<PAGE>
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 MARCH 31, 1999
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
(State or other jurisdiction of incorporation or organization)
59-3074176
(I.R.S. Employer 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 May 10, 1999
----- ---------------------------
Common Stock, $0.01 par value 46,149,128 shares
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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 March 31, 1999 and December 31, 1998......................... 3
Condensed Consolidated Statements of Operations
for the Three Months ended March 31, 1999 and 1998................. 4
Condensed Consolidated Statements of Cash Flows
for the Three Months ended March 31, 1999 and 1998................. 5
Notes to Condensed Consolidated Financial Statements............... 6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................... 15
Item 3 Quantitative and Qualitative Disclosures About Market Risk......... 22
PART II OTHER INFORMATION
Item 1 Legal Proceedings................................................ 23
Item 2 Changes in Securities............................................ 25
Item 3 Defaults Upon Senior Securities.................................. 26
Item 4 Submission of Matters to a Vote of Security Holders.............. 26
Item 5 Other Information................................................ 26
Item 6 Exhibits and Reports on Form 8-K................................. 27
SIGNATURES.................................................................. 28
EXHIBIT INDEX
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ITEM 1. FINANCIAL STATEMENTS
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF
MARCH 31, 1999 AND DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
March 31, December 31,
1999 1998
--------- ---------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and equivalents ................................ $ 15,673 $ 19,226
Marketable securities ............................... 2,919 20,769
Accounts receivable, net ............................ 57,573 55,660
Prepaid expenses and other .......................... 10,398 7,940
Deferred income taxes, net .......................... 25,327 20,977
--------- ---------
Total current assets ............................ 111,890 124,572
PROPERTY AND EQUIPMENT, NET .......................... 126,271 137,311
OTHER ASSETS
Strategic alliances and investments, net ............ 28,364 28,510
Intangibles, net .................................... 469,150 492,185
Other assets ........................................ 20,246 20,173
--------- ---------
$ 755,921 $ 802,751
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable .................................... $ 24,466 $ 24,270
Accrued liabilities ................................. 44,398 48,817
Accrued taxes ....................................... 20,894 16,279
Revolving loan....................................... 102,630 118,082
Current maturities of long-term debt and
capital lease obligations ......................... 1,875 3,370
Accrued restructuring, merger costs
and other special charges ......................... 7,009 7,545
--------- ---------
Total current liabilities ....................... 201,272 218,363
--------- ---------
LONG-TERM LIABILITIES
Convertible subordinated notes ...................... 172,500 172,500
Long-term debt and capital lease obligations ........ 2,967 5,721
Other accrued liabilities ........................... 1,008 1,111
Deferred income taxes, net .......................... 3,748 4,162
--------- ---------
Total long-term liabilities ..................... 180,223 183,494
--------- ---------
COMMITMENTS AND CONTINGENCIES (Note 10)
SHAREHOLDERS' EQUITY
Common stock, $0.01 par value; 150,000,000 shares
authorized, 47,166,147 and 46,894,148 shares
issued in 1999 and 1998, respectively, and
46,069,147 and 45,797,148 shares outstanding in
1999 and 1998, respectively ....................... 472 469
Additional paid-in capital .......................... 562,473 562,106
Treasury stock, at cost ............................. (9,133) (9,133)
Note receivable, shareholder ........................ (973) (973)
Cumulative translation adjustment ................... (541) 1,269
Accumulated deficit ................................. (177,872) (152,844)
--------- ---------
Total shareholders' equity ...................... 374,426 400,894
--------- ---------
$ 755,921 $ 802,751
========= =========
Accompanying notes are integral to these condensed consolidated
financial statements.
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PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1999 1998
---- ----
(Unaudited)
REVENUES ....................................... $112,809 $ 84,901
TELECOMMUNICATIONS COSTS ....................... 32,456 26,370
-------- --------
GROSS PROFIT ................................... 80,353 58,531
DIRECT OPERATING COSTS ......................... 15,742 5,942
-------- --------
CONTRIBUTION MARGIN ............................ 64,611 52,589
-------- --------
OTHER OPERATING EXPENSES
Selling and Marketing ......................... 24,124 21,079
General and administrative .................... 21,985 8,208
Depreciation and amortization ................. 40,301 12,538
Restructuring, merger costs and
other special charges ....................... -- 7,545
Acquired research and development ............. -- 15,500
Accrued settlement cost ....................... -- 1,500
-------- --------
Total other operating expenses ............ 86,410 66,370
-------- --------
OPERATING LOSS ................................. (21,799) (13,781)
-------- --------
OTHER INCOME (EXPENSE)
Interest, net ................................. (5,596) (1,480)
Other, net .................................... (445) (112)
-------- --------
Total other income (expense) .............. (6,041) (1,592)
-------- --------
LOSS BEFORE INCOME TAXES ....................... (27,840) (15,373)
INCOME TAX BENEFIT ............................. (2,812) (2,613)
-------- --------
NET LOSS ....................................... $(25,028) $(12,760)
======== ========
BASIC NET LOSS PER SHARE ....................... $ (0.54) $ (0.32)
======== ========
DILUTED NET LOSS PER SHARE ..................... $ (0.54) $ (0.32)
======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING
BASIC ......................................... 45,998 39,493
======== ========
DILUTED ....................................... 45,998 39,493
======== ========
Accompanying notes are integral to these condensed consolidated
financial statements.
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PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(IN THOUSANDS)
1999 1998
---- ----
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss .......................................... $(25,028) $(12,760)
Adjustments to reconcile net loss to cash
flows from operating activities:
Depreciation and amortization ................... 40,301 12,538
Deferred income taxes ........................... (3,415) (7,784)
Restructuring, merger costs and other
special charges ............................... -- 7,545
Accrued settlement cost ......................... -- 1,500
Acquired research and development ............... -- 15,500
Payments for restructuring, merger costs
and other special charges ..................... (537) (8,539)
Changes in assets and liabilities:
Accounts receivable, net ........................ (2,024) (5,236)
Prepaid expenses and other ...................... (363) (241)
Accounts payable and accrued expenses ........... (351) 5,697
-------- --------
Total adjustments ........................ 33,611 20,980
-------- --------
Net cash provided by operating activities. 8,583 8,220
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment ................ (10,623) (13,644)
Proceeds from disposal of property
and equipment ................................... -- 107
Redemption of marketable securities, net .......... 17,850 29,846
Cash paid for acquired companies, net
of cash acquired ................................ (182) (883)
Strategic investments ............................. (1,000) (3,000)
Other ............................................. (1,527) --
-------- --------
Net cash provided by investing activities. 4,518 12,426
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments under borrowing arrangements ............. (16,717) (4,458)
Debt issue costs .................................. -- (35)
Net funds from exercise of stock options .......... 273 (8,551)
Other ............................................. -- (319)
-------- --------
Net cash used in financing activities .... (16,444) (13,363)
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH ............ (210) --
-------- --------
NET (DECREASE) INCREASE IN CASH AND EQUIVALENTS .... (3,553) 7,283
CASH AND EQUIVALENTS, beginning of period .......... 19,226 21,770
-------- --------
CASH AND EQUIVALENTS, end of period ................ $ 15,673 $ 29,053
======== ========
Accompanying notes are integral to these condensed consolidated
financial statements.
