-----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, Wv+XZSv36PgOu6NU+UI3pqc+TFg567YQr7vxO3zPK/YTJALxas6MG3qH0esiW1Po 99I6RJwJA4t3ahGW/gZx1w== 0000931763-99-001040.txt : 19990413 0000931763-99-001040.hdr.sgml : 19990413 ACCESSION NUMBER: 0000931763-99-001040 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990331 DATE AS OF CHANGE: 19990412 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PREMIERE TECHNOLOGIES INC CENTRAL INDEX KEY: 0000880804 STANDARD INDUSTRIAL CLASSIFICATION: 4899 IRS NUMBER: 593074176 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-13577 FILM NUMBER: 99584137 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-K 1 FORM 10-K - - ------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM 10-K ---------------- [X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 1998 Commission file number: 0-27778 PREMIERE TECHNOLOGIES, INC. (Exact name of registrant as specified in its charter) Georgia 59-3074176 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization)
3399 Peachtree Road, N.E., The Lenox Building, Suite 600, Atlanta, Georgia 30326 (address of principal executive office) (Registrant's telephone number, including area code): (404) 262-8400 Securities registered pursuant to Section 12(b) of the Act: None None (Title of each class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: Common Stock, Par Value $0.01 Per Share (Title of class) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K ((S)229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] The aggregate market value of voting stock held by non-affiliates of the registrant, based upon the closing sale price of common stock on March 29, 1999 as reported by The Nasdaq Stock Market's National Market, was approximately $455,478,924. As of March 30, 1999 there were 46,067,323 shares of the registrant's common stock outstanding. List hereunder the documents incorporated by reference and the part of the Form 10-K (e.g., Part I. Part II, etc.) into which the document is incorporated: Portions of the registrant's Proxy Statement for its 1998 meeting of shareholders are incorporated by reference in Part III. - - ------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------- Index
Page ---- Part I Item 1. Business........................................................ Item 2. Properties...................................................... Item 3. Legal Proceedings............................................... Item 4. Submission of Matters to a Vote of Security Holders............. Part II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters................................................................. Item 6. Selected Financial Data......................................... Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................................................... Item 8. Financial Statements and Supplementary Data..................... Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................................................... Part III Item 10. Directors and Executive Officers of the Registrant.............. Item 11. Executive Compensation.......................................... Item 12. Security Ownership of Certain Beneficial Owners and Management.. Item 13. Certain Relationships and Related Transactions.................. Part IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8- K....................................................................... Signatures............................................................... Exhibits.................................................................
FORWARD LOOKING STATEMENTS When used in this Form 10-K and elsewhere by management or Premiere Technologies, Inc. ("Premiere" or the "Company") 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 under the caption "Factors Affecting Future Performance" in this Form 10K; . 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 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-K and in documents incorporated in this Form 10-K 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-K. 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-K, or the date of the statement, if a different date. PART I ITEM 1. BUSINESS Overview Premiere Technologies, Inc. ("Premiere" or the "Company") began in 1991 with the vision to enhance telephone-based communications. The telephony solutions offered by Premiere in effect became a virtual office for thousands of mobile professionals worldwide. In 1996, the Company saw the opportunity to integrate the Internet into everyday business and personal communications solutions. Through its Orchestrate(R) suite of Internet-based communications products, the Company is Web-enabling its traditional network-based solutions, including Premiere Document Distribution, Premiere Interactive Voice Response, Premiere Conferencing, Premiere Voice and Data Messaging and Premiere Enhanced Calling Services. Combining the power of the Internet with the reach of the telephone, the Company offers an impressive array of innovative solutions to simplify the communications people rely on everyday, at work and at home. Premiere, a Georgia corporation, was incorporated in 1991, and its principal executive offices are located at 3399 Peachtree Road, N.E., Lenox Building, Suite 600, Atlanta, Georgia 30326, telephone number (404) 262-8400. Industry Background Managing the evolving communications environment has become more complex as a result of increased service and device options, rapidly changing technology standards and shortened product life cycles. The proliferation of communications devices and multiple messaging platforms has dramatically increased the average person's accessibility and, accordingly, the number of messages and means of communications he or she must manage. A study by the Institute for the Future, the Gallup Organization, Pitney-Bowes and San Jose State University, based on responses from more than 1,000 employees of Fortune 1000 companies, found that workers send and receive an average of 178 messages each day. Both businesses and individuals face a demanding communications environment today in which they must utilize a number of communications systems, convert information from one medium to another and deal with multiple vendors for each of these services. Today, many stand-alone communications services are provided through hardware-based legacy systems, including landline telephone systems, messaging devices and local area networks, or "LANs", that reside in whole or in part at a customer's location. The architecture of the customer premises equipment, or "CPE," that comprises such systems is often closed in nature, which makes integration with other systems and networks difficult and expensive. Increasingly, users are demanding that their existing CPE be integrated with more open and intelligent worldwide communications networks such as the Internet. The Company believes that, due to the growth of Internet communications and the complexity of the integration of current telecommunications with Internet communications, users will increasingly outsource their communications requirements to third parties such as Premiere. Management believes that its single source, network-based solutions for simplifying communications uniquely positions the Company to capitalize on these trends. The Premiere Solution Premiere believes that customers will prefer the Company's network-based solutions to help them manage their communications needs more effectively and efficiently, because the Company's solutions reduce its customers' costs of equipment ownership, exposure to technology obsolescence and dependence on scarce internal technical resources. The core of the Premiere solution is its "intelligent network" or "Network Premiere," which integrates stand-alone communications services and provides customers with access to a suite of advanced Internet and telephony-based communications services for the management of their communications needs. The Company's modular and scaleable network infrastructure incorporates an open-system design, which allows the Company to easily expand capacity and provides the Company with the flexibility to develop and customize its service offerings. Premiere's network infrastructure consists of several platforms, including: . platforms connected to the public switched telephone network via large tandem switches; . platforms which transmit voice and data utilizing Internet protocol ("IP"), frame relay switching protocol, and other packet and call based technologies; 1--1 . platforms which are Internet accessible; . a platform for document distribution services using servers from Sun MicroSystems to perform all primary processing and switching functions; and . commercially available conferencing bridges. The Company plans to continue to make investments in its network infrastructure in 1999 and may, from time to time, outsource certain of its network infrastructure requirements. Notwithstanding this continued investment in its network infrastructure, the Company considers itself primarily an integrator of innovative communications solutions and a sales and marketing organization. The Premiere Strategy Premiere's goal is to become the world's leading provider and integrator of innovative communications solutions. Premiere's principal strategies to achieve this goal are as follows: Leverage the Company's Existing Customer Base. The Company's corporate customer base includes 40% of the Fortune 500 companies. While certain of these enterprises are customers of more than one service offered by Premiere, the Company believes that the cross-selling opportunities within its customer base have only begun to be exploited. To enhance these cross-selling opportunities, the Company recently reorganized by combining Premiere Document Distribution, Premiere Corporate Messaging, Premiere Worldlink Corporate Card, Premiere Interactive Voice Response and Premiere Conferencing (the Company's most complementary offerings to large corporations) into a single strategic business unit known as "Corporate Enterprise Solutions." As part of that reorganization the Company also combined Premiere Internet-Based Communications Services, Premiere Voice and Data Messaging and Premiere Enhanced Calling Services into a single strategic business unit known as Emerging Enterprise Solutions. Premiere's 1999 sales plan is designed to reward the cross-selling efforts of the Corporate Enterprise group's direct sales force, and to capitalize on the Emerging Enterprise group's opportunities to migration-sell its existing customers to Internet-based services. Continue to Offer Innovative Applications and Solutions. The Company plans to continue to enhance the Orchestrate line of services and introduce additional Internet-based services in 1999 and beyond. Consistent with Premiere's strategy of Web-enabling the everyday communications needs and business strategies of its partners and customers, the Company has commercially released Orchestrate(R) office, a robust unified messaging tool, and Orchestrate(R) personal assistant, which provides customers with their own single electronic address that serves as the customer's phone number, fax number and e-mail address. Build Brand Recognition and Leadership. The Company believes that a consistent and focused branding message will differentiate the Company's products and services in the minds of its customers and enhance the Company's reputation for delivering innovative communications solutions to the marketplace. The Company recently consolidated its entire suite of products and services under the Premiere brand and intends to commit significant resources to establishing and strengthening recognition of the Premiere brand. Create Revenue-Generating Partnerships and Strategic Alliances. The Company believes that its ability to create and maintain effective alliances that generate revenues and produce new technologies is an important aspect of its long-term strategy. The Company's strategic marketing partners include leading companies such as American Express Travel Related Services, Inc. ("American Express"), British Airways PLC and Mastercard International Incorporated ("Mastercard International"). The Company's strategic relationships with and investments in several companies offering Internet-based information and communications products and services were recently consolidated under the name PTEKVentures.com. PTEKVentures.com is responsible for maximizing the Company's technical, commercial and financial investments in these relationships by, among other things, establishing new sales channels that will drive utilization of Premiere's Internet-based service offerings. The Company has made investments in, and created meaningful sales channel and technology development arrangements with, a series of companies that provide communications and information services through the Internet, including WebMD, Inc. ("WebMD"), a leading full service healthcare portal, and USA.NET, Inc. ("USA.NET"), a leading electronic messaging company. 2 Continue International Expansion. The Company presently maintains international points-of-presence ("POPs") in over 60 cities in 25 countries, including POPs owned by the Company and those maintained by contractual partners who license document distribution systems from the Company. The Company expects to expand its geographic presence in 1999, either by acquisition or through internal growth. For example, the Company believes that it can increase international revenues by porting Premiere Conferencing and Premiere Voice and Data Messaging solutions to Europe and Asia, and then selling those services to existing multinational customers who are presently served by Premiere only in the United States. Premiere Services The Company provides its innovative solutions for simplifying communications through two strategic business units: Corporate Enterprise Solutions, targeting Fortune 500 and other large companies, and Emerging Enterprise Solutions, targeting smaller fast-track companies and individuals. Corporate Enterprise Solutions includes Premiere Document Distribution (formerly Xpedite); Premiere Corporate Messaging (formerly VoiceCom); Premiere Worldlink Corporate Card (formerly VoiceCom AccessOne); Premiere Interactive Voice Response; and Premiere Conferencing (formerly American Teleconferencing Services). Emerging Enterprise Solutions includes Internet-Based Communications Services; Premiere Voice and Data Messaging (formerly Voice- Tel); and Premiere Enhanced Calling Services (formerly Premiere Communications). Premiere Corporate Enterprise Solutions Premiere Document Distribution. Premiere's Document Distribution services provide customers with a lower cost, more reliable, more timely and effective information delivery method than most other document distribution alternatives. These services are described below.
Feature Description ------- ----------- Fax Broadcast............... Customers rapidly distribute a document to multiple recipients by a single transmission through Premiere's document distribution system to a list of multiple fax addresses. Robust Access Options....... Premiere's proprietary "PC Xpedite" software enables a customer to transmit a document to Premiere from a PC or local area network for distribution across the Premiere network and enables a customer to maintain lists of addresses by computer access to the Premiere system. Customers may also access Premiere's document distribution system from fax machines, e-mail or main frame computer.
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Feature Description ------- ----------- Gateway Messaging........... Customers can send information from the customer's computer through Premiere's document distribution system to a recipient's fax or telex machine, or to a recipient via the Internet or X.400 electronic mail networks. This service allows a customer to send a large volume of individual communications (i.e., a single document to a single recipient or from a single sender), each of which may require similar processing but contains different information such as confirmations of reservations and delivery of invoices. Fax on Demand............... Callers can select information using a touch tone phone and have such information sent directly to a fax machine. Enhanced Fax Merging........ Senders may personalize information which can be inserted into original text at any point in a standard multi-address document. Toll-Free Fax Response...... Senders may receive responses by fax to a toll- free 800 number. X-Web....................... Provides Internet access to Premiere's Document Distribution services, including access to job status information.
In addition, Premiere offers discounted international services. These services allow a customer to use an automatic dialing device attached to the customer's fax machine to direct international faxes to the Premiere network for delivery to the recipient at a discount from standard international prices. Premiere's discounted international service includes "store-and- forward" service, in which a fax is transmitted and stored for subsequent delivery and "real-time" service in which the sender's fax machine is connected directly to the recipient's fax machine thereby best emulating "normal" fax transmission. Premiere Corporate Messaging. Premiere offers centralized 800-based voice messaging services to large corporate clients through four operations centers. Premiere also offers local access voice messaging services to large corporate clients through its worldwide private data network. Both services offer customers functionality similar to e-mail and the ability to easily communicate with the touch of a button. Premiere Corporate Messaging services allow customers to record and send messages to hundreds of recipients by entering their mailbox numbers or sending to a pre-established distribution list; answer messages simply by pressing a number on the telephone keypad; and copy and route received messages to anyone else on the system or network. Premiere Corporate Messaging also includes facilities management services where the voice messaging equipment is located on the customer's premises and Premiere provides all voice messaging services to that customer, including equipment maintenance and end-user service and support. All of the Premiere Corporate Messaging services include important end-user support services, such as the development and distribution of voice mail directories, the generation and maintenance of large voice mail distribution lists, all administration services (adds, deletes and changes) and customer or end-user training. Premiere WorldLink Corporate Card. Premiere offers an 800-based enhanced calling card that allows customers to make domestic and international long distance calls, access voice mail and fax mail, set up conference calls, speed-dial frequently called corporate and personal numbers, and easily connect to travel services (travel agents, airlines, hotels and rental cars), information services (news, weather, sports and financial information), and help desk services. In addition, the Premiere Worldlink Corporate Card provides project code accounting functionality, which allows the customer to set up project or account codes for easy billing of calls to a particular client matter or account. Premiere Interactive Voice Response. Premiere provides various interactive voice response ("IVR") applications using custom voice prompts and commands from a caller's telephone keypad to retrieve, process or route certain information or telephone calls. This IVR service is used by, among others, financial institutions (such as Bank of America), where Premiere's platform is used to enhance call processing for checking, savings and other account information. 4 Premiere Conferencing. Premiere offers a full range of conferencing services for successful business communications worldwide. Premiere Conferencing specialists assist customers in customizing services to best meet their needs. The three basic levels of conferencing services are as follows:
Service Level Description ------------- ----------- Dialog Services............. This automated conferencing service allows users to begin and conduct their conference without the assistance of a Premiere Conferencing support specialist. Security features include passcodes and tones to introduce the arrival and departure of participants. Ideal for routine meetings with 48 or fewer participants. Legend Services............. These group communications services includes assistance from Premiere Conferencing support specialists and other Premiere Conferencing team members. The Legend Plus service includes a dedicated conference support specialist to fully monitor the conference call. Ideal for sales meetings, company announcements, strategic planning sessions, staff meetings and Board meetings. Paragon Services............ This collection of event management services are customized for each client through consultation with Premiere Conferencing team members. These services are for high profile events such as press conferences, training programs, client seminars and quarterly earnings releases.
In addition, Premiere Conferencing offers Web enhancements that allow real- time sharing of presentations over the Internet during the course of a conference call (Web-based data collaboration). Premiere Conferencing also offers enhancements such as taping and replay services, translation services, transcription services, consulting services, fulfillment services to assemble and mail conference materials, invitation design, RSVP and reminder services and electronic question and answer and polling services. Future plans include international expansion and Web-enabled conferencing services, including Click 'N Conference(TM), reservations and scheduling. Premiere Emerging Enterprise Solutions Premiere Internet-Based Communications Services. Premiere's primary Internet-based service is Orchestrate(R) by Premiere, a Web-based communications platform. Orchestrate(R) integrates the Company's service offerings by allowing customers to access the Company's services through a computer or telephone. The Orchestrate(R) product line includes:
Service Level Description ------------- ----------- Orchestrate(R) office A Web-based communications tool kit that combines voice mail, e-mail, fax mail and conference calling into one easy to use service. Orchestrate(R) office includes an embedded contact manager to manage a customer's communications needs: a universal inbox for all of the customer's messages; a personal Web page that functions as a virtual receptionist; Click 'N Conference(TM), which allows the customer to initiate conference calls from a computer; and a personal 800 number. A customer's personal Web page is automatically generated by the Premiere platform from input provided by the customer. Orchestrate(R) office operates using an Internet browser in connection with any device connected to the Internet and does not require customers to purchase additional specialized hardware or software.
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Orchestrate(R) personal Provides customers with a single electronic assistant address that serves as their telephone number, fax number and e-mail address. Customers dial the same number to access all their messages voice, fax and e-mail messages and to place long-distance or conference calls and use enhanced services such as travel and news services. Orchestrate(R) unified Allows customer to listen and respond to their messaging e-mail and voice mail messages from virtually any touch-tone phone using advanced text-to- speech technology. The service also allows customersto access their voice mail and e-mail messages from their computer.
5--1 In addition, the Orchestrate(R) platform is used by other companies to power Internet communications in their product offerings. For example, WebMD, the Atlanta-based Internet healthcare Web site that offers a comprehensive suite of Internet-based products and services for healthcare professionals, utilizes a co-branded version of Orchestrate(R) that allows healthcare professionals to manage their critical flow of communications. Premiere recently announced WebMD's agreement to purchase a minimum of 50,000 Orchestrate(R) accounts. The agreement provides for Web-based communications elements of WebMD's commercial offering to be branded as "Virtual Receptionist Powered by Orchestrate(R)". The strategic alliance provides that Premiere will serve as WebMD's exclusive provider of enhanced and unified telecommunications services offered to WebMD's community of healthcare professionals. In addition, under a licensing and co-marketing arrangement, WebMD will be Premiere's exclusive reseller of Orchestrate(R) services through medical portals for the next four years. The Company recently introduced the tagline "Powered by Orchestrate(R)" as its branding approach in circumstances in which its service is an important ingredient of another party's offering. The Company intends to continue to deploy this branding strategy in 1999. Premiere Voice and Data Messaging. Premiere's private data network allows customers of Voice and Data Messaging services access to one of the largest "voice intranets" in the world. The Company's intelligent data network offers voice mail customers functionality similar to e-mail and the ability to easily communicate inside the voice intranet with a touch of a button. Customers to the Company's voice intranet can record and send messages to hundreds of recipients by entering their mailbox numbers or sending to a pre-established distribution list; answer messages simply by pressing a number on the telephone keypad; and copy and route received messages to anyone else on the network. Premiere Enhanced Calling Services. Premiere Enhanced Calling Services include long distance and enhanced 800-based communications services, which are offered on a direct and a wholesale basis. The following table describes available products and features.
Feature Description ------- ----------- Long Distance Calling Card.. Customers can place worldwide long distance calls at attractive rates. Message Notification........ Customers can instruct platform to notify them upon receipt of messages by page or call to a predesignated number. Special pager codes identify type of message (voice, fax or e-mail) received. Personal 800 Numbers........ Customers receive personal 800 number serving as single point of access for callers to select various messaging options or attempt to locate customer through call connect feature. E-mail ..................... Customers are provided with an e-mail address. Messages can be read over a telephone using proprietary text-to-speech functionality or sent to a fax machine. Fax Mail.................... Customers can receive and store fax transmissions and later instruct the platform to forward faxes to a specified location. Callers may also attach a voice introduction. Conference Calling.......... Customers can initiate conference calls by commands delivered through a telephone key pad. Information Services........ Customers can access news, weather, sports and financial and other information updates. Other Services.............. Customers can program speed dial and access travel and concierge services including lodging, airline, rental car, dining and other events.
6 Premiere Platforms and Network Infrastructure The Company operates, and is continuing to develop, a global network ("Network Premiere") that provides customers with a way to simplify their everyday communications. Network Premiere has been designed to facilitate the "one to many" communications requirements of large corporations. Through Network Premiere, customers have access to a suite of advanced Internet and telephony-based communications services for the management of all of their daily communications. This includes messages, documents, contact information, and incoming and outgoing calls. The network is designed to take full advantage of the latest telephony and Internet technologies. Network Premiere is being developed using an open standards approach, which makes it simple for Premiere to use the hardware and software of external vendors and for other service providers to interconnect their networks with Network Premiere. Customers can access Premiere's various services through the Internet and through local and/or 800 telephone numbers. Premiere Document Distribution services are provided primarily through a document distribution platform that uses servers to perform all primary processing and switching functions. This platform supports multiple input methods including, but not limited to, fax-to-fax, priority PC based software, e-mail gateways and high speed IP based interconnects. Outgoing faxes are delivered through line group controllers ("LGCs"), which are deployed in a decentralized fashion to exploit local delivery costs. The remote LCGs are connected to the servers over a wide area network via either private lines or Premiere's global TCP/IP based network. Messages are transported in bulk from one location domain to another using MCP to MCP protocol. The current domains include Sydney, Australia; Hong Kong; Tokyo, Japan; Seoul, Korea; Singapore; Basel, Switzerland; York, UK; Leeds, UK; Eatontown, New Jersey; Munich, Germany; and Paris, France. Remote nodes on the network are located in Belgium, Canada, Denmark, Italy, Malaysia, Netherlands, New Zealand and Taiwan. Premiere Document Distribution operates real time fax and real time telex nodes in many additional countries. Premiere Corporate Messaging offers centralized voice messaging services to large corporate clients via 800 access through multiple voice messaging platforms located in Atlanta, Georgia; Reno, Nevada; Arlington, Virginia; and Oakbrook, Illinois. Premiere also offers local access voice messaging services to large corporate clients through the Voice and Data Messaging platforms and network described below. Premiere WorldLink Corporate Card services are provided through a platform located in Atlanta, Georgia that consists of Unix-based industrial grade PC front-ends connected by a local area network to a tandem computer database server. Premiere Conferencing services are provided from centers in Colorado Springs, Colorado and Overland Park, Kansas on commercially available conferencing bridges. Complex, operator-assisted calls are supported on these bridges. Internally developed Dialog conference bridges utilizing Dialogic hardware and Premiere software are used to support unattended (no operator assistance) conference calls. Customers access the conferencing platform through DID, 800, Internet and virtual network access. The e-mail to voice mail exchange functionality which is the basis of Orchestrate(R) unified messaging and Orchestrate(R) personal assistant services is provided through unified servers that are connected to Premiere's frame relay network infrastructure. Acting as mail gateways, the unified messaging servers facilitate the transfer of messages between voice and e-mail message stores but do not store messages. The unified messaging platform can be configured either to send e-mail to a customer's local voice mail account, to send voice mail messages to the customer's e-mail account, or both, depending on the customer's needs. Customers access their messages using the familiar interface of the existing Premiere voice mail servers or their favorite e-mail client. Premiere Voice and Data Messaging services are currently provided through platforms installed in more than 200 sites in the US, Canada, Australia, New Zealand, UK, Hong Kong, Korea and Japan. Each system is connected to Premiere's global frame relay network infrastructure, which is used for transport of messages from one system to another. 7 Most of Premiere's Enhanced Calling services and Interactive Voice Response services are provisioned on platforms located in Atlanta, Georgia and Dallas, Texas that include Dialogic-based telephony nodes, fax nodes and conference nodes. These platforms are connected to the public switched telephone network via large tandem switches that are used primarily for least-cost routing functions. Premiere has also installed more advanced telephony platforms in Atlanta and London, England. These platforms will be used to support new calling card and voice mail/messaging applications as well as the telephony features for many of Premiere's Orchestrate(R) services. 7--1 Sales, Marketing And Distribution Premiere markets its services through multiple distribution channels that encompass: (i) direct sales through the Company's own dedicated sales force; (ii) direct marketing efforts where Premiere is responsible for lead generation and sales; (iii) co-brand relationships in which Premiere offers its services to the customers of other companies, such as financial institutions, that are seeking to increase their revenue from, and goodwill with, their customer base by offering value-added services; (iv) private-label relationships where Premiere may develop custom applications for its platforms and market its services jointly with its strategic partners; and (v) licensing and wholesale relationships where other companies market and sell Premiere's services under their names without significant assistance from Premiere. In all distribution channels, except licensing arrangements, Premiere pays commissions to, in the case of employees and agents, or shares revenues with the parties who assist Premiere in marketing its services. The Premiere marketing staff is primarily responsible for providing marketing support to the five channels described above at varying levels of involvement, depending on the channel. The marketing staff is also responsible for promoting the Premiere brand and corporate image in the marketplace. Direct Sales. The direct sales force is organized by the Company into the two key strategic business units mentioned earlier, Corporate Enterprise Solutions and Emerging Enterprise Solutions. The direct sales force for the Corporate Enterprise Solutions group has a regional reporting structure and a centrally managed national and international accounts program. Regional sales managers and their direct sales people have the ability to generate sales leads for all of Premiere's products and services. The Corporate Enterprise Solutions group sales staff targets primarily larger businesses with respect to Document Distribution, Conferencing and Interactive Voice Response services. The centrally managed national accounts program focuses on multi- location businesses that are better served by dedicated representatives with ultimate responsibility across different geographic regions. If appropriate, these national accounts sales people form account teams that include regional sales people when greater geographic coverage is needed or that include wholesale channel representatives when necessary. The Corporate Enterprise Solutions group markets its services through a full-time direct sales force operating from 50 sales offices in 16 countries and a significant network of third-party distributors. The direct sales force for the Emerging Enterprise Solutions group targets primarily single location, small to medium sized businesses, emphasizing Orchestrate(R) Web-based communications, Voice and Data Messaging and Enhanced Calling Services. This group also sells directly to hundreds of thousands of multilevel marketing representatives in organizations such as Amway, Mary Kay and Excel Communications. Direct Marketing. Premiere markets its Enhanced Calling Services directly under the Premiere WorldLink and AFCOM names. Direct marketing and sales efforts have traditionally focused on print advertising and direct mailings targeted at mobile professionals or, with respect to AFCOM, direct marketing done in conjunction with financial institutions located on military bases. Co-Brand Relationships. Premiere has relationships with a number of other companies, including the Royal Bank of Scotland PLC, Shared Technologies, and Cellular, Inc. under which Premiere provides its services to customers of those companies. These companies generally offer their customers access to Premiere's services, and Premiere pays a commission to the other company with respect to each customer who uses a co-branded service. Premiere believes that companies which enter into co-brand relationships with Premiere are motivated by the ability to offer additional value through unique product offerings to their customers, reinforce brand equity through custom voice prompts that their customers hear each time they access the service, communicate with their customers by broadcasting voice, fax or e-mail messages, and derive additional revenue. Marketing and fulfillment materials are generally issued under the Premiere name, with the co-brand customers also placing their logo on the materials. Private-Label Relationships. The Company also markets its services by establishing strategic relationships with companies such as American Express, British Airways PLC and Mastercard International. Through these relationships, Premiere provides enhanced services to the customers of the other company to help their customers better manage their communications. Private-label relationships are intended to provide these 8 other companies with: (i) a unique product or service which will be viewed as providing a value-add to their customers, thereby building brand loyalty and greater affinity; (ii) the ability to provide customized services to their customers over Premiere's platforms; and (iii) an incremental source of revenue. In connection with these private-label relationships, services are generally issued in the name of the other company and bear a logo and design of the other company's choosing. The fulfillment materials generally state that communications services are provided by Premiere. Licensing and Wholesale Relationships. A number of telecommunications companies have chosen to outsource part or all of their enhanced communications services to Premiere. Premiere licenses use of its platforms and voice messaging network to these companies. Such relationships enable these companies to: (i) provide enhanced services to their customers; (ii) generate additional revenue without developing or investing in their own infrastructure; and (iii) reduce costs and improve operational efficiencies through the use of more advanced technologies than are internally available. The open architecture of Premiere's platforms allows customization of services for the licensee or wholesale customer. Premiere generally provides its licensee or wholesale customers with access to customer and billing records for marketing and billing purposes. Licensee and wholesale customers generally are responsible for billing the end user and generally provide their own transmission facilities for use with Premiere's services. Services are private labeled by the licensee or wholesale customer with Premiere's contribution transparent to the end user. 8--1 Strategic Alliances PTEKVentures.com is the Company's Internet strategic alliance initiative designed to extend Premiere's Orchestrate(R) Web-based communications technology to emerging Internet companies. PTEKVentures.com's strategy is to identify Internet partners that create solutions that will drive utilization of the Company's Web-based services and provide long-term sales and marketing opportunities. In connection with these strategic alliances, PTEKVentures.com typically makes early round investments in these companies to promote partner loyalty, fund technological co-development opportunities, create distribution channels and provide a potential return on investment. PTEKVentures.com's Internet-related alliances are summarized below. WebMD. Based in Atlanta, Georgia, WebMD is a leading full service Internet healthcare Web site that offers a comprehensive suite of Internet-based content and services for healthcare professionals, as well as trusted healthcare information and online support communities for consumers. Through its relationship with WebMD, WebMD's healthcare professional customers receive the Virtual Receptionist, powered by Orchestrate(R)--a marriage of WebMD's Virtual Receptionist product and Premiere's Orchestrate platform, which integrates the full range of Internet-based communications services necessary for healthcare professionals. These services include voice mail, e-mail, fax mail, paging, worldwide long distance and active message notification. WebMD utilizes a co-branded version of Orchestrate(R) that allows healthcare professionals to manage their critical flow of communications. Premiere recently announced WebMD's agreement to purchase a minimum of 50,000 Orchestrate(R) accounts. The agreement provides for Web-based communications elements of WebMD's commercial offering to be branded as "Virtual Receptionist Powered by Orchestrate(R)". The strategic alliance provides that Premiere will serve as WebMD's exclusive provider of enhanced and unified telecommunications services offered to WebMD's community of healthcare professionals. In addition, under a licensing and co-marketing arrangement, WebMD will be Premiere's exclusive reseller of Orchestrate(R) services through medical portals for the next four years. USA.NET. Based in Colorado Springs, Colorado, USA.NET is a leading electronic messaging company dedicated to setting the global standard in advanced messaging services. USA.NET's mail architecture leverages the advantages of the Web to offer premium e-mail services to businesses and customers. Webforia. Based in Seattle, Washington, Webforia provides Web services, tools and communities that guide people through the process of researching, organizing and presenting high quality information from the Internet. Through its partnership with Webforia, Premiere plans to provide Orchestrate(R) users with access to Webforia's Organizer product for storing and organizing Internet content. In addition, Webforia plans to provide its users access to Orchestrate(R) for their personal communications needs. VerticalOne. Based in Atlanta, Georgia, VerticalOne provides network-based services that are designed to increase the frequency, duration and quality of visits to its customers' Web sites. VerticalOne represents the next generation of Internet portal--an "infomediary" that aggregates "personal content" available on the Web (for example, a user's bank balance, securities accounts, and voice mails, fax mails and e-mails) into a single, easy-to-use interface. Through its partnership with VerticalOne, Premiere intends to offer Orchestrate(R) users with the choice of having personal information and content "pushed" to them in addition to receiving all their messages, giving them access to all their personal communications in one central place. Intellivoice Communications. Based in Atlanta, Georgia, Intellivoice Communications develops and sells voice activation and other speech technologies for both land-based and wireless telephone users. Through its partnership with Intellivoice, Premiere intends to provide Orchestrate(R) users with speech recognition technology tools. Intellivoice also provides out-sourced engineering services to Premiere to develop next-generation Orchestrate services. 9 Acquisitions Premiere has historically engaged in acquisitions in order to obtain new technology, build its infrastructure, expand its suite of products and services and increase its sales force and customer base. As part of this strategy, Premiere acquired Xpedite Systems, Inc. ("Xpedite") and American Teleconferencing Services, Ltd. ("American Teleconferencing Services") during 1998. Xpedite Systems. In February 1998, Premiere acquired Xpedite, a worldwide leader and innovator in the enhanced document distribution business, including fax, e-mail, telex, Internet and mailgram services. The merger with Xpedite resulted in the issuance of approximately 11.0 million shares of Premiere common stock to the stockholders of Xpedite. In addition, Premiere converted existing Xpedite options and warrants into options and warrants to acquire approximately 543,000 shares of Premiere common stock. In February 1999, Premiere 9--1 announced that as a result of discussions with the Office of the Chief Accountant of the Securities and Exchange Commission, Premiere is required to discontinue accounting for its acquisition of Xpedite as a pooling-of- interests and to account for such acquisition under the purchase method of accounting. 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, although no questions were raised regarding the propriety of the original accounting of the merger with Xpedite. American Teleconferencing Services. In April 1998, Premiere acquired all of the issued and outstanding shares of the common stock of American Teleconferencing Services, a provider of conference call and group communications services. In this acquisition, the shareholders of American Teleconferencing Services received an aggregate of approximately 678,500 shares of Premiere common stock and cash consideration of approximately $21.0 million, subject to adjustment. Approximately 33,500 additional shares of Premiere common stock and cash consideration of approximately $1.04 million were placed in escrow to secure any indemnification claims that Premiere may have. Indebtedness, transaction expenses and other obligations equal to approximately $13.02 million were assumed pursuant to the acquisition. The acquisition of American Teleconferencing Services has been accounted for using the purchase method of accounting. Research And Development Premiere's research and development and engineering personnel are responsible for developing, testing and supporting proprietary software applications, as well as creating and improving enhanced system features and services. Premiere's research and development strategy is to focus its efforts on enhancing its proprietary software and integrating its software with readily available software and hardware when feasible. Premiere maintains both internal and outsourced software development programs pursuant to which the Company introduces new products and enhances existing ones. Premiere's research and development and engineering personnel also engage in joint development efforts with Premiere's strategic partners and vendors. Customer Care And Technical Support Premiere believes that effective customer care is essential to attracting and retaining its customers. Premiere's customer care groups are responsible for educating and assisting customers in using Premiere's services, for resolving billing and related issues and, in consultation with Premiere's technical support associates, for resolving technical problems customers may have in using Premiere's services. Premiere provides customer care through call centers in Atlanta, Georgia, Colorado Springs, Colorado, Overland Park, Kansas and Eatontown, New Jersey, as well as regionally deployed representatives. In the United States, most services are provided 24 hours per day, seven days per week. In addition, customers are supported in eight centers in Europe, Asia, Canada and Australia during their business hours. Premiere employs separate associates who are responsible for technical support functions. These employees are responsible for performing more technically demanding support activities, such as list and feature management, consulting with Premiere's strategic partners and licensees regarding technical issues and resolving technical issues brought to their attention by the customer service department. Competition Premiere's strategy is to seek to gain a competitive advantage by being among the first companies to offer network-based integrated communications solutions, being an innovator in this market and offering unique services to its customers. The Company intends to continue to exploit cross-selling and migration-selling opportunities within its customer base. The Company also intends to seek to capitalize on strategic relationships with key technology development and distribution partners such as American Express, WebMD, USA.NET and Webforia, in order to build its customer base and to maintain and increase customer loyalty. The Company believes that the principal competitive factors affecting the market for communications services are features and functions, reliability, ease of use, brand name recognition and price. The Company believes that it competes effectively in these areas. 