<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from TO .
------------- ------------
Commission File Number:
0-27778
Premiere Technologies, Inc.
(Exact name of registrant as specified in its charter)
Georgia 59-3074176
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3399 Peachtree Road NE
The Lenox Building, Suite 600
Atlanta, Georgia 30326
(Address of principal executive offices, including zip code)
(404) 262-8400
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
(1) Yes X No (2) Yes X No .
----- ----- ----- -----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at August 13, 1998
----------------------------- --------------------------------
Common Stock, $0.01 par value 45,885,865 shares
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
PAGE
----
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Consolidated Balance Sheets as of
June 30, 1998 and December 31, 1997 3
Condensed Consolidated Statements of Operations for the
Three and Six Month periods ended June 30, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows for the
Six Month period ended June 30, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3 Quantitative and Qualitative Disclosures About Market Risk 12
PART II OTHER INFORMATION
Item 1 Legal Proceedings 13
Item 2 Changes in Securities 15
Item 3 Defaults Upon Senior Securities 15
Item 4 Submission of Matters to a Vote of Security Holders 15
Item 5 Other Information 16
Item 6 Exhibits and Reports on Form 8-K 16
SIGNATURES 18
EXHIBIT INDEX 19
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents........................................ $ 47,009 $ 43,731
Marketable securities....................................... 51,988 154,569
Accounts receivable (less allowances of
$12,727 and $7,248, respectively)......................... 60,272 55,040
Prepaid expenses and other.................................. 13,957 10,589
Deferred income taxes, net.................................. 41,848 27,957
--------- ---------
Total current assets...................................... 215,074 291,886
--------- ---------
PROPERTY AND EQUIPMENT, NET.................................... 118,826 87,428
--------- ---------
OTHER ASSETS
Deferred income taxes, net.................................. - 544
Strategic alliances and investments, net.................... 62,264 54,328
Goodwill, net............................................... 175,570 104,244
Intangibles and other....................................... 28,453 22,937
--------- ---------
$ 600,187 $ 561,367
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses......................... $ 114,395 $ 100,694
Revolving loan, net of issue costs............................ 129,332 128,456
Current maturities of long term debt.......................... 4,209 6,243
Accrued restructuring, rebranding and other special charges... 26,226 22,324
--------- ---------
Total current liabilities................................... 274,162 257,717
--------- ---------
LONG TERM LIABILITIES
Convertible subordinated notes, net of issue costs............ 167,651 167,270
Long term debt................................................ 12,188 3,562
Other accrued liabilities..................................... 2,835 11,879
Deferred income taxes, net.................................... 5,762 -
--------- ---------
Total long term liabilities................................. 188,436 182,711
--------- ---------
SHAREHOLDERS' EQUITY
Common stock, $0.01 par value; 150,000,000 shares authorized,
46,200,865 and 44,670,619 shares issued and outstanding,
respectively................................................ 462 447
Additional paid-in capital.................................... 280,419 246,255
Treasury stock, at cost....................................... (2,616) -
Note receivable, shareholder.................................. (973) (973)
Cumulative translation adjustment............................. (3,497) (3,551)
Accumulated deficit........................................... (136,206) (121,239)
--------- ---------
Total shareholders' equity.................................. 137,589 120,939
--------- ---------
$ 600,187 $ 561,367
========= =========
Accompanying notes are integral to these condensed consolidated financial statements.
</TABLE>
3
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------------- --------------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
-------------------------- --------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES................................................................. $ 121,435 $ 98,519 $ 240,461 $ 191,092
COST OF SERVICES......................................................... 37,620 31,885 76,655 61,702
--------- --------- --------- ---------
GROSS PROFIT............................................................. 83,815 66,634 163,806 129,390
--------- --------- --------- ---------
OPERATING EXPENSES
Selling, general and administrative.................................... 76,379 43,688 124,542 84,962
Depreciation and amortization.......................................... 11,827 6,946 21,778 13,087
Restructuring, rebranding and other special charges.................... - 45,423 24,845 45,423
Accrued settlement cost................................................ - 1,500 2,850 1,500
--------- --------- --------- ---------
Total operating expenses............................................. 88,206 97,557 174,015 144,972
--------- --------- --------- ---------
OPERATING INCOME (LOSS).................................................. (4,391) (30,923) (10,209) (15,582)
--------- --------- --------- ---------
OTHER INCOME (EXPENSE)
Interest, net.......................................................... (3,723) (752) (6,546) (1,653)
Other, net............................................................. (71) 57 (104) (64)
--------- --------- --------- ---------
Total other income (expense)......................................... (3,794) (695) (6,650) (1,717)
--------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES........................................ (8,185) (31,618) (16,859) (17,299)
INCOME TAX BENEFIT....................................................... (3,307) (4,333) (1,893) (281)
--------- --------- --------- ---------
NET INCOME (LOSS)........................................................ $ (4,878) $ (27,285) $ (14,966) $ (17,018)
========= ========= ========= =========
BASIC NET INCOME (LOSS) PER SHARE........................................ $ (0.11) $ (0.64) $ (0.33) $ (0.40)
========= ========= ========= =========
DILUTED NET INCOME (LOSS) PER SHARE...................................... $ (0.11) $ (0.64) $ (0.33) $ (0.40)
========= ========= ========= =========
WEIGHTED AVERAGE SHARES OUTSTANDING
BASIC.................................................................. 46,243 42,475 45,614 42,399
========= ========= ========= =========
DILUTED................................................................ 46,243 42,475 45,614 42,399
========= ========= ========= =========
Accompanying notes are integral to these condensed consolidated financial statements.
</TABLE>
4
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997
------------ ------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss).................................................... $(14,966) $(17,018)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization..................................... 21,778 13,087
Deferred income taxes............................................. (12,848) (5,784)
Restructuring, rebranding and other special charges............... 24,845 45,423
Accrued settlement cost........................................... 2,850 1,500
Payments for restructuring, rebranding and other special charges.. (29,458) (13,190)
Changes in assets and liabilities:
Accounts receivable, net........................................ (3,791) (6,857)
Prepaid expenses and other...................................... 1,421 (1,233)
Accounts payable and accrued expenses........................... 4,376 339
-------- --------
Total adjustments.................................................. 9,173 33,285
-------- --------
Cash flows from operating activities............................ (5,793) 16,267
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment................................... (33,117) (17,980)
Redemption of marketable securities, net............................. 102,581 36,104
Cash paid for acquired companies, net of cash acquired............... (46,350) (16,198)
Strategic investments................................................ (8,019) -
Other................................................................ 49 (514)
-------- --------
Cash flows from investing activities............................ 15,144 1,412
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments under borrowing arrangements................................ (6,742) (22,666)
Payment for purchase of treasury stock............................... (2,616) -
Proceeds from issuance of debt....................................... - 2,050
Proceeds from revolving loan, net.................................... 2,000 -
Proceeds from convertible subordinated notes, net.................... - 145,105
Shareholder distributions, primarily S-Corporation distributions..... - (5,161)
Net funds from exercise of stock options............................. 1,696 235
Other................................................................ (395) (1,501)
-------- --------
Cash flows from financing activities............................ (6,057) 118,062
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH................................ (16) (887)
-------- --------
NET INCREASE IN CASH AND EQUIVALENTS................................... 3,278 134,854
CASH AND EQUIVALENTS, beginning of period.............................. 43,731 22,616
-------- --------
CASH AND EQUIVALENTS, end of period.................................... $ 47,009 $157,470
======== ========
Accompanying notes are integral to these condensed consolidated financial statements.
</TABLE>
5
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited interim condensed consolidated financial statements
have been prepared by management of Premiere Technologies, Inc. (the "Company"
or "Premiere") in accordance with rules and regulations of the Securities and
Exchange Commission ("SEC"). Accordingly, certain information and footnote
disclosures usually found in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted. In the
opinion of management of the Company, all adjustments (consisting only of normal
recurring adjustments, except as disclosed herein) considered necessary for a
fair presentation of the condensed consolidated financial statements have been
included. Preparing financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses. Examples include provisions for bad debts, carrying
values and useful lives assigned to goodwill and other long-lived assets and
accruals for restructuring costs and employee benefits. Actual results could
differ from those estimates. These interim condensed consolidated financial
statements should be read in conjunction with the Company's Annual Report on
Form 10-K, for the year ended December 31, 1997.
2. SIGNIFICANT CHARGES AND COSTS
The Company recorded certain charges and costs of approximately $17.1 million
before income taxes in the three month period ended June 30, 1998. Such amount
consists of approximately $8.4 million of charges associated with uncollectible
accounts receivable related principally to the bankruptcy of two customers, $2.3
million of start-up costs, primarily executive compensation, incurred by its
Orchestrate.com subsidiary, $1.8 million related to asset impairments and other
costs. Approximately $16.1 million of these nonrecurring charges and costs are
included as selling, general and administrative expenses in the accompanying
condensed consolidated statement of operations.
3. NEW ACCOUNTING PRONOUNCEMENTS
During 1997 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") No. 131, "Disclosures About Segments of
an Enterprise and Related Information" effective for fiscal years beginning
after December 15, 1997. Interim period reporting is not required in the initial
year of adoption. Management is currently studying the impact that SFAS No. 131
will have on its financial statement disclosures.
4. NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed in accordance with SFAS No. 128,
"Earnings per Share." Basic and diluted net income (loss) per share are the same
for the three and six month periods ended June 30, 1998 and 1997 because both of
the Company's potentially dilutive securities, convertible subordinated notes
and stock options, are antidilutive in all periods presented.
5. COMPREHENSIVE INCOME
In 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income."
Comprehensive income represents the change in equity of a business during a
period, except for investments by owners and distributions to owners. Foreign
currency translation adjustments represent the Company's only component of other
comprehensive income. For the three month period ended June 30, 1998 and 1997,
total comprehensive loss was approximately $5.5 and $28.3 million, respectively.
For the six month period ended June 30, 1998 and 1997, total comprehensive loss
was $14.9 and $18.0 million, respectively.
6
<PAGE>
6. ACQUISITIONS
American Teleconferencing Services, Ltd. Acquisition
Effective April 22, 1998, the Company purchased all of the outstanding common
stock of American Teleconferencing Services, Ltd. ("ATS") for an aggregate
purchase price of approximately $58 million in stock and cash. ATS is a leading
provider of full service conference calling and other forms of group
communications. Excess purchase price over fair value of net assets acquired of
approximately $47 million has been recorded as goodwill based on a preliminary
purchase price allocation and is being amortized on a straight-line basis over
40 years. Such purchase price allocation is subject to change within one year of
the acquisition date under certain circumstances as set forth in Accounting
Principles Board Opinion No. 16 "Business Combinations" ("APB No.16").
Xpedite Systems, Inc. Acquisition
On February 27, 1998, the Company completed its merger with Xpedite Systems,
Inc. ("Xpedite"). In connection with the merger, the Company issued
approximately 11 million shares of its common stock in exchange for all of the
issued and outstanding common shares of Xpedite. 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 Xpedite.
International Acquisitions
During the first quarter of 1998, the Company acquired Xpedite Systems, GmbH
("XSG") for $13.1 million in cash, net of cash acquired. XSG provides enhanced
electronic document distribution services in Germany. Excess purchase price
over fair value of net assets acquired of approximately $12.9 million has been
recorded as goodwill based on a preliminary purchase price allocation and is
being amortized on a straight-line basis over 40 years. Such purchase price
allocation is subject to change within one year of the acquisition date under
certain circumstances as set forth in APB No. 16.
On December 17, 1997, Xpedite purchased substantially all of the outstanding
capital stock of Xpedite Systems Limited ("XSL") for $87.8 million in cash. XSL
is a leading supplier of enhanced electronic document distribution services in
the United Kingdom. Excess purchase price over fair value of net assets acquired
of approximately $79.1 million has been recorded as goodwill based on a
preliminary purchase price allocation and is being amortized on a straight-line
basis over 40 years. Such purchase price allocation is subject to change within
one year of the acquisition date under certain circumstances as set forth in
APB No. 16.
During the second quarter of 1998, the Company acquired two electronic document
distribution companies located in Germany and Singapore. The aggregate purchase
price of these acquisitions approximates $16 million in cash and liabilities
assumed. Both of the acquisitions were accounted for as purchases. Excess
purchase price over fair value of net assets acquired of approximately $12
million has been recorded as goodwill based on a preliminary purchase price
allocation and is being amortized over 40 years. Such purchase price allocation
is subject to change within one year of the acquisition date under certain
circumstances as set forth in APB No. 16.
VoiceCom Acquisition
During the third quarter of 1997, the Company completed its merger with VoiceCom
Holdings, Inc. ("VoiceCom"), a provider of voice messaging, interactive voice
response and other enhanced communications services. In connection with the
merger, the Company issued approximately 446,000 shares of its common stock in
exchange for all of the issued and outstanding common shares of VoiceCom. 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
VoiceCom.
7
<PAGE>
Voice-Tel Acquisitions
On June 12, 1997, the Company completed the acquisitions of Voice-Tel
Enterprises, Inc. ("VTE"), its affiliate Voice-Tel Network Limited Partnership
("VTN") and substantially all of the approximately 100 independently owned
Voice-Tel franchise businesses ("Franchisees") (collectively, the "Voice-Tel
Entities" and "Voice-Tel Acquisitions"). In connection with the acquisitions,
the Company issued approximately 7.4 million shares of its common stock, paid
approximately $16.2 million in cash and assumed approximately $21.3 million in
indebtedness, net of cash acquired. Most of the Voice-Tel Acquisitions 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 the Voice-Tel Acquisitions accounted for using this method. The
Company purchased 15 of the Voice-Tel Entities for an aggregate of approximately
$15.5 million in cash and approximately 94,000 shares of its common stock.
Excess purchase price over fair value of net assets acquired has been recorded
as goodwill based on preliminary purchase price allocations and is being
amortized on a straight-line basis over 40 years. Such purchase price
allocations are subject to change within one year of the acquisition date under
certain circumstances as set forth in APB No. 16.
The following unaudited pro forma consolidated results of operations for the
three and six month periods ended June 30, 1998 and 1997 assumes the
acquisitions made by the Company in 1997 and 1998 which were accounted for as
purchases occurred on January 1, 1997. Pro forma adjustments consist of
amortization of intangible assets acquired, interest expense associated with
borrowings incurred in connection with the XSG and XSL purchases and lost
interest income reflecting cash paid in the purchase of ATS.
<TABLE>
<CAPTION>
(000's) (000's)
Three Month Period Ended Six Month Period Ended
-------------------------- ---------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $122,150 $118,017 $251,869 $228,023
======== ======== ======== ========
Net loss $ (5,060) $(28,261) $(21,971) $(18,905)
======== ======== ======== ========
Basic net loss per share $ (0.11) $ (0.65) $ (0.48) $ (0.44)
======== ======== ======== ========
Diluted net loss per share $ (0.11) $ (0.65) $ (0.48) $ (0.44)
======== ======== ======== ========
</TABLE>
7. RESTRUCTURING, REBRANDING AND OTHER SPECIAL CHARGES
The Company recorded charges against income of approximately $27.7 million in
the first quarter of 1998 in connection with the Xpedite merger. Such charges
consist of transaction costs, principally investment banking and professional
fees, which must be expensed under the pooling of interests method of
accounting. In addition, the Company has accrued the estimated costs to exit
certain facilities and discontinue certain business processes and activities
which are duplicative or redundant in the combined operations of Premiere and
Xpedite. These costs consist of severance associated with workforce reduction,
lease termination costs resulting from exiting certain facilities and asset
impairments resulting from management's decision to upgrade certain network
based telecommunications equipment in order to more efficiently integrate the
Premiere and Xpedite telecommunication networks. The Company also recorded the
costs to settle a patent infringement claim made against Xpedite. This
settlement was paid in April 1998.
Xpedite recorded restructuring and other special charges of approximately $16.5
million before income taxes in the fourth quarter of 1997. Such amounts result
principally from transaction costs incurred by Xpedite in connection with its
merger with the Company, including legal and professional fees and a $9.5
million transaction "break-up" fee paid by Xpedite in connection with an
unsuccessful attempt to acquire Xpedite. In addition, Xpedite recorded charges
for severance and asset impairment costs associated with closing its existing
United Kingdom ("UK") based operation. This action resulted from Xpedite
management's plan to restructure its European operations by acquiring its UK
affiliate (XSL) in December 1997 and centralizing administration of European
business operations in the newly acquired organization.
8
<PAGE>
In connection with the VoiceCom acquisition, the Company recorded restructuring
and other special charges of approximately $28.2 million before income taxes 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.
The Company also recorded a $1.5 million charge for anticipated legal and
settlement costs resulting from bankruptcy proceedings of a customer,
Communications Network Corporation. See Note 10 for further information.
Activity in accrued costs for restructuring and other special charges during
the six month period ended June 30, 1998 is as follows:
<TABLE>
<CAPTION>
Accrued Costs Accrued Costs
December 31, Charges to Costs June 30,
1997 Operations Incurred 1998
------------- --------------- -------- -------------
<S> <C> <C> <C> <C>
Severance $ 6,672 $ 1,803 $ 2,885 $ 5,590
Asset impairments 12,648 3,490 7,010 9,128
Restructure or terminate contractual
obligations 13,354 670 1,952 12,072
Transaction costs 6,948 11,388 14,653 3,683
Accrued settlement costs - 2,850 2,751 99
Rebranding costs - 2,710 1,566 1,144
Other costs, primarily to exit facilities
and certain activities 3,788 4,784 6,236 2,336
------- ------- ------- -------
$43,410 $27,695 $37,053 $34,052
======= ======= ======= =======
</TABLE>
8. STRATEGIC ALLIANCES AND INVESTMENTS
Assets recorded as strategic alliances and investments at June 30, 1998 and
December 31, 1997 are as follows (amounts in millions):
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- ------------
<S> <C> <C>
WorldCom $30.0 $30.0
Intangible and other asset 15.0 18.5
Less accumulated amortization 3.8 1.9
-------- ------------
41.2 46.6
Equity investments 21.1 7.7
-------- ------------
$62.3 $54.3
======== ============
</TABLE>
The most individually significant asset in this caption relates to the Company's
strategic alliance agreement entered into with WorldCom, Inc. ("WorldCom") in
November 1996. 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 the agreement, the Company issued 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. Costs capitalized of
approximately $30.0 million are being amortized over the life of the agreement.
WorldCom has entered into an agreement to acquire MCI, the consummation of which
is subject to certain regulatory approvals. MCI competes with the Company with
respect to certain services. The impact of WorldCom's proposed acquisition of
MCI on the Company's strategic alliance with WorldCom cannot be determined at
this time. Current revenue levels under the strategic alliance agreement are
significantly below the specified minimum payment levels in the agreement. The
minimum payments cease at the end of September 1998. The Company periodically
reviews this asset for impairment. Based on such reviews, management currently
believes this asset is appropriately valued. Management will continue to review
this asset periodically, and there can be no assurance that future reviews will
not require a write-down in the carrying value of this asset.
Intangible assets and equity investments classified as strategic alliances and
investments consist of investments made 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 an intangible asset are
being amortized over seven years. All equity investments held by the Company in
other organizations represent a less than 20% ownership and are being accounted
for under the cost method. Management periodically reviews these assets for
impairment. Based on such reviews, management believes that these assets are
appropriately valued. Management will continue to periodically review these
assets and there can be no assurance that future reviews will not require a
write-down of these assets.
9. STOCK PLANS
Recent sharp declines in the market price of the Company's common stock have
resulted in many outstanding employee stock options being exercisable at prices
that exceed the current market price, thereby substantially impairing the
effectiveness of such options as performance incentives. Consistent with the
Company's philosophy of using equity incentives to motivate and retain
management and employees, the Board of Directors determined it to be in the best
interests of the Company and its shareholders to restore the performance
incentives intended to be provided by employee stock options by repricing such
options to the current market price. Consequently, on July 22, 1998, the Board
of Directors of the Company determined to reprice or regrant all employee stock
options which had exercise prices in excess of the closing price of the Common
Stock on such date (other than those of Chief Executive Officer Boland T. Jones,
who requested that his options not be repriced) to $10.25, which was the closing
price of Premiere's common stock on July 22, 1998. While the vesting schedules
will remain unchanged, all repriced and regranted options will be subject to a
twelve-month black-out period, during which the options may not be exercised. In
addition, if the optionee's employment is terminated during the black-out
period, he or she will forfeit any repriced or regranted options that first
vested during the twelve-month period preceding his or her termination of
employment. By imposing the black-out and forfeiture provisions on the repriced
and regranted options, the Board of Directors intends to provide added incentive
for the optionees to continue service.
On July 22, 1998, the Board of Directors approved a new 1998 Stock Plan (the
"1998 Plan") that essentially mirrors the terms of the Company's existing Second
Amended and Restated 1995 Stock Plan (the "1995 Plan"), except that it is not
intended to be used for officers or directors. In addition, the 1998 Plan,
because it was not approved by the shareholders, does not provide for the grant
of incentive stock options. Under the 1998 Plan, 4,000,000 shares of Common
Stock are reserved for the grant of nonqualified stock options and other
incentive awards to employees and consultants of the Company. The objective of
the 1998 Plan is to provide the grantees with an incentive to achieve the
Company's objectives by encouraging their continued service and contribution. In
connection with the repricing of options, as discussed above, some of the
options currently outstanding under the 1998 Plan will be cancelled and replaced
with market-value options under the 1998 Plan, thereby achieving greater
availability for the grant of incentive stock options and other performance
incentives under the 1995 Plan.
On June 23, 1998, the Company's Board of Directors declared a dividend of one
preferred stock purchase right (a "Right") for each outstanding share of the
Company's Common Stock. The dividend was paid on July 6, 1998, to the
shareholders of record on that date. Each Right entitles the registered holder
to purchase from the Company one one-thousandth of a share of Series C Junior
Participating Preferred Stock, par value $0.01 per share (the "Preferred
Shares"), at a price of sixty dollars ($60.00) per one-thousandth of a Preferred
Share, subject to adjustment. The description and terms of the Rights are set
forth in the Shareholder Protection Rights Agreement, as the same may be amended
from time to time, dated as of June 23, 1998, between the Company and SunTrust
Bank, Atlanta, as rights agent. The Rights may have certain anti-takeover
effects. The Rights will cause substantial dilution by a person or group that
attempts to acquire the Company on terms not approved by the Board of Directors
of the Company. However, the Rights should not interfere with any merger,
statutory share exchange or other business combination approved by the Board of
Directors since the Rights may be terminated by the Board of Directors at any
time on or prior to the close of business ten business days after announcement
by the Company that a person has become an Acquiring Person. Thus, the Rights
are intended to encourage persons who may seek to acquire control of the Company
to initiate such an acquisition through negotiations with the Board of
Directors. However, the effect of the Rights may be to discourage a third party
from making a partial tender offer or otherwise attempting to obtain a
substantial equity position in the equity securities of, or seeking to obtain
control of, the Company.
10. COMMITMENTS AND CONTINGENCIES
Litigation
Since June 25, 1998, the Company and certain of its current and former officers,
two of whom are currently directors and one of whom was previously a director,
have been named as defendants in multiple shareholder class action lawsuits
filed in the United States District Court for the Northern District of Georgia.
Plaintiffs seek to represent a class of individuals who purchased the Company's
Common Stock during various periods, including as early as April 2, 1997 through
June 10, 1998. Plaintiffs allege the defendants made positive public statements
concerning the Company's growth and acquisitions. In particular, plaintiffs
allege the defendants spoke positively about the Company's acquisition of Voice-
Tel, Xpedite, ATS, TeleT, and VoiceCom as well as its venture with UniDial
Communications, its investment in USA.NET, Inc. and the roll out of Orchestrate.
Plaintiffs allege these public statements were fraudulent because the defendants
knowingly failed to disclose that the Company allegedly was not successfully
consolidating and integrating these acquisitions. Alleged evidence of scienter
include sales by certain individual defendants during the class period and the
desire to keep the Common Stock price high so that future acquisitions could be
made using the Company's Common Stock. Plaintiffs allege the truth was
purportedly revealed on June 10, 1998, when the Company announced it would not
meet analysts' estimates of second quarter 1998 earnings because, in part, of
the financial difficulties experienced by a licensing customer and by a
strategic partner in the Company's Enhanced Calling Services product group,
revenue shortfalls in its Voice Messaging product group, as well as other
unanticipated costs and one-time charges totaling approximately $17.1 million on
a pre-tax basis. Plaintiffs allege the Company admitted it had experienced
difficulty in achieving its anticipated revenue and earnings from its Voice
Messaging product group due to difficulties in consolidating and integrating its
sales function. Plaintiffs allege violation of Section 10(b) of the Securities
Exchange Act of 1934 against all defendants and violation of Section 20(a) of
the Securities Exchange Act of 1934 against the individual defendants as
"controlling persons." The Company believes the alleged claims in these lawsuits
are without merit. The Company intends to defend these lawsuits vigorously. Due
to inherent uncertainties of the litigation process and the judicial system, the
Company is unable to predict the outcome of this litigation. If the outcome of
any 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.
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. The
Company has filed a motion for summary judgment which is currently pending.
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 business, financial condition 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 $1.5 million 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 final payment under the license agreement
was made in April 1998.
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 to file a third party action 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 of approximately $950,000, the bankruptcy trustee (the
"Trustee") and PCI have reached a tentative settlement of all issues, subject to
Bankruptcy Court approval. The terms of the proposed settlement have been
incorporated into a motion requesting approval of the settlement and a proposed
plan of reorganization (the "Plan") filed by the Trustee. On June 23, 1998, the
Bankruptcy Court approved the settlement whereby PCI obtained a release from the
Trustee and the Trustee dismissed the Intervention Suit in consideration of PCI
making a cash payment of $1.2 million 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 recorded a reserve for the settlement and Plan payment.
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. On May 1, 1998, PCI filed a motion to dismiss
for failure to state a claim and such motion to dismiss is currently pending.
The individual PCI defendants, Boland Jones and Patrick Jones, filed a separate
motion to dismiss based upon lack of personal jurisdiction and such motion to
dismiss is currently pending. PCI believes that it has meritorious defenses to
the Plaintiffs' allegations and will vigorously defend the same. Due to the
inherent uncertainties of litigation process and the judicial system, the
Company is not able to predict the outcome of this litigation. If this
litigation is not resolved in PCI'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 plaintiffs seek damages of approximately $2.0
million and an accounting of royalties. The Company believes that Xpedite has
meritorious defenses to the plaintiffs' allegations, but due to the inherent
uncertainties of the litigation process and the judicial system, the Company is
not able to predict the outcome of this litigation. If this litigation is not
resolved in Xpedite's favor it could have a material adverse effect on the
Company's business, financial condition and results of operations.
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 and certain of its alleged current and former officers,
directors, agents and representatives. 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 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 seek an accounting of the
corporate stock in Xpedite, compensatory damages of approximately $4.85 million,
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 has
filed an answer denying the material allegations of the complaint and asserting
various affirmative defenses and intends to file a motion to dismiss the counts
of the complaint against it. The Company believes that Xpedite has meritorious
defenses to the plaintiffs' allegations, but due to the inherent uncertainties
of the litigation process and the judicial system, the Company is not able 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 the Company's
business, financial condition and results of operations.
On or about May 27, 1998, Telephone Company of Central Florida, Inc. ("TCCF"), a
user of the Company's network management system, filed for protection under
Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the
Middle District of Florida. WorldCom Network Services, Inc. ("WorldCom Network
Services") and the Company are two of the largest creditors in this bankruptcy
case. In August 1998, WorldCom Network Services filed a separate lawsuit in the
Federal District Court for the Middle District of Florida against certain
insiders of TCCF alleging payment of improper distributions to the insiders in
excess of $1.0 million and asserting a constructive trust claim against the
amounts received by the insiders. On August 10, 1998, TCCF filed a motion with
the Bankruptcy Court requesting authority to hire counsel for the purpose of
pursuing certain alleged claims against WorldCom Network Services and the
Company, alleging service problems with WorldCom Network Services and the
Company. Due to the inherent uncertainties of the litigation process and the
judicial system, and the lack of specificity of the nature of the claims which
may be asserted by TCCF, the Company is not able to predict with certainty
whether a lawsuit will be filed by TCCF or, if such a lawsuit is filed, whether
the outcome of such litigation will be adverse to the Company. If TCCF pursues
its alleged claims through litigation which 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 30, 1998, Xfer Communications, Inc. ("Xfer") filed a lawsuit against
VoiceCom in the United States District Court for the Eastern District of
Michigan, alleging breach of contract, tortious interference with business
relationships, fraudulent inducement, and misappropriation of trade secrets
allegedly in connection with the solicitation by VoiceCom of certain
telecommunication customer accounts of Xfer. The plaintiff seeks to recover
actual damages in an amount alleged to be in excess of $100,000, together with
costs, interest, attorneys' fees and punitive damages. The Company believes that
VoiceCom has meritorious defenses to the plaintiff's allegations, but due to the
inherent uncertainties of the litigation process and the judicial system, the
Company is unable to predict the outcome of this litigation. If the outcome of
this litigation is adverse to VoiceCom, it could have a material adverse effect
on the Company's business, financial condition and results of operations.
9
<PAGE>
ITEM 2. 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 enhanced calling services for mobile individuals,
voice messaging, full service conference calling, enhanced electronic document
distribution services and Internet based communications. The Company believes
its principal competitive advantage is that it integrates these services through
its private 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 enhanced calling services consist of usage fees from individual
subscribers which are generally based on per minute rates. Also, license
fees from corporations, primarily telecommunication carriers, under outsourcing
arrangements by which the carriers license use of the Company's network to offer
enhanced communications service to their customers. 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. Enhanced document distribution services revenues generally
consist of per page or per minute fees, sales of fax message handling systems
and royalties for the use of certain Company software from corporations and
individual subscribers. Revenues from full service conference calling are
generally based on per minute rates. Although the Company does not currently
derive any revenues from 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 and
operating 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.
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 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 condensed financial statements and notes thereto.
10
<PAGE>
Analysis
The Company's financial statements for all periods presented have been restated
to include the operations of Xpedite, 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 by major product group for the three and six month periods ended June
30, 1998 and 1997 are as follows (amounts in millions):
Three month period Six month period
ended ended
June 30, June 30,
------------------ ----------------
1998 1997 1998 1997
------ -------- ------- ------
Enhanced Calling Services $ 20.6 $20.4 $ 51.9 $ 39.3
Voice Messaging 31.8 34.7 64.5 70.2
Conference Calling 11.7 .9 12.7 1.8
Enhanced Document Distribution 57.3 42.5 111.4 79.8
------ ----- ------ ------
$121.4 $98.5 $240.5 $191.1
====== ===== ====== ======
Revenues increased 23.3% for the three month period ended June 30, 1998 as
compared with the same period in 1997 and increased 25.8% comparing the six
month periods ended June 30, 1998 and 1997. Revenue grew in the following areas:
. Conference Calling, through the acquisition of ATS in April 1998,
. Electronic Document Distribution services, through both internal growth and
acquisitions of European-based electronic document distribution providers XSL
and XSG in December 1997 and January 1998, respectively,
. Strategic partner programs for Enhanced Calling Services, particularly
American Express and First USA, which experienced significant increases in new
subscribers and,
. License programs, both from growth in revenue from existing customers and new
license customers.
In the second quarter of 1998, two customers of the Company's Enhanced Calling
Services product group initiated Chapter 11 bankruptcy proceedings. Although the
Company continued receiving payments from both customers through the first
quarter of 1998, it recorded no revenue from either of these customers in the
second quarter of 1998 and does not anticipate deriving significant revenues
from either of these customers in the future. In addition, the Company has also
discontinued certain unprofitable prepaid calling card programs with a customer.