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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/A, for the year ended December 31, 1998, as amended.
2. ACCOUNTING CHANGES
Restatement
In February 1999, Premiere announced that as a result of discussions with the
Office of the Chief Accountant of the Securities and Exchange Commission,
Premiere was required to discontinue accounting for its acquisition of Xpedite
Systems, Inc. ("Xpedite") as a pooling-of-interests and to account for such
acquisition under the purchase method of accounting. Accordingly, Premiere has
restated its unaudited interim financial statements for 1998. The Office of the
Chief Accountant determined that Premiere's post-merger share repurchase
program, completed in September 1998, was not implemented in accordance with
pooling requirements. No questions were raised regarding the propriety of the
original accounting for the merger with Xpedite.
Acceleration of Depreciation and Amortization
In the fourth quarter of 1998, the Company accelerated depreciation of certain
assets by shortening their estimated useful lives. These assets consist of
computers and telecommunications equipment associated with certain legacy
technology systems which management intends to remove from service in the
foreseeable future. Effective in the fourth quarter of 1998, these assets are
being amortized over periods ranging from nine months to one year, the
anticipated remaining service period. Prior to the change, such assets were
being amortized over estimated lives ranging from two to five years.
In addition, the Company accelerated the amortization of all remaining goodwill
and other acquired intangible assets effective in the fourth quarter of 1998.
This action resulted from management's determination that the period over which
it anticipates deriving future cash flows from such assets warrants a shorter
estimated useful life for amortization purposes. Goodwill is now being amortized
over seven years as compared with 10 to 40 years prior to the change. Remaining
acquired intangible assets are being amortized over lives ranging from three to
five years as compared with five to eight years prior to the change.
The Company has also shortened the amortization period associated with a
strategic alliance contract intangible asset from 25 years to three years
effective in the fourth quarter of 1998. See Note 8-Strategic Alliances and
Investments for further discussion surrounding events causing this change.
3. NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (the "FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS
No. 133 establishes accounting and reporting standards for derivatives and
hedging. It requires that all derivatives be recognized as either assets or
liabilities at fair value and establishes specific
<PAGE>
criteria for the use of hedge accounting. The Company's required adoption date
is January 1, 2000. SFAS No. 133 is not to be applied retroactively to financial
statements of prior periods. The Company expects no material impact to its
results of operations or financial position upon adoption of SFAS No. 133.
4. NET INCOME (LOSS) PER SHARE
Net loss per share is computed in accordance with SFAS No. 128, "Earnings per
Share." Basic and diluted net loss per share are the same in the three month
periods ended March 31, 1999 and 1998 because both of the Company's potentially
dilutive securities, convertible subordinated notes and stock options, are
antidilutive in both periods.
5. COMPREHENSIVE INCOME
In 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income."
Comprehensive income (loss) 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 (loss) in the three month periods ended March 31, 1999 and
1998. For the three month periods ended March 31, 1999 and 1998, total
comprehensive loss was approximately $(26.8) million and $(12.8) million,
respectively.
6. ACQUISITIONS
AMERICAN TELECONFERENCING SERVICES, LTD. ACQUISITION
In April 1998, the Company purchased all of the issued and outstanding common
stock of American Teleconferencing Services ("ATS"), a provider of full service
conference calling and group communication services. The shareholders of ATS
received an aggregate of approximately 712,000 shares of Premiere common stock
and cash consideration of approximately $22.1 million. Excess purchase price
over fair value of net assets acquired of approximately $47 million has been
recorded as goodwill and is being amortized on a straight-line basis over seven
years. This transaction has been accounted for as a purchase.
XPEDITE SYSTEMS, INC. ACQUISITION
On February 27, 1998, Premiere acquired Xpedite, a worldwide leader in the
electronic document distribution business including, fax, e-mail, telex and
mailgram services. Premiere issued approximately 11.0 million shares of its
common stock in connection with this acquisition. This transaction has been
accounted for as a purchase. The purchase of Xpedite has been allocated as
follows:
Operating and other tangible assets.. $ 90,035
Customer lists....................... 35,700
Developed technology................. 34,300
Acquired research and development.... 15,500
Assembled workforce.................. 7,500
Goodwill............................. 384,701
--------
Assets acquired...................... 567,736
Less liabilities assumed............. 203,487
--------
$364,249
========
The valuation of intangible assets and acquired research and development were
based upon an independent appraisal. Acquired research and development
represents the value assigned to research and development projects in the
development stage which had not reached technological feasibility at the date of
acquisition or had no alternative future use. These costs were expensed at the
date of the acquisition.
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The acquired research and development related to a project to develop a new job
monitor. This project was 50% complete as of the acquisition date and had not
yet completed a successful beta test. The primary high risk at valuation date
involved identifying and correcting the design flaws that would typically arise
during beta testing. Fair value was determined using an income approach.
Revenues from this new job monitor are anticipated beginning in 1999 and a
discount rate of 25% was used for valuation purposes.
INTERNATIONAL ACQUISITIONS
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 $18 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 $13
million has been recorded as goodwill and is being amortized on a straight-line
basis over seven years.
The following unaudited pro forma consolidated results of operations for the
three month period ended March 31, 1998 assumes the acquisitions made by the
Company in 1998 which were accounted for as purchases occurred on January 1,
1998. Pro forma adjustments consist of amortization of intangible assets
acquired and lost interest income reflecting cash paid in the acquisitions
(amounts in thousands).
Revenues $ 132,079
Net loss $ (27,928)
Basic net loss per share $ (0.61)
Diluted net loss per share $ (0.61)
7. RESTRUCTURING, MERGER COSTS AND OTHER SPECIAL CHARGES
In the first quarter of 1998, Premiere recorded a charge of approximately $7.5
million to restructure the operations of Premiere and Xpedite subsequent to
their merger. Such costs consist of severance associated with workforce
reduction, lease termination costs, costs to terminate certain contractual
obligations and asset impairments. Severance benefits have been provided for
termination of 122 employees. These actions resulted from management's plan to
reduce sales, operations and administrative headcount by exiting duplicative and
under performing operations. Premiere has also provided for lease termination
and clean-up costs associated with these facilities and operations. In addition,
the Company provided for costs associated with commitments under certain
advertising contracts from which the Company was generating no incremental
revenue and for costs to terminate certain unfavorable reseller agreements.
Although certain restructuring actions were being contemplated at the
acquisition date, definitive plans for such actions were not formalized until
after such date. Accordingly, there were no exit costs included in the purchase
price allocation of Xpedite.
