lenox Building, such as entrances,
passages , courts, elevators, vestibules, stairways, corridors halls, shall not
be obstructed or encumbered by Tenant or used for any purpose other than egress
and egress to and from the Premises.
Except where installed by Landlord, no awning or other projection shall be
attached to the outside walls of The Lenox Building and no curtain, blind,
shade, louvered openings or screen shall be attached to or hung in, or used in
connection with, any window or door of the Premises, without prior written
consent of Landlord.
Except as otherwise specifically permitted under Tenant's lease for the
Premises, no sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by Tenant on any part of the outside of the
Premises or The Lenox Building or on corridor walls. Signs at entrance doors
shall conform to building standard signs, samples of which are on display in
Landlord's rental office. Signs at entrance doors shall, at Tenant's expense,
be inscribed, painted or affixed for Tenant by sign makers approved by Landlord.
In the event of the violation of the foregoing by Tenant, Landlord may remove
same without any liability, and may charge the expense incurred by such removal
to Tenant.
Skylights, windows, heating, ventilating and air conditioning vents and doors
that reflect or admit light and air into the halls, passageways or other public
places in The Lenox Building shall not be covered or obstructed by Tenant, nor
shall any bottles, parcels, or other articles be placed on the window sills.
Mini-blinds are required to be in the down position at all times.
No show case or other article shall be put in front of or affixed to any part of
the exterior of The Lenox Building, nor placed in public halls, corridors or
vestibules without the prior written consent of Landlord.
Water and wash closets and other plumbing fixtures shall not be used for any
purposes other than those for which they were constructed, and no sweepings,
rubbish, rags, or other substances shall be thrown therein. All damages
resulting from any misuse of the fixtures shall be borne by Tenant.
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Tenant shall not deface any part of the Premises or The Lenox Building.
Tenant shall not engage or pay any employees on the Premises, except those
actually working for Tenant an said Premises, nor advertise for laborers giving
an address at The Lenox Building.
Tenant shall not employ any cleaning and maintenance contractor, nor any
individual, firm or organization for such purpose, without Landlord's prior
written consent. Tenants shall not employ any mechanical (HVAC), electrical or
plumbing contractor other than those approved by the Landlord.
Landlord shall have the right to prohibit any advertising by Tenant which, in
Landlord's reasonable opinion, impairs the reputation of The Lenox Building or
its desirability as a building for offices, and upon written notice from
Landlord, Tenant shall refrain from or discontinue such advertising.
Landlord reserves the right to exclude from The Lenox Building at all times
other than standard building days and hours all persons not presenting a pass
signed by Tenant. Tenant shall be responsible for all persons to whom it issues
a pass and shall be liable to Landlord for all acts of such persons. Landlord
may deny anyone requesting access to Tenant premises, after hours, who does not
have a key or acceptable identification.
The Premises shall not be used for lodging or sleeping or for any immoral or
illegal purpose.
The requirements of Tenant will be attended to only upon application at the
Management Office of The Lenox Building. Building employees shall not perform
any work or do anything outside of their regular duties, unless under special
instructions from the office of Landlord.
Canvassing, soliciting and peddling in The Lenox Building are prohibited, and
Tenant shall cooperate to prevent the same. Shoe shine, auto glass, auto repair
and car wash services may not perform work on the property without the prior
approval of the Landlord.
All hand trucks used to transport property within The Lenox Building shall be
equipped with rubber tires and side guards. No hand truck shall be used in
passenger elevators.
All paneling or other wood products not constituting furniture shall be of fire
retardant materials. Before installation of such materials, certification of
the materials' fire retardant characteristics shall be submitted to Landlord or
its agents, in a manner satisfactory to Landlord. No live Christmas trees,
----
wreaths or garlands will be permitted unless certified as fire retardant.
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Neither Tenant's employees nor Tenant's agents shall be permitted to remove
materials from The Lenox Building without a signed letter of authorization on
Tenants, letterhead, giving the individual permission to remove specific
material.
Tenants and their employees will park only in those areas designated by the
Landlord. No parking in the loading dock area, lobby entry plaza, fire lanes or
reserved (handicap, visitor, etc.) spaces will be permitted. No entry or egress
through the loading dock/service vestibule is allowed.
No access to the building roof, mechanical or control rooms by tenants,
employees or contractors is permitted without the prior approval of the
Landlord. Landlord reserves the right to control access to the building
balconies. No light weight furniture or material is to be allowed on the
building balconies.
Duplicate door keys, building pass cards and parking garage cards are available
only through the Landlord's management offices.
All adjustments to HVAC controls, thermostats, ducts, diffusers, etc. must be
made by Landlord's maintenance personnel.
Smoking or loitering in the restrooms or stairwells is not permitted.
Landlord reserves the right to promulgate additional rules and regulations,
which Landlord may make, for the management and use of the Building and
Auxiliary Areas.
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EXHIBIT D
---------
[PARKING SPACE EXHIBIT]
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EXHIBIT E
COMMENCEMENT DATE AND RATIFICATION
OF LEASE AGREEMENT
The undersigned, Corporate Property Investors having its Principal place of
business at 3 Dag Hammarskjold Plaza (305 East 47th Street) New York, NY 10017
(Landlord), and _____________________________________ having its principal place
of business at _____________________________________ (Tenant), in consideration
of TEN and no/100 ($10.00) DOLLARS and other good and valuable consideration,
the receipt whereof is hereby acknowledged, agree as follows:
1. That certain lease (which lease, and the amendments hereinafter
listed, if any, as hereby modified, is hereinafter collectively referred to as
the "Lease") from Landlord to Tenant dated _________________________________,
as amended on (no amendments), which Lease demises ____ square feet of rentable
floor space in the building known as The Lenox Building, located at 3399
Peachtree Road, N.E., Atlanta, Georgia 30326 is in full force and effect. The
Commencement Date of the original Term is _____________________________________,
and the expiration date is _____________________________________
2. The Lease contains the following renewal terms:
3. Tenant has accepted possession of the Premises demised to it under
the Lease and is now in occupancy thereof.
4. No Rent under the Lease has been paid for more than thirty (30)
days in advance of its due date.
5. Tenant is paving the full Rent called for under the Lease on a
current basis without concession and without offset, claim or defense against
Landlord and/or against payment of the Rent.
6. All of Landlord's Work, as defined in the Lease, has been completed,
except for any latent defects.
7. $________ has been deposited with Landlord as security for Tenant's
performance of its obligations under the Lease.
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IN WITNESS WHEREOF, the Parties have executed this agreement this ____ day
of _____________________________________.
LANDLORD:
Corporate Property Investors
By:
-------------------------------
TENANT:
By:
-------------------------------
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EXHIBIT F
---------
PERIMETER MAINTENANCE CORPORATION
CLEANING - SCHEDULE
-------------------
THE LENOX BUILDING
I. LOBBY & COMMON AREA
-------------------
A. Daily
-----
1. Sweep and police entrance areas to curb.
2. Vacuum walk-off mats
3. Empty all trash receptacles; damp clean, sanitize exterior, and
replace liners.
4. Empty and clean ashtrays and sand urns.
5. Spot clean to hand height (70") all windows, glass partitions,
and glass doors.
6. Spot clean all walls to hand height.
7. Damp clean all window ledges.
8. Dust and spot clean hand rails.
9. Dust mop composition floors.
10. Spot mop composition floors.
11. Vacuum carpet.
12. Spot clean carpet.
13. Buff traffic areas.
14. Police stairwells
15. Spot mop stairwells.
B. Weekly
------
1. Sweep baseboards, corners, around and under desks
2. Spray buff composition floors.
3. Sweep stairwells.
4. Damp mop stairwells.
5. High dust ledges in atrium.
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C. Monthly
-------
1. High dust above hand height all horizontal surfaces including any
shelves, moldings, ledges, pipes, ducts, vents, and beating
outlets.
2. Clean exterior of urns and trash containers.
D. Annually
--------
1. Refinish composition floors.
II. ELEVATORS
---------
A. Daily
-----
1. Vacuum and spot clean carpet or dust mop/wet mop composition
floor.
2. Door tracts vacuumed and wiped clean.
3. Wall panels, cab doors cleaned and polished.
C. Monthly
-------
1. High dust above hand height all horizontal surfaces, including
shelves, moldings, ledges, pipes, ducts, and heating outlets.
2. Remove dust and cobwebs from ceiling areas.
3. Buff composition flooring.
D. Quarterly
---------
1. Dust venetian blinds.
E. Annually
--------
1. Refinish composition floors.
NOTE. All maid carts, trash carts and vacuum cleaners will have a
protective bumper to avoid damage to walls, doors and furniture.
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V. RESTROOMS
---------
A. Daily
-----
1. Clean and sanitize all vitreous fixtures including toilet bowls,
urinals, and hand basins.
2. Clean and sanitize all flush rings, drain and
overflow outlets.
3. Clean and polish all chrome fittings.
4. Clean and sanitize toilet seats.
5. Damp mop with disinfectant.
6. Clean and polish all glass and mirrors.
7. Empty all containers and disposals.
8. Spot clean and sanitize exterior of all containers.
9. Dust metal partitions and window sills.
10. Remove spots, stains, splashes from wall area adjacent to hand
basins.
11. Refill all dispensers to normal limits: soap, tissue, and towels.
12. Spot clean metal partitions.
13. Low dust all surfaces to hand height including sills, moldings,
ledges, shelves, frames, and ducts.
14. Remove spots, stains, and splashes from wall area adjacent to
hand basins.
III. ESCALATORS
----------
A. Daily
-----
1. Clean hand rails.
2. Clean interior side panels.
3. Mop entrance & exit plates.
B. Weekly
------
1. Polish all stainless steel.
2. Polish entrance and exist plates.
C. Special task
------------
1. Use crevice tool to vacuum around walls and in corners.
2. Employees will be instructed to be extremely careful not to
damage wood finishes when performing all cleaning tasks.
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IV. OFFICES
-------
A. Daily
-----
1. Empty wastebaskets and replace liners as needed.
2. Empty and damp clean ashtrays.
3. Dust furniture, paying special attention to lacquered and
special-finished furniture.
4. Dust all telephones.
5. Dust all exposed filing cabinets, bookcases and shelves.
6. Spot clean desk tops.
7. Clean counter tops.
8. Clean and sanitize water fountains.
9. Clean sand urns of debris.
10. Spot clean door glass, partition glass, lobby glass, and metal
partitions.
11. Spot clean entrance doors.
12. Dust mop composition floors.
13. Spot mop composition floors.
14. Vacuum carpet.
15. Spot clean carpet.
B. Weekly
------
1. Low dust all horizontal surfaces to hand height (70")
2. Clean entire desk tops (where possible).
3. Remove fingerprints from doors, frames, light switches, kick and
push plates, handles and moldings around doorways.
B. Weekly
------
1. Wash and sanitize metal partitions.
2. Spot clean tile walls.
3. Polish stainless steel.
4. High dust above hand height including sills, moldings, ledges
shelves, frames, ducts, and heating outlets.
C. Quarterly
---------
1. Machine scrub floor.
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VI. KITCHEN - VENDING AREAS
-----------------------
A. Daily
-----
1. Wash and sanitize table tops.
2. Damp clean seats and backs of chairs.
3. Empty and damp clean ashtrays.
4. Empty all containers and disposals.
5. Remove fingerprints from doors, frames, light switches, kick and push
plates and handles.
6. Vacuum carpet.
7. Spot clean carpel
8. Dust mop composition floors.
9. Mop composition floors.
10. Wash and sanitize counter tops.
11. Empty wastebaskets and replace liners.
B. Weekly
------
1. Low dust all surfaces below hand height including sills,
moldings, ledges, shelves, frames and vents.
2. Sanitize exterior of containers and disposals.
VII. LOADING DOCK
------------
A. Daily
-----
1. Sweep and police.
2. Maintain clean appearance.
B. Weekly (or as needed)
------
1. Pressure wash.
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<PAGE>
EXHIBIT H
STANDARD FORM
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
THIS AGREEMENT is made as of this day of ___________, 1997 by and
among____________, a corporation having an office andplace of business at
_____________________________________ ("Lender"), a corporation, whose address
is _____________________________________ ("Landlord"), and having an office at
_____________________________________ ("Tenant").
WITNESSETH:
WHEREAS, Tenant has entered into a certain lease (the "Lease"),
dated______, with landlord covering premises (the Ppremises") within a certain
building known as _____________________________________, located in (a conformed
copy of said lease has been delivered to Lender); and
WHEREAS, Lender has made a certain loan (the "Loan") to landlord, which
loan is secured by the mortgages (the "Mortgages") more particularly described
in Exhibit A annexed hereto and affecting the premises known as_________,
in_____________; and
WHEREAS, Lender has been requested by Tenant and by Landlord to enter into
a non-disturbance and attornment agreement with Tenant;
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, the parties hereto mutually covenant and agree as
follows:
1. The Lease and any extensions, renewals, replacements or modifications
thereof, and all of the right, title and interest of Tenant thereunder in and to
the Premises, are and shall be subject and subordinate to the Mortgages and to
all of the terms and conditions contained therein, and to any renewals,
modifications, replacements, consolidations and extensions thereof.
2. Lender consents to the Lease and, in the event Lender comes into
possession of or acquires title to the Premises as a result of the foreclosure
or other enforcement of the Mortgages or the notes secured by the Mortgages, or
as a result of any other means, Lender agrees that, so long as Tenant is not
then in default hereunder beyond any applicable notice and grace periods and the
Lease is then in full force and effect, Lender will recognize Tenant and will
not terminate the Lease or disturb tenant in its possession of the Premises or
evict Tenant from the premises for any reason other than one which would entitle
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<PAGE>
Landlord to terminate the Lease under its terms or would cause, without any
further action by Landlord the termination of the Lease or would entitle
Landlord under the terms of the Lease to dispossess Tenant from the Premises.
3. Tenant agrees with Lender that if the interest of Landlord in the
Premises shall be transferred to and owned by lender by reason of foreclosure or
other proceedings brought by it, or in any other manner, or shall be conveyed
thereafter by Lender or shall be conveyed pursuant to a foreclosure sale of the
Premises, Tenant shall, upon notice of receipt of such transfer of interest to
Lender, be bound to Lender under all of the terms, covenants and conditions of
the Lease for the balance of the term thereof remaining and any extensions or
renewals thereof which may be effected in accordance with any option therefor in
the Lease, with the same force and effect as if Lender were the Landlord under
the Lease, and Tenant does hereby attorn to Lender as its Landlord, said
attornment to be effective and self-operative without the execution of any
further instruments on the part of any of the parties hereto immediately upon
Lender succeeding to the interest of Landlord in the Premises. Tenant agrees,
however, upon the election of and written demand by Lender to promptly execute
an instrument in confirmation of the foregoing provisions, reasonably
satisfactory to Lender, in which Tenant shall acknowledge such attornment and
shall set forth the terms and conditions of its tenancy.
4. Tenant agrees with lender that if Lender shall succeed to the interest
of Landlord under the Lease, Lender shall not be (a) liable for any action or
omission of any prior Landlord under the Lease, except to the extent that such
action or omission continues after Lender succeeds to the interest of Landlord,
or (b) subject to any offsets or defenses which tenant might have against any
prior Landlord, or (c) bound by any security deposit which tenant may have paid
to any prior Landlord, unless such deposit is in an escrow fund available to
Lender, or (d) bound by an amendment or modification of the lease not expressly
provided for in the lease made without lender's written consent, or (e) bound by
any notice of termination not provided for in the, lease given by landlord to
tenant without Lender's written consent thereto, or (f) personally liable under
the lease, and Lender's liability under the lease shall be limited to the
ownership interest of Lender in the Premises. Tenant further agrees with Lender
that Tenant will not voluntarily subordinate the lease to any lien or
encumbrance without Lender's written consent.
5. In the event that Landlord shall default in the performance or
observance of any of the terms, conditions or agreements in the Lease, Tenant
shall give written notice thereof to Lender, and Lender shall have the right
(but not the obligation) to cure such default. Tenant shall not take any action
with respect to such default under the Lease, including, without limitation, any
action in order to terminate, rescind or void the Lease or to withhold any
rental thereunder, for a period of 30 days after receipt of such written notice
by Lender with respect to any such default capable of being cured by the payment
of money and for a period of 45 days after receipt of such written notice by
Lender with respect to any other default (provided, that in the case of any
default which cannot be cured by the payment of money and cannot with diligence
be cured within such 45-day period because of the nature of such default or
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<PAGE>
because Lender requires time to obtain possession of the Premises in order to
cure the default, if Lender shall proceed promptly and proceed with reasonable
diligence to obtain possession of the Premises, where possession is required,
and to cure the same and thereafter shall prosecute the curing of such default
with diligence and continuity, then the time within which such default may be
cured shall be extended for such period as may be necessary to complete the
curing of the same with diligence and continuity).
6. Landlord has agreed in the mortgages that the rentals payable under
the lease shall be paid directly by Tenant to Lender upon the occurrence of a
default by Landlord under the Mortgages. Accordingly, after notice is given by
Lender to Tenant that the rentals under the Lease should be paid to Lender,
Tenant shall pay to Lender, or in accordance with the directions of Lender, all
rentals and other moneys due and to become due to Landlord under the Lease.
Tenant shall have no responsibility to ascertain whether such demand by Lender
is permitted under the Mortgages. Landlord hereby waives any right, claim or
demand it may now or hereafter have against Tenant by reason of such payment to
Lender, and any such payment to Lender shall discharge the obligations ofTtenant
to make such payment to Landlord.
7. Tenant declares, agrees and acknowledges that:
a. Lender, in making disbursements pursuant to any agreement
relating to the Loan, is under no obligation or duty to, nor has
Lender represented that it will, see to the application of such
proceeds, and any application or use of such proceeds for
purposes other than those provided for in such agreement shall
not defeat at the subordination herein made in whole or in part;
and
b. It intentionally and unconditionally waives, relinquishes and
subordinates the Lease and its leasehold interest thereunder in
favor of the lien or charge of the Mortgages, and in
consideration of this waiver, relinquishment and subordination,
specific loans and advances are being and will be made by Lender
to Landlord and, as part and parcel thereof, specific monetary
and other obligations are being and will be entered into by
Landlord and Lender which would not be made or entered into but
for said reliance upon this waiver, relinquishment and
subordination.
8. This Agreement shall bind and inure to the benefit of the parties
hereto, their successors and assigns. As used herein the term "Tenant" shall
include Tenant, its successors and assigns; the words "foreclosure" and
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<PAGE>
"foreclosure sale" as used herein shall be deemed to include the acquisition of
Landlord's estate in the Premises by voluntary deed (or assignment) in lieu of
foreclosure; and the word "Lender" shall include the Lender herein specifically
named and any of its successors, participants and assigns, including anyone who
shall have succeeded to Landlord's interest in the Premises by, through or under
foreclosure of the Mortgages.
9. All notices, consents and other communications pursuant to the
provisions of this agreement shall be in writing and shall be sent by registered
or certified mail, return receipt requested, or by a reputable commercial
overnight carrier that provides a receipt, such as Federal Express or Airborne,
and shall be deemed given when postmarked and addressed as follows:
If to Lender:
with a copy to:
If to Tenant:
If to Landlord:
or to such other address as shall from time to time have been designated by
written notice by such party to the other parties as herein provided.
10. This Agreement shall be the whole and only agreement between the
parties hereto with regard to the subordination of the Lease and the Leasehold
interest of Tenant thereunder to the lien or charge of the Mortgages in favor of
Lender, and shall supersede and control any prior agreements as to such, or any
subordination, including, but not limited to, those provisions, if any,
contained in the Lease, which provide for the subordination of the Lease and the
leasehold interest of tenant thereunder to a deed or deeds of trust or to a
mortgage or mortgages to be thereafter executed, and shall not be modified or
amended and no provision herein shall be waived except in writing by the party
against which enforcement of any such modification or amendment is sought.
The use of the neuter gender in this Agreement shall be deemed to include
any other gender, and words in the singular number shall be held to include the
plural, when the sense requires. In the event any one or more of the provisions
of this agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if such invalid, illegal or unenforceable provision had never
been contained herein. This Agreement shall be governed by and construed in
accordance with the laws of the State of ______________.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have placed their hands and seals
the day and year first above written.
Signed and acknowledged in TENANT:
the presence of us:
_______________________
_____________________ By:____________________
Typed Name:
Title:
_____________________ Attest:________________
LANDLORD:
_____________________ By:____________________
Typed Name:
Title:
_____________________ Attest:________________
LENDER:
_____________________ By:____________________
Typed Name:
Title:
_____________________ Attest:________________
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<PAGE>
EXHIBIT I
[FLOOR PLANS]
-77-
<PAGE>
MODIFICATION OF LEASE
THIS MODIFICATION OF LEASE ("the Modification") is entered
into this 4th day of August, 1997 by and between Corporate
Property Investors, a Massachusetts business trust
("Landlord") and Premiere Communications, Inc., a Georgia
corporation ("Tenant")
LANDLORD NAME AND ADDRESS: CORPORATE PROPERTY INVESTORS
Three Dag Hammarksjold Plaza
305 East 47th Street
New York, New York 10017
TENANT NAME AND ADDRESS: Premiere Communications, Inc.