10 The markets for the Company's services are intensely competitive, quickly evolving and subject to rapid technological change. The Company expects competition to increase in the future. Many of the Company's current and potential competitors have longer operating histories, greater name recognition, larger customer bases and substantially greater financial, personnel, marketing, engineering, technical and other resources than the Company. Although the Company is aware of other companies that are marketing one or more of its services, the Company is not aware of any major competitor that is marketing an integrated personal communications service identical to the service marketed by the Company. Many of the Company's competitors have substantial resources and technical expertise and could likely develop such a service if those competitors chose to expend sufficient resources. The Company believes that existing competitors are likely to expand their product and service offerings and that new competitors are likely to enter the Company's markets. Such competitors may attempt to integrate their products and services, resulting in greater competition for the Company. Such competition could materially adversely affect the Company's business, financial condition and results of operations. The Company attempts to differentiate itself from its competitors in part by offering an integrated suite of innovative personal communications solutions that are network-based. Many competitors currently offer each of the individual services and certain combinations of the services offered by the Company. Premiere's Document Distribution services compete with services provided by AT&T, MCI Worldcom and Sprint, and many of the international postal, telephone and telegraph ("PTT") companies located around the world, as well as numerous smaller regional companies. Premiere's Corporate Messaging and Voice and Data Messaging services compete with voice mail services provided by AT&T, certain regional Bell operating companies ("RBOCs") and other service bureaus as well as by equipment manufacturers, such as Octel Communications (which is owned by Lucent Technologies), Northern Telecom, Siemens Business Communications Systems, Centigram Communications, Boston Technology and Digital Sound. The Company's enhanced travel, concierge, news and e-mail services compete with services provided by America Online, Prodigy and numerous Internet service providers. Premiere Interactive Voice Response services compete with IVR services provided by AT&T, MCI WorldCom, Lucent, West Teleservices, Call Interactive and Syntellect. Premiere Conferencing competes with conference calling services provided by AT&T, MCI Worldcom, Sprint, as well as numerous smaller regional competitors. The Company's Orchestrate(R) service competes with products offered by companies such as Octel/Lucent, Microsoft, Novell, Sun Microsystems, Motorola, and numerous smaller entities, such as Jfax, General Magic and Webley Systems. These competing products incorporate some, but not all, of the bundled services offered through Orchestrate(R). The Company expects that other parties will develop and implement information and telecommunications services similar to Orchestrate(R), thereby increasing competition for the Company's services. Premiere's Worldlink Corporate Card and Enhanced Calling Services compete directly with services provided by companies such as AT&T, MCI Worldcom and Sprint, as well as smaller interexchange long distance providers. Global Operations For financial information about the Company's geographic areas for the years ended December 31, 1998, 1997 and 1996, see Note 18 to the Consolidated Financial Statements. Legislative Matters The Telecommunications Act of 1996 (the "1996 Act") was intended to increase competition in the long distance and local telecommunications markets. The 1996 Act opens competition in the local services market and, at the same time, contains provisions intended to protect consumers and businesses from unfair competition by incumbent local exchange carriers ("LECs"), including the RBOCs. The 1996 Act allows RBOCs to provide long distance service outside of their local service territories but bars them from immediately offering in region, inter-LATA, long distance services until certain conditions are satisfied. An RBOC must apply to the Federal 11 provide in-region inter-LATA long distance services and must satisfy a set of pro-competitive criteria intended to ensure that RBOCs open their own local markets to competition before the FCC will approve such application. Further, while the FCC has final authority to grant or deny such RBOC application, the FCC must consult with the Department of Justice to determine if, among other things, the entry of the RBOC would be in the public 11--1 Communications Commission ("FCC"). FCC to interest, and with the relevant state to determine if the pro-competitive criteria have been satisfied. While the FCC has yet to grant any RBOC inter-LATA application, the Company is unable to determine how the FCC will rule on any such applications in the future. In response to a constitutional challenge filed by SBC Communications Inc., the United States District Court for the Northern District of Texas found the 1996 Act's restrictions on RBOC interLATA services to be an unconstitutional bill of attainder, but stayed the effect of its decision pending further appeal. If the interLATA restrictions are ultimately struck down, the Company may experience increased competition from RBOCs in the long distance industry. The 1996 Act provides a framework for the Company's operating subsidiary, Premiere Communications, Inc. ("PCI"), and other long distance carriers to compete with LECs by reselling local telephone service, by interconnecting to LEC network facilities at various points in the network, or by building new local service facilities. In the future, PCI may decide to lease unbundled network elements, which could also be used as a platform to provide access to the Company's services, or to build local service facilities. PCI's decision to enter the local services market in one or more states depends on the economic viability of the options and on the regulatory environment, which will likely vary by state. Government Regulation Certain of the Company's subsidiaries provide both telecommunications and information services. Consequently, PCI is, and certain other Premiere subsidiaries may be, subject to extensive federal and state regulation in the United States. Various international authorities may also seek to regulate the services provided by PCI and possibly other Premiere subsidiaries. The Company is currently reviewing whether and to what extent additional regulatory compliance may be required in connection with the Company's subsidiaries. Tariffs and Detariffing. PCI is classified by the FCC as a non-dominant carrier for its domestic interstate and international common carrier telecommunications services. Common carriers that provide domestic interstate and international telecommunications services must maintain tariffs on file with the FCC describing rates, terms and conditions of service. While the tariffs of non-dominant carriers, such as PCI, are subject to FCC review, they are presumed to be lawful upon filing with the FCC. Currently, PCI has been granted authority by, or has filed tariffs with, the FCC to provide domestic interstate and international telecommunications services. In October 1996, the FCC issued an order detariffing long distance services which prohibited non-dominant long distance carriers from filing tariffs for domestic, interstate, long distance services. The FCC's scheduled detariffing rules were to become effective September 22, 1997. The detariffing rules were appealed by several parties, and in February 1997, the U.S. Court of Appeals for the District of Columbia Circuit issued a temporary stay preventing the rules from taking effect pending judicial review. The Company and PCI are currently unable to predict what impact the outcome of the FCC's detariffing proceeding will have on the Company or PCI. Local Interconnection and Resale. In August 1996, the FCC adopted an order (the "Interconnection Order") which established a minimum set of rules relating to the manner in which all telecommunications carriers would be able to interconnect with the LECs' networks. The Interconnection Order addressed several important interconnection issues, including the purchase of unbundled network elements, resale of local services at wholesale discounts, interconnection negotiation and arbitration procedures, and mutual compensation arrangements for transporting and terminating local calls between competing carriers. The RBOCs, several states, various carriers, associations and other entities appealed the Interconnection Order. On July 18, 1997, the U.S. Court of Appeals for the Eighth Circuit overturned many of the rules established by the FCC's Interconnection Order governing, among other things, the pricing of interconnection, resale and unbundled network elements. On October 14, 1997, the court further overturned FCC rules requiring that LECs provide unbundled network elements on a combined basis. In January 1999, the Supreme Court reversed the Eighth Circuit's decisions, finding that the FCC had jurisdiction to implement the pricing provisions of the 1996 Act. The Eighth Circuit, however, is expected on remand to rule on the merits of the FCC's pricing methodology. The Supreme Court also upheld the 12 FCC's rule requiring LECs to provide unbundled network elements on a combined basis. Competitors using such combined network elements may conceivably be able to provide retail local services entirely through the use of the LEC's facilities at lower discounts than those available through local resale. However, the Supreme Court reversed in part the FCC's decision which specifically identified the particular unbundled network elements that LECs must provide. The FCC is expected to release a new list of unbundled network elements sometime in the summer or fall of 1999. The Company has at times considered entering the local exchange market as a so-called competitive local exchange carrier ("CLEC"). If the Company becomes a CLEC, it will face rules that are likely to vary substantially from state to state. A patchwork of state regulations could make competitive entry by the Company in some markets more difficult and expensive than in others and could increase the costs of regulatory compliance associated with local entry. Moreover, the Company cannot predict at this time the ultimate outcome of the FCC's remand proceeding on pricing or the effect the FCC's new list of unbundled network elements may have on any future CLEC operations. Universal Service Reform. On May 8, 1997, the FCC released an order establishing a significantly expanded federal telecommunications subsidy regime. For example, the FCC established new subsidies for schools and libraries with an annual cap of $2.25 billion and for rural health care providers with an annual cap of $400 million. Providers of interstate telecommunications service, such as PCI, as well as certain other entities, must pay for the federal programs. PCI's contributions to the federal subsidy funds will be based on its share of total interstate (including certain international) telecommunications services and on certain defined telecommunications end user revenues. No assurance can be given that the FCC's universal service order will not have a material adverse effect on the Company's business, financial condition and results of operations. Access Charge Reform. On May 16, 1997, the FCC released an Access Charge Reform Order, which revised rules governing the interstate switched access charge rate structure. Switched access charges are assessed by the LECs on long distance carriers and others for use of the local loop and local access facilities to originate and terminate long distance calls. The new rules are intended to eliminate implicit subsidies and to establish rate structures that better reflect the manner in which costs are incurred. The new rules substantially increase the costs that price cap LECs recover through monthly, non-traffic sensitive access charges and substantially decrease the costs that price cap LECs recover through traffic sensitive access charges. The manner in which the FCC implements its approach to lowering access charge levels will have an effect on the prices that PCI pays for originating and terminating interstate traffic. Portions of the Access Charge Reform Order have been appealed. In light of the uncertainty regarding ultimate disposition of the Access Charge Reform proceeding by the FCC and the courts, the Company is unable to predict what impact the FCC's revised access charge scheme will have on PCI's access charge cost structure. Payphone Compensation. In September 1996, the FCC issued an order adopting rules to implement the 1996 Act's requirements establishing "a per call compensation plan to ensure all payphone service providers are fairly compensated for each and every completed call using their payphone." This order included a specific fee to be paid to each payphone service provider by long distance carriers and intra-LATA toll providers (including LECs) on all "dial around" calls, including debit card and calling card calls. In decisions released on July 1, 1997, and September 16, 1997, the U.S. Court of Appeals for the D.C. Circuit vacated and remanded some of the FCC rules for the implementation plan. In response to these decisions, on October 7, 1997, the FCC issued a second order, revising the per-call, compensation amount to be paid to payphone service providers. Specifically, the FCC decreased the compensation amount to $0.284 per call. PCI began paying this per-call amount in 1997. This compensation amount was to remain in effect until October 6, 1999, when a market-based rate would have become effective. On May 15, 1998, the U.S. Court of Appeals for the D.C. Circuit again remanded certain issues to the FCC for further consideration. In response, on January 28, 1999, the FCC issued a third order in its payphone compensation proceeding, revising the per-call compensation amount to be paid to payphone service providers. Specifically, the FCC decreased the compensation amount to $0.24 per call. In addition, the FCC extended the time period that this compensation amount will be in effect until January 31, 2001. Portions of the FCC's third order have been appealed to the U.S. Court of Appeals for the D.C. Circuit. 13 Although PCI expects to incur additional costs to receive "dial around" calls that originate from payphones, the FCC has permitted long distance carriers, such as PCI, to pass such costs through to its customers. However, the Company is unable to predict what impact the payphone rules will have on PCI's costs for such calls until the ultimate outcome of the FCC's and the court's rulings with respect to these payphone compensation obligations. Additional Requirements. The FCC imposes additional obligations on all telecommunications carriers, such as PCI, including obligations to: (i) interconnect with other carriers and not to install equipment that cannot be connected with the facilities of other carriers; (ii) ensure that their services are accessible and usable by persons with disabilities; (iii) provide telecommunications relay service, either directly or through arrangements with other carriers; (iv) comply with verification procedures in connection with changing a customer's carrier so as to prevent "slamming", a practice by which a customer's chosen telecommunications service provider is switched without the customer's consent; (v) protect the confidentiality of proprietary information obtained from other carriers, manufacturers and customers; (vi) pay annual regulatory fees; and (vii) contribute to the Telecommunications Relay Services Fund. State Regulation. Most state public service and public utility commissions ("PUCs") require carriers that provide intrastate, common carrier services to be authorized to provide such services. PCI either has applied for and received, or is in the process of applying for and receiving, all necessary authorizations to provide intrastate, long distance services. PCI is generally not subject to price regulation or to rate of return regulation for its intrastate services. In most states, however, PCI is required to file tariffs setting forth the terms, conditions and prices of its intrastate services. In some state jurisdictions, the tariff can list a range of rates for intrastate services. PCI may be subject to additional regulatory burdens in some states, such as compliance with quality of service requirements or remittance of contributions to support state sponsored universal service. PCI's ability to incur long-term indebtedness is subject to prior PUC approval in some state jurisdictions. In addition, some state PUCs regulate the issuance of securities and the transfer of control of entities subject to their jurisdiction. Currently, the Company is reviewing whether and to what extent additional regulatory compliance is required in this regard. Other. In conducting its business, the Company is subject to various laws and regulations relating to commercial transactions generally, such as the Uniform Commercial Code and is also subject to the electronic funds transfer rules embodied in Regulation E promulgated by the Federal Reserve. Congress has held hearings regarding, and various agencies are considering, whether to regulate providers of services and transactions in the electronic commerce market. For example, the Federal Reserve completed a study, directed by Congress, regarding the propriety of applying Regulation E to stored value cards. The Department of Treasury promulgated proposed rules applying record keeping, reporting and other requirements to a wide variety of entities involved in electronic commerce. It is possible that Congress, the states or various government agencies could impose new or additional requirements on the electronic commerce market or entities operating therein. If enacted, such laws, rules and regulations could be imposed on the Company's business and industry and could have a material adverse effect on the Company's business, financial condition or results of operations. The Company's proposed international activities also will be subject to regulation by various international authorities and the inherent risk of unexpected changes in such regulation. Proprietary Rights and Technology The Company's ability to compete is dependent in part upon its proprietary technology. The Company relies primarily on a combination of intellectual property laws and contractual provisions to protect its proprietary rights and technology. These laws and contractual provisions provide only limited protection of the Company's proprietary rights and technology. The Company's proprietary rights and technology include confidential information and trade secrets which the Company attempts to protect through confidentiality and nondisclosure provisions in its licensing, services, reseller and other agreements. The Company typically attempts to protect its confidential information and trade secrets through these contractual provisions for the terms of the 14 applicable agreement and, to the extent permitted by applicable law, for some negotiated period of time following termination of the agreement. Premiere currently has two patents, four patent applications pending, numerous worldwide registrations of trademarks and service marks, and numerous worldwide trademark and service mark registrations pending. Despite the Company's efforts to protect its proprietary rights and technology, there can be no assurance that others will not be able to copy or otherwise obtain and use the Company's proprietary technology without authorization, or independently develop technologies that are similar or superior to the Company's technology. However, the Company believes that, due to the rapid pace of technological change in the information and telecommunications service industry, factors such as the technological and creative skills of its personnel, new product developments, frequent product enhancements and the timeliness and quality of support services are of equal or greater importance to establishing and maintaining a competitive advantage in the industry. Many patents, copyrights and trademarks have been issued in the general areas of information and telecommunications services and computer telephony. The Company believes that in the ordinary course of its business third parties will claim that the Company's current or future products or services infringe the patent, copyright or trademark rights of such third parties. The Company is aware of other companies that use the terms "WorldLink" or "Premiere" in describing their products and services, including telecommunications products and services. Certain of those companies hold registered trademarks which incorporate the names "WorldLink" or "Premiere." The Company has received correspondence from a provider of prepaid calling cards which claims that the Company's use of the term "WorldLink" infringes upon its trademark rights. In addition, the Company has received correspondence from a major bank, which is among the holders of registered trademarks incorporating the term "WorldLink," inquiring as to the nature of the Company's use of the term "WorldLink" as part of its mark "Premiere WorldLink." Based on, among other things, the types of businesses in which the other companies are engaged and the low likelihood of confusion, the Company believes these claims to be without merit. In October 1996, one of Premiere's subsidiaries received a letter from a third party claiming that certain aspects of that subsidiary's voice messaging products and services may be infringing upon one or more of the third party's patents. The Company has reviewed the patent claims of such third party and does not believe that any of the subsidiary's products or services infringe on the claims of the third party. No patent infringement claims against the Company or any of its subsidiaries have been filed by the third party at this time. Should the third party file patent infringement claims against the Company or any of its subsidiaries, the Company believes that it would have meritorious defenses to any such claims. However, due to the inherent uncertainties of litigation, the Company is unable to predict the outcome of any potential litigation with the third party, and any adverse outcome could have a material adverse effect on the Company's business, results of operations and financial condition. Even if the Company were to ultimately prevail, the Company's business could be adversely affected by the diversion of management attention and litigation costs. Because of this risk, the Company withheld in escrow approximately 123,000 shares of Common Stock from the purchase price paid to acquire one of the Company's voice messaging subsidiaries. This escrow arrangement terminates in April 2000. There can be no assurance that such escrow will be sufficient to fully cover the Company's exposure in the event of litigation or an adverse outcome to the potential infringement claims. In February 1997, the Company entered into a long-term nonexclusive license agreement (the "License Agreement") with AudioFAX IP LLC ("AudioFax") settling a patent infringement suit filed by AudioFAX in June 1996. Effective April 1, 1998, the License Agreement was amended to include Xpedite within the coverage of the license. In September 1997, a subsidiary of the Company also entered into a long-term non-exclusive license agreement with AudioFAX. Prior to acquisition by the Company, Xpedite received a letter from Cable & Wireless, Inc. informing Xpedite that Cable & Wireless had received a demand letter from AudioFAX claiming that certain Cable & Wireless products and services infringed AudioFAX's patent rights and seeking indemnification from Xpedite under a supply agreement that Xpedite and Cable & Wireless had previously entered into. Subsequent to the acquisition of Xpedite by the Company, Cable & Wireless notified the Company directly of the AudioFAX claim 15 and sought indemnification from the Company. The Company does not have sufficient information to evaluate the merits of this claim and is unable at this time to predict the outcome of this matter. An adverse outcome could have a material adverse effect on the Company's business, financial condition and results of operations. In May 1997, Premiere received a letter from a manufacturer and marketer of certain telecommunications equipment asserting that Premiere is offering certain "calling card and related enhanced services," "single number service" and "call connecting services" covered by four patents held by that company and inviting Premiere to obtain a license. Premiere has reviewed the subject patents and, based on that review, believes that its products and services currently being marketed do not infringe these patents. In March 1999, Aspect Telecommunications, Inc. ("Aspect"), the purported current owner of the patents, filed suit against Premiere and PCI alleging that they have violated claims in the patents and requesting damages and injunctive relief. On March 29, 1999 the Company filed an answer denying the allegations and a counterclaim seeking to invalidate the patents. The Company believes that it has meritorious defenses to the plaintiff's allegations. In addition, 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. However, due to the uncertainty of litigation, there can be no assurance that the Company will prevail, and an adverse outcome could have a material adverse effect on Premiere's business, financial condition and results of operations. In May 1997, the Company received a letter from counsel for a provider of goods and services in the telecommunications field objecting to the Company's use of the phrase "personal assistant" based on that company's federally registered "personal assistant" service mark. In June 1997, counsel for the Company responded to the objections, noting that the Company did not intend to use, nor would it use in the future, the words "personal assistant" as a trademark or service mark, but instead would merely use these words to describe the nature of its product. The Company has not heard anything further from the potential claimant and believes that the matter has been resolved. In July 1997, the Company received a letter from counsel for a French publishing company objecting to the Company's use of the "Premiere" trademark. The Company is in discussions with the French company that may result in a mutually acceptable resolution. Due to the inherent uncertainties of litigation, however, the Company is unable to predict the outcome of any potential litigation with the French company, and any adverse outcome could have a material effect on the Company's business, financial condition and results of operations. In January 1999 the Company received a letter from Ronald A. Katz Technology Licensing, L.P. informing it of the existence of the Katz patent portfolio and its potential applicability to the services of the Company. This matter is presently being reviewed by the Company, but the Company currently lacks sufficient information to assess the outcome of this matter. An adverse outcome could have a material adverse effect on the Company's business, financial condition and results of operations. No assurance can be given that actions or claims alleging patent, copyright or trademark infringement will not be brought against the Company with respect to current or future products or services, or that, if such actions or claims are brought, the Company will ultimately prevail. Any such claiming parties may have significantly greater resources than the Company to pursue litigation of such claims. Any such claim alleging patent, copyright or trademark infringement, whether with or without merit, could be time consuming, result in costly litigation, cause delays in introducing new or improved products and services, require the Company to enter into royalty or licensing agreements, or cause the Company to discontinue use of the challenged technology, trade name or service mark at potentially significant expense to the Company associated with the marketing of a new name or the development or purchase of replacement technology, all of which could have a material adverse effect on the Company's business, financial condition and results of operation. Employees As of December 31, 1998, the Company employed approximately 2,301 persons, substantially all of whom were employed on a full-time basis. Of these employees, 836 were engaged in sales and marketing; 444 in engineering and research and development; 679 in customer service and technical support; and 342 were in general and administrative activities. None of the Company's employees are members of a labor union or are covered by a collective bargaining agreement. ITEM 2. PROPERTIES Premiere's corporate headquarters occupy approximately 103,400 square feet of office space in Atlanta, Georgia under a lease expiring August 31, 2007, and approximately 10,800 square feet of office space in the same building under a lease expiring August 31, 2006. The headquarters of the Company's Voice and Data Messaging business unit occupies approximately 28,300 square feet of office space in Cleveland, Ohio under a lease expiring October 31, 1999. The headquarters of the Company's Document Distribution business unit 16 occupies approximately 54,900 square feet of office space in Eatontown, New Jersey under three separate leases expiring on September 30, 1999, December 31, 2000 and September 30, 2001, respectively. The Company's Conferencing business unit occupies approximately 54,500 square feet of office space in Colorado Springs, Colorado under a lease expiring August 31, 2006, and approximately 24,400 square feet of office space in Overland Park, Kansas under a lease expiring February 29, 2000. The Company also has data and switching centers and sales offices within and outside the United States. The Company believes that its current facilities and office space is sufficient to meet its present needs and does not anticipate any difficulty securing additional space, as needed, on terms acceptable to the Company. ITEM 3. LEGAL PROCEEDINGS 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. 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 17 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 August 6, 1996, Communications Network Corporation ("CNC"), a licensing customer of the Company, was placed into bankruptcy (the "Bankruptcy Case") under Chapter 11 of the United States Bankruptcy Code. On August 23, 1996, CNC filed a motion to intervene in a separate lawsuit brought by a CNC creditor in the United States District Court for the Southern District of New York against certain guarantors of CNC's obligations and to file a third-party action against numerous entities, including such CNC creditor and Premiere Communications, Inc. ("PCI") for alleged negligent misrepresentations of fact in connection with an alleged fraudulent scheme designed to damage CNC (the "Intervention Suit"). The District Court denied CNC's requests to intervene and to file a third party action and transferred the remainder of the Intervention Suit to the bankruptcy case. On June 23, 1998, the Bankruptcy Court approved a settlement whereby PCI obtained a release from the trustee and the trustee dismissed the Intervention Suit in consideration of PCI making a cash payment of $1.2 million to the trustee. The Plan was subsequently approved by the Bankruptcy Court on December 8, 1998 and PCI made an additional cash payment of $300,000 to the trustee in January 1999 in consideration of PCI obtaining certain allowed subordinated claims and the Court granting an injunction in PCI's favor against possible nuisance suits relating to the CNC business. On November 26, 1997, Wael Al-Khatib ("Al-Khatib"), the sole shareholder and former president of CNC, and his company, Platinum NetworkCorp. ("Platinum"), filed a complaint against 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 18 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. The parties are awaiting a decision on this motion. 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 are being circulated for execution, in accordance with the terms of the settlement. The settlement does not require PCI or Premiere to make any payments. 19 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of the Company's security holders during the fourth quarter of the fiscal year covered by this report. 20 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's common stock, $.01 par value per share (the "Common Stock"), has traded on the Nasdaq National Market under the symbol "PTEK" since its initial public offering on March 5, 1996. The following table sets forth the high and low sales prices of the Common Stock as reported on the Nasdaq National Market for the periods indicated. Such prices are based on inter- dealer bid and asked prices without markup, markdown, commissions or adjustments and may not represent actual transactions.
1998 High Low ---- ------- ------- First Quarter............................................... $34.625 $20.875 Second Quarter.............................................. 35.000 7.688 Third Quarter............................................... 11.313 3.625 Fourth Quarter.............................................. 8.250 2.500 1997 High Low ---- ------- ------- First Quarter............................................... $27.750 $16.500 Second Quarter.............................................. 30.500 19.250 Third Quarter............................................... 34.500 22.875 Fourth Quarter.............................................. 38.500 22.875
The closing price of the Common Stock as reported on the Nasdaq National Market on March 29, 1999 was $10.9375. As of March 29, 1999 there were approximately 715 record holders of the Company's Common Stock. The Company has never paid cash dividends on its Common Stock, and the current policy of the Company's Board of Directors is to retain any available earnings for use in the operation and expansion of the Company's business. In addition, the Company's credit agreement contains a negative covenant which restricts the payment of dividends. Therefore, the payment of cash dividends on the common stock is unlikely in the foreseeable future. Any future determination to pay cash dividends will be at the discretion of the Board of Directors and will depend upon the Company's earnings, capital requirements, financial condition and any other factors deemed relevant by the Board of Directors. During the year ended December 31, 1998, certain current and former employees, directors and investors exercised options to purchase an aggregate of 242,452 shares of Common Stock at prices ranging from $0.417 to $1.61 per share in transactions exempt from registration pursuant to Section 4(2) and Rule 701 of the Securities Act. ITEM 6. SELECTED FINANCIAL DATA The following selected consolidated statement of operations data for the years ended December 31, 1998, 1997 and 1996, and the consolidated balance sheet data as of December 31, 1998 and 1997, have been derived 21 from the audited consolidated financial statements of the Company included in this Annual Report on Form 10-K, which give retroactive effect to the mergers with Voice-Tel and VoiceCom, both of which were accounted for as poolings-of- interests, and are qualified by reference to such consolidated financial statements including the related notes thereto. The unaudited consolidated statement of operation data for the year ended December 31, 1994 and the unaudited consolidated balance sheet data at December 31, 1994 are derived from unaudited consolidated financial statements of the Company which give retroactive effect to the mergers with Voice-Tel and VoiceCom, both of which were accounted for as poolings-of-interests, and include all adjustments, consisting only of normal recurring adjustments, which the Company considers necessary for a fair presentation thereof. The selected consolidated financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Company's consolidated financial statements and the notes thereto.
YEAR ENDED DECEMBER 31, 1998 -------------------------------------------------- 1998 1997 1996 1995 1994 -------- -------- -------- -------- ----------- (unaudited) Statement of Operations Data: Revenues................... $444,818 $229,352 $197,474 $147,543 $119,136 Gross margin............... 309,782 165,378 141,873 103,675 85,229 Operating income (loss)(1)................. (74,582) (28,101) 6,806 7,003 (13,232) Net income (loss)(1)....... (74,206) (25,375) 3,458 4,171 (15,519) Net income (loss) attributable to common and common equivalent shares for shareholders for: --basic net income (loss) per share................ $(74,206) $(25,375) $ 3,429 $ 3,863 $(15,839) --diluted net income (loss) per share......... (74,206) (25,375) 3,429 3,863 (15,839) Net income (loss) per common and common equivalent shares for: --basic(1)(2)............. $ (1.67) $ (0.78) $ 0.12 $ 0.19 $ (1.18) --diluted(1)(2)........... $ (1.67) $ (0.78) $ 0.11 $ 0.17 $ (1.18) Shares used in computing net income (loss) per common and common equivalent shares for --basic................... 44,325 32,443 27,670 19,868 13,468 --diluted................. 44,325 32,443 31,288 24,312 13,468 Balance Sheet Data (at period end): Cash, cash equivalents and investments............... $ 39,995 $176,339 $ 83,836 $ 11,759 $ 7,849 Working capital............ (91,180) 136,182 45,377 (16,093) (12,521) Total assets............... 802,751 381,108 201,541 78,131 60,051 Total debt................. 299,673 181,698 47,975 52,650 49,203 Total shareholders' equity (deficit)................. 400,894 100,814 104,533 (11,639) (14,921)
- - -------- (1) Excluding charges for restructuring, merger costs and other special charges of approximately $15.6 million in 1998 and $73.6 million in 1997, charges for acquired research and development of approximately $15.5 million in 1998 and $11.0 million in 1996, and accrued settlement costs of approximately $1.5 million in 1998 and 1997 and $1.3 million in 1996, operating income (loss) would have been approximately $(42.0) million in 1998, $47.0 million in 1997 and $19.1 million in 1996, EBITDA would have been $68.1 million in 1998, $64.1 million in 1997, and $33.3 million in 1996. (2) Basic net income (loss) per share is computed using the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is computed using the weighted average number of shares of common stock and dilutive common stock equivalents outstanding during the period from convertible preferred stock, convertible subordinated notes (using the if-converted method) and from stock options (using the treasury stock method). 22 ITEM 7. 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 units: Corporate Enterprise Solutions, which targets Fortune 1,000 and other large companies; and Emerging Enterprise Solutions, which targets smaller fast-track companies and individuals. Corporate Enterprise Solutions' services include Premiere Document Distribution, which provides enhanced electronic document distribution services; Premiere Corporate Messaging, which provides 800-based and local access voice messaging services; Premiere WorldLink Corporate Card, which provides 800-based enhanced calling card services; Premiere Interactive Voice Response, which provides various IVR applications; and Premiere Conferencing, which provides a full range of conferencing services. Emerging Enterprise Solutions' 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 internets" 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, 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 in addition to usage fees. Cost of services consists primarily of the cost of long distance transmission and other telecommunications related charges incurred in providing Premiere's services. Selling, general and administrative expenses include salaries and wages associated with customer service, operations, research and development, direct sales, marketing and administrative functions, sales commissions, direct marketing and advertising costs, travel and entertainment expenses, bad debt expense, rent and facility expense, professional and consulting fees, property taxes and other operating and administrative expenses. 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 set forth 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 the estimates. The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of the Company's consolidated results of operations and financial condition. This discussion should be read in conjunction with the consolidated financial statements and notes thereto. 23 Results Of Operations The following table presents the percentage relationship of certain statements of operations items to total revenues for Premiere's consolidated operating results for the periods indicated:
Year Ended December 31, 1998 --------------------- 1998 1997 1996 ----- ----- ----- REVENUES................................................. 100.0% 100.0% 100.0% COST OF SERVICES......................................... 30.4 27.9 28.2 ----- ----- ----- GROSS MARGIN............................................. 69.6 72.1 71.8 OPERATING EXPENSES Selling, general and administrative..................... 54.3 44.2 55.0 Depreciation and amortization........................... 24.7 7.4 7.2 Restructuring, merger costs and other special charges... 3.5 32.1 -- Acquired research and development....................... 3.5 -- 5.6 Accrued settlement costs................................ .3 0.7 0.6 ----- ----- ----- Total operating expenses............................... 86.3 84.4 68.4 OPERATING INCOME (LOSS).................................. (16.7) (12.3) 3.4 OTHER INCOME (EXPENSE) Interest, net........................................... (3.3) (0.4) (0.9) Other, net.............................................. 0.1 0.1 (0.1) ----- ----- ----- Total other income (expense)........................... (3.2) (0.3) (1.0) INCOME (LOSS) BEFORE INCOME TAXES........................ (19.9) (12.6) 2.4 INCOME TAX PROVISION (BENEFIT)........................... (3.3) (1.5) 0.7 ----- ----- ----- NET INCOME (LOSS)........................................ (16.6)% (11.1)% 1.7% ===== ===== =====
The following table presents certain financial information about the Company's operating segments for the periods presented (amounts in millions):
Year Ended December 31, 1998 ---------------------- 1998 1997 1996 ------ ------ ------ REVENUES: Corporate Enterprise Solutions.............. $275.7 $ 55.0 $ 60.0 Emerging Enterprise Solutions.............. 169.4 174.4 137.5 Corporate and eliminations........... (.3) -- -- ------ ------ ------ Totals.................. $444.8 $229.4 $197.5 ====== ====== ====== OPERATING PROFIT (LOSS): Corporate Enterprise Solutions.............. $ (6.0) $ 10.6 $ 2.0 Emerging Enterprise Solutions.............. (9.5) 36.4 17.1 Corporate and eliminations........... (26.5) -- -- Restructuring, merger costs and other special charges................ (15.6) (73.6) -- Acquired research and development............ (15.5) -- (11.0) Accrued settlement costs.................. (1.5) (1.5) (1.3) ------ ------ ------ Totals.................. $(74.6) $(28.1) $ 6.8 ====== ====== ====== EBITDA: Corporate Enterprise Solutions ............. $ 75.8 $ 13.5 $ 5.0 Emerging Enterprise Solutions.............. 18.7 50.6 28.3 Corporate and eliminations........... (26.4) -- -- Restructuring, merger costs and other special charges................ (15.6) (73.6) -- Acquired research and development............ (15.5) -- (11.0) Accrued settlement costs.................. (1.5) (1.5) (1.3) ------ ------ ------ Totals.................. $ 35.5 $(11.0) $ 21.0 ====== ====== ======
