-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OokamsLKLdV7WgxORm3E+gfPGclWTk/nU626fnuad9s5J8C6rtuRA2mnsUfuxch/ MMa+FaFetTg1P/Sa1JoQEw== 0000931763-99-001697.txt : 19990518 0000931763-99-001697.hdr.sgml : 19990518 ACCESSION NUMBER: 0000931763-99-001697 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PREMIERE TECHNOLOGIES INC CENTRAL INDEX KEY: 0000880804 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATION SERVICES, NEC [4899] IRS NUMBER: 593074176 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13577 FILM NUMBER: 99626105 BUSINESS ADDRESS: STREET 1: 3399 PEACHTREE RD NE STREET 2: LENOX BLDG STE 400 CITY: ATLANTA STATE: GA ZIP: 30326 BUSINESS PHONE: 4042628400 MAIL ADDRESS: STREET 1: 3399 PEACHTREE RD NE STREET 2: STE 400 CITY: ATLANTA STATE: GA ZIP: 30326 10-Q 1 FORM 10-Q 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 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 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. 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. 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. 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 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. 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): 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. 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 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 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) ======== ======= 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 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. 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 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 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 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. 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 . 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 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 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. 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. 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) 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. EX-3.1 2 AMENDED AND RESTATED BYLAWS AMENDED AND RESTATED BYLAWS OF PREMIERE TECHNOLOGIES, INC. Adopted as of December 18, 1995 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- 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- 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- 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. 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- 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- 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. -4- 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. -5- 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 -6- 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- 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. -8- 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. -9- 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 -10- 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 -11- 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 -12- 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 -13- 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. -14- 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. -15- 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- 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- 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- EX-27 3 FINANCIAL DATA SCHEDULE
5 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. 1,000 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 15,673 2,919 68,293 (10,720) 0 111,890 247,785 (121,514) 755,921 201,272 0 0 0 472 373,954 755,921 112,809 112,809 32,456 48,198 86,410 0 (5,596) (27,840) (2,812) (25,028) 0 0 0 (25,028) (0.54) (0.54)
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