3399 Peachtree Road, N.E.
The Lenox Building
Suite 400
Atlanta, GA 30326
DATE OF LEASE: Executed March _____, 1997
ORIGINAL LEASED PREMISES: Suite #300 and 400 on the 3/rd/ and 4/th /
Floors
OFFICE BUILDING: The Lenox Building
EFFECTIVE DATE OF MODIFICATION: The later of September 1, 1997 or the date
on which Landlord delivers possession of the
Additional Space to Tenant
DATE OF AGREEMENT: August 4, 1997
R E C I T A L
WHEREAS, Landlord and Tenant entered into that certain Agreement of
Lease dated March 3, 1997 (the "Lease"), a true, accurate and complete copy of
which is attached hereto as Exhibit "A" and incorporated by reference; and
WHEREAS, Landlord and Tenant desire to amend the Lease to provide for
the expansion of the Premises (as defined in the Lease) to include Suite No. 500
and Suite 600, the Fifth (5th) and Sixth (6th) floors of The Lenox Building
(the "Additional Space"); WHEREAS,
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<PAGE>
Landlord and Tenant have agreed to amend the Lease in accordance with the
terms of this Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual covenants herein contained
it is hereby agreed as follows:
1. The Effective Date of the Modification shall be the later of
_____________ or the date on which Landlord delivers possession of the
Additional Space to Tenant ("Effective Date").
2. As of the Effective Date, Article I of the Lease,
"Premises" section Line 1 and 2 are hereby amended by deleting "No. 300 and 400,
Third (3rd) and Fourth (4th)" and inserting the "Nos. 300, 400, 500, and
600, Third (3rd) and Fourth (4th), Fifth (5th) and Sixth (6th)" in lieu
thereof.
3. As of the Effective Date, Article I of the Lease, "Size of Premises"
section, Line 1 is hereby amended by deleting the number "40,886" and by
inserting the number __________ to reflect the increase of the Size of the
Premises by 41,676 rentable square feet.
4. As the Effective Date, Rider 1(B) of the Lease is hereby amended by
deleting the number "35,553", pertaining to usable square footage, and by
inserting "71,793" and be deleting the number "40,886" pertaining to rentable
square footage and inserting the number "82,562".
5. As of the Effective Date, Article I of the Lease, "Tenant's Pro
Rata Share" section is hereby amended by deleting the number "11.74" and by
inserting the number "23.71" to reflect the increase of the Size of the
Premises.
6. As of the Effective Date, Article I of the Lease, "Fixed Rent"
section is hereby amended by deleting the existing section and by inserting the
following in lieu thereof:
Fixed Rent $1,733,802.00 per year through
----------
March 31, 2001: $1,816,364.00 per year from
April 1, 2001 through August 31, 2004; and $1,898,926.00 per year
from September 1, 2004 through August 31, 2007
7. As of the Effective Date, Article I of the Lease is hereby amended
by inserting the following section after the "Fixed Rent" section:
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<PAGE>
Fixed Rent Abatement Tenant shall be entitled to an abatement of the fixed
rent attributable to Suite 600 for a full seven (7)
months from the later of September 1, 1997 or the date
on which Landlord delivers possession of Suite 600 to
Tenant
8. As the Effective Date, Exhibit B, annexed hereto, which describes
the Additional Space knows as Suite 500 and 600 shall be added to the Exhibit B
annexed to the Lease.
9. Amending Rider #44C Parking:
Line 2, delete "five (5)", and substitute "ten (10)"
10. As of the Effective Date, Article 2, Rider 3(B) of the Lease are
hereby amended by deleting Rider 3(B) and inserting the following:
Rider 3(B):
----------
Tenant is currently in possession of Suite 300 and Suite 400 of the
Premises pursuant to the Sublease. Tenant is familiar with Suite 300 and Suite
400 of the Premises and accepts the same in an "as is" and "where is" condition,
and Landlord shall not be obligated to do any further construction or make any
additional improvements in Suite 300 and Suite 400 of the Premises, except as
may otherwise by expressly provided herein. Landlord shall deliver Suite 500 and
Suite 600 of the Premises to Tenant on the Effective Date of the Modification,
in broom-clean condition and free of all existing tenants.
Landlord acknowledges and agrees that Tenant shall be allowed to
make tenant improvements ("Tenant Improvements") to the Premises at any time
during the Term. Tenant shall provide Landlord with Tenant's drawings, plans and
specifications regarding the proposed Tenant Improvements to the Premises.
Landlord shall notify Tenant within Fifteen (15) days after its receipt of such
drawings, plans and specifications of its approval thereof, which shall not be
unreasonably withheld, or its objection to anything contained therein.
11. As of the Effective Date, Article 2 and Rider 3(D) to the Lease are
hereby amended by inserting the phrase and "and fifth (5th) and sixth (6th)
Floors" after the word "floors" on Line 4.
12. As of the Effective Date, Rider 4(A) to the Lease is hereby amended
by deleting the phrase and "and (4th) floor" on Line 3 and by inserting the
phrase "fourth (4th) floor and sixth (6th) floors"
13. As of the Effective Date, Section 7.1C and Rider 25 to the Lease
and amended such that Landlord represents and warrants that no conditions exist
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<PAGE>
in the Additional Space as of the Effective Date which are not in compliance
with Government Authority in effect on the Effective Date and agrees to remedy
an such conditions in the same manner as provided for Suite 300 and 400 as of
the Commencement Date.
14. Amending Section 2.3 and 7.1 K
In the event Tenant shall construct an internal staircase between
floors to connect the various suite(s), Tenant shall, and Landlord's request,
remove same and restore the floors to individual rental units at the expiration
or earlier termination of the Lease.
In the event Tenant incorporate Common Areas of the Building into
Tenant's Premises and including, but not limited to, the elevator lobbies and
the restrooms, then Tenant shall, at Landlord's request, restore same to the
initial condition existing upon execution of this Modification at the expiration
or earlier termination of the Lease.
If Landlord elects to require Tenant to restore the Premises and
Common Areas as set forth above, then Landlord shall give Tenant notice at least
thirty (30) days prior to the expiration or sooner termination of the Term.
15. All additional rents and other charges attributable to the Additional
Space shall be prorated as of the Effective Date.
16. Except as provided herein all of the terms, conditions and covenants
of the Lease, including all items of additional rent, termination date and
rights of renewal shall remain the same and in full force and effect.
17. Any capitalized term used herein shall have the meaning ascribed to
it in the Lease.
18. Additional Provisions:
IN WITNESS WHEREOF, Landlord and Tenant have executed this Agreement as of
the date and year first written.
Tenant:
Premiere Communications, Inc.
By: /s/ JULIEANNE F. VAIO
--------------------------
CORPORATE PROPERTY INVESTORS
By: /s/ JANE FORTENBERRY
--------------------------
Vice President
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<PAGE>
SECOND MODIFICATION OF LEASE
THIS MODIFICATION OF LEASE (the "Modification") is entered
into this ____ day of September, 1997 by and between
Corporate Property Investors, a Massachusetts business trust
("Landlord") and Premiere Communications, Inc., a Georgia
corporation ("Tenant")
LANDLORD NAME AND ADDRESS: CORPORATE PROPERTY INVESTORS
Three Dag Hammarksjold Plaza
305 East 47th Street
New York, New York 10017
TENANT NAME AND ADDRESS: Premiere Communications, Inc.
3399 Peachtree Road, N.E.
The Lenox Building
Suite 400
Atlanta, GA 30326
DATE OF LEASE: Executed March 3, 1997, modified by
Modification of August 4, 1997
LEASED PREMISES: Suite #300 and 400 on the 3rd and 4th
Floors, and Suite 500 and Suite 600 on the 5th
and 6th Floor by Modification
OFFICE BUILDING: The Lenox Building
EFFECTIVE DATE OF MODIFICATION: The date of delivery of a fully executed
Modification from Landlord to Tenant
DATE OF AGREEMENT: October 30, 1997
R E C I T A L
WHEREAS, Landlord and Tenant entered into that certain Agreement of
Lease dated March 3, 1997 (the "Lease") and Modification of Lease date August 4,
1997.
WHEREAS, Landlord and Tenant desire to amend the Lease to provide for
the expansion of the Premises (as defined in the Lease) to include Suite No. 700
on the Seventh (7th) floor of The Lenox Building (the "Additional Space II");
Landlord and Tenant have agreed to amend the Lease in accordance
with the terms of this Agreement.
<PAGE>
A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual covenants herein contained
it is hereby agreed as follows:
1. The Effective Date of the Modification shall be the date on which
Landlord delivers possession of the Additional Space II to Tenant ("Effective
Date") (November 1, 1997).
2. As of the Effective Date, Article I of the Lease, "Premises" section
Line 1 and 2 are hereby amended by deleting "No. 300, 400, 500 and 600, Third
(3rd) and Fourth (4th), Fifth (5th) and Sixth (6th)" and inserting the
"Nos. 300, 400, 500, and 600, Third (3rd) and Fourth (4th), Fifth (5th),
Sixth (6th) and Seventh (7th)" in lieu thereof.
3. As of the Effective Date, Article I of the Lease, "Size of Premises"
section, Line 1 is hereby amended by deleting the number "82,562" and by
inserting the number "103,400" to reflect the increase of the Size of the
Premises by 20,838 rentable square feet.
4. As the Effective Date, Rider 1(B) of the Lease is hereby amended by
deleting the number "71,793", pertaining to useable square footage, and by
inserting "89,913" and by deleting the number "82,562" pertaining to rentable
square footage and inserting the number "103,400".
5. As of the Effective Date, Article I of the Lease, "Tenant's Pro Rata
Share" section is hereby amended by deleting the number "23.71" and by inserting
the number "29.70" to reflect the increase of the Size of the Premises.
6. As of the Effective Date, Article I of the Lease, "Fixed Rent" section
is hereby amended by deleting the existing section and by inserting the
following in lieu thereof:
Fixed Rent $2,171,400.00 per year through
----------
March 31, 2001: $2,274,800.00 per year from
April 1, 2001 through August 31, 2004; and $2,378,200.00 per year
from September 1, 2004 through August 31, 2007
7. As the Effective Date, Exhibit B, annexed hereto, which describes the
Additional Space II knows as Suite 700 shall be added to the Exhibit B annexed
to the Lease.
8. As of the Effective Date, Article 2, Rider 3(B) of the Lease are hereby
amended by deleting Rider 3(B) and inserting the following:
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<PAGE>
Rider 3(B):
----------
Tenant is familiar with Suite 700 of the Premises and accepts the same
in an "as is" and "where is" condition, and Landlord shall not be obligated to
do any further construction or make any additional improvements in Suite 700 of
the Premises, except as may otherwise by expressly provided herein. Landlord
shall deliver Suite 700 of the Premises to Tenant on the Effective Date of the
Modification, in broom-clean condition and free of all existing tenants.
Landlord acknowledges and agrees that Tenant shall be allowed to make
tenant improvements ("Tenant Improvements") to the Premises at any time during
the Term. Tenant shall provide Landlord with Tenant's drawings, plans and
specifications regarding the proposed Tenant Improvements to the Premises.
Landlord shall notify Tenant within Fifteen (15) days after its receipt of such
drawings, plans and specifications of its approval thereof, which shall not be
unreasonably withheld, or its objection to anything contained therein.
9. As of the Effective Date, Article 2 and Rider 3(D) to the Lease are
hereby amended by inserting the phrase and "and seventh (7th) Floors" after
the word "floors" on Line 4.
10. As of the Effective Date, Rider 4(A) to the Lease is hereby amended by
deleting the phrase and "and (4th) floor" on Line 3 and by inserting the
phrase "sixth (6th) floor and seventh (7th) Floors"
11. As of the Effective Date, Section 7.1C and Rider 25 to the Lease are
amended such that Landlord represents and warrants that no conditions exist in
the Additional Space II as of the Effective Date which are not in compliance
with Government Authority in effect on the Effective Date and agrees to remedy
an such conditions in the same manner as provided for Suite 300 and 400 as of
the Commencement Date.
13. Amending Section 2.3 and 7.1K
In the event Tenant shall construct an internal staircase between
floors to connect the various suite(s), Tenant shall, and Landlord's request,
remove same and restore the floors to individual rental units at the expiration
or earlier termination of the Lease.
In the event Tenant incorporate Common Areas of the Building into
Tenant's Premises and including, but not limited to, the elevator lobbies and
the restrooms, then Tenant shall, at Landlord's request, restore same to the
initial condition existing upon execution of this Modification at the expiration
or earlier termination of the Lease.
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<PAGE>
If Landlord elects to require Tenant to restore the Premises and
Common Areas as set forth above, then Landlord shall give Tenant notice at least
thirty (30) days prior to the expiration or sooner termination of the Term.
14. All additional rents and other charges attributable to the Additional
Space II shall be prorated as of the Effective Date.
15. Except as provided herein all of the terms, conditions and covenants
of the Lease, including all items of additional rent, termination date and
rights of renewal shall remain the same and in full force and effect.
16. Any capitalized term used herein shall have the meaning ascribed to it
in the Lease.
17. Additional Provisions:
So long as Tenant occupies the majority of the rentable square footage
it hires from Landlord in the Office Building then Landlord acknowledges and
agrees that Tenant's name will be placed on the sign located at the Wright
Avenue entrance of The Lenox Building's top parking deck. Tenant's display of
name shall be of the same size (i.e., area of sing face) and shall be the
highest placement of any other Office Building tenant on said sign.
Notwithstanding the foregoing, if at anytime a Governmental Authority
requires Landlord to remove or alter Tenant's sign, then Landlord shall have the
right to take such action as said Governmental Authority requires.
18. Additional Provisions: None
IN WITNESS WHEREOF, Landlord and Tenant have executed this
Agreement as of the date and year first written.
Tenant:
Premiere Communications, Inc.
By: /s/ Julianne F. Vaio
----------------------------
CORPORATE PROPERTY INVESTORS
By: /s/ Jane Fortenberry
----------------------------
Vice President
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<PAGE>
GUARANTOR
Acknowledged and Agreed to:
/s/ Julianne F. Vaio
- --------------------------------
Premiere Technologies, Inc.
-5-
<PAGE>
EXHIBIT 10.20
SUBLEASE AGREEMENT
------------------
THIS SUBLEASE AGREEMENT (this "Sublease") is made and entered into as of
the 16th day of December, 1997, by and between PREMIERE COMMUNICATIONS, INC., a
Florida corporation, (the "Sublandlord") and ENDEAVOR TECHNOLOGIES Inc., a
Georgia corporation (the "Subtenant"), to be effective as of the "Commencement
Date", as hereinafter defined.
WITNESSETH:
----------
WHEREAS, Sublandlord, by Agreement of Lease dated March 3, 1997, (the
"Master Lease"), leased from Corporate Property Investors (the "Landlord") the
entire 4th floor comprising 20,838 rentable square feet (the "Premises"), along
with additional space on other floors, of that certain building, located at 3399
Peachtree Road, N.E., Atlanta, Georgia (the "Building") such Premises being more
particularly described on Exhibit B to the Master Lease (a copy of which Master
Lease is attached hereto as Exhibit "A" and made a part hereof); and
-----------
WHEREAS, Subtenant desires to sublease the Premises on the terms and
conditions set forth below;
NOW THEREFORE, for and in consideration of the sum of TEN and NO/100
Dollars, the mutual promises set forth below, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto, intending to be legally bound, do hereby agree as follows:
1. Premises: Term
--------------
Sublandlord hereby subleases to Subtenant, and Subtenant hereby subleases
from Sublandlord, the Premises for a term (the "Sublease Term") commencing on
the date (the "Commencement Date") which is the earlier of (i) the date of
occupancy agreed to by Sublandlord and Subtenant, or (ii) February 1, 1998, and
ending on the date which is two (2) years from such date (the "Expiration Date")
unless sooner terminated according to the terms hereof.
2. Subordination
-------------
This Sublease is hereby expressly made subject and subordinate to the
Master Lease and shall be upon the same terms, covenants and conditions provided
in the Master Lease as applicable to the Premises (except such as by their
nature are inapplicable to or inconsistent with this Sublease). Subtenant
acknowledges that its possession and use of the Premises due at all times be
subject to the rights of Landlord set forth in the Master Lease. Sublandlord
shall have no liability to Subtenant for any of the Landlord pursuant to the
Master Lease. The provisions of the Master Lease pertaining to the Premises are
<PAGE>
deemed included herein and made a part hereof ("Sublandlord" being substituted
for "Landlord" and "Subtenant being substituted for "Tenant"), except that
Subtenant's obligations for each subject addressed in this Sublease, including
rental obligations, are limited to the terms of this Sublease.
3. Obligations Under Master Lease
------------------------------
For the purposes of this Sublease only, Subtenant hereby assumes all of the
responsibilities and obligations to be performed on the part of Sublandlord as
tenant under the Master Lease with respect to the Premises for the entire
Sublease Term (other than the obligations to pay rent and additional rent and in
no way relieve other amounts which are governed by this Sublease). Such
undertaking shall in no way relieve Sublandlord of its obligations under the
Master Lease. Both Sublandlord and Subtenant covenant and agree not to do,
permit or allow any act which would violate or constitute a breach of or a
default under the Master Lease. Upon any breach by Subtenant of any of the
terms, covenants, or agreements to be performed or observed under this Sublease
by Subtenant, Sublandlord may exercise any of the rights given to the Landlord
under the Master Lease, subject to the limitations thereof and hereof, and the
exercise thereof shall not be in derogation of, but shall be in addition to any
other remedies available to Sublandlord, hereunder or under law or equity.
4. Termination
-----------
A. Termination of Master Lease
---------------------------
In the event the Master Lease is terminated pursuant to its terms prior to
the expiration of the term of this Sublease, this Sublease shall automatically
cease and terminate as of the date upon which the Master Lease is terminated.
Upon any such termination of the Master Lease, all rent due hereunder shall be
prorated from the first day of the month of termination, and neither party shall
have any further obligation or liability to the other arising out of this
Sublease except for the payment by Subtenant of such amounts of rent as so
prorated and any other amounts accrued as of the date of termination, and except
for rights or obligations that had accrued prior to the effective date of the
termination of this Sublease. To the extent that Sublandlord has over thirty
(30) days' notice of such termination, Sublandlord agrees to give Subtenant
reasonable notice at least thirty (30) days prior to any such termination date.
B. Other Termination
-----------------
In the event of termination of that certain Equipment Lease between
Sublandlord and Subtenant dated of even date herewith (the "Equipment Lease") or
that certain Co-Marketing and Integration Agreement between Sublandlord and
Subtenant dated of even date herewith (the "Co-Marketing Agreement either party
hereto, provided it is not responsible for a default causing such termination,
shall have the right to terminate this Sublease upon written notice to the other
party, which termination shall be effective on the
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<PAGE>
date on which such other agreement terminates, unless the parties mutually
agree to another effective date. In the event of such termination, Subtenant
shall surrender the Premises to Sublandlord in the manner described in the
Master Lease, and neither party shall have any further rights or obligations
under this Sublease, except for rights or obligations that had accrued prior to
the effective date of the termination of this Sublease.
5. Rent
----
A. Base Rent for Premises
----------------------
Subtenant shall pay Sublandlord as the annual base rent (the "Base Rent")
for the Premises during the Sublease Term the sum of Four Hundred Thirty Seven
Thousand Five Hundred Ninety Eight Dollars ($437,598.00) payable in advance in
equal monthly installments of Thirty Six Thousand Four Hundred Sixty Six and
50/100 ($36,466.50) beginning on the Commencement Date and continuing on the day
ten (10) days in advance of each payment to be made under the Master Lease
(recognizing that payments due under the Master Lease are due in advance on the
first day of the month) during the Sublease Term ("Due Date"), and continuing
each and every month thereafter, without demand, deduction, set-off or abatement
whatsoever, said payments of Base Rent to be made directly to Sublandlord at the
address of Sublandlord set forth herein. Appropriate prorations shall be made
in the event the Commencement Date is not a Due Date or in the event that the
Sublease terminates prior to a Due Date.
B. Additional Rent for Premises
----------------------------
Subtenant shall also pay Sublandlord as additional rent, as and when the
same shall become due and payable under the provisions of the Master Lease, all
costs and expenses including, without limitation, all taxes and assessments, all
insurance costs and repair costs pertaining specifically to the Premises or
prorated in the event the same applies to the entire leasehold interest of
Sublandlord under the Master Lease due under the Master Lease for each year
during the Sublease Term (collectively, the "Additional Rent"). Sublandlord
agrees to provide Subtenant with an invoice and the corresponding bill from the
Landlord for the Additional Rent.
C. Late Charges
------------
Any rental amounts not paid when due shall bear interest at the rate of one
and one-half percent (1.5%) per month until paid.
6. Condition of Premises
---------------------
Subtenant represents that it has made a thorough examination and inspection
of the Premises and is familiar with the condition of such property, and
Subtenant agrees to accept the Premises in their "as is" condition, as of the
date of this Sublease. Except as provided in the Co-Marketing Agreement,
Subtenant agrees that it enters into this
-3-
<PAGE>
Sublease without any representations or warranties by Sublandlord, its agents,
representatives, servants or employees or any other person, as to the condition
or use by Subtenant of the Premises.
7. Exclusion from Master Lease
---------------------------
The following Articles or Sections of the Master Lease are expressly
excluded from this Sublease and shall not to Subtenant: any renewal options, or
options to lease additional space in the Building, apply or rights of first
refusal with regard to space in the Building. Subtenant acknowledges and agrees
that such rights are personal to Sublandlord and that Subtenant shall have no
rights to exercise such options and renewals, if any, contained in the Master
Lease.