24 Overview The Company has achieved substantial growth since its initial public offering during the first quarter of 1996. Revenues grew from $147.5 million for the year ended December 31, 1995 to $444.8 million in 1998, a compounded annual growth rate of 44.5% for such period. Similarly, EBITDA, before restructuring, merger costs and other special charges, acquired research and development and accrued settlement costs, grew from $20.0 million to $68.1 million over the same period, a 50.4% compounded annual growth. Premiere has achieved growth in revenues and EBITDA, before restructuring, merger costs and other special charges, acquired research and development and accrued settlement costs, by pursuing its mission to become the world's leading provider of innovative solutions to simplify everyday communications of both businesses and individuals. During 1996, 1997 and 1998 the Company pursued an aggressive acquisition strategy to expand its service offerings and means of distribution. Significant acquisitions in 1998 included Xpedite, a leading provider of electronic document distribution services, and ATS, a full-service provider of conferencing services. In 1997, the Company acquired Voice-Tel and VoiceCom. The acquisition of Voice-Tel provided Premiere with the ability to offer voice messaging services on a local access basis over an international private network utilizing frame relay and Internet protocols. In connection with the acquisition of VoiceCom, Premiere assumed a significant base of large corporate customers. During 1996, the Company acquired TeleT, an enterprise engaged in computer telephony software development. TeleT provided Premiere with the foundation of its Orchestrate suite of product offerings. Analysis Premiere's financial statements reflect the results of operations of Xpedite and ATS from the date of their respective acquisition. These acquisitions have been accounted under the purchase method of accounting. Premiere's financial statements have been restated for all periods presented to reflect the Voice- Tel and VoiceCom acquisitions which have been accounted for as poolings-of- interests. The following discussion and analysis is prepared on that basis. Consolidated revenues increased 94.0% to $444.8 million in 1998 and 16.1% to $229.4 million in 1997. Revenues in the Company's Corporate Enterprises Solutions ("CES") group increased from $60.0 million in 1996 to $275.7 million in 1998, a compounded annual growth rate of 114.4%. Revenue growth in this segment resulted principally from the acquisition of Xpedite in February 1998 and ATS in April 1998 and increases in the call center IVR services provided to Bank of America (formerly NationsBank). Revenue grew from $137.5 million to $169.4 million in the Emerging Enterprise Solutions ("EES") group over the same period, a compounded annual growth rate of 11.0%. Revenue growth in this segment resulted mainly from strategic partner programs, including Premiere's strategic alliance with MCI WorldCom and private label calling card programs with American Express, DeltaTel and MBNA, which experienced significant increases in new subscribers. The Company also experienced revenue increases from expanded Enhanced Calling Services, including prepaid calling cards. Revenue growth in these EES group's programs were offset in part by revenues losses resulting from the bankruptcy of two wholesale Enhanced Calling Services customers in the second quarter of 1998, management's decision to discontinue certain unprofitable prepaid calling card programs and the expiration of revenue commitments provided under the Company's strategic alliance agreement with MCI WorldCom. Revenues from the lost customers and discontinued programs set forth above contributed revenues of $33.1 million, $39.6 million and $5.5 million in 1998, 1997 and 1996, respectively. Consolidated gross profit margins were 69.6%, 72.1% and 71.8% in 1998, 1997 and 1996, respectively. Gross profit margin declined in 1998 due to revenue mix resulting from the acquisition of Xpedite in February 1998. Gross profit margins for Premiere's Document Distribution services are generally lower than that of Premiere's other services. Gross profit margin improvement in 1997 was caused by revenue mix, as revenues from higher margin wholesale arrangements for certain Enhanced Calling Services and local access Voice and Data Messaging services constituted a greater proportion of revenues in 1997 as compared with 1996. Generally, Premiere has experienced favorable trends in per unit telecommunications costs in the three year period ended December 31, 1998 by aggressively leveraging increasing minute volumes to negotiate quantity discounts with 25 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. Selling, general and administrative costs as a percent of revenues were 54.3%, 44.2% and 55.0% in 1998, 1997 and 1996, respectively. Contributing to the increase in selling, general and administrative costs as a percent of revenues in 1998 as compared with 1997, was approximately $16.1 million of costs recorded in the second quarter of 1998. Such costs consist of approximately $8.4 million of bad debt expense recorded in response to the bankruptcies of two customers, $1.8 million of asset write-offs and other costs. The acquisition of ATS in 1998 also contributed to an increase in selling, general and administrative costs in proportion to revenues because the service delivery processes of ATS include relatively higher labor costs as compared with Premiere's other services. In addition, Premiere aggressively expanded its management infrastructure in 1998 to more effectively support continued growth in its business. These actions included hiring additional senior level managers and expanding its corporate headquarters facilities. Selling, general and administrative costs decreased in 1997 as compared with 1996 as Premiere aggressively restructured the operations of its acquired businesses Voice-Tel and VoiceCom subsequent to their acquisitions in 1997. These activities included substantially reducing the workforce, exiting duplicative facilities, eliminating redundant business activities and general spending reductions. Depreciation and amortization was $110.0 million or 24.7% of revenues in 1998, $17.1 million or 7.4% of revenues in 1997 and $14.2 million or 7.2% of revenues in 1996. Increases in depreciation and amortization in 1998 result mainly from depreciation and amortization of assets acquired in the purchases of Xpedite and ATS in 1998 and the acceleration of depreciation and amortization of certain other operating and intangible assets. Identifiable intangible assets and goodwill acquired in the Xpedite and ATS acquisitions of approximately $517.3 million is being amortized over 3 to 7 years. In addition, amortization and depreciation of certain operating and intangible assets with a carrying value of approximately $80.1 million at December 31, 1998 was 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 will be discontinued in the forseeable future. Such assets will be amortized over lives ranging from 1 to 7 years effective in the fourth quarter of 1998 as compared with lives ranging from 5 to 40 years prior to the change. In 1998, management also evaluated the useful economic life of a strategic alliance intangible asset based on current facts and circumstances including the current level of revenues being generated by the strategic alliance. In connection with this evaluation, the carrying value of this asset was reduced by a charge of approximately $13.9 million in the fourth quarter of 1998. The amortization period of the remaining carrying value of this asset was reduced to 3 years effective in the fourth quarter of 1998 which compares with an estimated remaining useful life of 23 years prior to the change. Incremental depreciation and amortization expense recorded in 1998 as compared with 1997 resulting from assets acquired in the Xpedite and ATS acquisitions and acceleration of depreciation and amortization of the operating and intangible assets set forth above approximates $92.0 million. Increased depreciation and amortization expense in 1997 as compared with 1996 results mainly from depreciation associated with increased purchases of computer telephony equipment to support new business growth, amortization of goodwill and other intangibles acquired in connection with the Voice-Tel acquisitions in 1997 and amortization of the strategic alliance asset recorded in 1996. See Not 6 -- Strategic Alliances and Investments. Net interest expense increased to $14.7 million in 1998, from $.9 million in 1997 and $1.7 million in 1996. Net interest expense increased in 1998 mainly due to interest associated with $132.3 million of debt assumed in the acquisition of Xpedite in February 1998 and $5.9 million of debt assumed in the acquisition of ATS in April 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 December 1998, Premiere amended and restated this facility for a one year period. The amount outstanding under this loan facility at December 31, 1998 was $118.1 million. Borrowings assumed in the acquisition of ATS consisted principally of term notes secured by operating 26 equipment purchased with the proceeds of the loans. These terms loans were repaid in full by Premiere in 1998. Also contributing to the increase in net interest expense in 1998 was the reduction in cash and marketable securities balances to fund operations and other strategic initiatives thereby lowering interest income. Net interest expense in 1996 resulted mainly from indebtedness assumed in the Voice-Tel acquisitions in 1997 and the VoiceCom acquisition in September 1997. The majority of these obligations were repaid subsequent to the acquisitions. 26--! Restructuring, merger costs and other special charges incurred in 1998 were $15.6 million compared to $73.6 million in 1997. See Note 3--Restructuring, Merger Costs and other Special Charges and Note 4 Acquisitions in the Notes to Consolidated Financial Statements and "Restructuring, Merger Costs and Other Special Charges" which follows for a description of these costs. Accrued settlement costs were $15.5 million in 1998 and 1997 and $1.3 million in 1996. See Note 15--Commitments and Contingencies of the Notes to the Consolidated Financial Statements and "Legal Proceedings" under Item 1 of Part II of this document for further information about the matters giving rise to these accruals. Acquired research and development costs of $15.5 million expensed in 1998 are associated with the acquisition of Xpedite. Approximately $11.0 million of acquired research and development costs were expensed in connection with the TeleT acquisition in 1996. These costs represent the value assigned to research and development projects in the developmental stage which had not reached technological feasibility at the date of the acquisition or had no alternative future use. The valuation of these costs was based on independent appraisals. See Note 4--Acquisitions in the Notes to Consolidated Financial Statements for additional information. In 1998, Premiere's effective income tax rate varied from the statutory rate primarily as a result of nondeductible goodwill amortization associated with Premiere's acquisitions which have been accounted for under the purchase method of accounting. In 1997 and 1996, Premiere's effective tax rate varied from the statutory rate due to certain non-taxable investment income and income of Voice-Tel entities which had elected to be treated as S-Corporations under U.S. tax law prior to their acquisition by the Company. See Note 16-- Income Taxes in the Notes to Consolidated Financial Statements for additional information. Liquidity And Capital Resources The Company has funded its growth through cash generated by operations, by issuing subordinated convertible indebtedness in July 1997 and from the proceeds of its initial public offering in March 1996. Cash provided by operations was $22.2 million in 1998, $27.2 million in 1997 and $36.9 million in 1996. Excluding payments made for restructuring, merger costs, accrued settlement costs and other special charges, cash provided by operations was $44.7 million in 1998, $57.7 million in 1997 and $36.9 million in 1996. Operating cash flow declined on higher revenues in 1998 primarily as a result of revenue losses in Premiere's EES group and continued investment by the Company to expand its management infrastructure to support continued growth. Improvement in operating cash flows in 1997 as compared with 1996 results principally from Premiere's integration and cost reduction initiatives associated with the Voice-Tel and VoiceCom acquisitions in 1997 which reduced the operating costs of these businesses. Premiere's working capital ratio was .6 to 1 at December 31, 1998 as compared with 2.5 to 1 at December 31, 1997. Decline in working capital resulted principally from borrowings of approximately $118.1 million outstanding at December 31, 1998 under the revolving loan facility assumed by Premiere in the Xpedite acquisition. In addition, Premiere liquidated approximately $133.8 million of short-term investment balances in 1998 to fund operating and strategic initiatives. Xpedite's revolving loan facility was extended under a one-year arrangement effective December 16, 1998. Accordingly, such borrowings are classified as a current liability. If borrowings under this facility were excluded from current liabilities, Premiere's current ratio would have been 1.3 to 1 at December 31, 1998. Investing activities provided cash of approximately $21.3 million in 1998 and used cash of approximately $160.1 million and $96.1 in 1997 and 1996, respectively. The principal source of cash from investing activities in 1998 was the liquidation of approximately $133.8 million of short-term investments to fund various operating and strategic initiatives. Premiere made capital expenditures of $61.3 million in 1998. Significant capital programs in 1998 included construction costs and equipment purchases associated with the Company's network expansion program, development costs incurred in connection with the Company's introduction of Internet-enabled communications services and operating infrastructure expansion in support of new business growth. Premiere paid approximately $43.6 million to fund acquisition activity in 1998. Premiere paid cash of approximately $22.1 million to acquire ATS in April 1998. 27 Shareholders of ATS also received approximately 712,000 shares of Premiere common stock in connection with the acquisition. Remaining cash paid for acquisitions in 1998 is associated with payment of transaction related costs incurred in acquiring Xpedite and three individually insignificant acquisitions including two Document Distribution businesses located in Germany and Singapore and a company engaged in marketing long distance calling cards to college students in the United States. The Company made investments of approximately $8.3 million in 1998 to acquire initial or increase existing equity interests in various companies engaged in emerging technologies, such as the Internet. Premiere's investments include minority equity investments in WebMD, a leading full service Internet healthcare Web site, USA.NET, a leading electronic messaging company, Intellivoice, an entity engaged in developing voice activation and other technologies, VerticalOne, a network-based services provider that increases frequency, duration, and quality of visits to customers' Web sites, and Webforia, a provider of Web services, tools and communities that assist individuals in the process of researching, organizing and presenting high quality information from the Internet. Management intends to continue to make such investments in the future in complementary businesses and other initiatives that further its strategic business plan. Significant investing activities in 1997 and 1996 included investment of proceeds associated with Premiere's $172.5 million convertible subordinated debt issuance in 1997 and its initial public offering which raised net proceeds of approximately $74.6 million in 1996. Premiere made capital expenditures to purchase property and equipment, mainly computer and telecommunications equipment, of approximately $33.4 million in 1997 and $21.9 million in 1996. These expenditures were made primarily to expand operational infrastructure to support new business growth. Management anticipates that these expenditures will continue to increase in the future as the Company upgrades and expands the operational infrastructure of both its existing computer telephony network and integrates the networks of its acquired companies. In addition, the Company paid approximately $16.2 million of cash in connection with the Voice- Tel acquisitions in 1997 and $2.9 million in the acquisition of TeleT in 1996. See also Note 4 -- Acquisitions in Notes to Consolidated Financial Statements. 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 December 31, 1998. Continued compliance under these loan covenants will require that Premiere attain certain revenue and earnings growth rates or reduce indebtedness in order to satisfy the minimum ratio requirements required under this arrangement. At December 31, 1998, the Company had unused borrowing capacity of approximately $31.9 million under this arrangement. Premiere used cash of approximately $46.1 million in 1998 in financing activities. Significant cash outflows for financing activities included repayment of approximately $29.8 million of indebtedness mainly in connection with the Company's revolving loan facility extension. In addition, Premiere executed a stock repurchase program in 1998 under which the Company repurchased approximately 1.1 million shares of its common stock for approximately $9.1 million. The Company's principal financing activities in 1997 and 1996 consisted of the issuance of convertible subordinated notes of $172.5 million in 1997 and its initial public offering which yielded net proceeds of $74.6 million in 1996. Premiere also repaid approximately $29.5 million of indebtedness in 1997 assumed in connection with the Voice-Tel and VoiceCom acquisitions. Cash distributions to shareholders of VoiceCom and certain Voice-Tel companies, primarily S Corporations, used $9.4 million and $3.6 million in 1997 and 1996, respectively. Such distributions were made in periods prior to the Voice-Tel and VoiceCom acquisitions and were made primarily to reimburse S Corporation shareholders for taxes paid on the proportionate share of taxable income of such companies they were required to report in their individual income tax returns. At December 31, 1998, the Company's principal commitments involve indebtedness under its revolving loan facility which matures December 15, 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. See also Note 8--Indebtedness and Note 15--Contingencies and Commitments in Notes to Consolidated Financial Statements. 28 Management believes that cash and marketable securities on hand, cash flows from operations and borrowing capacity under the Company's revolving loan facility should be sufficient to fund growth in the Company's 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, Merger Costs And Other Special Charges Premiere recorded restructuring, merger costs and other special charges of approximately $15.6 million in 1998. Such amount is comprised of approximately $7.5 million of costs recorded in the first quarter of 1998 representing the estimated costs to restructure certain operating activities 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. In the fourth quarter of 1998, Premiere recorded a $13.9 million charge to write-down the value of its MCI WorldCom strategic alliance intangible asset. This charge was required based upon management's assessment of current facts and circumstances within guidelines mandated by SFAS No. 121 "Accounting for the Impairment of Long- Lived Assets and for Long-Lived Assets to be Disposed of." In addition, Premiere recorded a charge of approximately $3.9 million to reduce the carrying value of its investment in certain equity securities of Digitec 2000 to fair market value. This charge was necessitated based upon management's assessment that the decline in value of these securities was not temporary. These charges were offset in part by a reduction in restructuring reserves of approximately $9.7 million. The reduction in reserves was necessary to eliminate remaining accruals associated with programs that have been completed and to reflect subsequent changes to management's restructuring plans rendering the accrual of certain costs unnecessary. In connection with the VoiceCom Acquisition, the Company recorded restructuring, merger costs and other special charges of approximately $28.2 million in the third quarter of 1997. Such amounts consisted of transaction costs, asset impairments, costs to terminate or restructure certain contractual obligations and other costs. Transaction costs associated with the VoiceCom acquisition were expensed as required by the pooling-of-interests method of accounting. Other restructuring and special charges recorded in the third quarter result principally from management's plan to restructure VoiceCom's operations by reducing its workforce, exiting certain facilities, discontinuing duplicative product offerings and terminating or restructuring certain contractual obligations. The Company recorded approximately $45.4 million of restructuring, merger costs and other special charges in the second quarter of 1997 in connection with the Voice-Tel Acquisitions. Those charges result from management's plan to restructure the operations of the Voice-Tel businesses under a consolidated business group model and discontinue its franchise operations. This initiative involves substantial reduction in the administrative workforce, abandoning duplicative facilities and assets and other costs necessary to discontinue redundant business activities. See Note 3--Restructuring, Merger Costs and Other Special Charges of Notes to Consolidated Financial Statements. Other Matters It is possible that a significant portion of the Company's currently installed computer systems, software products, billing systems, telephony platforms, networks, database or other business systems (hereinafter referred to collectively as "Systems"), or those of the Company's customers, vendors or resellers, working either alone or in conjunction with other software or systems, will not accept input of, store, manipulate and output dates for the years 1999, 2000 or thereafter without error or interruption (commonly known as the "Year 2000" problem). The Company is currently in the process of evaluating its Systems to determine whether or not modifications 29 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. "Statement of Position "SOP" 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," provides guidance on accounting for the costs of computer software developed or obtained for internal use and is required to be adopted no later than Premiere's 1999 fiscal year. Also, in June 1998, the American Institute of Certified Public Accountants issued SOP 98-5, "Reporting on the Costs of Start-up Activities." SOP 98-5 requires costs of start-up activities and organizational costs, as defined to be expensed as incurred. The Company expects no material adverse effect to its financial position upon adoption of SOP 98-1 or SOP 98-5. FACTORS AFFECTING FUTURE PERFORMANCE The Successful Integration and Consolidation of Acquired Businesses, Products and Services Into Our Operations are Essential to Our Future Performance. We are in the process of continuing to integrate several businesses acquired in 1997 and 1998 by attempting to eliminate duplicative and unnecessary costs and to operate them under common management. There can be no assurance that the acquired businesses will be successfully integrated with our operations on schedule or at all, that the acquisitions of these businesses will result in sufficient net sales or earnings to justify our investment in these acquisitions or the expenses related thereto, or that operational synergies will develop. The successful integration of the acquired businesses into our operations is critical to our future performance. Failure to successfully integrate the acquired businesses or to achieve operating synergies would have a material adverse effect on our business, financial condition and results of operations. Potential challenges to the successful integration of acquired businesses include, but are not limited to: . centralization and consolidation of financial, operational and administrative functions; . consolidation of service centers, networks and work forces; . elimination of unnecessary costs; and . realization of economies of scale. We are continuing to integrate and consolidate previously acquired service offerings, operations and systems with ours, and therefore, our integration plans may materially change in the future. Challenges to the successful integration of acquired service offerings, operations and systems include, but are not limited to: . localization of our products and services; . integration of platforms and networks; . cross-selling of products and services to our customer base and customer bases of acquired businesses; . integration and retention of new personnel; and . compliance with regulatory requirements. 30 We May Not Be Able to Continue to Compete Successfully Due to Increased Competition and the Development of Alternatives to Our Services. The markets for our products and services are intensely competitive, quickly evolving and subject to rapid technological change. Competitive pressures could have a material adverse effect on our business, financial condition and results of operations. We expect competition to increase in the future. Many of our current and potential competitors have longer operating histories, greater name recognition, larger customer bases and substantially greater financial, personnel, marketing, engineering, technical and other resources than we do. We believe that our current competitors are likely to expand their product and service offerings and that new competitors are likely to enter the Company's markets, and such competitors may to attempt to integrate their products and services, resulting in greater competition. Our Corporate Messaging and Voice and Data Messaging services compete with voice mail services provided by AT&T, certain regional Bell operating companies ("RBOCs") and other service bureaus as well as by equipment manufacturers, such as Octel Communications Corporation (which is owned by Lucent Technologies), Northern Telecom, Siemens Business Communications Systems, Centigram Communications, Boston Technology, and Digital Sound. Our Interactive Voice Response Services compete with IVR Services provided by AT&T, MCI, WorldCom, Lucent, West Teleservices, Call Interactive and Syntellect. Our Conferencing services compete with conference calling services provided by AT&T, MCI WorldCom, Sprint, as well as numerous smaller regional competitors. Our enhanced travel, concierge, news and e-mail services compete with services provided by America Online, Prodigy and numerous Internet service providers. Our Orchestrate(R) service competes with unified communications products offered by companies such as Octel/Lucent, Microsoft, Novell, Sun Microsystems, Motorola, and numerous smaller entities, such as Jfax General Magic and Webley Systems. For example, Octel and Microsoft have announced a service, called "Unified Messenger," which places all voice mail, e-mail and fax messages in a single mailbox accessible by computer or telephone. Sun MicroSystems and Lucent have announced an alliance to build products that tie together voice mail, e-mail, telephone and fax communications. Motorola and General Magic have announced similar products. Our Enhanced Calling services and Premiere WorldLink Corporate Card compete with services provided by companies such as AT&T, MCI WorldCom and Sprint, as well as smaller interexchange long distance providers. Our Document Distribution services compete with services provided by AT&T, MCI WorldCom and Sprint, and many of the international postal, telephone and telegraph ("PTT") companies located around the world, as well as numerous smaller regional competitors. We cannot predict whether AT&T, MCI WorldCom, Sprint, any Internet service provider or PTT or any other competitor will expand its electronic document distribution business, and there can be no assurance that these or other competitors will not commence or expand their businesses. Moreover, our receiving, queuing, routing and other systems logic and architecture are not proprietary, and as a result, there can be no assurance that such information will not be acquired or duplicated by existing and potential competitors. We do not typically have long-term contractual agreements with our customers, and there can be no assurance that our customers will continue to transact business with us in the future. In addition, even if there is continued growth in the use of electronic document distribution services, there can be no assurance that potential customers will not elect to use their own equipment to fulfill their needs for electronic document distribution services. There also can be no assurance that customers will not elect to use alternatives to our Document Distribution services, including the Internet, to carry their communications or that companies offering such alternatives will not develop product features or pricing which are more attractive to customers than those currently offered by us. 31 The Degree to Which We Are Leveraged Could Adversely Effect Our Business. In connection with the issuance of our convertible notes to the public on June 30 and July 30, 1997, we incurred $172.5 million in indebtedness. Effective December 16, 1998, we amended and restated the revolving loan facility we 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 us to maintain minimum earnings and interest coverage ratios and achieve certain revenue levels, in addition to other covenants. We were in compliance with all such covenants at December 31, 1998. We will have to attain certain revenue and earnings growth rates or reduce indebtedness in order to satisfy the minimum ratio requirements required under this arrangement in the future. At December 31, 1998 the Company had unused borrowing capacity of approximately $31.9 million under this arrangement. Our loan facility limits our ability to incur additional indebtedness, grant liens, pay dividends or distributions, make certain acquisitions for cash, sell assets and repurchase our securities. As a result of this increased leverage, our principal and interest obligations increased substantially. The degree to which we are leveraged and the restrictions contained in the loan facility could adversely affect our ability to obtain additional financing for working capital, acquisitions or other purposes and could make us more vulnerable to economic downturns and competitive pressures. Our increased leverage could also adversely affect our liquidity, as a substantial portion of available cash from operations may have to be applied to meet debt service requirements, and in the event of a cash shortfall, we could be forced to reduce other expenditures and forego potential acquisitions to be able to meet such requirements. The indenture related to our convertible notes does not contain any financial covenants or any other agreements restricting the payments of dividends, the repurchase of our securities, the issuance of additional equity or the incurrence of additional indebtedness. The Telecommunications Act of 1996 May Increase Competition. Furthermore, on February 8, 1996, President Clinton signed into law the Telecommunications Act of 1996 (the "1996 Act"), which allows local exchange carriers ("LECs"), including the RBOCs, to immediately provide long distance telephone service between Local Access and Transport Areas ("LATAs") outside of their local service territories. The legislation also grants the Federal Communications Commission (the "FCC") the authority to deregulate other aspects of the telecommunications industry, which in the future may, if authorized by the FCC, facilitate the offering of an integrated suite of information and telecommunications services by the RBOCs in competition with us. This increased competition could have a material adverse effect on our business, financial condition and results of operations. Our Future Success Will Depend On Our Ability to Anticipate Advances In Technologies. The market for our products and services is characterized by rapid technological change, frequent new product introductions and evolving industry standards. Our future success will depend in significant part on our ability to anticipate industry standards, continue to apply advances in technologies, enhance our current services, develop and introduce new products and services in a timely fashion, enhance our software and our platforms and compete successfully with products and services based on evolving or new technologies. We expect new products and services, and enhancements to existing products and services, to be developed and introduced which will compete with our products and services. Our Orchestrate(R) product line is expected to compete within markets where larger companies are working to provide a unified communications solution. Technological advances may result in the availability of new services, products or methods of electronic document distribution that could compete with the electronic document distribution services currently provided by us or decrease the cost of existing products or services which could enable our established or potential customers to meet their own needs for electronic document distribution services more cost efficiently than through the use of our services. 32 The acquisitions of the Voice-Tel entities in 1997 constituted a significant investment by us in a private frame relay network architecture. Alternative architectures currently exist, and technological advances may result in the development of additional network architectures. There can be no assurance that the telecommunications industry will not standardize on a protocol other than frame relay or that our frame relay architecture will not become obsolete. Such events would require us to invest significant capital in upgrading or replacing our private frame relay network and could have a material adverse effect on our business, financial condition and results of operations. In addition, we may experience difficulty integrating incompatible systems of acquired businesses into our networks. There can be no assurance that we will not be materially adversely affected in the event of such technological change or difficulty, or that changes in technology will not enable additional companies to offer services which could replace, or be more cost-effective than, some or all of the services we now offer. Our Future Success Will Depend on Market Acceptance of New Products and Services That We Develop. We must continually introduce new products and services in response to technological changes, evolving industry standards and customer demands for enhancements to our existing products and services. One such product is Orchestrate(R). 32--1 Delays in the introduction of new products and services, our inability to develop such new products and services or the failure of such products and services to achieve market acceptance could have a material adverse effect on our business, financial condition and results of operations. There can be no assurance that: . we will successfully develop and market new products and services or product and service enhancements that respond to these or other technological changes, evolving industry standards or customer demands; . we will develop effective marketing, pricing and distribution strategies for new products and services, including Orchestrate; . we will not experience difficulties that could delay or prevent the successful development, introduction and marketing of new products and services; or . our new products and services, including Orchestrate(R), and enhancements to our existing products and services, will adequately meet the requirements of the marketplace and achieve market acceptance. Managing Our Growth Through Acquisitions May Strain Our Administrative, Technical and Financial Resources. We regularly evaluate acquisition opportunities and, as a result, frequently engage in acquisition discussions, conduct due diligence activities in connection with possible acquisitions, and, where appropriate, engage in acquisition negotiations. There can be no assurance that we will be able to successfully identify suitable acquisition candidates, complete acquisitions, integrate acquired operations into our existing operations or expand into new markets. In addition, we compete for acquisitions and expansion opportunities with companies that have substantially greater resources. We have experienced substantial growth in revenue and personnel in recent years, particularly in 1997 and early 1998. A substantial portion of such growth has been accomplished through acquisitions, including the acquisitions of Voice-Tel and its affiliate Voice-Tel Network Limited Partnership ("VTN") and substantially all of Voice-Tel's franchisees (the "Franchisees") (Voice- Tel, VTN and the Franchisees are collectively referred to as the "Voice-Tel Entities" and such acquisitions are referred to collectively as the "Voice-Tel Acquisitions"), the acquisition of VoiceCom, the merger with Xpedite and the acquisition of American Teleconferencing Services. Our growth has placed significant demands on all aspects of our business, including our administrative, technical and financial personnel and systems. Additional expansion may further strain our management, financial and other resources. There can be no assurance that our systems, procedures, controls and existing space are or will be adequate to support expansion of our operations. Our future operating results will substantially depend on the ability of our officers and key employees to manage changing business conditions and to implement and improve our administrative, technical and financial control and reporting systems. If we are unable to respond to and manage changing business conditions, then the quality of our services, our ability to attract and retain key personnel and our results of operations could be materially adversely affected. At certain stages of growth in network usage, we will be required to add capacity to our platforms and our digital central office switches and we will need to continually add capacity to our private frame relay network, thus requiring that we continuously attempt to predict growth in its network usage and add capacity accordingly. Difficulties in managing continued growth, including difficulties in predicting the growth in our network usage, could have a material adverse effect on our business, financial condition and results of operations. Acquisitions also involve numerous additional risks, including difficulties in the assimilation of the operations, services, products and personnel of the acquired company, the diversion of our management's attention from other business concerns, entry into markets in which we have little or no direct prior experience and the potential loss of key employees of the acquired company. Assimilation and retention of the key employees of an acquired company are generally important to the success of an acquisition and the failure to assimilate and retain any such key employees could have a material adverse effect on our business, financial condition and results of operations. 33 Acquisitions May Decrease Our Shareholders' Percentage Ownership and Require Us to Incur Additional Debt. Future acquisitions may result in potentially dilutive issuances of equity securities, the incurrence of additional debt, the assumption of known and unknown liabilities, the write-off of software development costs and the amortization of expenses related to goodwill and other intangible assets, all of which could have a material adverse effect on our business, financial condition and results of operations. As of December 31, 1998, we had approximately $492.2 million of goodwill and other intangible assets reflected on our financial statements as a result of acquisitions. We are amortizing the goodwill and other intangibles over a range of periods we believe appropriate for the assets. If the amortization period is accelerated due to a reevaluation of the useful life of these assets or otherwise, amortization expense may initially increase on a quarterly basis or require a write-down of the goodwill or other intangible assets. An increase in the rate of amortization of goodwill or future write-downs and restructuring charges could have a material adverse effect on our business, financial condition and results of operations. Acquisitions May Involve Restructuring and Other Special Charges. We have taken, and in the future may take, charges in connection with acquisitions. There can be no assurance that the costs and expenses incurred will not exceed the estimates upon which such charges are based. During the second quarter of 1997, we took a pre-tax charge of approximately $45.4 million in connection with the acquisitions of the Voice-Tel entities. During the third quarter of 1997, we took a pre-tax charge of approximately $28.2 million in connection with the acquisition of VoiceCom. We also recorded restructuring and other special charges before income taxes of approximately $7.5 million in connection with the merger with Xpedite. Long Distance Pricing Pressures Could Adversely Effect Our Business. Telecommunications companies compete for consumers based on price, with major long distance carriers conducting extensive advertising campaigns to capture market share. There can be no assurance that a decrease in the rates charged for communications services by the major long distance carriers or other competitors, whether caused by general competitive pressures or the entry of the RBOCs and other LECs into the long distance market, would not have a material adverse effect on our business, financial condition and results of operations. We Need to Retain the Services of Our Key Management and Personnel. Our success is largely dependent upon its executive officers and other key personnel, the loss of one or more of whom could have a material adverse effect on our performance. We believe that our continued success will depend to a significant extent upon the efforts and abilities of Boland T. Jones, Chairman and Chief Executive Officer, and certain other key executives. Mr. Jones has entered into an employment agreement which expires in December 1999, and we maintain key man life insurance on Mr. Jones in the amount of $3.0 million. We Need to Attract and Retain Highly Qualified Technical Personnel. We also believe that to be successful we must hire and retain highly qualified engineering and product development personnel. Competition in the recruitment of highly qualified personnel in the information and 34 telecommunications services industry is intense. If we are not able to locate, hire and retain such personnel it may have a material adverse effect on our business, financial condition and results of operations. No assurance can be given that we will be able to retain our key employees or that we will be able to attract qualified personnel in the future. We Do Not Typically Have LongTerm Contractual Agreements With Our Customers. We expect that the information and telecommunications services markets will continue to attract new competitors and new technologies, possibly including alternative technologies that are more sophisticated and cost effective than our technologies. We do not typically have long-term contractual agreements with our customers, and there can be no assurance that our customers will continue to transact business with us in the future. We Rely on Amway and Certain Other Clients for Significant Revenues. We have historically relied on sales through Amway Corporation for a substantial portion of our revenue. Such sales accounted for approximately 23.7%, 21.8% and 9.4% of our revenue for 1996, 1997 and 1998, respectively. Total revenues from Amway have decreased significantly over the last two fiscal years but Amway remains a significant customer. There can be no assurance that our relationship with Amway and the Amway distributors will continue at historical levels or at all, nor can there be any assurance of long-term price protection for services provided to Amway. Continued loss in total revenues from Amway or diminution in the Amway relationship, or a decrease in average sales price without an offsetting increase in volume, could have a material adverse effect on our business, financial condition and results of operations. We have entered into a service and reseller agreement with Amway (the "Amway Agreement") providing, among other things, for the sale of voice messaging and network transmission services on an exclusive basis to Amway in the United States, Canada, New Zealand and Australia for resale by Amway to its independent distributors. The Amway Agreement does not bind the Amway distributors, who are free to acquire messaging services from alternative vendors. The Amway Agreement may be canceled by either party upon 180 days prior written notice or upon shorter notice in the event of a breach. The Amway Agreement does not prohibit us from continuing to provide voice messaging and network transmission services to Amway's distributors following termination of the Amway Agreement. However, in the event that Amway recommended a voice messaging and network transmission services provider other than ours, there can be no assurance that Amway's distributors would not follow such recommendation. Amway has sold substantially all of the Common Stock of Premiere that it acquired in the Voice-Tel acquisitions. The sale of such stock may increase the possibility that Amway will recommend a voice messaging and network transmission services provider other than us. Financial Difficulties of Licensees or Strategic Partners Could Adversely Impact Our Earnings. The telecommunications industry is intensely competitive and rapidly consolidating. The majority of companies that have chosen to outsource communications card services to us are small or medium-sized telecommunications companies that may be unable to withstand the intense competition in the telecommunications industry. During the second quarter of 1998, a licensing customer and a strategic partner in our Enhanced Calling Services group initiated proceedings under Chapter 11 of the United States Bankruptcy Code. We recorded approximately $8.4 million of charges in the second quarter of 1998 associated with uncollectible accounts receivable, primarily related to these financially distressed customers. The financial difficulties of these two customers, as well as revenue shortfalls in the Voice and Data Messaging group and other unanticipated costs and one-time charges, contributed to an after tax loss for the second quarter of 1998. There can be no assurance that one or more additional failures will not occur, and any such additional failures could have a material adverse effect on our business, financial condition and results of operations. Our Future Success Depends On the Success of Our Strategic Relationships. A principal element of our strategy is the creation and maintenance of strategic relationships that will enable us to offer our services to a larger customer base than we could otherwise reach through our direct marketing 35 efforts. Failure of one or more of our strategic partners to successfully develop and sustain a market for our services, or the termination of one or more of our relationships with a strategic partner, could have a material adverse effect on our overall performance. We experienced growth in our existing strategic relationships during 1996, 1997 and 1998 and entered into or initiated new strategic relationships with several companies, including MCI WorldCom, WebMD, USA.NET, Intellivoice, and Webforia. Although we intend to continue to expand our direct marketing channels, we believe that strategic partner relationships may offer a potentially more effective and efficient marketing channel. Consequently, our success depends in part on the ultimate success of these relationships and on the ability of these strategic partners to market our services effectively. In connection with our strategic plan, we make investments and form alliances with companies involved in 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 our products. In 1998, the Company made investments of approximately $8.3 million to acquire initial or increase existing equity interests in companies engaged in emerging technologies. Since many of the companies in which we make investments are small, early-stage companies, our investments are subject to the significant risks faced by these companies which could result in the loss of our investment. In 1998, the Company took a net charge of $3.9 million reflecting the write-down of an equity investment in a telecommunications distribution partner, DigiTEC. In November 1996, we entered into a strategic alliance agreement with WorldCom, now known as MCI WorldCom, whereby MCI WorldCom is required, among other things, to provide us with the right of first opportunity to provide certain enhanced computer telephony services for a period of at least 25 years. In connection with this agreement, we issued to MCI WorldCom 2,050,000 shares of common stock valued at approximately $25.2 million (based on an independent appraisal) and paid MCI WorldCom $4.7 million in cash. We recorded the value of this agreement as an intangible asset. Subsequent to entering into this strategic alliance agreement WorldCom completed a merger with MCI to form MCI WorldCom. MCI was a competitor of ours with respect to certain services and the total impact of the merger between MCI and WorldCom on our strategic alliance with MCI WorldCom cannot be determined at this time. Current activity levels under the strategic alliance agreement are significantly below the specified minimum payment levels in the agreement and the minimum payments ceased at the end of September 1998. We periodically review this intangible asset for impairment and in 1998 we wrote down the carrying value of the MCI WorldCom strategic alliance intangible asset by approximately $13.9 million. In addition, we accelerated amortization of the remaining carrying value of the asset starting in the fourth quarter of 1998 by shortening its estimated remaining useful life to three years from 23 years. Although we view our strategic relationships as a key factor in our overall business strategy and in the development and commercialization of our services, there can be no assurance that our strategic partners view their relationships with us as significant for their own businesses or that they will not reassess their commitment to us in the future. Our arrangements with our strategic partners do not always establish minimum performance requirements for our strategic partners, but instead rely on the voluntary efforts of these partners in pursuing joint goals. Certain of these arrangements prevent us from entering into strategic relationships with other companies in the same industry as our strategic partners, either for specified periods of time or while the arrangements remain in force. In addition, even when we are without contractual restriction, we may be restrained by business considerations from pursuing alternative arrangements. The ability of our strategic partners to incorporate our services into successful commercial