Activity in accrued costs for restructuring and other special charges during the
three month period ended March 31, 1999 is as follows (amounts in thousands):
Accrued Accrued
Costs Costs
December 31, Costs March 31,
1998 Incurred 1999
----------- -------- --------
Severance $ 4,837 $ 318 $ 4,519
Asset impairments 4,722 -- 4,722
Restructure or terminate contractual
obligations 417 -- 417
Other costs, primarily to exit
facilities and certain activities 2,291 219 2,072
------- ----- --------
$12,267 $ 537 $ 11,730
======= ===== ========
8. STRATEGIC ALLIANCES AND INVESTMENTS
Assets recorded as strategic alliances and investments at March 31, 1999 and
December 31, 1998 are as follows (amounts in thousands):
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March 31, December 31,
1999 1998
-------- -------
MCI WorldCom strategic alliance $ 16,072 $16,072
Less accumulated amortization 4,591 3,445
-------- -------
11,481 12,627
Equity investments 16,883 15,883
-------- -------
$ 28,364 $28,510
======== =======
Management periodically reviews assets for impairment and in 1998 determined
that a write-down in the carrying value of the MCI WorldCom strategic alliance
was required based upon management's assessment of revenue levels expected to be
derived from this alliance and uncertainties surrounding the merger of WorldCom
and MCI in 1998. Accordingly, Premiere recorded a write-down in the carrying
value of this investment of approximately $13.9 million in 1998. In addition,
the Company accelerated amortization of this asset effective in the fourth
quarter of 1998 by shortening its amortization period to three years as compared
with 25 years prior to the change. In addition, Premiere recorded a write-down
of approximately $3.9 million in the fourth quarter of 1998 in its investment in
certain equity securities of DigiTEC 2000. This charge was necessary to reduce
the carrying value of this investment to its fair market value based upon
management's assessment that the decline in value of these securities below
their carrying value was not temporary. Management continually reviews these and
other assets for impairment. In the event management determines an asset
impairment has occurred, write-downs in the carrying value of such assets
may be required.
Equity investments classified as strategic alliances and investments consist of
initiatives funded by the Company to further its strategic plan. These
investments and alliances involve emerging technologies, such as 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.
Premiere's investments include minority equity interests in WebMD, a provider of
internet-based services to the healthcare industry, USA.NET, a leading provider
of outsourced e-mail services, Intellivoice, an entity engaged in developing
internet-enabled communications products, VerticalOne, a network-based services
provider that increases frequency, duration, and quality of its customers'
visits to Web sites and Webforia, a provider of Web services, tools and
communities that assist individuals in presenting high quality information from
the Internet. Management will continue to make such investments in the future in
complementary businesses and other initiatives that further its strategic
business plan. All equity investments held by the Company in other organizations
represent a less than 20 percent ownership and are being accounted for under the
cost method.
9. STOCK-BASED COMPENSATION PLANS
The Company has three stock based compensation plans, the 1994 Stock Option
Plan, the 1995 Stock Plan and the 1998 Stock Plan, which provide for the
issuance of restricted stock, stock options, warrants or stock appreciation
rights to employees, directors, non-employee consultants and advisors of the
Company. These plans are administered by committees consisting of members of the
Board of Directors of the Company.
Options for all 960,000 shares of common stock available under the 1994 Stock
Option Plan have been granted. Generally, all such options are non-qualified,
provide for an exercise price equal to fair market value at date of grant, vest
ratably over three years and expire eight years from date of grant.
The 1995 Stock Plan provides for the issuance of stock options, stock
appreciation rights and restricted stock to employees. A total of 8,000,000
shares of common stock have been reserved in connection with this plan. Options
issued under this plan may be either incentive stock options, which permit
income tax deferral upon exercise of options, or non-qualified options not
entitled to such deferral.
Sharp declines in the market price of the Company's common stock during 1998
resulted in many outstanding employee stock options being exercisable at prices
that exceeded the current market price of the Company's common stock, 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. 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 on such date
(other than those of Chief Executive Officer Boland T. Jones) to $10.25, which
was the closing price of Premiere's common stock on such date.
<PAGE>
On December 14, 1998, the Board of Directors determined to reprice or regrant at
an exercise price of $5.50, all employee stock options which had an exercise
price in excess of $5.50, which was above the closing price of Premiere's common
stock on such date. The vesting schedules remained the same and the repriced or
regranted options are generally subject to a twelve-month black-out period
during which the option may not be exercised. 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 with the
Company.
On July 22, 1998, the Board of Directors approved the 1998 Stock Plan (the "1998
Plan") that essentially mirrors the terms of the Company's existing 1995 Stock
Plan, except that it is not intended to be used for executive 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
non-qualified stock options and other incentive awards to employees and
consultants of the Company.
10. COMMITMENTS AND CONTINGENCIES
LITIGATION
The Company has several litigation matters pending, as described below, which it
is defending vigorously. Due to the inherent uncertainties of the litigation
process and the judicial system, the Company is unable to predict the outcome of
such litigation matters. If the outcome of one or more of such matters is
adverse to the Company, it could have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company and certain of its officers and directors 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 or otherwise acquired the
Company's common stock from as early as February 11, 1997 through June 10, 1998.
Class members allegedly include those who purchased the Company's common stock
as well as those who acquired stock through the Company's acquisitions of Voice-
Tel Enterprises, Inc. ("Voice-Tel"), Voice-Tel's franchisees and Xpedite.
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 acquisitions of Voice-Tel,
Xpedite, American Teleconferencing Services, TeleT Telecommunications, LLC
("TeleT") and VoiceCom Holdings, Inc. ("VoiceCom"), as well as its venture with
UniDial Communications, its investment in USA.NET and the commercial release of
Orchestrate(R). 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 with respect to the Company's Enhanced Calling Services,
revenue shortfalls from its Voice and Data Messaging services, 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 voice
messaging services due to difficulties in consolidating and integrating its
sales function. Plaintiffs allege violation of Sections 10(b), 14(a) and 20(a)
of the Securities Exchange Act of 1934 and Sections 11, 12 and 15 of the
Securities Act of 1933. The Company filed a motion to dismiss this complaint in
April 1999.
A lawsuit was filed on November 4, 1998 against the Company, as well as
individual defendants Boland T. Jones, Patrick G. Jones, George W. Baker, Sr.,
Eduard J. Mayer and Raymond H. Pirtle, Jr. in the Southern District of New York.
Plaintiffs were shareholders of Xpedite who acquired common stock of the Company
as a result of the merger between the Company and Xpedite in February 1998.
Plaintiffs' allegations are based on the representations and warranties made by
the Company in the prospectus and the registration statement related to the
merger, the merger agreement and other documents incorporated by reference,
regarding the Company's acquisitions of Voice-Tel and VoiceCom, the Company's
roll-out of Orchestrate(R), the Company's relationship with customers Amway
Corporation and DigiTEC, 2000, Inc., and the Company's 800-based calling card
service. Based on these factual allegations, plaintiffs allege causes of action
against the Company for breach of contract against all defendants for negligent
misrepresentation, violations of Sections 11 and
<PAGE>
12(a)(2) of the Securities Act of 1933 ("Securities Act"), and against the
individual Defendants for violation of Section 15 of the Securities Act.