8. Services, Utilities, Maintenance and Repairs
--------------------------------------------
Subtenant acknowledges and agrees that Sublandlord shall provide, only via
the Landlord, maintenance or repair of the Premises, utilities or other services
described as being provided by the Landlord in the Master Lease. Subtenant
agrees that, in cooperation with the Sublandlord, it shall look solely to the
Landlord and not to Sublandlord for the rendition of all such services and the
performance of all obligations required to be furnished and performed in the
Premises. Subtenant shall receive directly from the Landlord all services and
utilities and the performance of all obligations which the Landlord is required
to provide in and for the benefit of the Premises, and Sublandlord shall have no
liability whatsoever in the event that Landlord fails to furnish or perform any
such services or obligations during the Sublease Term. However, Sublandlord
agrees to cooperate with Subtenant in good faith, in dealings with and notices
to Landlord regarding services, utilities, maintenance and repair of the
Premises.
9. Additional Services
-------------------
Subtenant covenants and agrees to pay any fees and expenses assessed by
Landlord pursuant to the Master Lease resulting from Subtenant's use and
occupancy of the Premises. In addition, if other services not provided by
Landlord (the "Other Services") are obtained for the joint benefit of Subtenant
and Sublandlord, as mutually agreed to by the parties, the parties shall share
the cost of such services on a fair and equitable basis. If Other Services are
desired, solely for the benefit of Subtenant, Subtenant shall bear all of such
costs, and Sublandlord agrees to cooperate with Subtenant, to the extent
reasonably requested, in obtaining such Other Services, provided same are at no
cost to Sublandlord.
10. Use of Premises
---------------
Subtenant shall use the Premises only for the "Permitted Use" as defined in
the Master Lease, and shall not use the Premises for any use or purpose which
would violate the Master Lease. Subtenant shall not change its use of the
Premises without the prior
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<PAGE>
written consent of the Sublandlord, in its reasonable discretion and Landlord,
in the manner provided in the Master Lease. During the Sublease Term, Subtenant
agrees to assume any responsibility previously borne by Sublandlord in its
capacity as tenant under the Master lease regarding the Occupational Safety
Health Act, the Americans with Disabilities Act, and the legal use or
adaptability of the Premises and the compliance thereof to all applicable laws
and regulations enforced during the Sublease Term.
11. Alterations
-----------
Subtenant shall make no alterations, additions, installations or
improvements of any kind ("Alterations") to the Premises without the prior
written consent of Landlord (in accordance with the Master Lease) and
Sublandlord, in its reasonable discretion. Except as provided in the Co-
Marketing Agreement, any Alterations made to the Premises with consent shall be
at the sole cost and expense of Subtenant, and Subtenant agrees to restore the
Premises to their original condition at its sole cost if -so requested by
Sublandlord or Landlord the end of the Sublease Term. Any and all approved
Alterations at shall be made in conformity with the applicable terms and
conditions of the Master Lease. Subtenant shall submit is proposed Alterations,
simultaneously to Landlord and Sublandlord for consent, subject to the
provisions of the Master Lease.
12. Assignment and Subletting
-------------------------
A. Consent Required
----------------
Subtenant shall not voluntarily or by operation of law assign, transfer,
mortgage, sublet, or otherwise transfer or encumber all or any part of
Subtenant's interest in this Sublease or the Premises without the prior written
consent of the Landlord (in accordance with the applicable provisions of the
Master Lease) and Sublandlord, in Sublandlord's reasonable discretion, Any
attempted assignment, transfer, mortgage, encumbrance or subletting without such
consent shall be void, and shall constitute a breach of this Sublease.
B. No Release
----------
Regardless of any consent by Sublandlord, no subletting or assignment shall
release Subtenant of Subtenant's obligations, or after the primary liability of
Subtenant to pay the Base Rent, Additional Rent, and to perform all other
obligations to be performed by Subtenant hereunder. The acceptance of rent by
Sublandlord from any other person shall not be deemed a waiver by Sublandlord of
any provision hereof. Consent to one assignment or subletting shall not be
deemed consent to any subsequent assignment or subletting. In the event of
default by any assignee of Subtenant or any successor of Subtenant in the
performance of any of the terms hereof, Sublandlord may proceed directly against
Subtenant without the necessity of exhausting remedies against said assignee or
such additional sublessee.
-5-
<PAGE>
C. Fees
----
In the event Subtenant shall assign or sublet the Premises or request the
consent of Sublandlord to any assignment or subletting, or if Subtenant shall
request the consent of Sublandlord for any act that Subtenant proposes to do,
then Subtenant shall reimburse Sublandlord for any fees Sublandlord is required
Subtenant proposes to pay as tenant pursuant to the Master Lease, by reason of
such act.
13. Consent and Approvals
---------------------
Sublandlord shall not be liable for any damages if Sublandlord withholds or
delays any consent or approval requested by Subtenant, and as to any consent or
approval which the Sublandlord has agreed in writing not to unreasonably
withhold or delay, Subtenant shall have only the remedy of specific in writing
not to unreasonable performance or injunction.
14. Indemnity
---------
Subtenant shall indemnify and hold harmless Sublandlord and the Landlord
from and against any and all claims arising from Subtenant's use of the
Premises, or from the conduct of Subtenant's business or from any activity, work
or thing done, permitted or suffered by Subtenant in or about the Premises or
elsewhere, except to the extent resulting from a material breach of
Sublandlord's obligations under the Co-Marketing Agreement, and shall further
indemnify and hold harmless the Sublandlord and the Landlord from and against
any and all claims arising from any breach or default in the performance of any
obligation on Subtenant's part to be performed under the terms of this Sublease,
or arising from any negligence of Subtenant or any of Subtenant's agents,
contractors, or employees, (excluding Sublandlord to the extent it is a
contractor of the Subtenant under the Co-Marketing Agreement), and from and
against all costs, attorneys' fees, expenses and liabilities incurred in the
defense of any such claim or any action or proceeding brought thereon. Subtenant
agrees that should any action or proceeding be brought against Sublandlord or
the Landlord by reason of any such claim, upon notice from Sublandlord or the
Landlord, Subtenant shall defend the same at Subtenant's expense by counsel
reasonably satisfactory to Sublandlord.
Subtenant, as a material part of the consideration to Sublandlord, hereby
assumes all risk of upon or damage to property or injury to persons, in, upon or
about the Premises arising from Subtenant's use of the Premises, subject to the
terms of the Equipment Lease as to damages to property addressed therein, and
Subtenant hereby waives all claims in respect thereof against Sublandlord.
Subtenant hereby agrees that Sublandlord shall not be liable for injury to
Subtenant's business or any loss of income, therefrom or for damage to the
goods, wares, merchandise or other property of Subtenant, Subtenant's
shareholders, employees, invitees, customers; or any other person in or about
the Premises, nor shall Sublandlord be liable for injury to any person including
Subtenant's shareholders, employees, agents or contractors, whether such damage
or injury is caused by or results
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<PAGE>
from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, sprinklers, wires, appliances,
plumbing, air conditioning or lighting fixtures, or from any other cause whether
the said damage or injury results from conditions arising upon the Premises or
upon portions of the Building, or from other sources or places, and regardless
of whether the cause of such damage or injury or the means of repairing the same
is inaccessible to Subtenant. Sublandlord shall not be liable for any damages
arising from any act, omission or neglect of the Landlord or any tenant of the
Building.
15. Insurance
---------
Sublandlord shall have no obligation to provide insurance or perform any
repair, replacement, or any other requirement imposed upon the Landlord as
landlord pursuant to the Master Lease in the event of damage to all of or any
part of the Building. However, Sublandlord agrees to keep in place, for the
Premises, such policies of insurance as are required of it as tenant pursuant to
the Master Lease. Subtenant shall obtain and maintain insurance policies
identical to those required to be maintained by Sublandlord as tenant pursuant
to the Master Lease (but only with regard to the Premises herein described and
not the entirety of the premises leased pursuant to the Master Lease), and
Sublandlord and Landlord shall be named as additional insureds. Subtenant
acknowledges and agrees that the Landlord and Sublandlord shall not be
responsible or liable to Subtenant for any loss or damage at the Premises.
16. Estoppel Certificate
--------------------
A. Requirements
------------
Subtenant shall, at any time, upon not less than ten (10) days' prior
written notice from sublandlord, execute, acknowledge and deliver to Sublandlord
a statement in writing (i) certifying that this Sublease is unmodified and in
full force and effect (or, if modified, stating the nature of such modification
and certifying that this Sublease, as so modified, is in full force and effect)
and the extent to which the rent and other charges are paid in advance, if any;
and (ii) acknowledging that there are not, to Subtenant's knowledge, any uncured
defaults on the part of Sublandlord hereunder, or specifying such defaults if
any are claimed. Any such statement may be conclusively relied upon by any
prospective assignee or mortgagees of the Premises.
B. Failure to Comply
-----------------
Subtenant's failure to provide such statement within such times shall be a
default by Subtenant under this Sublease, and shall be conclusive upon Subtenant
(i) that this Sublease is in full force and may effect, without modification
except as may be represented by Sublandlord; (ii) that there are no uncured
defaults in the performance by Sublandlord Landlord; and (iii) that not more
than one month's rent or has been paid in advance.
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<PAGE>
17. Eminent Domain
--------------
In the event of any condemnation of the Premises, all awards and
compensation, or proceeds payable to Sublandlord pursuant to the Master Lease be
the property of Sublandlord. No part of any condemnation awards, compensation
shall be payable to Subtenant.
18. Rules and Regulations
---------------------
Subtenant shall faithfully observe and comply with all rules and
regulations described in or annexed to the Master Lease, as amended from time to
time.
19. Tax on Tenant's Personal Property
---------------------------------
Subtenant shall pay all taxes levied or assessed upon Subtenant's personal
property and shall deliver satisfactory evidence of such payment to Sublandlord,
if requested.
20. Right to Additional Space
-------------------------
Subtenant acknowledges that it shall have no rights under this Sublease to
lease any other space in the Building.
21. Option to Extend
----------------
If Subtenant and Sublandlord mutually agree (and Landlord consents),
Subtenant shall have the option to renew this Sublease for one (1) additional
one-year period under the same terms and conditions as this Sublease, except
that the Base Rent to be paid hereunder shall be adjusted upward by the amount
of the increase under the Master Lease, if any.
22. Arbitration
-----------
Any dispute arising out of this Sublease shall. at the option of either
party, be settled by arbitration. Within ten (10) days after either party shall
have requested arbitration in writing, the parties shall agree on an impartial
arbitrator, and failing agreement, he shall be selected by the American
Arbitration Association at the request of either party. The arbitration shall
be conducted in accordance with the then current rules of commercial arbitration
of the American Arbitration Association, and judgment upon the award granted by
the arbitrator may be entered in any court having jurisdiction thereof. Fees,
costs and expenses of the arbitrator shall be borne by the party against whom
the arbitration shall be determined, or in such proportions as the arbitrator
shall designate.
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<PAGE>
23. Abatement of Rent
-----------------
Subtenant shall receive no abatement of any rent due under this Sublease
for any part of the Sublease Term.
24. Severability
------------
The invalidity of any provision of this Sublease as determined by a court
of competent jurisdiction shall in no way affect the validity of any other
provision hereof.
25. Time of Essence
---------------
Time is of the essence of this Sublease.
26. Captions
--------
Captions of Articles or subdivisions thereof are not a part hereof and are
intended for reference purposes.
27. Notices
-------
All notices or demands given or required to be given hereunder shall be in
writing and shall sent by, hand delivery, overnight courier, or by certified or
registered mail, return receipt requested, addressed to the parties' addresses
set forth below or to each other address as either party may specify in writing
in accordance with this notice provision. Any such notice so given shall be
deemed given and shall be effective on the day of its receipt by the respective
party.
PRIOR TO OCCUPANCY:
- -------------------
Sublandlord: Premiere Communications Inc.
----------- 3399 Peachtree Road, N.E.
Lenox Building, Suite 400
Atlanta, Georgia 30326
Attention: Patrick G. Jones
with a copy to:
Premiere Communications Inc.
3399 Peachtree Road N.E.
Lenox Building, Suite 400
Atlanta, Georgia 30326
Attention: Julianne F. Vaio
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<PAGE>
Subtenant: Endeavor Technologies, Inc.
--------- 1100 Lake Hearn Drive, Suite 370
Atlanta, Georgia 30342-1524
Attention: W. Michael Heekin
AFTER OCCUPANCY:
- ----------------
Sublandlord: Premiere Communications Inc. 3399 Peachtree
----------- 3399 N.E. Lenox Building, Suite 700
Atlanta, Georgia 30326
Attention: Patrick G. Jones
with a copy to:
Premiere Communications, Inc.
3399 Peachtree Road, N.E.
Lenox Budding, Suite 400
Atlanta, Georgia 30326
Attention: Julianne F. Vaio
Subtenant: Endeavor Technologies; Inc.
--------- 3399 Peachtree Road, N.E.
Lenox Building, Suite 400
Atlanta, Georgia 30326
Attention: W. Michael Heekin
28. Brokers
-------
Subtenant warrants and represents to Sublandlord that it has dealt
with no broker or real estate agent or made no agreement or created any
liability with respect to this Sublease and/or the Premises or in connection
with the payment of brokerage or other commissions to anyone, and Subtenant
hereby agrees to indemnify, defend and hold Sublandlord harmless from and
against all liability, cost, or expense rising out of the claims of any other
broker or real estate agent claiming by, through or under Subtenant for a
commission in connection with this Sublease and/or the transaction contemplated
by this Sublease.
Sublandlord warrants and represents to Subtenant that it has dealt
with no broker or real estate agent or made no agreement or created any
liability with respect to this Sublease and/or the Premises or in connection
with the payment of brokerage or other commissions to anyone, and Sublandlord
hereby agrees to indemnify, defend and hold Subtenant harmless from and against
all liability, cost, or expense rising out of the claims of any other broker or
real estate agent claiming by, through or under Sublandlord for a
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<PAGE>
commission in connection with this Sublease and/or the transaction contemplated
by this Sublease.
29. Consents Required
-----------------
This Sublease is expressly conditioned upon the written consent of the
Landlord. Upon execution of this Sublease, Sublandlord will prompt request such
written consent. If such consent has not been received by Sublandlord within
thirty (30) days from the date of hereof, then, at the option of either party,
upon written notice to the other at any time after such 30-day period, this
Sublease shall be deemed canceled, null and void and of no further force and
effect, and neither party shall have any claim of any kind or nature against the
other provided such notice is sent before the Landlord's written consent is
delivered to Sublandlord. In no event shall Sublandlord be obligated to deliver
possession of the Premises to Subtenant until date upon which Sublandlord
notifies Subtenant that it has received the written consent of the Landlord.
30. Condition of Premises on Termination
------------------------------------
Upon the expiration or other termination of the term of this Sublease,
Subtenant covenants and agrees that it shall quit and surrender the Premises in
the condition required pursuant to the terms of the Master Lease, shall remove
all Subtenant's personal property therefrom (except such items, including,
without limitation, such fixtures, equipment, improvements and Alterations,
which are required to remain a part of the Premises pursuant to the Master
Lease), and shall make any repairs or restorations required by reason of each
removal to put the Premises in the condition required pursuant to the Master
Lease.
31. Waivers
-------
No waiver by Sublandlord of any provision hereof shall be deemed a
waiver of any provision hereof or of any subsequent breach by Subtenant of the
same or any provision. The consent or approval by Sublandlord of any act shall
not be deemed to render unnecessary obtaining subsequent consent or approval
from Sublandlord or any subsequent act by Subtenant. The acceptance of rent
hereunder by Sublandlord shall not be a waiver of any preceding breach by
Subtenant of any provision hereof, regardless of knowledge by Sublandlord of
such preceding breach at the time of acceptance of each rent.
32. Recording
---------
Subtenant shall not record this Sublease, and such recordation shall,
at the option of Sublandlord, constitute a non-curable default of Subtenant
hereunder.
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<PAGE>
33. Holding Over
------------
Subtenant shall have no right to hold over at the Premises beyond the
Expiration Date or earlier termination of this Sublease. If Subtenant remains
in possession after the expiration or earlier termination of the Sublease Term
without the express written consent of Sublandlord, such occupancy shall, at the
Sublandlord's option, be deemed an act of trespass, and Subtenant shall pay as
liquidated damages (and not as rent) an amount equal to three times the Base
Rent in effect at the time for the expiration or termination of this Sublease,
prorated on a daily basis for each such day of continued occupancy, plus all
other charges payable hereunder. In the event of any such holdover, Subtenant
shall also pay as liquidated damages (and not as rent) all amounts payable by
Sublandlord to Landlord incurred as a result of such holdover, including but not
limited to all amounts payable by Sublandlord to the Landlord pursuant to the
Master Lease as a result of such continued occupancy by Subtenant. Nothing
herein shall be deemed to limit Sublandlord's rights to, forcibly evict
Subtenant, or any other rights or remedies available to Sublandlord. No receipt
of money by Sublandlord from Subtenant after expiration or termination of this
Sublease reinstate or extend this Sublease.
34. Cumulative Remedies
-------------------
No remedy or election hereunder shall be deemed exclusive but shall,
wherever possible, be cumulative with all other remedies at law or in equity.
35. Covenants and Conditions
------------------------
Each provision of this Sublease performable by Subtenant shall be deemed
both a covenant and condition.
36. Choice of Law
--------------
This Sublease shall be governed by the laws of the State of Georgia.
37. Attorneys' Fees
---------------
In the event Sublandlord, without any fault on its part, is a party to any
litigation commenced by or against Subtenant or by or against any party in
possession of the Premises or any part thereof claiming under Subtenant,
Subtenant shall pay, as additional rent, all costs including, without implied
limitation, reasonable attorneys' fees incurred by or imposed by or upon
Sublandlord in connection with such litigation, and the costs of enforcement of
this Sublease against Subtenant.
38. Sublandlord's Access
--------------------
Sublandlord and its agents shall have the right to enter the Premises at
reasonable times, upon reasonable notice to Subtenant, for the purpose of
inspecting the same,
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<PAGE>
showing the same to prospective assignees, lenders or lessees, all without undue
interruption to business. In addition, Sublandlord shall have the right to
enter the Premises to perform such actions as are required of it as tenant
pursuant to the Master Lease. Notwithstanding the foregoing, without notice,
Sublandlord shall have the right to enter the Premises to repair, maintain,
inspect or otherwise deal with any equipment in or improvements to the Premises
necessary for Sublandlord to operate in the remainder of the office space
covered by the Master Lease, including, without limitation, repair or additions
of wiring to riser space between floors of the Building. Subject to the above,
and provided Subtenant is not in default hereunder or under the Master Lease,
Sublandlord covenants that Subtenant shall have the right to possession and
quiet enjoyment of the Premises during the term of this Sublease.
39. Security Deposit
----------------
Upon the execution of this Sublease, Subtenant shall pay to Sublandlord the
sum of $0.00 as security for Subtenant's performance of its obligations under
-----
this Sublease. Upon termination of this Sublease, provided Subtenant is not then
in default of any of the terms hereof, the security deposit shall be returned to
Subtenant, without interest, less any amounts due Sublandlord upon termination.
40. Corporate Authority
-------------------
Each of individual executing this Sublease on behalf Subtenant or
Sublandlord represents and warrants that he is duly authorized to execute and
deliver this Sublease on behalf of such party.
41. Amendments
----------
This Sublease may be modified only in writing, signed by the parties in
interest at the time of the modification.
42. Landlord's Liability
--------------------
Subtenant acknowledges and agrees to the following with respect to the
Landlord:
A. In the event of a sale or transfer of all or any portion of the
Building or any undivided interest therein, or in the event of the masking of a
lease of all or substantially of the Building, or in the event of a sale or
transfer of the Landlord's fee or leasehold estate, the grantor, transferor or
lessor, as the case may be, shall thereafter be entirely relieved of all terms,
covenants and obligations thereafter to be performed by Landlord under the
Master Lease and this Sublease to the extent of the interest or portion so sold,
transferred or leased. Upon the termination of any such lease, the lessor
thereunder shall become and remain liable as Landlord hereunder only so long as
there shall not be made another such lease.
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<PAGE>
B. Subtenant agrees that it has no direct fights to Landlord, but if
it did that it shall look solely to the estate and property of Landlord in the
Building and the land constituting the "Building Parcel", as such term is
defined in the Master Lease (subject of prior rights, if any, of holders of
superior interests) for the collection of any judgment (or other judicial
process) requiring the payment of money by Landlord in the event of any default
or breach by Landlord with respect to any of the terms, covenants and conditions
of this Lease to be observed or performed by Landlord; and no other assets of
Landlord or any Person (as defined in the Master Lease) having any interest in
Landlord shall be subject to levy, execution or other procedures for the
satisfaction of Subtenant's remedies.
C. Corporate Property Investors is the designation of the Trustees
under a Declaration of Trust dated June 24, 1971 as amended, and neither the
shareholders nor the Trustee, officers, employees or agents of the Trust created
thereby shall be liable hereunder and, subject to Section 6.2B of the Master
Lease, all persons shall look solely to the trust estate for the payment of any
claims hereunder or for the performance hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hands and seals as of
the day and year first above written.