ventures will require us, among other things, to continue to successfully enhance our existing products and services and develop new products and services. Our inability to meet the requirements of our strategic partners or to comply with the terms of our strategic partner arrangements could result in our strategic partners failing to market our services, seeking alternative providers of communications and information services or canceling their contracts with us, any of which could have a material adverse impact on our business, financial condition and results of operations. Our Success Depends on Our Ability to Establish and Maintain Licensing and Wholesale Relationships. We have licensing and wholesale relationships with companies that have chosen to outsource part or all of their communications card services. License fees accounted for approximately 11.7% and 5.8% of our revenues 36 in 1997 and 1998, respectively. MCI WorldCom accounted for approximately 66.9% of our 1997 license fees and 7.0% of our total 1997 revenues, and approximately 53.3% of our license fees and 3.1% of our total revenues in 1998. Although we intend to increase our number of licensees and our licensee transaction volume in the future, our success depends in part upon the ultimate success or failure of our licensees and our ability to establish and maintain licensing and strategic relationships. The telecommunications industry is intensely competitive and rapidly consolidating. The majority of companies that have chosen to outsource communications card services to us are small or medium-sized telecommunications companies that may be unable to withstand the intense competition in the telecommunications industry. During the second quarter of 1998, a licensing customer and a strategic partner in our Enhanced Calling Services group initiated proceedings under Chapter 11 of the United States Bankruptcy Code. We recorded approximately $8.4 million of charges in the second quarter of 1998 associated with uncollectible accounts receivable, primarily related to these financially distressed customers. There can be no assurance that one or more additional failures will not occur or that the failure of one or more of our licensees to develop and sustain a market for our services, or termination of one or more of our licensing or strategic relationships, will not have a material adverse effect on our business, financial condition and results of operations. Consolidation in the Telecommunications Industry Could Adversely Effect Our Business. The telecommunications industry is experiencing rapid consolidation. For example, in 1998 WorldCom, a strategic partner of the Company, completed a merger with MCI Communications Corp., a competitor of ours with respect to certain services, to form MCI WorldCom. Consolidation in the communications industry, including consolidations involving the Company's customers, competitors and strategic partners, could have a material adverse effect on the Company's business, financial condition and results of operations. Our Future Success Depends on Market Acceptance of Computer Telephony. Our future success depends upon the market acceptance of our existing and future computer telephony product lines and services. Computer telephony integrates the functionality of telephones and computers and thus represents a departure from standards for information and telecommunications services. Market acceptance of computer telephony products and services generally requires that individuals and enterprises accept a new way of exchanging information. A decline in the demand for, or the failure to achieve broad market acceptance of, our computer telephony product lines and services would have a material adverse effect on our business, financial condition and results of operations. We believe that broad market acceptance of our computer telephony product lines and services will depend on several factors, including ease of use, price, reliability, access and quality of service, system security, product functionality and the effectiveness of strategic marketing and distribution relationships. There can be no assurance that our computer telephony products and services will achieve broad market acceptance or that such market acceptance will occur at the rate which we currently anticipate. Downtime in Our Platforms Networks Could Result in the Loss of Significant Customers. We currently maintain switching facilities and computer telephony platforms in approximately 300 locations. Our network service operations are dependent upon our ability to protect the equipment and data at our switching facilities against damage that may be caused by fire, power loss, technical failures, unauthorized intrusion, natural disasters, sabotage and other similar events. We have taken precautions to protect ourselves and our customers from events that could interrupt delivery of our services. These precautions include physical security systems, uninterruptible power supplies, on-site power generators, upgraded backup hardware, fire protection systems and other contingency plans. In addition, certain of our networks are designed such that the data on each network server is duplicated on a separate network server. Notwithstanding such precautions, we have experienced downtime in our networks from time to time and there can be no assurance that downtime will not occur in the future. In addition, there can be no assurance that a fire, act of sabotage, technical failure, natural disaster or a similar event would not cause the failure of a network server and its backup server, other portions of our networks or one of the switching facilities as a whole, thereby resulting in an interruption of the our services. Such interruptions could result in the loss of significant customers and could have a material adverse effect on our business, financial condition and results of operations. Although we maintain business interruption 37 insurance providing for aggregate coverage of approximately $86.1 million per policy year, there can be no assurance that we will be able to maintain our business interruption insurance, that such insurance will continue to be available at reasonable prices or that such insurance will be sufficient to compensate us for losses we experience due to our inability to provide services to our customers. We May Be Unable to Protect and Maintain the Competitive Advantage of Our Proprietary Technology and Intellectual Property Rights. We rely primarily on a combination of intellectual property laws and contractual provisions to protect our proprietary rights and technology. These laws and contractual provisions provide only limited protection of our proprietary rights and technology. Our proprietary rights and technology include confidential information and trade secrets which we attempt to protect through confidentiality and nondisclosure provisions in our licensing, services, reseller and other agreements. We typically attempt to protect our confidential information and trade secrets through these contractual provisions for the term of the applicable agreement and, to the extent permitted by applicable law, for some negotiated period of time following termination of the agreement, typically one to two years at a minimum. There can be no assurance that our means of protecting our proprietary rights and technology will be adequate or that our competitors will not independently develop similar technology. In addition, the laws of some foreign countries do not protect our proprietary rights to as great an extent as the laws of the United States. No Assurance Can Be Given That Claims Alleging Patent, Copyright or Trademark Infringement Will Not Be Brought. Many patents, copyrights and trademarks have been issued in the general areas of information and telecommunications services and computer telephony. We believe that in the ordinary course of our business third parties will claim that our current or future products or services infringe the patent, copyright or trademark rights of such third parties. No assurance can be given that actions or claims alleging patent, copyright or trademark infringement will not be brought against us with respect to current or future products or services, or that, if such actions or claims are brought, we will ultimately prevail. Any such claiming parties may have significantly greater resources than we have to pursue litigation of such claims. Any such claims, whether with or without merit, could be time consuming, result in costly litigation, cause delays in introducing new or improved products and services, require us to enter into royalty or licensing agreements, or cause us to discontinue use of the challenged technology, tradename or service mark at potentially significant expense associated with the marketing of a new name or the development or purchase of replacement technology, all of which could have a material adverse effect on our business, financial condition and results of operations. For a description of the Company's material infringement claims, see Part I--"Business--Proprietary Rights and Technology" of this Form 10-K. We May Lose Revenue or Incur Additional Costs Because of Failure to Adequately Address the Year 2000 Issue. It is possible that a significant portion of our currently installed computer systems, software products, billing systems, telephony platforms, networks, database or other business systems (hereinafter referred to collectively as "Systems"), or those of our customers, vendors or resellers, working either alone or in conjunction with other software or systems, will not accept input of, store, manipulate and output dates for the years 1999, 2000 or thereafter without error or interruption (commonly known as the "Year 2000" problem). We are currently in the process of evaluating our Systems to determine whether or not modifications will be required to prevent problems related to the Year 2000. Although we have not completed our evaluation, we have identified certain of our Systems that will require modification or upgrades to remedy Year 2000 problems. There can be no assurance that we will identify all such Year 2000 problems in our Systems or those of our customers or vendors, including network transmission providers, in advance of their occurrence or that we will be able to successfully remedy any problems that have been or may subsequently be discovered. In addition, we are dependent upon third parties for transmission of its calls and other communications. There can be no assurance that these third party providers will identify and remedy any Year 2000 problems in their transmission facilities. The expenses of our efforts to 38 identify and address such problems, the expenses or liabilities to which we may be subject as a result of such problems, or the failure of third party providers of transmission facilities, could have a material adverse effect on our business, financial condition and results of operations. The financial stability of existing customers may be adversely impacted by Year 2000 problems which could have a material adverse impact on our revenues. In addition, any failure by us to identify and remedy Year 2000 problems could put us at a competitive disadvantage relative to companies that have corrected Year 2000 problems. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--The Year 2000 Issue." 39 One or More Adverse Outcomes in Our Pending Litigation Could Have a Material Effect on Our Business. In the ordinary course of our business, we are subject to claims and litigation from third parties alleging that our products and services infringe the patents, trademarks and copyrights of such third parties. See "--Risk of Infringement Claims." We have several litigation matters pending not involving infringement claims which we are defending vigorously. Due to the inherent uncertainties of the litigation process and the judicial system, we are unable to predict the outcome of such litigation matters. If the outcome of one or more of such matters is adverse to us, it could have a material adverse effect on our business, financial condition and results of operations. For a description of the Company's pending material litigation, see "Item 3--Legal Proceedings" of this Form 10-K. 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. Our Quarterly Results May Not Always Meet the Expectations of Public Market Analysts and Investors. Quarterly revenues are difficult to forecast because the market for our services is rapidly evolving. Our expense levels are based, in part, on our expectations as to future revenues. If revenue levels are below expectations, we may be unable or unwilling to reduce expenses proportionately and operating results would likely be adversely affected. As a result, we believe that period-to-period comparisons of its results of operations are not necessarily meaningful and should not be relied upon as indications of future performance. Due to all of the foregoing factors, it is likely that in some future quarter our operating results will be below the expectations of public market analysts and investors. In such event, the market price of our common stock will likely be materially adversely affected. Our operating results have varied significantly in the past and may vary significantly in the future. Specific factors that may cause our future operating results to vary include: . the unique nature of strategic relationships into which we may enter in the future; . changes in operating expenses resulting from such strategic relationships and other factors; . the continued acceptance of our licensing program; . the financial performance of our licensees and strategic partners; 41 . the timing of new service announcements; . market acceptance of new and enhanced versions of our products and services, including Orchestrate(R); . acquisitions; . performance of strategic investments; . changes in legislation and regulations that may affect the competitive environment for our communications services; and . general economic and seasonal factors. In the future, revenues from our strategic relationships may become an increasingly significant portion of our total revenues. Due to the unique nature of each strategic relationship, these relationships may change the mix of our expenses relative to our revenues. Software Failures or Errors May Result in Failure of Our Networks and/or Platforms or Loss of Significant Customers. The software that we have developed and utilized in providing our services, including the Orchestrate software, may contain undetected errors. Although we generally engage in extensive testing of our software prior to introducing the software onto any of our networks and/or platforms, there can be no assurance that errors will not be found in the software after the software goes into use. Any such error may result in partial or total failure of our networks, additional and unexpected expenses to fund further product development or to add programming personnel to complete a development project, and loss of revenue because of the inability of customers to use our networks or the cancellation by significant customers of their service with us, any of which could have a material adverse effect on our business. We maintain technology errors and omissions insurance coverage of $35.0 million per policy aggregate. However, there can be no assurance that we will be able to maintain our technology errors and omissions insurance, that such insurance will continue to be available at reasonable prices or will be sufficient to compensate us for losses we experience due to our inability to provide services to our customers. Interruption in Long Distance Service Could Result in a Loss of Significant Customers and Revenue. We do not own a transmission network and, accordingly, depend on MCI WorldCom, AT&T and other facilities-based and non-facilities based carriers for transmission of our customers' long distance calls. These long distance telecommunications services generally are procured pursuant to supply agreements for terms of three to five years, subject to earlier termination in certain events. Certain of these agreements provide for minimum purchase requirements. Further, we are dependent upon LECs or CLECs for call origination and termination. If there is an outage affecting one of our terminating carriers, our platform automatically switches calls to another terminating carrier if capacity is available. We have not experienced significant losses in the past due to interruptions of service at terminating carriers, but no assurance can be made in this regard in the future. Our ability to maintain and expand our business depends, in part, on our ability to continue to obtain telecommunication services on favorable terms from long distance carriers and the cooperation of both interexchange and LECs or CLECs in originating and terminating service for our customers in a timely manner. The partial or total loss of the ability to receive or terminate calls would result in a loss of revenues and could lead to a loss of significant customers, which could have a material adverse effect on our business, financial condition or results of operations. We lease capacity on the MCI WorldCom backbone to provide connectivity and data transmission within our private data network. The telecommunication agreement expires in September 2000. Our hub equipment is co-located at various MCI WorldCom sites pursuant to co-location agreements that are terminable by either party upon 30 days written notice. Our ability to maintain network connectivity is dependent upon our access to transmission facilities provided by MCI WorldCom or an alternative provider. We have no assurance that we will be able to continue our relationship with MCI WorldCom beyond the terms of our current agreements with MCI WorldCom or that we will be able to find an alternative provider on terms as favorable as those offered by MCI WorldCom or on any other terms. If we were required to relocate our hub equipment or change our network 42 transmission provider, we could experience shutdowns in our service and increase costs which could have a material adverse effect on our customer relationships and customer retention and, therefore, our business, financial condition and results of operations. Any Significant Difficulty Obtaining Voice Messaging Equipment From Suppliers Could Adversely Effect Our Business. We do not manufacture voice messaging equipment used at our voice messaging service centers, and such equipment is currently available from a limited number of sources. Although we have not historically experienced any significant difficulty in obtaining equipment required for our operations and believe that viable alternative suppliers exist, no assurance can be given that shortages will not arise in the future or that alternative suppliers will be available. Our inability to obtain voice messaging equipment could result in delays or reduced delivery of messages which would materially and adversely affect our business, financial condition and results of operations. In addition, technological advances may result in the development of new voice messaging equipment and changing industry standards and there can be no assurance that our voice messaging equipment will not become obsolete. Such events would require us to invest significant capital in upgrading or replacing our voice messaging equipment and could have a material adverse effect on our business, financial condition and results of operations. Various Regulatory Factors Affect Our Financial Performance and Our Ability to Compete. Our operating subsidiaries that provide regulated long distance telecommunications services are subject to regulation by the FCC and by various state public service and public utility commissions ("PUCs"), and are otherwise affected by regulatory decisions, trends and policies made by these agencies. FCC rules currently require interexchange carriers to permit resale of their transmission services. FCC rules also require LECs to provide all interexchange carriers with equal access to local exchange facilities for purposes of origination and termination of long distance calls. If either or both of these requirements were eliminated, we could be adversely affected. Moreover, the underlying carriers that provide services to our operating subsidiaries or that originate or terminate the operating subsidiaries' traffic may increase rates or experience disruptions in service due to factors outside our control, which could cause the operating subsidiaries to experience increases in rates for telecommunications services or disruptions in transmitting their subscribers' long distance calls. PCI has made the requisite filings with the FCC to provide interstate and international long distance services. In order to provide intrastate long distance service, PCI generally is required to obtain certification from state PUCs, to register with such state PUCs or to be found exempt from registration by such state PUCs. PCI has either filed the applications necessary to provide intrastate long distance telecommunications services throughout the United States or is in the process of filing such applications. To date, PCI is authorized to provide long distance telecommunications services in 46 states and in the District of Columbia and is seeking authorization to provide long distance telecommunications services in four states. With the exception of three states, Colorado, Michigan and Arizona, in which PCI's applications to provide operator service (i.e., "0+") are pending, PCI is authorized to provide operator service in each state where PCI provides long distance telecommunications service. In addition, as a condition of providing intrastate long distance services, PCI generally is required to comply with PUC tariffing requirements, reporting obligations and regulatory assessments, and to submit to PUC jurisdiction over complaints, transfers of control and certain financing transactions. PCI uses reasonable efforts to ensure that its operations comply with these regulatory requirements. However, there can be no assurance that PCI is currently in compliance with all PUC regulatory requirements. Further PCI's facilities do not prevent subscribers from using the facilities to make long distance calls in any state, including states in which PCI currently is not authorized to provide intrastate telecommunications services and operator services. There can be no assurance that PCI's provision of long distance telecommunications and operator services in states where it is not in compliance with PUC requirements will not have a material adverse effect on our business, financial condition and results of operations. 43 The 1996 Act is intended to increase competition in the long distance and local telecommunications markets. The 1996 Act opens competition in the local services market and, at the same time, contains provisions intended to protect consumers and businesses from unfair competition by incumbent LECs, including the RBOCs. The 1996 Act allows RBOCs to provide long distance service outside of their local service territories but bars them from immediately offering in- region interLATA long distance services until certain conditions are satisfied. An RBOC must apply to the FCC to provide in-region interLATA long distance services and must satisfy a set of pro-competitive criteria intended to ensure that RBOCs open their own local markets to competition before the FCC will approve such application. Further, while the FCC has final authority to grant or deny such RBOC application, the FCC must consult with the Department of Justice to determine if, among other things, the entry of the RBOC would be in the public interest, and with the relevant state to determine if the pro-competitive criteria have been satisfied. While the FCC has yet to grant any RBOC interLATA application, we are unable to determine how the FCC will rule on any such applications in the future. In response to a constitutional challenge filed by SBC Communications Inc., the United States District Court for the Northern District of Texas found the 1996 Act's restrictions on RBOC interLATA services to be an unconstitutional bill of attainder, but stayed the effect of its decision pending further appeal. As a result of the 1996 Act and if the in-region interLATA restrictions are ultimately struck down, we may experience increased competition from others, including the RBOCs. In addition, our operating subsidiaries may be subject to additional regulatory requirements and fees, including universal service assessments and payphone compensation surcharges resulting from the implementation of the 1996 Act. In conducting its business, we are subject to various laws and regulations relating to commercial transactions generally, such as the Uniform Commercial Code and is also subject to the electronic funds transfer rules embodied in Regulation E promulgated by the Board of Governors of the Federal Reserve System (the "Federal Reserve"). Congress has held hearings regarding, and various agencies are considering, whether to regulate providers of services and transactions in the electronic commerce market. For example, the Federal Reserve completed a study, directed by Congress, regarding the propriety of applying Regulation E to stored value cards. The Department of Treasury has promulgated proposed rules applying record keeping, reporting and other requirements to a wide variety of entities involved in electronic commerce. It is possible that Congress, the states or various government agencies could impose new or additional requirements on the electronic commerce market or entities operating therein. If enacted, such laws, rules and regulations could be imposed on our business and industry and could have a material adverse effect on our business, financial condition and results of operations. Our proposed international activities also will be subject to regulation by various international authorities and the inherent risk of unexpected changes in such regulation. Our Expansion Into International Markets May Not Be Successful A key component of our strategy is our planned expansion into international markets. If international revenues are not adequate to offset the expense of establishing and maintaining these international operations, it could have a material adverse effect on our business, financial condition and results of operations. We operate Voice and Data Messaging service centers in Canada, Australia, New Zealand and Puerto Rico. New Voice and Data Messaging service centers have recently been established in the United Kingdom, Germany, Italy, Japan, Hong Kong and South Korea. In addition, Conferencing operations were recently established in Canada. We also plan to establish Conferencing operations or capability in the United Kingdom, Germany, France, Singapore, Australia and Hong Kong. While our Document Distribution subsidiary has significant international experience, we only have limited experience in marketing and distributing our Voice and Data Messaging and Conferencing services internationally. There can be no assurance that we will be able to successfully: . establish the proposed Conferencing operations or capabilities, or . market, sell and deliver our Voice and Data Messaging and Conferencing services in the new international markets. 44 There Are Certain Risks Inherent to International Operations. In addition to the uncertainty as to our ability to expand our international presence, there are certain difficulties and risks inherent in doing business on an international level, such as burdensome regulatory requirements and unexpected changes in these requirements, export restrictions, export controls relating to technology, tariffs and other trade barriers, difficulties in staffing and managing international operations, longer payment cycles, problems in collecting accounts receivable, political instability, fluctuations in currency exchange rates, seasonal reductions in business activity during the summer months in Europe and certain other parts of the world and potentially adverse tax consequences. We typically denominate foreign transactions in foreign currency and have not regularly engaged in hedging transactions, although we may engage in hedging transactions from time to time in the future. In connection with one acquisition we borrowed funds denominated in the local currency. We have not experienced any material losses from fluctuations in currency exchange rates, but there can be no assurance that we will not incur material losses due to currency exchange rate fluctuations in the future. We Rely on International Operations for Significant Revenues From Enhanced Document Distribution Services A significant portion of our Document Distribution business is conducted outside the United States and a significant portion of our revenues and expenses from that business are derived in foreign currencies. Accordingly, the results of operations from our Document Distribution business may be materially affected by fluctuations in foreign currencies. Many aspects of our international operations and business expansion plans are subject to foreign government regulations, currency fluctuations, political uncertainties and differences in business practices. There can be no assurance that foreign governments will not adopt regulations or take other actions that would have a direct or indirect adverse impact on the business or market opportunities of our Document Distribution business within such governments' countries, including increased tariffs. Furthermore, there can be no assurance that the political, cultural and economic climate outside the United States will be favorable to our operations and growth strategy. We May Not Be Able to Expand Our Document Distribution Services. We intend to accelerate growth of our Document Distribution services throughout the world by expansion of our proprietary private world-wide document distribution network (the "Document Distribution Network"), the integration of that network with our private frame relay network and computer telephony platforms and the acquisition of entities engaged in the business of electronic document distribution services. There can be no assurance that we will be able to expand our ability to provide electronic document services at a rate or in a manner satisfactory to meet the demands of existing or future customers, including, but not limited to, increasing the capacity of the Document Distribution Network to process increasing amounts of document traffic, integrating and increasing the capability of 45 the Document Distribution network to perform tasks required by our customers or identifying and establishing alliances with new partners in order to enable us to expand our network in new geographic regions. Such inability may adversely affect customer relationships and perceptions of our business in the markets in which we provide services, which could have a material adverse effect on our business, financial condition and results of operations. In addition, such growth will involve substantial investments of capital, management and other resources. There can be no assurance that we will generate sufficient cash for future growth of our Document Distribution business through earnings or external financings, or that such external financings will be available on terms acceptable to us or that we will be able to employ any such resources in a manner that will result in accelerated growth. Returned Transactions or Thefts of Services Could Adversely Effect Our Business. Although we believe that our risk management and bad debt reserve practices are adequate, there can be no assurance that our risk management practices, including our internal controls, or reserves will be sufficient to protect us from unauthorized or returned transactions or thefts of services which could have a material adverse effect on our business, financial condition and results of operations. We use two principal financial payment clearance systems in connection with our Enhanced Calling Services: the Federal Reserve's Automated Clearing House for electronic fund transfers; and the national credit card systems for electronic credit card settlement. In our use of these established payment clearance systems, we generally bear credit risks similar to those normally assumed by other users of these systems arising from returned transactions caused by insufficient funds, stop payment orders, closed accounts, frozen accounts, unauthorized use, disputes, theft or fraud. From time to time, persons have gained unauthorized access to our network and obtained services without rendering payment to us by unlawfully using the access numbers and Personal Identification Numbers ("PINs") of authorized users. In addition, in connection with our wholesale prepaid telephone card relationships, we have experienced unauthorized activation of prepaid telephone cards. No assurance can be given that losses due to unauthorized use of access numbers and PINs, unauthorized activation of prepaid calling cards or activation of prepaid calling cards in excess of the prepaid amount, or theft of prepaid calling cards will not be material. We attempt to manage these risks through our internal controls and proprietary billing systems. Our computer telephony platform is designed to prohibit a single access number and PIN from establishing multiple simultaneous connections to the platform, and generally we establish preset spending limits for each subscriber. We also maintain reserves for such risks. Past experience in estimating and establishing reserves and our historical losses are not necessarily accurate indicators of future losses or the adequacy of the reserves we may establish in the future. Our Articles of Incorporation and Bylaws and Georgia Law May Inhibit a Takeover. Our Board of Directors is empowered to issue preferred stock without shareholder action. The existence of this "blank-check" preferred could render more difficult or discourage an attempt to obtain control of the Company by means of a tender offer, merger, proxy contest or otherwise. Our Articles of Incorporation, as 46 amended, divide the Board of Directors into three classes, as nearly equal in size as possible, with staggered three-year terms. One class will be elected each year. The classification of the Board of Directors could have the effect of making it more difficult for a third party to acquire control of us. We are also subject to certain provisions of the Georgia Business Corporation Code which relate to business combinations with interested shareholders. In addition to considering the effects of any action on us and our shareholders, our Articles of Incorporation permit our Board of Directors and the committees and individual members thereof to consider the interests of various constituencies, including employees, customers, suppliers, and creditors, communities in which we maintain offices or operations, and other factors which such directors deem pertinent, in carrying out and discharging the duties and responsibilities of such positions and in determining what is believed to be our best interests. On June 23, 1998, our Board of Directors declared a dividend of one preferred stock purchase right (a "Right") for each outstanding share of common stock. The dividend was paid on July 6, 1998, to the shareholders of record on that date. Each Right entitles the registered holder to purchase one one-thousandth of a share of Series C Junior Participating Preferred Stock, par value $0.01 per share (the "Preferred Shares"), at a price of sixty dollars ($60.00) per one-thousandth of a Preferred Share, subject to adjustment. The description and terms of the Rights are set forth in the Shareholder Protection Rights Agreement, as the same may be amended from time to time, dated as of June 23, 1998, between us and SunTrust Bank, Atlanta, as rights agent. The Rights may have certain anti-takeover effects. The Rights will cause substantial dilution to a person or group that attempts to acquire us on terms not approved by our Board of Directors. However, the Rights should not interfere with any merger, statutory share exchange or other business combination approved by the Board of Directors since the Rights may be terminated by the Board of Directors at any time on or prior to the close of business ten business days after announcement by us that a person has become an acquiring person, as such term is defined in the Shareholder Protection Rights Agreement. Thus, the Rights are intended to encourage persons who may seek to acquire control of us to initiate such an acquisition through negotiations with the Board of Directors. However, the effect of the Rights may be to discourage a third party from making a partial tender offer or otherwise attempting to obtain a substantial equity position in the equity securities of, or seeking to obtain control of, us. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to market risk form changes in interest rates and foreign currency exchange rates. The Company manages it 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 December 31, 1998, 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 the 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 December 31, 1998, fixed rate convertible subordinated notes outstanding at December 31, 1998, by $7.2 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 $1.1 million in 1999. Approximately 22.2% of the Company's sales and 15.2% of its operating costs and expenses were transacted in foreign currencies in 1998. 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 have been related to local currency operating costs and expenses in the United Kingdom and local currency sales in Europe (principally the United Kingdom and Germany). The company has not used derivative to manage foreign currency exchange risk and no foreign currency exchange derivatives were outstanding at December 31, 1998. To minimize the impact of changes in exchange rates, the Company borrows from time to time in British Pounds under its credit facility. 47 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Premiere Technologies, Inc. and Subsidiaries Index to Consolidated Financial Statements Report of Independent Public Accountants.................................. 48 Consolidated Balance Sheets, December 31, 1998 and 1997................... 49 Consolidated Statements of Operations, Three Years Ended December 31, 1998..................................................................... 50 Consolidated Statements of Shareholders' Equity (Deficit), Three Years Ended December 31, 1998.................................................. 51 Consolidated Statements of Cash Flows, Three Years Ended December 31, 1998..................................................................... 52 Notes to Consolidated Financial Statements................................ 53
47--1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders of Premiere Technologies, Inc. We have audited the accompanying consolidated balance sheets of PREMIERE TECHNOLOGIES, INC. (a Georgia corporation) AND SUBSIDIARIES as of December 31, 1998 and 1997 and the related consolidated statements of operations, shareholders' equity (deficit) and cash flows for the years ended December 31, 1998, 1997 and 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Premiere Technologies, Inc. and subsidiaries as of December 31, 1998 and 1997 and the results of their operations and their cash flows for the years ended December 31, 1998, 1997 and 1996 in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Atlanta, Georgia March 15, 1999 48 PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 1998 AND 1997 (in thousands, except share data)
1998 1997 -------- -------- ASSETS CURRENT ASSETS Cash and equivalents..................................... $ 19,226 $ 21,770 Marketable securities.................................... 20,769 154,569 Accounts receivable (less allowances of $9,437 and $3,303, respectively)................................... 55,660 20,719 Prepaid expenses and other............................... 10,551 6,941 Deferred income taxes, net............................... 20,977 25,715 -------- -------- Total current assets.................................... 127,183 229,714 PROPERTY AND EQUIPMENT, NET................................ 134,700 63,577 OTHER ASSETS Deferred income taxes, net............................... -- 3,963 Strategic alliances and investments, net................. 28,510 51,895 Intangibles, net......................................... 492,185 20,756 Other assets............................................. 20,173 11,203 -------- -------- $802,751 $381,108 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable......................................... $ 24,270 $ 30,704 Deferred revenue......................................... 1,877 7,139 Accrued taxes............................................ 16,279 9,745 Accrued liabilities...................................... 46,940 20,192 Revolving loan........................................... 118,082 -- Current maturities of long-term debt..................... 1,412 2,849 Current portion of capital lease obligations............. 1,958 3,058 Accrued restructuring and other special charges.......... 7,545 19,845 -------- -------- Total current liabilities............................... 218,363 93,532 -------- -------- LONG-TERM LIABILITIES Convertible subordinated notes........................... 172,500 172,500 Long-term debt........................................... 4,191 854 Obligations under capital lease.......................... 1,530 2,437 Other accrued liabilities................................ 1,111 10,971 Deferred income taxes, net............................... 4,162 -- -------- -------- Total long-term liabilities............................. 183,494 186,762 -------- -------- COMMITMENTS AND CONTINGENCIES (Note 15) SHAREHOLDERS' EQUITY Common stock, $.01 par value; 150,000,000 shares authorized, 46,894,148 and 34,100,018 shares issued in 1998 and 1997, respectively, and 45,797,148 and 34,100,018 shares outstanding in 1998 and 1997, respectively............................................ 469 341 Additional paid-in capital............................... 562,106 180,084 Treasury stock, at cost.................................. (9,133) -- Note receivable, shareholder............................. (973) (973) Cumulative translation adjustment........................ 1,269 -- Accumulated deficit...................................... (152,844) (78,638) -------- -------- Total shareholders' equity.............................. 400,894 100,814 -------- -------- $802,751 $381,108 ======== ========
Accompanying notes are integral to these consolidated financial statements. 49 PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended December 31, 1998, 1997 and 1996 (in thousands, except per share data)
1998 1997 1996 -------- -------- -------- Revenues......................................... $444,818 $229,352 $197,474 Cost Of Services................................. 135,036 63,974 55,601 -------- -------- -------- Gross Profit..................................... 309,782 165,378 141,873 -------- -------- -------- Operating Expenses Selling, general and administrative............. 241,699 101,308 108,603 Depreciation and amortization................... 110,049 17,074 14,184 Restructuring, merger costs and other special charges........................................ 15,616 73,597 -- Acquired research and development............... 15,500 -- 11,030 Accrued settlement costs........................ 1,500 1,500 1,250 -------- -------- -------- Total operating expenses....................... 384,364 193,479 135,067 -------- -------- -------- Operating Income (Loss).......................... (74,582) (28,101) 6,806 Other Income (Expense) Interest, net................................... (14,664) (912) (1,690) Other, net...................................... 286 226 (286) -------- -------- -------- Total other expense............................ (14,378) (686) (1,976) -------- -------- -------- Income (Loss) Before Income Taxes................ (88,960) (28,787) 4,830 Income Tax Provision (Benefit)................... (14,754) (3,412) 1,372 -------- -------- -------- Net Income (Loss)................................ $(74,206) $(25,375) $ 3,458 ======== ======== ======== Basic Net Income (Loss) Per Share................ $ (1.67) $ (0.78) $ 0.12 ======== ======== ======== Diluted Net Income (Loss) Per Share.............. $ (1.67) $ (0.78) $ 0.11 ======== ======== ========
Accompanying notes are integral to these consolidated financial statements. 50 PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) Years Ended December 31, 1998, 1997 and 1996 (in thousands)
Series A (Formerly Series 1994) Common Additional Stock Note Stock Cumulative Preferred Stock Paid-In Subscriptions Receivable Treasury Warrants Accumulated Translation Stock Issued Capital Receivable Shareholder Stock Outstanding Deficit Adjustment --------- ------ ---------- ------------- ----------- -------- ----------- ----------- ----------- BALANCE, December 31, 1995............ $ 3,907 $198 $ 29,146 $(2,437) $ -- $ -- $ 244 $ (42,697) $ -- Comprehensive Income: Net income...... -- -- -- -- -- -- -- 3,458 -- -------- ---- -------- ------- ----- ------- ----- --------- ------ Comprehensive income.......... -- -- -- -- -- -- -- -- -- -------- ---- -------- ------- ----- ------- ----- --------- ------ Conversion of Series A Preferred Stock........... (3,907) 31 3,876 -- -- -- -- -- -- Conversion of stock warrants....... -- 6 238 -- -- -- (244) -- -- Payment of subscriptions receivable...... -- -- -- 2,437 -- -- -- -- -- Issuance of common stock: Initial public offering........ -- 46 74,571 -- -- -- -- -- -- Acquisition (TeleT)......... -- 5 7,495 -- -- -- -- -- -- Strategic investment (MCI WorldCom)....... -- 21 25,174 -- -- -- -- -- -- Exercise of stock options... -- 9 308 -- -- -- -- -- -- Income tax benefit from exercise of stock options... -- -- 6,886 -- -- -- -- -- -- Other equity transactions, primarily S-corporation distributions... -- -- (665) -- -- -- -- (3,573) -- -------- ---- -------- ------- ----- ------- ----- --------- ------ BALANCE, December 31, 1996............ $ -- $316 $147,029 $ -- $ -- $ -- $ -- $ (42,812) $ -- Comprehensive Loss: Net loss........ -- -- -- -- -- -- -- (25,375) -- -------- ---- -------- ------- ----- ------- ----- --------- ------ Comprehensive income.......... -- -- -- -- -- -- -- -- -- -------- ---- -------- ------- ----- ------- ----- --------- ------ Payment of debt in common stock (Voice-Tel Acquisitions)... -- 5 11,577 -- -- -- -- -- -- Issuance of common stock: Voice-Tel Acquisitions.... -- 2 789 -- -- -- -- -- -- Exercise of stock options... -- 18 4,692 -- -- -- -- -- -- Income tax benefit from exercise of stock options... -- -- 15,262 -- -- -- -- -- -- Issuance of shareholder note receivable...... -- -- -- -- (973) -- -- -- -- Recapitalization of S-corporation accumulated earnings........ -- -- 735 -- -- -- -- (735) -- Other equity transactions, primarily S-corporation distributions... -- -- -- -- -- -- -- (9,716) -- -------- ---- -------- ------- ----- ------- ----- --------- ------ BALANCE, December 31, 1997............ $ -- $341 $180,084 $ -- $(973) $ -- $ -- $ (78,638) $ -- Comprehensive Loss: Net loss........ -- -- -- -- -- -- -- (74,206) -- Translation adjustments.... -- -- -- -- -- -- -- -- 1,269 Comprehensive loss........... -- -- -- -- -- -- -- -- -- Treasury stock purchase....... -- -- -- -- -- (9,133) -- -- -- Issuance of common stock: Xpedite Acquisition.... -- 110 345,009 -- -- -- -- -- -- ATS Acquisition.... -- 7 23,527 -- -- -- -- -- -- Exercise of stock options........ -- 11 7,318 -- -- -- -- -- -- Income tax benefit from exercise of stock options... -- -- 6,168 -- -- -- -- -- -- -------- ---- -------- ------- ----- ------- ----- --------- ------ BALANCE, December 31, 1998........... $ -- $469 $562,106 $ -- $(973) $(9,133) $ -- $(152,884) $1,269 ======== ==== ======== ======= ===== ======= ===== ========= ====== Total Shareholders' Equity (Deficit) ------------- BALANCE, December 31, 1995............ $(11,639) Comprehensive Income: Net income...... 3,458 ------------- Comprehensive income.......... 3,458 ------------- Conversion of Series A Preferred Stock........... -- Conversion of stock warrants....... -- Payment of subscriptions receivable...... 2,437 Issuance of common stock: Initial public offering........ 74,617 Acquisition (TeleT)......... 7,500 Strategic investment (MCI WorldCom)....... 25,195 Exercise of stock options... 317 Income tax benefit from exercise of stock options... 6,886 Other equity transactions, primarily S-corporation distributions... (4,238) ------------- BALANCE, December 31, 1996............ $104,533 Comprehensive Loss: Net loss........ (25,375) ------------- Comprehensive income.......... (25,375) ------------- Payment of debt in common stock (Voice-Tel Acquisitions)... 11,582 Issuance of common stock: Voice-Tel Acquisitions.... 791 Exercise of stock options... 4,710 Income tax benefit from exercise of stock options... 15,262 Issuance of shareholder note receivable...... (973) Recapitalization of S-corporation accumulated earnings........ Other equity transactions, primarily S-corporation distributions... (9,716) ------------- BALANCE, December 31, 1997............ $100,814 Comprehensive Loss: Net loss........ (74,206) Translation adjustments.... 1,269 Comprehensive loss........... (72,937) Treasury stock purchase....... (9,133) Issuance of common stock: Xpedite Acquisition.... 345,119 ATS Acquisition.... 23,534 Exercise of stock options........ 7,329 Income tax benefit from exercise of stock options... 6,168 ------------- BALANCE, December 31, 1998........... $400,894 =============