Plaintiffs seek undisclosed damages together with pre- and post-judgment
interest, recission or recissory damages as to violation of Section 12(a)(2) of
the Securities Act, punitive damages, costs and attorneys' fees. A motion to
dismiss and a motion to transfer venue to Georgia are presently pending.
On November 26, 1997, Wael Al-Khatib ("Al-Khatib"), the sole shareholder and
former president of Communications Network Corporation ("CNC"), and his company,
Platinum NetworkCorp. ("Platinum"), filed a complaint against Premiere
Communications, Inc. ("PCI"), WorldCom Network Services, Inc. f/k/a WilTel, Inc,
("WorldCom"), 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 United States District Court for
the Eastern District of New York. 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 scheme. The
plaintiffs are seeking at least $250 million in compensatory damages and $500
million in punitive damages from PCI and the other defendants. This matter has
been settled, pending payment of $250,000 by Khatib to WorldCom. The settlement
does not require PCI or Premiere to make any payments.
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 in the complaint against Xpedite are limited to
plaintiffs' investment in Xpedite. The plaintiffs have alleged that two of the
named defendants, allegedly acting as officers, directors, agents or
representatives of Xpedite, induced the plaintiffs to make certain investments
in Xpedite but that the plaintiffs failed to receive the benefits that they were
promised. Plaintiffs allege that Xpedite knew or should have known of alleged
wrongdoing on the part of other defendants. 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. On November
16, 1998 the court entered an order transferring all disputes between plaintiffs
and certain defendants to arbitration and dismissing without prejudice
plaintiff's complaint against those defendants. On or about December 23, 1998,
Xpedite filed a motion to stay the action pending the resolution of the
arbitration or in the alternative to compel plaintiffs to provide discovery. On
January 22, 1999, the court granted Xpedite's motion to stay further proceedings
pending the arbitration. On March 11, 1999, plaintiffs filed a motion for
reconsideration of the court's decision. A trial date has been tentatively set
for July 1999.
On or about May 27, 1998, Telephone Company of Central Florida ("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 and PCI are two of the largest creditors in this
bankruptcy case. In August 1998, WorldCom 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 and PCI, alleging service
problems with WorldCom and PCI. PCI and TCCF reached an agreement, approved by
the Bankruptcy Court in November 1998, which provides for mutual releases to be
executed between the parties and certain affiliates and insiders. The mutual
releases have been fully executed, in accordance with the terms of the
settlement. The settlement does not require PCI or Premiere to make any
payments.
On December 22, 1998 Shelly D. Swift filed a complain against First USA Bank,
First Credit Card Services USA, and PCI in the United States District Court for
the Northern District of Illinois. Swift alleges that the defendants sent her an
unsolicited "credit card" in violation of the Truth in Lending Act and state
law. Swift seeks an injunction and monetary damages on behalf of a putative
class of persons who received the alleged credit card. On February 19,1999, the
defendants moved to dismiss the complaint for failure to state a claim upon
which relief can be granted.
In March 1999, Aspect Telecommunications, Inc. ("Aspect"), the purported current
owner of certain patents, filed suit against Premiere and PCI alleging that they
had violated certain patent rights owned by Aspect and requesting damages and
injunctive
<PAGE>
relief. The suit asserts that Premiere is offering certain "calling card and
related enhanced services," "single number service" and "call connecting
services" covered by such rights. Premiere has reviewed the subject patents and,
based on that review, believes that its products and services currently being
marketed do not infringe them. On March 29, 1999 the Company filed an answer
denying the allegations and a counterclaim seeking to invalidate the patents.
Additionally, the Company believes that certain licenses it has from third-party
vendors may insulate the Company from some or all of any damages in the event of
an adverse outcome in this litigation.
The Company is also involved in various other legal proceedings which the
Company does not believe will have a material adverse effect upon the Company's
business, financial condition or results of operations, although no assurance
can be given as to the ultimate outcome of any such proceedings.
11. SEGMENT REPORTING
The Company's reportable segments are strategic business groups that align the
Company in two distinct market segments focused on the customers each serves:
large businesses and small office/home businesses and individuals. Corporate
Enterprise Solutions caters to large businesses, such as Fortune 1000 companies.
Its services include those most complementary with large organizations including
electronic document distribution, corporate messaging services, 800-based and
local access voice messaging, interactive voice response and calling card
programs, and full-service conference calling. Emerging Enterprise Solutions
focuses in the small office/home office and individual subscriber segment. Its
services include Orchestrate (R), a suite of internet-based communication
services, local access voice and data messaging and enhanced calling services,
including long distance and enhanced 800-based services. Information concerning
the operations in these reportable segments for the three months ended March 31,
1999 and 1998 is as follows (in millions):
1999 1998
---- ----
REVENUES:
Corporate Enterprise Solutions $ 81.6 $ 33.5
Emerging Enterprise Solutions 31.3 51.4
Corporate and eliminations (0.1) --
-------- -------
Totals $ 112.8 $ 84.9
======== =======
EBITDA:
Corporate Enterprise Solutions $ 20.1 $ 11.8
Emerging Enterprise Solutions 2.9 12.1
Corporate and eliminations (4.9) (.7)
-------- -------
Subtotal 18.1 23.2
Restructuring, merger costs and
other special charges -- (7.6)
Acquired research and development -- (15.5)
Accrued settlement costs -- (1.5)
-------- -------
Totals $ 18.1 $ (1.4)
======== =======
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Premiere is a leading provider of enhanced communications services designed to
simplify everyday communications of both businesses and individuals. Premiere
provides its innovative solutions for simplifying communications through two
strategic business groups: Corporate Enterprise Solutions ("CES"), which targets
Fortune 1000 and other large companies; and Emerging Enterprise Solutions
("EES"), which targets smaller fast-track companies and individuals. CES's
services include: Premiere Document Distribution, which provides enhanced
electronic document distribution services; Premiere Corporate Messaging, which
provides local access and 800-based voice messaging services; Premiere WorldLink
Corporate Card, an 800-based enhanced calling card service; Premiere Interactive
Voice Response, which provides various IVR applications; and Premiere
Conferencing, which provides a full range of conferencing services. EES's
services include: Premiere Internet-Based Communications Services, featuring
Orchestrate(R) by Premiere, which integrates the Company's service offerings by
allowing customers to access such services through a computer or telephone;
Premiere Voice and Data Messaging, which provides customers access to one of the
largest "voice intranets" in the world; and Premiere Enhanced Calling Services,
which provides long distance and enhanced 800-based services.
Premiere's revenues are generally based on usage. In addition to usage fees,
local access Voice and Data Messaging services, certain of Premiere's Enhanced
Calling Services and the Orchestrate(R) suite of products contain fixed monthly
fees.
Telecommunications costs consist primarily of the cost of long distance
transmission and other telecommunications related charges incurred in providing
Premiere's services.
Direct operating costs consist primarily of rent and facility expense associated
with operations centers, salaries and wages of operations engineering and
support personnel and other operating costs incurred in service delivery
activities.
Selling and marketing costs consist primarily of advertising and promotion
costs, employee and non-employee commissions and salary and wages and other
operating expenses associated with selling and marketing activities.