SUBLANDLORD:
-----------
Signed, sealed and delivered this 15th PREMIERE COMMUNICATIONS, INC.
day of December, a Florida corporation
1997, in the presence of:
/s/ Wade H. Stribling By: /s/ Patrick G. Jones
- --------------------------------------- ------------------------
Witness Title: Senior Vice President
---------------------
/s/ Pamela Callon Evans
- ---------------------------------------
Notary Public
My Commission Expires:
[CORPORATE SEAL]
9-14-2000
- ---------------------------------------
[NOTARIAL SEAL]
SUBTENANT:
---------
Signed, sealed and delivered this 15th
day of December, 1997, ENDEAVOR TECHNOLOGIES, INC.
in the presence of: a Georgia corporation
/s/ Wade H. Stribling By: /s/ W. Michael Heekin
- --------------------------------------- --------------------
Witness Title: COO
-----------------
/s/ Sherry D. Hall
- ---------------------------------------
Notary Public
My Commission Expires:
October 23, 2000
- ---------------------------------------
[CORPORATE SEAL]
[NOTARIAL SEAL]
[consent of Landlord on following page]
-15-
<PAGE>
CONSENT OF LANDLORD
-------------------
Corporate Property Investors, as Landlord under the Master Lease, hereby
consents to the within Sublease by Endeavor Technologies, Inc., pursuant to
Article 7.2(c) of the Master Lease and further acknowledges that any right to
terminate the Master Lease by virtue of the granting of this Sublease is hereby
waived.
LANDLORD:
CORPORATE PROPERTY INVESTORS, a
Massachusetts business trust
Dated: December 16, 1997 By: /s/
------------------- ------------------------
Title:
---------------------
Corporate Property Investors is the designation of the Trustees under a
Declaration of Trust, as amended and restated on file with the Secretary of
State of the Commonwealth of Massachusetts, and neither the Shareholders nor the
Trustees, officers, employees or agents of the Trust created thereby, nor any of
their personal assets shall be liable hereunder and all persons dealing with the
Trust shall look solely to the Trust estate for the payment of any claims
hereunder or the performance hereof.
-16-
<PAGE>
EXHIBIT 10.26
PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A REQUEST FOR CONFIDENTIAL
TREATMENT. THE COPY FILED AS AN EXHIBIT OMITS THE INFORMATION SUBJECT TO THE
CONFIDENTIALITY REQUEST. SUCH OMITTED INFORMATION HAS BEEN FILED SEPARATELY
WITH THE COMMISSION. SUCH PORTIONS ARE MARKED BY BRACKETS [***] AND THE PAGE ON
WHICH THEY APPEAR CONTAIN AN ASTERISK (*) IN THE UPPER RIGHT HAND CORNER.
WILMAX UNIVERSAL
AMENDED AND RESTATED
PROGRAM ENROLLMENT TERMS
------------------------
These Amended and Restated Program Enrollment Terms (the "PET") are made
this 30th day of September, 1997 (the "Effective Date"), by and between WorldCom
Network Services, Inc. d/b/a WilTel ("WilTel") and Premiere Communications, Inc.
("Customer") and are a part of their agreement for switched services, more
particularly identified as TSA #PCI-951020 (the "Agreement"). In accordance
with the Agreement, charges to Customer for Service obtained thereunder shall be
subject to the Discount Schedule set forth below and the Agreement shall also be
subject to the terms and conditions set forth herein.
1. PRIOR AGREEMENT: The parties acknowledge that they previously executed
those certain Program Enrollment Terms (the "Prior PET"), Pricing Exhibit
(the "Prior Pricing Exhibit"), and Service Schedule (the "Existing Service
Schedule") to the Agreement all of which are dated December 1, 1995. As of
the Effective Date the parties agree that the Prior PET and the Prior
Pricing Exhibit shall be canceled in their entirety and of no further force
or effect with the exception of certain accrued obligations arising under
the Prior PET such as the payment of money or application of credits
accruing prior to the Effective Date. Further, as of the Effective Date,
all Service currently being provided Customer under the Agreement will be
provisioned and maintained by WilTel taking into account the terms and
conditions of this Amended PET and the Existing Service Schedule.
2. SERVICE TERM: The Service Term shall commence as of the Effective Date
stated above and shall continue for a period of Thirty-six (36) Months (the
"Service Term"). Upon the expiration of the Service Term, the Service in
question will continue to be provided pursuant to the same terms and
conditions as are then in effect (including without limitation, the
applicable rates and discounts then in effect), subject to termination by
either party upon thirty (30) days prior written notice to the other party.
3. DISCOUNT SCHEDULE:
(A) Commencing with the Effective Date and continuing through the end of the
Service Term (including any applicable extensions thereto), Customer's
---------
discount (the "Discount") will be as determined under this Subsection 2(A)
taking into account any increase as described in Subsection 2(B) below.
The Discount is based on the number of months contained in the Service Term
divided by 12. If the number of months is less than 12, the month-to-month
(MTM) discounts shall apply. If the product of the division is equal to or
greater than 1 but less than 2, the 1-Year discounts apply; if the product
of the division is equal to or greater than 2 but less than 3, the 2-Year
discounts apply; and, if the product of the division is equal to or greater
than 3, the 3-
-1-
<PAGE>
*
Year discounts apply. Throughout the Service Term including any applicable
extensions thereto, Customer will automatically receive the next higher
discount when Customer's eligible Monthly Revenue reaches the next level.
<TABLE>
<CAPTION>
SERVICE TERM
Monthly Revenue(a) MTM 1-YR 2-YR 3YR
<S> <C> <C> <C> <C>
$[***] - $[***](b) [***]% [***]% [***]% [***]%
$[***] - $[***] [***]% [***]% [***]% [***]%
$[***] - $[***] [***]% [***]% [***]% [***]%
$[***] - $[***] [***]% [***]% [***]% [***]%
$[***] - $[***] [***]% [***]% [***]% [***]%
$[***] - $[***] [***]% [***]% [***]% [***]%
$[***] - $[***] [***]% [***]% [***]% [***]%
$[***]+ [***]% [***]% [***]% [***]%
</TABLE>
(a) For purposes of this Agreement, "Monthly Revenue" will include all
of Customer's gross measured and per call Switched Service charges (i.e.,
Directory Assistance and both Domestic and International) plus [***]. Monthly
Revenue shall exclude any pro rata charges, access charges, ancillary or special
feature charges, such as, Authorization codes or CDR Tapes, or any other charges
other than those identified by the relevant WilTel invoice as Monthly Recurring
Interexchange Service charges or Switched Service charges.
(b) If Customer's Monthly Revenue is less than $[***], Customer must
maintain at least one (1) DS-1 circuit comprising a Service Interconnection as
defined in the Service Schedule with respect to TERMINATION Service and/or 800
ORIGINATION Service.
(B) If Customer's Minimum Commitment (as described in Section 3
below) is equal to or greater than $[***], all of the percentages shown in the
Discount Schedule above will be increased by the following amounts based on
Customer's Minimum Commitment:
If Customer's Minimum The applicable percentages
Commitment is at least will be increased by
- ---------------------- --------------------
$[***] [***]%
$[***] [***]%
$[***] [***]%
$[***] [***]%
$[***] [***]%
EXAMPLE: [***]
[***] CONFIDENITAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION
-2-
<PAGE>
*
4. CUSTOMER'S MINIMUM REVENUE COMMITMENT: Commencing with the [***]
billing period and continuing through the end of the Service Term (including any
extensions thereto) (the "Commitment Period"), Customer agrees to maintain, on a
take-or-pay basis, Monthly Revenue equal to at least the level of [***]
Customer maintains during the [***] billing period ("Customer's Minimum Monthly
Commitment").
5. DEFICIENCY CHARGE: In the event Customer does not maintain three (3) times
the designated Minimum Monthly Commitment as designated in Section 4 above, in
any three (3) month period ("Quarter") during the Commitment Period, then for
those month(s) only, Customer will pay WilTel the difference between (x) three
(3) times Customer's Minimum monthly Commitment and (y) Customer's actual
Monthly Revenue as described in Section 3 above for the same Quarter net of any
applicable discounts (the "Deficiency Charge"). The Deficiency Charge will be
due at the same time payment is due for Service provided to Customer, or
immediately in an amount equal to Customer's Minimum Revenue Commitment for the
unexpired portion of the Service Term, if (i) Customer cancels all circuits
comprising all Service Interconnections as described in the Service Schedules,
or (ii) WilTel terminates this Agreement based on Customer's default.
EXAMPLE: [***]
6. APPLICATION OF DISCOUNTS:
(A) After determining Customer's applicable discount percentage based on the
Discount Schedule described in Section 2 above, the applicable percentage will
be applied to Monthly Revenues comprised of Customer's Interstate (including
----------
Alaska, Hawaii, the United States Virgin Islands and Puerto Rico unless
otherwise noted herein) measured usage charges (which includes 1+ and 800 usage,
whether switched access or dedicated access or travel card usage).
(B) During the Service Term of the Agreement, accumulated credits derived
from the applicable Discounts will be applied in arrears commencing with the
first day of the month following the Effective Date, that is, the Discount will
be applied to Customer's measured usage charges for the preceding month (the
"Discount Period"). The initial Discount Period shall include any partial
calendar month following Start of Service, or such other time basis as may be
mutually determined by the parties.
(C) Each Discount will result in the application of a credit obtained during
the Discount Period to the WilTel invoice to Customer relevant to the billed
measured Switched Service for the calendar month next following the completion
of each Discount Period, provided Customer has paid undisputed charges
--------
[***] CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION
-3-
<PAGE>
*
(including any late fees, if applicable) for that month and has not otherwise
been subject to a Suspension Notice in accordance with the Agreement. Failure
of Customer to comply with the foregoing provision shall entitle WilTel to
withhold any credit due Customer for the Discount Period in question until such
charges (including late fees) have been paid in full.
7 RATES:
(A) TERMINATION Service
(i) Interstate Rates Per Minute
$[***] without regard to time of day, within the 48 contiguous
United States except with respect to termination in the
SUPERSAVER LATAs described below.
(ii) Interstate Extended Rates Per Minute
SEE the DEDICATED ACCESS Service Extended Rates described in
Subsection 6(D) below.
(iii) Interstate SUPERSAVER Rates Per Minute
$[***] without regard to time of day. These rates are only
available and only apply to Interstate TERMINATION Service calls
to the SUPERSAVER LATAs set forth on Schedule I attached hereto
(i.e., Intrastate TERMINATION Service calls will not be subject
to SUPERSAVER Rates).
(iv) Intrastate Rates Per Minute [***]
SEE the DEDICATED ACCESS Service Intrastate rates shown on
Schedule 2 attached hereto.
(v) International (excluding Canada and Mexico) Rates Per Minute
[***]
SEE DEDICATED ACCESS Service International rates shown on
Schedule 5 attached hereto. [Note: The applicable "Rate Plan"
will be as determined under Section 8 below.]
(vi) Canada and Mexico Rates Per Minute [***]
[***] CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION
-4-
<PAGE>
*
SEE the DEDICATED ACCESS Service Canada and Mexico rates shown on
Schedule 3 attached hereto.
(B) 800 ORIGINATION Service
(i) Interstate Rates Per Minute
$[***] without regard to time of day, within the 48 contiguous
United States except with respect to origination in the
SUPERSAVER LATAs described below.
(ii) Interstate Extended Rates Per Minute
SEE the DEDICATED ACCESS Service rates described in Subsection
6(D) below.
(iii) Interstate SUPERSAVER Rates Per Minute
$[***] without regard to time of day. These rates are only
available and only apply to Interstate 800 ORIGINATION Service
calls to the SUPERSAVER LATAs set forth on Schedule 1 attached
hereto (i.e., Intrastate 800 ORIGINATION Service calls will not
be subject to SUPERSAVER Rates).
(iv) Intrastate Rates Per Minute [***]
SEE DEDICATED ACCESS Service Intrastate Rates shown on Schedule 2
attached hereto.
(iv) Canada Rates Per Minute [***]
SEE the DEDICATED ACCESS Service Mexico and Canada rates shown on
Schedule 3 attached hereto.
(C) SWITCHED ACCESS Service
(i) Interstate Rates Per Minute
$[***] without regard to time of day within the 48 contiguous
United States.
[***] CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION
-5-
<PAGE>
*
(ii) Interstate (1+) Extended Rates Per Minute
$[***] Day, $[***] Nonday from the 48 contiguous United States to
Hawaii.
$[***] Day, $[***] Nonday from the 48 contiguous United States to
Alaska, Puerto Rico and the United States Virgin Islands.
$[***] Day, $[***] Nonday from Hawaii to the 48 contiguous United
States.
See SWITCHED Access Service (1+) Rates shown on Schedule 3 for
calls from Hawaii to Canada and Mexico and Schedule 8 for calls
from Hawaii to certain International locations.
(iii) Interstate (800) Extended Rates Per Minute [***]
$[***] Day, $[***] Nonday from Hawaii to the 48 contiguous United
States.
$[***] Day, $[***] Nonday from Alaska to the 48 contiguous United
States.
$[***] Day, $[***] Nonday from Puerto Rico to the 48 contiguous
United States.
$[***] Day, $[***] Nonday from the United States Virgin Islands
to the 48 contiguous United States.
(iv) Intrastate Rates Per Minute [***]
SEE the SWITCHED ACCESS Service Intrastate rates shown on
Schedule 2 attached hereto.
(v) International (excluding Canada and Mexico) Rates Per Minute
[***]
SEE the SWITCHED ACCESS Service International rates shown on
Schedule 4 attached hereto. [Note: The applicable "Rate Plan"
will be as determined under Section 8 below.]
[***] CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION
-6-
<PAGE>
*
(vi) Canada and Mexico Rates Per Minute [***]
SEE the SWITCHED ACCESS Service Canada and Mexico rates shown on
Schedule 3 attached hereto.
(D) DEDICATED ACCESS Service
(i) Interstate Rates Per Minute
$[***] without regard to time of day within the 48 contiguous
United States.
(ii) Interstate (1+) Extended Rates Per Minute
$[***] Day, $[***] Nonday from the 48 contiguous United States to
Hawaii.
$[***] Day, $[***] Nonday from the 48 contiguous United States to
Alaska, Puerto Rico and the United States Virgin Islands.
(iii) Interstate (800) Extended Rates Per Minute [***]
$[***] Day, $[***] Nonday from Hawaii to the 48 contiguous United
States.
$[***] Day, $[***] Nonday from Alaska to the 48 contiguous United
States.
$[***] Day, $[***] Nonday from Puerto Rico to the 48 contiguous
United States.
$[***] Day, $[***] Nonday from the United States Virgin Islands
to the 48 contiguous United States.
(iv) Intrastate Rates Per Minute [***]
SEE the DEDICATED ACCESS Service Intrastate rates shown on
Schedule 2 attached hereto.
(v) International (excluding Canada and Mexico) Rates Per Minute
[***]
[***] CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION
-7-
<PAGE>
*
SEE the DEDICATED ACCESS Service International rates shown on
Schedule 5 attached hereto. [Note: The applicable "Rate Plan"
will be as determined under Section 8 below.]
(vi) Canada and Mexico Rates Per Minute [***]
SEE the DEDICATED ACCESS Service Canada and Mexico rates shown on
Schedule 3 attached hereto.
(E) TRAVEL CARD Service:
(i) Basic Interstate TRAVEL CARD Service Rates Per Minute
$[***] Day, $[***] Nonday within the 48 contiguous United States.
(ii) Basic Intrastate TRAVEL CARD Service Rates Per Minute [***]
SEE the SWITCHED ACCESS Service Intrastate rates shown on
Schedule 2 attached hereto.
(iii) Basic International (excluding Canada and Mexico) TRAVEL CARD
Service Rates Per Minute [***]
SEE the SWITCHED ACCESS Service International rates shown on
Schedule 4 attached hereto. [Note: The applicable "Rate Plan"
will be as determined under Section 8 below.] International
TRAVEL CARD Service calls from the 48 contiguous United States to
International locations (excluding only Canada) are subject to a
surcharge of $[***] per call.
(iv) Basic Canada TRAVEL CARD Service Rates Per Minute [***]
$[***] Day, $[***] Nonday from the 48 contiguous United States to
Canada. TRAVEL CARD Service calls from the 48 contiguous United
States to Canada are subject to a surcharge of $[***] per call.
$[***] Day, $[***] Nonday from Canada to the 48 contiguous United
States. TRAVEL CARD Service calls from Canada to the domestic
United States are subject to a surcharge of $[***] per call.
[***] CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION
-8-
<PAGE>
*
(v) Basic Mexico TRAVEL CARD Service Rates Per Minute [***]
SEE the SWITCHED ACCESS Service Mexico rates shown on Schedule 3
attached hereto. TRAVEL CARD Service calls from the 48
contiguous United States to Mexico are subject to a surcharge of
$[***] per call.
(vi) Enhanced TRAVEL CARD Service Pricing [Note: Enhanced features to
TRAVEL CARD Service are available at the rates shown on Schedule
6 attached hereto.] [***]
(F) Directory Assistance
(i) Interstate Rate Per Call [***]: $[***]
(ii) Intrastate Rate Per Call [***]: $[***]
8. INTERNATIONAL SERVICE:
(A) Commencing with the Effective Date, with respect to calls originating in
the continental United States and terminating to an International location
(excluding Puerto Rico, the United States Virgin Islands, Canada and Mexico),
unless Customer has elected an International Sub-Commitment as described in
Subsection (B) below, Customer's International rates will be deemed to
correspond with the level of applicable charges shown on Schedule 4 and Schedule
5, both of which are attached hereto and incorporated herein by reference based
on [***] of Customer's Minimum Revenue Commitment described in Section 4 above
(rounded down to the nearest International Revenue Level) taking into account
the International Rate periods on Schedule 7, which is also attached hereto and
made a part hereof. In the event (i) Customer's Service Term is Month-to-Month,
or (ii) Customer's Minimum Revenue Commitment is less than $[***], Customer's
International rates will correspond with the applicable level of "Base
International Rates" shown on Schedule 4 and Schedule 5. With respect to
TERMINATION Service and 800 ORIGINATION Service calls, Customer's International
rates will be the applicable DEDICATED ACCESS Service rates.
Example: [***]
(B) Commencing with the Effective Date and continuing through the end of the
Service Term including any applicable extensions thereto ("International
Commitment Period"), Customer agrees to maintain, on a take-or-pay basis,
International Monthly Revenue (as described herein) of at least (check one of
[***] CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION
-9-
<PAGE>
*
the following) ("Customer's International Sub-Commitment") (NOTE: If none of
the boxes below are checked, Customer will be deemed to have elected an
International Sub-Commitment of $[***]]:
$[***] $[***] $[***] $[***]
$[***] $[***] $[***]
For purposes of this Agreement, Customer's "INTERNATIONAL MONTHLY REVENUE" will
be comprised of all of Customer's gross (i.e., prior to the application of
discounts) measured and per call Switched Service charges (i.e., Directory
Assistance and both Domestic and International) associated with a call to an
International location (excluding Puerto Rico, the United States Virgin Islands,
Canada and Mexico).
(C) At any time during the Service Term of this Agreement, Customer may
modify Customer's International Sub-Commitment ("CUSTOMER'S MODIFIED
INTERNATIONAL SUB-COMMITMENT") for the remainder of the International Commitment
Period by notifying WilTel in writing. Commencing with the first day of the
month following at least thirty (30) days after WilTel receives the notice
described herein, (i) Customer's Modified International Sub-Commitment will be
effective, and (ii) Customer's International rates will correspond with the
applicable rates shown on Schedule 4 and Schedule 5 based on Customer's Modified
International Sub-Commitment.
(D) In the event Customer does not maintain Customer's International Sub-
Commitment (or Customer's Modified International Sub-Commitment, if applicable)
in any month during the International Commitment Period, then for those month(s)
only, Customer will pay WilTel the difference between the greater of (i)
Customer's International Sub-Commitment (or customer's Modified International
Sub-Commitment) and Customer's actual International Monthly Revenue as defined
above (the "INTERNATIONAL DEFICIENCY CHARGE"), or (ii) the Deficiency Charge
calculated under Section 4 above. If applicable, the International Deficiency
Charge will be due at the same time payment is due for Service provided to
Customer, or immediately in an amount equal to Customer's International Sub-
Commitment for the unexpired portion of the International Commitment Period if
WilTel terminates this Agreement based on Customer's default.
9. PAYMENT TERMS: The parties agree to delete Subsection 5(A) of the TSA in
its entirety and replace it with the following:
WilTel billings for service are made on a monthly basis (or such other
basis as may be mutually agreed to by the parties) following Start of Service.
Subject to Subsection 5(D) below, Service shall be billed at rates as described
in the PET, and Service Requests, as the case may be. Discounts, if any,
applicable to the rates for certain Switched Services are also
[***] CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION
-10-
<PAGE>
*
set forth in the PET. Customer will pay each WilTel invoice in full for
Switched Service within forty-five (45) days of the invoice date set forth on
each WilTel invoice to Customer ("Due Date"). If payment is not received by
WilTel on or before the Due Date, Customer shall also pay a late fee in the
amount of the lesser of one and one-half percent (1.5%) of the unpaid balance of
the Service charges per month or the maximum lawful rate under applicable state
law.
10 RIGHT OF FIRST REFUSAL: [***]
[***] CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION
-11-
<PAGE>
IN WITNESS WHEREOF, the parties have executed these WILMAX UNIVERSAL
Program Enrollment Terms on the date first written above.
WORLDCOM NETWORK SERVICES, INC., d/b/a PREMIERE COMMUNICATIONS, INC.