Accompanying notes are integral to these consolidated financial statements. 51 PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 1998, 1997 and 1996 (in thousands)
1998 1997 1996 -------- -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss).............................. $(74,206) $(25,375) $ 3,458 Adjustments to reconcile net income (loss) to net cash provided by operating activities (excluding effects of acquisitions): Depreciation and amortization................. 110,049 17,074 14,184 Gain on disposal of property and equipment.... 13 -- -- Deferred income taxes......................... (20,044) (4,902) (2,515) Restructuring, merger costs and other special charges...................................... 15,616 73,597 -- Acquired research and development............. 15,500 -- 11,030 Accrued settlement costs...................... 1,500 1,500 1,250 Payments for restructuring, merger costs and other special charges........................ (21,200) (30,586) -- Payments for accrued settlement costs......... (1,291) -- -- Changes in assets and liabilities: Accounts receivable, net..................... 4,281 (6,467) (1,668) Prepaid expenses and other................... 6,067 (433) (2,525) Accounts payable and accrued expenses........ (14,037) 2,751 13,675 -------- -------- -------- Total adjustments........................... 96,454 52,534 33,431 -------- -------- -------- Net cash provided by operating activities... 22,248 27,159 36,889 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures........................... (61,335) (33,387) (21,905) Proceeds from disposal of property and equipment..................................... 569 -- -- Redemption (purchase) of marketable securities, net........................................... 133,796 (86,669) (67,182) Acquisitions................................... (43,644) (16,198) (2,870) Strategic alliances and investments............ (8,259) (23,801) (4,777) Other.......................................... 165 -- 622 -------- -------- -------- Net cash provided by (used in) investing activities................................. 21,292 (160,055) (96,112) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Principal payments under borrowing arrangements, net............................. (29,848) (29,469) (9,547) Purchase of common stock....................... (9,133) -- -- Proceeds from convertible subordinated notes... -- 172,500 -- Debt issue costs............................... (1,285) (6,028) -- Shareholder distributions, primarily S- corporation distributions..................... -- (9,360) (3,550) Exercise of stock options, net of tax withholding payments.......................... (5,530) 13,823 317 Issuance of shareholder note receivable........ -- (973) -- Net proceeds from initial public offering...... -- -- 74,617 Payment of stock subscriptions receivable...... -- -- 2,437 Issuance of debt............................... -- -- 3,985 Other.......................................... (319) (1,763) (1,343) -------- -------- -------- Net cash (used in) provided by financing activities..................................... (46,115) 138,730 66,916 -------- -------- -------- Effect of exchange rate changes on cash......... 31 -- -- -------- -------- -------- NET (DECREASE) INCREASE IN CASH AND EQUIVALENTS.................................... (2,544) 5,834 7,693 CASH AND EQUIVALENTS, beginning of period....... 21,770 15,936 8,243 -------- -------- -------- CASH AND EQUIVALENTS, end of period............. $ 19,226 $ 21,770 $ 15,936 ======== ======== ========
Accompanying notes are integral to these consolidated financial statements. 52 PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. THE COMPANY AND ITS BUSINESS Premiere Technologies, Inc. and subsidiaries ("Premiere" or the "Company"), a Georgia corporation, began operations in 1991 and went public in March 1996. The Company provides an array of innovative solutions designed to simplify everyday communications of business and individuals. Premiere's services include voice and data messaging, electronic document distribution, full service conference calling services, enhanced calling services and Internet- based communications services. Through a series of acquisitions that began in September 1996, Premiere has assembled a suite of communications solutions, an international private data network, a global direct sales force and an international facilities presence consisting of points of presence in North America, Australia, Asia and Europe. These acquisitions are more fully described under Note 4 "Acquisitions", which follows. 2. SIGNIFICANT ACCOUNTING POLICIES 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 is required to discontinue accounting for its acquisition of Xpedite as a pooling-of-interests and to account for such acquisition under the purchase method of accounting. 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 of the merger with Xpedite. Accounting Estimates Preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Principles of Consolidation The financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated. Cash and Equivalents Cash and equivalents include cash on hand and highly liquid investments with a maturity at date of purchase of three months or less. Marketable Securities The Company follows Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities." SFAS No. 115 mandates that a determination be made of the appropriate classification for equity securities with a readily determinable fair value and all debt securities at the time of purchase and a reevaluation of such designation as of each balance sheet date. At December 31, 1998 and 1997, investments consisted of commercial paper, United States Treasury bills, municipal bonds, coupon municipals, auction rate preferred investments with various maturities and equity instruments. Management considers all debt instruments as "held to maturity" and all equity instruments as "available for sale." Debt instruments are carried at cost, and equity instruments are carried at the lower of cost or market. As cost approximates market, there were no unrealized gains or losses at December 31, 1998 or 1997. 53 Property and Equipment Property and equipment are recorded at cost. Depreciation is provided under the straight-line method over the estimated useful lives of the assets, commencing when the assets are placed in service. The estimated useful lives are ten years for furniture and fixtures, seven years for office equipment and one to ten years for computer and telecommunications equipment. The cost of installed equipment includes expenditures for installation. Assets recorded under capital leases and leasehold improvements are depreciated over the shorter of their useful lives or the term of the related lease. The Company has capitalized costs related to the development of proprietary software utilized to provide enhanced communications services. All costs in the software development process that are classified as research and development are expensed as incurred until technological feasibility has been established. Once technological feasibility has been established, such costs are considered for capitalization. The 53--1 PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Company's policy is to amortize these costs by the greater of (a) the ratio that current gross revenues for a service offering bear to the total of current and anticipated future gross revenues for that service offering or (b) the straight-line method over the remaining estimated life of the service offering. Goodwill Goodwill represents excess of the cost of businesses acquired over fair value of net identifiable assets at the date of acquisition and has historically been amortized using the straight line method over various lives up to 40 years. In the fourth quarter of 1998 the Company shortened the life of all remaining goodwill to seven years to better reflect rapidly changing technology and increased competition in the enhanced telecommunications marketplace. Valuation of Long-Lived Assets Management periodically evaluates carrying values of long-lived assets, including property and equipment, strategic investments, goodwill and other intangible assets, to determine whether events and circumstances indicate that these assets have been impaired. An asset is considered impaired when undiscounted cash flows to be realized from such asset are less than its carrying value. In that event, a loss is determined based on the amount the carrying value exceeds the fair market value of such asset. Strategic Alliances and Investments The Company has entered into alliances with and made investments in various companies that are engaged in telecommunications and emerging technologies that are complementary with the Company's core businesses and which further the Company's strategic plan. These alliances and investments involve outsourcing initiatives, equity investments and innovative marketing programs. Each of the equity investments represent less than a twenty percent ownership interest and are carried at cost. Intangible assets representing strategic alliances are amortized over the term of the arrangement and such investments are carried net of accumulated amortization. See Note 6--"Strategic Alliances and Investments." Stock-Based Compensation Plans The Company recognizes stock based compensation using the intrinsic value method as permitted by SFAS No. 123. Accordingly, no compensation expense is recorded for stock based awards issued at market value at the date such awards are granted. The Company makes pro forma disclosures of net income and net income per share as if the market value method was followed. See Note 12-- "Stock Based Compensation Plans." Revenue Recognition The Company recognizes revenues when services are provided. Revenues consist of fixed monthly fees, usage fees generally based on per minute rates and service initiation fees as well as license fees earned from companies which have license arrangements for the use of the Company's computer telephony platform. Deferred revenue consists of billings made to customers in advance of the time services are rendered. Income Taxes Deferred income taxes are recorded using enacted tax laws and rates for the years in which income taxes are expected to be paid. Deferred income taxes are provided when there is a temporary difference between the recognition of items in income for financial reporting and income tax purposes. Net Income (Loss) Per Share The Company follows SFAS No. 128, "Earnings per Share." That statement requires the disclosure of basic net income (loss) per share and diluted net income (loss) per share. Basic net income (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted- average number of common 54 PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) shares outstanding during the period and does not include any other potentially dilutive securities. Diluted net income (loss) per share gives effect to all potentially dilutive securities. The Company's convertible subordinated notes and stock options are potentially dilutive securities. In 1998 and 1997, both potentially dilutive securities were antidilutive and therefore are not included in diluted net income (loss) per share. A reconciliation of basic net income (loss) per share to diluted net income (loss) per share follows:
For the Years Ended December 31 ----------------------------------------------------------------------------------- 1998 1997 1996 ---------------------------- ---------------------------- ------------------------- Weighted Weighted Net Weighted Net Average Net Loss Average Income Net Average Income Net Loss Shares Per Share Net Loss Shares Per Share Income Shares Per Share -------- -------- --------- -------- -------- --------- ------ -------- --------- (in thousands, except per share data) Net income (loss)....... $(74,206) -- $ -- $(25,375) -- $ -- $3,458 -- $ -- Less: Preferred stock dividends.............. -- -- -- -- -- -- 29 -- -- -------- ------ ------ -------- ------ ------ ------ ------ ----- Basic net income (loss)................. $(74,206) 44,325 $(1.67) $(25,375) 32,443 $(0.78) $3,429 27,670 $0.12 Dilutive Securities Stock options.......... -- -- -- -- -- -- -- 3,618 0.01 Series A convertible redeemable 8% cumulative preferred stock.................. -- -- -- -- -- -- -- -- -- -------- ------ ------ -------- ------ ------ ------ ------ ----- Diluted net income (loss)................. $(74,206) 44,325 $(1.67) $(25,375) 32,443 $(0.78) $3,429 31,288 $0.11 ======== ====== ====== ======== ====== ====== ====== ====== =====
Concentration of Credit Risk Revenues from one customer in the Emerging Enterprise Solutions segment of the Company represented approximately $41.9 million, $49.9 million and $46.8 million of the Company's consolidated revenues for 1998, 1997 and 1996, respectively. Foreign Currency Translation The assets and liabilities of subsidiaries domiciled outside the United States are translated at rates of exchange existing at the balance sheet date. Revenues and expenses are translated at average rates of exchange prevailing during the year. The resulting translation adjustments are recorded as a separate component of stockholders equity. Treasury Stock Treasury stock transactions are recorded at cost. When treasury shares are reissued, the company uses a first-in, first-out method and the excess of purchase cost over reissuance price, if any, is recorded in retained earnings. Comprehensive Income In 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income." Comprehensive income represents the change in equity of a business during a period, except for investments by owners and distributions to owners. Foreign currency translation adjustments represent the Company's only component of other comprehensive income. For the year ended December 31, 1998, total comprehensive loss was approximately $(72.9) million. For the years ended December 31, 1997 and 1996, total comprehensive income (loss) approximates net income (loss). 55 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 financial position upon adoption of SFAS No. 133. "Statement of Position "SOP" 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," provides guidance on accounting for the costs of computer software developed or obtained for internal use and is required to be adopted no later than Premiere's 1999 fiscal year. Also, in June 1998, the American Institute of Certified Public Accountants issued SOP 98-5, "Reporting on the Costs of Start-up Activities." SOP 98-5 requires costs of start-up activities and organizational costs, as defined to be expensed as incurred. The Company expects no material impact to its financial position upon adoption of SOP 98-1 or SOP 98-5. Reclassifications Certain prior year amounts in the Company's financial statements have been reclassified to conform to the 1998 presentation. 55--1 PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 3. RESTRUCTURING, MERGER COSTS AND OTHER SPECIAL CHARGES In 1998, Premiere recorded restructuring, merger costs and other special charges of approximately $15.6 million. Such costs consist of write-downs of two strategic investments associated with its Emerging Enterprise Solution group in 1998 totaling approximately $17.8 million offset in part by a net reduction in accrued restructuring, merger costs and other special charges of approximately $2.2 million discussed below. Approximately $13.9 million of the $17.8 million writedown relates to a write-down in the carrying value of the MCI WorldCom strategic alliance intangible asset. This charge was required based upon management's assessment regarding recoverability of this asset given current events and circumstances and guidelines mandated by SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The fair market value of this asset was computed using the estimated future cash flows expected to be derived under this arrangement discounted at an appropriate rate. The Company reevalulated the carrying value and remaining life of the MCI WorldCom strategic alliance in light of the level of revenues expected to be achieved from the alliance following the merger of WorldCom and MCI in the third quarter of 1998. The remaining write- down reflects a charge of approximately $3.9 million to reduce the carrying value of Premiere's investment in certain equity securities of DigiTEC 2000 to their fair market value. This charge resulted from management's assessment that the decline in value of these securities was not temporary. The fair market value of this investment used to determine the impairment charge was based on quoted market prices. The $2.2 million net reduction of accrued restructuring, merger costs and other special charges includes a charge of approximately $7.5 million in the first quarter of 1998 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 approximately 122 employees. These actions result from management's plans to reduce sales, operations and administrative headcount by exiting duplicative and underperforming 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 is currently 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 allocation of Xpedite. These costs were offset by adjustments in the reserve balance in the fourth quarter of 1998 which reduced such reserves by approximately $9.7 million. The net reduction in reserves was necessary to eliminate remaining accruals for programs that have been completed at lower cost than anticipated and to reflect subsequent changes to management's restructuring plans. In 1997, Premiere recorded restructuring, merger costs and other special charges of approximately $73.6 million in connection with its mergers of VoiceCom and Voice-Tel. In connection with the VoiceCom acquisition, the Company recorded restructuring, merger costs and other special charges of approximately $28.2 million in the third quarter of 1997. Such amounts consist of transaction costs, asset impairments, costs to terminate or restructure certain contractual obligations and other costs. Transaction costs associated with the VoiceCom acquisition were expensed as required by the pooling-of- interests method of accounting. Other restructuring and special charges recorded in the third quarter result principally from management's plan to restructure VoiceCom's operations by reducing its workforce, exiting certain facilities, discontinuing duplicative product offerings and terminating or restructuring certain contractual obligations. The Company recorded 56 PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) approximately $45.4 million of restructuring, merger costs and other special charges in the second quarter of 1997 in connection with the Voice-Tel Acquisitions. Those charges result from management's plan to restructure the operations of the Voice-Tel Entities under a consolidated business group model and discontinue its franchise operations. This initiative involves substantial reduction in the administrative workforce, abandoning duplicate facilities and assets and other costs necessary to discontinue redundant business activities. Reserves for restructuring, merger costs and other special costs and charges against operations for the year ended December 31, 1998 are as follows (in thousands):
Charges (Credits) to Operations ----------------------------- Accrued Costs First Net Accrued Costs December 31, Quarter reduction Costs December 31, 1997 Charge in reserves Incurred 1998 ------------- ------- ----------- --------- ------------- Severance............... $ 6,201 $1,778 $ 1,567 $ (4,709) $ 4,837 Asset impairments....... 10,831 707 (3,668) (3,148) 4,722 Restructure or terminate contractual obligations............ 13,354 390 (8,718) (4,609) 417 Transaction costs....... 4,940 833 (864) (4,909) -- Other costs, primarily to exit facilities and certain activities..... 3,788 3,837 1,976 (7,310) 2,291 ------- ------ ------- --------- ------- $39,114 $7,545 $(9,707) $(24,685) $12,267 ======= ====== ======= ========= =======
4. 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 678,500 shares of Premiere common stock and cash consideration of approximately $21 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. Approximately 33,500 shares of Premiere common stock and cash consideration of $1.04 million were placed in escrow to secure indemnification claims. Xpedite Systems, Inc. Acquisition On February 27, 1998, Premiere acquired Xpedite Systems, Inc. ("Xpedite") , a worldwide leader in the enhanced document distribution business including fax, e-mail, telex and mailgram services. Premiere issued 57 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 price of Xpedite has been allocated based on an independent appraisal 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 ad development were based upon an independent appraisal. Acquired research and development costs 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 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 discount rate of 25% was used. 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. 57--1 PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) VoiceCom Acquisition During the third quarter of 1997, the Company acquired VoiceCom, a provider of 800-based enhanced calling and voice messaging services, through the issuance of approximately 446,000 shares of its common stock. This transaction was accounted for as a pooling-of-interests, and the Company's financial statements present for all periods the operations of VoiceCom. Voice-Tel Acquisitions In June 1997, the Company completed the Voice-Tel Acquisitions. The Company issued approximately 7.4 million shares of its common stock, paid approximately $16.2 million in cash and assumed approximately $21.3 million in indebtedness, net of cash acquired to complete the Voice-Tel acquisitions. Most of the transactions were structured as tax-free mergers or share exchanges and were accounted for under the pooling-of-interests method of accounting. Accordingly, the financial statements of the Company present for all periods the operations of the Voice-Tel Acquisitions that were accounted for as pooling-of-interests. The Company purchased 15 of the Franchisees and the limited partner interest in VTNLP for an aggregate of approximately $15.5 million in cash and approximately 94,000 shares of its common stock. The excess of the purchase price over the fair value of the net assets acquired is recorded as an intangible asset. A reconciliation of previously reported operating results to those restated for pooling-of-interests transactions is as follows:
1996 -------------- (in thousands, except per share data) Revenue: Premiere, as previously reported............................. $ 52,079 Voice-Tel Acquisitions....................................... 90,075 VoiceCom..................................................... 55,320 -------- Premiere, as restated......................................... $197,474 -------- Net income (loss): Premiere, as previously reported............................. $ (956) Voice-Tel Acquisitions....................................... 3,972 VoiceCom..................................................... 442 -------- Premiere, as restated......................................... $ 3,458 -------- Net income (loss) per share: Premiere, as previously reported Basic........................................................ $ (0.05) ======== Diluted...................................................... $ (0.05) ======== Premiere, as restated Basic........................................................ $ 0.12 ======== Diluted...................................................... $ 0.11 ========
58 PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) TeleT Acquisition On September 18, 1996, the Company purchased substantially all of the assets and business operations of TeleT Communications LLC ("TeleT") for 498,187 shares of the Company's common stock and approximately $2,9 million in cash. TeleT was an Internet-based technology development company focused on the integration of computers and telephones. In connection with this acquisition, the Company allocated approximately $11.0 million of the purchase price to research and development projects which had not yet reached technological feasibility and had no alternate future use. This allocation was based on values determined by an independent appraisal. The following unaudited pro forma consolidated results of operations for the years ended December 31, 1998 and 1997 assume acquisitions completed during 1998 and 1997 which were accounted for as purchases occurred as of January 1, 1997, (in thousands, except per share data).
1998 1997 -------- --------- Revenues............................................... $494,982 $ 441,797 Net loss............................................... $(96,023) $(112,822) Basic net loss per share............................... $ (2.03) $ (2.59) Diluted net loss per shares............................ $ (2.03) $ (2.59)
5. PROPERTY AND EQUIPMENT Property and equipment at December 31 is as follows (in thousands):
1998 1997 -------- ------- Computer and telecommunications equipment.................. $187,602 $92,137 Furniture and fixtures..................................... 11,700 2,123 Office equipment........................................... 10,931 5,476 Leasehold improvements..................................... 23,064 7,199 Construction in progress................................... 11,712 13,926 -------- ------- 245,009 120,861 Less accumulated depreciation.............................. 110,309 57,284 -------- ------- Property and equipment, net................................ $134,700 $63,577 ======== =======
Assets under capital leases included in property and equipment at December 31 are as follows (in thousands):
1998 1997 ------ ------- Telecommunications equipment................................. $7,000 $18,345 Less accumulated depreciation................................ 4,973 10,867 ------ ------- Property and equipment, net.................................. $2,027 $ 7,478 ====== =======
Management continually reevaluates the Company's assets with respect to estimated remaining useful lives and whether current events and circumstances indicate an impairment condition exists. Effective in the fourth quarter of 1998, management 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. The carrying value of such assets approximated $41.0 million at December 31, 1998. Effective in the fourth quarter of 1998, these assets will be amortized over periods ranging from nine months to one year, the anticipated remaining service period. The remaining estimated useful lives of these assets prior to this change ranged from two to five years. 59 PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 6. STRATEGIC ALLIANCES AND INVESTMENTS Strategic alliances and investments at December 31 is as follows (in thousands):
1998 1997 ------- ------- MCI WorldCom, net........................................... $16,072 $29,972 Intangible assets........................................... -- 18,500 Less accumulated amortization............................... 3,445 1,878 ------- ------- 12,627 46,594 Equity investments.......................................... 15,883 5,301 ------- ------- $28,510 $51,895 ======= =======
In November 1996, the Company entered into a strategic alliance agreement with WorldCom, Inc. (predecessor to MCI WorldCom), the second largest long- distance carrier in the United States. Under the agreement, MCI WorldCom is required, among other things, to provide the Company with the right of first opportunity to provide enhanced computer telephony products for a period of at least 25 years. In connection with this agreement, the Company issued to MCI WorldCom 2,050,000 shares of common stock valued at approximately $25.2 million (based on an independent appraisal), and paid MCI WorldCom approximately $4.7 million in cash. The Company periodically reviews this asset for impairment and in 1998 determined that a write-down 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 estimated useful life to 3 years as compared with a remaining life of 23 years prior to the change. Premiere also recorded a write-down of approximately $3.9 million in 1998 in its investment in certain equity securities of DigiTEC 2000 Inc. This charge was necessary to reduce the carrying value of this investment to its fair market value. The charge resulted from management's assessment that the decline in value of these securities below their carrying value was not temporary. See also Note 3 "Restructuring, Merger Costs and Other Special Charges." Intangible assets and equity investments classified as strategic alliances and investments consist of initiatives funded by the Company to further its strategic plan. These investments and alliances involve emerging technologies, such as 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. The Company made investments of approximately $8.3 million in 1998 to acquire initial or increase existing equity interests in various companies engaged in emerging technologies, such as the internet. Premiere's equity investments include now holds minority equity investments 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 visits to customers' 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. 60 PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 7. INTANGIBLES ASSETS Intangibles assets consist of the following amounts for December 31, 1998 and 1997 (in thousands):
1998 1997 -------- ------- Goodwill................................................... $468,720 $18,959 Customer lists............................................. 50,058 2,946 Developed technology....................................... 34,300 -- Assembled work force....................................... 7,500 -- -------- ------- 560,578 21,905 Less accumulated amortization.............................. 68,393 1,149 -------- ------- $492,185 $20,756 ======== =======
A summary of intangible assets acquired in the Xpedite acquisitions and the estimated useful lives over which such assets are being amortized is as follows:
Appraised Estimated Useful Value Life (years) --------- ---------------- Goodwill.......................................... $384,701 7 Customer lists.................................... 35,700 5 Developed technology.............................. 34,300 4 Assembled workforce............................... 7,500 3 -------- $462,201 ========
Effective in the fourth quarter of 1998 management accelerated the amortization of all goodwill and intangible assets from its purchase acquisitions. 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 7 years as compared with 10 to 40 years prior to the change. Remaining intangible assets are being amortized over lives ranging from 3 to 5 years as compared with 5 years prior to the change. These changes in estimated useful lives of goodwill and other intangible assets increased amortization expense by approximately $18.3 million in the fourth quarter of 1998. 8. INDEBTEDNESS Long-term debt at December 31 is as follows (in thousands):
1998 1997 -------- ------ Revolving loan to banks..................................... $118,082 $ -- Notes payable............................................... 5,122 573 Notes payable to shareholders and individuals............... 481 3,130 -------- ------ 123,685 3,703 Less current portion........................................ 119,494 2,849 -------- ------ $ 4,191 $ 854 ======== ======
On December 16, 1998, the Company amended and restated the revolving loan facility it assumed in the acquisition of Xpedite for a one year period. This facility provides for borrowings of up to $150 million with two banks. At December 31, 1998, the Company had approximately $118.1 million outstanding under this facility. This arrangement expires in December 1999 and the Company is currently in discussions to replace the 61 facility. Interest rates for borrowings on the facility are determined at the time of borrowings based on a choice of formulas as specified in the agreement. In addition, certain restrictive covenants require the Company to maintain certain leverage and interest coverage ratios. Notes payable to shareholders and individuals consist principally of indebtedness assumed by the Company in connection with the Voice-Tel and VoiceCom acquisitions. Interest on borrowings under such notes range from 5% to 16%. A majority of these obligations were repaid in 1997 in connection with the acquisitions. The Company issued approximately 484,000 shares to redeem approximately $11.6 million of such indebtedness in connection with the acquisitions. Maturities of long-term debt are as follows (in thousands): 1999................................................................ $119,494 2000................................................................ 1,860 2001................................................................ 1,873 2002................................................................ 433 2003................................................................ 25 -------- $123,685 ========
61--1 PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 9. CONVERTIBLE SUBORDINATED NOTES In July 1997, the Company issued convertible subordinated notes ("Convertible Notes") of $172,500,000 which mature in 2004 and bear interest at 5 3/4%. The Convertible Notes are convertible at the option of the holder into common stock at a conversion price of $33 per share, through the date of maturity, subject to adjustment in certain events. The Convertible Notes are redeemable by the Company beginning in July 2000 at a price of 103% of the conversion price declining to 100% at maturity with accrued interest. Debt issuance costs consisting of investment banking, legal and other fees of approximately $6,028,000 incurred in connection with the Convertible Notes are being amortized on a straight-line basis over the life of the notes and are included in other assets in the accompanying balance sheets. Included in interest is approximately $785,000 and $897,000 of debt issuance cost amortization for December 31, 1998 and 1997, respectively. 10. FINANCIAL INSTRUMENTS The estimated fair value of certain financial instruments at December 31, 1998 and 1997 are as follows:
1998 1997 -------------------- ------------------ Carrying Fair Carrying Fair (Dollar amounts in thousands) Amount Value Amount Value - - ----------------------------- --------- --------- -------- -------- Cash and short-term investments..... $ 19,226 $ 19,226 $ 21,770 $ 21,770 Marketable securities............... 20,769 20,769 154,569 154,569 Revolving loan...................... (118,082) (118,082) -- -- Convertible subordinated notes (see Note 9)............................ (172,500) (96,169) (172,500) (181,349) Notes payable, long-term debt and capital leases (see Notes 8 and 15)................................ (9,091) (9,091) (9,198) (9,198)
The carrying amount of cash and short-term investments, marketable securities, accounts receivable and payable, revolving loan and accrued liabilities approximates fair value. The fair value of convertible subordinated notes is estimated based on market quotes. The carrying value of notes payable, long-term debt and capital lease obligations does not vary materially from fair value at December 31, 1998 and 1997. 11. SHAREHOLDERS' EQUITY During 1998, Premiere executed a stock repurchase program under which it repurchased approximately 1.1 million shares of its common stock for approximately $9.1 million. These shares were held in treasury at December 31, 1998. On January 18, 1996, the holder of the Series A Preferred Stock elected to convert all of the shares of the Series A Preferred Stock into 3,095,592 shares of the Company's common stock at $93 per share (presplit). The Series A Preferred Stock was fully cumulative, and the holders of the shares were entitled to receive dividends at a rate of 8%. The Company accrued $308,419 and $29,337 of dividends payable, plus accrued interest, if applicable, during the years ended December 31, 1995 and 1996, respectively. Dividends of $676,981 were paid during the year ended December 31, 1996 to holders of Series A Preferred Stock. During 1998, 1997 and 1996, stock options were exercised under the Company's stock option plans. None of the options exercised qualified as incentive stock options, as defined in Section 422 of the Internal Revenue Code (the "Code"). Approximately $6,168,000, $15,262,000 and $6,886,000 were recorded as increases in additional paid-in capital reflecting tax benefits to be realized by the Company as a result of the exercise of such options during the years ended December 31, 1998, 1997 and 1996, respectively. 62 PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The Company made distributions to shareholders of approximately $9.7 million and $3.6 million in 1997 and 1996. These distributions were made to shareholders of Voice-Tel and VoiceCom in periods prior to their acquisition by the Company. Such distributions consisted principally of amounts paid to shareholders of S-Corporations in connection with their responsibility to pay income tax on the proportionate share of taxable income they were required to include in their individual income tax return. Upon acquisition by the Company, these S-Corporations became subject to income tax. Accumulated earnings of S-Corporations at the date of acquisition have been reclassified as additional paid-in capital representing the recapitalization of these entities. 12. STOCK-BASED COMPENSATION PLANS The Company has three stock based compensation plans, 1994 Stock Option Plan, 1995 Stock Plan and 1998 Stock Plan, which provide for the issuance of restricted stock, stock options, warrants or stock appreciation rights to employees, directors, and non-employee consultants as advisors of the Company. These plans are administered by a committee consisting of members of the board of directors of the Company. Options for all 960,000 shares of common stock available under the 1994 Stock Option Plan have been granted. Generally, all such options are non- qualified, provide for an exercise price equal to fair market value at date of grant, vest ratably over three years and expire eight years from date of grant. The 1995 Stock Plan provides for the issuance of stock options, stock appreciation rights ("SARs") and restricted stock to employees. A total of 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 nonqualified options not entitled to such deferral. Sharp declines in the market price of the Company's common stock 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. While the vesting schedules remained unchanged, the repriced and regranted options are generally subject to a twelve-month black-out period, during which the options may not be exercised. If an 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. 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. Again, the vesting schedules remained the same, as 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. 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 Second Amended and Restated 1995 Stock Plan (the "1995 Plan"), except that it is not intended to be used for executive officers or directors. In addition, the 1998 Plan, 63 PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) because it was not approved by the shareholders, does not provided for the grant of incentive stock options. Under the 1998 Plan, 4,000,000 shares of Common Stock are reserved for the grant of nonqualified stock options and other incentive awards to employees and consultants of the Company. On June 23, 1998, the Company's Board of Directors declared a dividend of one preferred stock purchase right (a "Right") for each outstanding share of the Company's Common Stock. The dividend was paid on July 6, 1998, to the shareholders of record on that date. Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series C Junior Participating Preferred Stock, par value $0.01 per share (the "Preferred Shares"), at a price of sixty dollars ($60.00) per one-thousandth of a Preferred Share, subject to adjustment. The description and terms of the Rights are set forth in the Shareholder Protection Rights Agreement, as the same may be amended from time to time, dated as of June 23, 1998, between the Company and SunTrust Bank, Atlanta, as rights agent. The Rights should not interfere with any merger, statutory share exchange or other business combination approved by the Board of Directors since the Rights may be terminated by the Board of Directors at any time on or prior to the close of business ten business days after announcement by the Company that a person has become an Acquiring Person. Thus, the Rights are intended to encourage persons who may seek to acquire control of the Company to initiate such an acquisition through negotiations with the Board of Directors. However, the effect of the Rights may be to discourage a third party from making a partial tender offer or otherwise attempting to obtain control of the Company. As permitted by SFAS No. 123, the Company recognizes stock based compensation using the intrinsic value method. Accordingly, no compensation expense has been recognized for awards issued under the Company's stock based compensation plans since the exercise price of such awards is generally the market price of the underlying common stock at date of grant. Had compensation cost been determined under the market value method using Black-Scholes valuation principles, net income (loss) and net income (loss) per share would have been reduced to the following pro forma amounts:
1998 1997 --------- ------- (in thousands, except per share data) Net loss As reported............................................. $ (74,206) (25,375) Pro forma............................................... (100,428) (32,399) Net loss per share As reported Basic.................................................. $ (1.67) $ (0.78) Diluted................................................ (1.67) (0.78) Pro forma Basic.................................................. (2.27) (1.02) Diluted................................................ (2.27) (1.02)
Significant assumptions used in the Black-Scholes option pricing model computations are as follows:
1998 1997 ---------- ---------- Risk-free interest rate.............................. 4.33%-5.68% 6.30% Dividend yield....................................... 0% 0% Volatility factor.................................... 1.05 .46 Weighed average expected life........................ 4.65 years 2.10 years
64 PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The pro forma amounts reflect options granted since January 1, 1996. Pro forma compensation cost may not be representative of that expected in future years. A summary of the status of the Company's stock plans is as follows:
Weighted Average Fixed Options Shares Exercise Price ------------- ---------- ---------------- Options outstanding at December 31, 1995........ 7,535,391 $ 1.07 Granted........................................ 1,332,088 18.89 Exercised...................................... (1,372,369) 0.51 Forfeited...................................... (88,778) 18.03 ---------- ------ Options outstanding at December 31, 1996........ 7,406,332 $ 4.27 Granted........................................ 3,484,092 23.38 Exercised...................................... (2,221,244) 2.06 Forfeited...................................... (1,256,432) 8.81 ---------- ------ Options outstanding at December 31, 1997........ 7,412,748 $13.29 Granted........................................ 9,062,589 16.44 Exercised...................................... (1,112,361) 7.06 Forfeited...................................... (1,413,120) 16.06 ---------- ------ Options outstanding at December 31, 1998........ 13,949,856 $ 5.79 ========== ======
The following table summarizes information about stock options outstanding at December 31, 1998:
Weighted Weighted Average Weighted Average Range of Average Exercise Exercise Exercise Options Remaining Price of Options Options Price of Options Prices Outstanding Life Outstanding Exercisable Exercisable - - -------- ----------- --------- ---------------- ----------- ---------------- $0--$5 2,531,976 4.58 $1.33 2,531,569 $1.33 $6--$10 10,366,085 7.18 5.76 2,407,747 6.28 $11--$15 497,520 6.09 10.41 216,833 10.62 $16--$30 554,275 4.59 22.67 514,022 22.71 ---------- ---- ----- --------- ----- 13,949,856 6.56 $5.79 5,670,171 $5.72 ========== ==== ===== ========= =====