Revenues in the Company's Enhanced Calling Services product group would have
increased by 16.1% in the three month period ended June 30, 1998 as compared
with same period in 1997 if revenues from these three customers were excluded
from both periods.
Gross profit margins were 69.0% and 67.6% for three month periods ended June 30,
1998 and 1997 and 68.1% and 67.7% for the six month periods ended June 30, 1998
and 1997. Improving gross margins resulted from the acquisition of ATS which has
higher gross margins than the Company's existing product groups. The Company has
also benefitted from general industry trends in which long distance transport
and 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 62.9%
and 44.3% for the three month periods ended June 30, 1998 and 1997 and 51.8% and
44.5% for the six month periods ended June 30, 1998 and 1997. A majority of the
increase in these costs in 1998 results from adjustments of approximately $16.1
million recorded in the second quarter of 1998 reflecting approximately $8.4
million of charges associated with uncollectible accounts receivable related
primarily to the two financially distressed customers discussed above, $2.3
million of start-up costs, primarily executive compensation, incurred in the
start-up of its Orchestrate.com subsidiary, $1.8 million of asset impairment and
other costs. Excluding these costs and charges from 1998 amounts, selling,
general and administrative costs as a percent of revenues are 49.6% and 45.1%
for the three and six month periods ended June 30, 1998, respectively. The
remaining increase in selling, general and administrative costs in 1998 is due
to the acquisition of ATS which has higher selling, general and administrative
costs as a percent of revenue than the Company's existing businesses. Also, the
Company increased staffing and added other administrative and operational
infrastructure necessary to support both current and anticipated growth in the
Company.
11
<PAGE>
Depreciation and amortization was $11.8 million and $21.8 million or 9.7% and
9.1% of revenues in the three and six month periods ended June 30, 1998,
respectively, and $6.9 million and $13.1 million or 7.1% and 6.8% of revenues in
the three and six month periods ended June 30, 1997, respectively. Increased
depreciation and amortization expense results mainly from depreciation
associated with increased purchases of computer telephony equipment and other
capital expenditures to support new business growth and amortization of goodwill
and other intangibles acquired in connection with the acquisitions of ATS, XSL,
XSG and Voice-Tel Entities.
Net interest expense increased to $3.7 million and $6.5 million in the three and
six month periods ended June 30, 1998, respectively, up from $0.8 million and
$1.7 million in the same periods of 1997. Increased interest expense results
from interest on the Company's convertible subordinated notes issued in June
1997 and borrowings associated with Xpedite's purchase of XSL and XSG.
In 1998, the Company's effective income tax rate varied from the statutory rate
due to non-deductible goodwill amortization and merger costs. In 1997, the
Company's effective income tax rate varied from the statutory rate due to non
deductible merger costs incurred in connection with the Voice-Tel Acquisitions,
certain non-taxable investment income and income of Voice-Tel Entities which had
elected to be treated as S Corporations or partnerships under U.S. tax law prior
to their acquisition by the Company.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operations was $5.8 million in the six month period ended June
30, 1998. Net cash provided by operations in the same period of 1997 was $16.3
million. Excluding payments for restructuring, rebranding and other special
charges in both periods, net cash provided by operations was $23.7 million in
1998 and $29.5 million in 1997, respectively. Lower cash from operations before
payments for restructuring, rebranding and other special charges in 1998
resulted primarily from higher selling, general and administrative costs.
Investing activities provided cash of approximately $15.1 million and $1.4
million in the six month periods ended June 30, 1998 and 1997. The Company
liquidated short-term investments in marketable securities of $102.6 million and
$36.1 million in the six month periods ended June 30, 1998 and 1997 to fund
capital expenditure programs, acquisitions and strategic investment activities.
Capital expenditures of $33.1 million in 1998 consisted mainly of purchases of
telecommunications equipment in connection with programs to upgrade and expand
operating infrastructure, including build-out of the Company's London and
Toronto data centers, expansion of the Company's administrative headquarters and
implementation of new management information systems. Cash paid for acquisitions
of approximately $46.4 in 1998 consisted mainly of the acquisition of ATS, the
cash portion of which was approximately $29.3 million. Remaining cash paid for
acquisitions resulted principally from the acquisition of Xpedite's German
affiliate, XSG, which was acquired in January 1998. Cash paid for acquisitions
in 1997 of approximately $16.2 million represents cash paid for acquisitions of
Voice-Tel Entities accounted for as purchases. The Company made strategic
investments of $8.0 million in the six month period ended June 30, 1998 in
businesses involved in emerging technologies which the Company believes will
further its strategic plan. Such investments included increases in the Company's
equity ownership in Endeavor Technologies and USA.NET, and new equity
investments in Intellivoice, a company involved with developing voice activation
technology, and Live Content, a company engaged in certain Internet related
technology.
The Company used cash of approximately $6.1 million in financing activities in
the six month period ended June 30, 1998. Principal uses of cash were to repay
borrowings under term notes and capital lease obligations assumed in connection
with the Voice-Tel acquisitions. In addition, the Company repurchased 306,500
shares of its Common Stock for approximately $2.6 million. Financing activities
provided $118.1 million in the six month period ended June 30, 1997. The
principal source of cash from financing activities in 1997 was the issuance of
convertible subordinated notes in June 1997. The net proceeds to the Company
after exercise of the Underwriter's over-allotment option in July 1997 was
approximately $167.0 million. The notes bear interest at 5.75% and mature in
2004. The Company also repaid $22.7 million of borrowings in 1997 assumed in
connection with the Voice-Tel Acquisitions. Cash distributions of $5.2 million
in 1997 result from distributions made in periods prior to the Company's
acquisitions of the Voice-Tel Entities. Such distributions were made 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 June 30, 1998, 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.
Management believes that cash and marketable securities on-hand of approximately
$99.0 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 consists of a revolving line of credit which approximates $130
million and matures December 16, 1998. Management is currently evaluating
alternatives in this regard.
RESTRUCTURING, REBRANDING AND OTHER SPECIAL CHARGES
The Company recorded charges against income of approximately $27.7 million in
the first quarter of 1998 in connection with the Xpedite merger. Such charges
consist of transaction costs, principally investment banking and professional
fees, which must be expensed under the pooling of interests method of
accounting. In addition, the Company has accrued the estimated costs to exit
certain facilities and discontinue certain business processes and activities
which are duplicative or redundant in the combined operations of Premiere and
Xpedite. These costs consist of severance associated with workforce reduction,
lease termination costs resulting from exiting certain facilities and asset
impairments resulting from management's decision to upgrade certain network
based telecommunications equipment in order to more efficiently integrate the
Premiere and Xpedite telecommunications networks. The Company also recorded the
costs to settle a patent infringement claim made against Xpedite. This
settlement was paid in April 1998.
Xpedite recorded restructuring and other special charges of approximately $16.5
million before income taxes in the fourth quarter of 1997. Such amounts result
principally from transaction costs incurred by Xpedite in connection with its
merger with the Company, including legal and professional fees and 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, Xpedite recorded
charges for severance and asset impairment costs associated with closing its
existing United Kingdom ("UK") based operation. These actions were an integral
part of Xpedite management's plan to restructure its European operations by
acquiring its UK affiliate, XSL, and centralizing administration of European
business operations in the newly acquired organization.
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 before income taxes 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.
THE YEAR 2000 ISSUE
Introduction. The term "Year 2000 issue" is a general term used to describe
- ------------
the various problems that may result from the improper processing of dates and
date-sensitive calculations by computers and other machinery as the Year 2000 is
approached and reached. These problems generally arise from the fact that most
of the world's computer hardware and software has historically used only two
digits to identify the year in a date, often meaning that the computer will fail
to distinguish dates in the "2000s" from dates in the "1900s." These problems
may also arise from other sources as well, such as the use of special codes and
conventions in software that make use of the date field.
The Company's State Of Readiness. The Company has formed a Year 2000 Executive
- --------------------------------
Committee comprised of five members of senior management and a Year 2000 Task
Force comprised of technical representatives from each of the Company's
operating subsidiaries. The Year 2000 Executive Committee and the Task Force are
charged with evaluating the Company's Year 2000 issue and taking appropriate
actions so that the Company will incur minimal disruption from the Year 2000
issue ("Year 2000 ready"). The Year 2000 Task Force is currently developing and
implementing a comprehensive initiative (the "Initiative") to make the Company's
software applications and/or systems ("Software Applications") and hardware
platforms ("Hardware Platforms") Year 2000 ready. The Initiative covers the
following seven phases: (i) inventory of all Software Applications and Hardware
Platforms, (ii) assessment of repair requirements, (iii) repair of Software
Applications and Hardware Platforms, (iv) testing of individual Software
Applications and Hardware Platforms to determine correct manipulation of dates
and date-related data (v) certification by users within the Company that
Software Applications and Hardware Platforms correctly handle dates and date-
related data, (vi) system integration testing of multiple Software Applications
and Hardware Platforms to determine correct manipulation of dates and date-
related data, and (vii) creation of contingency plans in the event of Year 2000
failures. The Company is aware that some of its Hardware Platforms contain
embedded microprocessors and it has taken the repair of the embedded
microprocessors into consideration in developing the Initiative.
The Company has retained a nationally recognized independent consultant
("Consultant") to assist in finalizing the Initiative. If the Consultant
determines that the Initiative will not adequately lead to the Company's Year
2000 readiness, the Consultant will provide the Company with assistance in
adjusting the Initiative so that the Company can appropriately address its Year
2000 issues. The Company will periodically review its progress with respect to
the Initiative as the Year 2000 is approached and reached. This periodic review
by the Company will include necessary adjustments to the Initiative.
The Company has completed the first six phases of the Initiative for certain of
its Software Applications and Hardware Platforms. While each of the Company's
operating subsidiaries is at a different stage of completion of the Initiative,
the Initiative calls for a majority of the Company's operating subsidiaries to
complete the first six phases of the Initiative by June 30, 1999. The system
integration testing of Software Applications and Hardware Platforms required by
phase (vi) of the Initiative has begun with respect to some of the Company's
business activities. The Initiative calls for initiation of such testing
throughout the Company by no later than the end of the first quarter of 1999.
In the process of assessing the Year 2000 readiness of Software Applications and
Hardware Platforms as required by phase (ii) of the Initiative, the Company has
communicated with many of its suppliers of Software Applications and Hardware
Platforms to determine (1) whether the Software Applications and Hardware
Platforms provided to the Company will correctly manipulate dates and date-
related data as the Year 2000 is approached and reached, and (2) whether the
suppliers will solve their Year 2000 problems in order to continue providing the
Company products and services as the Year 2000 is approached and reached. The
Company has received written verification from a number of suppliers that
Software Applications and Hardware Platforms will correctly manipulate dates and
date-related data as the Year 2000 is approached and reached. If a supplier
informs the Company that it will not appropriately rectify its Year 2000 issues,
then the Company will use that information to develop appropriate contingency
plans as required by phase (vii) of the Initiative. As a general matter, the
Company is vulnerable to a significant supplier's inability to remedy its own
Year 2000 issues. Other than the Company's own remediation efforts, there can be
no assurance that the Software Applications and Hardware Platforms supplied by
third parties on which the Company's business relies will correctly manipulate
dates and date-related data as the Year 2000 is approached and reached. Such
failures could have a material adverse effect on the Company's financial
condition and results of operations.
To operate its business, the Company relies upon providers of telecommunication
services, government agencies, utility companies, and other third party service
providers ("External Providers"), over which it can assert little control. If
the inability of any of these entities to correct their Year 2000 issues results
in a failure to provide the Company services, the Company's operations may be
materially adversely impacted and may result in a material adverse effect on the
Company's financial condition and results of operations. The Company depends
upon telecommunications carriers to conduct its business and is heavily
dependent upon the ability of such telecommunications carriers to correctly fix
their Year 2000 issues. If telecommunications carriers and other External
Providers do not appropriately rectify their Year 2000 issues, the Company's
ability to conduct its business may be materially impacted, which could result
in a material adverse effect on the Company's financial condition and results of
operations.
A significant portion of the Company's business is conducted outside of the
United States. External Providers located outside of the United States may face
significantly more severe Year 2000 issues than similar entities located in the
United States. If such External Providers located outside the United States are
unable to rectify their Year 2000 issues, the Company may be unable to
effectively conduct the international portion of its business, which could
result in a material adverse effect on the Company's financial condition and
results of operations.
Costs to Address the Company's Year 2000 Issues. Thus far the majority of
- ------------------------------------------------
the work on the Initiative has been performed by the Company's employees, which
has limited the cost spent to date. The Company estimates that the total
historical and future costs of implementing the Initiative will be approximately
$40 million, the majority of which relate to capital expenditures. However,
because the Initiative may undergo changes as a result of many factors,
including but not limited to, the results of any phase of the Initiative, the
Company's periodic review of its progress or recommendations of the Consultant,
the Company's estimate of the total cost of implementation may be revised as the
Initiative progresses. In the event such costs need to be revised, such revised
costs could have a material adverse effect on the Company's financial condition
and results of operations. The Company will fund the costs of implementing the
Initiative from cash flows. The Company has not deferred any specific
information technology project as a result of the implementation of the
Initiative. The Company does not expect that the opportunity cost of
implementation of the Initiative will have a material effect on the financial
condition of the Company or its results of operations.
Risks Presented by Year 2000 Issues. Until system integration testing is
- -----------------------------------
substantially in process, the Company cannot fully estimate the risks of its
Year 2000 issue. As a result of system integration testing, the Company may
identify business activities that are at risk of Year 2000 disruption. The
absence of any such determination at this point represents only the status
currently in the implementation of the Initiative, and should not be construed
to mean that there is no business activity which is at risk of a Year 2000
related disruption. It is possible that one or more disruptions to a major
business activity could have a material adverse effect on the Company's
financial condition and results of operations. In addition, as noted above,
many of the Company's business critical External Providers may not appropriately
address their Year 2000 issues, the result of which could have a material
adverse effect on the Company's financial condition and results of operations.
The Company's Contingency Plans. The Initiative includes the development
- -------------------------------
of contingency plans for business activities that are susceptible to a
substantial risk of a disruption resulting from a Year 2000 related event.
Because the Company has not fully assessed its risk from potential Year 2000
failures, the Company has not yet developed detailed contingency plans specific
to Year 2000 events for any business activity. The Company is aware of the
possibility, however, that certain business activities may be hereafter
identified as at risk. Consistent with the Initiative, the Company is
developing contingency plans for such business activities as and if such
determinations are made.
NEW ACCOUNTING PRONOUNCEMENTS
In 1997 the FASB issued 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.
FORWARD-LOOKING STATEMENTS
When used in this Quarterly Report on Form 10-Q, in documents incorporated
herein and elsewhere by management or the Company from time to time, the words
"believes," "anticipates," "expects," "will" and similar expressions are
intended to identify forward-looking statements concerning the Company's
operations, economic performance and financial condition, including in
particular, the Company's business strategy and means to implement the strategy,
goals, the amount of capital expenditures, and the likelihood of the Company's
success in developing and expanding its business. 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 under the caption "Risk
Factors" in the Company's Registration Statement on Form S-3 (333-50003) 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 "Xpedite 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 Xpedite Merger and other acquisitions may be lower than expected,
operating costs or customer loss and business disruption following the Xpedite
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
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 that may occur in the securities markets; (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; (k) the success of the Company's strategic
relationships, including the amount of business generated and the viability of
the strategic partner; (l) the impact of possible adverse litigation; (m) market
acceptance of new products and services, including Orchestrate; (n) development
of effective marketing, pricing and distribution strategies for new products and
services, including Orchestrate; (o) risks associated with interruption in the
Company's services due to the failure of the communications platforms and
networks utilized in providing the Company's services; and (p) risks associated
with the Year 2000 issue, including Year 2000 problems that may arise on the
part of third parties which may effect the Company's operations. The Company
cautions that such factors are not exclusive. Consequently, all of the forward-
looking statements made in this Prospectus are qualified by these cautionary
statements and readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. The Company
undertakes no obligation to publicly release the results of any revisions to
such forward-looking statements that may be made to reflect events or
circumstances after the date hereof, or thereof, as the case may be, or to
reflect the occurrence of unanticipated events.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
12
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Since June 25, 1998, the Company and certain of its current and former
officers, two of whom are currently directors and one of whom was previously a
director, have been named as defendants in multiple shareholder class action
lawsuits filed in the United States District Court for the Northern District of
Georgia. Plaintiffs seek to represent a class of individuals who purchased the
Company's Common Stock during various periods, including as early as April 2,
1997 through June 10, 1998. Plaintiffs allege the defendants made positive
public statements concerning the Company's growth and acquisitions. In
particular, plaintiffs allege the defendants spoke positively about the
Company's acquisition of Voice-Tel, Xpedite, ATS, TeleT, and VoiceCom as well as
its venture with UniDial Communications, its investment in USA.NET, Inc. and the
roll out of Orchestrate. Plaintiffs allege these public statements were
fraudulent because the defendants knowingly failed to disclose that the Company
allegedly was not successfully consolidating and integrating these acquisitions.
Alleged evidence of scienter include sales by certain individual defendants
during the class period and the desire to keep the Common Stock price high so
that future acquisitions could be made using the Company's Common Stock.
Plaintiffs allege the truth was purportedly revealed on June 10, 1998, when the
Company announced it would not meet analysts' estimates of second quarter 1998
earnings because, in part, of the financial difficulties experienced by a
licensing customer and by a strategic partner in the Company's enhanced calling
services product group, revenue shortfalls in its voice messaging product group,
as well as other unanticipated costs and one-time charges totaling approximately
$17.1 million on a pre-tax basis. Plaintiffs allege the Company admitted it had
experienced difficulty in achieving its anticipated revenue and earnings from
its voice messaging product group due to difficulties in consolidating and
integrating its sales function. Plaintiffs allege violation of Section 10(b) of
the Securities Exchange Act of 1934 against all defendants and violation of
Section 20(a) of the Securities Exchange Act of 1934 against the individual
defendants as "controlling persons." The Company believes the alleged claims in
these lawsuits are without merit. The Company intends to defend these lawsuits
vigorously. Due to inherent uncertainties of the litigation process and the
judicial system, the Company is unable to predict the outcome of this
litigation. If the outcome of any 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.
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. PCI has
filed a motion for summary judgment which is currently pending. 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
13
<PAGE>
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 requests to intervene and to file a third party
action 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, subject to
Bankruptcy Court approval. The terms of the proposed settlement have been
incorporated into a motion requesting approval of the settlement and a proposed
plan of reorganization (the "Plan") filed by the Trustee. On June 23, 1998, the
Bankruptcy Court approved the settlement whereby PCI obtained a release from the
Trustee and the Trustee dismissed the Intervention Suit in consideration of PCI
making a cash payment of $1.2 million to the Trustee. If the Plan is
subsequently approved by the Bankruptcy 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 recorded a reserve for the settlement and Plan
payment.
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 United
States District Court for the Eastern District of New York (the "Al-Khatib
lawsuit"). 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. On May 1, 1998, PCI filed a motion to dismiss
for failure to state a claim and such motion to dismiss is currently pending.
The individual PCI defendants, Mr. Boland Jones and Mr. Patrick Jones, filed a
separate motion to dismiss based upon lack of personal jurisdiction and such
motion to dismiss is currently pending. PCI believes that it has meritorious
defenses to the Plaintiffs' allegations and will vigorously defend the same. Due
to the inherent uncertainties of the litigation process and the judicial system,
the Company is not able to predict the outcome of this litigation. If this
litigation is not resolved in the PCI'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 plaintiffs seek damages of approximately $2.0
million and an accounting of royalties. The Company believes that Xpedite has
meritorious defenses to the plaintiffs' allegations but due to the inherent
uncertainties of the litigation process and the judicial system, the Company is
not able to predict the outcome of this litigation. If this litigation is not
resolved in Xpedite's favor, it could have a material adverse effect on the
Company's business, financial condition and results of operations.
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 and certain of its alleged current and former officers,
directors, agents and representatives. 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
14
<PAGE>
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 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
approximately $4.85 million, 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 has filed an answer denying the material allegations
of the complaint and asserting various affirmative defenses and intends to file
a motion to dismiss the counts of the complaint against it. The Company believes
that Xpedite has meritorious defenses to the plaintiffs' allegations, but due to
the inherent uncertainties of the litigation process and the judicial system,
the Company is not able 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 the Company's business, financial condition and results of
operations.
On or about May 27, 1998, TCCF, a user of the Company's network management
system, filed for protection under Chapter 11 of the Bankruptcy Code in the
United States Bankruptcy Court for the Middle District of Florida. WorldCom
Network Services and the Company are two of the largest creditors in this
bankruptcy case. In August 1998, WorldCom Network Services filed a separate
lawsuit in the Federal District Court for the Middle District of Florida against
certain insiders of TCCF alleging payment of improper distributions to the
insiders in excess of $1.0 million and asserting a constructive trust claim
against the amounts received by the insiders. On August 10, 1998, TCCF filed a
motion with the Bankruptcy Court requesting authority to hire counsel for the
purpose of pursuing certain alleged claims against WorldCom Network Services and
the Company, alleging service problems with WorldCom Network Services and the
Company. Due to the inherent uncertainties of the litigation process and the
judicial system, and the lack of specificity of the nature of the claims which
may be asserted by TCCF, the Company is not able to predict with certainty
whether a lawsuit will be filed by TCCF or, if such a lawsuit is filed, whether
the outcome of such litigation will be adverse to the Company. If TCCF pursues
its alleged claims through litigation which 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 30, 1998, Xfer filed a lawsuit against VoiceCom in the United
States District Court for the Eastern District of Michigan, alleging breach of
contract, tortious interference with business relationships, fraudulent
inducement, and misappropriation of trade secrets allegedly in connection with
the solicitation by VoiceCom of certain telecommunication customer accounts of
Xfer. The plaintiff seeks to recover actual damages in an amount alleged to be
in excess of $100,000, together with costs, interest, attorneys' fees and
punitive damages. The Company believes that VoiceCom has meritorious defenses to
the plaintiff's allegations, but due to the inherent uncertainties of the
litigation process and the judicial system, the Company is unable to predict the
outcome of this litigation. If the outcome of this litigation is adverse to
VoiceCom, it could have a material adverse effect on the Company's business,
financial condition and results of operations.
ITEM 2. CHANGES IN SECURITIES.
SHAREHOLDER RIGHTS PLAN
Information with respect to this item may be found under Item 5 of the
Company's Current Report on Form 8-K dated June 23, 1998 (date of earliest event
reported), filed with the Commission on June 26, 1998. Such information is
incorporated herein by reference.
RECENT SALES OF UNREGISTERED SECURITIES
On April 23, 1998, the Company acquired all of the issued and outstanding
shares of the common stock of ATS pursuant to the terms of an Agreement and Plan
of Merger dated April 22, 1998 by and among the Company, ATS, PTEK Missouri
Acquisition Corp. and the shareholders of ATS. In connection with the
acquisition of ATS, the Company issued an aggregate of approximately 712,125
shares of its Common Stock to the former shareholders or owners of ATS. The
shares were issued without registration under the Securities Act of 1933, as
amended (the "Act"), in transactions exempt from registration under Regulation D
and Section 4(2) of the Act and the rules promulgated thereunder.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
An annual meeting of the Company's shareholders was held on July 29, 1998.
At the annual meeting, the following nominees were elected to serve as Class I
directors for terms expiring at the annual meeting of shareholders in 2001:
15
<PAGE>
Name of Director Votes For Votes Withheld Abstentions Nonvotes
- ----------------- --------- -------------- ----------- --------
Jeffrey A. Allred 32,071,747 2,071,300 0 0
William P. Payne 32,772,833 1,370,214 0 0
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit Exhibit
Number Description
- ------ -----------
2.1 Agreement and Plan of Merger, dated April 22, 1998, by and among the
Company, American Teleconferencing Services, Ltd. ("ATS"), PTEK
Missouri Acquisition Corp. and the shareholders of ATS (incorporated
herein by reference to Exhibit 99.1 of the Company's Current Report on
Form 8-K dated April 23, 1998, and filed with the Commission on April
28, 1998.)
3.1 Articles of Incorporation of Premiere Technologies, Inc., as amended.
3.2 Amended and Restated Bylaws of Premiere Technologies, Inc., as further
amended on August 1, 1998.
4.1 Shareholder Protection Rights Agreement, dated June 23, 1998, between
the Company and SunTrust Bank, Atlanta, as Rights Agent (incorporated
herein by referenced to Exhibit 99.1 of the Company's Current Report
on Form 8-K dated June 23, 1998, and filed with the Commission on June
26, 1998).
10.1 Executive Employment and Incentive Option Agreement, effective as of
July 24, 1997, by and between the Company and Jeffrey A. Allred.
10.2 Premiere Technologies, Inc. 1998 Stock Plan.
11.1 Statements re: computation of per share earnings.
27.1 Financial Data Schedule for the Three and Six Month Periods Ended
June 30, 1998.
27.2 Restated Financial Data Schedule for the Three and Six Month Periods
Ended June 30, 1997.
(b) Reports on Form 8-K:
The following reports on Form 8-K were filed during the quarter for which this
report is filed:
16
<PAGE>
<TABLE>
<CAPTION>
ENTITIES FOR WHICH
DATE OF REPORT FINANCIAL
(DATE FILED) ITEMS REPORTED STATEMENTS FILED
-------------- -------------- -------------------
<S> <C> <C>
April 13, 1998 Items 5 and 7 - Amendment Premiere Technologies, Inc.
to Current Report on Form Xpedite Systems, Inc.
8-K, dated February 27,
1998, to file
consolidated financial
statements of Xpedite Systems,
Inc. (incorporated by
reference) and supplemental
consolidated financial
statements of Premiere
Technologies, Inc.
April 28, 1998 Item 5 - Announcement None
regarding the Company's
acquisition of American
Teleconferencing Services,
Ltd. and the appointment
of Harvey A. Wagner as
Executive Vice President of
Finance and Administration
and Chief Financial Officer.
May 15, 1998 Item 5 - Announcement regarding None
the Company's share repurchase
program.
June 11, 1998 Item 5 - Announcement regarding None
the Company's second-quarter
and full-year results.
June 26, 1998 Item 5 - Announcement regarding None
the Company's shareholder rights
plan.
</TABLE>
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
August 14, 1998 PREMIERE TECHNOLOGIES, INC.
- ---------------
Date
/s/ Harvey A. Wagner
------------------------------------------
Harvey A. Wagner
Executive Vice President of Finance and
Administration
and Chief Financial Officer
(Principal Financial and Accounting Officer
and duly authorized signatory of the Registrant)
18
<PAGE>
EXHIBIT INDEX
Exhibit Exhibit
Number Description
- ------ -----------
2.1 Agreement and Plan of Merger, dated April 22, 1998, by and among the
Company, American Teleconferencing Services, Ltd. ("ATS"), PTEK
Missouri Acquisition Corp. and the shareholders of ATS (incorporated
herein by reference to Exhibit 99.1 of the Company's Current Report on
Form 8-K dated April 23, 1998, and filed with the Commission on April
28, 1998.)
3.1 Articles of Incorporation of Premiere Technologies, Inc., as amended.
3.2 Amended and Restated Bylaws of Premiere Technologies, Inc., as
further amended on August 1, 1998.
4.1 Shareholder Protection Rights Agreement, dated June 23, 1998, between
the Company and SunTrust Bank, Atlanta, as Rights Agent (incorporated
herein by referenced to Exhibit 99.1 of the Company's Current Report
on Form 8-K dated June 23, 1998, and filed with the Commission on June
26, 1998).
10.1 Executive Employment and Incentive Option Agreement, effective as of
July 24, 1997, by and between the Company and Jeffrey A. Allred.
10.2 Premiere Technologies, Inc. 1998 Stock Plan.
11.1 Statements re: computation of per share earnings.
27.1 Financial Data Schedule for the Three and Six Month Period Ended
June 30, 1998.
27.2 Restated Financial Data Schedule for the Three and Six Month Period
Ended June 30, 1997.
19
<PAGE>
EXHIBIT 3.1
PREMIERE TECHNOLOGIES REINCORPORATION, INC.
ARTICLES OF INCORPORATION
ARTICLE I
NAME
----
The name of the Corporation is Premiere Technologies Reincorporation, Inc.
ARTICLE II
PURPOSE
-------
The Corporation is being formed in connection with the reincorporation of
Premiere Technologies, Inc. from a Florida corporation to a Georgia corporation,
pursuant to an Agreement and Plan of Merger between Premiere Technologies, Inc.
and the Corporation. The Corporation is organized for the purpose of transacting
any and all lawful business authorized and not prohibited by the Georgia
Business Corporation Code (the "Code"), as the same may from time to time be
amended, and to have and to exercise all power necessary, convenient or
incidental to carrying out such business.
ARTICLE III
CAPITALIZATION
--------------
The Corporation shall have authority, exercisable by its Board of
Directors, to issue up to 150,000,000 shares of common stock, par value $.01 per
share ("Common Stock"), and 5,000,000 shares of preferred stock, par value $.01
per share ("Preferred Stock"), any part or all of which shares of Preferred
Stock may be established and designated from time to time by the Board of
Directors, in such series and with such preferences, limitations and relative
rights as may be determined by the Board of Directors.
The first series, designated as Series A Preferred Stock (the "Series A
Preferred"), will consist of 128,983 shares and will have the preferences,
voting powers, relative, participating, optional or other special rights and
privileges, and the qualifications, limitations and restrictions as shown on
EXHIBIT "A" attached hereto and incorporated herein by reference.
ARTICLE IV
INITIAL REGISTERED OFFICE AND AGENT
-----------------------------------
The street address and county of the initial registered office of the
Corporation shall be at 3399 Peachtree Road, N.E., The Lenox Building, Suite
400, Atlanta, Fulton County, Georgia 30326. The initial registered agent of the
Corporation at such address shall be Patrick G. Jones.
<PAGE>
ARTICLE V
INCORPORATOR
------------
The name and address of the incorporator are as follows:
Jeffrey A. Allred, Esq.
400 Colony Square
1201 Peachtree Street, N.E., Suite 2200
Atlanta, Georgia 30361
ARTICLE VI
MAILING ADDRESS OF PRINCIPAL OFFICE
-----------------------------------
The mailing address of the initial principal office of the Corporation is
as follows:
3399 Peachtree Road, N.E.
The Lenox Building
Suite 400
Atlanta, Georgia 30326
ARTICLE VII
DIRECTORS
---------
The initial number of directors of the Corporation shall be five, which
number may be increased or decreased pursuant to the Bylaws of the Corporation.
The persons who will serve as the initial directors are George W. Baker, Sr.,
Robert A. Jetmundsen, Boland T. Jones, Eduard J. Mayer and D. Gregory Smith.
ARTICLE VIII
LIMITATION ON DIRECTOR LIABILITY
--------------------------------
No director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for breach of the duty of
care or any other duty as a director, except that such liability shall not be
eliminated for:
(i) any appropriation, in violation of the director's duties, of
any business opportunity of the Corporation;
(ii) acts or omissions that involve intentional misconduct or a
knowing violation of law;
(iii) liability under Section 14-2-832 (or any successor provision
or redesignation thereof) of the Code; and
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<PAGE>
(iv) any transaction from which the director received an improper
personal benefit.
If at any time the Code shall have been amended to authorize the further
elimination or limitation of the liability of a director, then the liability of
each director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the Code, as so amended, without further action by the
shareholders, unless the provisions of the Code, as amended, require further
action by the shareholders.
Any repeal or modification of the foregoing provisions of this Article VIII
shall not adversely affect the elimination or limitation of liability or alleged
liability pursuant hereto of any director of the Corporation for or with respect
to any alleged act or omission of the director occurring prior to such repeal or
modification.