General and administrative expenses include salaries and wages associated with
customer service, research and development and administrative functions, bad
debt expense, professional and consulting fees, property taxes and other
operating expenses incurred in customer service, research and development and
administrative activities.
Depreciation and amortization includes 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, 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. Intangible
assets being amortized include capitalized software development costs, goodwill,
customer lists, assembled work force, and the MCI WorldCom strategic alliance
agreement.
"EBITDA" as used below, is defined as the sum of net income or loss and, to
the extent deducted in determining net income or loss for such period, net
interest expense, income taxes, depreciation and amortization.
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.
In February 1999, Premiere announced that as a result of discussions with the
Office of the Chief Accountant of the Securities and Exchange Commission,
Premiere was required to discontinue accounting for its acquisition of Xpedite
Systems, Inc. ("Xpedite") as a pooling-of-interests and to account for such
acquisition under the purchase method of accounting. Accordingly, Premiere has
restated its unaudited interim financial statements for 1998. The Office of the
<PAGE>
Chief Accountant determined that Premiere's post merger share repurchase
program, completed in September 1998, was not implemented in accordance with
pooling requirements. No questions were raised regarding the propriety of the
original accounting for the merger with Xpedite.
ANALYSIS OF OPERATING RESULTS
Overview
The following table presents certain financial information about the Company's
strategic business groups for the three months ended March 31, (amounts in
millions):
1999 1998
---- ----
REVENUES:
Corporate Enterprise Solutions $ 81.6 $ 33.5
Emerging Enterprise Solutions 31.3 51.4
Corporate and eliminations (0.1) --
-------- -------
Totals $ 112.8 $ 84.9
======== =======
EBITDA:
Corporate Enterprise Solutions $ 20.1 $ 11.8
Emerging Enterprise Solutions 2.9 12.1
Corporate (4.9) (.7)
-------- -------
Subtotal 18.1 23.2
Restructuring, merger costs and
other special charges -- (7.6)
Acquired research and development -- (15.5)
Accrued settlement costs -- (1.5)
-------- -------
Totals $ 18.1 $ (1.4)
======== =======
Analysis
Premiere's financial statements reflect the results of operations of Xpedite,
acquired in February 1998, and ATS, acquired in April 1998, from the date of
their respective acquisitions. These acquisitions have been accounted for under
the purchase method of accounting. The following discussion and analysis is
prepared on that basis.
Consolidated revenues increased 32.9% to $112.8 million in the three months
ended March 31, 1999 as compared with the same period in 1998. CES revenues
increased 143.6% to $81.6 million over this period principally due to the
acquisition of Xpedite in February 1998 and ATS in April 1998. Revenue growth
from acquisitions in the CES group, was offset by revenue losses in 1998 from
two EES Group customers which declared bankruptcy in the second quarter,
management's decision to discontinue certain unprofitable prepaid calling card
programs and expiration of minimum revenue commitments provided under the
Company's strategic alliance agreement with MCI WorldCom.
Consolidated gross profit margins were 71.2% and 68.9% for the three months
ended March 31, 1999 and 1998, respectively. Consolidated gross profit margins
benefited in 1999 from the discontinuance of unprofitable prepaid calling card
programs in the first half of 1998. In general, Premiere has experienced
favorable trends in per unit telecommunications costs in each of its strategic
business groups by aggressively leveraging increasing minute volumes to
negotiate quantity discounts with telecommunications carriers. Such costs have
also been favorably affected by general industry trends in which long distance
transport and the cost of local access services have decreased as a result of
increased capacity and competition among long distance and local exchange
carriers.
Consolidated direct costs of operations increased to 14.0% of revenues in the
three months ended March 31, 1999 as compared with 7.0% for the same period of
1998. The increase in these costs as a percent of revenues results mainly from
the acquisition of ATS (Premiere Conferencing) in April 1998. The service
delivery processes of Premiere Conferencing include a relatively higher labor
cost than Premiere's other services. Another factor contributing to the increase
in these costs as a percent of revenues in 1999, is revenue losses in the EES
group. Such losses hampered coverage of certain relatively fixed operations,
engineering and support costs.
<PAGE>
Consolidated selling and marketing costs declined to 21.4% of revenues in the
three months ended March 31, 1999 from 24.8% of revenues in the same period in
1998. This decrease principally reflects the discontinuance of certain
ineffective advertising programs in the EES group in 1998. In addition, the
acquisitions of Xpedite (Premiere Document Distribution) and ATS (Premiere
Conferencing) have favorably impacted the ratio of consolidated selling and
marketing costs to revenues. Such costs have generally been lower in relation to
revenues for these businesses as compared with the Company's other businesses.
General and administrative costs were 19.5% of revenues for the three months
ended March 31, 1999 compared with 9.7% of revenues for the same period in 1998.
Contributing to the increase in these costs as a percent of revenues, was the
acquisition of ATS in April 1998. Additionally, Premiere aggressively expanded
its management infrastructure in 1998 to more effectively support anticipated
growth in its business. These actions included hiring additional senior level
managers and expanding its corporate headquarters facilities throughout 1998.
Depreciation and amortization was $40.3 million for three month period ended
March 31, 1999 as compared with $12.5 million for the same period in 1998. The
increase in depreciation and amortization in 1999 results mainly from
amortization of assets acquired in the acquisitions of Xpedite and ATS and
changes in depreciable lives for certain assets and goodwill. Identifiable
intangible assets and goodwill acquired in the Xpedite and ATS acquisitions are
being amortized over three to seven years. In addition, amortization and
depreciation of certain existing operating and intangible assets were
accelerated, effective in the fourth quarter of 1998, following a reduction in
the estimated useful lives of such assets. This action was based on a
reassessment of the utility of such assets by Premiere's management. The
affected assets consist of goodwill and other intangible assets and computer and
telecommunications equipment associated with certain legacy technology systems,
the use of which is expected to be discontinued in the foreseeable future. Such
assets are being amortized over lives ranging from one to seven years, effective
in the fourth quarter of 1998, as compared with lives ranging from five to 40
years prior to the change.
Net interest expense increased to $5.6 million for the three months ended March
31, 1999 as compared with $1.5 million for the same period in 1998. Net interest
expense increased in 1999 mainly due to interest associated with $132.3 million
of debt assumed in the acquisition of Xpedite in February 1998. Substantially
all of the debt assumed in the acquisition of Xpedite was associated with a
short-term revolving loan facility maintained by Xpedite. In addition, the use
of cash and short-term investments to fund strategic and operating initiatives
reduced interest income in 1999.
In the first quarter of 1998, Premiere recorded a charge of approximately $7.5
million to restructure the operations of Premiere and Xpedite subsequent to
their merger. Such costs consist of severance associated with workforce
reduction, lease termination costs, costs to terminate certain contractual
obligations and asset impairments. Severance benefits have been provided for
termination of 122 employees. These actions resulted from management's plans to
reduce sales, operations and administrative headcount by exiting duplicative and
under performing operations. Premiere has also provided for lease termination
and clean-up costs associated with these facilities and operations. In addition,
the Company provided for costs associated with commitments under certain
advertising contracts from which the Company was generating no incremental
revenue and for costs to terminate certain unfavorable reseller agreements.