13. EMPLOYEE BENEFIT PLANS The Company sponsors three defined contribution retirement plans covering substantially all full-time employees. These plans allow employees to defer a portion of their compensation and associated income taxes pursuant to Section 401(k) of the Internal Revenue Code. The Company may make discretionary contributions for the benefit of employees under each of these plans. The Company made contributions of $424,000 and $0 in 1998. There were no contributions made by Premiere to defined contribution plans in 1997. 14. RELATED-PARTY TRANSACTIONS The Company has in the past entered into agreements and arrangements with certain officers, directors and principal shareholders of the Company involving loans of funds, grants of options and warrants and the acquisition of a business. Certain of these transactions may be on terms more favorable to officers, directors and principal shareholders than they could acquire in a transaction with an unaffiliated party. The Company follows a policy that requires all material transactions between the Company and its officers, directors or other affiliates (i) be approved by a majority of the disinterested members of the board of directors of the Company and (ii) be on terms no less favorable to the Company than could be obtained from unaffiliated third parties. 65 In November 1995, the Company loaned $90,000 with recourse to an officer of the Company in connection with the officer's transition from his previous employer to the Company. This unsecured loan is evidenced by a promissory note bearing interest at 6.11%, the interest on which is payable beginning in November 1997 and continuing each year until November 1999. Principal is to be repaid in five equal annual installments, with accrued interest, commencing in November 2000. The principal and accrued interest on this note were cancelled in January 1998. During 1997, an officer of the Company exercised an option to purchase 100,000 shares of the Company's common stock at an exercise price of $.27 a share. The Company loaned the officer $973,000 to pay taxes associated with the exercise of the options. The loan is evidenced by a recourse promissory note which bears interest at 6% and is secured by the common stock purchase by the officer. In may 1998, the Company loaned $100,000 with recourse to an officer of the Company in connection with the officer's transition from his previous employer to the Company. This unsecured loan is evidenced by a promissory note bearing interest at 5.5%, and the principal plus accrued interest are due and payable on the second anniversary of the note; provided, however, one-half of the principal plus accrued interest will be cancelled on the first anniversary of the note if the officer is employed by the Company on that date, and the balance of the principal plus accrued interest will be cancelled on the second anniversary of the note if the officer is employed by the Company on that date. In addition, the unpaid principal of the note plus all accrued interest will be cancelled if the officer's employment is terminated without cause or if there is a change in control of the Company. During 1998, the Company leased the use of an airplane on an hourly basis from a limited liability company that is owned 99% by the Company's chief executive officer and 1% by the Company. In connection with this lease arrangement, the Company advanced approximately $270,000 to the limited liability company to pay the expenses of maintaining and operating the airplane. The amount due from the limited liability company is recorded in accounts receivable at December 31, 1998. 65--1 PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 15. COMMITMENTS AND CONTINGENCIES Lease Commitments The Company leases computer and telecommunications equipment, office space and other equipment under noncancelable lease agreements. The leases generally provide that the Company pay the taxes, insurance and maintenance expenses related to the leased assets. Future minimum operating and capital lease payments as of December 31, 1998 are as follows (in thousands):
Capital Operating Leases Leases ------- --------- 1999...................................................... $2,082 $ 9,728 2000...................................................... 986 7,357 2001...................................................... 412 5,807 2002...................................................... 224 4,757 2003...................................................... -- 4,434 Thereafter................................................ -- 14,893 ------ ------- Net minimum lease payments................................ 3,704 $46,976 ======= Less amount representing interest......................... 216 ------ Present value of net minimum lease payments............... 3,488 Less current portion...................................... 1,958 ------ Obligations under capital lease, net of current portion... $1,530 ======
Rent expense under operating leases was approximately $11,199,000, $7,516,000 and $8,275,000 for the years ended December 31, 1998, 1997 and 1996, respectively. Future minimum payments for facilities rent are reduced by scheduled sublease income of approximately $501,000 and $700,000 for the years ended December 31, 1998 and 1997. During 1997 and 1996, additions of computer and telecommunications equipment resulted in an increase in capital lease obligations of approximately $829,000 and $85,000, respectively. Supply Agreements The Company obtains long-distance telecommunications services pursuant to supply agreements with suppliers of long-distance telecommunications transmission services. These contracts generally provide fixed transmission prices for terms of three to five years, but are subject to early termination in certain events. No assurance can be given that the Company will be able to obtain long-distance services in the future at favorable prices or at all, and the unavailability of long-distance service, or a material increase in the price at which the Company is able to obtain long-distance service, would have a material adverse effect on the Company's business, financial condition and results of operations. Certain of these agreements provide for minimum purchase requirements. The Company is currently a party to five [update] long- distance telecommunications services contracts that require the Company to purchase a minimum amount of services each month. Litigation and Claims 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. 66 PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 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, Voice-Tel franchises 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, ATS, TeleT and VoiceCom, as well as its venture with UniDial Communications, its investment in USA.NET, and the commercial release of Orchestrate. Plaintiffs allege these public statements were fraudulent because the defendants knowingly failed to disclose that the Company allegedly was not successfully consolidating and integrating these acquisitions. Alleged evidence of scienter include sales by certain individual defendants during the class period and the desire to keep the common stock price high so that future acquisitions could be made using the Company's common stock. Plaintiffs allege the truth was purportedly revealed on June 10, 1998, when the Company announced it would not meet analysts' estimates of second quarter 1998 earnings because, in part, of the financial difficulties experienced by a licensing customer and by a strategic partner 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 anticipated revenue and earnings from its voice messaging product group, 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. 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 causes 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 August 6, 1996, Communications Network Corporation ("CNC"), a licensing customer of the Company, was placed into bankruptcy (the "Bankruptcy Case") under Chapter 11 of the United States Bankruptcy Code. On August 23, 1996, CNC filed a motion to intervene in a separate lawsuit brought by a CNC creditor in the United States District Court for the Southern District of New York against certain guarantors of CNC's obligations and to file a third-party action against numerous entities, including such CNC creditor and Premiere Communications, Inc. ("PCI") for alleged negligent misrepresentations of fact in connection with an alleged fraudulent scheme designed to damage CNC (the "Intervention Suit"). The District Court denied CNC's request to intervene and has transferred the remainder of the Intervention Suit to the bankruptcy case. On June 23, 1998, the Bankruptcy Court approved a settlement whereby PCI obtained a release from the trustee and 67 the trustee dismissed the Intervention Suit in consideration of PCI making a cash payment of $1.2 million to the trustee. The Plan was subsequently approved by the Bankruptcy Court on December 8, 1998 and PCI made an additional cash payment of $300,000 to the trustee in January 1999 in consideration of PCI obtaining certain allowed subordinated claims and the Court granting an injunction in PCI's favor against possible nuisance suits relating to the CNC business. On November 26, 1997, Wael Al-Khatib ("Al-Khatib"), the sole shareholder and former president of CNC, and his company, Platinum Network, Corp. ("Platinum") (Al-Khatib and Platinum are collectively referred to herein as "Plaintiffs"), filed a complaint against PCI , WorldCom Network Services, Inc. f/k/a WilTel, Inc., ("World-Com"), Bernard J. Ebbers, David F. Meyers, Robert Vetera, Joseph Cusick, William Trower, Don Wilmouth, Digital Communications of America, Inc., Boland Jones, Patrick Jones, and John Does I-XX (the "Defendants") in the United States District Court for Eastern District of New York., Plaintiffs contend 67--1 PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 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 connections with the plaintiffs' investment in securities of Xpedite and in unrelated investments involving insurance-related products. The defendants include Equitable and certain of is 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 the other defendants. Plaintiffs' claims against Xpedite include breach of contract, breach of fiduciary duty, unjust enrichment, conversion, fraud, conspiracy, interference with economic advantage and liability for ultra vires acts. The plaintiffs seek an accounting of the corporate stock in Xpedite, compensatory damages of approximately $4.85 million, plus $200,000 in "lost investments," interest and/or dividends that have accrued and have not been paid, punitive damages in an unspecified amount, and for certain equitable relief, including a request for Xpedite to issue 139,430 shares of common stock in the plaintiffs' names, attorneys' fees and costs and such other and further relief as the Court deems just and equitable. 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 failed 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, plaintiffs filed a motion for reconsideration of the court's decision. The parties are awaiting a decision on this motion. 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 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 68 PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 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 are being circulated for execution, 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 complaint 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 here 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. 69 PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Premiere 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 the ultimate outcome of any such proceedings. 16. INCOME TAXES Income tax provision (benefit) for 1998, 1997 and 1996 is as follows (in thousands):
1998 1997 1996 -------- ------- ------ Current: Federal............................................ $ -- $ -- $3,247 State.............................................. 1,200 1,000 598 International ..................................... 4,090 490 42 -------- ------- ------ 5,290 1,490 3,887 -------- ------- ------ Deferred: Federal............................................ (15,267) (4,405) (3,303) State.............................................. (3,751) (582) (553) International...................................... (1,026) 85 1,341 -------- ------- ------ (20,044) (4,902) (2,515) -------- ------- ------ $(14,754) $(3,412) $1,372 ======== ======= ======
The difference between the statutory federal income tax rate and the Company's effective income tax rate applied to income before income taxes for 1998, 1997 and 1996 is as follows (in thousands):
1998 1997 1996 -------- ------- ------ Income taxes at federal statutory rate............. $(31,136) $(9,787) $1,951 State taxes, net of federal benefit................ (1,658) 276 229 Non-deductible merger costs........................ -- 8,390 -- Change in valuation allowance...................... 1,733 -- 940 S-corporation earnings not subject to corporate level taxes....................................... -- (3,117) (1,462) Non-taxable investment income...................... -- (1,265) (723) Establish deferred taxes for non-taxable predecessor entities.............................. -- 1,207 -- Non-deductible expenses, primarily goodwill amortization...................................... 16,307 884 437 -------- ------- ------ Income taxes at the Company's effective rate ...... $(14,754) $(3,412) $1,372 ======== ======= ======
70 PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Differences between financial accounting and tax bases of assets and liabilities giving rise to deferred tax assets and liabilities are as follows at December 31 (in thousands):
1998 1997 ------- ------- Deferred tax assets: Net operating loss carryforwards............................ $53,030 $17,715 In-process research and development......................... 3,680 4,302 Restructuring and other special charges..................... 5,425 11,489 Accrued liabilities......................................... 5,923 3,082 Other assets ............................................... -- 2,281 ------- ------- 68,058 38,869 Deferred tax liabilities: Intangible assets........................................... (34,291) 3,826 Depreciation and amortization............................... (3,356) (4,242) Other liabilities........................................... (7,060) (20) ------- ------- (44,707) (436) Valuation allowance ........................................ (6,536) (8,755) ------- ------- Net deferred tax assets..................................... $16,815 $29,678 ======= =======
U.S. tax rules impose limitations on the use of net operating loss carryforwards following certain changes in ownership. Premiere's utilization of tax benefits associated with loss carryforwards could be limited if such a change were to occur. Management of the Company has recorded valuation allowances for deferred tax assets based on their estimate regarding realization of such assets. Most Voice-Tel Franchises acquired in transactions accounted for as pooling- of-interests had elected to be treated as S-Corporations or partnerships for income tax and other purposes. Income taxes were not provided on income of these entities for any year presented because S-Corporations and partnerships are generally not subject to income tax. Rather, shareholders or partners of such entities are taxed on their proportionate shares of these entities' taxable income in their individual income tax returns. At December 31, 1997, the Company had net operating loss carryforwards for state, federal and international income tax purposes of approximately $109 million expiring in 2008 through 2018. Deferred tax benefits of approximately $6.2 million in 1998 are associated with nonqualified stock option exercises, the benefit of which was credited directly to additional paid-in capital. 71 PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 17. STATEMENT OF CASH FLOW INFORMATION Supplemental Disclosure of Cash Flow Information (in thousands):
1998 1997 1996 -------- ------- ------- Cash paid during the year for: Interest............................................ $ 15,415 $ 7,100 $ 4,516 Income taxes........................................ $ 3,554 $ 840 $ 309 Cash paid for acquisitions accounted for as purchases are as follows: 1998 1997 1996 -------- ------- ------- Fair value of assets acquired....................... $633,671 $19,833 $11,030 Less liabilities assumed............................ 233,734 2,124 100 Less common stock issued to sellers................. 372,283 2,255 8,060 Cash paid for transaction costs..................... 15,990 -- -- -------- ------- ------- Net cash paid....................................... $ 43,644 $15,454 $ 2,870 ======== ======= =======
18. SEGMENT REPORTING The Company's reportable segments are strategic business units that align the Company in two distinct market segments: large business and small office/home businesses and individuals. These businesses emphasize the company's focus on target markets. Corporate Enterprise Solutions caters to large businesses, such as Fortune 1,000 companies. Its services include those most complementary with large organizations including electronic document distribution, full services, such as interactive voice response and calling card programs. Emerging Enterprise Solutions focuses in the small office/home office and individual subscriber segment. Its services include Orchestrate, a suite of internet based communication services, local access voice and data messaging and enhanced calling services. Emerging Enterprise Solutions revenues are generated by direct advertising programs through Co-brand and strategic partner relationships and Internet enabled communication services, including the Company's suite of products marketed under the Orchestrate(R) brand. 72 PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Information concerning the operations in these reportable segments is as follows:
1998 1997 1996 ------ ------ ------ Revenues Corporate Enterprise Solutions......................... $275.7 $ 55.0 $ 60.0 Emerging Enterprise Solutions.......................... 169.4 174.4 137.5 Corporate and eliminations............................. (0.3) -- -- ------ ------ ------ Total................................................. $444.8 $229.4 $197.5 ====== ====== ====== Operating profit Corporate Enterprise Solutions......................... $ (6.0) $ 10.6 $ 2.0 Emerging Enterprise Solutions.......................... (9.5) 36.4 17.1 Corporate and eliminations............................. (26.5) -- -- Restructuring, merger and other special charges........ (15.6) (73.6) -- Acquired research and development...................... (15.5) -- (11.0) Accrued settlement costs............................... (1.5) (1.5) (1.3) ------ ------ ------ Total................................................. $(74.6) $(28.1) $ 6.8 ====== ====== ====== EBITDA Corporate Enterprise Solutions......................... $ 75.8 $ 13.5 $ 5.0 Emerging Enterprise Solutions.......................... 18.7 50.6 28.3 Corporate and eliminations............................. (26.4) -- -- Restructuring, merger and other special charges........ (15.6) (73.6) -- Acquired research and development...................... (15.5) -- (11.0) Accrued settlement costs............................... (1.5) (1.5) (1.3) ------ ------ ------ Total................................................. $ 35.5 $(11.0) $ 21.0 ====== ====== ====== Identifiable assets Corporate Enterprise Solutions......................... $606.9 $ 13.9 $ 19.5 Emerging Enterprise Solutions.......................... 133.0 154.9 100.9 Corporate and eliminations............................. 62.9 212.3 81.1 ------ ------ ------ Total................................................. $802.8 $381.1 $201.5 ====== ====== ======
73 PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The following table presents financial information based on the Company's geographic segments for the years ended December 31, 1998, 1997 and 1996 (in thousands):
Operating Net Income Identifiable Revenues (Loss) Assets -------- --------- ------------ 1998 North America................................... 351,929 (94,062) 743,809 Asia Pacific.................................... 51,438 7,609 33,736 Europe.......................................... 47,347 12,286 191,811 Eliminations.................................... (5,896) (415) (166,605) ------- ------- -------- Total.......................................... 444,818 (74,582) 802,751 ======= ======= ======== 1997 North America................................... 225,413 (27,970) 379,581 Asia Pacific.................................... 3,939 (131) 1,527 ------- ------- -------- Total.......................................... 229,352 (28,101) 381,108 ======= ======= ======== 1996 North America................................... 192,916 7,939 198,403 Asia Pacific.................................... 4,558 (1,133) 3,138 ------- ------- -------- Total.......................................... 197,474 6,806 201,541 ======= ======= ========
74 PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There have been no disagreements with or change in the registrant's independent accountant since the Company's inception. 76 PART III Certain information required by Part III is omitted from this report in that the Registrant will file a Definitive Proxy Statement pursuant to Regulation 14A ("Proxy Statement") not later than 120 days after the end of the fiscal year covered by this report. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this item is incorporated herein by reference to the Company's Proxy Statement. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is incorporated herein by reference to the Company's Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item is incorporated herein by reference to the Company's Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is incorporated herein by reference to the Company's Proxy Statement. 77 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1.Financial Statements The financial statements listed in the index set forth in Item 8 of this report are filed as part of this report. 2.Financial Statement Schedules Financial statement schedules required to be included in this report are either shown in the financial statements and notes thereto, included in Item 8 of this report or have been omitted because they are not applicable. 3.Exhibits 2.1 Agreement and Plan of Merger, together with exhibits, dated as of April 2, 1997 by and among Premiere Technologies, Inc., PTEK Merger Corporation and Voice-Tel Enterprises, Inc. and the Stockholders of Voice-Tel Enterprises, Inc. (incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K dated April 2, 1997 and filed April 4, 1997). 2.2 Agreement and Plan of Merger, together with exhibits, dated as of April 2, 1997 by and among Premiere Technologies, Inc., PTEK Merger Corporation II, VTN, Inc. and the Stockholders of VTN, Inc. (incorporated by reference to Exhibit 2.2 to the Registrant's Current Report on Form 8-K dated April 2, 1997 and filed April 4, 1997). 2.3 Purchase and Sale Agreement dated April 2, 1997 by and between Premiere Technologies, Inc. and Merchandising Productions, Inc. (incorporated by reference to Exhibit 2.3 to the Registrant's Current Report on Form 8-K dated April 2, 1997 and filed April 4, 1997). 2.4 Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., Continuum, Inc. and Owners of Continuum, Inc.(incorporated by reference to Exhibit 2.4 to the Registrant's Current Report on Form 8-K dated April 30, 1997 and filed May 14, 1997). 2.5 Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., DMG, Inc. and Owners of DMG, Inc. and Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., VTG, Inc. and Owners of VTG, Inc. (incorporated by reference to Exhibit 2.5 to the Registrant's Current Report on Form 8-K dated April 30, 1997 and filed May 14, 1997). 2.6 Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., Penta Group, Inc. and Owners of Penta Group, Inc. and Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., Scepter Communications, Inc. and Owners of Scepter Communications, Inc. (incorporated by reference to Exhibit 2.6 to the Registrant's Current Report on Form 8-K dated April 30, 1997 and filed May 14, 1997). 2.7 Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., Premiere Business Services, Inc. and Owners of Premiere Business Services, Inc. (incorporated by reference to Exhibit 2.7 to the Registrant's Current Report on Form 8-K dated April 30, 1997 and filed May 14, 1997). 2.8 Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., Dunes Communications, Inc., Sands Communications, Inc., Sands Comm, Inc., SandsComm, Inc., and Owner of Dunes Communications, Inc., Sands Communications, Inc., Sands Comm, Inc., and SandsComm, Inc. (incorporated by reference to Exhibit 2.8 to the Registrant's Current Report on Form 8-K dated April 30, 1997 and filed May 14, 1997). 78 2.9 Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., Shamlin, Inc. and Owner of Shamlin, Inc. (incorporated by reference to Exhibit 2.9 to the Registrant's Current Report on Form 8-K dated April 30, 1997 and filed May 14, 1997). 2.10 Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., VT of Ohio, Inc. and Owners of VT of Ohio, Inc.; Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., Carter Voice, Inc. and Owners of Carter Voice, Inc.; Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., Widdoes Enterprises, Inc. and Owners of Widdoes Enterprises, Inc.; and Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., Dowd Enterprises, Inc. and Owners of Dowd Enterprises, Inc. (incorporated by reference to Exhibit 2.10 to the Registrant's Current Report on Form 8-K dated April 30, 1997 and filed May 14, 1997). 2.11 Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., SDVT, Inc. and Owners of SDVT, Inc. (incorporated by reference to Exhibit 2.11 to the Registrant's Current Report on Form 8-K dated April 30, 1997 and filed May 14, 1997). 2.12 Amended and Restated Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., Car Zee, Inc. and Owners of Car Zee, Inc. (incorporated by reference to Exhibit 2.12 to the Registrant's Current Report on Form 8-K dated April 30, 1997 and filed May 14, 1997). 2.13 Transfer Agreement dated as of March 31, 1997 by and among Premiere Technologies, Inc. and Owners of the VTEC Franchisee: 1086236 Ontario, Inc. (incorporated by reference to Exhibit 2.13 to the Registrant's Current Report on Form 8-K dated April 30, 1997 and filed May 14, 1997). 2.14 Transfer Agreement dated as of March 31, 1997 by and among Premiere Technologies, Inc. and Owners of the Eastern Franchisees: 1139133 Ontario Inc., 1116827 Ontario Inc., 1006089 Ontario Inc., and 1063940 Ontario Inc. (incorporated by reference to Exhibit 2.14 to the Registrant's Current Report on Form 8-K dated April 30, 1997 and filed May 14, 1997). 2.15 Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., Communications Concepts, Inc. and Owners of Communications Concepts, Inc. (incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K dated May 16, 1997 and filed June 2, 1997). 2.16 Transfer Agreement dated as of May 20, 1997 by and among Premiere Technologies, Inc., DARP, Inc. and Owners of DARP, Inc. (incorporated by reference to Exhibit 2.2 to the Registrant's Current Report on Form 8-K dated May 16, 1997 and filed June 2, 1997). 2.17 Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., Hi-Pak Systems, Inc. and Owners of Hi-Pak Systems, Inc. (incorporated by reference to Exhibit 2.3 to the Registrant's Current Report on Form 8-K dated May 16, 1997 and filed June 2. 1997). 2.18 Transfer Agreement dated as of May 29, 1997 by and among Premiere Technologies, Inc., MMP Communications, Inc. and Owners of MMP Communications, Inc. (incorporated by reference to Exhibit 2.4 to the Registrant's Current Report on Form 8-K dated May 16, 1997 and filed June 2, 1997). 2.19 Transfer Agreement dated as of May 16, 1997 by and among Premiere Technologies, Inc., Lar-Lin Enterprises, Inc., Lar-Lin Investments, Inc. and Voice-Mail Solutions, Inc. and Owners of Lar-Lin Enterprises, Inc., Lar-Lin Investments, Inc. and Voice- Mail Solutions, Inc. (incorporated by reference to Exhibit 2.5 to the Registrant's Current Report on Form 8-K dated May 16, 1997 and filed June 2, 1997). 2.20 Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., Voice-Net Communications Systems, Inc. and Owners of Voice-Net Communications Systems, Inc. and 79 Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., VT of Long Island Inc. and Owners of VT of Long Island Inc. (incorporated by reference to Exhibit 2.6 to the Registrant's Current Report on Form 8-K dated May 16, 1997 and filed June 2, 1997). 2.21 Transfer Agreement dated as of May 22, 1997 by and among Premiere Technologies, Inc. Voice Systems of Greater Dayton, Inc. and Owner of Voice Systems of Greater Dayton, Inc. and Transfer Agreement dated as of May 22, 1997 by and among Premiere Technologies, Inc., Premiere Acquisition Corporation, L'Harbot, Inc. and the Owners of L'Harbot, Inc. (incorporated by reference to Exhibit 2.7 to the Registrant's Current Report on Form 8-K dated May 16, 1997 and filed June 2, 1997). 2.22 Transfer Agreement dated as of May 30, 1997 by and among Premiere Technologies, Inc., Audioinfo Inc. and Owners of Audioinfo Inc. (incorporated by reference to Exhibit 2.8 to the Registrant's Current Report on Form 8-K dated May 16, 1997 and filed June 2, 1997). 2.23 Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., D&K Communications Corporation and Owners of D&K Communications Corporation (incorporated by reference to Exhibit 2.10 to the Registrant's Current Report on Form 8-K dated May 16, 1997 and filed June 2, 1997). 2.24 Transfer Agreement dated as of May 19, 1997 by and among Premiere Technologies, Inc. Voice-Tel of South Texas, Inc. and Owners of VoiceTel of South Texas, Inc. (incorporated by reference to Exhibit 2.11 to the Registrant's Current Report on Form 8-K dated May 16, 1997 and filed June 2, 1997). 2.25 Transfer Agreement dated as of May 31, 1997 by and among Premiere Technologies, Inc. Indiana Communicator, Inc. and Owner of Indiana Communicator, Inc. (incorporated by reference to Exhibit 2.12 to the Registrant's Current Report on Form 8-K dated May 16, 1997 and filed June 2, 1997). 2.26 Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., Voice Messaging Development Corporation of Michigan and the Owners of Voice Messaging Development Corporation of Michigan (incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K/A dated May 16, 1997 and filed June 24, 1997). 2.27 Transfer Agreement dated as of June 13, 1997 by and among Premiere Technologies, Inc., Voice Partners of Greater Mahoning Valley, Ltd. and the Owners of Voice Partners of Greater Mahoning Valley, Ltd. (incorporated by reference to Exhibit 2.2 to the Registrant's Current Report on Form 8-K/A dated May 16, 1997 and filed June 24, 1997). 2.28 Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc. In-Touch Technologies, Inc. and the Owners of InTouch Technologies, Inc. (incorporated by reference to Exhibit 2.3 to the Registrant's Current Report on Form 8-K/A dated May 16, 1997 and filed June 24, 1997). 2.29 Transfer Agreement dated as of March 31, 1997 by and among Premiere Technologies, Inc. and Owners of the Western Franchisees: 3325882 Manitoba Inc., 601965 Alberta Ltd., 3266622 Manitoba Inc., 3337821 Manitoba Inc. and 3266631 Manitoba Inc. (incorporated by reference to Exhibit 2.4 to the Registrant's Current Report on Form 8-K/A dated May 16, 1997 and filed June 24, 1997). 2.30 Uniform Terms and Conditions, Exhibit A to Transfer Agreements by and among Premiere Technologies, Inc., Wave One Franchisees and Owners of Wave One Franchisees (incorporated by reference to Exhibit A to Exhibit 2.4 to the Registrant's Current Report on Form 8-K dated April 2, 1997 and filed April 4, 1997). 2.31 Uniform Terms and Conditions, Exhibit A to Transfer Agreements by and among Premiere Technologies, Inc., Wave Two Franchisees and owners of Wave Two Franchisees (incorporated 80 by reference to Exhibit 2.14 to the Registrant's Current Report on dated May 16, 1997 and filed June 2, 1997). 2.32 Stock Purchase Agreement, together with exhibits, dated as of September 12, 1997, by and among Premiere Technologies, Inc., VoiceCom Holdings, Inc. and the Shareholders of VoiceCom Holdings, Inc. (incorporated by reference to Exhibit 2.1 to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended September 30, 1997). 2.33 Agreement and Plan of Merger, dated as of November 13, 1997, together with exhibits, by and among Premiere Technologies, Inc., Nets Acquisition Corp. and Xpedite Systems, Inc. (incorporated by reference to Exhibit 99.2 to the Registrant's Current Report on Form 8-K dated November 13, 1997 and filed December 5, 1997, as amended by Form 8-K/A filed December 23, 1997). 2.34 Agreement and Plan of Merger, dated April 22, 1998, by and among the Company, American Teleconferencing Services, Ltd. ("ATS"), PTEK Missouri Acquisition Corp. and the shareholders of ATS (incorporated by reference to Exhibit 99.1 of the Company's Current Report on Form 8-K dated April 23, 1998, and filed with the Commission on April 28, 1998.) 3.1 Articles of Incorporation of Premiere Technologies, Inc., as amended, (incorporated by reference to Exhibit 3.1 to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1998). 3.2 Amended and Restated Bylaws of Premiere Technologies, Inc., as further amended on August 1, 1998 (incorporated by reference to Exhibit 3.2 to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1998). 4.1 See Exhibits 3.1--3.2 for provisions of the Articles of Incorporation and Bylaws defining the rights of the holders of common stock of the Registrant. 4.2 Specimen Stock Certificate (incorporated by reference to Exhibit 4.2 to the Registrant's Registration Statement on Form S-1 (No. 33- 80547)). 4.3 Indenture, dated as of June 15, 1997, between Premiere Technologies, Inc. and IBJ Schroder Bank & Trust Company, as Trustee (incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K dated July 25, 1997 and filed August 5, 1997). 4.4 Form of Global Convertible Subordinated Note due 2004 (incorporated by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K dated July 25, 1997 and filed August 5, 1997). 4.5 Registration Rights Agreement, dated as of June 15, 1997, by and among the Registrant, Robertson, Stephens & Company LLC, Alex. Brown & Sons Incorporated and Donaldson, Lufkin & Jenrette Securities Corporation (incorporated by reference to Exhibit 4.3 to the Registrant's Current Report on Form 8-K dated July 25, 1997 and filed August 5, 1997). 4.6 Registration Rights Agreement, dated as of April 30, 1997, by and among the Registrant, those stockholders of Voice-Tel Enterprises, Inc. ("VTE") appearing as signatories thereto, those shareholders of VTN, Inc. appearing as signatories thereto and those stockholders or other equity owners of franchisees of VTE that executed adoption agreements (incorporated by reference to Exhibit 4 to Exhibit 2.1 to the Registrant's Current Report on Form 8-K dated April 2, 1997 and filed April 4, 1997). 4.7 Stock Restriction and Registration Rights Agreement dated as of September 30, 1997, by and among the Registrant and those shareholders of VoiceCom Holdings, Inc. appearing as signatories thereto (incorporated by reference to Exhibit 3 to Exhibit 2.1 to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended September 30, 1997). 81 4.8 Stock Restriction and Registration Rights Agreement dated as of April 22, 1998, by and among the Registrant and those shareholders of American Teleconferencing Services, Ltd. appearing as signatories thereto. 4.9 Shareholder Protection Rights Agreement, dated June 23, 1998, between the Company and SunTrust Bank, Atlanta, as Rights Agent (incorporated by reference to Exhibit 99.1 of the Company's Current Report on Form 8-K dated June 23, 1998, and filed with the Commission on June 26, 1998). 10.1 Shareholder Agreement dated as of January 18, 1994 among the Registrant, NationsBanc Capital Corporation, Boland T. Jones, D. Gregory Smith, Leonard A. DeNittis and Andrea L. Jones (incorporated by reference to Exhibit 10.12 to the Registrant's Registration Statement on Form S-1 (No. 33-80547)). 10.2 Amended and Restated Executive Employment Agreement and Incentive Option Agreement dated November 6, 1995 between the Registrant and David Gregory Smith (incorporated by reference to Exhibit 10.15 to the Registrant's Registration Statement on Form S-1 (No. 33-80547)).** 10.3 Amended and Restated Executive Employment Agreement dated November 6, 1995 between Premiere Communications, Inc. and David Gregory Smith (incorporated by reference to Exhibit 10.16 to the Registrant's Registration Statement on Form S-1 (No. 33-80547)).** 10.3 Amended and Restated Executive Employment Agreement dated November 6, 1995 between Premiere Communications, Inc. and David Gregory Smith (incorporated by reference to Exhibit 10.16 to the Registrant's Registration Statement on Form S-1 (No. 33-80547)).** 10.4 Mutual Release dated December 5, 1997 by and among the Registrant, Premiere Communications, Inc. and David Gregory Smith (incorporated by reference to Exhibit 10.6 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1997). 10.5 Amended and Restated Executive Employment and Incentive Option Agreement dated November 6, 1995 between the Registrant and Boland T. Jones (incorporated by reference to Exhibit 10.17 to the Registrant's Registration Statement on Form S-1 (No. 33-80547)).** 10.6 Amended and Restated Executive Employment Agreement dated November 6, 1995 between Premiere Communications, Inc. and Boland T. Jones (incorporated by reference to Exhibit 10.18 to the Registrant's Registration Statement on Form S-1 (No. 33-80547)).** 10.7 Executive Employment and Incentive Option Agreement dated November 1, 1995 between the Registrant and Patrick G. Jones (incorporated by reference to Exhibit 10.19 to the Registrant's Registration Statement on Form S-1 (No. 33-80547)).** 10.8 Executive Employment Agreement dated November 1, 1995 between Premiere Communications, Inc. and Patrick G. Jones (incorporated by reference to Exhibit 10.20 to the Registrant's Registration Statement on Form S-1 (No. 33-80547)).** 10.9 Promissory Note dated November 17, 1995 payable to the Registrant made by Patrick G. Jones (incorporated by reference to Exhibit 10.27 to the Registrant's Registration Statement on Form S-1 (No. 33-80547)).** 10.10 Amended and Restated Employment Agreement, made as of April 30, 1997, by and between Xpedite Systems, Inc., and Roy B. Anderson, Jr. (incorporated by reference to Exhibit 10.5 to the Registrant's Quarterly Report on Form 10-Q for the Quarter ended March 31, 1998.)** 10.11 Executive Employment and Incentive Option Agreement, effective as of July 24, 1997, by and between the Company and Jeffrey A. Allred (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the Quarter ended June 30, 1998.).** 82 10.12 Executive Employment and Incentive Option Agreement, effective as of July 6, 1998, by and between the Company and William Porter Payne.** 10.13 Memorandum of Understanding dated as of July 6, 1998, by and between the Company and William Porter Payne.** 10.14 Executive Employment Agreement, effective as of May 4, 1998, by and between the Company and Harvey A. Wagner.** 10.15 Promissory Note dated May 11, 1998 payable to the Registrant made by Harvey A. Wagner.** 10.16 Split-Dollar Agreement dated as of November 11, 1998 by and between the Company and Harvey A. Wagner.** 10.17 Premiere Communications, Inc. 401(k) Profit Sharing Plan (incorporated by reference to Exhibit 10.30 to the Registrant's Registration Statement on Form S-1 (No. 33-80547)).** 10.18 Form of Director Indemnification Agreement between the Registrant and Non-employee Directors (incorporated by reference to Exhibit 10.31 to the Registrant's Registration Statement on Form S-1 (No. 33- 80547)).** 10.19 Park Place Office Lease dated May 31, 1993 between Premiere Communications, Inc. and Mara-Met Venture, as amended by First Amendment dated December 15, 1995 (incorporated by reference to Exhibit 10.34 to the Registrant's Registration Statement on Form S-1 (No. 33-80547)). 10.20 Second and Third Amendment to 55 Park Place Office Lease dated November 5, 1996 between Premiere Communications, Inc. and Mara- Met Venture (incorporated by reference to Exhibit 10.49 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996). 10.21 Office Lease Agreement dated May 12, 1996 between Premiere Communications, Inc. and Beverly Hills Center LLC, as amended by the First Amendment dated August 1, 1996 (incorporated by reference to Exhibit 10.50 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996). 10.22 Second Amendment of Lease dated July 1, 1997, between Premiere Communications, Inc. and Beverly Hills Center LLC (incorporated by reference to Exhibit 10.18 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1997). 10.23 Agreement of Lease between Corporate Property Investors and Premiere Communications, Inc., dated as of March 3, 1997, as amended by Modification of Lease dated August 4, 1997, as amended, by Second Modification of Lease, dated October 30, 1997 (incorporated by reference to Exhibit 10.19 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1997). 10.24 Sublease Agreement dated as of December 16, 1997, by and between Premiere Communications, Inc. and Endeavor Technologies, Inc. (incorporated by reference to Exhibit 10.20 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1997). 10.25 Form of Officer Indemnification Agreement between the Registrant and each of the executive officers (incorporated by reference to Exhibit 10.36 to the Registrant's Registration Statement on Form S-1 (No. 33- 80547)).** 10.26 Telecommunications Services Agreement dated December 1, 1995 between Premiere Communications, Inc. and WorldCom Network Services, Inc. d/b/a WilTel (incorporated by reference to Exhibit 10.40 to the Registrant's Registration Statement on Form S-1 (No. 33-80547)). 10.27 Amended and Restated Program Enrollment Terms dated September 30, 1997 by and between Premiere Communications, Inc. and WorldCom Network Services, Inc., d/b/a WilTel, as amended by Amendment No. 1 dated November 1, 1997 (incorporated by reference to Exhibit 10.26 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1997).* 83 10.28 Service Agreement dated September 30, 1997, by and between VoiceCom Systems, Inc. and AT&T Corp. (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended September 30, 1997).* 10.29 Strategic Alliance Agreement dated November 13, 1996 by and between the Registrant and WorldCom, Inc. (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated November 13, 1996).* 10.30 Investment Agreement dated November 13, 1996 by and between the Registrant and WorldCom, Inc. (incorporated by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K dated November 13, 1996). 10.31 Service and Reseller Agreement dated September 28, 1990 by and between Amway Corporation and Voice-Tel Enterprises, Inc. (incorporated by reference to Exhibit 2.33 to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1997).* 10.32 Independent Distributor Agreement dated September 26, 1997, by and between Registrant and Digitec 2000, Inc. (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report as Form 10-Q for the Quarter ended September 30, 1997). 10.33 Form of Stock Purchase Warrant Agreement (incorporated by reference to Exhibit 4.3 to the Registrant's Registration Statement on Form S-8 (No. 333-11281)). 10.34 Form of Warrant Transaction Statement (incorporated by reference to Exhibit 4.4 to the Registrant's Registration Statement on Form S-8 (No. 333-11281)). 10.35 Form of Director Stock Purchase Warrant (incorporated by reference to Exhibit 4.3 to the Registrant's Registration Statement on Form S-8 (No. 333-17593)).** 10.36 Purchase Agreement, dated June 25, 1997, by and among Premiere Technologies, Inc., Robertson, Stephens & Company LLC, Alex. Brown & Sons Incorporated and Donaldson, Lufkin & Jenrette Securities Corporation (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated July 25, 1997 and filed August 5, 1997). 10.37 1991 Non-Qualified and Incentive Stock Option Plan of Voice-Tel Enterprises, Inc. (assumed by the Registrant) (incorporated by reference to Exhibit 4.2 to the Registrant's Registration Statement on Form S-8 (No. 333-29787)). 10.38 1991 Non-Qualified and Incentive Stock Option Plan of VTN, Inc. (assumed by the Registrant) (incorporated by reference to Exhibit 4.3 to the Registrant's Registration Statement on Form S-8 (No. 333-29787)). 10.39 Form of Stock Option Agreement by and between the Registrant and certain current or former employees of Voice-Tel Enterprises, Inc. (incorporated by reference to Exhibit 4.4 to the Registrant's Registration Statement on Form S-8 (No. 333-29787)). 10.40 Premiere Technologies, Inc. Second Amended and Restated 1995 Stock Plan (incorporated by reference to Exhibit A to the Registrant's Definitive Proxy Statement distributed in connection with the Registrant's June 11, 1997 annual meeting of shareholders, filed April 30, 1997). 10.41 First Amendment to Premiere Technologies, Inc. Second Amended and Restated 1995 Stock Plan (incorporated by reference to Exhibit 10.43 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1997). 84 10.42 VoiceCom Holdings, Inc. 1995 Stock Option Plan (assumed by the Registrant) (incorporated by reference to Exhibit 10.44 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1997). 10.43 VoiceCom Holdings, Inc. Amended and Restated 1985 Stock Option Plan (assumed by the Registrant) (incorporated by reference to Exhibit 10.45 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1997). 10.44 Premiere Technologies, Inc., 1998 Stock Plan (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the Quarter ended June 30, 1998.). 10.45 Xpedite Systems, Inc. 1992 Incentive Stock Option Plan (assumed by the Registrant) (incorporated by reference to Exhibit to Xpedite's Registration Statement on Form S-1 (No. 33-73258)). 10.46 Xpedite Systems, Inc. 1993 Incentive Stock Option Plan (assumed by the Registrant) (incorporated by reference to Exhibit to Xpedite's Registration Statement on Form S-1 (No. 33-73258)). 10.47 Xpedite Systems, Inc. 1996 Incentive Stock Option Plan (assumed by the Registrant) (incorporated by reference to Exhibit to Xpedite's Annual Report on Form 10-K for the year ended December 31, 1995). 10.48 Xpedite Systems, Inc. Non-Employee Directors' Warrant Plan (assumed by the Registrant) (incorporated by reference to Exhibit 10.31 to Xpedite's Annual Report on Form 10-K for the year ended December 31, 1996). 10.49 Xpedite Systems, Inc. Officer's Contingent Stock Option Plan (assumed by the Registrant) (incorporated by reference to Exhibit 10.30 to Xpedite's Annual Report on Form 10-K for the year ended December 31, 1996). 10.50 Credit Agreement dated as of December 17, 1997, as amended and restated as of December 16, 1998, by and among Xpedite Systems, Inc. and Xpedite Systems Holdings (UK) Limited, as Borrowers, and the Guarantors party thereto, the banks listed on the signature pages thereof, NationsBank, N.A., as Documentation Agent and The Bank of New York, as Administrative Agent. 10.51 Share Purchase Agreement dated as of August 8, 1997, by and among Xpedite Systems, Inc., Xpedite Systems Holdings (UK) Limited, and the shareholders of Xpedite Systems Limited (incorporated by reference to Exhibit 99.3 to the Registrant's Current Report on Form 8-K dated November 13, 1997 and filed December 5, 1997, as amended by Form 8-K/A filed December 23, 1997 and Form 8-K/A filed January 27, 1998)). 10.52 Amendment to the Share Purchase Agreement, dated December 17, 1997, by and among Xpedite Systems, Inc., Xpedite Systems Holdings (UK) Limited and the shareholders of Xpedite Systems Limited (incorporated by reference to Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q for the Quarter ended March 31, 1998.) 11.1 Statement re: Computation of Per Share Earnings. 85 21.1 Subsidiaries of the Registrant. 23.1 Consent of Arthur Andersen LLP. 27.1 Financial Data Schedule for the year ended December 31, 1998. - - -------- * Confidential treatment has been granted. The copy on file as an exhibit omits the information subject to the confidentiality request. Such omitted information has been filed separately with the Commission. **Management contracts and compensatory plans and arrangements required to be filed as exhibits pursuant to Item 14(c) of this report. (b) The Registrant did not file any Current Reports on Form 8-K during the fourth quarter of 1998. 86 SIGNATURES PREMIERE TECHNOLOGIES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Premiere Technologies, Inc. By: _________________________________ Boland T. Jones, Chairman of the Board and Chief Executive Officer Date: March , 1999 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated. Signature Title Date Chairman of the March , 1999 - - ------------------------------------- Board and Chief Boland T. Jones Executive Officer (principal executive officer) Executive Vice March , 1999 - - ------------------------------------- President of Finance Harvey A. Wagner and Administration and Chief Financial Officer (principal financial and accounting officer) Director March , 1999 - - ------------------------------------- George W. Baker, Sr. Director March , 1999 - - ------------------------------------- Raymond H. Pirtle, Jr. Director March , 1999 - - ------------------------------------- Roy B. Andersen, Jr. Director March , 1999 - - ------------------------------------- Jackie M. Ward President and Chief March , 1999 - - ------------------------------------- Operating Officer Jeffrey A. Allred and Director Vice Chairman and March , 1999 - - ------------------------------------- Director William P. Payne 87 EXHIBIT INDEX Exhibit Number Description 2.1 Agreement and Plan of Merger, together with exhibits, dated as of April 2, 1997 by and among Premiere Technologies, Inc., PTEK Merger Corporation and Voice-Tel Enterprises, Inc. and the Stockholders of Voice-Tel Enterprises, Inc. (incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K dated April 2, 1997 and filed April 4, 1997). 