ARTICLE IX
OTHER CONSTITUENCIES
--------------------
In discharging the duties of their respective positions and in determining
what is believed to be in the best interests of the Corporation, the Board of
Directors, committees of the Board of Directors, and individual directors, in
addition to considering the effects of any action on the Corporation or its
shareholders, may consider the interests of the employees, customers, suppliers
and creditors of the Corporation and its subsidiaries, the communities in which
offices or other establishments of the Corporation and its subsidiaries are
located, and all other factors such directors consider pertinent. This
provision solely grants discretionary authority to the directors and shall not
be deemed to provide to any other constituency any right to be considered.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Incorporation as of the 6th day of December, 1995.
---
/s/ Jeffrey A. Allred
---------------------
Jeffrey A. Allred, Esq., Incorporator
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<PAGE>
EXHIBIT "A"
Preferences, Limitations and Rights of Series A Preferred:
(1) DIVIDENDS AND DISTRIBUTIONS.
---------------------------
(a) The holders of shares of Series A Preferred shall be entitled to
receive dividends at a rate of eight percent (8%) of the Conversion Value (as
defined in Section 3(a) below) per annum per share of Series A Preferred, which
shall be fully cumulative, prior and in preference to any declaration or payment
of any dividend (payable other than in Common Stock) or other distribution on
any other class or series of Preferred Stock or the Common Stock of the
Corporation (and excluding any stock splits and subdivisions for which an
adjustment is made under Section 3(d)(vi)(1) below). The dividend(s) payable
hereunder shall be payable annually on March 31 of each year (each an "Annual
Dividend Date") commencing on March 31, 1996, except that if any such date is a
Saturday, Sunday or legal holiday (a "Non-Business Day") then such dividend
shall be payable on the next day that is not a Saturday, Sunday or legal holiday
on which banks in the State of Georgia are permitted to be closed (a "Business
Day") to holders of record as they appear on the stock books of the Corporation
on the applicable record date, which shall be not more than 60 nor less than 10
days preceding the payment date for such dividends, as fixed by the Board of
Directors (the "Record Date"). The foregoing dividend on the Series A Preferred
shall accrue from the date of issuance of each share, but shall be payable only
when, as and if declared by the Board of Directors out of funds legally
available therefor. The dividend shall be payable in cash, except as otherwise
provided in the next paragraph. In addition to the above dividends, each person
who is a holder of record of Series A Preferred at the time of the initial
issuance of shares of Series A Preferred by the Corporation shall be entitled to
receive a one-time supplemental dividend per share of Series A Preferred in an
amount equal to the dividend which would have accrued on a share of Series A
Preferred had such share been issued on January 18, 1994, and remained
outstanding until the day prior to the date of initial issuance, with the
dividend computed at the rate of eight percent (8%) of the Conversion Value per
annum per share of Series A Preferred. The supplemental dividend shall be
payable in cash, except as otherwise provided in the next paragraph, on the
Annual Dividend Date occurring on March 31, 1996, or the next following Business
Day. The supplemental dividend shall be payable only when, as and if declared by
the Board of Directors out of funds legally available therefor. All subsequent
references herein to dividends on the Series A Preferred shall include such
supplemental dividend. The amount of dividends payable for any period that is
shorter or longer than a full annual dividend shall be computed on the basis of
a 360-day year of twelve 30-day months. All accrued but unpaid dividends shall
accrue interest after each Annual Dividend Date at a rate of eight percent (8%)
per annum (compounded on an annual basis) from each Annual Dividend Date.
The Board of Directors of the Corporation may, within sixty (60) days after
each Annual Dividend Date, elect (the "Dividend Election") to pay the annual
cash dividends
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<PAGE>
payable for such year on such Annual Dividend Date in shares of Common Stock
(the "Payments-in-Kind") rather than cash. If such an election is made, the
Corporation shall promptly notify the holders of record of the Series A
Preferred entitled to such annual dividend of the election to make the Payments-
in-Kind in lieu of cash dividends for such Annual Dividend Date. A Dividend
Election for any particular Annual Dividend Date shall operate only for such
Annual Dividend Date. Payments-in-Kind shall be payable as of the Annual
Dividend Date of each year for which the election is made, except that if such
date is a Non-Business Day then such Payment-in-Kind shall be payable as of the
next Business Day to holders of record as they appear on the stock books of the
Corporation on the applicable Record Date. Each Payment-in-Kind shall be equal
in amount to be that number of shares of Common Stock that is equal in number to
the aggregate cash dividend payable on any such dividend date divided by the
Conversion Value (as defined in Section 3(a) below), and shall be allocated on a
pro rata basis to each holder entitled to receive such dividend. Certificates
representing the shares of Common Stock issuable on payment of any Payment-in-
Kind shall be delivered to each holder entitled to receive such Payment-in-Kind
(in appropriate denominations) on or before the ninetieth (90th) day following
the Annual Dividend Date for which such Payment-in-Kind is elected to be made
hereunder. No interest shall accrue on a Payment-in-Kind issued in compliance
with the terms hereof. If a Payment-in-Kind is not made in compliance with the
terms hereof, the Corporation shall be obligated to pay the cash dividends under
the procedures in the previous paragraph.
(b) Notwithstanding Section l(a) hereof, the Corporation may at any
time, out of funds legally available therefor, repurchase shares of Common Stock
of the Corporation (i) issued to or held by employees, directors or consultants
of the Corporation or its subsidiaries upon termination of their employment or
services, pursuant to any agreement providing for such right of repurchase, or
(ii) issued to or held by any person subject to the Corporation's right of first
refusal to purchase such shares where the purchase is pursuant to the exercise
of such right of first refusal, in either case whether or not dividends on the
Series A Preferred Stock shall have been declared and paid or funds set aside
therefor, subject to any other contractual restrictions entered into by the
Corporation.
(2) LIQUIDATION RIGHTS. In the event of any liquidation, dissolution or
------------------
winding up of the Corporation, whether voluntary or involuntary, distributions
shall be made to the holders of Series A Preferred in respect of such Series A
Preferred before any amount shall be paid to the holders of any other class or
series of capital stock of the Corporation, in the following manner:
(a) SERIES A PREFERRED. The holders of the Series A Preferred shall
------------------
be entitled to be paid first out of the assets of the Corporation available for
distribution to holders of its capital stock an amount per share equal to (i)
the Conversion Value (as defined in Section 3(a) below), as appropriately
adjusted to reflect any stock split, stock dividend, combination,
recapitalization and the like (collectively a "Recapitalization") of the Series
A Preferred, plus (ii) all accrued or declared but unpaid
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<PAGE>
dividends (including any interest accrued thereon calculated through the date of
liquidation). If, upon the occurrence of a liquidation, dissolution or winding
up, the assets and funds thus distributed among the holders of the Series A
Preferred shall be insufficient to permit the payment to such holders of their
full liquidation preferences, then the entire assets and funds of the
Corporation legally available for distribution to the holders of capital stock
shall. be distributed ratably among the holders of the Series A Preferred.
(b) REMAINING ASSETS. If assets are remaining after payment of the
----------------
full preferential amount with respect to the Series A Preferred set forth in
Section 2(a) above, then the holders of any other class or series of Preferred
Stock, if any, shall be entitled to their respective preferential amounts on
liquidation, and thereafter the holders of the Common Stock shall be entitled to
share ratably in all such remaining assets and surplus funds based on the number
of shares of Common Stock held by each.
(c) EVENTS DEEMED A LIQUIDATION. For purposes of this Section 2, the
---------------------------
holders of a majority of the Series A Preferred may elect, as part of any
approval of such class required under Section 8 below, to have treated as a
liquidation, dissolution or winding up of the Corporation the consolidation or
merger of the Corporation with or into any other corporation or the sale or
other transfer in a single transaction or a series of related transactions of
all or substantially all of the assets of the Corporation, or any other
reorganization of the Corporation, unless the stockholders of the Corporation
immediately prior to any such transaction are holders of a majority of the
voting securities of the surviving or acquiring corporation immediately
thereafter (and for purposes of this calculation equity securities which any
stockholder or the Corporation owned immediately prior to such merger or
consolidation as a stockholder of another party to the transaction shall be
disregarded).
(d) VALUATION OF SECURITIES AND PROPERTY. In the event the
------------------------------------
Corporation proposes to distribute assets other than cash in connection with any
liquidation, dissolution or winding up of the Corporation, the value of the
assets to be distributed to the holders of shares of Series A Preferred shall be
determined in good faith by the Board of Directors. Any securities not subject
to investment letter or similar restrictions on free marketability shall be
valued as follows:
(i) If traded on a national securities exchange or the Nasdaq
National Market System ("Nasdaq"), the value shall be deemed to be the
average of the security's closing prices on such exchange or Nasdaq over
the thirty (30) day period ending three (3) days prior to the distribution;
(ii) If actively traded over-the-counter (other than Nasdaq), the
value shall be deemed to be the average of the closing bid prices over the
thirty (30) day period ending three (3) days prior to the distribution; and
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<PAGE>
(iii) If there is no active public market, the value shall be the
fair market value thereof as determined in good faith by the Board of
Directors.
The method of valuation of securities subject to investment letter or other
restrictions on free marketability shall be adjusted to make an appropriate
discount from the market value determined as above in clauses (i), (ii) or (iii)
to reflect the fair market value thereof as determined in good faith by the
Board of Directors. The holders of at least 50% of the outstanding Series A
Preferred shall have the right to challenge any determination by the Board of
Directors of fair market value pursuant to this Section 2(d), in which case the
determination of fair market value shall be made by an independent appraiser
selected jointly by the Board of Directors and the challenging parties, the cost
of such appraisal to be borne equally by the Corporation and the challenging
parties.
(3) CONVERSION. The holders of the Series A Preferred have conversion
----------
rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT. Each share of Series A Preferred shall
----------------
initially be convertible, at the option of the holder thereof, at any time on or
after the earlier of (i) January 18, 1997, (ii) the date the Corporation becomes
subject to the periodic reporting requirements of the Securities Act of 1934, as
amended, (iii) the date the Corporation enters into a transaction for a
consolidation or merger of the Corporation into any other corporation or the
sale or other transfer in a single transaction or series of related transactions
of all or substantially all of the assets of the Corporation which will result
in the exchange of each share of Series A Preferred (or shares issuable upon
conversion thereof) for cash or property with a value (as defined in Section
2(d) of at least two times the Conversion Value (as defined herein) on or prior
to January 18, 1996, and at least three times the Conversion Value if after such
date (a "Qualified Merger"), or (iv) the giving by the Corporation of the
Redemption Notice under Section 5 below (each of the foregoing an "Eligible
Conversion Date"), but not later than on or prior to the second day prior to
such date, if any, as may have been fixed for the redemption thereof in any call
for redemption pursuant to Section 5 below, at the principal office of the
Corporation or any transfer agent for the Series A Preferred, into the number of
fully paid and nonassessable shares of Common Stock which results from dividing
the Conversion Price (as hereinafter specified) per share in effect for such
series at the time of conversion into the per share Conversion Value (as
hereinafter specified) of such series. The initial Conversion Price of the
Series A Preferred shall be $31.012 per share, and the Conversion Value of the
Series A Preferred shall be $31.012 per share. The initial Conversion Price of
the Series A Preferred shall be subject to adjustment from time to time as
provided in Section 3(d) hereof. The Conversion Value shall not be subject to
adjustment (except in connection with a Recapitalization). Upon conversion, all
accrued or declared but unpaid dividends (including any interest accrued thereon
calculated as of the date of conversion) on the Series A Preferred shall be paid
in cash, to the extent permitted by applicable law.
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<PAGE>
(b) AUTOMATIC CONVERSION. Each share of Series A Preferred shall
--------------------
automatically be converted into shares of Common Stock upon the closing of a
firm commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of securities for the account of the Corporation to the
public, (i) the net proceeds of which exceed $10,000,000 at a price per share to
the public of at least $10, and (ii) the aggregate value of the shares of Common
Stock issuable on conversion of each share of Series A Preferred is at least two
times the Conversion Value if prior to or on January 18, 1996, and at least
three times the Conversion Value after such date. Upon conversion, all accrued
or declared but unpaid dividends (including any interest accrued thereon
calculated as of the date of conversion) on the Series A Preferred shall be paid
in cash, to the extent permitted by applicable law.
(c) MECHANICS OF CONVERSION. Before any holder of Series A
-----------------------
Preferred shall be entitled to convert the same into shares of Common Stock and
to receive certificates therefor, he or she shall surrender the certificate or
certificates therefor, duly endorsed, at the principal office of the Corporation
or of any transfer agent for the Series A Preferred, and shall give written
notice to the Corporation at such office that he or she elects to convert the
same; provided, however, that in the event of an automatic conversion pursuant
-------- -------
to Section 3(b) hereof, the outstanding shares of Series A Preferred shall be
converted automatically without any further action by the holders of such shares
and whether or not the certificates representing such shares are surrendered to
the Corporation or its transfer agent; and provided further that the Corporation
shall not be obligated to issue certificates evidencing the shares of Common
Stock issuable upon such automatic conversion unless and until the certificates
evidencing such shares of Series A Preferred are either delivered to the
Corporation or its transfer agent as provided above, or the holder notifies the
Corporation or its transfer agent that such certificates have been lost, stolen
or destroyed and executes an agreement satisfactory to the Corporation to
indemnify the Corporation from any loss incurred by it in connection with such
certificates. The Corporation shall, as soon as practicable after such delivery,
or after such agreement and indemnification, issue and deliver at such office to
such holder of Series A Preferred, a certificate or certificates for the number
of shares of Common Stock to which he or she shall be entitled as aforesaid and
a check payable to the holder in the amount of any accrued or declared but
unpaid dividends (including any interest accrued thereon calculated as of the
date of conversion) payable pursuant to Section I hereof, if any. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of Series A Preferred to be
converted, or, in the case of automatic conversion, immediately prior to the
occurrence of the event leading to such automatic conversion, and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on such date. In the event of a notice of redemption
of any shares of Series A Preferred pursuant to Section 5 below, the conversion
rights shall terminate as to the shares designated for redemption at the close
of business on the second day preceding the redemption date, unless default is
made in payment of the redemption price, in which case the conversion rights for
such shares shall
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<PAGE>
continue until such payment. If the Corporation fails to pay all such dividends
(and interest thereon) within twenty (20) days of the date of conversion, the
holder entitled to such dividends (and interest thereon) may elect to have the
Corporation issue to such holder, in lieu of such cash payment, additional
shares of Common Stock calculated by dividing the total amount payable on such
date by the Conversion Value.
(d) ADJUSTMENTS TO CONVERSION PRICE.
-------------------------------
(i) SPECIAL DEFINITIONS. For purposes of this Section 3(d), the
-------------------
following definitions shall apply:
(1) "OPTION" shall mean rights, options or warrants to subscribe
------
for, purchase or otherwise acquire either Common Stock or Convertible
Securities.
(2) "CONVERTIBLE SECURITIES" shall mean any evidences of
----------------------
indebtedness, shares or other securities convertible into or exchangeable
for Common Stock.
(3) "ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares of
---------------------------------
Common Stock issued (or, pursuant to Section 3(d)(iii), deemed to be
issued) by the Corporation after the Original Issue Date, other than shares
of Common Stock issued or issuable:
(A) upon conversion of shares of Series A Preferred;
(B) pursuant to a stock grant, option plan or purchase plan,
other employee stock incentive program or agreement, not to exceed 320,260
shares, net of repurchases and cancellations and expirations (without
exercise) of Options;
(C) as a dividend or distribution on Series A Preferred;
(D) in a transaction described in Section 3(d)(vi); or
(E) by way of dividend or other distribution on shares of
Common Stock excluded from the definition of Additional Shares of Common
Stock by the foregoing clauses (A), (B), (C), (D), or this clause (E).
(4) "ORIGINAL ISSUANCE DATE" shall mean the date on which the
----------------------
first share of Series A Preferred was issued.
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<PAGE>
(ii) NO ADJUSTMENT OF CONVERSION PRICE. No adjustment in the
---------------------------------
Conversion Price of the Series A Preferred shall be made in respect of the
issuance of Additional Shares of Common Stock unless the consideration per
share for an Additional Share of Common Stock issued or deemed to be issued
by the Corporation is less than the Conversion Price for the Series A
Preferred in effect on the date of, and immediately prior to, such issue.
(iii) DEEMED ISSUE OF ADDITIONAL SHARES OF COMMON STOCK.
-------------------------------------------------
(1) OPTIONS AND CONVERTIBLE SECURITIES. In the event the
----------------------------------
Corporation at any time or from time to time after the Original Issue Date
shall issue any Options (other than the issuance of Options pursuant to the
Corporation's Option Pool of 25,000 shares of Common Stock, and the
issuance of Options in replacement or substitution of the Options issued
prior to the Original Issue Date) or Convertible Securities or shall fix a
record date for the determination of holders of any class of securities
entitled to receive any such Options or Convertible Securities, then the
maximum number of shares (as set forth in the instrument relating thereto
-------
without regard to any provisions contained therein for a subsequent
adjustment of such number) of Common Stock issuable upon the exercise of
such Options or, in the case of Convertible Securities and Options
therefor, the exercise of such Options and conversion or exchange of such
Convertible Securities shall be deemed to be Additional Shares of Common
Stock issued as of the time of such issue or, in case such a record date
shall have been fixed, as of the close of business on such record date,
provided that Additional Shares of Common Stock shall not be deemed to have
been issued unless the consideration per share (determined pursuant to
Section 3(d)(v) hereof) of such Additional Shares of Common Stock would be
less than the Conversion Price in effect on the date of and immediately
prior to such issue, or such record date, as the case may be, and provided
further that in any such case in which Additional Shares of Common Stock
are deemed to be issued:
(A) except as provided in Section 3(d)(iii)(1)(B), no further
adjustment in the Conversion Price shall be made upon the subsequent issue
of Convertible Securities or shares of Common Stock upon the exercise of
such Options or conversion or exchange of such Convertible Securities;
(B) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any change in the
consideration payable to the Corporation, or change in the number of shares
of Common Stock issuable, upon the exercise, conversion or exchange thereof
(other than under or by reason of provisions designed to protect against
dilution), the Conversion Price computed upon the original issue thereof
(or upon
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<PAGE>
the occurrence of a record date with respect thereto) and any subsequent
adjustments based thereon, shall, upon any such increase or decrease
becoming effective, be recomputed to reflect such increase or decrease
insofar as it affects such Options or the rights of conversion or exchange
under such Convertible Securities; and
(C) no readjustment pursuant to clause (B) above shall have the
effect of increasing the Conversion Price to an amount which exceeds the
lower of (1) the Conversion Price on the original adjustment date or (2)
the Conversion Price that would have resulted from any issuance of
Additional Shares of Common Stock between the original adjustment date and
such readjustment date.
(iv) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF ADDITIONAL
----------------------------------------------------------
SHARES OF COMMON STOCK. In the event the Corporation shall issue
----------------------
Additional Shares of Common Stock (including Additional Shares of Common
Stock deemed to be issued pursuant to Section 3(d)(iii)) without
consideration or for a consideration per share less than the Conversion
Price of the Series A Preferred in effect on the date of and immediately
prior to such issue (such issuance price being referred to herein as the
"Dilution Price"), then and in each such event the Conversion Price of the
Series A Preferred shall be reduced to a price (calculated to the nearest
cent) determined by multiplying such Conversion Price by a fraction, the
numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issue plus the number of shares of
Common Stock which the aggregate consideration received by the Corporation
for the total number of Additional Shares of Common Stock so issued would
purchase at such Conversion Price; and the denominator of which shall be
the number of shares of Common Stock outstanding immediately prior to such
issue plus the number of such Additional Shares of Common Stock so issued;
provided that, for the purposes of this Section 3(d)(iv), all shares of
Common Stock issuable upon conversion of all outstanding Series A Preferred
and other classes or series of Preferred Stock and all outstanding Options
(provided such Options have an exercise price below the Conversion Price of
the Series A Preferred immediately prior to such issue) and Convertible
Securities shall be deemed to be outstanding, and, immediately after any
Additional Shares of Common Stock are deemed issued pursuant to Section
3(d)(iii) such Additional Shares of Common Stock shall be deemed to be
outstanding.
(v) DETERMINATION OF CONSIDERATION. For purposes of this
------------------------------
Section 3(d), the consideration received by the Corporation for the issue
of any Additional Shares of Common Stock shall be computed as follows:
(1) CASH AND PROPERTY: Such consideration shall:
-----------------
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<PAGE>
(A) insofar as it consists of cash, be computed at the
aggregate amount of cash received by the Corporation;
(B) insofar as it consists of property other than cash, be
computed at the fair value thereof at the time of such issue, as determined
by the Board of Directors in the good faith exercise of its reasonable
business judgment; and
(C) in the event Additional Shares of Common Stock are issued
together with other shares or securities or other assets of the Corporation
for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (A) and (B)
above, as determined by the Board of Directors in the good faith exercise
of its reasonable business judgment.
(2) OPTIONS AND CONVERTIBLE SECURITIES. The consideration per
----------------------------------
share received by the Corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to Section 3(d)(iii)(1), relating to
Options and Convertible Securities, shall be determined by dividing
(A) the total amount, if any, received or receivable by the
Corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration
(as set forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such
consideration) payable to the Corporation upon the exercise of such Options
or the conversion or exchange of such Convertible Securities, or in the
case of Options for Convertible Securities, the exercise of such Options
for Convertible Securities and the conversion or exchange of such
Convertible Securities, by
(B) the maximum number of shares of Common Stock (as set forth
in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon
the exercise of such Options or the conversion or exchange of such
Convertible Securities.
(vi) OTHER ADJUSTMENTS.
-----------------
(1) SUBDIVISIONS, COMBINATIONS, OR CONSOLIDATIONS OF COMMON
-------------------------------------------------------
STOCK. In the event the outstanding shares of Common Stock shall be
-----
subdivided, combined or consolidated, by stock split, stock dividend,
combination or like event, into a greater or lesser number of shares of
Common Stock, the Conversion Price of the Series A Preferred in effect
immediately prior to such subdivision, combination, consolidation or stock
-9-
<PAGE>
dividend shall, concurrently with the effectiveness of such subdivision,
combination or consolidation, be proportionately adjusted.
(2) RECLASSIFICATIONS. In the case, at any time after the date
-----------------
hereof, of any capital reorganization or any reclassification of the stock
of the Corporation (other than as a result of a stock dividend or
subdivision, split-up or combination of shares), or the consolidation or
merger of the Corporation with or into another person (other than a
consolidation or merger (A) in which the Corporation is the continuing
entity and which does not result in any change in the Common Stock or (B)
which is treated as a liquidation pursuant to Section 2(c)), the shares of
the Series A Preferred shall, after such reorganization, reclassification,
consolidation or merger be convertible into the kind and number of shares
of stock or other securities or property of the Corporation or otherwise to
which such holder would have been entitled if immediately prior to such
reorganization, reclassification, consolidation or merger he had converted
his shares of the Series A Preferred into Common Stock. The provisions of
this clause 3(d)(vi)(2) shall similarly apply to successive
reorganizations, reclassifications, consolidations or mergers.
(e) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Price of the Series A Preferred
pursuant to this Section 3, the Corporation at its expense shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
furnish to each holder of Series A Preferred a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Series A Preferred, furnish or cause to be
furnished to such holder a like certificate setting forth (i) such adjustments
and readjustments, (ii) the Conversion Price of the Series A Preferred at the
time in effect, and (iii) the number of shares of Common Stock and the amount,
if any, of other property which at the time would be received upon the
conversion of the Series A Preferred.
(f) STATUS OF CONVERTED STOCK. In case any shares of Series A
-------------------------
Preferred shall be converted pursuant to Section 3 hereof, the shares so
converted shall be canceled, shall not be reissuable and shall cease to be a
part of the authorized capital stock of the Corporation.
(g) FRACTIONAL SHARES. In lieu of any fractional shares to which
-----------------
the holder of Series A Preferred would otherwise be entitled upon conversion,
the Corporation shall pay cash equal to such fraction multiplied by the fair
market value of one share of Common Stock as determined by the Board of
Directors in the good faith exercise of its reasonable business judgment.
(h) MISCELLANEOUS.
-------------
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<PAGE>
(i) All calculations under this Section 3 shall be made to the
nearest cent or to the nearest one hundredth (1/100) of a share, as the
case may be.
(ii) The holders of at least 50% of the outstanding Series A
Preferred shall have the right to challenge any determination by the Board
of Directors of fair market value pursuant to this Section 3, in which case
such determination of fair market value shall be made by an independent
appraiser selected jointly by the Board of Directors and the challenging
parties, the cost of such appraisal to be borne equally by the Corporation
and the challenging parties.
(iii) No adjustment in the Conversion Price of the Series A
Preferred need be made if such adjustment would result in a change in such
Conversion Price of less than $0.01. Any adjustment of less than $0.01
which is not made shall be carried forward and shall be made at the time of
and together with any subsequent adjustment which, on a cumulative basis,
amounts to an adjustment of $0.01 or more in such Conversion Price.
(i) NO IMPAIRMENT. The Corporation will not through any
-------------
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 3 and in the
taking of all such action as may be necessary or appropriate in order to protect
the conversion rights of the holders of Series A Preferred against impairment.
(j) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
---------------------------------------------
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of Series A Preferred, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of Series A Preferred. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of Series A Preferred, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
(4) VOTING RIGHTS. Except as otherwise required by law or by
-------------
Section 8 hereof, the holders of all Series A Preferred issued and outstanding,
in the aggregate, shall be entitled to the number of votes equal to (a) sixteen
percent (16%) of the number of shares of Common Stock at the record date for
determination of the stockholders entitled to vote on such matters, minus (b)
the number of votes attributable to shares of Common Stock previously issued
upon conversion of such Series A Preferred, if any, or, if no such record date
is established, at the date such vote is taken or any written consent of
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<PAGE>
stockholders is solicited, such votes to be counted together with all other
shares of stock of the Corporation having general voting power and not
separately as a class. Fractional votes by the holders of Series A Preferred
shall not, however, be permitted, and any fractional voting rights shall (after
aggregating all shares into which shares of Series A Preferred held by each
holder could be converted) be rounded to the nearest whole number.
(5) REDEMPTION.
----------
(a) At any time after January 18, 1996, the Corporation may, by
giving a Notice of Redemption (as defined below), elect to redeem all (and not
less than all) of the Series A Preferred outstanding on the Redemption Date (as
defined below) out of funds legally available therefor. The Corporation shall
pay in cash therefor a sum per share equal to three times the Conversion Value,
together with all accrued or declared but unpaid dividends (including any
interest accrued thereon) calculated as of the earlier of (i) ten (10) days
following the Notice of Redemption or (ii) the date of conversion of the Series
A Preferred pursuant to Section 5(b)(ii) with respect to such shares as of the
date of the redemption (collectively the "Redemption Value").
(b) Any notice of redemption (the "Notice of Redemption") given by
the Corporation shall be delivered by mail, first class postage prepaid, to each
holder of record (at the close of business on the business day preceding the day
on which notice is given) of Series A Preferred, at the address last shown on
the records of the Corporation for such holder or given by the holder to the
Corporation, for the purpose of notifying such holder of the redemption to be
effected. The Notice of Redemption shall specify a date (the "Redemption Date")
between 45 and 75 days after the mailing of the Notice of Redemption on which
the Series A Preferred then outstanding shall be redeemed and the place at which
payment may be obtained, which shall be the principal offices of the Corporation
or such other place as shall be mutually agreeable to the Corporation and
holders of a majority of the Series A Preferred. The Notice of Redemption shall
call upon each holder of Series A Preferred to either (i) surrender to the
Corporation, in the manner and at the place designated, such holder's
certificate or certificates representing the shares to be redeemed or (ii)
convert such Series A Preferred into Common Stock prior to the Redemption Date
in accordance with the provisions of Section 3 above.
(c) On the Redemption Date, the Corporation shall pay by cash or
check to the order of the person whose name appears on the certificate or
certificates of the Series A Preferred that (i) shall not have been converted
pursuant to Section 3 hereof and (ii) shall have been surrendered to the
Corporation in the manner and at the place designated in the Notice of
Redemption, the Redemption Value, and thereupon each surrendered certificate
shall be canceled.
(d) If the funds of the Corporation legally available for
redemption of the Series A Preferred are insufficient to redeem the total number
of shares
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<PAGE>
of Series A Preferred outstanding on the Redemption Date, the Corporation shall
not have the right to redeem any of the Series A Preferred.
(e) From and after the Redemption Date, unless there shall have
been a default in payment of the Redemption Value, all rights of the holders of
shares of Series A Preferred (except the right to receive the Redemption Value
subsequent to the Redemption Date upon surrender of their certificate or
certificates) shall cease with respect to such shares, and such shares shall not
thereafter be transferred on the books of the Corporation or be deemed to be
outstanding for any purpose whatsoever.
(6) NOTICES OF RECORD DATE. In the event of any taking by the
----------------------
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any other right, the Corporation shall mail to each
holder of Series A Preferred, at least twenty (20) days prior to the date
specified therein, a notice specifying the date on which any such record is to
be taken for the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right.
(7) NOTICES. Any notice required by the provisions of the Articles
-------
of Incorporation to be given to the holders of Series A Preferred shall be
deemed given when deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his or her address appearing on the books
of the Corporation.
(8) PROTECTIVE PROVISIONS.
---------------------
(a) APPROVAL OF CERTAIN TRANSACTIONS WHILE ANY SERIES A PREFERRED
-------------------------------------------------------------
IS OUTSTANDING. So long as any shares of Series A Preferred are outstanding,
- --------------
the Corporation shall not, without first obtaining the approval of the holders
of at least a majority of the Series A Preferred then outstanding, voting as a
separate class, take any action that:
(i) alters the rights, preferences or privileges of the Series
A Preferred;
(ii) increases or decreases the authorized number of shares of
Series A Preferred or any series of Preferred Stock of the Corporation;
(iii) creates any new class or series of shares that has a
preference over or is on a parity with the Series A Preferred with respect
to voting, dividends or liquidation preferences;
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<PAGE>
(iv) reclassifies stock into shares having a preference over or
parity with the Series A Preferred with respect to voting, dividends or
liquidation preferences;
(v) authorizes any dividend or other distribution with respect
to the Common Stock (other than a dividend payable in Common Stock or as
authorized by Section 1);
(vi) repurchases, redeems or retires any shares of capital stock
of the Corporation other than pursuant to contractual rights to repurchase
shares of Common Stock held by employees, directors or consultants of the
Corporation or its subsidiaries upon termination of their employment or
services or pursuant to the exercise of a contractual right of first
refusal held by the Corporation.
(b) APPROVAL OF CERTAIN TRANSACTIONS AS LONG AS AT LEAST 64,492
-----------------------------------------------------------
SERIES A PREFERRED OUTSTANDING. As long as at least 64,492 shares of Series A
- ------------------------------
Preferred are outstanding (as adjusted for any Recapitalization), the
Corporation shall not, without first obtaining the approval of the holders of at
least a majority of the Series A Preferred then outstanding, voting as a
separate class, take any action that:
(i) results in the consolidation or merger with or into any
other corporation (other than a merger approved under Section 8(b)(iv)
below) or the sale or other transfer in a single transaction or a series of
related transactions of all or substantially all of the assets of the
Corporation, or otherwise results in the reorganization of the Corporation;
provided, however, that no such approval shall be necessary if any of the
--------
above transactions results in cash proceeds or equity securities that are
freely tradeable on a recognized public market to the holders of Series A
Preferred of a value of at least (i) two times the Conversion Value if such
transaction(s) occurs prior to or on January 18, 1996, or (ii) three times
the Conversion Value if after such date (as adjusted for any
Recapitalization);
(ii) materially changes the business of the Corporation to a
business outside the field of telecommunications;
(iii) issues any Common Stock or other security of the Corporation
exchangeable, convertible or exercisable into any of the capital stock of
the Corporation, except pursuant to the stock or option plans permitted
under Section 3(d)(B);
(iv) involves the acquisition, by merger or otherwise, by the
Corporation of assets or securities valued at more than $1,000,000 in one
or a series of related transactions;
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<PAGE>
(v) requires the Corporation to incur any indebtedness in excess
of that obtained under credit facilities from credit sources regularly
engaged in lending for working capital purposes, except for the refinancing
of any existing indebtedness and trade payables (including acquisitions of
equipment) in the ordinary course of business;
(vi) consummates any material transaction with an "affiliate" (as
such term is used under the Securities Act of 1933, as amended) of the
Corporation; or
(vii) increases management compensation to Boland T. Jones, D.