Although certain restructuring actions were being contemplated at the
acquisition date, definitive plans for such actions were not formalized until
after such date. Accordingly, there were no exit costs included in the purchase
price allocation of Xpedite.
Premiere expensed approximately $15.5 million in the three months ended March
31, 1998 reflecting costs associated with a research and development project
acquired in the Xpedite acquisition. These costs were valued based upon an
independent appraisal. The acquired research and development related to a
project to develop a new job monitor. This project was 50% complete as of the
acquisition date and had not yet completed a successful beta test. The primary
high risk at valuation date involved identifying and correcting the design flaws
that would typically arise during beta testing. Fair value was determined using
an income approach. Revenues from this new job monitor are anticipated beginning
in 1999 and a discount rate of 25% was used for valuation purposes.
In 1999 and 1998, the Company's effective income tax rate varied from the
statutory rate primarily as a result of non-deductible goodwill amortization
associated with Premiere's acquisitions which have been accounted for under the
purchase method of accounting.
LIQUIDITY AND CAPITAL RESOURCES
<PAGE>
Net cash provided by operations was $8.6 million in the first quarter of 1999 as
compared with $8.2 million in the first quarter of 1998. Excluding payments made
for restructuring, merger costs and other special charges, net cash provided by
operations in the three months ended March 31, 1999 was $9.1 million as compared
with $16.8 million for the same period in 1998. Operating cash flow declined in
1999 primarily as a result of revenue losses in Premiere's EES group and
continued investment by the Company to expand its management infrastructure.
Investing activities provided cash of approximately $4.5 million and $12.4
million in the three months ended March 31, 1999 and 1998, respectively. The
principal source of cash from investing activities in 1999 and 1998 was the
liquidation of short-term investments in marketable securities to fund various
operating and strategic initiatives. Premiere made capital expenditures of $10.6
million and $13.6 million in the three months ended March 31, 1999 and 1998,
respectively. Capital programs in 1999 include construction costs and equipment
purchases associated with the Company's network expansion program, development
costs incurred in connection with the Company's Web-based communications
services and operating infrastructure expansion in support of new business
growth. Management anticipates that capital expenditure levels experienced in
the first quarter of 1999 will continue for the foreseeable future as the
Company continues development of its Web-based communications services and
upgrades and expands operational infrastructure of both its existing computer
telephony network and the networks of its acquired companies.
Significant cash outflows for financing activities in 1999 included a net
reduction in borrowings, mainly repayments under the Company's revolving loan
facility, of approximately $16.7 million. Effective December 16, 1998, Premiere
amended and restated the revolving loan facility it assumed in connection with
the Xpedite acquisition for a period of one year. This arrangement provides for
borrowings of up to $150 million and contains certain covenants which require
the Company to maintain minimum earnings and interest coverage ratios and
achieve certain revenue levels, in addition to other covenants. The Company was
in compliance with all such covenants at March 31, 1999. Continued compliance
under these loan covenants will require that Premiere attain certain revenue
levels, as well as achieve earnings growth or reduce indebtedness in order
to satisfy the minimum ratio requirements required under this arrangement. At
March 31, 1999, the Company had unused borrowing capacity of approximately $47.4
million under the revolving loan facility.
At March 31, 1999, the Company's principal commitments involve indebtedness
under its revolving loan facility which matures December 16, 1999, 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
$18.6 million, cash generated by operating activities and borrowing capacity
under the Company's revolving loan facility will be adequate to fund growth in
the Company's existing businesses in 1999. Premiere's revolving loan arrangement
matures on December 15, 1999 and the Company will be required to repay or
refinance this indebtedness at that time. Management regularly reviews the
Company's capital structure and evaluates potential alternatives in light of
current conditions in the capital markets. Depending upon conditions in these
markets and other factors, the Company, may from time to time, engage in capital
transactions, including debt or equity issuances, in order to increase the
Company's financial flexibility and meet other capital needs.
RESTRUCTURING, REBRANDING AND OTHER SPECIAL CHARGES
In the first quarter of 1998, Premiere recorded a charge of approximately $7.5
million to restructure the operations of Premiere and Xpedite subsequent to
their merger. Such costs consist of severance associated with workforce
reduction, lease termination costs, costs to terminate certain contractual
obligations and asset impairments. Severance benefits have been provided for
termination of 122 employees. These actions resulted from management's plans to
reduce sales, operations and administrative headcount by exiting duplicative and
under performing operations. Premiere has also provided for lease termination
and clean-up costs associated with these facilities and operations. In addition,
the Company provided for costs associated with commitments under certain
advertising contracts from which the Company was generating no incremental
revenue and for costs to terminate certain unfavorable reseller agreements.
Although certain restructuring actions were being contemplated at the
acquisition date, definitive plans for such actions were not formalized until
after such date. Accordingly, there were no exit costs included in the purchase
price allocation of Xpedite.
THE YEAR 2000 ISSUE
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 have
<PAGE>
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 members of senior management and a Year 2000 Task Force
comprised of project leaders for each of the Company's operating subsidiaries
and key corporate functional areas. 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 necessary 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
appropriate Software Applications and Hardware Platforms, (ii) assessment of
appropriate repair requirements, (iii) repair or replacement of Software
Applications and Hardware Platforms, where appropriate, (iv) researching and/or
testing of appropriate individual Software Applications and Hardware Platforms
to determine correct manipulation of dates and date-related data regarding the
Year 2000 issue, (v) certification by users or testers within the Company that
such Software Applications and Hardware Platforms appropriately handle dates and
date-related data regarding the Year 2000 issue, (vi) appropriate system
integration testing of multiple Software Applications and Hardware Platforms to
determine correct manipulation of dates and date-related data regarding the
Year 2000 issue, and (vii) creation of commercially reasonable contingency plans
in the event certain Year 2000 readiness efforts fail. The Company is aware that
some of its Hardware Platforms contain embedded microprocessors and it has
included the repair or replacement of such embedded microprocessors as part of
the Initiative.
The Company retained a nationally recognized independent consultant
("Consultant") to assist in assessing and recommending revisions to the
Initiative, and such recommendations have been taken into consideration in
developing the Initiative. 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 additional adjustments to the
Initiative, as required.
The Company has materially 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. In one operating subsidiary, one operational challenge not related to Year
2000 has the potential to delay the completion of software deployment in one
subsystem into the third quarter of 1999. Two contingency plans are being
pursued in parallel with the primary initiative to insure that there is minimal
impact on customers' use of the Company's services. In another subsidiary, the
implementation of a new, enhanced customer care system has been rescheduled
until after the completion of the summer peak usage season. As a contingency
plan, the existing system will also be adapted for Year 2000. 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 final testing
throughout the Company by no later than the end of the second 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 verification that the majority of suppliers' Software
Applications and Hardware Platforms, with appropriate "version modification,"
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 may be vulnerable to a
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
<PAGE>
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 business, 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 business, 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 business, 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 and
subcontractors, 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 $7 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 complete, 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 business, 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 business, financial condition and results of operations.