2.2 Agreement and Plan of Merger, together with exhibits, dated as of April 2, 1997 by and among Premiere Technologies, Inc., PTEK Merger Corporation II, VTN, Inc. and the Stockholders of VTN, Inc. (incorporated by reference to Exhibit 2.2 to the Registrant's Current Report on Form 8-K dated April 2, 1997 and filed April 4, 1997). 2.3 Purchase and Sale Agreement dated April 2, 1997 by and between Premiere Technologies, Inc. and Merchandising Productions, Inc. (incorporated by reference to Exhibit 2.3 to the Registrant's Current Report on Form 8-K dated April 2, 1997 and filed April 4, 1997). 2.4 Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., Continuum, Inc. and Owners of Continuum, Inc. (incorporated by reference to Exhibit 2.4 to the Registrant's Current Report on Form 8-K dated April 30, 1997 and filed May 14, 1997). 2.5 Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., DMG, Inc. and Owners of DMG, Inc. and Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., VTG, Inc. and Owners of VTG, Inc. (incorporated by reference to Exhibit 2.5 to the Registrant's Current Report on Form 8-K dated April 30, 1997 and filed May 14, 1997). 2.6 Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., Penta Group, Inc. and Owners of Penta Group, Inc. and Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., Scepter Communications, Inc. and Owners of Scepter Communications, Inc. (incorporated by reference to Exhibit 2.6 to the Registrant's Current Report on Form 8-K dated April 30, 1997 and filed May 14, 1997). 2.7 Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., Premiere Business Services, Inc. and Owners of Premiere Business Services, Inc. (incorporated by reference to Exhibit 2.7 to the Registrant's Current Report on Form 8-K dated April 30, 1997 and filed May 14, 1997). 2.8 Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., Dunes Communications, Inc., Sands Communications, Inc., Sands Comm, Inc., SandsComm, Inc., and Owner of Dunes Communications, Inc., Sands Communications, Inc., Sands Comm, Inc., and SandsComm, Inc. (incorporated by reference to Exhibit 2.8 to the Registrant's Current Report on Form 8-K dated April 30, 1997 and filed May 14, 1997). 2.9 Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., Shamlin, Inc. and Owner of Shamlin, Inc. (incorporated by reference to Exhibit 2.9 to the Registrant's Current Report on Form 8-K dated April 30, 1997 and filed May 14, 1997). 2.10 Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., VT of Ohio, Inc. and Owners of VT of Ohio, Inc.; Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., Carter Voice, Inc. and Owners of Carter Voice, Inc.; Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., Widdoes Enterprises, Inc. and Owners of Widdoes Enterprises, Inc.; and Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., Dowd Enterprises, Inc. and Owners of Dowd Enterprises, Inc. (incorporated by reference to Exhibit 2.10 to the Registrant's Current Report on Form 8-K dated April 30, 1997 and filed May 14, 1997). Exhibit Number Description 2.11 Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., SDVT, Inc. and Owners of SDVT, Inc. (incorporated by reference to Exhibit 2.11 to the Registrant's Current Report on Form 8-K dated April 30, 1997 and filed May 14, 1997). 2.12 Amended and Restated Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., Car Zee, Inc. and Owners of Car Zee, Inc. (incorporated by reference to Exhibit 2.12 to the Registrant's Current Report on Form 8-K dated April 30, 1997 and filed May 14, 1997). 2.13 Transfer Agreement dated as of March 31, 1997 by and among Premiere Technologies, Inc. and Owners of the VTEC Franchisee: 1086236 Ontario, Inc. (incorporated by reference to Exhibit 2.13 to the Registrant's Current Report on Form 8-K dated April 30, 1997 and filed May 14, 1997). 2.14 Transfer Agreement dated as of March 31, 1997 by and among Premiere Technologies, Inc. and Owners of the Eastern Franchisees: 1139133 Ontario Inc., 1116827 Ontario Inc., 1006089 Ontario Inc., and 1063940 Ontario Inc. (incorporated by reference to Exhibit 2.14 to the Registrant's Current Report on Form 8-K dated April 30, 1997 and filed May 14, 1997). 2.15 Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., Communications Concepts, Inc. and Owners of Communications Concepts, Inc. (incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K dated May 16, 1997 and filed June 2, 1997). 2.16 Transfer Agreement dated as of May 20, 1997 by and among Premiere Technologies, Inc., DARP, Inc. and Owners of DARP, Inc. (incorporated by reference to Exhibit 2.2 to the Registrant's Current Report on Form 8-K dated May 16, 1997 and filed June 2, 1997). 2.17 Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., Hi-Pak Systems, Inc. and Owners of Hi-Pak Systems, Inc. (incorporated by reference to Exhibit 2.3 to the Registrant's Current Report on Form 8-K dated May 16, 1997 and filed June 2. 1997). 2.18 Transfer Agreement dated as of May 29, 1997 by and among Premiere Technologies, Inc., MMP Communications, Inc. and Owners of MMP Communications, Inc. (incorporated by reference to Exhibit 2.4 to the Registrant's Current Report on Form 8-K dated May 16, 1997 and filed June 2, 1997). 2.19 Transfer Agreement dated as of May 16, 1997 by and among Premiere Technologies, Inc., Lar-Lin Enterprises, Inc., Lar-Lin Investments, Inc. and Voice-Mail Solutions, Inc. and Owners of Lar-Lin Enterprises, Inc., Lar-Lin Investments, Inc. and Voice-Mail Solutions, Inc. (incorporated by reference to Exhibit 2.5 to the Registrant's Current Report on Form 8-K dated May 16, 1997 and filed June 2, 1997). 2.20 Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., Voice-Net Communications Systems, Inc. and Owners of Voice-Net Communications Systems, Inc. and Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., VT of Long Island Inc. and Owners of VT of Long Island Inc. (incorporated by reference to Exhibit 2.6 to the Registrant's Current Report on Form 8-K dated May 16, 1997 and filed June 2, 1997). 2.21 Transfer Agreement dated as of May 22, 1997 by and among Premiere Technologies, Inc. Voice Systems of Greater Dayton, Inc. and Owner of Voice Systems of Greater Dayton, Inc. and Transfer Agreement dated as of May 22, 1997 by and among Premiere Technologies, Inc., Premiere Acquisition Corporation, L'Harbot, Inc. and the Owners of L'Harbot, Inc. (incorporated by reference to Exhibit 2.7 to the Registrant's Current Report on Form 8-K dated May 16, 1997 and filed June 2, 1997). 2.22 Transfer Agreement dated as of May 30, 1997 by and among Premiere Technologies, Inc., Audioinfo Inc. and Owners of Audioinfo Inc. (incorporated by reference to Exhibit 2.8 to the Registrant's Current Report on Form 8-K dated May 16, 1997 and filed June 2, 1997). Exhibit Number Description 2.23 Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., D&K Communications Corporation and Owners of D&K Communications Corporation (incorporated by reference to Exhibit 2.10 to the Registrant's Current Report on Form 8-K dated May 16, 1997 and filed June 2, 1997). 2.24 Transfer Agreement dated as of May 19, 1997 by and among Premiere Technologies, Inc. Voice-Tel of South Texas, Inc. and Owners of VoiceTel of South Texas, Inc. (incorporated by reference to Exhibit 2.11 to the Registrant's Current Report on Form 8-K dated May 16, 1997 and filed June 2, 1997). 2.25 Transfer Agreement dated as of May 31, 1997 by and among Premiere Technologies, Inc. Indiana Communicator, Inc. and Owner of Indiana Communicator, Inc. (incorporated by reference to Exhibit 2.12 to the Registrant's Current Report on Form 8-K dated May 16, 1997 and filed June 2, 1997). 2.26 Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc., Voice Messaging Development Corporation of Michigan and the Owners of Voice Messaging Development Corporation of Michigan (incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K/A dated May 16, 1997 and filed June 24, 1997). 2.27 Transfer Agreement dated as of June 13, 1997 by and among Premiere Technologies, Inc., Voice Partners of Greater Mahoning Valley, Ltd. and the Owners of Voice Partners of Greater Mahoning Valley, Ltd. (incorporated by reference to Exhibit 2.2 to the Registrant's Current Report on Form 8-K/A dated May 16, 1997 and filed June 24, 1997). 2.28 Transfer Agreement dated as of April 2, 1997 by and among Premiere Technologies, Inc. In-Touch Technologies, Inc. and the Owners of InTouch Technologies, Inc. (incorporated by reference to Exhibit 2.3 to the Registrant's Current Report on Form 8-K/A dated May 16, 1997 and filed June 24, 1997). 2.29 Transfer Agreement dated as of March 31, 1997 by and among Premiere Technologies, Inc. and Owners of the Western Franchisees: 3325882 Manitoba Inc., 601965 Alberta Ltd., 3266622 Manitoba Inc., 3337821 Manitoba Inc. and 3266631 Manitoba Inc. (incorporated by reference to Exhibit 2.4 to the Registrant's Current Report on Form 8-K/A dated May 16, 1997 and filed June 24, 1997). 2.30 Uniform Terms and Conditions, Exhibit A to Transfer Agreements by and among Premiere Technologies, Inc., Wave One Franchisees and Owners of Wave One Franchisees (incorporated by reference to Exhibit A to Exhibit 2.4 to the Registrant's Current Report on Form 8-K dated April 2, 1997 and filed April 4, 1997). 2.31 Uniform Terms and Conditions, Exhibit A to Transfer Agreements by and among Premiere Technologies, Inc., Wave Two Franchisees and owners of Wave Two Franchisees (incorporated by reference to Exhibit 2.14 to the Registrant's Current Report on dated May 16, 1997 and filed June 2, 1997). 2.32 Stock Purchase Agreement, together with exhibits, dated as of September 12, 1997, by and among Premiere Technologies, Inc., VoiceCom Holdings, Inc. and the Shareholders of VoiceCom Holdings, Inc. (incorporated by reference to Exhibit 2.1 to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended September 30, 1997). 2.33 Agreement and Plan of Merger, dated as of November 13, 1997, together with exhibits, by and among Premiere Technologies, Inc., Nets Acquisition Corp. and Xpedite Systems, Inc. (incorporated by reference to Exhibit 99.2 to the Registrant's Current Report on Form 8-K dated November 13, 1997 and filed December 5, 1997, as amended by Form 8-K/A filed December 23, 1997). Exhibit Number Description 2.34 Agreement and Plan of Merger, dated April 22, 1998, by and among the Company, American Teleconferencing Services, Ltd. ("ATS"), PTEK Missouri Acquisition Corp. and the shareholders of ATS (incorporated by reference to Exhibit 99.1 of the Company's Current Report on Form 8-K dated April 23, 1998, and filed with the Commission on April 28, 1998.) 3.1 Articles of Incorporation of Premiere Technologies, Inc., as amended, (incorporated by reference to Exhibit 3.1 to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1998). 3.2 Amended and Restated Bylaws of Premiere Technologies, Inc., as further amended on August 1, 1998 (incorporated by reference to Exhibit 3.2 to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1998). 4.1 See Exhibits 3.1--3.2 for provisions of the Articles of Incorporation and Bylaws defining the rights of the holders of common stock of the Registrant. 4.2 Specimen Stock Certificate (incorporated by reference to Exhibit 4.2 to the Registrant's Registration Statement on Form S-1 (No. 33- 80547)). 4.3 Indenture, dated as of June 15, 1997, between Premiere Technologies, Inc. and IBJ Schroder Bank & Trust Company, as Trustee (incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K dated July 25, 1997 and filed August 5, 1997). 4.4 Form of Global Convertible Subordinated Note due 2004 (incorporated by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K dated July 25, 1997 and filed August 5, 1997). 4.5 Registration Rights Agreement, dated as of June 15, 1997, by and among the Registrant, Robertson, Stephens & Company LLC, Alex. Brown & Sons Incorporated and Donaldson, Lufkin & Jenrette Securities Corporation (incorporated by reference to Exhibit 4.3 to the Registrant's Current Report on Form 8-K dated July 25, 1997 and filed August 5, 1997). 4.6 Registration Rights Agreement, dated as of April 30, 1997, by and among the Registrant, those stockholders of Voice-Tel Enterprises, Inc. ("VTE") appearing as signatories thereto, those shareholders of VTN, Inc. appearing as signatories thereto and those stockholders or other equity owners of franchisees of VTE that executed adoption agreements (incorporated by reference to Exhibit 4 to Exhibit 2.1 to the Registrant's Current Report on Form 8-K dated April 2, 1997 and filed April 4, 1997). 4.7 Stock Restriction and Registration Rights Agreement dated as of September 30, 1997, by and among the Registrant and those shareholders of VoiceCom Holdings, Inc. appearing as signatories thereto (incorporated by reference to Exhibit 3 to Exhibit 2.1 to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended September 30, 1997). 4.8 Stock Restriction and Registration Rights Agreement dated as of April 22, 1998, by and among the Registrant and those shareholders of American Teleconferencing Services, Ltd. appearing as signatories thereto. 4.9 Shareholder Protection Rights Agreement, dated June 23, 1998, between the Company and SunTrust Bank, Atlanta, as Rights Agent (incorporated by reference to Exhibit 99.1 of the Company's Current Report on Form 8-K dated June 23, 1998, and filed with the Commission on June 26, 1998). 10.1 Shareholder Agreement dated as of January 18, 1994 among the Registrant, NationsBanc Capital Corporation, Boland T. Jones, D. Gregory Smith, Leonard A. DeNittis and Andrea L. Jones (incorporated by reference to Exhibit 10.12 to the Registrant's Registration Statement on Form S-1 (No. 33-80547)). Exhibit Number Description 10.2 Amended and Restated Executive Employment Agreement and Incentive Option Agreement dated November 6, 1995 between the Registrant and David Gregory Smith (incorporated by reference to Exhibit 10.15 to the Registrant's Registration Statement on Form S-1 (No. 33-80547)).** 10.3 Amended and Restated Executive Employment Agreement dated November 6, 1995 between Premiere Communications, Inc. and David Gregory Smith (incorporated by reference to Exhibit 10.16 to the Registrant's Registration Statement on Form S-1 (No. 33-80547)).** 10.3 Amended and Restated Executive Employment Agreement dated November 6, 1995 between Premiere Communications, Inc. and David Gregory Smith (incorporated by reference to Exhibit 10.16 to the Registrant's Registration Statement on Form S-1 (No. 33-80547)).** 10.4 Mutual Release dated December 5, 1997 by and among the Registrant, Premiere Communications, Inc. and David Gregory Smith (incorporated by reference to Exhibit 10.6 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1997). 10.5 Amended and Restated Executive Employment and Incentive Option Agreement dated November 6, 1995 between the Registrant and Boland T. Jones (incorporated by reference to Exhibit 10.17 to the Registrant's Registration Statement on Form S-1 (No. 33-80547)).** 10.6 Amended and Restated Executive Employment Agreement dated November 6, 1995 between Premiere Communications, Inc. and Boland T. Jones (incorporated by reference to Exhibit 10.18 to the Registrant's Registration Statement on Form S-1 (No. 33-80547)).** 10.7 Executive Employment and Incentive Option Agreement dated November 1, 1995 between the Registrant and Patrick G. Jones (incorporated by reference to Exhibit 10.19 to the Registrant's Registration Statement on Form S-1 (No. 33-80547)).** 10.8 Executive Employment Agreement dated November 1, 1995 between Premiere Communications, Inc. and Patrick G. Jones (incorporated by reference to Exhibit 10.20 to the Registrant's Registration Statement on Form S-1 (No. 33-80547)).** 10.9 Promissory Note dated November 17, 1995 payable to the Registrant made by Patrick G. Jones (incorporated by reference to Exhibit 10.27 to the Registrant's Registration Statement on Form S-1 (No. 33- 80547)).** 10.10 Amended and Restated Employment Agreement, made as of April 30, 1997, by and between Xpedite Systems, Inc., and Roy B. Anderson, Jr. (incorporated by reference to Exhibit 10.5 to the Registrant's Quarterly Report on Form 10-Q for the Quarter ended March 31, 1998.)** 10.11 Executive Employment and Incentive Option Agreement, effective as of July 24, 1997, by and between the Company and Jeffrey A. Allred (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the Quarter ended June 30, 1998.).** 10.12 Executive Employment and Incentive Option Agreement, effective as of July 6, 1998, by and between the Company and William Porter Payne.** 10.13 Memorandum of Understanding dated as of July 6, 1998, by and between the Company and William Porter Payne.** 10.14 Executive Employment Agreement, effective as of May 4, 1998, by and between the Company and Harvey A. Wagner.** Exhibit Number Description 10.15 Promissory Note dated May 11, 1998 payable to the Registrant made by Harvey A. Wagner.** 10.16 Split-Dollar Agreement dated as of November 11, 1998 by and between the Company and Harvey A. Wagner.** 10.17 Premiere Communications, Inc. 401(k) Profit Sharing Plan (incorporated by reference to Exhibit 10.30 to the Registrant's Registration Statement on Form S-1 (No. 33-80547)).** 10.18 Form of Director Indemnification Agreement between the Registrant and Non-employee Directors (incorporated by reference to Exhibit 10.31 to the Registrant's Registration Statement on Form S-1 (No. 33- 80547)).** 10.19 Park Place Office Lease dated May 31, 1993 between Premiere Communications, Inc. and Mara-Met Venture, as amended by First Amendment dated December 15, 1995 (incorporated by reference to Exhibit 10.34 to the Registrant's Registration Statement on Form S-1 (No. 33-80547)). 10.20 Second and Third Amendment to 55 Park Place Office Lease dated November 5, 1996 between Premiere Communications, Inc. and Mara-Met Venture (incorporated by reference to Exhibit 10.49 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996). 10.21 Office Lease Agreement dated May 12, 1996 between Premiere Communications, Inc. and Beverly Hills Center LLC, as amended by the First Amendment dated August 1, 1996 (incorporated by reference to Exhibit 10.50 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996). 10.22 Second Amendment of Lease dated July 1, 1997, between Premiere Communications, Inc. and Beverly Hills Center LLC (incorporated by reference to Exhibit 10.18 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1997). 10.23 Agreement of Lease between Corporate Property Investors and Premiere Communications, Inc., dated as of March 3, 1997, as amended by Modification of Lease dated August 4, 1997, as amended, by Second Modification of Lease, dated October 30, 1997 (incorporated by reference to Exhibit 10.19 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1997). 10.24 Sublease Agreement dated as of December 16, 1997, by and between Premiere Communications, Inc. and Endeavor Technologies, Inc. (incorporated by reference to Exhibit 10.20 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1997). 10.25 Form of Officer Indemnification Agreement between the Registrant and each of the executive officers (incorporated by reference to Exhibit 10.36 to the Registrant's Registration Statement on Form S-1 (No. 33- 80547)).** 10.26 Telecommunications Services Agreement dated December 1, 1995 between Premiere Communications, Inc. and WorldCom Network Services, Inc. d/b/a WilTel (incorporated by reference to Exhibit 10.40 to the Registrant's Registration Statement on Form S-1 (No. 33-80547)). 10.27 Amended and Restated Program Enrollment Terms dated September 30, 1997 by and between Premiere Communications, Inc. and WorldCom Network Services, Inc., d/b/a WilTel, as amended by Amendment No. 1 dated November 1, 1997 (incorporated by reference to Exhibit 10.26 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1997).* Exhibit Number Description 10.28 Service Agreement dated September 30, 1997, by and between VoiceCom Systems, Inc. and AT&T Corp. (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended September 30, 1997).* 10.29 Strategic Alliance Agreement dated November 13, 1996 by and between the Registrant and WorldCom, Inc. (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated November 13, 1996).* 10.30 Investment Agreement dated November 13, 1996 by and between the Registrant and WorldCom, Inc. (incorporated by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K dated November 13, 1996). 10.31 Service and Reseller Agreement dated September 28, 1990 by and between Amway Corporation and Voice-Tel Enterprises, Inc. (incorporated by reference to Exhibit 2.33 to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1997).* 10.32 Independent Distributor Agreement dated September 26, 1997, by and between Registrant and Digitec 2000, Inc. (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report as Form 10-Q for the Quarter ended September 30, 1997). 10.33 Form of Stock Purchase Warrant Agreement (incorporated by reference to Exhibit 4.3 to the Registrant's Registration Statement on Form S-8 (No. 333-11281)). 10.34 Form of Warrant Transaction Statement (incorporated by reference to Exhibit 4.4 to the Registrant's Registration Statement on Form S-8 (No. 333-11281)). 10.35 Form of Director Stock Purchase Warrant (incorporated by reference to Exhibit 4.3 to the Registrant's Registration Statement on Form S-8 (No. 333-17593)).** 10.36 Purchase Agreement, dated June 25, 1997, by and among Premiere Technologies, Inc., Robertson, Stephens & Company LLC, Alex. Brown & Sons Incorporated and Donaldson, Lufkin & Jenrette Securities Corporation (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated July 25, 1997 and filed August 5, 1997). 10.37 1991 Non-Qualified and Incentive Stock Option Plan of Voice-Tel Enterprises, Inc. (assumed by the Registrant) (incorporated by reference to Exhibit 4.2 to the Registrant's Registration Statement on Form S-8 (No. 333-29787)). 10.38 1991 Non-Qualified and Incentive Stock Option Plan of VTN, Inc. (assumed by the Registrant) (incorporated by reference to Exhibit 4.3 to the Registrant's Registration Statement on Form S-8 (No. 333- 29787)). 10.39 Form of Stock Option Agreement by and between the Registrant and certain current or former employees of Voice-Tel Enterprises, Inc. (incorporated by reference to Exhibit 4.4 to the Registrant's Registration Statement on Form S-8 (No. 333-29787)). 10.40 Premiere Technologies, Inc. Second Amended and Restated 1995 Stock Plan (incorporated by reference to Exhibit A to the Registrant's Definitive Proxy Statement distributed in connection with the Registrant's June 11, 1997 annual meeting of shareholders, filed April 30, 1997). 10.41 First Amendment to Premiere Technologies, Inc. Second Amended and Restated 1995 Stock Plan (incorporated by reference to Exhibit 10.43 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1997). Exhibit Number Description 10.42 VoiceCom Holdings, Inc. 1995 Stock Option Plan (assumed by the Registrant) (incorporated by reference to Exhibit 10.44 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1997). 10.43 VoiceCom Holdings, Inc. Amended and Restated 1985 Stock Option Plan (assumed by the Registrant) (incorporated by reference to Exhibit 10.45 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1997). 10.44 Premiere Technologies, Inc., 1998 Stock Plan (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the Quarter ended June 30, 1998.). 10.45 Xpedite Systems, Inc. 1992 Incentive Stock Option Plan (assumed by the Registrant) (incorporated by reference to Exhibit to Xpedite's Registration Statement on Form S-1 (No. 33-73258)). 10.46 Xpedite Systems, Inc. 1993 Incentive Stock Option Plan (assumed by the Registrant) (incorporated by reference to Exhibit to Xpedite's Registration Statement on Form S-1 (No. 33-73258)). 10.47 Xpedite Systems, Inc. 1996 Incentive Stock Option Plan (assumed by the Registrant) (incorporated by reference to Exhibit to Xpedite's Annual Report on Form 10-K for the year ended December 31, 1995). 10.48 Xpedite Systems, Inc. Non-Employee Directors' Warrant Plan (assumed by the Registrant) (incorporated by reference to Exhibit 10.31 to Xpedite's Annual Report on Form 10-K for the year ended December 31, 1996). 10.49 Xpedite Systems, Inc. Officer's Contingent Stock Option Plan (assumed by the Registrant) (incorporated by reference to Exhibit 10.30 to Xpedite's Annual Report on Form 10-K for the year ended December 31, 1996). 10.50 Credit Agreement dated as of December 17, 1997, as amended and restated as of December 16, 1998, by and among Xpedite Systems, Inc. and Xpedite Systems Holdings (UK) Limited, as Borrowers, and the Guarantors party thereto, the banks listed on the signature pages thereof, NationsBank, N.A., as Documentation Agent and The Bank of New York, as Administrative Agent. 10.51 Share Purchase Agreement dated as of August 8, 1997, by and among Xpedite Systems, Inc., Xpedite Systems Holdings (UK) Limited, and the shareholders of Xpedite Systems Limited (incorporated by reference to Exhibit 99.3 to the Registrant's Current Report on Form 8-K dated November 13, 1997 and filed December 5, 1997, as amended by Form 8- K/A filed December 23, 1997 and Form 8-K/A filed January 27, 1998)). 10.52 Amendment to the Share Purchase Agreement, dated December 17, 1997, by and among Xpedite Systems, Inc., Xpedite Systems Holdings (UK) Limited and the shareholders of Xpedite Systems Limited (incorporated by reference to Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q for the Quarter ended March 31, 1998.) Exhibit Number Description 11.1 Statement re: Computation of Per Share Earnings. 21.1 Subsidiaries of the Registrant. 23.1 Consent of Arthur Andersen LLP. 27.1 Financial Data Schedule for the year ended December 31, 1998. - - -------- * Confidential treatment has been granted. The copy on file as an exhibit omits the information subject to the confidentiality request. Such omitted information has been filed separately with the Commission. EX-4.8 2 STOCK RESTRICTION AND REGISTRATION RIGHTS AGREEMENT EXHIBIT 4.8 STOCK RESTRICTION AND REGISTRATION RIGHTS AGREEMENT --------------------------------------------------- THIS STOCK RESTRICTION AND REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered into as of April 22, 1998, by and among Premiere Technologies, Inc., a corporation ("Premiere"), and those shareholders of American Teleconferencing Services, Ltd., a Missouri corporation ("ATS"), appearing as signatories hereto (each, an "Investor" and collectively, the "Investors"). R E C I T A L S --------------- WHEREAS, pursuant to the terms of an Agreement and Plan of Merger, dated as of April 22, 1998 (as the same may be amended, the "Acquisition Agreement"), by and between Premiere, PTEK Missouri Acquisition Corp. ("Sub") and ATS, ATS shall be merged with and into Sub (the "Acquisition"), with the result that each of outstanding shares of $.0125 par value common stock of ATS ("ATS Common Stock") will be converted into the right to receive cash and shares of the $.01 par value common stock of Premiere ("Premiere Common Stock"); and WHEREAS, Premiere has agreed, as a condition precedent to ATS's obligations under the Acquisition Agreement, to grant the Investors certain registration rights; and WHEREAS, Premiere and the Investors desire to define such registration rights on the terms and subject to the conditions herein set forth. NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the parties hereby agree as follows: 1. DEFINITIONS ----------- As used in this Agreement, the following terms have the respective meanings set forth below: Commission: shall mean the Securities and Exchange Commission or any other ---------- federal agency at the time administering the Securities Act; Cowan: shall mean Robert A. Cowan. ----- Effective Date: shall mean the date on which the Acquisition is -------------- consummated; Exchange Act: shall mean the Securities Exchange Act of 1934, as amended; ------------ Holder: shall mean any holder of Registrable Securities; ------ Jaffe: shall mean Louis I. Jaffe; ----- -1- Other Stockholders: shall mean Persons who, by virtue of an agreement with ------------------ Premiere, are entitled to include their Securities in any registration effected under Section 3; Person: shall mean an individual, partnership, joint stock company, ------ corporation, trust or unincorporated organization, and a government or agency or political subdivision thereof; register, registered and registration: shall mean a registration effected -------- ---------- ------------ by preparing and filing a registration statement in compliance with the Securities Act (and any post-effective amendments filed or required to be filed) and the declaration or ordering of effectiveness of such registration statement; Registrable Securities: shall mean (A) one-half (1/2) of the aggregate of ---------------------- the shares of Premiere Common Stock issued to Cowan under the Acquisition Agreement, (B) the aggregate of the shares of Premiere Common Stock issued to the Investors (other than Cowan) under the Acquisition Agreement and (C) any securities of Premiere issued as a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares of Premiere Common Stock referred to in clause (A) and (B); provided, that Registrable Securities shall not include (i) securities with respect to which a registration statement with respect to the sale of such securities has become effective under the Securities Act and all such securities have been disposed of in accordance with such registration statement, (ii) such securities as are actually sold pursuant to Rule 144 (or any successor provision thereto) under the Securities Act ("Rule 144"), or are eligible for sale pursuant to Rule 144, (iii) such securities as are acquired by Premiere or any of its subsidiaries or (iv) the shares of Premiere Common Stock issued to the Investors under the Acquisition Agreement that are held by the escrow agent under that certain Escrow Agreement, dated of even date hereof, by and among Premiere, the Investors and SunTrust Bank, Atlanta; Registration Expenses: shall mean all expenses incurred by Premiere in --------------------- compliance with Sections 3(a) and (b) hereof, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for Premiere, fees and expenses of one counsel for all the Holders, blue sky fees and expenses and the expense of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of Premiere, which shall be paid in any event by Premiere); Restricted Securities: shall mean the shares of Premiere Common Stock --------------------- issued to the Investors under the Acquisition Agreement; Security, Securities: shall have the meaning set forth in Section 2(1) of -------------------- the Securities Act; Securities Act: shall mean the Securities Act of 1933, as amended; and -------------- Selling Expenses: shall mean all underwriting discounts and selling ---------------- commissions applicable to the sale of Registrable Securities and all fees and disbursements of counsel for each of the Holders other than fees and expenses of one counsel for all the Holders. -2- Shareholder Representative: shall have the meaning given that term in the -------------------------- Acquisition Agreement. Shelf Filing Date: shall mean the date that is ninety (90) days following ----------------- the Effective Date. 2. RESTRICTIONS ON TRANSFER ------------------------ (a) Prior to any proposed transfer of any Restricted Securities (other than under the circumstances described in Section 3 hereof), the Holder thereof shall give written notice to Premiere of its intention to effect such transfer. Each such notice shall describe the manner of the proposed transfer and, if requested by Premiere, shall be accompanied by an opinion of counsel reasonably satisfactory to Premiere to the effect that the proposed transfer may be effected without registration under the Securities Act, whereupon such Holder shall be entitled to transfer the Restricted Securities in accordance with the terms of its notice. Each certificate or instrument transferred as above provided shall bear the legend set forth in Section 2(b), except that such certificate or instrument shall not bear such legend if (i) such transfer is in accordance with the provisions of Rule 144 (or any other rule permitting public sale without registration under the Securities Act) or (ii) the opinion of counsel referred to above is to the further effect that the transferee and any subsequent transferee would be entitled to transfer such Restricted Securities in a public sale without registration under the Securities Act. Notwithstanding anything herein to the contrary, in no event shall Jaffe, during the period commencing on the date hereof and ending on the one (1) year anniversary of the date hereof, transfer in any three (3) month period a number of shares of Registrable Securities in excess of twenty-five percent (25%) of the Registrable Securities held by Jaffe as of the Effective Date except pursuant to a Premiere Registration pursuant to Section 3(a) below; provided that the limitations provided by this sentence shall cease to apply (a) upon the occurrence of a "change of control" of Premiere reportable under Item 1 of Form 8-K under the Exchange Act, (b) upon the closing of a Commission Rule 145 transaction unless the stockholders of Premiere immediately prior to such transaction continue to hold more than 50% of the shares of the surviving entity immediately following such transaction, and (c) in the event that the closing stock price of Premiere Common Stock, as reported by The Wall Street Journal, is less than 66% of the Average Closing Price (as defined in the Acquisition Agreement) for three consecutive trading days. (b) Each certificate evidencing Restricted Securities issued to any Holder in connection with the Acquisition shall bear a legend in substantially the following form: "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES ACTS AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE SECURITIES ACTS OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE." -3- (c) In the event that any Restricted Securities shall cease to be subject to the restrictions on transfer set forth in this Agreement, Premiere shall, upon the written request of the Holder thereof, issue to such Holder a new certificate evidencing such Restricted Securities without the legend required by Section 2(b) hereof endorsed thereon. 3. REGISTRATION RIGHTS ------------------- (a) Premiere Registration. --------------------- (i) If Premiere shall determine to register at any time prior to the one (1) year anniversary of the date of this Agreement any of its equity securities either for its own account or for the account of Other Stockholders, other than a registration relating solely to benefit plans, or a registration relating solely to a Commission Rule 145 transaction, or a registration covering any method of distribution which is not an underwritten public offering, or a registration on any registration form which does not permit secondary sales or does not include substantially the same information as would be required to be included in a registration statement covering the sale of Registrable Securities, Premiere will: (A) promptly give to each of the Holders a written notice thereof (which shall include a list of the jurisdictions in which Premiere intends to attempt to qualify such securities under the applicable blue sky or other state securities laws); and (B) include in such registration (and any related qualification under blue sky laws or other compliance), and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests, made by any Holder within ten (10) business days after the giving of the written notice from Premiere described in clause (i) above, except as set forth in Section 3(a)(ii) below. Such written request shall specify the amount of Registrable Securities intended to be disposed of by a Holder and may specify all or a part of the Holders' Registrable Securities. Notwithstanding the foregoing, if, at any time after giving such written notice of its intention to effect such registration and prior to the effective date of the registration statement filed in connection with such registration, Premiere shall determine for any reason not to register such equity securities Premiere may, at its election, give written notice of such determination to the Holders and thereupon Premiere shall be relieved of its obligation to register such Registrable Securities in connection with the registration of such equity securities (but not from its obligation to pay Registration Expenses to the extent incurred in connection therewith as provided herein). Notwithstanding anything to the contrary set forth in this Agreement, no Holder shall have any right to include any Registrable Securities in any registration statement filed pursuant to any of the following: the 5-3/4% Convertible Subordinated Notes Due 2004 Registration Rights Agreement dated as of June 15, 1997, by and among Premiere and Robertson, Stephens & Company LLC, Alex. Brown & Sons Incorporated and Donaldson, Lufkin & Jenrette Securities Corporation; the Stock Restriction and Registration Rights Agreement dated April 30, 1997 by and among Premiere, and those Stockholders of Voice-Tel Enterprises, Inc. ("VTE"), VTN, Inc. and the -4- stockholders of franchisees of VTE appearing as signatories thereto; or the Stock Restriction and Registration Rights Agreement dated September 30, 1997 by and among Premiere and those shareholders of VoiceCom Holdings, Inc. appearing as signatories thereto. (ii) Underwriting. The right of each of the Holders to registration ------------ pursuant to this Section 3(a) shall be conditioned upon such Holders' participation in such underwriting and the inclusion of such Holders' Registrable Securities in the underwriting to the extent provided herein. The Holders whose shares are to be included in such registration shall (together with Premiere and the Other Stockholders distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the representative of the underwriter or underwriters selected for the underwriting by Premiere or such Other Stockholders, as the case may be. Such underwriting agreement will contain such representations and warranties by Premiere and such other terms and provisions as are customarily contained in underwriting agreements with respect to secondary distributions, including, without limitation, indemnities and contribution to the effect and to the extent provided in Section 3(e) hereof and the provision of opinions of counsel and accountants' letters to the effect and to the extent provided in Section 3(f), and the representations and warranties by, and the other agreements on the part of, Premiere to and for the benefit of such underwriters shall also be made to and for the benefit of the Holders whose shares are to be included in such registration. Notwithstanding any other provision of this Section 3, if the representative determines that marketing factors require a limitation on the number of shares to be underwritten, Premiere shall so advise all holders of securities requesting registration, and the number of shares of securities that are entitled to be included in the registration and underwriting shall be allocated by Premiere in its sole discretion, subject to agreements between Premiere and the Other Stockholders. If any of the Holders or any officer, director or Other Stockholder disapproves of the terms of any such underwriting, he or she may elect to withdraw therefrom by written notice to Premiere and the underwriter. Any Registrable Securities or other securities excluded or withdrawn from such underwriting shall be withdrawn from such registration. (b) Shelf Registration. ------------------ (i) On or before the Shelf Filing Date Premiere shall file a "shelf" registration statement pursuant to Rule 415 under the Securities Act (the "Shelf Registration") with respect to the Registrable Securities to be issued under the Acquisition Agreement; provided, however, Premiere shall not be required to file or effect, or take any action to file or effect, any Shelf Registration pursuant to this Section 3(b) if all of the Registrable Securities are or were included in, or are or were eligible for sale under, any such registration pursuant to Section 3(a) hereof. Premiere shall, subject to Section 3(g) hereof, use its reasonable best efforts to cause the Shelf Registration to become effective as soon as practicable after the date of filing thereof, and shall use its reasonable best efforts to keep the Shelf Registration continuously effective from the date such Shelf Registration is effective until the first anniversary of the Effective Date in order to permit the prospectus forming a part thereof to be usable by Holders during such period. The Shelf Registration may include securities of Premiere other than Registrable Securities. The Registrable Securities may be included in another Shelf Registration that otherwise meets the requirements set forth herein. -5- (ii) Subject to Section 3(g) hereof, Premiere shall supplement or amend the Shelf Registration, (A) as required by the registration form utilized by Premiere or by the instructions applicable to such registration form or by the Securities Act or the rules and regulations promulgated thereunder and (B) to include in such Shelf Registration any additional securities that become Registrable Securities by operation of the definition thereof. (iii) The Holders may, at their election and upon written notice by the Shareholder Representative to Premiere, effect offers and sales under the Shelf Registration by means of one or more offerings (provided that Premiere shall not be required to effect any underwritten offering); provided, however, that Premiere shall not be obligated to effect, or take any action to effect, any such registration: (A) In any particular jurisdiction in which Premiere would be required to execute a general consent to service of process in effecting such registration, qualification or compliance, unless Premiere is already subject to service in such jurisdiction and except as may be required by the Securities Act or applicable rules or regulations thereunder. (B) Other than pursuant to a registration statement on Form S-3. If Other Stockholders request inclusion in any such registration under Section 3(b)(iii), the Holders shall offer to include the securities of such Other Stockholders and may condition such offer on their acceptance of the further applicable provisions of this Section 3. Notwithstanding any other provision of this Section 3(b)(iii), if a recognized national independent investment banking firm advises the Holders in writing that marketing factors require a limitation on the number of shares to be included in the registration, the Shareholder Representative shall so advise Premiere and the securities of Premiere held by Other Stockholders shall be excluded from such registration to the extent so required by such limitation. No Registrable Securities or any other securities excluded from the underwriting by reason of the underwriter's marketing limitation shall be included in such registration. (c) Expenses of Registration. All Registration Expenses incurred in ------------------------ connection with any registration, qualification or compliance pursuant to this Section 3 (including all Registration Expenses incurred in connection with the Shelf Registration and any supplements or amendments thereto, whether or not it becomes effective, and whether all, none or some of the Registrable Securities are sold pursuant to the Shelf Registration) shall be borne by Premiere, and all Selling Expenses shall be borne by the Holders of the securities so registered pro rata on the basis of the number of their shares so registered. (d) Registration Procedures. In the case of each registration ----------------------- effected by Premiere pursuant to this Section 3, Premiere will keep the Holders, as applicable, advised in writing as to the initiation of each registration and as to the completion thereof. At its expense, Premiere will: (i) furnish to the Shareholder Representative, and to any underwriter simultaneously with filing with the Commission, copies of any registration statement -6- (including all exhibits) for a registration in which the Holders have elected to participate pursuant to Section 3(a) and any prospectus forming a part thereof and any amendments and supplements thereto (including all documents incorporated or deemed incorporated by reference therein prior to the effectiveness of such registration statement and including each preliminary prospectus, any summary prospectus or any term sheet (as such term is used in Rule 434 under the Securities Act)) and any other prospectus filed under Rule 424 under the Securities Act; (ii) furnish to the Shareholder Representative, and to any underwriter before filing with the Commission, copies of any registration statement (including all exhibits) for a Shelf Registration and any prospectus forming a part thereof and any amendments and supplements thereto (including all documents incorporated or deemed incorporated by reference therein prior to the effectiveness of such registration statement and including each preliminary prospectus, any summary prospectus or any term sheet (as such term is used in Rule 434 under the Securities Act)), which documents, other than documents incorporated or deemed incorporated by reference, will be subject to the review of the Shareholder Representative and any such underwriter for a period of at least five business days, and Premiere shall not file any such registration statement or such prospectus or any amendment or supplement to such registration statement or prospectus to which the Shareholder Representative or any such underwriter shall reasonably object within five business days after the receipt thereof; the Shareholder Representative or such underwriters, if any, shall be deemed to have reasonably objected to such filing only if the registration statement, amendment, prospectus or supplement, as applicable, as proposed to be filed, contains a material misstatement or omission; (iii) furnish to the Shareholder Representative and to any underwriter, such number of conformed copies of the applicable registration statement and of each amendment and supplement thereto (in each case including all exhibits) and such number of copies of the prospectus forming a part of such registration statement (including each preliminary prospectus, any summary prospectus or any term sheet (as such term is used in Rule 434 under the Securities Act)) and any other prospectus filed under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and such other documents, including without limitation documents incorporated or deemed to be incorporated by reference prior to the effectiveness of such registration, as the Shareholder Representative or any such underwriter, from time to time may reasonably request; (iv) to the extent practicable, promptly prior to the filing of any document that is to be incorporated by reference into any registration statement or prospectus forming a part thereof subsequent to the effectiveness thereof, and in any event no later than the date such document is filed with the Commission, provide copies of such document to the Shareholder Representative, if requested, and to any underwriter, and make representatives of Premiere available for discussion of such document and other customary due diligence matters, and include in such document prior to the filing thereof such information as Shareholder Representative or any such underwriter reasonably may request; -7- (v) use its reasonable best efforts (x) to register or qualify all Registrable Securities and other securities covered by such registration under such other securities or blue sky laws of such States of the United States