WilTel
By: /s/ By: /s/ Tom Houlihan
----------------------------------- ----------------------
(Signature) (Signature)
Tom Houlihan
----------------------------------- ----------------------
(Print Name) (Print Name)
VP Engineering & Operations
- ----------------------------------- ----------------------------
(Title) (Title)
ATTACHMENTS:
Schedule 1 SUPERSAVER LATAs
Schedule 2 Intrastate Rates; Canada and Mexico Rates from Hawaii
Schedule 3 Canada and Mexico Rates
Schedule 4 SWITCHED ACCESS Service International Rates
Schedule 5 DEDICATED ACCESS Service International Rates
Schedule 6 ENHANCED TRAVEL CARD Service Rates
Schedule 7 International Rate Periods
Schedule 8 Switched International 1+ Rates from Hawaii
<PAGE>
*
Schedule 1
WILMAX UNIVERSAL
Interstate
SuperSaver
LATAs
<TABLE>
<CAPTION>
<S> <C> <C> <C>
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</TABLE>
[***] CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
<PAGE>
*
WILMAX UNIVERSAL INTRASTATE BASE RATES
<TABLE>
<CAPTION>
Switched Dedicated Switched Dedicated
Peak Off-Pk Peak Off-Pk Peak Off-Pk Peak Off-Pk
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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[***] [***] [***] [***] [***] [***] [***] [***] [***] [***]
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[***] [***] [***] [***] [***] [***] [***] [***] [***] [***]
- -----------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***] [***] [***]
- -----------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***] [***] [***]
- -----------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***] [***] [***]
- -----------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***] [***] [***]
- -----------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***] [***] [***]
- -----------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***] [***] [***]
- -----------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***] [***] [***]
- -----------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***] [***] [***]
- -----------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***] [***] [***]
- -----------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***] [***] [***]
- -----------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***] [***] [***]
- -----------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***] [***] [***]
- -----------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***] [***] [***]
- -----------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***] [***] [***]
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
*Billed on an 18-sec min, 6-sec increments (18/6). Must maintain an average
call duration of 1 min for all intralata and intrastate products
Calls are billed in 6 second increments with a 6 second minimum. Rates apply to
both Outbound 1+ and Inbound 800 Service.
Dedicated Rates apply to Intrastate Carrier Termination Service and Intrastate
800 Origination Service.
WilTel - Proprietary
Not for use or disclosure outside WilTel
Except under written agreement
[***] CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION
<PAGE>
*
WILMAX UNIVERSAL 1 + CANADA / MEXICO RATES
<TABLE>
<S> <C> <C>
[***] [***] [***]
- --------------------------------------------------------- ------------------------------------------
[***] [***] [***]
- --------------------------------------------------------- ------------------------------------------
[***] [***] [***]
- --------------------------------------------------------- ------------------------------------------
[***] [***] [***]
- --------------------------------------------------------- ------------------------------------------
[***] [***] [***]
- --------------------------------------------------------- ------------------------------------------
[***] [***] [***]
- --------------------------------------------------------- ------------------------------------------
[***] [***] [***]
- --------------------------------------------------------- ------------------------------------------
[***] [***] [***]
- --------------------------------------------------------- ------------------------------------------
[***] [***] [***]
- --------------------------------------------------------- ------------------------------------------
[***] [***] [***]
- --------------------------------------------------------- ------------------------------------------
[***] [***] [***]
- --------------------------------------------------------- ------------------------------------------
[***] [***] [***]
- --------------------------------------------------------- ------------------------------------------
[***] [***] [***]
- --------------------------------------------------------- ------------------------------------------
[***] [***] [***]
- --------------------------------------------------------- ------------------------------------------
</TABLE>
WILMAX UNIVERSAL INBOUND 800 FROM CANADA
<TABLE>
<S> <C> <C>
[***] [***] [***]
- ---------------------------------------------------------------------- ------------------------------------------
[***] [***] [***]
- ---------------------------------------------------------------------- ------------------------------------------
[***] [***]
------------------------------------------
</TABLE>
WILMAX UNIVERSAL 1 + CANADA / MEXICO RATES FROM HAWAII
<TABLE>
<S> <C> <C>
[***] [***] [***]
- ---------------------------------------------------------------------- ------------------------------------------
[***] [***] [***]
- ---------------------------------------------------------------------- ------------------------------------------
[***] [***] [***]
- ---------------------------------------------------------------------- ------------------------------------------
[***] [***] [***]
- ---------------------------------------------------------------------- ------------------------------------------
[***] [***] [***]
- ---------------------------------------------------------------------- ------------------------------------------
[***] [***] [***]
- ---------------------------------------------------------------------- ------------------------------------------
[***] [***] [***]
- ---------------------------------------------------------------------- ------------------------------------------
[***] [***] [***]
- ---------------------------------------------------------------------- ------------------------------------------
[***] [***] [***]
- ---------------------------------------------------------------------- ------------------------------------------
[***] [***] [***]
- ---------------------------------------------------------------------- ------------------------------------------
[***] [***] [***]
- ---------------------------------------------------------------------- ------------------------------------------
[***] [***] [***]
- ---------------------------------------------------------------------- ------------------------------------------
[***] [***]
------------------------------------------
[***] [***]
------------------------------------------
</TABLE>
[***]
[***]
WilTel - Proprietary
Not for use or disclosure outside WilTel
except under written agreement
[***] CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
<PAGE>
*
WILMAX UNIVERSAL SWITCHED INTERNATIONAL RATES
<TABLE>
<CAPTION>
1+ From Mainland Billing Increments 1st 30/Addtn'l 6
- ------------------------------------------------------------------------------------------------------------------------------------
WilMax Univ'l WilMax Univ'l WilMax Univ'l WilMax Univ'l WilMax Univ'l WilMax Univ'l WilMax Univ'l
Switched Switched Switched Switched Switched Switched Switched
Base $50K Int'l $100K Int'l $250K Int'l $500K Int'l $750K Int'l $1,000K Int'l
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
COUNTRY
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
WilTel - Proprietary
Not for use or disclosure outside WilTel
except under written agreement
[***] CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
<PAGE>
*
WILMAX UNIVERSAL DEDICATED INTERNATIONAL RATES
<TABLE>
<CAPTION>
1+ From Mainland Billing Increments 1st 30/Addtn'l 6
- -----------------------------------------------------------------------------------------------------------------------------------
WilMax Univ'l WilMax Univ'l WilMax Univ'l WilMax Univ'l WilMax Univ'l WilMax Univ'l WilMax Univ'l
Switched Switched Switched Switched Switched Switched Switched
Base $50K Int'l $100K Int'l $250K Int'l $500K Int'l $750K Int'l $1,000K Int'l
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
COUNTRY
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
WilTel - Proprietary
Not for use or disclosure outside WilTel
except under written agreement
[***] CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
<PAGE>
*
Schedule 6
WILMAX UNIVERSAL ENHANCED TRAVEL CARD PRICING
INTERNATIONAL ORIGINATION FOR U.S. TERMINATION
<TABLE>
<CAPTION>
Origination from U.S. to Listed Terminating Locations
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Enhanced Feature U.S. OVERSEAS CANADA MEXICO ALASKA HAWAII P.R. &
U.S.V.I.
- ------------------------------------------------------------------------------------------------------------------
Basic Calling per min. (day/non) [***] [***]* [***] [***]** [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------
Surcharge [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------
Conf. Calling per min (day/non) [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------
Surcharge [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------
Directory Assistance per call [***] N/A N/A N/A [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------
Surcharge [***] N/A N/A N/A [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------
Message store & forward per msg [***] N/A N/A N/A [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------
Surcharge [***] N/A N/A N/A [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------
Audio Text per min. [***] N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
Surcharge [***] N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
Operator Services per call **** [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------
Surcharge [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Origination from Listed Locations and Terminating in the U.S.
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Enhanced Feature U.S. OVERSEAS CANADA MEXICO ALASKA HAWAII P.R. & U.S.V.I.
- ------------------------------------------------------------------------------------------------------------------
Basic Calling per min. (day/non) [***] [***]*** [***] N/A [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------
Surcharge [***] [***] [***] N/A [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------
Conf. Calling per min (day/non) [***] N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
Surcharge [***] N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
Directory Assistance per call [***] N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
Surcharge [***] N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
Message store & forward per msg [***] N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
Surcharge [***] N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
Audio Text per min. [***] N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
Surcharge [***] N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
Operator Services per call **** [***] [***] [***] N/A [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------
Surcharge [***] [***] [***] N/A [***] [***] [***]
- -----------------------------------------------------------------------------------------------
[***] CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION
</TABLE>
<PAGE>
*
Schedule 6
WILMAX UNIVERSAL ENHANCED TRAVEL CARD PRICING
INTERNATIONAL ORIGINATION FOR U.S. TERMINATION
<TABLE>
<CAPTION>
INTERNATIONAL DAY NON-DAY TOLL FREE
ORIGINATION ACCESS #
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Canada [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------
Mexico Not Applicable
- ------------------------------------------------------------------------------------------------------------------------------
Australia [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------
France [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------
Germany [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------
Hong Kong [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------
Israel [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------
Italy [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------
Japan [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------
Korea [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------
Netherlands [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------
Switzerland [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------
United Kingdom [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
N/A - SERVICE NOT AVAILABLE
* WILMAX UNIVERSAL INTERNATIONAL SWITCHED ACCESS RATE SCHEDULE
** WILMAX UNIVERSAL MEXICO SWITCHED ACCESS RATE SCHEDULE
*** INTERNATIONAL ORIGINATION RATES
<TABLE>
<CAPTION>
Billing Increments
- -------------------------------------------------------------------------------
<S> <C>
Domestic to Domestic [***]
Domestic to Canada, Int'l [***]
Domestic to Mexico [***]
International to Domestic [***]
- -------------------------------------------------------------------------------
</TABLE>
[***] CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
<PAGE>
AMENDMENT NO. 1 *
This Amendment No. 1 (the "Amendment") is made as of the 1st day of
November, 1997, by and between Premiere Communications, Inc. ("Customer") and
WorldCom Network Services, Inc., d/b/a WilTel ("WilTel"), to those certain
Amended and Restated Program Enrollment Terms dated September 30, 1997 (the
"Amended PET" to that certain WILMAX UNIVERSAL(TM) Telecommunications Services
Agreement (TSA #PCI-951020) made by and between Customer and WilTel dated as of
December 1, 1995 (the "TSA"). In the event of any conflict between the terms of
the TSA, the Amended PET or the Service Schedule, or the terms of this Amendment
No. 1, the terms of this Amendment No. 1 shall control. The TSA (along with the
Amended PET and the Service Schedule), and this Amendment No. 1 shall
collectively be referred to as the "Agreement."
The parties agree for good and valuable consideration, intending legally to
be bound, as follows:
A. CUSTOMER'S MINIMUM REVENUE COMMITMENT: The parties agree to substitute
Section 4 of the Amended PET to read in its entirety as follows:
Commencing with the [***] billing period and continuing through the
end of the Service Term (including any extensions thereto) (the "Commitment
Period"), Customer agrees to maintain, on a take-or-pay basis, Monthly
Revenue equal to at least $[***] ("Customer's Minimum Monthly Commitment").
B. RIGHT OF FIRST REFUSAL: The parties agree to substitute Section 10 of the
Amended PET to read in its entirety as follows:
[***]
-1-
[***] CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION
<PAGE>
IN WITNESS WHEREOF the parties have entered into this Amendment No. 1 on
the date first written above.
WORLDCOM NETWORK SERVICES, INC., d/b/a PREMIERE COMMUNICATIONS, INC.
WilTel
By: /s/ By: /s/ Tom Houlihan
----------------------------------- ----------------------
Print Name: Print Name: Tom Houlihan
----------------------------------- ----------------
Title: Title: VP Engineering and Operations
----------------------------------- -----------------------------
<PAGE>
EXHIBIT 10.43
AMENDMENT TO
PREMIERE TECHNOLOGIES, INC.
SECOND AMENDED AND RESTATED 1995 STOCK PLAN
(As approved by the shareholders of Premiere Technologies, Inc.
on February 27, 1998)
1. The first sentence of Section 5.1 is hereby amended to read as follows:
"Subject to any antidilution adjustment pursuant to the provisions of
Section 5.2, the maximum number of shares of Stock that may be issued hereunder
shall be 8,000,000; provided, that the stock dividend declared shortly prior to
the Company's initial public offering did not and shall not affect the maximum
number of shares of Stock that may be issued hereunder."
<PAGE>
EXHIBIT 10.44
VOICECOM HOLDINGS, INC.
1995 STOCK OPTION PLAN
1. Statement of Purpose.
--------------------
The principal purposes of this Stock Option Plan ("Plan") are to secure to
VoiceCom Systems, Inc. (the "Company") the advantages of the incentive inherent
in stock ownership on the part of employees, officers, directors, and
consultants responsible for the continued success of the Company and to create
in such individuals a proprietary interest in, and a greater concern for, the
welfare of the Company through the grant of options to acquire shares of the
common stock of the Company ("Common Stock"). Each incentive stock option
("ISO") granted hereunder is intended to constitute an "incentive stock option,"
as such term is defined in Section 422 of the Internal Revenue Code of 1986, as
the same may be amended from time to time (the "Code"), and this Plan and each
such ISO is intended to comply with all of the requirements of said Section 422
and of all other provisions of the Code applicable to incentive stock options
and to plans issuing the same. Each nonstatutory stock option ("Non-ISO")
granted hereunder is intended to constitute a nonstatutory stock option that
does not comply with the requirements of Section 422 of the Code. ISOs and Non-
ISOs shall sometimes hereinafter be referred to collectively as "Options." This
Plan is expected to benefit shareholders by enabling the Company to attract and
retain personnel of the highest caliber by offering to them an opportunity to
share in any increase in the value of the Common Stock to which such personnel
have contributed.
2. Administration.
--------------
2.1 This Plan shall be administered by the Board of Directors of the
Company (the "Board") or by a committee of the Board appointed in accordance
with Section 2.2 or 2.4.2 below (the Board, or such committee, if appointed,
will be referred to in this Plan as the "Committee").
2.2 The Board may at any time appoint a Committee, consisting of not less
than two (2) of its members, to administer this Plan on behalf of the Board in
accordance with such terms and conditions not inconsistent with this Plan as the
Board may prescribe. Once appointed, the Committee shall continue to serve
until otherwise directed by the Board. From time to time the Board may increase
the size of the Committee and appoint additional members, remove members (with
or without cause) and appoint new members in their place, fill vacancies however
caused, and/or remove all members of the Committee and thereafter directly
administer this Plan.
2.3 A majority of the members of the Committee shall constitute a quorum,
and, subject to the limitations in this Section 2, all actions of the Committee
shall require the affirmative vote of members who constitute a majority of such
quorum.
<PAGE>
Members of the Committee who are not Disinterested Persons (as defined in
Section 2.5) may vote on any matters affecting the administration of this Plan
or the grant of Options hereunder, except that no such member shall act upon the
granting of an Option hereunder to himself or herself (but any such member may
be counted in determining the existence of a quorum at any meeting of the
Committee during which action is taken with respect to the granting of Options
to himself or herself).
2.4 Notwithstanding the foregoing provisions of this Section 2, if the
Company registers any class of any equity security pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), this Plan
shall, from the effective date of such registration until six (6) months after
the termination of such registration, be administered as follows:
2.4.1 This Plan shall be administered by the Board (regardless of
whether or not a Committee has been appointed under Section 2.2), so long as
each member of the Board is a Disinterested Person, or by a Committee appointed
in accordance with Section 2.4.2 below.
2.4.2 If at any time not all members of the Board are Disinterested
Persons, then the Board shall appoint a Committee consisting of two (2) or more
of its members, all of whom are Disinterested Persons, to administer this Plan
on behalf of the Board in accordance with such terms and conditions not
inconsistent with this Plan as the Board may prescribe. Once appointed, the
Committee shall continue to serve until otherwise directed by the Board. From
time to time the Board may increase the size of the Committee and appoint
additional members (all of whom shall be Disinterested Persons), remove members
(with or without cause) and appoint new members in their place, fill vacancies
however caused, or remove all members of the Committee and thereafter directly
administer this Plan so long as all members of the Board are Disinterested
Persons. At no time shall a person who is not a Disinterested Person serve on
the Committee appointed under this Section 2.4.2, nor shall such Committee at
any time have less than two (2) members.
2.5 The term "Disinterested Person" shall mean a director who qualifies as
a disinterested person as defined in 17 C.F.R. 240.16b-3(c)(2)(i), as the same
may be amended from time to time.
2.6 The Committee shall have the authority to do the following:
2.6.1 To administer this Plan in accordance with its express terms;
2.6.2 To determine all questions arising in connection with the
administration, interpretation, and application of this Plan, including all
questions relating to the value of the Common Stock;
-2-
<PAGE>
2.6.3 To correct any defect, supply any information, or reconcile any
inconsistency in such manner and to such extent as shall be deemed necessary or
advisable to carry out the purposes of this Plan;
2.6.4 To prescribe, amend, and rescind rules and regulations relating
to the administration of this Plan;
2.6.5 To determine the duration and purposes of leaves of absence which
may be granted to participants without constituting a termination of employment
for purposes of this Plan;
2.6.6 To do the following with respect to the granting of Options:
(a) Based on the eligibility criteria in Section 3 below, to
determine the employees, officers, directors, or consultants to whom Options
shall be granted;
(b) To determine whether such Options shall be ISOs or Non-ISOs.
(c) To determine the terms and provisions of the Option to be
granted to any Optionee hereunder (which need not be identical with the terms of
any other Option), and, with the consent of such Optionee, to modify and amend
such terms and provisions;
(d) To determine when such Options shall be granted;
(e) To determine the number of shares of Common Stock subject to
each Option; and
2.6.7 To make all other determinations necessary or advisable for
administration of this Plan.
2.7 The Committee's exercise of the authority set out in Section 2.6 shall
be consistent with the intent that the ISOs granted hereunder be qualified under
the terms of Section 422 of the Code, and that the Non-ISOs granted hereunder
shall not be so qualified. All determinations made by the Committee in good
faith on matters referred to in Section 2.6 shall be final, conclusive, and
binding upon all persons. The Committee shall have all powers necessary or
appropriate to accomplish its duties under this Plan.
3. Eligibility
-----------
3.1 ISOs may be granted to any employee of the Company or of an Affiliate
of the Company, as defined in Section 3.2 below. Non-ISOs may be granted to any
employee, officer or director (whether or not also an employee), or consultant
of the
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<PAGE>
Company or of an Affiliate of the Company. Each employee. officer, director, or
consultant selected by the Committee to receive an Option shall sometimes
hereinafter be referred to as an "Optionee."
3.2 As used in this Plan, an "Affiliate" of a corporation shall refer to a
a "parent corporation" of such corporation as described in Section 424(e) of the
Code or a "subsidiary corporation" of such corporation as described in Section
424(f) of the Code.
3.3 An Optionee who is not an employee of the Company or of an Affiliate
of the Company shall not be eligible to receive an ISO hereunder and no ISOs
shall be granted to any such non-employee Optionee.
3.4 No Option shall be granted hereunder to any Optionee unless the
Committee shall have determined, based on the advice of counsel, that the grant
of such option (and the exercise thereof by the Optionee) will not violate the
securities law of the state where the Optionee resides.
4. Shares Subject to the Plan.
--------------------------
4.1 The Committee, from time to time, may provide for the option and sale
in the aggregate of up to Two Million Seven Hundred and Twenty-Five Thousand
(2,725,000) shares of Common Stock, to be made available from authorized, but
unissued, or reacquired shares of Common Stock; provided, however, that at the
time any Option is issued hereunder, the total number of shares of Common Stock
for which Options issued hereunder are then exercisable (assuming full vesting
but net of terminated, expired or exercised Options) shall not exceed 2,725,000
minus the sum of (a) the number of shares of Common Stock for which options
under the Company's 1985 Stock Option Plan, as amended (the "1985 Plan"), are
then exercisable (assuming full vesting, but net of terminated, expired or
exercised options), plus (b) the number of shares issued upon exercise of
options granted under the 1985 Plan from and after June 29, 1995. The number of
such shares shall be adjusted to take account of the events referred to in
Section 10 hereof.
4.2 Upon exercise of an Option, the number of shares of Common Stock
thereafter available hereunder and under the Option shall decrease by the number
of shares of Common Stock as to which such Option was exercised; provided that
if such shares are pledged to secure a promissory note given in payment of the
Option Price for such shares and, as a result of a default on such note, the
pledged shares are returned to the Company, then such shares shall again be
available for the purposes of this Plan.
4.3 If any Option granted hereunder shall expire or terminate for any
reason without having been exercised in full, the unpurchased shares subject
thereto shall again be available for the purposes of this Plan.
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<PAGE>
4.4 The Company shall at all times during the term of this Plan reserve
and keep available such number of shares as shall be sufficient to satisfy the
requirements of the Plan.
5. Option Terms.
------------
5.1 The Committee shall specify the following terms to be contained in
each Option granted to an Optionee hereunder, which Option shall be executed by
the Company and such Optionee:
5.1.1 Whether such Option is an ISO or a Non-ISO;
5.1.2 The number of shares of Common Stock subject to purchase pursuant
to such Option;
5.1.3 The date on which the grant of such Option shall be effective
(the "Date of Grant");
5.1.4 The period of time during which such Option shall be exercisable,
which shall in no event be more than ten (10) years following its Date of Grant;
provided, however, that if an ISO is granted to an Optionee who on the Date of
Grant owns, either directly or indirectly within the meaning of Section 424(d)
of the Code, more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or an Affiliate of the Company, the period
of time during which such Option shall be exercisable shall in no event be more
than five (5) years following its Date of Grant;
5.1.5 The price at which such Option shall be exercisable by the
Optionee (the "Option Price"); provided, however, that the Option Price
specified in ISOs shall in no event be less than the fair market value, as
defined in Section 5.2 below, on the Date of Grant, of the shares of Common
Stock subject thereto; and provided further that, if such Option is granted to
an Optionee who on the Date of Grant owns, either directly or indirectly within
the meaning of Section 424(d) of the Code, more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or an
Affiliate of the Company, then the Option Price specified in such Option shall
be at least one hundred ten percent (110%) of the fair market value, on the Date
of Grant, of the Common Stock subject thereto;
5.1.6 Any vesting schedule upon which the exercise of an Option is
contingent; provided that the Committee shall have complete discretion with
respect to the terms of any vesting schedule upon which the exercise of an
Option is contingent, including, without limitation, discretion (a) to allow
full and immediate vesting upon grant of such Option, (b) to permit partial
vesting in stated percentage amounts based on the length of the holding period
of such Option, or (c) to permit full vesting after a stated holding period has
passed; and
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<PAGE>
5.1.7 Such other terms and conditions as the Committee deems advisable
and as are consistent with the purpose of this Plan.