The Company's Contingency Plans. The Initiative includes the development of
- -------------------------------
commercially reasonable 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 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 June 1998, the Financial Accounting Standards Board (the "FASB") issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS" No. 133"). SFAS No. 133 establishes accounting and reporting
standards for derivatives and hedging. It requires that all derivatives be
recognized as either assets or liabilities at fair value and establishes
specific criteria for the use of hedge accounting. The Company's required
adoption date is January 1, 2000. SFAS No. 133 is not to be applied
retroactively to financial statements of prior periods. The Company expects no
material adverse effect to its financial position upon adoption of SFAS No. 133.
<PAGE>
FORWARD-LOOKING STATEMENTS
When used in this Form 10-Q and elsewhere by management or Premiere from time to
time, the words "believes," "anticipates," "expects," "will" and similar
expressions are intended to identify forward-looking statements concerning
Premiere's operations, economic performance and financial condition. These
include, but are not limited to, forward-looking statements about Premiere's
business strategy and means to implement the strategy, Premiere's objectives,
the amount of future capital expenditures, the likelihood of Premiere's success
in developing and introducing new products and services and expanding its
business, and the timing of the introduction of new and modified products and
services. For those statements, Premiere 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 Premiere, 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
Premiere's forward-looking statements, including the following factors:
. factors described from time to time in the Company's press releases,
reports and other filings made with the Securities and Exchange
Commission;
. Premiere's ability to manage its growth and to respond to rapid
technological change and risk of obsolescence of its products,
services and technology;
. market acceptance of new products and services, including
Orchestrate(R);
. development of effective marketing, pricing and distribution
strategies for new products and services, including Orchestrate(R);
. competitive pressures among communications services providers may
increase significantly;
. costs or difficulties related to the integration of businesses, if
any, acquired or that may be acquired by Premiere may be greater
than expected;
. expected cost savings from past or future mergers and acquisitions
may not be fully realized or realized within the expected time
frame;
. revenues following past or future mergers and acquisitions may be
lower than expected;
. operating costs or customer loss and business disruption following
past or future mergers and acquisitions may be greater than
expected;
. the success of Premiere's strategic relationships, including the
amount of business generated and the viability of the strategic
relationships, including the amount of business generated and the
viability of the strategic partners, may not meet expectations;
. possible adverse results of pending or future litigation;
. risks associated with interruption in Premiere's services due to the
failure of the platforms and network infrastructure utilized in
providing its services;
. risks associated with the Year 2000 issue, including Year 2000
problems that may arise on the part of third parties which may
effect Premiere's operations;
. risks associated with expansion of Premiere's international
operations;
. general economic or business conditions, internationally, nationally
or in the local jurisdiction in which Premiere is doing business,
may be less favorable than expected;
. legislative or regulatory changes may adversely affect the business
in which Premiere is engaged; and
<PAGE>
. changes in the securities markets may negatively impact Premiere.
Premiere cautions that these factors are not exclusive. Consequently, all of the
forward-looking statements made in this Form 10-Q and in documents incorporated
in this Form 10-Q are qualified by these cautionary statements. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date of this Form 10-Q. Premiere takes on no obligation to
publicly release the results of any revisions to these forward-looking
statements that may be made to reflect events or circumstances after the date of
this Form 10-Q, or the date of the statement, if a different date.
All statements made herein regarding the Company's state of readiness with
respect to the Year 2000 issue constitute "Year 2000 readiness disclosures" made
pursuant to the Year 2000 Information and Readiness Disclosure Act, Public Law
No. 105-271.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is exposed to market risk from changes in interest rates and foreign
currency exchange rates. The Company manages its exposure to these market risks
through its regular operating and financing activities. Derivative instruments
are not currently used and, if utilized, are employed as risk management tools
and not for trading purposes.
At March 31, 1999, no derivative financial instruments were outstanding to hedge
interest rate risk. The interest rates on the Company's borrowings under its
credit facility are based on either the lender's Prime Rate or LIBOR. Any
changes in these rates would affect the rate at which the Company could borrow
funds under its bank credit facility. A hypothetical immediate 10% increase in
interest rates would decrease the fair value of the Company's fixed rate
convertible subordinated notes outstanding at March 31, 1999, by $6.9 million. A
hypothetical 10% increase in interest rates on the Company's variable rate long-
term debt for a duration of one year would increase interest expense by $0.9
million.
Approximately 27.0% of the Company's sales and 20.7% of its operating costs and
expenses were transacted in foreign currencies in 1999. As a result,
fluctuations in exchange rates impact the amount of the Company's reported sales
and operating income. Historically, the Company's principal exposure has been
related to local currency operating costs and expenses in the United Kingdom and
the Asia Pacific region and local currency sales in Europe and the Asia Pacific
region. The Company has not used derivatives to manage foreign currency exchange
risk and no foreign currency exchange derivatives were outstanding at March 31,
1999. To minimize the impact of changes in exchange rates, the Company borrows
from time to time in British Pounds under its credit facility.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company has several litigation matters pending, as described below, which it
is defending vigorously. Due to the inherent uncertainties of the litigation
process and the judicial system, the Company is unable to predict the outcome of
such litigation matters. If the outcome of one or more of such matters is
adverse to the Company, it could have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company and certain of its officers and directors 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 or otherwise acquired the
Company's common stock from as early as February 11, 1997 through June 10, 1998.
Class members allegedly include those who purchased the Company's common stock
as well as those who acquired stock through the Company's acquisitions of Voice-
Tel Enterprises, Inc. ("Voice-Tel"), Voice-Tel's franchisees and Xpedite.
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 acquisitions of Voice-Tel,
Xpedite, American Teleconferencing Services, TeleT Telecommunications, LLC
("TeleT") and VoiceCom Holdings, Inc. ("VoiceCom"), as well as its venture with
UniDial Communications, its investment in USA.NET and the commercial release of
Orchestrate(R). 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
<PAGE>
customer and by a strategic partner with respect to the Company's Enhanced
Calling Services, revenue shortfalls from its Voice and Data Messaging services,
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
voice messaging services due to difficulties in consolidating and integrating
its sales function. Plaintiffs allege violation of Sections 10(b), 14(a) and
20(a) of the Securities Exchange Act of 1934 and Sections 11, 12 and 15 of the
Securities Act of 1933. The Company filed a motion to dismiss this complaint in
April 1999.
A lawsuit was filed on November 4, 1998 against the Company, as well as
individual defendants Boland T. Jones, Patrick G. Jones, George W. Baker, Sr.,
Eduard J. Mayer and Raymond H. Pirtle, Jr. in the Southern District of New York
Plaintiffs were shareholders of Xpedite who acquired common stock of the Company
as a result of the merger between the Company and Xpedite in February 1998.