Gregory Smith or Leonard DeNittis by more than ten percent (10%) of the
amounts permitted by their respective employment agreements in effect on
the date of these Articles of Incorporation.
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<PAGE>
ARTICLES OF MERGER
OF
PREMIERE TECHNOLOGIES, INC.,
A FLORIDA CORPORATION
AND
PREMIERE TECHNOLOGIES REINCORPORATION, INC.,
A GEORGIA CORPORATION
Pursuant to the respective provisions of the Florida Business Corporation Act
and the Georgia Business Corporation Code, the corporations herein named do
hereby adopt the following Articles of Merger.
1.
Annexed hereto as Exhibit "A" and made a part hereof is the Agreement and
Plan of Merger for merging PREMIERE TECHNOLOGIES, INC., a Florida corporation
("Premiere"), with and into PREMIERE TECHNOLOGIES REINCORPORATION, INC., a
Georgia corporation ("Premiere Reincorporation"), as adopted by the Board of
Directors of Premiere on December 6, 1995, and adopted by the Board of Directors
of Premiere Reincorporation on December 6, 1995.
2.
The shareholders of Premiere entitled to vote thereon approved and duly
adopted the Agreement and Plan of Merger on December 16, 1995, and the sole
shareholder of Premiere Reincorporation approved and duly adopted the Agreement
and Plan of Merger on December 6, 1995.
3.
The merger of Premiere with and into Premiere Reincorporation is permitted
by the laws of Georgia (the jurisdiction of organization of Premiere
Reincorporation) and has been authorized in compliance with such laws.
4.
The merger of Premiere with and into Premiere Reincorporation is permitted
by the laws of Florida (the jurisdiction of organization of Premiere) and has
been authorized in compliance with such laws.
5.
Pursuant to the Agreement and Plan of Merger, Article I of the Articles of
Incorporation of Premiere Reincorporation, shall, at the effective time of the
merger of
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<PAGE>
Premiere with and into Premiere Reincorporation and without any further act or
action of Premiere Reincorporation, be amended to read: "The name of the
Corporation is Premiere Technologies, Inc."
IN WITNESS WHEREOF, the undersigned corporations have executed these
Articles of Merger this 18th day of December, 1995.
Premiere Technologies, Inc. a Florida corporation
By: /s/ Boland T. Jones
-------------------
Boland T. Jones, President
Attest: /s/ Patrick G. Jones
--------------------
Patrick G. Jones, Assistant Secretary
[CORPORATE SEAL]
Premiere Technologies Reincorporation, Inc. a
Georgia corporation
By: /s/ Boland T. Jones
-------------------
Boland T. Jones, President
Attest: /s/ Patrick G. Jones
--------------------
Patrick G. Jones, Secretary
[CORPORATE SEAL]
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<PAGE>
EXHIBIT A
---------
Agreement and plan of Merger
<PAGE>
ARTICLES OF AMENDMENT
TO ARTICLES OF INCORPORATION
OF PREMIERE TECHNOLOGIES, INC.
1. The name of the Corporation is Premiere Technologies, Inc.
2. Article III of the Articles of Incorporation of the Corporation are amended
to designate a new series of the preferred stock, par value $.01 per share, of
the Corporation, as follows:
"The second series of preferred stock, par value $.01 per share, shall
be designated as Series B Voting Preferred Stock ("Series B Voting
Preferred"), will consist of one (1) share, and will have the
preferences, voting powers, relative, participating, optional or other
special rights and privileges, and the qualifications, limitations and
restrictions as shown on EXHIBIT "B" attached hereto and incorporated
herein by reference."
3. The amendment was adopted on April 28, 1997.
4. The amendment was duly adopted by the board of directors of the Corporation.
PREMIERE TECHNOLOGIES, INC.
By: /s/ Patrick G. Jones
--------------------
Patrick G. Jones
Senior Vice President-Finance and
Legal
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<PAGE>
EXHIBIT "B"
PREFERENCES, LIMITATIONS AND RIGHTS OF SERIES B VOTING PREFERRED:
1. Dividends. The holder of Series B Voting Preferred shall not be entitled to
receive any dividends declared and paid by the Corporation.
2. Voting Rights. Except as otherwise required by law or the Articles of
Incorporation, (i) the holder of record of the share of Series B Voting
Preferred shall have a number of votes equal to the number of votes that the
holders of the outstanding Exchangeable Non-Voting Shares ("Exchangeable
Shares") of Voice-Tel Canada Limited, a wholly-owned subsidiary of the
Corporation (the "Subsidiary") from time to time, which are not owned by the
Corporation, any of its subsidiaries or any person directly or indirectly
controlled by or under common control of the Corporation, would be entitled to
if all such Exchangeable Shares were exchanged by the holders thereof for shares
of the Common Stock of the Corporation pursuant to the terms of the Exchangeable
Shares, in each case for the election of directors and on all matters submitted
to a vote of the shareholders of the Corporation, and (ii) in respect of all
matters concerning the voting of shares, the Series B Voting Preferred and the
Common Stock of the Corporation shall vote as a single
class.
3. Liquidation Preference. Upon any liquidation, dissolution or winding-up of
the Corporation, whether voluntary or involuntary, and subject to any prior
rights of holders of shares of preferred stock ranking senior to the Series B
Voting Preferred, the holder of the share of Series B Voting Preferred shall be
paid an amount equal to $1.00, together with payment to any class of stock
ranking equally with the Series B Voting Preferred, and before payment shall be
made to holders of any stock ranking on liquidation junior to the Series B
Voting Preferred (such amount payable with respect to the Series B Voting
Preferred being referred to as the Series B Voting Preferred Liquidation
Preference Payment").
4. Cancellation. At such time as the Series B Voting Preferred has no votes
attached to it because there are no Exchangeable Shares of the Subsidiary
outstanding which are not owned by the Corporation, any of its subsidiaries or
any person directly or indirectly controlled by or under common control of the
Corporation, and there are no shares of stock, debt, options or other agreements
of the Subsidiary which could give rise to the issuance of any Exchangeable
Shares of the Subsidiary to any person (other than the Corporation, any of its
subsidiaries or any person directly or indirectly controlled by or under common
control of the Corporation), the Series B Voting Preferred shall be canceled
without any action required by the holder thereof or the Corporation.
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<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
PREMIERE TECHNOLOGIES, INC.
1. The name of the corporation is: Premiere Technologies, Inc., a Georgia
corporation (hereinafter called the "Corporation"), which hereby certifies as
-----------
follows:
2. Article III of the Amended and Restated Articles of Incorporation is hereby
amended to designate a new series of the preferred stock, par value $.01 per
share, of the Corporation as follows:
1. Series C Junior Participating Preferred Stock. There is hereby
---------------------------------------------
established a series of Preferred Stock, par value $.01 per share, of the
Corporation, and the designation and certain terms, powers, preferences and
other rights of the shares of such series, and certain qualifications,
limitations and restrictions thereon, are hereby fixed as follows:
(i) The distinctive serial designation of this series shall be
"Series C Junior Participating Preferred Stock" (hereinafter called "this
Series"). Each share of this Series shall be identical in all respects with the
other shares of this Series except as to the dates from and after which
dividends thereon shall be cumulative.
(ii) The number of shares in this Series shall initially be
500,000, which number may from time to time be increased or decreased (but not
below the number then outstanding) by the Board of Directors. Shares of this
Series purchased by the Corporation shall be canceled and shall revert to
authorized but unissued shares of Preferred Stock undesignated as to series.
Shares of this Series may be issued in fractional shares, which fractional
shares shall entitle the holder, in proportion to such holder's fractional
share, to all rights of a holder of a whole share of this Series.
(iii) The holders of full or fractional shares of this Series shall
be entitled to receive, when and as declared by the Board of Directors, but only
out of funds legally available therefor, dividends, (A) on each date that
dividends or other distributions (other than dividends or distributions payable
in Common Stock of the Corporation) are payable on or in respect of Common Stock
comprising part of the Reference Package (as defined below), in an amount per
whole share of this Series equal to the aggregate amount of dividends or other
distributions (other than dividends or distributions payable in Common Stock of
the Corporation) that would be payable on such date to a holder of the Reference
Package and (B) on the last day of March, June, September and December in each
year, in an amount per whole share of this Series equal to the excess (if any)
of $1.00 over the aggregate dividends paid per whole share of this Series during
the three-month period ending on such last day. Each such dividend shall be
paid to the holders of record of shares of this Series on the date, not
exceeding sixty days preceding such dividend or
-1-
<PAGE>
distribution payment date, fixed for that purpose by the Board of Directors in
advance of payment of each particular dividend or distribution. Dividends on
each full and each fractional share of this Series shall be cumulative from the
date such full or fractional share is originally issued; provided that any such
full or fractional share originally issued after a dividend record date and on
or prior to the dividend payment date to which such record date relates shall
not be entitled to receive the dividend payable on such dividend payment date or
any amount in respect of the period from such original issuance to such dividend
payment date.
The term "Reference Package" shall initially mean 1000 shares of
Common Stock, par value $0.01 per share ("Common Stock"), of the Corporation.
In the event the Corporation shall at any time (A) declare or pay a dividend on
any Common Stock payable in Common Stock, (B) subdivide any Common Stock or (C)
combine any Common Stock into a smaller number of shares, then and in each such
case the Reference Package after such event shall be the Common Stock that a
holder of the Reference Package immediately prior to such event would hold
thereafter as a result thereof.
Holders of shares of this Series shall not be entitled to any
dividends, whether payable in cash, property or stock, in excess of full
cumulative dividends, as herein provided, on this Series.
So long as any shares of this Series are outstanding, no dividend
(other than a dividend in Common Stock or in any other stock ranking junior to
this Series as to dividends and upon liquidation) shall be declared or paid or
set aside for payment or other distribution declared or made upon the Common
Stock or upon any other stock ranking junior to this Series as to dividends or
upon liquidation, nor shall any Common Stock nor any other stock of the
Corporation ranking junior to or on a parity with this Series as to dividends or
upon liquidation be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a sinking fund for
the redemption of any shares of any such stock) by the Corporation (except by
conversion into or exchange for stock of the Corporation ranking junior to this
Series as to dividends and upon liquidation), unless, in each case, the full
cumulative dividends (including the dividend to be due upon payment of such
dividend, distribution, redemption, purchase or other acquisition) on all
outstanding shares of this Series shall have been, or shall contemporaneously
be, paid.
(iv) In the event of any merger, consolidation, reclassification
or other transaction in which the shares of Common Stock are exchanged for or
changed into other stock or securities, cash and/or any other property, then in
any such case the shares of this Series shall at the same time be similarly
exchanged or changed in an amount per whole share equal to the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as the
case may be, that a holder of the Reference Package would be entitled to receive
as a result of such transaction.
(v) In the event of any liquidation, dissolution or winding up of
the affairs of the Corporation, whether voluntary or involuntary, the holders of
full and
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<PAGE>
fractional shares of this Series shall be entitled, before any distribution or
payment is made on any date to the holders of the Common Stock or any other
stock of the Corporation ranking junior to this Series upon liquidation, to be
paid in full an amount per whole share of this Series equal to the greater of
(A) $1.00 or (B) the aggregate amount distributed or to be distributed prior to
such date in connection with such liquidation, dissolution or winding up to a
holder of the Reference Package (such greater amount being hereinafter referred
to as the "Liquidation Preference"), together with accrued dividends to such
distribution or payment date, whether or not earned or declared. If such payment
shall have been made in full to all holders of shares of this Series, the
holders of shares of this Series as such shall have no right or claim to any of
the remaining assets of the Corporation.
In the event the assets of the Corporation available for distribution
to the holders of shares of this Series upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, shall be
insufficient to pay in full all amounts to which such holders are entitled
pursuant to the first paragraph of this Section (v), no such distribution shall
be made on account of any shares of any other class or series of Preferred Stock
ranking on a parity with the shares of this Series upon such liquidation,
dissolution or winding up unless proportionate distributive amounts shall be
paid on account of the shares of this Series, ratably in proportion to the full
distributable, amounts for which holders of all such parity shares are
respectively entitled upon such liquidation, dissolution or winding up.
Upon the liquidation, dissolution or winding up of the Corporation,
the holders of shares of this Series then outstanding shall be entitled to be
paid out of assets of the Corporation available for distribution to its
shareholders all amounts to which such holders are entitled pursuant to the
first paragraph of this Section (v) before any payment shall be made to the
holders of Common Stock or any other stock of the Corporation ranking junior
upon liquidation to this Series.
For the purposes of this Section (v), the consolidation or merger of,
or binding share exchange by, the Corporation with any other corporation shall
not be deemed to constitute a liquidation, dissolution or winding up of the
corporation.
(vi) The shares of this Series shall not be redeemable.
(vii) In addition to any other vote or consent of shareholders
required by law or by the Amended and Restated Articles of Incorporation, as
amended, of the Corporation, each whole share of this Series shall, on any
matter, vote as a class with any other capital stock comprising part of the
Reference Package and voting on such matter and shall have the number of votes
thereon that a holder of the Reference Package would have.
3. The amendment was adopted on June 23, 1998.
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<PAGE>
4. The foregoing amendment did not require shareholder approval. The
foregoing amendment was duly approved by the Board of Directors of the
Corporation on June 23, 1998.
/s/ Patrick G. Jones
--------------------
Patrick G. Jones
Senior Vice President
Chief Legal Officer
Corporate Secretary
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<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
PREMIERE TECHNOLOGIES, INC.
ADOPTED AS OF DECEMBER 18, 1995
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
PREMIERE TECHNOLOGIES, INC.
TABLE OF CONTENTS
ARTICLE ONE Page
Name and Office......................................................... 1
1.1 Name................................................... 1
1.2 Registered Office and Agent............................ 1
1.3 Principal Office....................................... 1
1.4 Other Offices.......................................... 1
ARTICLE TWO
Shareholders' Meetings.................................................. 1
2.1 Place of Meetings...................................... 1
2.2 Annual Meetings........................................ 2
2.3 Special Meetings....................................... 2
2.4 Notice of Meetings..................................... 2
2.5 Waiver of Notice....................................... 2
2.6 Voting Group; Quorum; Vote Required to Act............. 2
2.7 Voting of Shares....................................... 3
2.8 Proxies................................................ 3
2.9 Presiding Officer...................................... 3
2.10 Adjournments........................................... 4
2.11 Conduct of the Meeting................................. 4
2.12 Action of Shareholders Without a Meeting............... 4
2.13 Matters Considered at Annual Meetings.................. 4
ARTICLE THREE
Board of Directors...................................................... 5
3.1 General Powers......................................... 5
3.2 Number, Election and Term of Office.................... 5
3.3 Removal of Directors................................... 6
3.4 Vacancies.............................................. 6
3.5 Compensation........................................... 6
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<PAGE>
3.6 Committees of the Board of Directors................... 6
3.7 Qualification of Directors............................. 6
3.8 Certain Nomination Requirements........................ 7
ARTICLE FOUR
Meetings of the Board of Directors...................................... 7
4.1 Regular Meetings....................................... 7
4.2 Special Meetings....................................... 7
4.3 Place of Meetings...................................... 7
4.4 Notice of Meetings..................................... 8
4.5 Quorum................................................. 8
4.6 Vote Required for Action............................... 8
4.7 Participation by Conference Telephone.................. 8
4.8 Action by Directors Without a Meeting.................. 8
4.9 Adjournments........................................... 8
4.10 Waiver of Notice....................................... 9
ARTICLE FIVE
Officers................................................................ 9
5.1 Offices................................................ 9
5.2 Term................................................... 9
5.3 Compensation........................................... 9
5.4 Removal................................................ 9
5.5 Chairman of the Board.................................. 10
5.6 President.............................................. 10
5.7 Vice Presidents........................................ 10
5.8 Secretary.............................................. 10
5.9 Treasurer.............................................. 10
ARTICLE SIX
Distributions and Dividends............................................. 11
ARTICLE SEVEN
Shares.................................................................. 11
7.1 Share Certificates..................................... 11
7.2 Rights of Corporation with Respect to Registered Owners 11
7.3 Transfers of Shares.................................... 11
7.4 Duty of Corporation to Register Transfer............... 11
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<PAGE>
7.5 Lost, Stolen, or Destroyed Certificates................ 12
7.6 Fixing of Record Date.................................. 12
7.7 Record Date if None Fixed.............................. 12
ARTICLE EIGHT
Indemnification......................................................... 12
8.1 Indemnification of Directors........................... 12
8.2 Indemnification of Others.............................. 13
8.3 Other Organizations.................................... 13
8.4 Advances............................................... 13
8.5 Non-Exclusivity........................................ 14
8.6 Insurance.............................................. 14
8.7 Notice................................................. 14
8.8 Security............................................... 14
8.9 Amendment.............................................. 14
8.10 Agreements............................................. 14
8.11 Continuing Benefits.................................... 15
8.12 Successors............................................. 15
8.13 Severability........................................... 15
8.14 Additional Indemnification............................. 15
ARTICLE NINE
Miscellaneous........................................................... 15
9.1 Inspection of Books and Records........................ 15
9.2 Fiscal Year............................................ 16
9.3 Corporate Seal......................................... 16
9.4 Annual Statements...................................... 16
9.5 Notice................................................. 16
9.6 Business Combination................................... 16
ARTICLE TEN
Amendments.............................................................. 17
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<PAGE>
AMENDED AND RESTATED BYLAWS
OF
PREMIERE TECHNOLOGIES, INC.
References in these Bylaws to "Articles of Incorporation" are to the
Articles of Incorporation, as amended and restated from time to time, of
Premiere Technologies Reincorporation, Inc., a Georgia corporation, which was
renamed Premiere Technologies, Inc. (the "Corporation") pursuant to that certain
Agreement and Plan of Merger dated as of December 6. 1995 between the
Corporation and Premiere Technologies, Inc., a Florida corporation.
All of these Bylaws are subject to contrary provisions, if any, of the
Articles of Incorporation (including provisions designating the preferences,
limitations, and relative rights of any class or series of shares), the Georgia
Business Corporation Code (the "Code"), and other applicable law, as in effect
on and after the effective date of these Bylaws. References in these Bylaws to
"Sections" shall refer to sections of the Bylaws, unless otherwise indicated.
ARTICLE ONE
Name and Office
1.1 Name. The name of the Corporation is Premiere Technologies, Inc.
----
1.2 Registered Office and Agent. The Corporation shall maintain a
---------------------------
registered office and shall have a registered agent whose business office is the
same as the registered office.
1.3 Principal Office. The principal office of the Corporation shall be at
----------------
the place designated in the Corporation's. annual registration with the Georgia
Secretary of State.
1.4 Other Offices. In addition to its registered office and principal
-------------
office, the Corporation may have offices at other locations either in or outside
the State of Georgia.
<PAGE>
ARTICLE TWO
Shareholders' Meetings
2.1 Place of Meetings. Meetings of the Corporation's shareholders may be
-----------------
held at any location inside or outside the State of Georgia designated by the
Board of Directors or any other person or persons who properly call the meeting,
or if the Board of Directors or such other person or persons do not specify a
location, at the Corporation's principal office.
2.2 Annual Meeting. The Corporation shall hold an annual meeting of
--------------
shareholders, at a time determined by the Board of Directors, to elect directors
and to transact any business that properly may come before the meeting. The
annual meeting may be combined with any other meeting of shareholders, whether
annual or special.
2.3 Special Meetings. Special meetings of shareholders of one or more
----------------
classes or series of the Corporation's shares may be called at any time by the
Board of Directors, the Chairman of the Board, or the President, and shall be
called by the Corporation upon the written request (in compliance with
applicable requirements of the Code) of the holders of shares representing 25%
or more of the votes entitled to be cast on each issue proposed to be considered
at the special meeting; provided, however, that at any time the Corporation has
more than 100 shareholders of record, such written request must be made by the
holders of shares representing 75% or more of the votes entitled to be cast on
each issue proposed to be considered at the special meeting. The business that
may be transacted at any special meeting of shareholders shall be limited to
that proposed in the notice of the special meeting given in accordance with
Section 2.4 (including related or incidental matters that may be necessary or
appropriate to effectuate the proposed business).
2.4 Notice or Meetings. In accordance with Section 9.5 and subject to
------------------
waiver by a shareholder pursuant to Section 2.5, the Corporation shall give
written notice of the date, time, and place of each annual and special
shareholders' meeting no fewer than 10 days nor more than 60 days before the
meeting date to each shareholder of record entitled to vote at the meeting. The
notice of an annual meeting need not state the purpose of the meeting unless
these Bylaws require otherwise. The notice of a special meeting shall state the
purpose for which the meeting is called. If an annual or special shareholders'
meeting is adjourned to a different date, time. or location, the Corporation
shall give shareholders notice of the new date, time, or location of the
adjourned meeting, unless a quorum of shareholders was present at the meeting
and information regarding the adjournment was announced before the meeting was
adjourned; provided, however, that if a new record date is or must be fixed in
-------- -------
accordance with Section 7.6, the Corporation must give notice of the adjourned
meeting to all shareholders of record as of the new record date who arc entitled
to vote at the adjourned meeting.
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2.5 Waiver of Notice. A shareholder may waive any notice required by the
----------------
Code, the Articles of Incorporation, or these Bylaws, before or after the date
and time of the matter to which the notice relates, by delivering to the
Corporation a written waiver of notice signed by the shareholder entitled to the
notice. In addition, a shareholder's attendance at a meeting shall be (a) a
waiver of objection to lack of notice or defective notice of the meeting unless
the shareholder at the beginning of the meeting objects to holding the meeting
or transacting business at the meeting, and (b) a waiver of objection to
consideration of a particular matter at the meeting that is not within the
purpose stated in the meeting notice, unless the shareholder objects to
considering the matter when it is presented. Except as otherwise required by
the Code, neither the purpose of nor the business transacted at the meeting need
be specified in any waiver.
2.6 Voting Group; Quorum; Vote Required to Act. (a) Unless otherwise
required by the Code or the Articles of Incorporation, all classes or series of
the Corporation's shares entitled to vote generally on a matter shall for that
purpose be considered a single voting group (a "Voting Group"). If either the
Articles of Incorporation or the Code requires separate voting by two or more
Voting Groups on a matter, action on that matter is taken only when voted upon
by each such Voting Group separately. At all meetings of shareholders, any
Voting Group entitled to vote on a matter may take action on the matter only if
a quorum of that Voting Group exists at the meeting, and if a quorum exists the
Voting Group may take action on the matter notwithstanding the absence of a
quorum of any other Voting Group that may be entitled to vote separately on the
matter. Unless the Articles of Incorporation, these Bylaws, or the Code
provides otherwise, the presence (in person or by proxy) of shares representing
a majority of votes entitled to be cast on a matter by a Voting Group shall
constitute a quorum of that Voting Group with regard to that matter. Once a
share is present at any meeting other than solely to object to holding the
meeting or transacting business at the meeting, the share shall be deemed
present for quorum purposes for the remainder of the meeting and for any
adjournments of that meeting, unless a new record date for the adjourned meeting
is or must be set pursuant to Section 7.6 of these Bylaws.
(b) Except as provided in Section 3.4, if a quorum exists, action on a
matter by a Voting Group is approved by that Voting Group if the votes cast
within the Voting Group favoring the action exceed the votes cast opposing the
action, unless the Articles of Incorporation, a provision of these Bylaws that
has been adopted pursuant to Section 14-2-1021 of the Code (or any successor
provision), or the Code requires a greater number of affirmative votes.
2.7 Voting of Shares. Unless otherwise required by the Code or the
----------------
Articles of Incorporation, each outstanding share of any class or series having
voting rights shall be entitled to one vote on each matter that is submitted to
a vote of shareholders.
2.8 Proxies. A shareholder entitled to vote on a matter may vote in
-------
person or by proxy pursuant to an appointment executed in writing by the
shareholder or by his or her attorney-in-fact. Any copy, facsimile
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telecommunication, or-other reliable reproduction of such writing may be
substituted or used in lieu of the original writing, provided that such copy,
facsimile telecommunication, or other reproduction shall be a complete
reproduction of the entire original writing. An appointment of a proxy shall be
valid for 11 months from the date of its execution, unless a longer or shorter
period is expressly stated in the proxy.
2.9 Presiding Officer. Except as otherwise provided in this Section 2.9,
-----------------
the Chairman of the Board, and in his or her absence or disability the
President, shall preside at every shareholders' meeting (and any adjournment
thereof) as its chairman, if either of them is present and willing to serve. If
neither the Chairman of the Board nor the President is present and willing to
serve as chairman of the meeting, and if the Chairman of the Board has not
designated another person who is present and willing to serve, then a majority
of the Corporation's directors present at the meeting shall be entitled to
designate a person to serve as chairman. If no director of the Corporation is
present at the meeting or if a majority of the directors who am present cannot
be established, then a chairman of the meeting shall be selected by a majority
vote of (a) the shares present at the meeting that would be entitled to vote in
an election of directors, or (b) if no such shares are present at the meeting,
then the shares present at the meeting comprising the Voting Group with the
largest number of shares present at the meeting and entitled to vote on a matter
properly proposed to be considered at the meeting. The chairman of the meeting
may designate other persons to assist with the meeting.
2.10 Adjournments. At any meeting of shareholders (including an adjourned
------------
meeting), a majority of shares of any Voting Group present and entitled to vote
at the meeting (whether or not those shares constitute a quorum) may adjourn the
meeting, but only with respect to that Voting Group, to reconvene at a specific
time and place. If more than one Voting Group is present and entitled to vote
on a matter at the meeting, then the meeting may be continued with respect to
any such Voting Group that does not vote to adjourn as provided above, and such
Voting Group may proceed to vote on any matter to which it is otherwise entitled
to do so; provided, however, that if (a) more than one Voting Group is required
-------- -------
to take action on a matter at the meeting and (b) any one of those Voting Groups
votes to adjourn the meeting (in accordance with the preceding sentence), then
the action shall not be deemed to have been taken until the requisite vote of
any adjourned Voting Group is obtained at its reconvened meeting. The only
business that may be transacted at any reconvened meeting is business that could
have been transacted at the meeting that was adjourned, unless further notice of
the adjourned meeting has been given in compliance with the requirements for a
special meeting that specifies the additional purpose or purposes for which the
meeting is called. Nothing contained in this Section 2.10 shall be deemed or
otherwise construed to limit any lawful authority of the chairman of a meeting
to adjourn the meeting.
2.11 Conduct of the Meeting. At any meeting of shareholders, the chairman
----------------------
of the meeting shall be entitled to establish the rules of order governing the
conduct of business at the meeting.
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<PAGE>
2.12 Action of Shareholders Without a Meeting. Action required or
----------------------------------------
permitted to be taken at a meeting of shareholders may be taken without a
meeting if the action is taken by all shareholders entitled to vote on the
action or, if permitted by the Articles of Incorporation, by persons who would
be entitled to vote at a meeting shares having voting power to cast the
requisite number of votes (or numbers, in the case of voting by groups) that
would be necessary to authorize or take the action at a meeting at which all
shareholders entitled to vote were present and voted. The action must be
evidenced by one or more written consents describing the action taken, signed by
shareholders entitled to take action without a meeting, and delivered to the
Corporation for inclusion in the minutes or filing with the corporate records.
Where required by Section 14-2-704 or other applicable provision of the Code,
the Corporation shall provide shareholders with written notice of actions taken
without a meeting.
2.13 Matters Considered at Annual Meetings. Notwithstanding anything to
-------------------------------------
the contrary in these Bylaws, the only business that may be conducted at an
annual meeting of shareholders shall be business brought before the meeting (a)
by or at the direction of the Board of Directors prior to the meeting, (b) by or
at the direction of the Chairman of the Board or the President, or (c) by a
shareholder of the Corporation who is entitled to vote with respect to the
business and who complies with the notice procedures set forth in this Section
2.13. For business to be brought properly before an annual meeting by a
shareholder, the shareholder must have given timely notice of the business in
writing to the Secretary of the Corporation. To be timely, a shareholder's
notice must be delivered or mailed to and received at the principal offices of
the Corporation not less than sixty nor more than ninety days prior to any such
meeting. A shareholder's notice to the Secretary shall set forth a brief
description of each matter of business the shareholder proposes to bring before
the meeting and the reasons for conducting that business at the meeting; the
name, as it appears on the Corporation's books and address of the shareholder
proposing the business; the series or class and number of shares of the
Corporation's capital stock that are beneficially owned by the shareholder; and
any material interest of the shareholder in the proposed business. The chairman
of the meeting shall have the discretion to declare to the meeting that any
business proposed by a shareholder to be considered at the meeting is out of
order and that such business shall not be transacted at the meeting if (i) the
chairman concludes that the matter has been proposed in a manner inconsistent
with this Section 2.13 or (ii) the chairman concludes that the subject matter of
the proposed business is inappropriate for consideration by the shareholders at
the meeting.
ARTICLE THREE
Board of Directors
3.1 General Powers. All corporate powers shall be exercised by or under
--------------
the authority of, and the business and affairs of the Corporation shall be
managed by, the Board of Directors, subject to any limitation set forth in the
Articles of Incorporation, in bylaws approved by the shareholders, or in
agreements among all the shareholders that are otherwise lawful.
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<PAGE>
3.2 Number, Election and Term of Office. The number of directors of the
-----------------------------------
Corporation shall be fixed by resolution of the Board of Directors from time to
time and, until otherwise determined, shall be between three and seven;
provided, however, that no decrease in the number of directors shall have the
- -------- -------
effect of shortening the term of an incumbent director. The number of directors
shall initially be fixed at five. Except as provided in Section 3.4, the
directors shall be elected at each annual meeting of shareholders, or at a
special meeting of shareholders called for purposes that include the election of
directors, by a plurality of the votes cast by the shares entitled to vote and
present at the meeting. The terms of office of directors will be staggered by
dividing the total number of directors into three classes, with each class
accounting for one-third, as near as may be, of the total, with the actual
number of directors within each of the three classes to be determined by vote of
a majority of the entire Board of Directors. The terms of directors in the
first class expire at the first annual shareholders' meeting after their
election. The terms of the second class expire at the second annual
shareholders' meeting after their election, and the terms of the third class
expire at the third annual shareholders' meeting after their election. At each
annual shareholders' meeting held thereafter. directors shall be chosen for a
term of three years to succeed those whose terms expire. If the number of
directors is changed, any increase or decrease shall be so apportioned among the
classes as to make all classes as nearly equal in number as possible, and when
the number of directors is increased and any newly created directorships are
filled by the board, the terms of the additional directors shall expire at the
next election of directors by the shareholders. Each director, except in the
case of his earlier death, written resignation, retirement, disqualification or
removal, shall serve for the duration of his term, as staggered, and thereafter
until his successor shall have been elected and qualified.
3.3 Removal of Directors. The entire Board of Directors or any individual
--------------------
director may be removed with cause by the shareholders, provided that directors
elected by a particular Voting Group may be removed only by the shareholders in
that Voting Group. Removal action may be taken only at a shareholders' meeting
for which notice of the removal action has been duly given, and a director may
be removed only by the holders of 75 % of the votes entitled to be cast. A
removed director's successor, if any, may be elected at the same meeting to
serve the unexpired term. Directors may not be removed without cause.