5.2 Fair market value shall be determined as follows:
5.2.1 If the Company's Common Stock is publicly traded at the time an
Option is granted hereunder, fair market value shall be determined as of the
last business day for which the prices or quotes discussed in this Section 5.2.1
are available prior to the date such Option is granted and shall mean:
(a) The average (on that date) of the high and low prices of the
Common Stock on the principal national securities exchange on which the Common
Stock is traded, if the Common Stock is then traded on a national securities
exchange; or
(b) The last reported sale price (on that date) of the Common
Stock on the NASDAQ National Market List, if the Common Stock is not then traded
on a national securities exchange; or
(c) The closing bid price (or average of bid prices) last quoted
on such date by an established quotation service for over-the-counter
securities, if the Common Stock is not reported on the NASDAQ National Market
list.
5.2.2 If the Common Stock is not publicly traded at the time an Option
is granted hereunder, fair market value shall be deemed to be the fair value of
the Common Stock as determined by the Committee after taking into consideration
all factors that it deems appropriate, including, without limitation, recent
sale and offer prices of the Common Stock in private transactions negotiated at
arm's length.
5.3 No Option shall be granted hereunder during the suspension of this
Plan pursuant to Section 11.1 or after the termination of this Plan pursuant to
Section 11.3, and no Option granted hereunder shall be exercisable after June
__, 2015. Except as expressly provided herein, nothing contained in this Plan
shall require that the terms and conditions of Options granted hereunder be
uniform.
5.4 The Option granted to a person who, on the Date of Grant, is subject
to Section 16 of the Exchange Act shall provide that at least six (6) months
must elapse from the Date of Grant of the Option to the date of disposition, as
defined in Section 424(c) of the Code, of the Common Stock issued upon exercise
of such option.
6. Limitation on Grants of Options.
-------------------------------
In the event that the aggregate fair market value of Common Stock and other
stock with respect to which ISOs granted to an Optionee hereunder or incentive
stock
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<PAGE>
options granted to such Optionee under any other plan of the Company or any of
its Affiliates are exercisable for the first time during any calendar year,
exceeds the maximum permitted under Section 422(d) of the Code, then to the
extent of such excess such Options shall be treated as Non-ISOs.
7. Exercise of Option.
------------------
7.1 Subject to any limitations or conditions imposed upon an Option
pursuant to Section 5 above, an Optionee may exercise an Option, or any part
thereof (unless partial exercise is specifically prohibited by the terms of the
Option), by giving written notice thereof to the Company at its principal place
of business.
7.2 The notice described in Section 7.1 shall be accompanied by full
payment of the Option Price to the extent the Option is so exercised, and full
payment of any amounts the Company determines must be withheld for tax purposes
from the Optionee pursuant to the Option. Such payment shall be:
7.2.1 In lawful money of the United States in cash or by check; or
7.2.2 At the discretion of the Committee, through delivery of shares of
Common Stock having a fair market value equal as of the date of the exercise to
the cash exercise price of the Option; or
7.2.3 At the discretion of the Committee, by delivery of the Optionee's
personal recourse note bearing interest payable not less than annually at no
less than 100% of the lowest applicable federal rate, as defined in Section
1274(d) of the Code; or
7.2.4 At the discretion of the Committee, by any combination of
Sections 7.2.1, 7.2.2, or 7.2.3 above.
7.3 As soon as practicable after exercise of an option in accordance with
Sections 7.1 and 7.2 above, the Company shall issue a stock certificate
evidencing the Common Stock with respect to which the Option has been exercised.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of such stock
certificate, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to such Common Stock, notwithstanding the
exercise of the Option. No adjustment will be made for a dividend or other
right for which the record date is prior to the date the stock certificate is
issued, except as provided in Section 10 below.
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<PAGE>
8. Transferability of Options.
--------------------------
8.1 Except as provided otherwise in this Section 8, no Option shall be
transferable or exercisable by any person other than the Optionee to whom such
Option was originally granted.
8.2 If an Optionee to whom an ISO has been granted (an "ISO Optionee")
ceases to be employed by the Company or by any Affiliate of the Company by
reason of such Optionee's death, any ISOs held by such Optionee shall pass to
the person or Persons entitled thereto pursuant to the will of the Optionee or
the applicable laws of descent and distribution (such person or persons are
sometimes herein referred to collectively as the "Qualified Successor" of the
Optionee), and shall be exercisable by the Qualified Successor for a period of
six (6) months following such death.
8.3 In the event a guardian (the "Guardian") is appointed for an ISO
Optionee whose employment is terminated by the Company or by any Affiliate of
the Company by reason of such Optionee's disability, as defined in Section
22(e)(3) of the Code, any ISO held by such Optionee that could have been
exercised immediately prior to such termination of employment shall be
exercisable by the Guardian of such Optionee for a period of twelve (12) months
following the termination of employment of such Optionee.
8.4 If an ISO Optionee who has ceased to be employed by the Company or by
any Affiliate of the Company by reason of such Optionee's disability, as defined
in Section 22(e)(3) of the Code, dies within six (6) months after the
termination of such employment, any ISO held by such Optionee that could have
been exercised immediately prior to his or her death shall pass to the Qualified
Successor of such Optionee, and shall be exercisable by the Qualified Successor
for a period of six (6) months following the termination of employment of such
Optionee.
8.5 In the event that a qualified domestic relations order, as defined by
Section 414(p) of the Code or Title I of the Employee Retirement Income Security
Act or the rules thereunder, mandates the transfer of any Non-ISO that could
have been exercised immediately prior to the issuance of such order, such Non-
ISO shall pass to the person or persons entitled thereto pursuant to the order
("Domestic Relations Successor"), and shall be exercisable by such person or
persons in accordance with the terms thereof. Hereinafter, all references to a
Qualified Successor shall include a Domestic Relations Successor.
8.6 If an Optionee to whom a Non-ISO has been granted dies, any Non-ISO
held by such Optionee shall pass to the person or persons entitled thereto
pursuant to the will of the Optionee or the applicable laws of descent and
distribution, and shall be exercisable by such person or persons in accordance
with the terms thereof.
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<PAGE>
8.7 Options held by a Qualified Successor or exercisable by a Guardian
shall, during the period prior to their termination that such Options are held
by the Qualified Successor or exercisable by the Guardian, continue to vest in
accordance with any vesting schedule under Section 5.1.6 to which such Options
are subject.
8.8 In the event that two or more persons constitute the Qualified
Successor or the Guardian of an Optionee, all rights of such Qualified Successor
or such Guardian shall be exercisable, if at all, by the unanimous agreement of
such persons.
8.9 Employment shall be considered as continuing intact during any
military or sick leave or other bona fide leave of absence if the period of such
leave does not exceed ninety (90) days or, if longer, for so long as the
Optionee's right to reemployment with the Company or an Affiliate thereof is
guaranteed either by statute or by contract. If the period of such leave exceeds
ninety (90) days and his or her reemployment is not so guaranteed, then his or
her employment shall be deemed to have terminated on the ninety-first (91st) day
of such leave.
9. Termination of Options.
----------------------
To the extent not earlier exercised, an Option shall terminate at the
earliest of the following dates:
9.1 The termination date specified for such Option in the respective
option Agreement;
9.2 With respect to ISOs, six (6) months after the date of termination of
the Optionee's employment with the Company or any Affiliate of the Company by
reason of such Optionee's disability (within the meaning of Section 22(e)(3) of
the Code) or such Optionee's death;
9.3 With respect to ISOs, three (3) months after the date of termination
of the Optionee's employment with the Company or any Affiliate of the Company
for any reason other than disability (within the meaning of Section 22(e)(3) of
the Code) or death;
9.4 The date of any sale, transfer, or hypothecation, or any attempted
sale, transfer or hypothecation, of such Option in violation of Section 8.1
above; or
9.5 The date specified in Section 10.2 below for such termination in the
event of a Terminating Event.
10. Adjustments to Options.
----------------------
10.1 In the event of a material alteration in the capital structure of the
Company on account of a recapitalization, stock split, reverse stock split,
stock dividend, or otherwise, then the Committee shall make such adjustments to
this Plan and to the
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<PAGE>
Options then outstanding and thereafter granted hereunder as the Committee
determines to be appropriate and equitable under the circumstances, so that the
proportionate interest of each holder of any such Option shall, to the extent
practicable, be maintained as before the occurrence of such event. Such
adjustments may include, without limitation (a) a change in the number or kind
------------------
of shares of stock of the Company covered by such Options, and (b) a change in
the Option Price payable per share; provided, however, that the aggregate Option
Price applicable to the unexercised portion of existing Options shall not be
altered, it being intended that any adjustments made with respect to such
Options shall apply only to the price per share and the number of shares subject
thereto. For purposes of this Section 10.1, neither (i) the issuance of
additional shares of stock of the Company in exchange for adequate consideration
(including services), nor (ii) the conversion of outstanding preferred shares of
the Company into Common Stock shall be deemed material alterations of the
capital structure of the Company. In the event the Committee shall determine
that the nature of a material alteration in the capital structure of the Company
is such that it is not practical or feasible to make appropriate adjustments to
this Plan or to the Options granted hereunder, such event shall be deemed a
Terminating Event as defined in Section 10.2 below.
10.2 Subject to Section 10.3, all Options granted hereunder shall
terminate upon the occurrence of any of the following events ("Terminating
Events"): (a) the dissolution or liquidation of the Company; or (b) a material
change in the capital structure of the Company that is subject to this Section
10.2 by virtue of the last sentence of Section 10.1 above.
10.3 The Committee shall give notice to Optionees not less than thirty
(30) days prior to the consummation of (a) a Terminating Event as defined in
Section 10.2 above; (b) a merger or consolidation of the Company with one or
more corporations as a result of which, immediately following such merger or
consolidation, the shareholders of the Company as a group will hold less than a
majority of the outstanding capital stock of the surviving corporation; or (c)
the sale or other disposition of all or substantially all of the assets of the
Company. Upon the giving of such notice, all Options granted hereunder shall
become immediately exercisable, without regard to any contingent vesting
provision to which such Options may have otherwise been subject.
10.4 All Options granted hereunder shall become immediately exercisable,
without regard to any contingent vesting provision to which such Options may
have otherwise been subject, upon the occurrence of an event whereby any person
or entity, including any "person" as such term is used in Section 13(d)(3) of
the Exchange Act, becomes the "beneficial owner," as defined in the Exchange
Act, of Common Stock representing fifty percent (50%) or more of the combined
voting power of the voting securities of the Company.
10.5 In the event of a reorganization as defined in this Section 10.5 in
which the Company is not the surviving or acquiring company, or in which the
Company is or becomes a wholly-owned subsidiary of another company after the
effective date of
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<PAGE>
the reorganization, then the plan or agreement respecting the reorganization
shall include appropriate terms providing for the assumption of each Option
granted hereunder, or the substitution of an option therefor, such that no
"modification" of any such Option occurs under Section 424 of the Code. For
purposes of this Section 10.5, reorganization shall mean any statutory merger,
statutory consolidation, sale of all or substantially all of the assets of the
Company, or sale, pursuant to an agreement with the Company, of securities of
the Company pursuant to which the Company is or becomes a wholly-owned
subsidiary of another corporation after the effective date of the
reorganization.
10.6 The Committee shall have the right to accelerate the date of exercise
of any installment of any option; provided, however, that, without the consent
of the Optionee, with respect to any Option, the Committee shall not accelerate
the date of any installment of any Option granted to an employee as an ISO (and
not previously converted into a Non-ISO pursuant to Section 12 below) if such
acceleration would violate the annual vesting limitation contained in Section
422(d) of the Code, as described in Section 6 above.
10.7 Adjustments and determinations under this Section 10 shall be made by
the Committee (upon the advice of counsel), whose decisions as to what
adjustments or determination shall be made, and the extent thereof, shall be
final, binding, and conclusive.
11. Suspension, Termination and Amendment.
-------------------------------------
11.1 Subject to this Section 11, the Board may, at any time, suspend,
terminate or amend the terms of this Plan.
11.2 Except as provided in Section 10 above, the Board may not do any of
the following without obtaining, within twelve (12) months either before or
after the Board's adoption of a resolution authorizing such action, approval by
the affirmative votes of the holders of a majority of the securities of the
Company present, or represented, and entitled to vote at a meeting duly held in
accordance with the applicable laws of Washington State or by the written
consent of the holders of a majority of the securities of the Company entitled
to vote:
11.2.1 Increase the aggregate number of shares which may be issued
hereunder;
11.2.2 Materially modify the requirements as to eligibility for
participation in this Plan, or change the designation of the employees or class
of employees eligible to receive ISOs under this Plan;
11.2.3 Materially increase the benefits accruing to participants under
this Plan; or
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<PAGE>
11.2.4 Make any change in the terms of this Plan that would cause the
ISOs granted hereunder to lose their qualification as incentive stock options
under Section 422 of the Code.
11.3 Subject to Section 11.3, this Plan shall terminate on June __, 2005
unless earlier terminated by the Board.
11.4 No amendment to the terms of this Plan shall, without the consent of
the Optionee, alter or impair any rights or obligations under any Option
theretofore granted. Notwithstanding the suspension or termination of this
Plan, this Plan shall remain in effect as to Options granted hereunder prior to
such suspension or termination.
12. Conversion of ISOs Into Non-ISOs.
--------------------------------
At the written request of any ISO Optionee, the Committee may in its
discretion take such actions as may be necessary to convert such Optionee's ISOs
(or any installments or portions of installments thereof) that have not been
exercised on the date of conversion into Non-ISOs at any time prior to the
expiration of such ISOs, regardless of whether the Optionee is an employee of
the Company or of an Affiliate of the Company at the time of such conversion.
Such actions may include, but shall not be limited to, extending the exercise
period or reducing the exercise price of the appropriate installments of such
ISOs. At the time of such conversion, the Committee, with the consent of the
Optionee, may impose such conditions on the exercise of the resulting Non-ISOs
as the Committee in its discretion may determine, provided that such conditions
shall not be inconsistent with this Plan. Nothing in this Plan shall be deemed
to give any Optionee the right to have such Optionee's ISOs converted into Non-
ISOs, and no such conversion shall occur until and unless the Committee takes
appropriate action. The Committee, with the consent of the Optionee, may also
terminate any portion of any ISO that has not been exercised at the time of such
conversion.
13. Conditions Upon Issuance of Shares.
----------------------------------
13.1 Shares shall not be issued pursuant to the exercise of any Option
unless the exercise of such Option and the issuance and delivery of such shares
pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended, the Exchange Act,
any applicable state securities law, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the shares may
then be listed or otherwise traded, and such compliance has been confirmed by
counsel for the Company.
13.2 As a condition to the exercise of any Option, the Company may require
the participant exercising such Option to represent and warrant at the time of
any such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the
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<PAGE>
Company, such representations and warranties are required by any relevant
provision of law.
13.3 The Company's inability to obtain authority from any regulatory body
having jurisdiction, which authority the Company's counsel has determined to be
necessary to the lawful issuance and sale of any shares hereunder, shall relieve
the Company of any liability with respect to the failure to issue or sell such
shares.
14. Use of Proceeds.
---------------
Proceeds from the sale of Common Stock pursuant to the exercise of Options
granted hereunder shall constitute general funds of the Company and shall be
used for general corporate purposes.
15. Notices.
-------
All notices, requests, demands and other communications required or
permitted to be given under this Plan and the Options granted hereunder shall be
in writing and shall be either served personally on the party to whom notice is
to be given (in which case notice shall be deemed to have been duly given on the
date of such service), or mailed to the party to whom notice is to be given, by
first class mail, registered or certified, return receipt requested, postage
prepaid, and addressed to the party at his or its most recent known address, in
which case such notice shall be deemed to have been duly given on the third
(3rd) postal delivery day following the date of such mailing.
16. Financial Statements.
--------------------
Upon request, the Company shall make available its annual audited financial
statements and monthly unaudited financial statements (balance sheet and income
statement) for review by Optionees holding currently exercisable Options. Any
such review shall be conducted in the offices of the Company and may be
conditioned upon such Optionees' execution of such confidentiality agreements as
the Company may reasonably require.
17. Miscellaneous Provisions.
------------------------
17.1 Optionees shall be under no obligation to exercise Options granted
hereunder.
17.2 Nothing contained in this Plan shall obligate the Company to retain
an Optionee as an employee, officer, director, or consultant for any period, nor
shall this Plan interfere in any way with the right of the Company to reduce
such Optionees compensation.
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<PAGE>
17.3 The provisions of this Plan and each Option issued to an Optionee
hereunder shall be binding upon such Optionee, the Qualified Successor or
Guardian of such Optionee, and the heirs, successors, and assigns of such
Optionee.
17.4 Where the context so requires, references herein to the singular
shall include the plural, and vice versa, and references to a particular gender
shall include either or both genders.
18. Effective Date of Plan and Amendments.
-------------------------------------
This Plan was initially adopted by the Board of Directors on June 29, 1995
and approved by the shareholders on July 27, 1995.
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<PAGE>
EXHIBIT 10.45
VOICECOM HOLDINGS, INC.
AMENDED AND RESTATED 1985 STOCK OPTION PLAN
AS AMENDED
1. Statement of Purpose.
--------------------
The principal purposes of this Stock Option Plan ("Plan") are to secure to
VoiceCom Systems, Inc. (the "Company") the advantages of the incentive inherent
in stock ownership on the part of employees, officers, directors, and
consultants responsible for the continued success of the Company and to create
in such individuals a proprietary interest in, and a greater concern for, the
welfare of the Company through the grant of options to acquire shares of the
common stock of the Company ("Common Stock"). Each incentive stock option
("ISO") granted hereunder is intended to constitute an "incentive stock option,"
as such term is defined in Section 422 of the Internal Revenue Code of 1986, as
the same may be amended from time to time (the "Code"), and this Plan and each
such ISO are intended to comply with all of the requirements of said Section 422
and of all other provisions of the Code applicable to incentive stock options
and to plans issuing the same. Each nonstatutory stock option ("Non-ISO")
granted hereunder is intended to constitute a nonstatutory stock option that
does not comply with the requirements of Section 422 of the Code. ISOs and Non-
ISOs shall sometimes hereinafter be referred to collectively as "Options". The
Plan is expected to benefit shareholders by enabling the Company to attract and
retain personnel of the highest caliber by offering to them an opportunity to
share in any increase in the value of the Common Stock to which such personnel
have contributed.
2. Administration.
--------------
2.1 The Plan shall be administered by the Board of Directors of the
Company (the "Board") or by a committee of the Board appointed in accordance
with Section 2.2 or 2.4.2 below (the Board, or such committee, if appointed,
will be referred to in this Plan as the "Committee").
2.2 The Board may at any time appoint a Committee, consisting of not less
than two (2) of its members, to administer the Plan on behalf of the Board in
accordance with such terms and conditions not inconsistent with this Plan as the
Board may prescribe. Once appointed, the Committee shall continue to serve
until otherwise directed by the Board. From time to time the Board may increase
the size of the Committee and appoint additional members, remove members (with
or without cause) and appoint new members in their place, fill vacancies however
caused, and/or remove all members of the committee and thereafter directly
administer the Plan.
2.3 A majority of the members of the Committee shall constitute a quorum,
and, subject to the limitations in this Section 2, all actions of the Committee
shall require the affirmative vote of members who constitute a majority of such
quorum. members of
<PAGE>
the Committee who are not Disinterested Persons (as defined in Section 2.5) may
vote on any matters affecting the administration of the Plan or the grant of
Options pursuant to the Plan, except that no such member shall act upon the
granting of an option to himself (but any such member may be counted in
determining the existence of a quorum at any meeting of the Committee during
which action is taken with respect to the granting of Options to him).
2.4 Notwithstanding the foregoing provisions of this Section 2, if the
Company registers any class of any equity security pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Plan
shall, from the effective date of such registration until six (6) months after
the termination of such registration, be administered as follows:
2.4.1 The Plan shall be administered by the Board (regardless of
whether or not a Committee has been appointed under Section 2.2), so long as
each member of the Board is a Disinterested Person, or by a Committee appointed
in accordance with Section 2.4.2 below.
2.4.2 If at any time not all members of the Board are Disinterested
Persons, then the Board shall appoint a Committee consisting of two (2) or more
of its members, all of whom are Disinterested Persons, to administer the Plan on
behalf of the Board in accordance with such terms and conditions not
inconsistent with this Plan as the Board may prescribe. Once appointed, the
Committee shall continue to serve until otherwise directed by the Board. From
time to time the Board may increase the size of the Committee and appoint
additional members (all of whom shall be Disinterested Persons), remove members
(with or without cause) and appoint new members in their place, fill vacancies
however caused, or remove all members of the Committee and thereafter directly
administer the Plan so long as all members of the Board are Disinterested
Persons. At no time shall a person who is not a Disinterested Person serve on
the committee appointed under this Section 2.4.2, nor shall such Committee at
any time have less than two (2) members.