Plaintiffs' allegations are based on the representations and warranties made by
the Company in the prospectus and the registration statement related to the
merger, the merger agreement and other documents incorporated by reference,
regarding the Company's acquisitions of Voice-Tel and VoiceCom, the Company's
roll-out of Orchestrate(R), the Company's relationship with customers Amway
Corporation and DigiTEC, 2000, Inc., and the Company's 800-based calling card
service. Based on these factual allegations, plaintiffs allege causes of action
against the Company for breach of contract against all defendants for negligent
misrepresentation, violations of Sections 11 and 12(a)(2) of the Securities Act
of 1933 ("Securities Act"), and against the individual Defendants for violation
of Section 15 of the Securities Act. Plaintiffs seek undisclosed damages
together with pre- and post-judgment interest, recission or recissory damages as
to violation of Section 12(a)(2) of the Securities Act, punitive damages, costs
and attorneys' fees. A motion to dismiss and a motion to transfer venue to
Georgia are presently pending.
On November 26, 1997, Wael Al-Khatib ("Al-Khatib"), the sole shareholder and
former president of Communications Network Corporation ("CNC"), and his company,
Platinum NetworkCorp. ("Platinum"), filed a complaint against Premiere
Communications, Inc. ("PCI"), WorldCom Network Services, Inc. f/k/a WilTel, Inc,
("WorldCom"), 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 United States District Court for
the Eastern District of New York. 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 scheme. The
plaintiffs are seeking at least $250 million in compensatory damages and $500
million in punitive damages from PCI and the other defendants. This matter has
been settled, pending payment of $250,000 by Khatib to WorldCom. The settlement
does not require PCI or Premiere to make any payments.
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 in the complaint against Xpedite are limited to
plaintiffs' investment in Xpedite. The plaintiffs have alleged that two of the
named defendants, allegedly acting as officers, directors, agents or
representatives of Xpedite, induced the plaintiffs to make certain investments
in Xpedite but that the plaintiffs failed to receive the benefits that they were
promised. Plaintiffs allege that Xpedite knew or should have known of alleged
wrongdoing on the part of other defendants. 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. On November
16, 1998 the court entered an order transferring all disputes between plaintiffs
and certain defendants to arbitration and dismissing without prejudice
plaintiff's complaint against those defendants. On or about December 23, 1998,
Xpedite filed a motion to stay the action pending the resolution of the
arbitration or in the alternative to compel plaintiffs to provide discovery. On
January 22, 1999, the court granted Xpedite's motion to stay further proceedings
pending the arbitration. On March 11, 1999, plaintiffs filed a motion for
reconsideration of the court's decision. A trial date has been tentatively set
for July 1999.
On or about May 27, 1998, Telephone Company of Central Florida ("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 and PCI are two of the largest creditors in this
bankruptcy case. In August
<PAGE>
1998, WorldCom 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
and PCI, alleging service problems with WorldCom and PCI. PCI and TCCF reached
an agreement, approved by the Bankruptcy Court in November 1998, which provides
for mutual releases to be executed between the parties and certain affiliates
and insiders. The mutual releases have been fully executed, in accordance with
the terms of the settlement. The settlement does not PCI or Premiere to make any
payments.
On December 22, 1998 Shelly D. Swift filed a complain against First USA Bank,
First Credit Card Services USA, and PCI in the United States District Court for
the Northern District of Illinois. Swift alleges that the defendants sent her an
unsolicited "credit card" in violation of the Truth in Lending Act and state
law. Swift seeks an injunction and monetary damages on behalf of a putative
class of persons who received the alleged credit card. On February 19,1999, the
defendants moved to dismiss the complaint for failure to state a claim upon
which relief can be granted.
In March 1999, Aspect Telecommunications, Inc. ("Aspect"), the purported current
owner of certain patents, filed suit against Premiere and PCI alleging that they
had violated claims in these patents and requesting damages and injunctive
relief. The suit asserts that Premiere is offering certain "calling card and
related enhanced services," "single number service" and "call connecting
services" covered by four patents owned by Aspect. Premiere has reviewed the
subject patents and, based on that review, believes that its products and
services currently being marketed do not infringe them. On March 29, 1999 the
Company filed an answer denying the allegations and a counterclaim seeking to
invalidate the patents. Additionally, the Company believes that certain licenses
it has from third-party vendors may insulate the Company from some or all of any
damages in the event of an adverse outcome in this litigation.
The Company is also involved in various other legal proceedings which the
Company does not believe will have a material adverse effect upon the Company's
business, financial condition or results of operations, although no assurance
can be given as to the ultimate outcome of any such proceedings.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Number Exhibit Description
3.1 Amended and Restated Bylaws of the registrant, as amended.
11.1 Statements re: computation of per share earnings.
<PAGE>
27.1 Financial Data Schedule for the Three Month Period Ended
March 31, 1999.
(b) Reports on Form 8-K:
The following reports on Form 8-K were filed during the quarter for which this
report is filed:
Entities For Which
Date of Report Financial
(Date Filed) Items Reported Statements Filed
03/04/99 Item 5 - Announcing change in the None.
accounting treatment of the merger
with Xpedite Systems, Inc.
<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.
May 17, 1999 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)
<PAGE>
EXHIBIT INDEX
Exhibit Number Exhibit Description
3.1 Amended and Restated Bylaws of the registrant, as amended.
27.1 Financial Data Schedule for the Three Month Period Ended
March 31, 1999.
<PAGE>
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
-i-
<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
-ii-
<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
-iii-
<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.
-2-
<PAGE>
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
telecommunication, or-other reliable
-3-
<PAGE>
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
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<PAGE>
director's Voting Group act to fill the vacancy. A 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
-7-
<PAGE>
unable or unwilling, 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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<PAGE>
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
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<PAGE>
designated by the Board of Directors or 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
certificate
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<PAGE>
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
necessary, any
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<PAGE>
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
different for each of the persons identified. Each
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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.
-16-
<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 office 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
-17-
<PAGE>
adopted by the Board of Directors may be altered, amended, or repealed, 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.
* * * * * *
-18-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PREMIERE
TECHNOLOGIES, INC. FINANCIAL STATEMENTS FOR THE PERIOD ENDED MARCH 31, 1999 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 15,673
<SECURITIES> 2,919
<RECEIVABLES> 68,293
<ALLOWANCES> (10,720)
<INVENTORY> 0
<CURRENT-ASSETS> 111,890
<PP&E> 247,785
<DEPRECIATION> (121,514)
<TOTAL-ASSETS> 755,921
<CURRENT-LIABILITIES> 201,272
<BONDS> 0
0
0
<COMMON> 472
<OTHER-SE> 373,954
<TOTAL-LIABILITY-AND-EQUITY> 755,921
<SALES> 112,809
<TOTAL-REVENUES> 112,809
<CGS> 32,456
<TOTAL-COSTS> 48,198
<OTHER-EXPENSES> 86,410
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (5,596)
<INCOME-PRETAX> (27,840)
<INCOME-TAX> (2,812)
<INCOME-CONTINUING> (25,028)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (25,028)
<EPS-PRIMARY> (0.54)
<EPS-DILUTED> (0.54)
</TABLE>