3.4 Vacancies. A vacancy occurring in the Board of Directors may be
---------
filled for the unexpired term, unless the shareholders have elected a successor,
by the affirmative vote of a majority of the remaining directors, whether or not
the remaining directors constitute a quorum; provided, however, that if the
-------- -------
vacant office was held by a director elected by a particular Voting Group, only
the holders of shares of that Voting Group or the remaining directors elected by
that Voting Group shall be entitled to fill the vacancy; provided further,
----------------
however, that if the vacant off-ice was held by a director elected by a
- -------
particular Voting Group and there is no remaining director elected by that
Voting Group, the other remaining directors or director (elected by another
Voting Group or Groups) may fill the vacancy during an interim period before the
shareholders of the vacated director's Voting Group act to fill the vacancy. A
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<PAGE>
vacancy or vacancies in the Board of Directors may result from the death,
resignation, disqualification, or removal of any director, or from an increase
in the number of directors.
3.5 Compensation. Directors may receive such compensation for their
------------
services as directors as may be fixed by the Board of Directors from time to
time. A director may also serve the Corporation in one or more capacities other
than that of director and receive compensation for services rendered in those
other capacities.
3.6 Committees of the Board of Directors. The Board of Directors may
------------------------------------
designate from among its members an executive committee or one or more other
standing or ad hoc committees, each consisting of one or more directors, who
serve at the pleasure of the Board of Directors. Subject to the limitations
imposed by the Code, each committee shall have the authority set forth in the
resolution establishing the committee or in any other resolution of the Board of
Directors specifying, enlarging, or limiting the authority of the committee.
3.7 Qualification of Directors. No person elected to serve as a director
--------------------------
of the Corporation shall assume office and begin serving unless and until duly
qualified to serve, as determined by reference to the Code, the Articles of
Incorporation, and any further eligibility requirements established in these
Bylaws.
3.8 Certain Nomination Requirements. No Person may be nominated for
-------------------------------
election as a director at any annual or special meeting of shareholders unless
(a) the nomination has been or is being made pursuant to a recommendation or
approval of the Board of Directors of the Corporation or a properly constituted
committee of the Board of Directors previously delegated authority to recommend
or approve nominees for director; (b) the person is nominated by a shareholder
of the Corporation who is entitled to vote for the election of the nominee at
the subject meeting, and the nominating shareholder has furnished written notice
to the Secretary of the Corporation, at the Corporation's principal office, not
less than sixty nor more than ninety days prior to any such meeting, and the
notice (i) sets forth with respect to the person to be nominated his or her
name, age, business and residence addresses, principal business or occupation
during the past five years, any affiliation with or material interest in the
Corporation or any transaction involving the Corporation, and any affiliation
with or material interest in any person or entity having an interest materially
adverse to the Corporation, and (ii) is accompanied by the sworn or certified
statement of the. shareholder that the nominee has consented to being nominated
and that the shareholder believes the nominee will stand for election and will
serve if elected, or (c) (i) the person is nominated to replace a person
previously identified as a proposed nominee (in accordance with the provisions
of subpart (b) of this Section 3.8) who has since become unable or unwilling to
be nominated or to serve if elected, (ii) the shareholder who furnished such
previous identification makes the replacement nomination and delivers to the
Secretary of the Corporation (at the time of or prior to making the replacement
nomination) an affidavit or other sworn statement affirming that the shareholder
had no reason to believe the original nominee would be so unable or unwilling,
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<PAGE>
and (iii) such shareholder also furnishes in writing to the Secretary of the
Corporation (at the time of or prior to making the replacement nomination) the
same type of information about the replacement nominee as required by subpart
(b) of this Section 3.8 to have been furnished about the original nominee. The
chairman of any meeting of shareholders at which one or more directors are to be
elected, for good cause shown and with proper regard for the orderly conduct of
business at the meeting, may waive in whole or in pan the operation of this
Section 3.8.
ARTICLE FOUR
Meetings of the Board of Directors
4.1 Regular Meetings. A regular meeting of the Board of Directors shall
----------------
be held in conjunction with each annual meeting of shareholders. In addition,
the Board of Directors may, by prior resolution, hold regular meetings at other
times.
4.2 Special Meetings. Special meetings of the Board of Directors may be
----------------
called by or-at the request of the Chairman of the Board, the President. or a
majority of the directors in office at that time.
4.3 Place of Meetings. Directors may hold their meetings at any place in
-----------------
or outside the State of Georgia that the Board of Directors may establish from
time to time.
4.4 Notice of Meetings. Directors need not be provided with notice of any
------------------
regular meeting of the Board of Directors. Unless waived in accordance with
Section 4.10, the Corporation shall give at least twenty-four hours' notice to
each director of the date, time, and place of each special meeting. Notice of a
meeting shall be deemed to have been given to any director in attendance at any
prior meeting at which the date, time, and place of the subsequent meeting was
announced.
4.5 Quorum. At meetings of the Board of Directors, a majority of the
------
directors then in office shall constitute a quorum for the transaction of
business.
4.6 Vote Required for Action. If a quorum is present when a vote is
------------------------
taken, the vote of a majority of the directors present at the time of the vote
will be the act of the Board of Directors, unless the vote of a greater number
is required by the Code, the Articles of incorporation, or these Bylaws. A
director who is present at a meeting of the Board of Directors when corporate
action is taken is deemed to have assented to the action taken unless (a) he or
she objects at the beginning of the meeting (or promptly upon his or her
arrival) to holding the meeting or transacting business at it; (b) his or her
dissent or abstention from the action taken is entered in the minutes of the
meeting; or (c) he or she delivers written notice of dissent or abstention to
the presiding officer of the meeting before its adjournment or to the
Corporation immediately after adjournment of the meeting. The right of dissent
or abstention is not available to a director who votes in favor of the action
taken.
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<PAGE>
4.7 Participation by Conference Telephone. Members of the Board of
-------------------------------------
Directors may participate in a meeting of the Board by means of conference
telephone or similar communications equipment through which all persons
participating may hear and speak to each other. Participation in a meeting
pursuant to this Section 4.7 shall constitute presence in person at the meeting.
4.8 Action by Directors Without a Meeting. Any action required or
-------------------------------------
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if a written consent, describing the action taken, is signed
by each director and delivered to the Corporation for inclusion in the minutes
or filing with the corporate records. The consent may be executed in
counterpart, and shall have the same force and effect as a unanimous vote of the
Board of Directors at a duly convened meeting.
4.9 Adjournments. A meeting of the Board of Directors, whether or not a
------------
quorum is present, may be adjourned by a majority of the directors present to
reconvene at a specific time and place. It shall not be necessary to give
notice to the directors of the reconvened meeting or of the business to be
transacted, other than by announcement at the meeting that was adjourned, unless
a quorum was not present at the meeting that was adjourned, in which case notice
shall be given to directors in the same manner as for a special meeting. At any
such reconvened meeting at which a quorum is present, any business may be
transacted that could have been transacted at the meeting that was adjourned.
4.10 Waiver of Notice. A director may waive any notice required by the
----------------
Code, the Articles of Incorporation, or these Bylaws before or after the date
and time of the matter to which the notice relates, by a written waiver signed
by the director and delivered to the Corporation for inclusion in the minutes or
filing with the corporate records. Attendance by a director at a meeting shall
constitute waiver of notice of the meeting, except where a director at the
beginning of the meeting (or promptly upon his or her arrival) objects to
holding the meeting or to transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting.
ARTICLE FIVE
Officers
5.1 Offices. The officers of the Corporation shall consist of a President
-------
and a Secretary, each of whom shall be elected or appointed by the Board of
Directors. The Board of Directors may also elect a Chairman of the Board from
among its members. The Board of Directors from time to time may create and
establish the duties of other offices and may elect or appoint, or authorize
specific senior officers to appoint, the persons who shall hold such other
offices, including a Treasurer, one or more Vice Presidents (including Executive
Vice Presidents, Senior Vice Presidents, Assistant Vice Presidents, and the
like), one or more Assistant Secretaries, and one or more Assistant Treasurers.
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Whether or not so provided by the Board of Directors, the Chairman of the Board
may appoint one or more Assistant Secretaries and one or more Assistant
Treasurers. Any two or more offices may be held by the same person. Until a
Treasurer is appointed by the Board, the Secretary shall be responsible for the
duties of the Treasurer described in Section 5.9 below.
5.2 Term. Each officer shall serve at the pleasure of the Board of
----
Directors (or, if appointed by a senior officer pursuant to this Article Five,
at the pleasure of the Board of Directors or any senior officer authorized to
have appointed the officer) until his or her death, resignation, or removal, or
until his or her replacement is elected or appointed in accordance with this
Article Five.
5.3 Compensation. The compensation of all officers of the Corporation
------------
shall be fixed by the Board of Directors or by a committee or officer appointed
by the Board of Directors. Officers may serve without compensation.
5.4 Removal. All officers (regardless of how elected or appointed) may be
-------
removed, with or without cause, by the Board of Directors, and any officer
appointed by another officer may also be removed, with or without cause, by any
senior officer authorized to have appointed the officer to be removed. Removal
will be without prejudice to the contract rights, if any, of the person removed,
but shall be effective notwithstanding any damage claim that may result from
infringement of such contract rights.
5.5 Chairman of the Board. The Chairman of the Board (if there be one)
---------------------
shall preside at and serve as chairman of meetings of the shareholders and of
the Board of Directors (unless another person is selected under Section 2.9 to
act as chairman). The Chairman of the Board shall perform other duties and have
other authority as may from time to time be delegated by the Board of Directors.
5.6 President. Unless otherwise provided in these Bylaws or by resolution
---------
of the Board of Directors, the President shall be the chief executive officer of
the Corporation, shall be charged with the general and active management of the
business of the Corporation, shall see that all orders and resolutions of the
Board of Directors are carried into effect, shall have the authority to select
and appoint employees and agents of the Corporation, and shall, in the absence
or disability of the Chairman of the Board, perform the duties and exercise the
powers of the Chairman of the Board. The President shall perform any other
duties and have any other authority as may be delegated from time to time by the
Board of Directors, and shall be subject to the limitations fixed from time to
time by the Board of Directors.
5.7 Vice Presidents. The Vice President (if there be one) shall, in the
---------------
absence or disability of the President, or at the direction of the President,
perform the duties and exercise the powers of the President, whether the duties
and powers are specified in these Bylaws or otherwise. If the Corporation has
more than one Vice President, the one designated by the Board of Directors or
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<PAGE>
the President (in that order of precedence) shall act in the event of the
absence or disability of the President. Vice Presidents shall perform any other
duties and have any other authority as from time to time may be delegated by the
Board of Directors or the President.
5.8 Secretary. The Secretary shall be responsible for preparing minutes
---------
of the meetings of shareholders, directors, and committees of directors and for
authenticating records of the Corporation. The Secretary or any Assistant
Secretary shall have authority to give all notices required by law or these
Bylaws. The Secretary shall be responsible for the custody of the corporate
books, records, contracts, and other documents. The Secretary or any Assistant
Secretary may affix the corporate seal to any lawfully executed documents
requiring it, may attest to the signature of any officer of the Corporation, and
shall sign any instrument that requires the Secretary's signature. The
Secretary or any Assistant Secretary shall perform any other duties and have any
other authority as from time to time may be delegated by the Board of Directors
or the President.
5.9 Treasurer. Unless otherwise provided by the Board of Directors, the
---------
Treasurer shall be responsible for the custody of all funds and securities
belonging to the Corporation and for the receipt, deposit, or disbursement of
these funds and securities under the direction of the Board of Directors. The
Treasurer shall cause full and true accounts of all receipts and disbursements
to be maintained and shall make reports of these receipts and disbursements to
the Board of Directors and President upon request. The Treasurer or Assistant
Treasurer shall perform any other duties and have any other authority as from
time to time may be delegated by the Board of Directors or the President.
ARTICLE SIX
Distributions and Dividends
Unless the Articles of Incorporation provide otherwise, the Board of
Directors, from time to time in its discretion, may authorize or declare
distributions or share dividends in accordance with the Code.
ARTICLE SEVEN
Shares
7.1 Share Certificates. The interest of each shareholder in the
------------------
Corporation shall be a evidenced by a certificate or certificates representing
shares of the Corporation, which shall be in such form as the Board of Directors
from time to time may adopt in accordance with the Code. Share certificates
shall be in registered form and shall indicate the date of issue, the name of
the Corporation, that the Corporation is organized under the laws of the State
of Georgia, the name of the shareholder, and the number and class of shares and
designation of the series, if any, represented by the certificate. Each
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certificate shall be signed by the President or a Vice President (or in lieu
thereof, by the Chairman of the Board or Chief Executive Officer, if there be
one) and may be signed by the Secretary or an Assistant Secretary; provided,
---------
however, that where the certificate is signed (either manually or by facsimile)
- -------
by a transfer agent, or registered by a registrar, the signatures of those
officers may be facsimiles.
7.2 Rights of Corporation with Respect to Registered Owners. Prior to due
-------------------------------------------------------
presentation for transfer of registration of its shares, the Corporation may
treat the registered owner of the shares (or the beneficial owner of the shares
to the extent of any rights granted by a nominee certificate on file with the
Corporation pursuant to any procedure that may be established by the Corporation
in accordance with the Code) as the person exclusively entitled to vote the
shares, to receive any dividend or other distribution with respect to the
shares, and for all other purposes: and the Corporation shall not be bound to
recognize any equitable or other claim to or interest in the shares on the part
of any other person, whether or not it has express or other notice of such a
claim or interest, except as otherwise provided by law.
7.3 Transfers of Shares. Transfers of shares shall be made upon the books
-------------------
of the corporation kept by the Corporation or by the transfer agent designated
to transfer the shares, only upon direction of the person named in the
certificate or by an attorney lawfully constituted in writing. Before a new
certificate is issued, the old certificate shall be surrendered for cancellation
or, in the case of a certificate alleged to have been lost, stolen, or
destroyed, the provisions of Section 7.5 of these Bylaws shall have been
complied with.
7.4 Duty of Corporation to Register Transfer. Notwithstanding any of the
----------------------------------------
provisions of Section 7.3 of these Bylaws, the Corporation is under a duty to
register the transfer of its shares only if: (a) the share certificate is
endorsed by the appropriate person or persons: (b) reasonable assurance is given
that each required endorsement is genuine and effective; (c) the Corporation has
no duty to inquire into adverse claims or has discharged any such duty; (d) any
applicable law relating to the collection of taxes has been complied with; (e)
the transfer is in fact rightful or is to a bona fide purchaser, and (f) the
transfer is in compliance with applicable provisions of any transfer
restrictions of which the Corporation shall have notice.
7.5 Lost, Stolen, or Destroyed Certificates. Any person claiming a share
---------------------------------------
certificate to be lost, stolen, or destroyed shall make an affidavit or
affirmation of this claim in such a manner as the Corporation may require and
shall if the Corporation requires, give the Corporation a bond of indemnity in
form and amount, and with one or more sureties satisfactory to the Corporation,
as the Corporation may require, whereupon an appropriate new certificate may be
issued in lieu of the one alleged to have been lost, stolen or destroyed.
7.6 Fixing of Record Date. For the purpose of determining shareholders
---------------------
(a) entitled to notice of or to vote at any meeting of shareholders or, if
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<PAGE>
necessary, any adjournment thereof, (b) entitled to receive payment of any
distribution or dividend, or (c) for any other proper purpose. The Board of
Directors may fix in advance a date as the record date. The record date may not
be more than 70 days (and, in the case of a notice to shareholders of a
shareholders' meeting, not less than 10 days) prior to the date on which the
particular action, requiring the determination of shareholders, is to be taken.
A separate record date may be established for each Voting Group entitled to vote
separately on a matter at a meeting. A determination of shareholders of record
entitled to notice of or to vote at a meeting of shareholders shall apply to any
adjournment of the meeting, unless the Board of Directors shall fix a new record
date for the reconvened meeting, which it must do if the meeting is adjourned to
a date more than 120 days after the date fixed for the original meeting.
7.7 Record Date if None Fixed. If no record date is fixed as provided in
-------------------------
Section 7.6, then the record date for any determination of shareholders that may
be proper or required by law shall be, as appropriate, the date on which notice
of a shareholders' meeting is mailed, the date on which the Board of Directors
adopts a resolution declaring a dividend or authorizing a distribution or the
date on which any other action is taken that requires a determination of
shareholders.
ARTICLE EIGHT
Indemnification
8.1 Indemnification of Directors. The Corporation shall indemnify and
----------------------------
hold harmless any director of the Corporation (an "Indemnified Person") who was
or is a party, or is threatened to be made a party, to any threatened, pending
or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, whether formal or informal, including any
action or suit by or in the right of the Corporation (for purposes of this
Article Eight, collectively, a "Proceeding") because he or she is or was a
director, officer, employee, or agent of the Corporation, against any judgment,
settlement, penalty, fine, or reasonable expenses (including, but not limited
to, attorneys' fees and disbursements, court costs, and expert witness fees)
incurred with respect to the Proceeding (for purposes of this Article Eight, a
"Liability"), provided, however, that no indemnification shall be made for: (a)
any appropriation by a director, in violation of the director's duties, of any
business opportunity of the Corporation; (b) any acts or omissions of a director
that involve intentional misconduct or a knowing violation of law; (c) the types
of liability set forth in Code Section 14-2-832; or (d) any transaction from
which the director received an improper personal benefit.
8.2 Indemnification of Others. The Board of Directors shall have the
-------------------------
power to Cause the Corporation to provide to officers, employees, and agents of
the Corporation all or any part of the right to indemnification permitted for
such persons by appropriate provisions of the Code. Persons to be indemnified
may be identified by position or name, and the fight of indemnification may be
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<PAGE>
different for each of the persons identified. Each officer, employee, or agent
of the Corporation so identified shall be an "Indemnified Person" for purposes
of the provisions of this Article Eight.
8.3 Other Organizations. The Corporation shall provide to each director,
-------------------
and the Board of Directors shall have the power to cause the Corporation to
provide to any officer, employee, or agent, of the Corporation who is or was
serving at the Corporation's request as a director, officer, partner, trustee,
employee, or agent of another corporation, partnership, joint venture, trust,
employee benefit plan, or other enterprise all or any pan of the right to
indemnification and other rights of the type provided under Sections 8.1, 8.2,
8.4, and 8.10 of this Article Eight (subject to the conditions, limitations, and
obligations specified in those Sections) permitted for such persons by
appropriate provisions of the Code. Persons to be indemnified may be identified
by position or name, and the right of indemnification may be different for each
of the persons identified. Each person so identified shall be an "Indemnified
Person" for purposes of the provisions of this Article Eight.
8.4 Advances. Expenses (including, but not limited to, attorneys' fees
--------
and disbursements, court costs, and expert witness fees) incurred by an
Indemnified Person in defending any Proceeding of the kind described in Sections
8.1 or 8.3, as to an Indemnified Person who is a director of the Corporation, or
in Sections 8.2 or 8.3, as to other Indemnified Persons, if the Board of
Directors has specified that advancement of expenses be made available to any
such Indemnified Person, shall be paid by the Corporation in advance of the
final disposition of such Proceeding as set forth herein. The Corporation shall
promptly pay the amount of such expenses to the Indemnified Person, but in no
event later than 10 days following the Indemnified Person's delivery to the
Corporation of a written request for an advance pursuant to this Section 8.4,
together with a reasonable accounting of such-expenses; provided, however, that
-------- -------
the Indemnified Person shall furnish the Corporation a written affirmation of
his or her good faith belief that he or she has met the applicable standard of
conduct and a written undertaking and agreement to repay to the Corporation any
advances made pursuant to this Section 8.4 if it shall be determined that the
Indemnified Person is not entitled to be indemnified by the Corporation for such
amounts. The Corporation may make the advances contemplated by this Section 8.4
regardless of the Indemnified Person's financial ability to make repayment. Any
advances and undertakings to repay pursuant to this Section 8.4 may be unsecured
and interest-free.
8.5 Non-Exclusivity. Subject to any applicable limitation imposed by the
---------------
Code or the Articles of Incorporation, the indemnification and advancement of
expenses provided by or granted pursuant to this Article Eight shall not be
exclusive of any other rights to which a person seeking indemnification or
advancement of expenses may be entitled under any provision of the Articles of
Incorporation, or any Bylaw, resolution, or agreement specifically or in general
terms approved or ratified by the affirmative vote of holders of a majority of
the shares entitled to be voted thereon.
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<PAGE>
8.6 Insurance. The Corporation shall have the power to purchase and
---------
maintain insurance on behalf of any person who is or was a director, officer,
employee, or agent of the Corporation, or who, while serving in such a capacity,
is also or was also serving at the request of the Corporation as a director,
officer, trustee, partner, employee, or agent of any corporation, partnership,
joint venture, trust, employee benefit plan, or other enterprise, against any
Liability that may be asserted against or incurred by him or her in any such
capacity, or arising out of his or her status as such, whether or not the
Corporation would have the power to indemnify him or her against such liability
under the provisions of this- Article Eight.
8.7 Notice. If the Corporation indemnifies or advances expenses to a
------
director under any of Sections 14-2-851 through 14-2-854 of the Code in
connection with a Proceeding by or in the right of the Corporation, the
Corporation shall, to the extent required by Section 14-21621 or any other
applicable provision of the Code, report the indemnification or advance in
writing to the shareholders with or before the notice of the next shareholders'
meeting.
8.8 Security. The Corporation may designate certain of its assets as
--------
collateral, provide self-insurance, establish one or more indemnification
trusts, or otherwise secure or facilitate its ability to meet its obligations
under this Article Eight, or under any indemnification agreement or plan of
indemnification adopted and entered into in accordance with the provisions of
this Article Eight, as the Board of Directors deems appropriate.
8.9 Amendment. Any amendment to this Article Eight that limits or
---------
otherwise adversely affects the right of indemnification, advancement of
expenses, or other rights of any Indemnified Person hereunder shall, as to such
Indemnified Person, apply only to Proceedings based on actions, events, or
omissions (collectively, "Post Amendment Events") occurring after such amendment
and after delivery of notice of such amendment to the Indemnified Person so
affected. Any Indemnified Person shall, as to any Proceeding based on actions,
events, or omissions occurring prior to the date of receipt of such notice, be
entitled to the right of indemnification, advancement of expenses, and other
rights under this Article Eight to the same extent as if such provisions had
continued as part of the Bylaws of the Corporation without such amendment. This
Section 8.9 cannot be altered, amended, or repealed in a manner effective as to
any Indemnified Person (except as to Post Amendment Events) without the prior
written consent of such Indemnified Person.
8.10 Agreements. The provisions of this Article Eight shall be deemed to
----------
constitute an agreement between the Corporation and each Indemnified Person
hereunder. In addition to the rights provided in this Article Eight, the
Corporation shall have the power, upon authorization by the Board of Directors,
to enter into an agreement or agreements providing to any Indemnified Person
indemnification rights substantially similar to those provided in this Article
Eight.
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<PAGE>
8.11 Continuing Benefits. The rights of indemnification and advancement
-------------------
of expenses permitted or authorized by this Article Eight shall, unless
otherwise provided when such tights arc granted or conferred, continue as to a
person who has ceased to be a director, officer, employee, or agent and shall
inure to the benefit of the heirs, executors, and administrators of such person.
8.12 Successors. For purposes of this Article Eight, the term
----------
"Corporation" shall include any corporation, joint venture, trust, partnership,
or unincorporated business association that is the successor to all or
substantially all of the business or assets of this Corporation, as a result of
merger, consolidation, sale, liquidation, or otherwise, and any such successor
shall be liable to the persons indemnified under this Article Eight on the same
terms and conditions and to the same extent as this Corporation.
8.13 Severability. Each of the Sections of this Article Eight, and each
------------
of the clauses set forth herein, shall be deemed separate and independent, and
should any pan of any such Section or clause be declared invalid or
unenforceable by any court of competent jurisdiction, such invalidity or
unenforceability shall in no way render invalid or unenforceable any other part
thereof or any separate Section or clause of this Article Eight that is not
declared invalid or unenforceable.
8.14 Additional Indemnification. In addition to the specific
--------------------------
indemnification rights set forth herein, the Corporation shall indemnify each of
its directors and such of its officers as have been designated by the Board of
Directors to the full extent permitted by action of the Board of Directors
without shareholder approval under the Code or other laws of the State of
Georgia as in effect from time to time.
ARTICLE NINE
Miscellaneous
9.1 Inspection of Books and Records. The Board of Directors shall have
-------------------------------
the power to determine which accounts, books, and records of the Corporation
shall be available for shareholders to inspect or copy, except for those books
and records required by the Code to be made available upon compliance by a
shareholder with applicable requirements, and shall have the power to fix
reasonable rules and regulations (including confidentiality restrictions and
procedures) not in conflict with applicable law for the inspection and copying
of accounts, books, and records that by law or by determination of the Board of
Directors are made available. Unless required by the Code or otherwise provided
by the Board of Directors, a shareholder of the Corporation holding less than
two percent of the total shares of the Corporation then outstanding shall have
no right to inspect the books and records of the Corporation.
9.2 Fiscal Year. The Board of Directors is authorized to fix the fiscal
-----------
year of the Corporation and to change the fiscal year from time to time as it
deems appropriate.
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<PAGE>
9.3 Corporate Seal. The corporate seal will be in such form as the Board
--------------
of Directors may from time to time determine. The Board of Directors may
authorize the use of one or more facsimile forms of the corporate seal. The
corporate seal need not be used unless its use is required by law, by these
Bylaws, or by the Articles of Incorporation.
9.4 Annual Statements. Not later than four months after the close of each
-----------------
fiscal year, and in any case prior to the next annual meeting of shareholders,
the Corporation shall prepare (a) a balance sheet showing in reasonable detail
the financial condition of the Corporation as of the close of its fiscal year,
and (b) a profit and loss statement showing the results of its operations during
its fiscal year. Upon receipt of written request, the Corporation promptly
shall mail to any shareholder of record a copy of the most recent such balance
sheet and profit and loss statement, in such form and with such information as
the Code may require.
9.5 Notice. (a) Whenever these Bylaws require notice to be given to any
------
shareholder, the notice may be given by mail, in person, by courier delivery, or
by overnight delivery service. Whenever these Bylaws require notice to be given
to any director, the notice may be given by mail, in person, by courier
delivery, by overnight delivery service, by telephone, by voice mail, by
facsimile, or by e-mail or similar electronic means. Whenever notice is given
to a shareholder or director by mail, the notice shall be sent by depositing the
notice in a post off-ice or letter box in a postage-prepaid, scaled envelope
addressed to the shareholder or director at his or her address as it appears on
the records of the Corporation. Any such written notice given by mail shall be
effective, at the time the same is deposited in the United States mail.
Whenever notice is given to a shareholder or director by any means other than
mail, the notice shall be deemed given when delivered to the physical address,
facsimile transmission number, e-mail address, or voice mailbox address as it
appears on the records of the Corporation, or in the case of notice by
telephone, to the telephone number appearing on the records of the Corporation.
(b) In calculating time periods for notice, when a period of time measured in
days, weeks, months, years or other measurement of time is prescribed for the
exercise of any privilege or the discharge of any duty, the first day shall not
be counted but the last day shall be counted.
9.6 Business Combination. The Corporation hereby elects to be governed by
--------------------
the provisions of Section 14-2-1132 of the Code, pertaining to business
combinations with interested shareholders. This Section 9.6 is adopted by the
Corporation as of December 18, 1995, pursuant to an amendment to the Bylaws in
accordance with Section 14-2-1133 of the Code.
ARTICLE TEN
Amendments
Except as otherwise provided under the Code, the Board of Directors shall
have the power to alter, amend, or repeal these Bylaws or adopt new Bylaws. Any
Bylaws adopted by the Board of Directors may be altered, amended, or repealed,
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<PAGE>
and new Bylaws adopted, by the shareholders. The shareholders may prescribe in
adopting any Bylaw or Bylaws that the Bylaw or Bylaws so adopted shall not be
altered, amended, or repealed by the Board of Directors. Except as otherwise
provided in the Articles of Incorporation, shareholders may alter, amend or
repeal any Bylaws or adopt new Bylaws only upon the affirmative vote of the
holders of 75 % of the shares entitled to vote on the matter.
* * * * * *
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<PAGE>
AMENDMENT NO. 1 TO
AMENDED AND RESTATED BYLAWS
OF PREMIERE TECHNOLOGIES, INC.
(EFFECTIVE AUGUST 1, 1998)
A. The first sentence of Section 2.3 of the Bylaws is hereby deleted and
replaced with the following:
2.3 Special Meetings. Special meetings of shareholders of one or more
----------------
classes or series of the Corporation's shares may be called at any time by
the Board of Directors, the Chairman of the Board, or the Chief Executive
Officer, and shall be called by the Corporation upon the written request
(in compliance with applicable requirements of the Code) of the holders of
shares representing 25% or more of the votes entitled to be cast on each
issue proposed to be considered at the special meeting; provided, however,
that at any time the Corporation has more than 100 shareholders of record,
such written request must be made by the holders of shares representing 75%
or more of the votes entitled to be cast on each issue proposed to be
considered at the special meeting.
B. The first two sentences of Section 2.9 of the Bylaws are hereby deleted
and replaced with the following:
2.9 Presiding Officer. Except as otherwise provided in this
-----------------
Section 2.9, the Chairman of the Board, and in his or her absence or
disability the Chief Executive Officer, shall preside at every
shareholders' meeting (and any adjournment thereof) as its chairman, if
either of them is present and willing to serve. If neither the Chairman of
the Board nor the Chief Executive Officer is present and willing to serve
as chairman of the meeting, and if the Chairman of the Board has not
designated another person who is present and willing to serve, then a
majority of the Corporation's directors present at the meeting shall be
entitled to designate a person to serve as chairman.
C. The first sentence of Section 2.13 of the Bylaws is hereby deleted and
replaced with the following:
<PAGE>
2.13 Matters Considered at Annual Meetings. Notwithstanding anything
-------------------------------------
to the contrary in these Bylaws, the only business that may be conducted at
an annual meeting of shareholders shall be business brought before the
meeting (a) by or at the direction of the Board of Directors prior to the
meeting, (b) by or at the direction of the Chairman of the Board or the
Chief Executive Officer, or (c) by a shareholder of the Corporation who is
entitled to vote with respect to the business and who complies with the
notice procedures set forth in this Section 2.13.
D. Section 4.2 of the Bylaws is hereby deleted in its entirety and
replaced with the following:
4.2 Special Meetings. Special meetings of the Board of Directors may
----------------
be called by or at the request of the Chairman of the Board, the Chief
Executive Officer or a majority of the directors in office at that time.
E. The first sentence of Section 5.1 of the Bylaws is hereby deleted and
replaced with the following:
5.1 Offices. The officers of the Corporation shall consist of a Chief
-------
Executive Officer, a President who shall be the Chief Operating Officer,
and a Secretary, each of whom shall be elected or appointed by the Board of
Directors.
F. Section 5.6 of the Bylaws is hereby deleted in its entirety and
replaced with the following:
5.6 Chief Executive Officer. The Chief Executive Officer shall be
-----------------------
charged with the general and active management of the business of the
Corporation, shall see that all orders and resolutions of the Board of
Directors are carried into effect, shall have the authority to select and
appoint employees and agents of the Corporation, and shall, in the absence
or disability of the Chairman of the Board, perform the duties and exercise
the powers of the Chairman of the Board. The Chief Executive Officer shall
perform any other duties and have any other authority as may be delegated
from time to time by the Board of Directors, and shall be subject to the
limitations fixed from time to time by the Board of Directors.
G. Sections 5.7, 5.8, and 5.9 are hereby renumbered 5.8, 5.9, 5.10,
respectively.