2.5 The term "Disinterested Person" shall mean a director who qualifies as
a disinterested person as defined in 17 C.F.R. 240.16b-3(c)(2)(i), as the same
may be amended from time to time.
2.6 The committee shall have the authority to do the following:
2.6.1 To administer the Plan in accordance with its express terms;
2.6.2 To determine all questions arising in connection with the
administration, interpretation, and application of the Plan, including all
questions relating to the value of the Common Stock;
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<PAGE>
2.6.3 To correct any defect, supply any information, or reconcile any
inconsistency in such manner and to such extent as shall be deemed necessary or
advisable to carry out the purposes of the Plan;
2.6.4 To prescribe, amend, and rescind rules and regulations relating
to the administration of the Plan;
2.6.5 To determine the duration and purposes of leaves of absence which
may be granted to participants without constituting a termination of employment
for purposes of the Plan;
2.6.6 To do the following with respect to the granting of options:
(a) Based on the eligibility criteria in Section 3 below, to
determine the employees, officers, directors, or consultants to
whom options shall be granted;
(b) To determine whether such options shall be ISOs or Non-ISOs.
(c) To determine the terms and provisions of the Option
Agreement, as defined in Section 5 below, to be entered into with
any Optionee (which need not be identical with the terms of any
other Option Agreement), and, with the consent of such Optionee,
to modify and amend such terms and provisions;
(d) To determine when such Options shall be granted;
(e) To determine the number of shares of Common Stock subject to
each Option; and
2.6.7 To make all other determinations necessary or advisable for
administration of the Plan.
2.7 The Committee's exercise of the authority set out in Section 2.6 shall
be consistent with the intent that the ISOs issued under the Plan be qualified
under the terms of Section 422 of the Code, and that the Non-ISOs shall not be
so qualified. All determinations made by the Committee in good faith on matters
referred to in Section 2.6 shall be final, conclusive, and binding upon all
persons. The Committee shall have all powers necessary or appropriate to
accomplish its duties under this Plan.
3. Eligibility.
-----------
3.1 ISOs may be granted to any employee of the Company or of an Affiliate
of the Company, as defined in Section 3.2 below. Non-ISOs may be granted to any
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<PAGE>
employee, officer or director (whether or not also an employee), or consultant
of the Company or of an Affiliate of the Company. Each employee, officer,
director, or consultant selected by the Committee to receive an option shall
sometimes hereinafter be referred to as an "Optionee".
3.2 As used in this Plan, an "Affiliate" of a corporation shall refer to a
"parent corporation" of such corporation as described in Section 424(e) of the
Code or a "subsidiary corporation" of such corporation as described in Section
424(f) of the Code.
3.3 An Optionee who is not an employee of the Company or of an Affiliate
of the Company shall not be eligible to receive an ISO under the Plan and no
ISOs shall be granted to any such nonemployee Optionee.
3.4 No Option shall be granted hereunder to any Optionee unless the
Committee shall have determined, based on the advice of counsel, that the grant
of such option (and the exercise thereof by the Optionee) will not violate the
securities law of the state where the Optionee resides.
4. Shares Subject to the Plan.
--------------------------
4.1 The Committee, from time to time, may provide for the option and sale
in the aggregate of up to Three Million Five Hundred Thousand (3,500,000) shares
of Common Stock, to be made available from authorized, but unissued, or
reacquired shares of Common Stock. The number of such shares shall be adjusted
to take account of the events referred to in Section 10 hereof.
4.2 Upon exercise of an Option, the number of shares of Common Stock
thereafter available under the Plan and under the option shall decrease by the
number of shares as to which the option was exercised; provided that if such
shares are pledged to secure a promissory note given in payment of the Option
price for such shares and, as a result of a default on such note, the pledged
shares are returned to the Company, then such shares shall again be available
for the purposes of the Plan.
4.3 If any Option granted under the Plan shall expire or terminate for any
reason without having been exercised in full, the unpurchased shares subject
thereto shall again be available for the purposes of the Plan.
4.4 The company will at all times during the term of this Plan reserve and
keep available such number of shares as shall be sufficient to satisfy the
requirements of the Plan.
5. Option Terms.
------------
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<PAGE>
5.1 With respect to each Option to be granted to an Optionee, the
Committee shall specify the following terms in a written agreement ("Option
Agreement") to be executed by the Company and the Optionee:
5.1.1 Whether such Option is an ISO or a Non-ISO;
5.1.2 The number of shares of Common Stock subject to purchase pursuant
to such option;
5.1.3 The date on which the grant of such Option shall be effective
(the "Date of Grant");
5.1.4 The period of time during which such Option shall be exercisable,
which shall in no event be more than ten (10) years following its Date of Grant;
provided, however, that if an ISO is granted to an Optionee who on the Date of
Grant owns, either directly or indirectly within the meaning of Section 424(d)
of the Code, more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or an Affiliate of the Company, the period
of time during which such Option shall be exercisable shall in no event be more
than five (5) years following its Date of Grant;
5.1.5 The price at which such Option shall be exercisable by the
optionee (the "Option Price"); provided, however, that the Option Price
specified in ISOs shall in no event be less than the fair market value, as
defined in section 5.2 below, on the Date of Grant, of the shares of Common
Stock subject thereto; and provided further that, if such Option is granted to
an Optionee who on the Date of Grant owns, either directly or indirectly within
the meaning of section 424(d) of the Code, more than ten percent (10%) of the
total combined voting power of all classes of stock of the company or an
Affiliate of the Company, then the Option Price specified in such Option shall
be at least one hundred ten percent (110%) of the fair market value, on the Date
of Grant, of the common Stock subject thereto;
5.1.6 Any vesting schedule upon which the exercise of an Option is
contingent; provided that the Committee shall have complete discretion with
respect to the terms of any vesting schedule upon which the exercise of an
Option is contingent, including, without limitation, discretion (a) to allow
full and immediate vesting upon grant of such Option, (b) to permit partial
vesting in stated percentage amounts based on the length of the holding period
of such Option, or (c) to permit full vesting after a stated holding period has
passed; and
5.1.7 Such other terms and conditions as the Committee deems advisable
and as are consistent with the purpose of this Plan.
5.2 Fair market value shall be determined as follows:
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<PAGE>
5.2.1 If the Company's Common Stock is publicly traded at the time an
option is granted under the Plan, fair market value shall be determined as of
the last business day for which the prices or quotes discussed in this section
5.2.1 are available prior to the date such Option is granted and shall mean:
(a) The average (on that date) of the high and low prices of the
Common Stock on the principal national securities exchange on
which the Common Stock is traded, if the Common Stock is then
traded on a national securities exchange; or
(b) The last reported sale price (on that date) of the Common
Stock on the NASDAQ National Market List, if the common stock is
not then traded on a national securities exchange; or
(c) The closing bid price (or average of bid prices) last quoted
(on that date) by an established quotation service for over-the-
counter securities, if the Common Stock is not reported on the
NASDAQ Rational Market List.
5.2.2 If the Common Stock is not publicly traded at the time an Option
is granted under the Plan, fair market value shall be deemed to be the fair
value of the Common Stock as determined by the Committee after taking into
consideration all factors that it deems appropriate, including, without
limitation, recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length.
5.3 No option shall be granted under the Plan later than February 10,
1995, and no Option granted under the Plan shall be exercisable more than ten
(10) years following said date. Except as expressly provided herein, nothing
contained in this Plan shall require that the terms and conditions of options
granted under the Plan be uniform.
5.4 The Option Agreement for any Option granted to a person who, on the
Date of Grant, is subject to Section 16 of the Exchange Act shall provide that
at least six (6) months must elapse from the Date of Grant of the Option to the
date of disposition, as defined in Section 424(c) of the Code, of the Common
Stock issued upon exercise of such option.
6. Limitation on Grants of Options.
-------------------------------
In the event that the aggregate fair market value of Common Stock and other
stock with respect to which ISOs granted to an Optionee under this Plan or
incentive stock options granted to such optionee under any other plan of the
Company or any of its Affiliates are exercisable for the first time during any
calendar year, exceeds the maximum permitted under Section 422(d) of the Code,
then to the extent of such excess such Options shall be treated as Non-ISOs.
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<PAGE>
7. Exercise of Option.
------------------
7.1 Subject to any limitations or conditions imposed upon an Option
pursuant to Section 5 above, an Optionee may exercise an Option, or any part
thereof (unless partial exercise is specifically prohibited by the terms of the
Option), by giving written notice thereof to the Company at its principal place
of business.
7.2 The notice described in section 7.1 shall be accompanied by full
payment of the Option Price to the extent the Option is so exercised, and full
payment of any amounts the Company determines must be withheld for tax purposes
from the Optionee pursuant to the Option Agreement. Such payment shall be:
7.2.1 In lawful money of the United States in cash or by check; or
7.2.2 At the discretion of the Committee, through delivery of shares of
Common Stock having a fair market value equal as of the date of the exercise to
the cash exercise price of the Option; or
7.2.3 At the discretion of the Committee, by delivery of the Optionee's
personal recourse note bearing interest payable not less than annually at no
less than 100% of the lowest applicable federal rate, as defined in Section
1274(d) of the Code; or
7.2.4 At the discretion of the Committee, by any combination of
Sections 7.2.1, 7.2.2, or 7.2.3 above.
7.3 As soon as practicable after exercise of an option in accordance with
Sections 7.1 and 7.2 above, the Company shall issue a stock certificate
evidencing the Ccommon Stock with respect to which the Option has been
exercised. Until the issuance (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company) of
such stock certificate, no right to vote or receive dividends or any other
rights as a shareholder shall exist with respect to such Common Stock,
notwithstanding the exercise of the Option. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in section 10 below.
8. Transferability of Options.
--------------------------
8.1 Except as provided otherwise in this Section 8, no Option shall be
transferable or exercisable by any person other than the Optionee to whom such
Option was originally granted.
8.2 If an Optionee to whom an ISO has been granted (an "ISO Optionee")
ceases to be employed by the Company or by any Affiliate of the Company by
reason of such Optionee's death, any ISOs held by such Optionee shall pass to
the person or persons entitled thereto pursuant to the will of the Optionee or
the applicable laws of descent and
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<PAGE>
distribution (such person or persons are sometimes herein referred to
collectively as the "Qualified Successor" of the Optionee), and shall be
exercisable by the Qualified Successor for a period of six (6) months following
such death.
8.3 In the event a guardian (the "Guardian") is appointed for an ISO
Optionee whose employment is terminated by the Company or by any Affiliate of
the Company by reason of such Optionee's disability, as defined in Section 22(e)
(3) of the Code, any ISO held by such Optionee that could have been exercised
immediately prior to such termination of employment shall be exercisable by the
Guardian of such Optionee for a period of twelve (12) months following the
termination of employment of such Optionee.
8.4 If an ISO Optionee who has ceased to be employed by the Company or by
any Affiliate of the Company by reason of such Optionee's disability, as defined
in Section 22 (e) (3) of the code, dies within six (6) months after the
termination of such employment, any ISO held by such Optionee that could have
been exercised immediately prior to his or her death shall pass to the Qualified
Successor of such Optionee, and shall be exercisable by the Qualified Successor
for a period of six (6) months following the termination of employment of such
Optionee.
8.5 In the event that a qualified domestic relations order, as defined by
Section 414(p) of the Code or Title I of the Employee Retirement Income Security
Act or the rules thereunder, mandates the transfer of any Non-ISO that could
have been exercised immediately prior to the issuance of such order, such Non-
ISO shall pass to the person or persons entitled thereto pursuant to the order
("Domestic Relations Successor"), and shall be exercisable by such person or
persons in accordance with the terms of the applicable Option Agreement.
Hereinafter, all references to a Qualified Successor shall include a Domestic
Relations Successor.
8.6 If an Optionee to whom a Non-ISO has been granted dies, any Non-ISO
held by such Optionee shall pass to the person or persons entitled thereto
pursuant to the will of the Optionee or the applicable laws of descent and
distribution, and shall be exercisable by such person or persons in accordance
with the terms of the applicable Option Agreement.
8.7 Options held by a Qualified Successor or exercisable by a Guardian
shall, during the period prior to their termination that such Options are held
by the Qualified Successor or exercisable by the Guardian, continue to vest in
accordance with any vesting schedule under Section 5.1.6 to which such Options
are subject.
8.8 In the event that two or more persons constitute the Qualified
Successor or the Guardian of an Optionee all rights of such Qualified Successor
or such Guardian shall be exercisable, if at all, by the unanimous agreement of
such persons.
8.9 Employment shall be considered as continuing intact during any
military or sick leave or other bona fide leave of absence if the period of such
leave does not exceed
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<PAGE>
ninety (90) days or, if longer, for so long as the Optionee's right to
reemployment with the Company or an Affiliate thereof is guaranteed either by
statute or by contract. If the period of such leave exceeds ninety (90) days and
his or her reemployment is not so guaranteed, then his or her employment shall
be deemed to have terminated on the ninety-first (91st) day of such leave.
9. Termination of Options.
----------------------
To the extent not earlier exercised, an Option shall terminate at the
earliest of the following dates:
9.1 The termination date specified for such Option in the respective
option Agreement;
9.2 With respect to ISOS, six (6) months after the date of termination of
the Optionee's employment with the Company or any Affiliate of the Company by
reason of such Optionee's disability (within the meaning of Section 22(e)(3) of
the Code) or such Optionee's death;
9.3 With respect to ISOS, three (3) months after the date of termination
of the Optionee's employment with the Company or any Affiliate of the Company
for any reason other than disability (within the meaning of Section 22(e)(3) of
the Code) or death;
9.4 The date of any sale, transfer, or hypothecation, or any attempted
sale, transfer or hypothecation, of such Option in violation of Section 8.1
above; or
9.5 The date specified in Section 10.2 below for such termination in the
event of a Terminating Event.
10. Adjustments to Options.
----------------------
10.1 In the event of a material alteration in the capital structure of the
Company on account of a recapitalization, stock split, reverse stock split,
stock dividend, or otherwise, then the Committee shall make such adjustments to
this Plan and to the Options then outstanding and thereafter granted under this
Plan as the Committee determines to be appropriate and equitable under the
circumstances, so that the proportionate interest of each holder of any such
Option shall, to the extent practicable, be maintained as before the occurrence
of such event. Such adjustments may include, without limitation (a) a change in
the number or kind of shares of stock of the Company covered by such options,
and (b) a change in the Option Price payable per share; provided, however, that
the aggregate Option Price applicable to the unexercised portion of existing
Options shall not be altered, it being intended that any adjustments made with
respect to such Options shall apply only to the price per share and the number
of shares subject thereto. For purposes of this Section 10.1, neither (i) the
issuance of additional shares of stock of the Company in exchange for adequate
consideration (including services), nor (ii) the conversion of
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<PAGE>
outstanding preferred shares of the Company into Common Stock shall be deemed
material alterations of the capital structure of the Company. In the event the
Committee shall determine that the nature of a material alteration in the
capital structure of the Company is such that it is not practical or feasible to
make appropriate adjustments to this Plan or to the Options granted hereunder,
such event shall be deemed a Terminating Event as defined in Section 10.2 below.
10.2 Subject to Section 10.3, all Options granted under the Plan shall
terminate upon the occurrence of any of the following events ("Terminating
Events"): (a) the dissolution or liquidation of the Company; or (b) a material
change in the capital structure of the Company that is subject to this Section
10.2 by virtue of the last sentence of Section 10.1 above.
10.3 The Committee shall give notice to Optionees not less than thirty
(30) days prior to the consummation of (a) a Terminating Event as defined in
Section 10.2 above; (b) a merger or consolidation of the Company with one or
more corporations as a result of which, immediately following such merger or
consolidation, the shareholders of the Company as a group will hold less than a
majority of the outstanding capital stock of the surviving corporation; or (c)
the sale or other disposition of all or substantially all of the assets of the
Company. Upon the giving of such notice, all Options granted under the Plan
shall become immediately exercisable, without regard to any contingent vesting
provision to which such options may have otherwise been subject; provided,
--------
however, that this Section 10.3 shall not apply to Options granted after May 19,
- -------
1993 under the Plan.
10.4 All Options granted under the Plan shall become immediately
exercisable, without regard to any contingent vesting provision to which such
Options may have otherwise been subject, upon the occurrence of an event whereby
any person or entity, including any "person" as such term is used in section
13(d)(3) of the Exchange Act, becomes the "beneficial owner", as defined in the
Exchange Act, of Common Stock representing fifty percent (50%) or more of the
combined voting power of the voting securities of the Company; provided, however
-------- -------
that this Section 10.4 shall not apply to Options granted after May 19, 1993
under the Plan.
10.5 In the event of a reorganization as defined in this Section 10.5 in
which the Company is not the surviving or acquiring company, or in which the
Company is or becomes a wholly-owned subsidiary of another company after the
effective date of the reorganization, then the plan or agreement respecting the
reorganization shall include appropriate terms providing for the assumption of
each Option granted under this Plan, or the substitution of an option therefor,
such that no "modification" of any such Option occurs under Section 424 of the
Code. For purposes of this Section 10.5, reorganization shall mean any
statutory merger, statutory consolidation, sale of all or substantially all of
the assets of the Company, or sale, pursuant to an agreement with the Company,
of securities of the Company pursuant to which the Company is or becomes a
wholly-owned subsidiary of another corporation after the effective date of the
reorganization.
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<PAGE>
10.6 The Committee shall have the right to accelerate the date of exercise
of any installment of any option; provided that, without the consent of the
Optionee with respect to any Option, the Committee shall not accelerate the date
of any installment of any Option granted to an employee as an ISO (and not
previously converted into a Non-ISO pursuant to Section 12 below) if such
acceleration would violate the annual vesting limitation contained in Section
422(d) of the Code, as described in Section 6 above; provided, however, that
-----------------
this Section 10.6 shall not apply to Options granted after May 19, 1993 under
the Plan.
10.7 Adjustments and determinations under this Section 10 shall be made by
the Committee (upon the advice of counsel), whose decisions as to what
adjustments or determination shall be made, and the extent thereof, shall be
final, binding, and conclusive.
11. Termination and Amendment.
-------------------------
11.1 Unless earlier terminated as provided in Section 10 above or in
Section 11.2 below, the Plan shall terminate on, and no Option shall be granted
under the Plan after, February 10, 1995.
11.2 The Board may at any time terminate, suspend or amend the terms of
the Plan; provided, however, that, except as provided in Section 10 above, the
Board may not do any of the following without obtaining, within twelve (12)
months either before or after the Board's adoption of a resolution authorizing
such action, approval by the affirmative votes of the holders of a majority of
the securities of the Company present, or represented, and entitled to vote at a
meeting duly held in accordance with the applicable laws of Washington State or
by the written consent of the holders of a majority of the securities of the
Company entitled to vote:
11.2.1 Increase the aggregate number of shares which way be issued
under the Plan;
11.2.2 Materially modify the requirements as to eligibility for
participation in the Plan, or change the designation of the employees or class
of employees eligible to receive ISOs under the Plan;
11.2.3 Materially increase the benefits accruing to participants under
the Plan; or
11.2.4 Make any change in the terms of the Plan that would cause the
ISOs granted hereunder to lose their qualification as incentive stock options
under Section 422 of the Code.
11.3 No Option may be granted during any suspension or after termination
of the Plan. Amendment, suspension, or termination of the Plan shall not,
without the
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<PAGE>
consent of the Optionee, alter or impair any rights or obligations under any
Option theretofore granted.
12. Conversion of ISOs Into Non-ISOs.
--------------------------------
At the written request of any ISO Optionee, the Committee may in its
discretion take such actions as may be necessary to convert such Optionee's ISOs
(or any installments or portions of installments thereof) that have not been
exercised on the date of conversion into Non-ISOs at any time prior to the
expiration of such ISOS, regardless of whether the Optionee is an employee of
the Company or of an Affiliate of the Company at the time of such conversion.
Such actions may include, but shall not be limited to, extending the exercise
period or reducing the exercise price of the appropriate installments of such
ISOS. At the time of such conversion, the Committee, with the consent of the
Optionee, may impose such conditions on the exercise of the resulting Non-ISOs
as the Committee in its discretion may determine, provided that such conditions
shall not be inconsistent with this Plan. Nothing in the Plan shall be deemed
to give any Optionee the right to have such Optionee's ISOs converted into Non-
ISOs, and no such conversion shall occur until and unless the Committee takes
appropriate action. The Committee, with the consent of the Optionee, may also
terminate any portion of any ISO that has not been exercised at the time of such
conversion.
13. Conditions Upon Issuance of Shares.
----------------------------------
13.1 Shares shall not be issued pursuant to the exercise of any Option
unless the exercise of such Option and the issuance and delivery of such shares
pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended, the Exchange Act,
any applicable state securities law, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the shares may
then be listed or otherwise traded, and such compliance has been confirmed by
counsel for the Company.
13.2 As a condition to the exercise of any Option, the Company may require
the participant exercising the option to represent and warrant at the time of
any such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such representations and warranties are
required by any relevant provision of law.
13.3 The Company's inability to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any shares hereunder, shall relieve
the Company of any liability with respect to the failure to issue or sell such
shares.
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<PAGE>
14. Use of Proceeds.
---------------
Proceeds from the sale of Common Stock pursuant to the Options granted and
exercised under the Plan shall constitute general funds of the Company and shall
be used for general corporate purposes.