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<PAGE>
H. A new Section 5.7 is hereby added to the Bylaws as follows:
5.7 President and Chief Operating Officer. The President and Chief
-------------------------------------
Operating Officer shall, subject to the authority of the Chairman of the
Board and the Chief Executive Officer, have day-to-day general management
responsibility of the business of the Corporation. The President and Chief
Operating Officer shall also have such powers and perform such duties and
have any authority as may be delegated from time to time by the Board of
Directors, the Chairman of the Board or the Chief Executive Officer, and
shall be subject to the limitations fixed from time to time by the Board of
Directors, the Chairman of the Board or the Chief Operating Officer. In
the absence or disability of the Chief Executive Officer, the President and
Chief Executive Officer shall perform the duties and exercise the powers of
the Chief Executive Officer and, when specifically authorized by the Board
of Directors, the President and Chief Operating Officer shall have the
powers and perform the duties of the Chairman of the Board.
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<PAGE>
EXHIBIT 10.1
PREMIERE TECHNOLOGIES, INC.
---------------------------
EXECUTIVE EMPLOYMENT AND INCENTIVE OPTION AGREEMENT
---------------------------------------------------
THIS AGREEMENT is made and entered into by and between Premiere Technologies,
Inc. (the "Company"), a Georgia corporation, and Jeffrey A. Allred (the
"Executive"), effective as of July 24, 1997.
BACKGROUND STATEMENT
--------------------
The Company and its subsidiaries are in the business of designing, developing,
marketing and providing enhanced communications services. During the course of
its operations the Company and its subsidiaries have developed, and expect to
develop, trade secrets and methods of conducting business which are worthy of
protection. The Executive has substantial knowledge of the Company's business
through his representation of the Company as its outside general counsel. The
Company considers it to be in its best interest to have the benefit of the
Executive's services as provided in this Agreement, and the Executive is willing
to render such services to the Company in accordance with the provisions of this
Agreement.
THEREFORE, in consideration of and reliance upon the foregoing background
statement and the representations and warranties contained in this Agreement,
the Company and the Executive agree to the following provisions:
TERMS
-----
Section 1. Duties.
------
The Company hereby agrees to employ the Executive as its Executive Vice
President of Strategic Development. The Executive will have the powers, duties
and responsibilities from time to time assigned to him by the Company's board of
directors (the "Board") or its Chief Executive Officer, and the Executive will
report directly to the Chief Executive Officer of the Company. During the term
of his employment under this Agreement, the Executive will devote substantially
all of his business time to faithfully and industriously perform his duties and
promote the business and best interests of the Company.
Section 2. Compensation.
------------
Section 2.1. Base Salary. During the term of the Executive's employment under
-----------
this Agreement, the Company will pay the Executive a base salary at the annual
rate of $200,000, payable in accordance with the Company's standard payroll
practices. At the beginning of each year after 1998 during the term of this
Agreement, the Executive will be entitled to an
<PAGE>
increase in his base salary equal to 5% of the previous year's base salary.
Section 2.2. Initial Bonus. In recognition of the Executive's involvement in
-------------
the Company's merger and acquisition activities during 1997, the Company shall
pay the Executive a bonus of $50,000 on or before October 31, 1997.
Section 2.3. Bonus Compensation. The Executive will also be entitled to any
------------------
bonus compensation provided for by resolution of the Board or its Compensation
Committee.
Section 2.4. Stock Options.
-------------
Section 2.4.1. Issuance of Stock Options. The Company hereby grants to
-------------------------
the Executive nonqualified stock options ("Options") having terms set forth
in this Section 2.4, in accordance with the following vesting schedule:
<TABLE>
<CAPTION>
Vesting Number of
Date Options
--------------- ---------
<S> <C>
August 11, 1997 150,000
August 11, 1999 150,000
August 11, 2000 150,000
-------
450,000
=======
</TABLE>
Section 2.4.2. Accelerated Vesting. Notwithstanding anything else
-------------------
contained in this Agreement, the Executive will be vested immediately in
all of the Options described in this Section 2.4 upon a Change in Control
of the Company. For the purposes of this Agreement, a "Change in Control"
shall mean the occurrence of any of the following events:
(a) An acquisition (other than directly from the Company) of any
voting securities of the Company ("Voting Securities") by any "Person"
(as the term person is used for purposes of Section 13(d) or 14(d) of
the Securities Exchange Act of 1934 (the "1934 Act")) immediately
after which such Person has "Beneficial Ownership" (within the meaning
of Rule 13d-3 promulgated under the 1934 Act) of 25% or more of the
combined voting power of the Company's then outstanding Voting
Securities; provided, however, that in determining whether a Change in
Control has occurred, Voting Securities that are acquired in an
acquisition by (i) an employee benefit plan (or a trust forming a part
thereof) maintained by (A) the Company or (B) any corporation or other
person of which a majority of its voting power or its equity
securities or equity interests are owned directly or indirectly by the
Company (a "Subsidiary"), or (ii) the Company or
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<PAGE>
any Subsidiary, or (iii) any Person in connection with a "Non-Control
Transaction" (as hereinafter defined), shall not constitute an
acquisition for purposes for this clause (a); or
(b) The individuals who, as of the date of this Agreement, are members
of the Board (the "Incumbent Board") cease for any reason to
constitute at least 60% of the Board; provided, however, that if the
election, or nomination for election by the Company's shareholders, of
any new director was approved by a vote of at least 80% of the
Incumbent Board, such new director shall for purposes of this
Agreement, be considered as a member of the Incumbent Board; provided,
further, however, that no individual shall be considered a member of
the Incumbent Board if such individual initially assumed office as a
result of either an actual or threatened "Election Contest" (as
described in Rule 14a-11 promulgated under the 1934 Act) or other
actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board (a "Proxy Contest"), including
by reason of any agreement intended to avoid or settle any Election
Contest or Proxy Contest; or
(c) Approval by the shareholders of the Company of:
(i) a merger, consolidation or reorganization involving the
Company, unless:
(A) the shareholders of the Company, immediately before such
merger, consolidation or reorganization, own, directly or
indirectly, immediately following such a merger,
consolidation or reorganization, at least two-thirds of the
combined voting power of the outstanding voting securities
of the corporation resulting from such merger, consolidation
or reorganization (the "Surviving Corporation") in
substantially the same proportion as their ownership of the
Voting Securities immediately before such merger,
consolidation or reorganization, and
(B) the individuals who were members of the Incumbent Board
immediately prior to the execution of the Agreement
providing for such merger, consolidation or reorganization
constitute at least 80% of the members of the board of
directors of the Surviving Corporation. (A transaction
described in clauses (A) and (B) above shall hereinafter
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<PAGE>
be referred to as a "Non-Control Transaction.")
(ii) A complete liquidation or dissolution of the Company;
or
(iii) An agreement for the sale or other disposition of all
or substantially all of the assets of the Company to any
Person (other than a transfer to a Subsidiary).
Notwithstanding anything else contained in this Agreement or elsewhere, if the
Executive voluntarily terminates his employment with the Company before the
earlier of August 11, 1998 or a Change in Control of the Company then any vested
but unexercised Options will be canceled as of the date of termination. If the
Company terminates the Executive's employment after August 11, 1998, or if the
Executive voluntarily terminates his employment with the Company after that
date, then all Options that have not vested as of the date of termination will
be canceled as of such date. Notwithstanding anything to the contrary in this
Agreement, any termination of the Executive's employment by the Company prior
to, but in anticipation of, a Change in Control shall be deemed to be a
termination following a Change in Control and, in such event, all unvested
Options shall immediately vest upon the date of termination and shall not be
cancelled.
Section 2.4.3. Disability. If during the term of the Executive's
----------
employment under this Agreement, the Executive, in the opinion of a
majority of the Board (excluding the Executive if he is serving on the
Board), as confirmed by competent medical evidence, becomes physically or
mentally unable to perform his duties for a continuous period ("Disabled"),
then the dates of vesting set forth in the above schedule will be changed
to reflect a deferral equal to the period of the Disability. The Executive
hereby agrees to submit himself for appropriate medical examination by a
physician selected by the Company for the purposes of this Section 2.4.3.
Section 2.4.4. Basic Option Terms. Each of the Options will entitle
------------------
the Executive to purchase one fully-paid, non-assessable share of Premiere
Technologies, Inc. voting common stock at a price of $23.375, as adjusted
(the "Exercise Price"), and will expire on August 11, 2005. The vested
Options will be exercisable by the Executive delivering to the Company a
written notice of exercise signed by the Executive, in substantially the
form attached hereto as EXHIBIT A, together with (a) a check payable to the
Company in the amount of the total Exercise Price for the shares being
purchased, or (b) a promissory note in
-4-
<PAGE>
substantially the form attached hereto as EXHIBIT B in the principal amount
of the total Exercise Price, or (c) a check and a promissory note in the
aggregate amount of the total Exercise Price. Such promissory note shall be
secured by a pledge of the shares being purchased with such note pursuant
to a Stock Pledge Agreement in substantially the form attached hereto as
EXHIBIT C. In the event any shares are purchased with a promissory note,
the Executive shall execute an Irrevocable Proxy in substantially the form
attached hereto as EXHIBIT D. In addition, in lieu of cash, all or any
portion of the Exercise Price may be paid by the Executive tendering to the
Company shares of the Company's common stock duly endorsed for transfer and
owned by the Executive, or by authorization to the Company to withhold
shares of the Company's common stock otherwise issuable upon exercise of
the Option, in each case to be credited against the Exercise Price at the
fair market value of such shares on the date of exercise (however, no
fractional shares may be so transferred, and the Company shall not be
obligated to make any cash payments in consideration of any excess of the
aggregate fair market value of shares transferred over the aggregate
Exercise Price). In addition to and at the time of payment of the Exercise
Price, the Company may withhold, or require the Executive to pay to the
Company in cash, the amount of any federal, state and local income,
employment or other withholding taxes which the Company determines are
required to be withheld under federal, state or local law in connection
with the exercise of an Option; provided, however, that all or any portion
of such tax obligations may, upon the election of the Executive, be paid by
tendering to the Company whole shares of the Company's common stock duly
endorsed for transfer and owned by the Executive, or by authorization to
the Company to withhold shares of the Company's common stock otherwise
issuable upon exercise of the Option, in either case in that number of
shares of the Company's common stock having a fair market value on the date
of exercise equal to the amount of such taxes thereby being paid. Each
Option must be exercised in full. As soon as practicable after exercise of
an Option by the Executive, the Company will deliver or cause to be
delivered to the Executive certificates or a certificate representing the
number of fully paid and non-assessable shares of voting common stock of
the Company purchased. The Company will not issue fractional shares.
Fractional calculations will be rounded up to the nearest number of whole
shares. The Executive will be deemed a shareholder of record as of the date
of exercise. The Company will at all times reserve and keep available
sufficient authorized voting common stock for the exercise or conversion of
all warrants, options and other securities it issues.
-5-
<PAGE>
Section 2.4.5. Registered Owner. Ownership of the Options will be
----------------
registered on the books of the Company and the Company will be entitled to
treat the registered owner as the absolute owner of the Options for all
purposes. The registered owner will not be entitled to any of the rights of
a shareholder of the Company by virtue of owning Options. No transfer of
the Options will be valid unless and until the Company has consented in
writing to such transfer and the Company has received an instrument of
transfer, in a form satisfactory to the Company and executed by the
registered owner or an authorized agent, and the transfer is recorded by
the Company. Transfers incident to the death of the Executive shall not
require the Company's approval and the assignee of such Options shall have
all rights as the Executive with respect to such Options.
Section 2.4.6. Adjustments.
-----------
(a) Stock Dividends and Stock Splits. If after the date of this
--------------------------------
Agreement the number of outstanding shares of the Company's common
stock is increased by a stock dividend payable in shares of the
Company's common stock or by a split-up of shares of the common stock,
then, on the day following the date fixed for determination of holders
of common stock entitled to receive the stock dividend or split-up,
the number of shares issuable upon exercise of the Options will be
increased in proportion to the increase in the number of outstanding
shares and the Exercise Price will be correspondingly decreased.
(b) Combination or Reclassification. If after the date of this
-------------------------------
Agreement the number of outstanding shares of the Company's common
stock is decreased by a combination or reclassification of shares of
common stock, then, on the day after the effective date of the
combination or reclassification, the number of shares issuable upon
exercise of the Options will be decreased in proportion to the
decrease in the number of outstanding shares and the Exercise Price
will be correspondingly increased.
(c) Reorganization. If after the date of this Agreement the
--------------
Company effects any capital reorganization or reclassification of its
common stock, or a consolidation or merger with another corporation,
or the sale or other transfer of substantially all of its assets to
another person or entity, then, as a condition to such transaction,
the Company will make fair and lawful provision whereby the registered
owner of the Options will have the right to purchase at the Exercise
Price, in lieu of voting common stock of the
-6-
<PAGE>
Company, such shares of stock, securities, or assets as may be issued
or payable with respect to or in exchange for a number of outstanding
shares of the Company's voting common stock equal to the number of
shares of the Company voting common stock which the registered owner
would be entitled to purchase at the applicable Exercise Price as of
the effective date of such transaction. The Company will not effect
any such transaction unless the resulting successor or purchasing
entity (if not the Company) assumes by written instrument the
obligation to deliver the applicable shares of stock, securities, or
assets in accordance with the foregoing provision.
(d) Notice of Adjustments. Within ten (10) days after the Board
---------------------
approves of an event which is likely to cause an adjustment to the
Exercise Price, the Company will deliver written notice to the
registered owner of the Options setting forth in reasonable detail the
facts of the event and the expected calculation of the adjustment.
Section 2.5. Employee Benefits. During the term of his employment under this
-----------------
Agreement, the Executive will be entitled to participate in all employee benefit
programs, including any pension, profit-sharing, or deferred compensation plans,
any medical, health, dental, disability and other insurance programs and any
fringe benefits, such as club dues, professional dues, the cost of an annual
medical examination and the cost of professional fees associated with tax
planning and the preparation of tax returns, on a basis at least equal to the
other senior executives of the Company. In addition to such benefits, the
Company will purchase and maintain a $1,000,000 term life insurance policy on
the life of and in the name of the Executive, and such other insurance as the
Board may determine. The Executive shall be the owner of such insurance policy
and have all rights pursuant thereto, including, without limitation, the right
to transfer ownership and designate beneficiaries. Notwithstanding anything else
contained in this Agreement, after termination or expiration of his employment
under this Agreement, the Executive will be entitled to participate for an
additional eighteen (18) months in any medical, health, dental, disability or
similar programs on the same basis as during his employment (including payment
by the Company of the costs and expenses associated with such programs on the
same terms as during the time the Executive was employed with the Company) and
in meeting its obligations under this provision the Company will take all
actions which may be necessary or appropriate to comply with criteria set forth
by the Company's insurance carriers and other program providers (including the
continued employment of the Executive in some nominal capacity, if necessary).
-7-
<PAGE>
Section 2.6. Reimbursement of Expenditures. The Company will reimburse the
-----------------------------
Executive for all reasonable expenditures incurred by the Executive in the
course of his employment or in promoting the interests of the Company, including
expenditures for (i) transportation, lodging and meals during overnight business
trips, (ii) business meals and entertainment, (iii) supplies and business
equipment, (iv) long-distance telephone calls and (v) membership dues of
business associations. Notwithstanding the foregoing, the Company will have no
obligation to pay reimbursements under this Section 2.6 unless the Executive
submits timely reports of his expenditures to the Company in the manner
prescribed by the Board and the rules and regulations underlying Section 162 of
the Internal Revenue Code (the "Code").
Section 2.7. Transition Loan. The Company will make a $200,000 loan to the
---------------
Executive, which will be paid to the Executive at his request, and which will be
evidenced by a Promissory Note in substantially the form attached hereto as
EXHIBIT E (the "Note"). The Company shall forgive 50% of the outstanding amount
of the Note, including accrued interest thereon, on the first anniversary of the
date of this Agreement if the Executive is employed by the Company on that date,
and shall forgive the remaining amount of the Note, including accrued interest
thereon, on the second anniversary of the date of this Agreement if the
Executive is employed by the Company on that date. The foregoing
notwithstanding, if the Company terminates the Executive's employment without
"cause" (as defined in Section 5.1 hereof), then in addition to any other rights
or remedies the Executive may have, the entire amount of the Note then
outstanding, including accrued interest thereon, will be forgiven by the
Company. Likewise, the Loan will be forgiven in its entirety by the Company if
there is a Change in Control of the Company, as that term is defined in Section
2.4.2 hereof.
Section 2.8. Severance Pay. If the Company terminates the Executive's
-------------
employment under this Agreement without "cause" (as defined in Section 5.1
hereof), then in addition to any other rights or remedies the Executive may
have, the Executive will be entitled to receive severance pay equal to two and
one-half (2 1/2) times the Executive's base salary in effect at the date of
termination, payable in accordance with the Company's standard payroll practices
over the twelve (12) month period following the date of termination.
Section 2.9. Disability of Executive. If during the term of the Executive's
-----------------------
employment under this Agreement the Executive becomes Disabled, then for the
first year of his Disability the Executive will receive his full base salary and
for the next six months of his Disability he will receive one-half of his base
salary. (The Company may satisfy this obligation in whole or in part by
payments to the Executive provided through disability
-8-
<PAGE>
insurance.) The Company will not, however, be obligated to pay any salary to the
Executive under this Section beyond expiration of his term of employment
hereunder. Nor will the Company be obligated to pay bonus compensation or an
automobile allowance with respect to the period of Disability. Bonus
compensation in this circumstance will be a pro rata portion of the bonus the
Executive would have earned absent the period of Disability based upon the
number of days during the fiscal year the Executive was not Disabled. When the
Executive is again able to perform his duties he will be entitled to resume his
full position and salary. If the Executive's Disability endures for a continuous
period of 18 months, then the Company may terminate the Executive's employment
under this Agreement after delivery of ten days written notice. The Executive
hereby agrees to submit himself for appropriate medical examination by a
physician selected by the Company for the purposes of this Section 2.9.
Section 2.10. Death of Executive. In addition to any other rights and
------------------
benefits inuring to the estate of the Executive upon his death under this
Agreement, any benefit plan maintained by the Company or otherwise, within
forty-five days after the Executive's death during the term of this Agreement,
the Company will pay to the Executive's estate, or his heirs, the amount of any
accrued and unpaid base salary (determined as of the date of death) and accrued
and unpaid bonus compensation determined as if the Company's fiscal year ended
at the date of death. In addition, the Company will pay to the Executive's
spouse (or if she is not alive, to his estate or heirs) a death benefit of
$5,000.
Section 2.11. Automobile Allowance. During the term of his employment under
--------------------
this Agreement, the Company will pay the Executive a monthly automobile
allowance of $1,000.
Section 2.12. Vacation. The Executive will be entitled to three weeks paid
--------
vacation annually. Unused vacation time will accumulate and carryover to
subsequent years. Any unused vacation at the date of termination of this
Agreement (for any reason) will be paid to the Executive.
Section 3. Certain Additional Payments by the Company.
------------------------------------------
Section 3.1. Amount of Additional Payment. Anything in this Agreement to
----------------------------
the contrary notwithstanding and except as set forth below, in the event it
shall be determined that any payment or distribution by the Company to or for
the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
3) (a "Payment") would be subject to the excise tax imposed by Section 4999 of
the Code or any interest or penalties are incurred by the Executive with
-9-
<PAGE>
respect to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
Section 3.2. Determinations. Subject to the provisions of Section 3.3, all
--------------
determinations required to be made under this Section 3, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by Arthur Andersen LLP or such other certified public accounting firm as may be
designated by the Executive (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within fifteen
(15) business days of the receipt of notice from the Executive that there has
been a Payment, or such earlier time as is requested by the Company. In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the change in control, the Executive shall
appoint another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 3, shall be paid by the Company to the Executive within five (5)
days of the receipt of the Accounting Firm's determination. Any determination by
the Accounting Firm shall be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 3.3 and the Executive thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.
Section 3.3. Contest of Claims. The Executive shall notify the Company in
-----------------
writing of any claim by the Internal Revenue Service that, if successful, would
require the payment by the Company of the Gross-Up Payment. Such notification
shall be given as soon as practicable but no later than ten (10) business
-10-
<PAGE>
days after the Executive is informed in writing of such claim and shall apprise
the Company of the nature of such claim and the date on which such claim is
requested to be paid. The Executive shall not pay such claim prior to the
expiration of the thirty (30)day period following the date on which it gives
such notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company notifies the
Executive in writing prior to the expiration of such period that it desires to
contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation of the foregoing provisions of
this Section 3.3, the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to
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<PAGE>
such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
Section 3.4. Refunds. If, after the receipt by the Executive of an amount
-------
advanced by the Company pursuant to Section 3.3, the Executive becomes entitled
to receive any refund with respect to such claim, the Executive shall (subject
to the Company's complying with the requirements of Section 3.3) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 3.3, a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of thirty (30) days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment required to
be paid.
Section 4. Term of Employment.
------------------
The Executive's initial term of employment under this Agreement will begin on
August 11, 1997 and will expire on August 11, 2002. The initial term of
employment will automatically renew for an additional one-year period upon the
foregoing expiration, and thereafter upon the expiration of any renewal term
provided by this Section 4, unless the Company or the Executive provides written
notice to the other party at least thirty (30) days prior to expiration that
such party does not want this Agreement to renew.
Section 5. Termination of Employment.
-------------------------
Section 5.1. Termination by the Company. The Company may terminate the
--------------------------
Executive's employment under this Agreement only for "cause" amounting to gross,
continuing and willful malconduct, misconduct or non-performance, having a
substantial, adverse effect upon the Company, or for Disability, as described in
Section 2.9 of this Agreement. No act or failure to act by the Executive will be
considered "willful" unless done or not done in bad faith and without reasonable
belief that the Executive's action or omission was in the best interests of the
Company. Termination for cause will not be effective unless the Company
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<PAGE>
delivers to the Executive thirty (30) days advance written notice setting forth
in reasonable detail the allegations of cause, and the Executive does not
correct the acts or omissions documented in such notice within such 30-day
period. For purposes of this Agreement, any significant change to the
Executive's title, his powers, duties or responsibilities, or his employee
benefits or working conditions, or any relocation of his workplace outside of
Atlanta, Georgia, will, at the option of the Executive, constitute a termination
of his employment by the Company without cause. Notwithstanding anything else
contained in this Agreement, if, for any reason whatsoever, the Company
terminates the Executive's employment, then the Company will reimburse the
Executive for all reasonable costs and expenses incurred by him (including
attorneys' fees, court costs and the costs of paralegal and other legal or
investigative support personnel) connected with investigating, preparing,
defending or appealing any litigation or similar proceeding arising out of this
Agreement, whether commenced or threatened. Such reimbursements will be paid in
advance of the final disposition of such litigation within 10 days after the
Executive submits requests for reimbursement along with supporting invoices.
Section 5.2. Termination by the Executive. The Executive may terminate his
----------------------------
employment under this Agreement thirty (30)days after giving written notice to
the Company. If the Executive terminates his employment under this Agreement,
then he will be entitled to pro rata portions of his base salary and bonus
compensation with respect to the fiscal year in which the termination occurs
(based on the number of days the Executive is employed by the Company during
such fiscal year) as well as any accrued but unpaid compensation.
Section 6. Restrictive Covenants.
---------------------
Section 6.1. Prohibited Activities. During the term of his employment under
---------------------
this Agreement and for a period of one (1) year thereafter, the Executive will
not, as a shareholder, owner, operator, employee, partner, independent
contractor, consultant, lender, financier, officer, director or by any other
means whatsoever participate in any of the following activities:
(i) Engage in or be associated with any business that directly or
indirectly competes with the Company with respect to enhanced
communications services;
(ii) Induce any person who is an employee, officer, agent, affiliate,
supplier, client or customer of the Company to terminate such relationship
or refuse to do business with the Company; or
(iii) Solicit, direct, take away, serve, interfere with, or endeavor
to entice away from the Company any
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<PAGE>
person, company, firm, institution, or other entity that has purchased
products or services from the Company.
Section 6.2. Trade Secrets. The Executive acknowledges and recognizes that
-------------
during his employment with the Company (including periods prior to the date of
this Agreement when he represented the Company as its outside general counsel)
he may acquire (or may have acquired) secret or confidential information,
knowledge, or data with respect to the business or products of the Company which
may provide advantage to the Company over others not having such information.
During his employment hereunder and for a period of one (1) year thereafter, the
Executive will not communicate, disclose or divulge any such secret or
confidential information to the detriment of the Company. Following the
termination of the Executive's employment hereunder, the provisions of this
Section 6.2 shall not apply to any information that (a) was known to the
Executive prior to the Company retaining his law firm to represent the Company
or (b) becomes generally available to the telecommunications industry other than
as a result of disclosure by the Executive.
Section 6.3. Property of the Company. The Executive acknowledges that all
-----------------------
confidential information relating to computer software or hardware currently
utilized by the Company or incorporated into its products and all such
information the Company currently plans to utilize or incorporate into its
products is the exclusive property of the Company. Furthermore, the Executive
agrees that all discoveries, inventions, creations and designs of the Executive
during the course of his employment pursuant to this Agreement will be the
exclusive property of the Company.
Section 6.4. Remedies. In the event the Executive violates or threatens to
--------
violate the provisions of this Section 6, damages at law will be an insufficient
remedy and the Company will be entitled to equitable relief in addition to any
other remedies or rights available to the Company and no bond or security will
be required in connection with such equitable relief.
Section 6.5. Counterclaims. The existence of any claim or cause of action
-------------
the Executive may have against the Company will not at any time constitute a
defense to the enforcement by the Company of the restrictions or rights provided
by this Section 6.
Section 7. Service as Director.
-------------------
The Executive agrees to be nominated to serve as a director of the Company,
and subject to his election by the shareholders, to serve as a director.
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<PAGE>
Section 8. Indemnification.
---------------
Section 8.1. Non-Derivative Actions. The Company will indemnify the
----------------------
Executive if he becomes a party to any proceeding (other than an action by, or
in the right of, the Company), by reason of the fact that he is or was a
director, officer, employee, or agent of the Company or is or was serving at the
request of the Company as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise against
liability incurred in connection with such proceeding, including any appeal,
provided he acted in good faith and in a manner he reasonably believed to be in,
or not opposed to, the best interests of the Company and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any proceeding by judgment, order, settlement,
or conviction or upon a plea of nolo contendere or its equivalent will not, of
itself, create a presumption that he did not act in good faith and in a manner
which he reasonably believed to be in, and not opposed to, the best interests of
the Company or, with respect to any criminal proceeding, had reasonable cause to
believe that his conduct was unlawful.
Section 8.2. Derivative Actions. The Company will indemnify the Executive if
------------------
he becomes a party to any proceeding by or in the right of the Company to
procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee, or agent of the Company or is or was serving at the
request of the Company as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise, against
expenses and amounts paid in settlement not exceeding, in the judgment of the
Board, the estimated expense of litigating the proceeding to conclusion,
actually and reasonably incurred in connection with the defense or settlement of
such proceeding, including any appeal; provided that he acted in good faith and
in a manner he reasonably believed to be in, or not opposed to, the best
interests of the Company.
Section 8.3. Advancement of Expenses. Expenses incurred by the Executive in
-----------------------
defending a civil or criminal proceeding described in this Section 8 will be
paid by the Company in advance of the final disposition of the proceeding within
ten (10) days after the Executive submits a request for payment; provided
however, that the Executive has undertaken in writing to repay such amounts if
he is ultimately found not to be entitled to indemnification by the Company.
Section 8.4. Non-Exclusivity; Continuity. The indemnification provided for
---------------------------
by this Agreement will not be exclusive and the Company may make any other
indemnification allowed by law. The indemnification provided for by this
Agreement will continue
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<PAGE>
after the Executive has ceased to be a director, officer, employee, or agent of
the Company or ceases to serve at the request of the Company as a director,
officer, employee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise and will inure to the Executive's heirs, executors,
and administrators.
Section 8.5. No Subrogation. The indemnification provided for by this
--------------
Agreement will be personal in nature and the Company will not have any liability
under this Section 8 to any insurer or any person, corporation, partnership,
trust or association or other entity (other than heirs, executors or
administrators) by reason of subrogation, assignment, or succession by any other
means to the claim of the Executive.
Section 9. Compliance With Other Agreements.
--------------------------------
The Executive represents and warrants to the Company that he is free to enter
this Agreement and that the execution of this Agreement and the performance of
the obligations under this Agreement will not, as of the date of this Agreement
or with the passage of time, conflict with, cause a breach of or constitute a
default under any agreement to which the Executive is a party or may be bound.
Section 10. Severability.
------------
Every provision of this Agreement is intended to be severable. If any
provision or portion of a provision is illegal or invalid, then the remainder of
this Agreement will not be affected. Moreover, any provision of this Agreement
which is determined to be unreasonable, arbitrary or against public policy will
be modified as necessary so that it is not unreasonable, arbitrary or against
public policy.
Section 11. Waivers.
-------
A waiver by a party to this Agreement of any breach of this Agreement by the
other party will not operate or be construed as a waiver of any other breach or
of the same breach on a future occasion. No delay or omission by either party
to enforce any rights it may have under this Agreement will operate or be
construed as a waiver.
Section 12. Modification.
------------
This Agreement may not be modified or amended except by a writing signed by
both parties.
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Section 13. Headings.
--------
The various headings contained in this Agreement are inserted only as a matter
of convenience and in no way define, limit or extend the scope or intent of any
of the provisions of this Agreement.
Section 14. Counterparts.
------------
This Agreement may be executed in several counterparts, each of which will be
deemed an original, but all of which taken together will constitute one and the
same instrument.
Section 15. Number and Pronouns.
-------------------
Wherever from the context it appears appropriate, each term stated in either
the singular or the plural will include the singular and the plural and pronouns
stated in the masculine, feminine or neuter gender will include the masculine,
feminine and neuter genders.
Section 16. Survival of Representations and Warranties.
------------------------------------------
The respective representations and warranties of the parties to this Agreement
will survive the execution of this Agreement and continue without limitation.
Section 17. Assignment; Binding Effect.
--------------------------
Neither this Agreement nor any right or interest hereunder shall be assignable
by either the Executive or the Company without the other party's prior written
consent; provided, however, that nothing in this Section 17 shall preclude (a)
the Executive from designating a beneficiary to receive any benefits payable
hereunder upon his death, or (b) the executors, administrators or other legal
representatives of the Executive or his estate from assigning any rights
hereunder to the person or persons entitled thereto.
In addition, at the request of the Executive, the Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business or assets of the Company,
by agreement in form and substance satisfactory to the Executive, to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession will be a breach of this Agreement and will
entitle the Executive to compensation from the Company in the same amount and on
the same terms as he would be entitled to
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<PAGE>
hereunder if his employment was terminated by the Company without cause.
Except as otherwise provided herein, this Agreement will be binding upon and
inure to the benefit of the parties hereto and their respective legal
representatives, administrators, executors, successors and assigns.
Section 18. Waiver of Jury.
--------------
With respect to any dispute which may arise in connection with this Agreement
each party to this Agreement hereby irrevocably waives all rights to demand a
jury trial.
Section 19. Entire Agreement.
----------------
With respect to its subject matter, this Agreement constitutes the entire
understanding of the parties superseding all prior agreements, understandings,
negotiations and discussions between them, whether written or oral, and there
are no other understandings, representations, warranties or commitments with
respect thereto.
Section 20. Governing Law; Venue.
--------------------
This Agreement will be governed by and interpreted in accordance with the
substantive laws of the State of Georgia without reference to conflicts of law.
Venue for the purposes of any litigation in connection with this Agreement will
lie solely in the state court in and for Fulton County, Georgia or the United
States District Court in and for the Northern District of Georgia.
Section 21. Notices.
-------
Any notices or other communications required or permitted under this Agreement
shall be in writing and shall be deemed to have been duly given and delivered
when delivered in person, two (2) days after being mailed postage prepaid by
certified or registered mail with return receipt requested, or when delivered by
overnight delivery service or by facsimile to the recipient at the following
address or facsimile number, or to such other address or facsimile number as to
which the other party subsequently shall have been notified in writing by such
recipient:
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If to the Company:
Premiere Technologies, Inc.
3399 Peachtree Road
The Lenox Building
Suite 600
Atlanta, GA 30326
Attn: Chief Executive Officer
Facsimile: (404) 262-8540
If to the Executive:
Jeffrey A. Allred
100 Inman Circle
Atlanta, Georgia 30309
The parties have executed this Agreement effective as of the 24th day of July,
1997.
PREMIERE TECHNOLOGIES, INC.
By: /s/ Boland T. Jones
-----------------------------
Boland T. Jones
THE EXECUTIVE
/s/ Jeffrey A. Allred
-----------------------------
Jeffrey A. Allred
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<PAGE>
EXHIBIT A
[DATE]
Premiere Technologies, Inc.
- -------------------------
- -------------------------
RE: EXERCISE OF STOCK OPTION
To whom it may concern:
The undersigned, Jeffrey A. Allred, pursuant to that certain Executive
Employment and Incentive Option Agreement dated as of July 24, 1997, by and
between Premiere Technologies, Inc. ("PTEK") and the undersigned (the
"Agreement"), hereby exercises the options granted under the Agreement for the
following number of option shares, subject to the terms and conditions of the
Agreement:
Number of option shares being purchased _______________
Total purchase price $______________
Purchase price paid by check $______________
Purchase price paid by promissory note $______________
Purchase price paid by tendering or
withholding PTEK stock $______________
Very truly yours,
Jeffrey A. Allred
<PAGE>
EXHIBIT B
PROMISSORY NOTE
$____________ [DATE]
JEFFREY A. ALLRED (hereinafter referred to as "Debtor"), for value received,
hereby promises to pay to the order of PREMIERE TECHNOLOGIES, INC., a Georgia
corporation (hereinafter referred to as "Payee"), the principal sum of
_____________________DOLLARS ($_____________) on [the tenth anniversary],
together with interest on the unpaid principal balance at the rate of
_______________percent (_____%) [the applicable Federal rate under I.R.C. (S)
1274(d) in effect on the date of this Note] per annum, compounded annually. Any
principal of or interest on this Note not paid when due shall bear interest
after such due date until paid at the rate of ______________________percent
(____%) [two points higher than the primary interest rate] per annum, and Debtor
shall pay all costs of collection. The principal hereof and the interest
thereon are payable at 3399 Peachtree Road, The Lenox Building, Suite 600,
Atlanta, Georgia 30326, or at such other place as Payee may from time to time
designate to Debtor in writing, in coin or currency of the United States of
America.
PREPAYMENT. Debtor may, at any time and from time to time, prepay all or any
portion of the principal of this Note remaining unpaid, without penalty or
premium. In the event Debtor sells any of the shares of $.01 par value common
stock of Payee that are held by Payee pursuant to the Stock Pledge Agreement
described hereinbelow, Debtor shall prepay a portion of this Note in an amount
equal to the after-tax proceeds received by Debtor from the sale of such shares.
Prepayments shall be applied first to the payment of accrued but unpaid interest
on this Note and the balance to principal.
EVENTS OF DEFAULT. If any of the following events (an "Event of Default")
shall occur and be continuing for any reason whatsoever (and whether such
occurrence shall be voluntary or involuntary or come about or be effected by
operation of law or otherwise), then this Note shall thereupon be and become due
and payable, without any further notice or demand of any kind whatsoever, all of
which are hereby expressly waived:
(a) If Debtor defaults in the payment of principal or interest on this Note
when and as the same shall become due and payable and such default continues for
twenty (20) days after Debtor receives notice from Payee of such default; or
(b) If Debtor makes an assignment for the benefit of creditors or admits in
writing his inability to pay his debts generally as they become due; or
<PAGE>
(c) If an order, judgment or decree is entered adjudicating Debtor bankrupt
or insolvent; or
(d) If Debtor petitions or applies to any tribunal for the appointment of a
trustee or receiver of Debtor, or of any substantial part of the assets of
Debtor, or commences any proceedings relating to Debtor under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in effect; or
(e) If any such petition or application is filed, or any such proceedings are
commenced, against Debtor, and Debtor by any act indicates his approval thereof,
consent thereto, or acquiescence therein, or an order is entered appointing any
such trustee or receiver, or approving the petition in any such proceedings, and
such order remains unstayed and in effect for more than ninety (90) days.
SECURITY. This Note is being executed and delivered pursuant to, and is
subject to the terms and conditions of, that certain Executive Employment and
Incentive Option Agreement by and between Payee and Debtor dated July 24, 1997,
and this Note is secured by a pledge of shares of $.01 par value common stock of
Payee pursuant to that certain Stock Pledge Agreement by and between Payee and
Debtor of even date herewith.
WAIVER. Any failure on the part of Payee at any time to require the
performance by Debtor of any of the terms or provisions hereof, even if known,
shall in no way affect the right thereafter to enforce the same, nor shall any
failure of Payee to insist on strict compliance with the terms and conditions
hereof be taken or held to be a waiver of any succeeding breach or of the right
of Payee to insist on strict compliance with the terms and conditions hereof.
TIME. Time is of the essence.
NOTICES. All notices, requests, demands and other communications to Debtor
hereunder shall be in writing and shall be deemed to have been duly given and
delivered when delivered in person, when mailed postage prepaid by registered or
certified mail with return receipt requested, or when delivered by overnight
delivery service to __________________________, or to such other address as
Debtor may designate to Payee in writing.
APPLICABLE LAW. This Note shall be governed by, and enforced and interpreted
in accordance with, the laws of the State of Georgia.
2
<PAGE>
IN WITNESS WHEREOF, Debtor has executed this Note under seal as of the date
first set forth above.
_________________________ (L.S.)
JEFFREY A. ALLRED
3
<PAGE>
EXHIBIT C
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT is made and entered into as of the ____ day of
__________, 199__, by and between JEFFREY A. ALLRED (the "Pledgor") and PREMIERE
TECHNOLOGIES, INC., Georgia corporation (the "Secured Party").
W I T N E S E E T H:
WHEREAS, the Pledgor has purchased from the Secured Party __________ shares
of the $.01 par value common stock (the "Shares") of Secured Party; and
WHEREAS, as consideration for the purchase of the Shares Pledgor has
delivered a Promissory Note of even date herewith (the "Note") to the Secured
Party in the principal amount of ________________________________________
Dollars ($__________); and
WHEREAS, to secure the payment of all obligations of the Pledgor under the
Note, the Pledgor has agreed to pledge to the Secured Party, and to grant the
Secured Party a security interest in, __________ of the Shares;
NOW, THEREFORE, for and in consideration of the premises and the agreements
and covenants contained herein, the parties hereto agree as follows:
1. SECURITY INTEREST. The Pledgor hereby unconditionally grants and
assigns to the Secured Party, its successors and assigns, a continuing security
interest in and security title to the Shares. The Pledgor has delivered to and
deposited with the Secured Party certificates representing the Shares and stock
powers endorsed in blank, as security for (i) payment of all obligations of the
Pledgor to the Secured Party under the Note, or any extension, renewal,
amendment or modification thereof, and (ii) all obligations of the Pledgor to
the Secured Party hereunder. Beneficial ownership of the Shares, including,
without limitation, all voting, consensual and dividend rights, shall remain in
the Pledgor until the occurrence of a Default pursuant to Section 3 hereof.
2. REPRESENTATION AND WARRANTY. The Pledgor hereby represents and
warrants to the Secured Party that except for the security interest created
hereby, the Pledgor owns the Shares free and clear of all liens, claims and
encumbrances, and has the unencumbered right to pledge the Shares.
3. DEFAULT. Upon the occurrence of an Event of Default under the Note, or
if the Pledgor shall fail to perform or observe any provision of this Agreement
and such failure shall continue for thirty (30) days after notice is given by
the Secured Party to the Pledgor of such failure (any of such occurrences being
hereinafter referred to as a
<PAGE>
"Default"), the Secured Party shall be entitled, without limitation, to exercise
the following rights, which the Pledgor hereby agrees to be commercially
reasonable:
(a) to receive all amounts payable in respect of the Shares otherwise
payable to the Pledgor, and to exercise all of the rights, powers and remedies
of the Pledgor with respect to such payments;
(b) to transfer all or any part of the Shares into the Secured Party's name
or the name of its nominee or nominees;
(c) to vote all or any part of the Shares (whether or not transferred into
the name of the Secured Party) and give all consents, waivers and ratifications
in respect of the Shares and otherwise act with respect thereto as though it
were the outright owner thereof;
(d) at any time or from time to time to sell, assign and deliver, or grant
options to purchase, all or any part of the Shares in one or more blocks, or any
interest therein, at any public or private sale at any exchange or elsewhere,
without demand of performance, advertisement or notice of intention to sell or
of the time or place of sale or adjournment thereof (all of which are hereby
expressly and irrevocably waived by the Pledgor), for cash, on credit or for
other property, for immediate or future delivery without any assumption of
credit risk, and for such price or prices and on such terms as the Secured Party
in its sole discretion may determine; the Pledgor agrees that to the extent that
notice of sale shall be required by law that at least five (5) business days'
notice to the Pledgor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable notification;
the Secured Party shall not be obligated to make any sale of the Shares
regardless of notice of sale having been given; the Secured Party may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and any such sale may, without further notice, be made at
the time and place to which it was so adjourned; the Pledgor hereby waives and
releases to the fullest extent permitted by law any right or equity of
redemption with respect to the Shares, whether before or after sale hereunder,
and all rights, if any, of marshalling the Shares; at any such sale, unless
prohibited by applicable law, the Secured Party may bid for and purchase all or
any part of the Shares so sold free from any such right or equity of redemption;
and the Secured Party shall not be liable for failure to collect or realize upon
any or all of the Shares or for any delay in so doing nor shall any of them be
under any obligation to take any action whatsoever with regard thereto; and
(e) generally, to take all such other action as the Secured Party in its
sole discretion may determined as incidental or conducive to any of the matters
or powers mentioned in the foregoing provisions of this Section 3 and which the
Secured Party may or can be do lawfully and to use the name of the Pledgor for
the purposes aforesaid and in any proceedings arising therefrom.
-2-
<PAGE>
4. APPLICATION OF PROCEEDS. The proceeds of the public or private sale or
other disposition shall be applied (a) to the costs incurred in connection with
the sale; (b) to any unpaid Interest which may have accrued on any obligations
secured hereby; (c) to any unpaid principal on any obligations secured hereby;
and (d) to damages incurred by the Secured Party by reason of any breach secured
against hereby, in such order as the Secured Party may determine, and any
remaining proceeds shall be paid over to the Pledgor or others as provided by
law. In the event the proceeds of the sale or other disposition of the Shares
are insufficient to pay such expenses, interest, principal, obligations and
damages, the Pledgor shall remain liable to the Secured Party for any such
deficiency.
5. ADDITIONAL RIGHTS OF SECURED PARTY. In addition to its rights and
privileges under this Agreement, the Secured Party shall have all the rights,
powers and privileges of a secured party under the Georgia Uniform Commercial
Code.
6. RETURN OF SHARES TO PLEDGOR.
(a) Upon payment in full of all principal and interest on the Note, this
Agreement shall terminate and the Secured Party shall return to the Pledgor all
of the then remaining Shares.
(b) Within (10) days after the Secured Party's receipt of a written request
from the Pledgor, the Secured Party shall deliver to the Pledgor a written
release of its security interest in up to the number of Shares representing the
equivalent value of the principal reduction of the Note to the date of such
request, based on the market value of the Shares being released. The request
shall state the number of Shares to be released, and the release shall be in the
form attached hereto as Annex 1. Within the aforesaid 10-day period, the
Secured Party also shall tender to the Company the certificate(s) representing
the pledged Shares to be released, along with written instructions to the
Company to cancel such certificate(s) and issue a new certificate(s) to the
Secured Party representing the remaining Shares subject to this Agreement and a
new certificates to the Pledgor representing the Shares released.
7. VOTING RIGHTS.
(a) For so long as any of the obligations secured hereby remain unpaid,
after a Default, (i) the Secured Party may exercise all voting rights, and all
other ownership or consensual rights of the Shares, but under no circumstances
is the Secured Party obligated by the terms of this Agreement to exercise such
rights, and (ii) the Pledgor hereby appoints the Secured Party the Pledgor's
true and lawful attorney-in-fact and IRREVOCABLE PROXY to vote the Shares in any
manner the Secured Party seems advisable for or against all matters submitted or
which nay be submitted to a vote of
-3-
<PAGE>
shareholders. The power-of-attorney granted hereby is coupled with an interest
and shall be irrevocable.
(b) For so long as the Pledgor shall have the right to vote the Shares, the
Pledgor covenants and agrees that it will not, without the prior written consent
of the Secured Party, vote or take any consensual action with respect to the
Shares which would constitute a default under this Agreement.
8. ASSIGNMENT. The Pledgor shall not transfer, assign or otherwise
dispose of its beneficial interest in any of the Shares without the prior
written consent of the Secured Party.
9. NOTICES. Any notices or other communications required or permitted by
this Agreement shall be in writing and shall be deemed to have been duly given
and delivered when delivered in person, when mailed postage prepaid by
registered or certified mail with return receipt requested, or when delivered by
overnight delivery service to the recipient at the address set forth below, or
to such other address as to which the other party has been subsequently notified
in writing by such recipient.
Pledgor: Secured Party:
Jeffrey Al. Allred Premiere Technologies, Inc.
_____________________________ _______________________________
_____________________________ _______________________________
_____________________________ _______________________________
Attention: President
10. APPLICABLE LAW; BINDING AGREEMENT. The provisions of this Agreement
shall be construed and interpreted, and all rights and obligations of the
parties hereto determined, in accordance with the laws of the State of Georgia.
This Agreement, together with all documents referred to herein, constitutes the
entire agreement between the Pledgor and the Secured Party with respect to the
matters addressed herein and may not be modified except by a writing executed by
the Secured Party and Pledgor. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which, taken
together, shall constitute one and the same instrument.
11. SEVERABILITY. If any Section or part thereof shall for any reason be
held or adjudged to be invalid, illegal or unenforceable by any court of
competent jurisdiction, such Section or part thereof so adjudicated invalid,
illegal or unenforceable shall be deemed separate, distinct and independent, and
the remainder of this Agreement shall remain in full force and effect and shall
not be affected by such holding or adjudication.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
PLEDGOR:
-----------------------------------
JEFFREY A. ALLRED
SECURED PARTY:
PREMIERE TECHNOLOGIES, INC.
By:
--------------------------------
Title:
------------------------
<PAGE>
ANNEX 1
[Date]
Mr. Jeffrey A. Allred
____________________
____________________
____________________
Dear _______________:
The undersigned acknowledges receipt of principal payments totaling
$__________ pursuant to that certain Promissory Note dated _______________, in
the original principal amount of $__________, payable by you to the undersigned,
and the undersigned hereby releases __________ shares of $.01 par value common
stock of the undersigned from the security interest granted to the undersigned
in accordance with the terms and conditions of that certain Stock Pledge
Agreement dated _______________, by and between you and the undersigned.
Sincerely,
PREMIERE TECHNOLOGIES, INC.
By:
---------------------------
Title:
------------------------
<PAGE>
EXHIBIT D
IRREVOCABLE PROXY
The undersigned shareholder of Premiere Technologies, Inc., a Georgia
corporation ("Premiere"), hereby irrevocably appoints the Chief Executive
Officer of Premiere as the sole and exclusive proxy of the undersigned, with
full power of substitution and resubstitution, to vote and exercise all voting
and related rights (to the full extent that the undersigned is entitled to do
so) with respect to _______ shares of the $.01 par value common stock of
Premiere (the "Shares") in accordance with the terms of this Proxy. Upon the
undersigned's execution of this Proxy, any and all prior proxies given by the
undersigned with respect to the Shares are hereby revoked, and the undersigned
agrees not to grant any subsequent proxies with respect to any Share prior to
the date on which such Share is returned to the undersigned pursuant to Section
6 of that certain Stock Pledge Agreement by and between the undersigned and
Premiere of even date (the "Pledge Agreement"); provided, that the undersigned
has granted a conditional proxy pursuant to Section 7 of the Pledge Agreement,
which proxy will override the proxy granted herein.
This Proxy is irrevocable, is coupled with an interest, and is granted
pursuant to that certain Executive Employment and Incentive Option Agreement
dated as of July 24, 1997, by and between Premiere and the undersigned. This
Proxy will terminate with respect to a Share upon its return to the undersigned
pursuant to Section 6 of the Pledge Agreement (the "Expiration Date").
The proxy named above is hereby authorized and empowered by the undersigned,
at any time prior to the Expiration Date, but subject to Section 7 of the Pledge
Agreement, to act as the undersigned's proxy to vote the Shares, and to exercise
all voting and other rights of the undersigned with respect to the Shares at
every annual, special or adjourned meeting of the shareholders of Premiere, and
in every written consent in lieu of such a meeting.
Dated this ______ day of _____________, 19___.
______________________________
JEFFREY A. ALLRED
<PAGE>
EXHIBIT E
PROMISSORY NOTE
$200,000.00 ________, 1998
JEFFREY A. ALLRED (hereinafter referred to as "Debtor"), for value received,
hereby promises to pay to the order of PREMIERE TECHNOLOGIES, INC., a Georgia
corporation (hereinafter referred to as "Payee"), the principal sum of TWO
HUNDRED THOUSAND AND NO/100 DOLLARS ($200,000.00), on _________, 2000, together
with interest on the unpaid principal balance at the rate of __________ percent
(_____%) per annum [the applicable Federal rate under I.R.C. (S) 1274(d) in
effect on the date of this Note], compounded annually. Any principal of or
interest on this Note not paid when due shall bear interest after such due date
until paid at the rate of _____________ percent (_____%) per annum [two points
higher than the primary interest rate], and Debtor shall pay all costs of
collection. The principal hereof and the interest thereon are payable at 3399
Peachtree Road, Suite 600, Atlanta, GA 30326, or at such other place as Payee
may from time to time designate to Debtor in writing, in coin or currency of the
United States of America.
PREPAYMENT. Debtor may, at any time and from time to time, prepay all or any
portion of the principal of this Note remaining unpaid, without penalty or
premium.
EVENTS OF DEFAULT. If any of the following events (an "Event of Default")
shall occur and be continuing for any reason whatsoever (and whether such
occurrence shall be voluntary or involuntary or come about or be effected by
operation of law or otherwise), then this Note shall thereupon be and become,
forthwith due and payable, without any further notice or demand of any kind
whatsoever, all of which are hereby expressly waived:
(a) If Debtor defaults in the payment of principal or interest on this Note
when and as the same shall become due and payable and such default continues for
ten (10) days after Debtor receives notice from Payee of such default; or
(b) If Debtor makes an assignment for the benefit of creditors or admits in
writing her inability to pay his debts generally as they become due; or
(c) If an order, judgment or decree is entered adjudicating Debtor bankrupt
or insolvent; or
(d) If Debtor petitions or applies to any tribunal for the appointment of a
trustee or receiver of Debtor, or of any substantial part of the assets of
Debtor, or commences any proceedings relating to Debtor under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in effect; or
<PAGE>
(e) If any such petition or application is filed, or any such proceedings
are commenced, against Debtor, and Debtor by any act indicates its approval
thereof, consent thereto, or acquiescence therein, or an order is entered
appointing any such trustee or receiver, or approving the petition in any such
proceedings, and such order remains unstayed and in effect for more than ninety
(90) days.
CANCELLATION OF DEBT. If Debtor is employed by Payee on August 11, 1998, one-
half (1/2) of the unpaid principal of this Note and all accrued interest thereon
shall be cancelled, and if Debtor is employed by Payee on August 11, 1999, the
balance of the unpaid principal of this Note and all accrued interest thereon
shall be cancelled. If Debtor's employment is terminated by Payee without
"cause" or if there is a "Change in Control" (as defined in Debtor's Executive
Employment and Incentive Option Agreement with Payee) prior to August 11, 1999,
then the entire amount of the unpaid principal of this Note and all accrued
interest thereon shall be cancelled as of the termination date.
WAIVER. Any failure on the part of Payee at any time to require the
performance by Debtor of any of the terms or provisions hereof, even if known,
shall in no way affect the right thereafter to enforce the same, nor shall any
failure of Payee to insist on strict compliance with the terms and conditions
hereof be taken or held to be a waiver of any succeeding breach or of the right
of Payee to insist on strict compliance with the terms and conditions hereof.
TIME. Time is of the essence.
NOTICES. All notices, requests, demands and other communications to Debtor
hereunder shall be in writing and shall be deemed to have been duly given and
delivered when delivered in person, when mailed postage prepaid by registered or
certified mail with return receipt requested, or when delivered by overnight
delivery service to 100 Inman Circle, Atlanta, GA 30309, or to such other
address as Debtor may designate to Payee in writing.
2
<PAGE>
APPLICABLE LAW. This Note shall be governed by, and enforced and interpreted
in accordance with, the laws of the State of Georgia.
IN WITNESS WHEREOF, Debtor has executed this Note under seal as of the date
first set forth above.
_________________________(L.S.)
JEFFREY A. ALLRED
3
<PAGE>
Exhibit 10.2
PREMIERE TECHNOLOGIES, INC.
1998 STOCK PLAN
<PAGE>
PREMIERE TECHNOLOGIES, INC.
1998 STOCK PLAN
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS................................................ 1
ARTICLE II THE PLAN................................................... 4
2.1 Name....................................................... 4
2.2 Purpose.................................................... 4
2.3 Effective Date............................................. 4
ARTICLE III PARTICIPANTS............................................... 4
ARTICLE IV ADMINISTRATION............................................. 5
4.1 Duties and Powers of the Committee......................... 5
4.2 Interpretation; Rules...................................... 5
4.3 No Liability............................................... 5
4.4 Majority Rule.............................................. 5
4.5 Company Assistance......................................... 6
ARTICLE V SHARES OF STOCK SUBJECT TO PLAN............................ 6
5.1 Limitations................................................ 6
5.2 Antidilution............................................... 6
ARTICLE VI OPTIONS.................................................... 8
6.1 Types of Options Granted................................... 8
6.2 Option Grant and Agreement................................. 8
6.3 Exercise Price............................................. 8
6.4 Exercise Period............................................ 8
6.5 Option Exercise............................................ 8
6.6 Reload Options............................................. 9
6.7 Nontransferability......................................... 10
6.8 Termination of Employment or Service....................... 10
6.9 Employment Rights.......................................... 10
6.10 Certain Successor Options.................................. 10
6.11 Effect of Change in Control................................ 11
<PAGE>
ARTICLE VII RESTRICTED STOCK.......................................... 11
7.1 Awards of Restricted Stock................................ 11
7.2 Nontransferability........................................ 11
7.3 Lapse of Restrictions..................................... 11
7.4 Termination of Employment................................. 12
7.5 Treatment of Dividends.................................... 12
7.6 Delivery of Shares........................................ 12
ARTICLE VIII STOCK APPRECIATION RIGHTS................................. 12
8.1 SAR Awards................................................ 12
8.2 Determination of Price.................................... 12
8.3 Exercise of an SAR........................................ 12
8.4 Payment for an SAR........................................ 13
8.5 Status of SAR Shares...................................... 13
8.6 Termination of SARs....................................... 13
8.7 No Shareholder Rights..................................... 13
ARTICLE IX STOCK CERTIFICATES........................................ 14
ARTICLE X TERMINATION AND AMENDMENT................................. 14
10.1 Termination and Amendment................................. 14
10.2 Effect on Grantee's Rights................................ 14
ARTICLE XI RELATIONSHIP TO OTHER COMPENSATION PLANS.................. 15
ARTICLE XII MISCELLANEOUS............................................. 15
12.1 Performance Goals......................................... 15
12.2 Replacement or Amended Grants............................. 15
12.3 Forfeiture for Competition................................ 15
12.4 Plan Binding on Successors................................ 16
12.5 Singular, Plural, Gender.................................. 16
12.6 Headings Not Part of Plan................................. 16
12.7 Interpretation............................................ 16
<PAGE>
PREMIERE TECHNOLOGIES, INC.
1998 STOCK PLAN
ARTICLE I
DEFINITIONS
As used herein, the following terms have the following meanings unless the
context clearly indicates to the contrary:
"Award" shall mean a grant of Restricted Stock or an SAR under this Plan.
- -------
"Board" shall mean the Board of Directors of the Company.
- -------
"Cause" shall mean theft or destruction of property of the Company or any
- -------
Subsidiary, disregard of the rules or policies of the Company or any Subsidiary,
or conduct evincing willful or wanton disregard of the interests of the Company
or any Subsidiary. Such determination shall be made by the Committee based on
information presented by the Company and the Employee (if the Employee chooses
to present information), and shall be final and binding on the Company and the
Employee.
"Change in Control" shall mean the occurrence of either of the following events:
- ------------------
(a) A change in the composition of the Board as a result of which fewer
than one-half of the incumbent Directors are Directors who either:
(i) were Directors of the Company twenty-four (24) months prior to
such change, or
(ii) were elected, or nominated for election, to the Board with the
affirmative votes of at least a majority of the Directors who had been Directors
of the Company twenty-four (24) months prior to such change and who were still
in office at the time of the election or nomination; or
(b) Any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than any person who is a shareholder of the Company on or
before the effective date of this Plan, by the acquisition or aggregation of
securities is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing fifty percent (50%) or more of the
combined voting power of the Company's then outstanding securities ordinarily
(and apart from rights accruing under special circumstances) having the right to
vote at elections of directors (the "Base Capital Stock"); except that any
change in the relative beneficial ownership of the Company's securities by any
person resulting solely from a reduction in the aggregate number of outstanding
shares of Base Capital Stock shall be disregarded until such person increases in
any manner, directly or indirectly, such person's beneficial ownership of any
securities of the Company.
<PAGE>
"Code" shall mean the Internal Revenue Code of 1986, including effective date
- ------
and transition rules (whether or not codified). Any reference herein to a
specific section of the Code shall be deemed to include a reference to any
corresponding provision of future law.
"Committee" shall mean a committee of at least two Directors appointed from time
- -----------
to time by the Board, having the duties and authority set forth herein in
addition to any other authority granted by the Board; provided, however, that
(i) with respect to any Options or Awards granted to an individual who is also a
Section 16 Insider, the Committee shall consist of at least two members of the
Board (who need not be members of the Committee with respect to Options or
Awards granted to any other individuals) who are Non-Employee Directors.
References herein to the "Committee" shall mean such Non-Employee Directors
insofar as any actions or determinations of the Committee shall relate to or
affect Options or Awards made to or held by any Section 16 Insider. At any time
that the Board shall not have appointed a committee as described above, any
reference herein to the Committee shall mean the Board.
"Company" shall mean Premiere Technologies, Inc., a Georgia corporation.
- ---------
"Director" shall mean a member of the Board and any person who is an advisory or
- ----------
honorary director of the Company if such person is considered a director for the
purposes of Section 16 of the Exchange Act, as determined by reference to such
Section 16 and to the rules, regulations, judicial decisions and interpretative
or "no-action" positions with respect thereto of the Securities and Exchange
Commission, as the same may be in effect or set forth from time to time.
"Exchange Act" shall mean the Securities Exchange Act of 1934. Any reference
- --------------
herein to a specific section of the Exchange Act shall be deemed to include a
reference to any corresponding provision of future law.
"Exercise Price" shall mean the price at which an Optionee may purchase a share
- ----------------
of Stock under a Stock Option Agreement.
"Fair Market Value" on any date shall mean (i) the closing sales price of the
- -------------------
Stock, regular way, on such date on the national securities exchange having the
greatest volume of trading in the Stock during the thirty (30) day period
preceding such date or, if such exchange was not open for trading on such date,
the next preceding date on which it was open; (ii) if the Stock is not traded on
any national securities exchange, the average of the closing high bid and low
asked prices of the Stock on the over-the-counter market on the date such value
is to be determined, or in the absence of closing bids on such date, the closing
bids on the next preceding date on which there were bids; or (iii) if the Stock
also is not traded on the over-the-counter market, the fair market value as
determined in good faith by the Committee based on such relevant facts as may be
available, which may include opinions of independent experts, the price at which
recent sales of Stock have been made, the book value of the Stock, and the
Company's past, current and future earnings.
-2-
<PAGE>
"Grantee" shall mean a person who is an Optionee or a person who has received an
- ---------
Award of Restricted Stock or an SAR.
"Non-Employee Director" shall have the meaning assigned such term in Rule 16b-3
- -----------------------
promulgated under Section 16 of the Exchange Act.
"Officer" shall mean a person who constitutes an officer of the Company for the
- ---------
purposes of Section 16 of the Exchange Act, as determined by reference to such
Section 16 and to the rules, regulations, judicial decisions, and interpretative
or "no-action" positions with respect thereto of the Securities and Exchange
Commission, as the same may be in effect or set forth from time to time.
"Option" shall mean an option to purchase Stock granted pursuant to the
- --------
provisions of Article VI hereof.
"Optionee" shall mean a person to whom an Option has been granted hereunder.
- ----------
"Permanent and Total Disability" shall have the meaning set forth in Code
- --------------------------------
Section 22(e)(3) and the regulations promulgated thereunder.
"Plan" shall mean the Premiere Technologies, Inc. 1998 Stock Plan, the terms of
- ------
which are set forth herein.
"Purchasable" shall refer to Stock that may be purchased by an Optionee under
- -------------
the terms of this Plan on or after a certain date specified in the applicable
Stock Option Agreement.
"Qualified Domestic Relations Order" shall have the meaning set forth in Code
- ------------------------------------
Section 414(p)(1)(A) and the regulations promulgated thereunder.
"Reload Option" shall have the meaning set forth in Section 6.6 hereof.
- ---------------
"Restricted Stock" shall mean Stock issued to a Grantee pursuant to Article VII
- ------------------
hereof.
"Restriction Agreement" shall mean a written agreement setting forth the terms
- -----------------------
of an Award of Restricted Stock, as provided in Section 7.1 hereof.
"SAR" means a stock appreciation right, which is the right to receive an amount
- -----
equal to the appreciation, if any, in the Fair Market Value of a share of Stock
from the date of the grant of the right to the date of its payment, as provided
in Article VIII hereof.
"SAR Agreement" shall mean a written agreement setting forth the terms of an
- ---------------
Award of an SAR, as provided in Section 8.1 hereof.
-3-
<PAGE>
"SAR Price" shall mean the base value established by the Committee for an SAR on
- -----------
the date the SAR is granted and which is used in determining the amount of
benefit, if any, paid to a Grantee.
"Section 16 Insider" shall mean any person who is subject to the provisions of
- --------------------
Section 16 of the Exchange Act, as provided in Rule 16a-2 promulgated pursuant
to the Exchange Act.
"Stock" shall mean the Common Stock, par value $.0l per share, of the Company
- -------
or, in the event that the outstanding shares of Stock are hereafter changed into
or exchanged for shares of a different stock or securities of the Company or
some other entity, such other stock or securities.
"Stock Option Agreement" shall mean a written agreement between the Company and
- ------------------------
an Optionee under which the Optionee may purchase Stock hereunder, as provided
in Article VI hereof.
"Subsidiary" shall mean any corporation, limited liability company, partnership
- ------------
or other entity in which the Company directly or indirectly controls fifty
percent (50%) or more of the total combined voting power of such entity.