15. Notices.
-------
All notices, requests, demands and other communications required or
permitted to be given under this Plan and the Options granted under this Plan
shall be in writing and shall be either served personally on the party to whom
notice is to be given (in which case notice shall be deemed to have been duly-
given on the date of such service), or mailed to the party to whom notice is to
be given, by first class mail, registered or certified, return receipt
requested, postage prepaid, and addressed to the party at his or its most recent
known address, in which case such notice shall be deemed to have been duly given
on the third (3rd) postal delivery day following the date of such mailing.
16. Financial Statements.
--------------------
Upon request, the Company shall make available its annual audited financial
statements and monthly unaudited financial statements (balance sheet and income
statement) for review by Optionees holding currently exercisable Options. Any
such review shall be conducted in the offices of the Company and may be
conditioned upon such Optionees' execution of such confidentiality agreements as
the Company may reasonably require.
17. Miscellaneous Provisions.
------------------------
17.1 Optionees shall be under no obligation to exercise Options granted
under this Plan.
17.2 Nothing contained in this Plan shall obligate the Company to retain
an Optionee as an employee, officer, director, or consultant for any period, nor
shall this Plan interfere in any way with the right of the Company to reduce
such Optionees compensation.
17.3 The provisions of this Plan, each option issued to an optionee under
the Plan, and each Option Agreement shall be binding upon such optionee, the
Qualified Successor or Guardian of such Optionee, and the heirs, successors, and
assigns of such Optionee.
17.3 Where the context so requires, references herein to the singular
shall include the plural, and vice versa, and references to a particular gender
shall include either or both genders.
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<PAGE>
18. Effective Date of Plan and Amendments.
-------------------------------------
This Plan was initially adopted by the Board of Directors on February 11,
1985 and approved by the shareholders on April 17, 1985. Subsequent amendments
were adopted by resolution of the Board of Directors adopted December 17, 1985;
by resolution of the Board of Directors and shareholders effective May 23, 1986;
by resolution of the Board of Directors adopted April 29, 1987; by resolution of
the Board of Directors adopted December 27, 1988; and by resolution of the Board
of Directors and shareholders effective February 1, 1991. The Plan was amended
and restated by resolution of the Board of Directors and shareholders effective
September 30, 1992. Subsequent amendments were adopted by resolution of the
Board of Directors on November 18, 1992, January 28, 1993 and July 26, 1994 and
approved by the shareholders on July 22, 1993 and August 15, 1994. Subsequent
amendments were adopted by resolution of the Board of Directors on May 19, 1993.
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<PAGE>
EXHIBIT A
---------
Proposed Amendments to the
VoiceCom Holdings, Inc.
Amended and Restated 1985 Stock Option Plan
(As adopted by the Board of Directors on June 29, 1995
and approved by the Shareholders on July 27, 1995)
10. Adjustments to Options.
-----------------------
10.1 In the event of a material alteration in the capital structure of the
Company on account of a recapitalization, stock split, reverse stock split,
stock dividend, or otherwise, then the Committee shall make such adjustments to
this Plan and to the Options then outstanding and thereafter granted under this
Plan as the Committee determines to be appropriate and equitable under the
circumstances, so that the proportionate interest of each holder of any such
Option shall, to the extent practicable, be maintained as before the occurrence
of such event. Such adjustments may include, without limitation (a) a change in
the number or kind of shares of stock of the Company covered by such Options,
and (b) a change in the Option Price payable per share; provided, however, that
the aggregate Option Price applicable to the unexercised portion of existing
Options shall not be altered, it being intended that any adjustments made with
respect to such Options shall apply only to the price per share and the number
of shares subject thereto. For purposes of this Section 10.1, neither (i) the
issuance of additional shares of stock of the Company in exchange for adequate
consideration (including services), nor (ii) the conversion of outstanding
preferred shares of the Company into Common Stock shall be deemed material
alterations of the capital structure of the Company. In the event the Committee
shall determine that the nature of a material alteration in the capital
structure of the Company is such that it is not practical or feasible to make
appropriate adjustments to this Plan or to the Options granted hereunder, such
event shall be deemed a Terminating Event as defined in Section 10.2 below.
10.2 Subject to Section 10.3, all Options granted under the Plan shall
terminate upon the occurrence of any of the following events ("Terminating
Events"): (a) the dissolution or liquidation of the Company; or (b) a material
change in the capital structure of the Company that is subject to this Section
10.2 by virtue of the last sentence of Section 10.1 above.
10.3 The Committee shall give notice to Optionees not less than thirty
(30) days prior to the consummation of (a) a Terminating Event as defined in
Section 10.2 above; (b) a merger or consolidation of the Company with one or
more corporations as a result of which, immediately following such merger or
consolidation, the shareholders of the Company as a group will hold less than a
majority of the outstanding capital stock of the surviving corporation; or (c)
the sale or other disposition of all or substantially all of the assets of the
Company. Upon the giving of such notice, all Options granted under the Plan
<PAGE>
shall become immediately exercisable, without regard to any contingent
vesting provision to which such Options may have otherwise been subject.
10.4 All Options granted under the Plan shall become immediately
exercisable, without regard to any contingent vesting provision to which such
Options may have otherwise been subject, upon the occurrence of an event whereby
any person or entity, including any "person" as such term is used in Section
13(d)(3) of the Exchange Act, becomes the "beneficial owner", as defined in the
Exchange Act, of Common Stock representing fifty percent (50%) or more of the
combined voting power of the voting securities of the Company.
10.5. In the event of a reorganization as defined in this Section 10.5 in
which the Company is not the surviving or acquiring company, or in which the
Company is or becomes a wholly-owned subsidiary of another company after the
effective date of the reorganization, then the plan or agreement respecting the
reorganization shall include appropriate terms providing for the assumption of
each Option granted under this Plan, or the substitution of an option therefor,
such that no "modification" of any such Option occurs under Section 424 of the
Code. For purposes of this Section 10.5, reorganization shall mean any
statutory merger, statutory consolidation, sale of all or substantially all of
the assets of the Company, or sale, pursuant to an agreement with the Company,
of securities of the Company pursuant to which the Company is or becomes a
wholly-owned subsidiary of another corporation after the effective date of the
reorganization.
10.6 The Committee shall have the right to accelerate the date of exercise
of any installment of any option; provided that, without the consent of the
Optionee with respect to any Option, the Committee shall not accelerate the date
of any installment of any Option granted to an employee as an ISO (and not
previously converted into a Non-ISO pursuant to Section 12 below) if such
acceleration would violate the annual vesting limitation contained in Section
422(d) of the Code, as described in Section 6 above.
10.7 Adjustments and determinations under this Section 10 shall be made by
the Committee (upon the advice of counsel), whose decisions as to what
adjustments or determination shall be made, and the extent thereof, shall be
final, binding, and conclusive.
-2-
<PAGE>
Exhibit A
---------
Amendment to the 1985 Stock Option Plan,
---------------------------------------
as adopted by the Board of Directors effective July 26, 1994
------------------------------------------------------------
and approved by the Shareholders on August 15, 1994
---------------------------------------------------
Section 4.1 of the VoiceCom Holdings, Inc. Amended and Restated 1985 Stock
Option Plan is hereby deleted in its entirety and replaced with the following:
"The Committee, from time to time, may provide for the option and sale in
the aggregate of up to Three Million Five Hundred Thousand (3,500,000)
shares of Common Stock, to be made available from authorized, but unissued,
or reacquired shares of Common Stock. The number of such shares shall be
adjusted to take account of the events referred to in Section 10 hereof."
<PAGE>
Amendment to 1985 Stock Option Plan,
as adopted by the Board of Directors effective
January 28, 1993 and approved by the
Shareholders on July 22, 1993
Section 4.1 of the Company's Amended and Restated 1985 Stock Option Plan is
hereby amended, to increase the number of shares available for option and sale
under the Plan to an aggregate of up to 2,500,000 shares of Common Stock.
-2-
<PAGE>
EXHIBIT A
---------
Amendments to the
VoiceCom Holdings, Inc.
Amended and Restated 1985 Stock Option Plan (the "Plan")
The following amendments to the Plan were approved by the Board of Directors of
VoiceCom Holdings, Inc. on May 19, 1993:
1. Section 10 of the Plan shall be deleted in its entirety and shall be
replaced with the following:
"10. Adjustments to Options.
----------------------
"10.1 In the event of a material alteration in the capital structure of
the Company on account of a recapitalization, stock split, reverse stock
split, stock dividend, or otherwise, then the Committee shall make such
adjustments to this Plan and to the Options then outstanding and thereafter
granted under this Plan as the Committee determines to be appropriate and
equitable under the circumstances, so that the proportionate interest of
each holder of any such Option shall, to the extent practicable, be
maintained as before the occurrence of such event. Such adjustments may
include, without limitation (a) a change in the number or kind of shares of
stock of the Company covered by such Options, and (b) a change in the
Option Price payable per share; provided, however, that the aggregate
Option Price applicable to the unexercised portion of existing Options
shall not be altered, it being intended that any adjustments made with
respect to such Options shall apply only to the price per share and the
number of shares subject thereto. For purposes of this Section 10.1,
neither (i) the issuance of additional shares of stock of the Company in
exchange for adequate consideration (including services), nor (ii) the
conversion of outstanding preferred shares of the Company into Common Stock
shall be deemed material alterations of the capital structure of the
Company. In the event the Committee shall determine that the nature of a
material alteration in the capital structure of the Company is such that it
is not practical or feasible to make appropriate adjustments to this Plan
or to the Options granted hereunder, such event shall be deemed a
Terminating Event as defined in Section 10.2 below.
"10.2 Subject to Section 10.3, all Options granted under the Plan shall
terminate upon the occurrence of any of the following events
<PAGE>
("Terminating Events"): (a) the dissolution or liquidation of the company;
or (b) a material change in the capital structure of the Company that is
subject to this Section 10.2 by virtue of the last sentence of Section 10.1
above.
"10.3 The Committee shall give notice to Optionees not less than thirty
(30) days prior to the consummation of (a) a Terminating Event as defined
in Section 10.2 above; (b) a merger or consolidation of the Company with
one or more corporations as a result of which, immediately following such
merger or consolidation, the shareholders of the Company as a group will
hold less than a majority of the outstanding capital stock of the surviving
corporation; or (c) the sale or other disposition of all or substantially
all of the assets of the Company. Upon the giving of such notice, all
options granted under the Plan shall become immediately exercisable,
without regard to any contingent vesting provision to which such Options
may have otherwise been subject; provided, however, that this Section 10.3
-------- -------
shall not apply to Options granted after May 19, 1993 under the Plan.
"10.4 All options granted under the Plan shall become immediately
exercisable, without regard to any contingent vesting provision to which
such options may have otherwise been subject, upon the occurrence of an
event whereby any person or entity, including any "person" as such term is
used in Section 13(d)(3) of the Exchange Act, becomes the "beneficial
owner", as defined in the Exchange Act, of Common Stock representing fifty
percent (50%) or more of the combined voting power of the voting securities
of the Company; provided, however, that this Section 10.4 shall not apply
-------- -------
to options granted after May 19, 1993 under the Plan.
"10.5 In the event of a reorganization as defined in this Section 10.5
in which the Company is not the surviving or acquiring company, or in which
the Company is or becomes a wholly-owned subsidiary of another company
after the effective date of the reorganization, then the plan or agreement
respecting the reorganization shall include appropriate terms providing for
the assumption of each option granted under this Plan, or the substitution
of an option therefor, such that no "modification" of any such option
occurs under Section 424 of the Code. For purposes of this Section 10.5,
reorganization shall mean any statutory merger, statutory consolidation,
sale of all or substantially all of the assets of the Company, or sale,
pursuant to an agreement with the Company, of securities of the Company
pursuant to which the company is or becomes a wholly-owned subsidiary of
another corporation after the effective date of the reorganization.
-2-
<PAGE>
"10.6 The Committee shall have the right to accelerate the date of
exercise of any installment of any option; provided that, without the
consent of the Optionee with respect to any Option, the Committee shall not
accelerate the date of any installment of any Option granted to an employee
as an ISO (and not previously converted into a Non-ISO pursuant to Section
12 below) if such acceleration would violate the annual vesting limitation
contained in Section 422 (d) of the Code, as described in Section 6 above;
provided, however, that this Section 10.6 shall not apply to options
-------- -------
granted after May 19, 1993 under the Plan.
"10.7 Adjustments and determinations under this Section 10 shall be
made by the Committee (upon the advice of counsel), whose decisions as to
what adjustments or determination shall be made, and the extent thereof,
shall be final, binding, and conclusive."
2. Section 18 of the Plan shall be deleted in its entirety and shall be
replaced by the following:
"18. Effective Date of Plan and Amendments.
-------------------------------------
This Plan was initially adopted by the Board of Directors on February 11,
1985 and approved by the shareholders on April 17, 1985. Subsequent amendments
were adopted by resolution of the Board of Directors adopted December 17, 1985;
by resolution of the Board of Directors and shareholders effective May 23, 1986;
by resolution of the Board of Directors adopted April 29, 1987; by resolution of
the Board of Directors adopted December 27, 1988; and by resolution of the Board
of Directors and shareholders effective February 1, 1991. The Plan was amended
and restated by resolution of the Board of Directors and shareholders effective
September 30, 1992. Subsequent amendments were adopted by resolution of the
Board of Directors on November 18, 1992 and January 28, 1993, and these
amendments were approved by the shareholders on July 22, 1993.
-3-
<PAGE>
EXHIBIT 11.1
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF NET INCOME (LOSS) PER SHARE
FOR THE YEAR ENDED DECEMBER 31, 1997, 1996, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
---------------------------------------------------------------------------------
1997 1996 1995
---------------------------- -------------------------- -------------------------
NET
WEIGHTED WEIGHTED INCOME WEIGHTED NET
AVERAGE NET LOSS NET AVERAGE PER SHARE NET AVERAGE INCOME
NET LOSS SHARES PER SHARE INCOME SHARES AMOUNT INCOME SHARES PER SHARE
-------- -------- --------- ------ -------- --------- ------ -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net income (loss)............... $(25,375) -- -- $3,458 -- -- $4,171 -- --
Less: Preferred stock dividends. -- -- -- (29) -- -- 308 -- --
Basic net income (loss)......... $(25,375) 32,443 $ (0.78) $3,429 27,670 $0.12 $3,863 19,868 $0.19
======== ====== ======= ====== ====== ===== ====== ====== =====
Dilutive Securities
Stock options................... -- -- -- -- 3,618 -- -- 1,348 --
Series A convertible redeemable
8% cumulative preferred stock.. -- -- -- -- -- -- 350 3,096 --
-------- ------ ------- ------ ------ ----- ------ ------ -----
Diluted net income (loss)....... $(25,375) 32,443 $ (0.78) $3,429 31,288 $0.11 $4,213 24,312 $0.17
======== ====== ======= ====== ====== ===== ====== ====== =====
</TABLE>
<PAGE>
EXHIBIT 21.1
Subsidiaries of Premiere Technologies, Inc.
Advanced Resources Technologies, Inc., incorporated in the State of New York
EBIS Communications, Inc., incorporated in the State of Georgia
Premiere Communications, Inc., incorporated in the State of Florida
VoiceCom Systems, Inc., incorporated in the State of Washington
Voice Partners Company, organized in the State of Ohio
Voice-Tel Canada Limited, organized in the Country of Canada
Voice-Tel Enterprises, Inc., incorporated in the State of Delaware
Car Zee, Inc., incorporated in the State of California
In Touch Technologies, Inc., incorporated in the State of California
Voice-Net Communications Systems, Inc., incorporated in the State of New York
VT of Long Island Inc., incorporated in the State of New York
Allagash Communications, Inc., incorporated in the State of Maine
Brooks-Sloan, Inc., incorporated in the State of Alabama
Caldwell, Inc., incorporated in the State of West Virginia
Charp-Tel Enterprises, Inc. incorporated in the State of Rhode Island
Digitele Corporation, incorporated in the State of California
Lar-Lin Enterprises, Inc., incorporated in the State of Kansas
Lar-Lin Investments, Inc., incorporate in the State of Kansas
Laugar International, Inc., incorporated in the State of Maryland
Mitchell E. Eil, Inc., incorporated in the State of New York
New West Communications, Inc., incorporate in the State of Nevada
Rambl Corporation, incorporated in the State of New Hampshire
RGB Enterprises, Inc., incorporated in the State of Oklahoma
Tri-C Communications Corp., incorporated in the State of New York
Voice Communications, Inc., incorporated in the State of Florida
<PAGE>
Voice Link, Inc., incorporated in the State of Louisiana
Voice Management, Inc., incorporated in the State of Missouri
Voice Telecommunications, Inc., incorporated in the State of New York
Voice-Mail Solutions, Inc., incorporated in the State of Kansas
Voice-Tel Network Limited Partnership, organized in the State of Delaware
Voice-Tel Pty Ltd., organized in the Countries of Australia and New Zealand
Xpedite Systems, Inc.,
Xpedite Systems Worldwide, Inc, incorporated in the State of Delaware
Xpedite Systems Holding (UK) Limited, incorporated in the Country of UK
Xpedite Systems Limited, incorporated in the Country of the UK
Transmit International Limited, incorporated in the Country of the UK
Connaught Commercial Services Limited, incorporated in the
Country of the UK
Xpedite Systems GmbH, incorporated in the Country of Germany
Transtelindo Tritamo, incorporated in the Country of Indonesia
Xpedite Systems Canada, Inc., incorporated in the Country of Canada
Xpedite Systems Korea Ltd., incorporated in the Country of Korea
APA Expert Beteiligungsgesellschaft mbH, incorporated in the
Country of Germany
Swift Global Communications, Inc., incorporated in the State of Delaware
Swift Global International Ltd., incorporated in the State of New York
Swift Global Communications H.K. Limited, incorporated in the Country of
Hong Kong
ViTel International Holding Company, Inc., incorporated in the State of
Delaware
ViTel Limited, incorporated in the Country of UK
ViTel Scandinavia A/S Kolding, Denmark, incorporated in the Country of
Denmark
ViTel Bureau Services Limited, incorporated in the Country of UK
ViTel International (H.K.) Limited, incorporated in the Country of Hong
Kong
ViTel Malaysia Sdn Bhd, incorporated in the Country of Malaysia
Xpedite International (Australia) Pty. Ltd., incorporated in the Country
of Australia
ViTel International (New Zealand) Ltd., incorporated in the Country of New
Zealand
ViTel International, Inc., incorporated in the State of New York
ViTel Telecommunications of Canada, Inc., incorporated in the Country of
Canada
Xpedite Japan, Inc., incorporated in the Country of Japan
ViTel GmbH, incorporated in the Country of Germany
Comwave Communications AG, incorporated in the Country of Switzerland
Comwave (U.K.) Ltd., incorporated in the Country of the UK
Comwave GmbH, incorporated in the Country of Germany
U.S. Comwave Communications, Inc., incorporated in the State of New York
-2-
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated February 3, 1998, except with respect to Note 17
which is dated February 27, 1998, included in this Annual Report on Form 10-K
into Premiere Technologies, Inc.'s previously filed Registration Statements
(File Nos. 333-17593, 333-11281, 333-29787, 333-36557 and 333-39693).
/s/ Arthur Andersen LLP
-------------------
Arthur Andersen LLP
March 30, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from the
financial statements of Premiere Technologies, Inc. for the year ended
December 31, 1997 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 21,770
<SECURITIES> 154,569
<RECEIVABLES> 24,022
<ALLOWANCES> 3,303
<INVENTORY> 0
<CURRENT-ASSETS> 229,714
<PP&E> 120,861
<DEPRECIATION> 57,284
<TOTAL-ASSETS> 375,878
<CURRENT-LIABILITIES> 93,532
<BONDS> 167,270
0
0
<COMMON> 341
<OTHER-SE> 100,473
<TOTAL-LIABILITY-AND-EQUITY> 375,878
<SALES> 229,352
<TOTAL-REVENUES> 229,352
<CGS> 63,974
<TOTAL-COSTS> 63,974
<OTHER-EXPENSES> 194,376
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,122
<INCOME-PRETAX> (28,787)
<INCOME-TAX> (3,412)
<INCOME-CONTINUING> (25,375)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (25,375)
<EPS-PRIMARY> (0.78)
<EPS-DILUTED> (0.78)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from the
financial statements of Premiere Technologies, Inc. for the year ended
December 31, 1996 and 1995 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C> <C>
<RESTATED>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> DEC-31-1996 DEC-31-1995
<CASH> 15,936 8,243
<SECURITIES> 67,900 3,516
<RECEIVABLES> 16,039 12,937
<ALLOWANCES> 1,435 967
<INVENTORY> 0 0
<CURRENT-ASSETS> 111,327 33,091
<PP&E> 88,814 66,910
<DEPRECIATION> 42,633 32,067
<TOTAL-ASSETS> 201,541 78,131
<CURRENT-LIABILITIES> 65,950 49,184
<BONDS> 0 0
0 0
0 3,907
<COMMON> 316 198
<OTHER-SE> 104,217 26,953
<TOTAL-LIABILITY-AND-EQUITY> 201,541 78,131
<SALES> 197,474 147,543
<TOTAL-REVENUES> 197,474 147,543
<CGS> 55,601 43,868
<TOTAL-COSTS> 55,601 43,868
<OTHER-EXPENSES> 135,067 96,672
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 4,498 4,812
<INCOME-PRETAX> 4,830 4,186
<INCOME-TAX> 1,372 15
<INCOME-CONTINUING> 3,458 4,171
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,458 4,171
<EPS-PRIMARY> .12 .19
<EPS-DILUTED> .11 .17
</TABLE>