ARTICLE II
THE PLAN
2.1 Name. This Plan shall be known as the "Premiere Technologies, Inc.
----
1998 Stock Plan."
2.2 Purpose. The purpose of the Plan is to advance the interests of
-------
the Company, its Subsidiaries and its shareholders by affording certain
employees of the Company and its Subsidiaries, as well as key consultants and
advisors to the Company or any Subsidiary, an opportunity to acquire or increase
their proprietary interests in the Company. The objective of the Options and
Awards is to promote the growth and profitability of the Company and its
Subsidiaries by providing the Grantees with an additional incentive to achieve
the Company's objectives through participation in its success and growth and by
encouraging their continued association with or service to the Company and its
Subsidiaries.
2.3 Effective Date. The effective date of this Plan is July 22, 1998.
--------------
ARTICLE III
PARTICIPANTS
The class of persons eligible to participate in this Plan shall consist of
all persons whose participation in the Plan the Committee determines to be in
the best interests of the Company which shall include, but not be limited to,
all employees of the Company or any
-4-
<PAGE>
Subsidiary, as well as directors, key consultants and advisors to the
Company or any Subsidiary.
ARTICLE IV
ADMINISTRATION
4.1 Duties and Powers of the Committee. This Plan shall be
----------------------------------
administered by the Committee. The Committee shall select one of its members as
its Chairman and shall hold its meetings at such times and places as it may
determine. The Committee shall keep minutes of its meetings and shall make such
rules and regulations for the conduct of its business as it may deem necessary.
The Committee shall have the power to act by unanimous written consent in lieu
of a meeting, and to meet telephonically. In administering this Plan, the
Committee's actions and determinations shall be binding on all interested
parties. The Committee shall have the power to grant Options or Awards in
accordance with the provisions of this Plan and may grant Options and Awards
singly, in combination, or in tandem. Subject to the provisions of this Plan,
the Committee shall have the discretion and authority to determine those persons
to whom Options or Awards will be granted and whether such Options will be
accompanied by the right to receive Reload Options, the number of shares of
Stock subject to each Option or Award, such other matters as are specified
herein, and any other terms and conditions of a Stock Option Agreement,
Restriction Agreement and an SAR Agreement. The Committee shall also have the
discretion and authority to delegate to any Officer its powers to grant Options
or Awards under this Plan to any person who is an employee of the Company or any
Subsidiary but not an Officer or Director. To the extent not inconsistent with
the provisions of this Plan, the Committee may give a Grantee an election to
surrender an Option or Award in exchange for the grant of a new Option or Award,
and shall have the authority to amend or modify an outstanding Stock Option
Agreement, Restriction Agreement or SAR Agreement, or to waive any provision
thereof, provided that the Grantee consents to such action.
4.2 Interpretation; Rules. Subject to the express provisions of this
---------------------
Plan, the Committee shall have complete authority to interpret this Plan, to
prescribe, amend and rescind rules and regulations relating to it, to determine
the details and provisions of each Stock Option Agreement, Restriction Agreement
and SAR Agreement, and to make all other determinations necessary or advisable
for the administration of this Plan, including, without limitation, the amending
or altering of this Plan and any Options or Awards granted hereunder as may be
required to comply with or to conform to any federal, state or local laws or
regulations.
4.3 No Liability. Neither any Director nor any member of the Committee
------------
shall be liable to any person or entity for any act or determination made in
good faith with respect to this Plan or any Option or Award granted hereunder.
4.4 Majority Rule. A majority of the members of the Committee shall
-------------
constitute a quorum, and any action taken by a majority at a meeting at which a
quorum is
-5-
<PAGE>
present, or any action taken without a meeting evidenced by a writing executed
by all the members of the Committee, shall constitute the action of the
Committee.
4.5 Company Assistance. The Company shall supply full and timely
------------------
information to the Committee on all matters relating to eligible persons, their
employment, death, retirement, disability or other termination of employment,
and such other pertinent facts as the Committee may require. The Company shall
furnish the Committee with such clerical and other assistance as is necessary in
the performance of its duties.
ARTICLE V
SHARES OF STOCK SUBJECT TO PLAN
5.1 Limitations. 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 4,000,000. Any or all shares of Stock subject to the
Plan may be issued in any combination of non-Incentive Stock Options, Restricted
Stock and SARs, and the amount of Stock subject to the Plan may be increased
from time to time in accordance with Article X hereof.
Shares subject to an Option or issued as an Award may be either authorized
and unissued shares or shares issued and later acquired by the Company. The
shares covered by any unexercised portion of an Option that has terminated for
any reason (except as set forth in the following paragraph), or any forfeited
portion of an Award, may again be optioned or Awarded under this Plan, and such
shares shall not be considered as having been optioned or issued in computing
the number of shares of Stock remaining available for Options or Awards
hereunder.
If Options are issued in respect of options to acquire stock of any entity
acquired, by merger or otherwise, by the Company or any Subsidiary, to the
extent that such issuance shall not be inconsistent with the terms, limitations
and conditions of Code Section 422 or Rule 16b-3 under the Exchange Act, the
aggregate number of shares of Stock for which Options may be granted hereunder
shall automatically be increased by the number of shares subject to the Options
so issued; provided, however, that the aggregate number of shares of Stock for
which Options may be granted hereunder shall automatically be decreased by the
number of shares covered by any unexercised portion of an Option so issued that
has terminated for any reason, and the shares subject to any such unexercised
portion may not be optioned to any other person.
5.2 Antidilution.
------------
(a) If (i) the Outstanding shares of Stock are increased, decreased, or
changed into or exchanged for a different number or kind of shares or other
securities of the Company, by reason of merger, consolidation, reorganization,
recapitalization, reclassification, combination or exchange of shares, or stock
split or stock dividend (excluding the Stock dividend declared shortly before
the Company's initial public offering
-6-
<PAGE>
of its Stock), (ii) any spin-off, split-off or other distribution of assets
materially affects the price of the Company's stock, or (iii) there is any
assumption and conversion to this Plan by the Company of an acquired company's
outstanding option grants, then:
(A) the aggregate number and kind of shares of Stock for which Options
or Awards may be granted hereunder shall be adjusted appropriately by the
Committee, and
(B) the rights of Optionees (concerning the number of shares subject
to Options and the Exercise Price) under outstanding Options and the rights of
the holders of Awards (concerning the terms and conditions of the lapse of any
then remaining restrictions), shall be adjusted appropriately by the Committee.
(b) If the Company is a party to any reorganization in which it does not
survive, involving merger, consolidation, or acquisition of the stock or
substantially all the assets of the Company, the Committee, in its discretion,
may:
(i) notwithstanding other provisions hereof, declare that all Options
granted under this Plan shall become exercisable immediately notwithstanding the
provisions of the respective Stock Option Agreements regarding exercisability,
that all such Options shall terminate thirty (30) days after the Committee gives
written notice of the immediate right to exercise all such Options and of the
decision to terminate all Options not exercised within such 30-day period, and
that all then-remaining restrictions pertaining to Awards under this Plan shall
immediately lapse; and/or
(ii) notify all Grantees that all Options and Awards granted under
this Plan shall be assumed by the successor corporation or substituted on an
equitable basis with options or restricted stock issued by such successor
corporation.
(c) If the Company is to be liquidated or dissolved in connection with a
reorganization described in Section 5.2(b), the provisions of that Section shall
apply. In all other instances, the adoption of a plan of dissolution or
liquidation of the Company shall, notwithstanding other provisions hereof, cause
all then-remaining restrictions pertaining to Options and Awards under the Plan
to lapse, and shall cause every Option outstanding under the Plan to terminate
to the extent not exercised prior to the adoption of the plan of dissolution or
liquidation by the shareholders; provided that, notwithstanding any other
provisions hereof, the Committee may declare all Options granted under the Plan
to be exercisable at any time on or before the fifth (5th) business day
following such adoption, notwithstanding the provisions of the respective Stock
Option Agreements regarding exercisability.
(d) The adjustments described in paragraphs (a) through (c) of this Section
5.2, and the manner of their application, shall be determined solely by the
Committee, and any such adjustment may provide for the elimination of fractional
share interests. The adjustments required under this Article V shall apply to
any successors of the Company
-7-
<PAGE>
and shall be made regardless of the number or type of successive events
requiring such adjustments.
ARTICLE VI
OPTIONS
6.1 Types of Options Granted. The Committee may, under this Plan,
------------------------
grant Options which do not qualify as incentive stock options. Within the
limitations provided in this Plan, the Options may be granted to the same person
at the same time, or at different times, under different terms and conditions,
as long as the terms and conditions of each Option are consistent with the
provisions of this Plan. Without limitation of the foregoing, Options may be
granted subject to conditions based on the satisfaction of performance goals or
any other factor the Committee deems relevant.
6.2 Option Grant and Agreement. Each Option granted hereunder shall be
--------------------------
evidenced by minutes of a meeting or the written consent of the Committee and by
a written Stock Option Agreement executed by the Company and the Optionee. The
terms of the Option, including the Option's duration, time or times of exercise,
exercise price, whether the Option is to be accompanied by the right to receive
a Reload Option, shall be stated in the Stock Option Agreement.
6.3 Exercise Price. The Exercise Price of the Stock subject to each
--------------
Option shall be determined by the Committee.
6.4 Exercise Period. The period for the exercise of each Option
---------------
granted hereunder shall be determined by the Committee.
6.5 Option Exercise.
---------------
(a) Unless otherwise provided in the Stock Option Agreement or Section 6.4
hereof, an Option may be exercised at any time or from time to time during the
term of the Option as to any or all full shares which have become Purchasable
under the provisions of the Option, but not at any time as to less than one
hundred (100) shares unless the remaining shares that have become so Purchasable
are less than one hundred (100) shares. The Committee shall have the authority
to prescribe in any Stock Option Agreement that the Option may be exercised only
in accordance with a vesting schedule during the term of the Option.
(b) An Option shall be exercised by (i) delivery to the Company at its
principal office a written notice of exercise with respect to a specified number
of shares of Stock and (ii) payment to the Company at that office of the full
amount of the Exercise Price for such number of shares in accordance with
Section 6.5(c). If requested by an Optionee, an Option may be exercised with the
involvement of a stockbroker in accordance with the federal margin rules set
forth in Regulation T (in which case the certificates representing the
underlying shares will be delivered by the Company directly to the stockbroker).
-8-
<PAGE>
(c) The Exercise Price is to be paid in full in cash upon the exercise of
the Option and the Company shall not be required to deliver certificates for the
shares purchased until such payment has been made; provided, however, the
Committee may provide in a Stock Option Agreement (or may otherwise determine in
its sole discretion at the time of exercise) that in lieu of cash, all or any
portion of the Exercise Price may be paid by tendering to the Company shares of
Stock duly endorsed for transfer and owned by the Optionee for at least six (6)
months, to be credited against the Exercise Price at the Fair Market Value of
such shares on the date of exercise (however, no fractional shares may be so
transferred, and the Company shall not be obligated to make any cash payments in
consideration of any excess of the aggregate Fair Market Value of shares
transferred over the aggregate Exercise Price); provided further, the Committee
may provide in a Stock Option Agreement (or may otherwise determine in its sole
discretion at the time of exercise) that, in lieu of cash or shares, all or a
portion of the Exercise Price may be paid by the Optionee's execution of a
recourse note equal to the Exercise Price or relevant portion thereof, subject
to compliance with applicable state and federal laws, rules and regulations. In
addition to the above methods of exercise, to the extent permitted under
Regulation T of the Federal Reserve Board, and subject to applicable securities
laws, an Option may be exercised through a broker in a so-called "cashless
exercise" whereby the broker sells the Option shares and delivers cash sales
proceeds to the Company in payment of the exercise price.
(d) In addition to and at the time of payment of the Exercise Price, the
Company may withhold, or require the Optionee to pay to the Company in cash, the
amount of any federal, state and local income, employment or other withholding
taxes which the Committee determines are required to be withheld under federal,
state or local law in connection with the exercise of an Option; provided,
however, the Committee may provide in a Stock Option Agreement (or may otherwise
determine in its sole discretion at the time of exercise) that the minimum
required withholding amount of such tax obligations may, upon the election of
the Optionee, be paid by tendering to the Company whole shares of Stock duly
endorsed for transfer and owned by the Optionee, or by authorization to the
Company to withhold shares of Stock otherwise issuable upon exercise of the
Option, in either case in that number of shares having a Fair Market Value on
the date of exercise equal to the amount of such taxes thereby being paid.
(e) The holder of an Option shall not have any of the rights of a
shareholder with respect to the shares of Stock subject to the Option until such
shares have been issued and transferred to the Optionee upon the exercise of the
Option.
6.6 Reload Options.
--------------
(a) The Committee may specify in a Stock Option Agreement (or may otherwise
determine in its sole discretion) that a Reload Option shall be granted, without
further action of the Committee, (i) to an Optionee who exercises an Option
(including a Reload Option) by surrendering shares of Stock in payment of
amounts specified in
-9-
<PAGE>
Sections 6.5(c) or 6.5(d) hereof, (ii) for the same number of shares as are
surrendered to pay such amounts, (iii) as of the date of such payment and at an
Exercise Price equal to the Fair Market Value of the Stock on such date, and
(iv) otherwise on the same terms and conditions as the Option whose exercise has
occasioned such payment, except as provided below and subject to such other
contingencies, conditions, or other terms as the Committee shall specify at the
time such exercised Option is granted.
(b) Unless provided otherwise in the Stock Option Agreement, a Reload
Option may not be exercised by an Optionee (i) prior to the end of a one (1)
year period from the date that the Reload Option is granted, and (ii) unless the
Optionee retains beneficial ownership of the shares of Stock issued to such
Optionee upon exercise of the Option referred to above in Section 6.6(a)(i), for
a period of one (1) year from the date of such exercise.
6.7 Nontransferability. No Option shall be transferable by an Optionee
------------------
other than by will or the laws of descent and distribution or pursuant to a
Qualified Domestic Relations Order; provided, however, that the Committee may
(but need not) permit other transfers where the Committee concludes that such
transferability (i) does not result in accelerated taxation and (ii) is
otherwise appropriate and desirable, taking into account any factors deemed
relevant, including without limitation, state or federal tax or securities laws
applicable to transferable options. During the lifetime of an Optionee, Options
shall be exercisable only by such Optionee (or by such Optionee's guardian or
legal representative, should one be appointed).
6.8 Termination of Employment or Service. The Committee shall have the
------------------------------------
power to specify, with respect to the Options granted to a particular Optionee,
the effect upon such Optionee's right to exercise an Option upon termination of
such Optionee's employment or service under various circumstances, which effect
may include immediate or deferred termination of such Optionee's rights under an
Option, or acceleration of the date at which an Option may be exercised in full.
For purposes of this Plan, a leave of absence approved by the Company shall not
be deemed to be termination of employment unless otherwise provided in the
Option Agreement or by the Company on the date of the leave of absence.
6.9 Employment Rights. Nothing in this Plan or in any Stock Option
-----------------
Agreement shall confer on any person any right to continue in the employ of the
Company or any of its Subsidiaries, or shall interfere in any way with the right
of the Company or any of its Subsidiaries to terminate such person's employment
at any time.
6.10 Certain Successor Options. To the extent not inconsistent with the
-------------------------
terms, limitations and conditions of Code Section 422 and any regulations
promulgated thereunder, an Option issued in respect of an option held by an
employee to acquire stock of any entity acquired, by merger or otherwise, by the
Company or any Subsidiary, may contain terms that differ from those stated in
this Article VI, but solely to the extent
-10-
<PAGE>
necessary to preserve for any such employee the rights and benefits contained in
such predecessor option, or to satisfy the requirements of Code Section 424(a).
6.11 Effect of Change in Control. The Committee may determine, at the
---------------------------
time of granting an Option or thereafter, that such Option shall become
exercisable on an accelerated basis in the event that a Change in Control occurs
with respect to the Company (and the Committee shall have the discretion to
modify the definition of Change in Control in a particular Option Agreement).
If the Committee finds that there is a reasonable possibility that, within the
succeeding six (6) months, a Change in Control will occur with respect to the
Company, then the Committee may determine that all outstanding Options shall be
exercisable on an accelerated basis.
ARTICLE VII
RESTRICTED STOCK
7.1 Awards of Restricted Stock. The Committee may grant Awards of
--------------------------
Restricted Stock, which shall be governed by a Restriction Agreement between the
Company and the Grantee. Each Restriction Agreement shall contain such
restrictions, terms and conditions (including, without limitation, the
satisfaction of stated performance goals) as the Committee may, in its
discretion, determine, and may require that an appropriate legend be placed on
the certificates evidencing the subject Restricted Stock. Shares of Restricted
Stock granted pursuant to an Award hereunder shall be issued in the name of the
Grantee as soon as reasonably practicable after the Award is granted, provided
that the Grantee has executed the Restriction Agreement governing the Award, the
appropriate blank stock powers and, in the discretion of the Committee, an
escrow agreement and any other documents which the Committee may require as a
condition to the issuance of such Shares. If a Grantee shall fail to execute
the foregoing documents within the time period prescribed by the Committee, if
any, the Award shall be void. At the discretion of the Committee, Shares issued
in connection with an Award shall be deposited together with the stock powers
with an escrow agent designated by the Committee. Unless the Committee
determines otherwise and as set forth in the Restriction Agreement, upon
delivery of the Shares to the escrow agent, the Grantee shall have all of the
rights of a shareholder with respect to such Shares, including the right to vote
the Shares and to receive all dividends or other distributions paid or made with
respect to the Shares.
7.2 Nontransferability. Until any restrictions upon Restricted Stock
------------------
awarded to a Grantee shall have lapsed in a manner set forth in Section 7.3,
such shares of Restricted Stock shall not be transferable other than by will or
the laws of descent and distribution, or pursuant to a Qualified Domestic
Relations Order, nor shall they be delivered to the Grantee.
7.3 Lapse of Restrictions. Restrictions upon Restricted Stock awarded
---------------------
hereunder shall lapse at such time or times and on such terms and conditions as
the Committee may, in its discretion, determine at the time the Award is granted
or thereafter.
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<PAGE>
7.4 Termination of Employment. The Committee shall have the power to
-------------------------
specify, with respect to each Award granted to any particular Grantee, the
effect upon such Grantee's rights with respect to such Restricted Stock of the
termination of such Grantee's employment under various circumstances, which
effect may include immediate or deferred forfeiture of such Restricted Stock or
acceleration of the date on which any then remaining restrictions shall lapse.
7.5 Treatment of Dividends. At the time an Award of Restricted Stock
----------------------
is made the Committee may, in its discretion, determine that the payment to the
Grantee of any dividends, or a specified portion thereof, declared or paid on
such Restricted Stock shall be (a) deferred until the lapsing of the relevant
restrictions and (b) held by the Company for the account of the Grantee until
such lapsing. In the event of such deferral, there shall be credited at the end
of each year (or portion thereof) interest on the amount of the account
outstanding during such year at a rate per annum determined by the Committee.
Payment of deferred dividends, together with interest thereon, shall be made
upon the lapsing of restrictions imposed on such Restricted Stock, and any
dividends deferred (together with any interest thereon) in respect of Restricted
Stock shall be forfeited upon any forfeiture of such Restricted Stock.
7.6 Delivery of Shares. Except as provided otherwise in Article IX
------------------
below, within a reasonable period of time following the lapse of the
restrictions on shares of Restricted Stock, the Committee shall cause a stock
certificate to be delivered to the Grantee with respect to such shares and such
shares shall be free of all restrictions hereunder.
ARTICLE VIII
STOCK APPRECIATION RIGHTS
8.1 SAR Awards. The Committee may grant Awards of SARs, which shall be
----------
governed by an SAR Agreement between the Company and the Grantee. Each SAR
Agreement shall contain such restrictions, terms and conditions (including,
without limitation, the satisfaction of stated performance goals) as the
Committee may, in its discretion, determine.
8.2 Determination of Price. The SAR Price shall be established by the
----------------------
Committee in its sole discretion.
8.3 Exercise of an SAR. Upon exercise of an SAR, the Grantee shall be
------------------
entitled, subject to the terms and conditions of this Plan and the SAR
Agreement, to receive for each share of Stock being exercised under the SAR, the
excess of (a) the Fair Market Value of such share of Stock on the date of
exercise over (b) the SAR Price for such share of Stock.
-12-
<PAGE>
8.4 Payment for an SAR. At the sole discretion of the Committee, the
------------------
payment of such excess shall be made in (a) cash, (b) shares of Stock, or (c) a
combination of both. Shares of Stock used for this payment shall be valued at
their Fair Market Value on the date of exercise of the applicable SAR.
8.5 Status of SAR Shares. Shares of Stock subject to an Award of an
--------------------
SAR shall be considered shares of Stock which may be issued under this Plan for
purposes of Section 5.1 hereof, unless the SAR Agreement making the Award of the
SAR provides that the exercise of such SAR results in the termination of an
unexercised Option for the same number of shares of Stock.
8.6 Termination of SARs. An SAR may be terminated as follows:
-------------------
(a) During the period of a Grantee's continuous employment with the Company
or a Subsidiary, an SAR will be terminated only if it has been fully exercised
or it has expired by its terms.
(b) Upon termination of a Grantee's employment with the Company or a
Subsidiary, the SAR will terminate upon the earliest of (1) the full exercise of
the SAR, (ii) the expiration of the SAR by its terms, and (iii) not more than
three (3) months following the date of employment termination; provided,
however, should termination of employment (A) result from the death or Permanent
and Total Disability of the Grantee, the period referenced in clause (iii)
hereof shall be one (1) year, or (B) be for Cause, the SAR will terminate on the
date of employment termination. For purposes of this Plan, a leave of absence
approved by the Company shall not be deemed to be termination of employment
unless otherwise provided in the SAR Agreement or by the Company on the date of
the leave of absence.
(c) Subject to the terms of the SAR Agreement with the Grantee, if a
Grantee should die or become Subject to a Permanent and Total Disability prior
to the termination of employment with the Company or any Subsidiary and prior to
the termination of an SAR, such SAR may be exercised to the extent that the
Grantee shall have been entitled to exercise it at the time of death or
Permanent and Total Disability, as the case may be, by the Grantee, the estate
of the Grantee or the person or persons to whom the SAR shall have been
transferred by will or by the laws of descent and distribution.
(d) Except as otherwise expressly provided in the SAR Agreement with the
Grantee, in no event will the continuation of the term of an SAR beyond the date
of termination of employment allow the Employee, or his beneficiaries or heirs,
to accrue additional rights under this Plan, have additional SARs available for
exercise, or receive a higher benefit than the benefit payable as if the SAR had
been exercised on the date of employment termination.
8.7 No Shareholder Rights. The Grantee of an SAR shall have no rights
---------------------
as a shareholder with respect to such SAR. In addition, no adjustment shall be
made for
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<PAGE>
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or rights except as provided in Section 5.2 hereof.
ARTICLE IX
STOCK CERTIFICATES
The Company shall not be required to issue or deliver any certificate for
shares of Stock purchased upon the exercise of any Option granted hereunder or
any portion thereof, or deliver any certificate for shares of Restricted Stock
granted hereunder, prior to fulfillment of all of the following conditions:
(a) the admission of such shares to listing on all stock exchanges on which
the Stock is then listed;
(b) the completion of any registration or other qualification of such
shares which the Committee shall deem necessary or advisable under any federal
or state law or under the rulings or regulations of the Securities and Exchange
Commission or any other governmental regulatory body;
(c) the obtaining of any approval or other clearance from any federal or
state governmental agency or body which the Committee shall determine to be
necessary or advisable; and
(d) the lapse of such reasonable period of time following the exercise of
the Option as the Board from time to time may establish for reasons of
administrative convenience.
Stock certificates issued and delivered to Grantees shall bear such
restrictive legends as the Company shall deem necessary or advisable pursuant to
applicable federal and state securities laws.
ARTICLE X
TERMINATION AND AMENDMENT
10.1 Termination and Amendment. The Board at any time may amend or
-------------------------
terminate the Plan without shareholder approval; provided, however, that the
Board may condition any amendment on the approval of shareholders of the Company
if such approval is necessary or advisable with respect to tax, securities or
other applicable laws.
10.2 Effect on Grantee's Rights. No termination, amendment or
--------------------------
modification of this Plan shall adversely affect a Grantee's rights under a
Stock Option Agreement, Restriction Agreement or an SAR Agreement without the
consent of the Grantee or his legal representative.
-14-
<PAGE>
ARTICLE XI
RELATIONSHIP TO OTHER COMPENSATION PLANS
The adoption of this Plan shall not affect any other stock option,
incentive or other compensation plans in effect for the Company or any of its
Subsidiaries; nor shall the adoption of the Plan preclude the Company or any of
its Subsidiaries from establishing any other form of incentive or other
compensation plan for employees or Directors of the Company or any of its
Subsidiaries.
ARTICLE XII
MISCELLANEOUS
12.1. Performance Goals. The Committee may, but need not, determine that
-----------------
any Award granted pursuant to this Plan to a participant shall be determined
solely on the basis of (a) the achievement by the Company or a Subsidiary of a
specified target return on equity or assets, (b) the Company's or Subsidiary's
stock price, (c) the achievement by the Company or a business unit of the
Company or Subsidiary of a specified target net income or earnings per share,
including without limitation earnings before interest, taxes, depreciation
and/or amortization, or (d) any combination of the goals set forth in (a)
through (c) above. Furthermore, in such case, the Committee shall have the
right for any reason to reduce (but not increase) any Award, notwithstanding the
achievement of a specified goal. If an Award is made on such basis, the
Committee shall establish goals prior to the beginning of the period for which
such performance goal relates. Any payment of an Award granted with performance
goals shall be conditioned on the written certification of the Committee in each
case that the performance goals and any other material conditions were
satisfied.
12.2 Replacement or Amended Grants. At the sole discretion of the
-----------------------------
Committee, and subject to the terms of this Plan, the Committee may modify
outstanding Options or Awards or accept the surrender of outstanding Options or
Awards and grant new Options or Awards in substitution thereof. However, no
modification of an Option or Award shall adversely affect a Grantee's rights
under a Stock Option Agreement, Restriction Agreement or an SAR Agreement
without the consent of the Grantee or his legal representative.
12.3 Forfeiture for Competition. If a Grantee provides services to a
--------------------------
competitor of the Company or any of its Subsidiaries, whether as an employee,
officer, director, independent contractor, consultant, agent or otherwise, which
services are of a nature that can reasonably be expected to involve the skills
and experience used or developed by the Grantee while an employee, consultant or
advisor of the Company or any Subsidiary, then that Grantee's rights under any
Options outstanding hereunder shall be forfeited and terminated, and any shares
of Restricted Stock held by such Grantee subject to remaining restrictions shall
be forfeited, subject in each case to a determination to the contrary by the
Committee.
-15-
<PAGE>
12.4 Plan Binding on Successors. This Plan shall be binding upon the
--------------------------
successors and assigns of the Company.
12.5 Singular, Plural, Gender. Whenever used herein, nouns in the
------------------------
singular shall include the plural, and the masculine pronoun shall include the
feminine gender and vice versa.
12.6 Headings Not Part of Plan. Headings of Articles and Sections
-------------------------
hereof are inserted for convenience and reference, and they do not constitute
part of this Plan.
12.7 Interpretation. With respect to Section 16 Insiders, transactions
--------------
under this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the Exchange Act, and shall be interpreted
consistent therewith.
-16-
<PAGE>
EXHIBIT 11.1
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF NET INCOME (LOSS) PER SHARE
FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTH PERIOD ENDED JUNE 30,
---------------------------------------------------------------
1998 1997
------------------------------- -----------------------------
NET NET
NET WEIGHTED INCOME NET WEIGHTED INCOME
INCOME AVERAGE (LOSS) INCOME AVERAGE (LOSS)
(LOSS) SHARES PER SHARE (LOSS) SHARES PER SHARE
-------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic net income (loss).......... $ (4,878) 46,243 $ (0.11) $(27,285) 42,475 $(0.64)
======== ====== ======= ======== ======= ======
Dilutive Securities
Stock options................... -- -- -- -- -- --
Convertible subordinated notes.. -- -- -- -- -- --
-------- ------ ------- -------- ------- ------
Diluted net income (loss)........ $ (4,878) 46,243 $ (0.11) $(27,285) 42,475 $(0.64)
======== ====== ======= ======== ======= ======
</TABLE>
<TABLE>
FOR THE SIX MONTH PERIOD ENDED JUNE 30,
---------------------------------------------------------------
1998 1997
------------------------------- -----------------------------
NET NET
NET WEIGHTED INCOME NET WEIGHTED INCOME
INCOME AVERAGE (LOSS) INCOME AVERAGE (LOSS)
(LOSS) SHARES PER SHARE (LOSS) SHARES PER SHARE
-------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic net income (loss).......... $(14,966) 45,614 $ (0.33) $(17,018) 42,399 $(0.40)
======== ====== ======= ======== ======= ======
Dilutive Securities
Stock options................... -- -- -- -- -- --
Convertible subordinated notes.. -- -- -- -- -- --
-------- ------ ------- -------- ------- ------
Diluted net income (loss)........ $(14,966) 45,614 $ (0.33) $(17,018) 42,399 $(0.40)
======== ====== ======= ======== ======= ======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> APR-01-1998 JAN-01-1998
<PERIOD-END> JUN-30-1998 JUN-30-1998
<CASH> 47,009 47,009
<SECURITIES> 51,988 51,988
<RECEIVABLES> 72,999 72,999
<ALLOWANCES> 12,727 12,727
<INVENTORY> 0 0
<CURRENT-ASSETS> 215,074 215,074
<PP&E> 204,282 204,282
<DEPRECIATION> 85,456 85,456
<TOTAL-ASSETS> 600,187 600,187
<CURRENT-LIABILITIES> 274,162 274,162
<BONDS> 0 0
0 0
0 0
<COMMON> 462 462
<OTHER-SE> 273,332 273,332
<TOTAL-LIABILITY-AND-EQUITY> 600,187 600,187
<SALES> 121,435 240,461
<TOTAL-REVENUES> 121,435 240,461
<CGS> 37,620 76,655
<TOTAL-COSTS> 37,620 76,655
<OTHER-EXPENSES> 88,206 174,015
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 5,227 10,395
<INCOME-PRETAX> (8,185) (16,859)
<INCOME-TAX> (3,307) (1,893)
<INCOME-CONTINUING> (4,878) (14,966)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (4,878) (14,966)
<EPS-PRIMARY> (.11) (.33)
<EPS-DILUTED> (.11) (.33)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> MAR-31-1997 JAN-01-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<CASH> 157,470 157,470
<SECURITIES> 31,796 31,796
<RECEIVABLES> 51,099 51,099
<ALLOWANCES> 3,693 3,693
<INVENTORY> 0 0
<CURRENT-ASSETS> 256,915 256,915
<PP&E> 128,407 128,407
<DEPRECIATION> 50,508 50,508
<TOTAL-ASSETS> 417,089 417,089
<CURRENT-LIABILITIES> 103,692 103,692
<BONDS> 0 0
0 0
0 0
<COMMON> 407 407
<OTHER-SE> 225,486 225,486
<TOTAL-LIABILITY-AND-EQUITY> 417,089 417,089
<SALES> 98,519 191,092
<TOTAL-REVENUES> 98,519 191,092
<CGS> 31,885 61,702
<TOTAL-COSTS> 31,885 61,702
<OTHER-EXPENSES> 97,557 144,972
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,307 2,837
<INCOME-PRETAX> (31,618) (17,299)
<INCOME-TAX> (4,333) (281)
<INCOME-CONTINUING> (27,285) (17,018)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (27,285) (17,018)
<EPS-PRIMARY> (.64) (.40)
<EPS-DILUTED> (.64) (.40)
</TABLE>