of America where an exemption is not available and as the sellers of Registrable Securities covered by such registration shall reasonably request, (y) to keep such registration or qualification in effect for so long as the applicable registration statement remains in effect, and (z) to take any other action which may be reasonably necessary or advisable to enable such sellers to consummate the disposition in such jurisdictions of the securities to be sold by such sellers, except that Premiere shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction where it is not so qualified, or to subject itself to taxation in any such jurisdiction, or to execute a general consent to service of process in effecting such registration, qualification or compliance, unless Premiere is already subject to service in such jurisdiction and except as may be required by the Securities Act or applicable rules or regulations thereunder; (vi) use its reasonable best efforts to cause all Registrable Securities covered by such registration statement to be registered with or approved by such other federal or state governmental agencies or authorities as may be necessary in the opinion of counsel to Premiere and counsel to the Holders of Registrable Securities to enable the Holders thereof to consummate the disposition of such Registrable Securities; (vii) subject to Section 3(g) hereof, promptly notify each Holder of Registrable Securities covered by a registration statement (A) upon discovery that, or upon the happening of any event as a result of which, the prospectus forming a part of such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, (B) of the issuance by the Commission of any stop order suspending the effectiveness of such registration statement or the initiation of proceedings for that purpose, (C) of any request by the Commission for (1) amendments to such registration statement or any document incorporated or deemed to be incorporated by reference in any such registration statement, (2) supplements to the prospectus forming a part of such registration statement or (3) additional information, or (D) of the receipt by Premiere of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation of any proceeding for such purpose, and at the request of any such Holder promptly prepare and furnish to it a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (viii) use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of any such registration, or the lifting of any suspension of the -8- qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction; (ix) if requested by the Shareholder Representative or any underwriter, promptly incorporate in such registration statement or prospectus, pursuant to a supplement or post effective amendment if necessary, such information as the Shareholder Representative and any underwriter may reasonably request to have included therein, including, without limitation, information relating to the "plan of distribution" of the Registrable Securities, information with respect to the principal amount or number of shares of Registrable Securities being sold to such underwriter, the purchase price being paid therefor and any other terms of the offering of the Registrable Securities to be sold in such offering and make all required filings of any such prospectus supplement or post-effective amendment as soon as practicable after Premiere is notified of the matters to be incorporated in such prospectus supplement or post effective amendment; (x) in the event the offering is an underwritten offering, furnish to the Holders, addressed to them, an opinion of counsel for Premiere, dated the date of the closing under the underwriting agreement, if any, or the date of effectiveness of the registration statement if such registration is not an underwritten offering, and use its reasonable best efforts to furnish to the Holders, addressed to them, a "cold comfort" letter signed by the independent certified public accountants who have certified Premiere's financial statements included in such registration, covering substantially the same matters with respect to such registration (and the prospectus included therein) and, in the case of such accountants' letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer's counsel and in accountants' letters delivered to underwriters in underwritten public offerings of securities and such other matters as the Shareholder Representative may reasonably request; (xi) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least 12 months, but not more than 18 months, beginning with the first full calendar month after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 promulgated thereunder; (xii) provide promptly to the Holders upon request any document filed by Premiere with the Commission pursuant to the requirements of Section 13 and Section 15 of the Exchange Act; and (xiii) use its reasonable best efforts to cause all Registrable Securities included in any registration pursuant hereto to be listed on each securities exchange on which securities of the same class are then listed, or, if not then listed on any securities exchange, to be eligible for trading in any over-the-counter market or trading system in which securities of the same class are then traded. -9- (e) Indemnification. --------------- (i) Premiere will indemnify each of the Holders, as applicable, each of its officers, directors, members and partners, and each person controlling each of the Holders, with respect to each registration which has been effected pursuant to this Section 3, and each underwriter, if any, and each person who controls any underwriter, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus, offering circular or other document (including any related registration statement, notification or the like) incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by Premiere of the Securities Act or the Exchange Act or any rule or regulation thereunder applicable to Premiere and relating to action or inaction required of Premiere in connection with any such registration, qualification or compliance, and will reimburse each of the Holders, each of its officers, directors, members and partners, and each person controlling each of the Holders, each such underwriter and each person who controls any such underwriter, for any legal and any other expenses reasonably incurred in connection with investigating and defending any such claim, loss, damage, liability or action, provided that Premiere will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission based upon written information furnished to Premiere by the Holders or underwriter and stated to be specifically for use therein. (ii) Each of the Holders will, if Registrable Securities held by it are included in the securities as to which such registration, qualification or compliance is being effected, indemnify Premiere, each of its directors and officers and each underwriter, if any, of Premiere's securities covered by such a registration statement, each person who controls Premiere or such underwriter, each Other Stockholder and each of their officers, directors, members and partners, and each person controlling such Other Stockholder against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular or other document made by such Holder, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements by such Holder therein not misleading, and will reimburse Premiere and such Other Stockholders, directors, officers, partners, members, persons, underwriters or control persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to Premiere by such Holder and stated to be specifically for use therein; provided, however, that the obligations of each of the Holders hereunder and under clause (vi) below shall be limited to an amount equal to the net proceeds to such Holder of securities sold as contemplated herein. -10- (iii) Each party entitled to indemnification under this Section 3(e) (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom; provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld) and the Indemnified Party may participate in such defense at such party's expense (unless the Indemnified Party shall have reasonably concluded that there may be a conflict of interest between the Indemnifying Party and the Indemnified Party in such action, in which case the fees and expenses of one such counsel for all Indemnified Parties shall be at the expense of the Indemnifying Party), and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 3 unless the Indemnifying Party is materially prejudiced thereby. No Indemnifying Party, in the defense of any such claim or litigation shall, except with the consent of each Indemnified Party (which consent shall not be unreasonably withheld or delayed), consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. Each Indemnified Party shall furnish such information regarding itself or the claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with the defense of such claim and litigation resulting therefrom. (iv) If the indemnification provided for in this Section 3(e) is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim, damage or expense referred to herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions which resulted in such loss, liability, claim, damage or expense, as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue (or alleged untrue) statement of a material fact or the omission (or alleged omission) to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (v) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with any underwritten public offering contemplated by this Agreement are in conflict with the foregoing provisions, the provisions in such underwriting agreement shall be controlling. (vi) The foregoing indemnity agreement of Premiere and Holders is subject to the condition that, insofar as they relate to any loss, claim, liability or damage made in a preliminary prospectus but eliminated or remedied in the amended prospectus on file with the -11- Commission at the time the registration statement in question becomes effective or the amended prospectus filed with the Commission pursuant to Commission Rule 424(b) (the "Final Prospectus"), such indemnity or contribution agreement shall not inure to the benefit of any underwriter or Holder (but only if such Holder was required to deliver such Final Prospectus) if a copy of the Final Prospectus was furnished to the underwriter and was not furnished to the person asserting the loss, liability, claim or damage at or prior to the time such action is required by the Securities Act. (f) Information by the Holders. Each of the Holders holding -------------------------- securities included in any registration shall furnish to Premiere such information regarding such Holder and the distribution proposed by such Holder as Premiere may reasonably request in writing and as shall be reasonably required in connection with any registration, qualification or compliance referred to in this Section 3. (g) Holdback Agreement; Postponement. Notwithstanding the provisions -------------------------------- of Sections 3(a) and (b), if the Board of Directors of Premiere determines in good faith that it is in the best interests of Premiere (A) not to disclose the existence of facts surrounding any proposed or pending acquisition, disposition, strategic alliance or financing transaction involving Premiere or (B) for any reasonable purpose relating to the business of Premiere, to suspend the registration rights set forth herein, Premiere may, by notice to the Shareholder Representative in accordance with Section 6(a), (1) suspend the rights of the Holders to make sales pursuant to any effective registration statement, and (2) postpone any obligation of Premiere hereunder to take any action for such a period of time as the Board of Directors may determine in its sole discretion; provided, however, that such periods of suspension may not exceed 90 days in the aggregate. (h) Assignment. The registration rights set forth in Section 3 hereof ---------- may be assigned, in whole or in part, to any transferee of Registrable Securities (who shall be considered thereafter to be a Holder (provided that any transferee who is not an affiliate of Investor shall be a Holder only with respect to such Registrable Securities so acquired and any stock of Premiere issued as a dividend or other distribution with respect to, or in exchange for or in replacement of, such Registrable Securities) and shall be bound by all obligations and limitations of this Agreement). 4. RULE 144 REPORTING ------------------ With a view to making available the benefits of certain rules and regulations of the Commission which may permit the sale of restricted securities to the public without registration, Premiere agrees to: (i) make and keep public information available (as those terms are understood and defined in Rule 144) at all times; (ii) use its reasonable best efforts to file with the Commission in a timely manner all reports and other documents required of Premiere under the Securities Act and the Exchange Act; and -12- (iii) so long as there are outstanding any Registrable Securities, furnish to each Holder, upon request, a written statement by Premiere as to its compliance with the reporting requirements of Rule 144 and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of Premiere, and such other reports and documents so filed as such Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing such Holder to sell any such securities without registration. 5. INTERPRETATION OF THIS AGREEMENT -------------------------------- (a) Directly or Indirectly. Where any provision in this Agreement ---------------------- refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person. (b) Governing Law. This Agreement shall be governed by and construed ------------- in accordance with the laws of the State of Georgia. (c) Section Headings. The headings of the sections and subsections of ---------------- this Agreement are inserted for convenience only and shall not be deemed to constitute a part thereof. 6. MISCELLANEOUS ------------- (a) Notices. ------- (i) All communications under this Agreement shall be in writing and shall be delivered by facsimile or by hand or mailed by overnight courier or by registered or certified mail, postage prepaid: . (A) if to Premiere, to Premiere Technologies, Inc., The Lenox Building, Suite 400, 3399 Peachtree Road, N.E., Atlanta, Georgia 30326, Attention: Boland T. Jones, President and Chief Executive Officer, with a required copy to Alston & Bird LLP, One Atlantic Center, 1201 West Peachtree Street, Atlanta, Georgia 30309-3424, Attention: Janine Brown, Esq., or at such other address as it may have furnished in writing to the Investors; (B) if to the Investors, at the addresses listed on Schedule I hereto, or at such other addresses as may have been furnished Premiere in writing. (C) if to the Shareholder Representative, to Cowan, 580 Sunny Glen Ct., Woodland Park, Colorado 80863 and to Jaffe, 2677 :Larkin #104, San Francisco, California 94109or at such other address as it may have furnished in writing to Premiere. (ii) Any notice so addressed shall be deemed to be given: if delivered by hand, on the date of such delivery; if mailed by courier, on the first business day following the date of -13- such mailing; and if mailed by registered or certified mail, on the third business day after the date of such mailing. (b) Reproduction of Documents. This Agreement and all documents ------------------------- relating thereto, including, without limitation, any consents, waivers and modifications which may hereafter be executed may be reproduced by the Investor by any photographic, photostatic, microfilm, microcard, miniature photographic or other similar process and the Investors may destroy any original document so reproduced. The parties hereto agree and stipulate that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by the Investors in the regular course of business) and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. (c) Entire Agreement; Amendment and Waiver. This Agreement -------------------------------------- constitutes the entire understanding of the parties hereto and supersedes all prior understanding among such parties. This Agreement may be amended, and the observance of any term of this Agreement may be waived, with (and only with) the written consent of Premiere and the Holders of a majority of the then outstanding Registrable Securities. (d) Counterparts. This Agreement may be executed in one or more ------------ counterparts, each of which shall be deemed an original and all of which together shall be considered one and the same agreement. (e) No Inconsistent Agreements. Premiere will not hereafter enter -------------------------- into any agreement with respect to its securities which is inconsistent with the rights granted to the Holders of Registrable Securities in this Agreement. (f) Remedies. Each Holder of Registrable Securities, in addition to -------- being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. Premiere agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. (g) Severability. In the event that any one or more of the provisions ------------ contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be in any way impaired thereby, it being intended and understood that all of the rights and privileges of each of the Holders shall be enforceable to the fullest extent permitted by law. [Signatures on the following page.] -14- IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first set forth above. PREMIERE TECHNOLOGIES, INC. By: /s/ Jeffrey A. Allred ---------------------------------- Name: Jeffrey A. Allred -------------------------------- Title: Executive Vice President of ------------------------------ Strategic Development ------------------------------ INVESTORS: /s/ Robert A. Cowan (SEAL) ---------------------------- Robert A. Cowan /s/ Louis I. Jaffe (SEAL) ---------------------------- Louis I. Jaffe /s/ Richard L. Clark (SEAL) ---------------------------- Richard L. Clark /s/ Norma L. Dukstein, (SEAL) ---------------------------- Norma L. Dukstein, Successor Trustee under Agreement dated November 3, 1986 /s/ Elizabeth D. White (SEAL) ---------------------------- Elizabeth D. White /s/ Richard L. Johnson (SEAL) ---------------------------- Richard L. Johnson /s/ Robert Stewart /s/ Kathryn Stewart (SEAL) ---------------------------- Robert Stewart & Kathryn Stewart, Trustees under Living Trust Agreement dated December 18, 1995 /s/ Louis Jaffe (SEAL) ---------------------------- Louis Jaffe, Trustee of the Jaffe 1996 Irrevocable Trust dated 12/2/96 -15- EX-10.12 3 EXECUTIVE EMPLOYMENT AND INCENTIVE OPTION AGREEMENT EXHIBIT 10.12 PREMIERE TECHNOLOGIES, INC. --------------------------- EXECUTIVE EMPLOYMENT AND INCENTIVE OPTION AGREEMENT --------------------------------------------------- THIS AGREEMENT is made and entered into by and between Premiere Technologies, Inc. (the "Company"), a Georgia corporation, and William Porter Payne(the "Executive"), effective as of July 6, 1998. BACKGROUND STATEMENT -------------------- The Company and its subsidiaries are in the business of designing, developing, marketing and providing enhanced communications services, and in connection therewith the Company and its subsidiaries have developed, and expect to develop, trade secrets and methods of conducting business which are worthy of protection. The Executive has substantial business experience and expertise through his service as President and Chief Executive Officer of the Atlanta Committee for the Olympic Games and as Vice Chairman of NationsBank Corporation ("NationsBank"), and otherwise. The Company considers it to be in its best interest to have the benefit of the Executive's services as provided in this Agreement, and the Executive is willing to render such services to the Company in accordance with the provisions of this Agreement. More specifically, the Company believes it is in its best interest to initially utilize the Executive's abilities to develop and support the business ventures involving Orchestrate.com, Inc. ("Orchestrate.com"), a wholly-owned subsidiary of the Company, and Endeavor Technologies, Inc. ("Endeavor"). The Company has a significant investment in Endeavor, which provides integrated Internet-based information and communications services to healthcare professionals under the name "WebMD." The Company believes that the Executive can provide significant assistance with the large-scale introduction of the Orchestrate(R) product through Endeavor. THEREFORE, in consideration of and reliance upon the foregoing background statement and the representations and warranties contained in this Agreement, the Company and the Executive agree to the following provisions: TERMS ----- Section 1. Duties. ------ The Company hereby agrees to employ the Executive as the Chairman of Orchestrate.com to advise and assist Orchestrate. com, Premiere and Premiere's affiliated companies in client development, sales and marketing activities and in establishing and developing strategic relationships principally with large corporations, and in particular to assist Endeavor as provided in the Memorandum (as defined below). The Executive shall have such powers, duties and responsibilities from time to time assigned to him by the Company's board of directors (the "Board") or its chief executive officer as are consistent with the foregoing activities. During the term of his employment under this Agreement, the Executive will devote substantially all of his -1- business time to faithfully and industriously perform his duties and promote the business and best interests of the Company and Orchestrate; provided, however, that the Executive shall be allowed to continue to serve on the boards of directors on which he currently serves, to pursue speaking engagements and other such public and charitable activities consistent with the promotion of the Executive's network and business experience, and to retain all compensation received by the Executive in connection therewith. In addition, the Company and the Executive hereby incorporate by reference the Memorandum of Understanding entered into effective as of July 6, 1998, by and among the Executive, the Company and Endeavor (the "Memorandum"). The Memorandum sets forth the sharing arrangement with regard to the Executive's time, compensation and responsibilities, and is intended to supplement the express terms of this Agreement. Section 2. Compensation. ------------ Section 2.1. Base Salary. During the term of the Executive's employment ----------- under this Agreement, the Company will pay the Executive a base salary at the annual rate of $750,000, payable in accordance with the Company's standard payroll practices. Section 2.2. Initial Bonus. The Company recognizes that the Executive is ------------- foregoing substantial salary and benefits that he was receiving as Vice Chairman of NationsBank in order to accept employment with the Company. Specifically, the Executive: (a) is foregoing options to purchase 50,000 shares of NationsBank stock currently valued at $1,250,000; (b) is foregoing a guaranteed salary from NationsBank which, over the two (2) year period of his employment there, would have exceeded the salary guaranteed by the Company by $500,000; (c) is foregoing NationsBank's participation in a cash savings plan at a rate of nine percent (9%) of salary per year; and (d) is losing considerable value due to the required premature exercise of vested stock options with NationsBank. In recognition of the above, and in recognition of the Executive's significant business experience and expertise, the Company has paid Executive a bonus in the amount of $2,250,000. Section 2.3. Bonus Compensation. In addition to his base salary, the ------------------ Executive will be entitled to receive an annual bonus of at least $250,000. Any amount over and above the $250,000 minimum shall be determined by the Chief Executive Officer of the Company. Such annual bonus shall be paid to the Executive in full within ten (10) days following each anniversary date of the Executive's employment with the Company, and if the Company does not pay such bonus to the Executive within such 10-day period, then the Company shall pay such bonus to the Executive within five (5) business days following receipt of notice from the Executive that his bonus has not been paid. The Executive will also be entitled to any other bonus compensation provided for by resolution of the Board or its Compensation Committee. Section 2.4. Stock Options. ------------- Section 2.4.1. Issuance of Stock Options. The Company hereby grants to ------------------------- the Executive nonqualified stock options ("Options") to purchase 500,000 shares (the "Option Shares") of the -2- Company's $.01 par value common stock (the "Common Stock"), pursuant to the Premiere Technologies, Inc. Second Amended and Restated 1995 Stock Plan, as amended (the "1995 Stock Plan"), having terms set forth in this Section 2.4. The Options shall vest with respect to all of the Option Shares on August 20, 1998, provided that the Executive has not voluntarily terminated his employment with the Company prior to that date, and following vesting the Options shall become exercisable on such dates and with respect to such number of Option Shares as are specified below: (a) Commencing as of the date of the 1999 annual meeting of shareholders of the Company, the Executive shall have the right to exercise the Options with respect to, and to thereby purchase, one-half (1/2) of the Option Shares; prior to said date, the Options shall not be exercisable. (b) Commencing as of the date of the 2000 annual meeting of shareholders of the Company, the Executive shall have the right to exercise the Options with respect to, and to thereby purchase, one-half (1/2) of the Option Shares. Section 2.4.2. Acceleration. Notwithstanding anything else contained in ------------ this Agreement, the Executive will be vested immediately in all of the Options described in this Section 2.4 and they shall be immediately exercisable upon the earliest of the Executive's death, his becoming Disabled (as defined in Section 2.4.3), or a Change in Control of the Company. For the purposes of this Agreement, a "Change in Control" shall mean the occurrence of any of the following events: (a) An acquisition (other than directly from the Company) of any voting securities of the Company ("Voting Securities") by any "Person" (as the term person is used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934 (the "1934 Act")) immediately after which such Person has "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of 25% or more of the combined voting power of the Company's then outstanding Voting Securities; provided, however, that in determining whether a Change in Control has occurred, Voting Securities that are acquired in an acquisition by (i) an employee benefit plan (or a trust forming a part thereof) maintained by (A) the Company or (B) any corporation or other person of which a majority of its voting power or its equity securities or equity interests are owned directly or indirectly by the Company (a "Subsidiary"), or (ii) the Company or any Subsidiary, or (iii) any Person in connection with a "Non-Control Transaction" (as hereinafter defined), shall not constitute an acquisition for purposes for this clause (a); or (b) The individuals who, as of the date of this Agreement, are members of the Board (the "Incumbent Board") cease for any reason to constitute at least 60% of the Board; provided, however, that if the election, or nomination for election by the Company's shareholders, of any new director was approved by a vote of at least 80% of the Incumbent Board, such new director shall for purposes of this Agreement, be considered as a member of the Incumbent Board; provided, further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened "Election Contest" (as described in Rule 14a-11 promulgated under the 1934 Act) or other actual -3- or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board (a "Proxy Contest"), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or (c) Approval by the shareholders of the Company of: (i) a merger, consolidation or reorganization involving the Company, unless: (A) the shareholders of the Company, immediately before such merger, consolidation or reorganization, own, directly or indirectly, immediately following such a merger, consolidation or reorganization, at least two-thirds of the combined voting power of the outstanding voting securities of the corporation resulting from such merger, consolidation or reorganization (the "Surviving Corporation") in substantially the same proportion as their ownership of the Voting Securities immediately before such merger, consolidation or reorganization, and (B) the individuals who were members of the Incumbent Board immediately prior to the execution of the Agreement providing for such merger, consolidation or reorganization constitute at least 80% of the members of the board of directors of the Surviving Corporation. (A transaction described in clauses (A) and (B) above shall hereinafter be referred to as a "Non-Control Transaction.") (ii) A complete liquidation or dissolution of the Company; or (iii) An agreement for the sale or other disposition of all or substantially all of the assets of the Company to any Person (other than a transfer to a Subsidiary). Section 2.4.3. Disability. For purposes of this Agreement, the Executive ---------- shall be considered "Disabled" if the Executive, in the opinion of a majority of the Board (excluding the Executive if he is serving on the Board), as confirmed by competent medical evidence, becomes physically or mentally unable to perform his duties hereunder. The Executive hereby agrees to submit himself for appropriate medical examination by a physician selected by the Company for the purposes of this Section 2.4.3; provided, however, that the Executive, in his sole discretion, shall have the option to submit to a medical examination by a physician of his own choice prior to the submission of the matter to the Board for consideration. Should the examinations by the two physicians produce conflicting evidence, the Executive hereby agrees to submit himself for appropriate medical examination by an independent physician selected and agreed upon by the Company's and the Executive's physicians to resolve the dispute. Section 2.4.4. Basic Option Terms. Each of the Options will entitle the ------------------ Executive to purchase one share of the Company's Common Stock at a price of $7.75, as adjusted pursuant to Section 2.4.6 (the "Exercise Price"), and will expire on December 31, 2005. The vested Options will be exercisable by the Executive delivering to the Company a written notice of exercise signed -4- by the Executive, in substantially the form attached hereto as Exhibit A, together with a check payable to the Company in the amount of the total Exercise Price for the shares being purchased. In lieu of cash, all or any portion of the Exercise Price may be paid by the Executive tendering to the Company shares of the Company's common stock duly endorsed for transfer and owned by the Executive for at least six (6) months, to be credited against the Exercise Price at the fair market value of such shares on the date of exercise (however, no fractional shares may be so transferred, and the Company shall not be obligated to make any cash payments in consideration of any excess of the aggregate fair market value of shares transferred over the aggregate Exercise Price). In addition to and at the time of payment of the Exercise Price, the Company may withhold, or require the Executive to pay to the Company in cash, the amount of any federal, state and local income, employment or other withholding taxes which the Company determines are required to be withheld under federal, state or local law in connection with the exercise of an Option; provided, however, that the minimum required withholding amount of such tax obligations may, upon the election of the Executive, be paid by tendering to the Company whole shares of the Company's common stock duly endorsed for transfer and owned by the Executive, or by authorization to the Company to withhold shares of the Company's common stock otherwise issuable upon exercise of the Option, in either case in that number of shares of the Company's common stock having a fair market value on the date of exercise equal to the amount of such taxes thereby being paid. Each Option must be exercised in full. As soon as practicable after exercise of an Option by the Executive, the Company will deliver or cause to be delivered to the Executive certificates or a certificate representing the number of fully paid and non- assessable shares of voting common stock of the Company purchased. The Company will not issue fractional shares. Fractional calculations will be rounded up to the nearest number of whole shares. The Executive will be deemed a shareholder of record as of the date of exercise. The Company will at all times reserve and keep available sufficient authorized voting common stock for the exercise or conversion of all warrants, options and other securities it issues. Section 2.4.5. Registered Owner. Ownership of the Options will be ---------------- registered on the books of the Company and the Company will be entitled to treat the registered owner as the absolute owner of the Options for all purposes. The registered owner will not be entitled to any of the rights of a shareholder of the Company by virtue of owning Options. No transfer of the Options will be valid unless and until the Company has consented in writing to such transfer and the Company has received an instrument of transfer, in a form satisfactory to the Company and executed by the registered owner or an authorized agent, and the transfer is recorded by the Company. Transfers incident to the death of the Executive shall not require the Company's approval and the assignee of such Options shall have all rights as the Executive with respect to such Options. Section 2.4.6. Adjustments. ----------- (a) Stock Dividends and Stock Splits. If after the date of this Agreement -------------------------------- the number of outstanding shares of the Company's Common Stock is increased by a stock dividend payable in shares of the Company's Common Stock or by a split-up of shares of the Common Stock, then, on the day following the date fixed for determination of holders of common stock entitled to receive the stock dividend or split-up, the number of shares issuable upon exercise of the Options -5- will be increased in proportion to the increase in the number of outstanding shares and the Exercise Price will be correspondingly decreased. (b) Combination or Reclassification. If after the date of this Agreement ------------------------------- the number of outstanding shares of the Company's Common Stock is decreased by a combination or reclassification of shares of Common Stock, then, on the day after the effective date of the combination or reclassification, the number of shares issuable upon exercise of the Options will be decreased in proportion to the decrease in the number of outstanding shares and the Exercise Price will be correspondingly increased. (c) Reorganization. If after the date of this Agreement the Company -------------- effects any capital reorganization or reclassification of its Common Stock, or a consolidation or merger with another corporation, or the sale or other transfer of substantially all of its assets to another person or entity, then, as a condition to such transaction, the Company will make fair and lawful provision whereby the registered owner of the Options will have the right to purchase at the Exercise Price, in lieu of Common Stock of the Company, such shares of stock, securities, or assets as may be issued or payable with respect to or in exchange for a number of outstanding shares of the Company's Common Stock equal to the number of shares of Common Stock which the registered owner would be entitled to purchase at the applicable Exercise Price as of the effective date of such transaction. The Company will not effect any such transaction unless the resulting successor or purchasing entity (if not the Company) assumes by written instrument the obligation to deliver the applicable shares of stock, securities, or assets in accordance with the foregoing provision. (d) Notice of Adjustments. Within ten (10) days after the Board approves --------------------- of an event which is likely to cause an adjustment to the Exercise Price, the Company will deliver written notice to the registered owner of the Options setting forth in reasonable detail the facts of the event and the expected calculation of the adjustment. Section 2.4.7. 1995 Stock Plan. The Executive accepts the Options subject --------------- to all the terms and provisions of the 1995 Stock Plan, a copy of which has been delivered to the Executive. The Executive agrees to accept as binding, conclusive and final all decisions and interpretations of the 1995 Stock Plan Committee and, where applicable, the Company's Board of Directors, regarding the 1995 Stock Plan. Section 2.5. Employee Benefits. During the term of his employment under ----------------- this Agreement, the Executive will be entitled to participate in all employee benefit programs, including any pension, profit-sharing, or deferred compensation plans, any medical, health, dental, disability and other insurance programs(other than life insurance), and any fringe benefits, such as club dues, professional dues, the cost of an annual medical examination and the cost of professional fees associated with tax planning and the preparation of tax returns, on a basis at least equal to the other senior executives of the Company. In addition to such benefits, the Company will (a) reimburse the Executive for his COBRA cost from the date hereof until the date that his insurance coverage with the Company begins, and (b) pay or reimburse the Executive for the annual premium, prorated as appropriate, for his $2,000,000 life insurance policy issued by -6- TransAmerica Occidental (policy no.92370400) and owned by Martha B. Payne, Trustee, which premium is approximately $25,000. Section 2.6. Reimbursement of Expenditures. The Company will reimburse ----------------------------- the Executive for all reasonable expenditures incurred by the Executive in the course of his employment or in promoting the interests of the Company, including expenditures for (i) transportation, lodging and meals during overnight business trips, (ii) business meals and entertainment, (iii) supplies and business equipment, (iv) long-distance telephone calls and (v) membership dues of business associations. Notwithstanding the foregoing, the Company will have no obligation to pay reimbursements under this Section 2.6 unless the Executive submits timely reports of his expenditures to the Company in the manner prescribed by the Board and the rules and regulations underlying Section 162 of the Internal Revenue Code (the "Code"). Section 2.7. Severance Pay. If the Executive voluntarily terminates his ------------- employment with the Company at any time between January 6 and July 6, 1999, then in addition to any other rights or remedies the Executive may have, the Executive will be entitled to receive severance pay equal to the Executive's base salary in effect at the date of termination, payable in accordance with the Company's standard payroll practices over the twelve (12) month period following the date of termination. If the Company terminates the Executive's employment under this Agreement without "cause" (as defined in Section 5.1 hereof) at any time prior to July 6, 1999, then the Executive shall be entitled to receive severance pay equal to the Executive's base salary in effect at the date of termination, payable in accordance with the Company's standard payroll practices in equal installments over what would have been the remaining term of this Agreement. If the Company terminates the Executive's employment under this Agreement without "cause" on or after July 6, 1999, or if the Executive's employment is terminated by the Executive or the Company after a Change in Control, then in addition to any other rights or remedies the Executive may have, the Executive will be entitled to receive severance pay equal to two (2) times the Executive's base salary in effect at the date of termination, payable in accordance with the Company's standard payroll practices over the twelve (12) month period following the date of termination. Section 2.8. Disability of Executive. If during the term of the ----------------------- Executive's employment under this Agreement the Executive becomes Disabled, then for the first year of his Disability the Executive will receive his full base salary and for the next six months of his Disability he will receive one-half of his base salary. (The Company may satisfy this obligation in whole or in part by payments to the Executive provided through disability insurance.) The Company will not, however, be obligated to pay any salary to the Executive under this Section beyond expiration of his term of employment hereunder. Nor will the Company be obligated to pay bonus compensation or an automobile allowance with respect to the period of Disability. Bonus compensation in this circumstance will be a pro rata portion of the bonus the Executive would have earned absent the period of Disability based upon the number of days during the fiscal year the Executive was not Disabled. When the Executive is again able to perform his duties he will be entitled to resume his full position and salary. If the Executive's Disability endures for a continuous period of eighteen (18) months, then the Company may terminate the Executive's employment under this Agreement after delivery of ten (10) days written notice. The Executive -7- hereby agrees to submit himself for appropriate medical examination in accordance with Section 2.4.3 hereof. Section 2.9. Death of Executive. In addition to any other rights and ------------------ benefits innuring to the estate of the Executive upon his death under this Agreement, any benefit plan maintained by the Company or otherwise, within forty-five days after the Executive's death during the term of this Agreement, the Company will pay to the Executive's estate, or his heirs, the amount of any accrued and unpaid base salary (determined as of the date of death) and accrued and unpaid bonus compensation determined as if the Company's fiscal year ended at the date of death. In addition, the Company will pay to the Executive's spouse (or if she is not alive, to his estate or heirs) a death benefit of $5,000. Section 2.10. Automobile Allowance. During the term of his employment -------------------- under this Agreement, the Company will pay the Executive a monthly automobile allowance of $1,000. Section 2.11. Vacation. The Executive will be entitled to three weeks -------- paid vacation annually. Unused vacation time will accumulate and carryover to subsequent years. Any unused vacation at the date of termination of this Agreement (for any reason) will be paid to the Executive. Section 3. Certain Additional Payments by the Company. ------------------------------------------ Section 3.1. Amount of Additional Payment. Anything in this Agreement to ---------------------------- the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 3) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Section 3.2. Determinations. Subject to the provisions of Section 3.3, all -------------- determinations required to be made under this Section 3, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Arthur Andersen LLP or such other certified public accounting firm as may be designated by the Executive (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within fifteen (15) business days of the receipt of notice from the Executive that there has been a Payment, or -8- such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the change in control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 3, shall be paid by the Company to the Executive within five (5) days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 3.3 and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. Section 3.3. Contest of Claims. The Executive shall notify the Company in ----------------- writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten (10) business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the thirty (30)day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim and such notification includes a legal opinion of reputable tax counsel stating that a reasonable basis exists for contesting such claim, the Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment -9- of costs and expenses. Without limitation of the foregoing provisions of this Section 3.3, the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. Section 3.4. Refunds. If, after the receipt by the Executive of an amount ------- advanced by the Company pursuant to Section 3.3, the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 3.3) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 3.3, a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. Section 3.5 Waiver by the Executive. The Executive may in his sole ----------------------- discretion elect at any time after the Company has notified the Executive that it desires to contest a claim to waive the operation of any or all of the provisions contained in Section 3.3 by providing written notice to the Company of such election, and in such case the Executive shall pay the Excise Tax and the Company shall have no obligation to make the Gross-Up Payment to the Executive. Section 4. Term of Employment. ------------------ The Executive's initial term of employment under this Agreement will begin on July 6, 1998 and will expire on July 6, 2000. The initial term of employment will automatically renew for an additional one-year period upon the foregoing expiration, and thereafter upon the expiration of any renewal term provided by this Section 4, unless the Company or the Executive provides -10- written notice to the other party at least thirty (30) days prior to expiration that such party does not want this Agreement to renew. Section 5. Termination of Employment. ------------------------- Section 5.1. Termination by the Company. The Company may terminate the -------------------------- Executive's employment under this Agreement only for "cause" amounting to gross, continuing and willful malconduct, misconduct or non-performance, having a substantial, adverse effect upon the Company, or for Disability, as described in Section 2.8 of this Agreement. No act or failure to act by the Executive will be considered "willful" unless done or not done in bad faith and without reasonable belief that the Executive's action or omission was in the best interests of the Company. Termination for cause will not be effective unless the Company delivers to the Executive thirty (30) days advance written notice setting forth in reasonable detail the allegations of cause, and the Executive does not correct the acts or omissions documented in such notice within such 30-day period. For purposes of this Agreement, any significant change to the Executive's title, his powers, duties or responsibilities, or his employee benefits or working conditions, or any relocation of his workplace outside of Atlanta, Georgia, will, at the option of the Executive, constitute a termination of his employment by the Company without cause. Notwithstanding anything else contained in this Agreement, if, for any reason whatsoever, the Company terminates the Executive's employment, then the Company will reimburse the Executive for all reasonable costs and expenses incurred by him (including attorneys' fees, court costs and the costs of paralegal and other legal or investigative support personnel) connected with investigating, preparing, defending or appealing any litigation or similar proceeding arising out of this Agreement, whether commenced or threatened. Such reimbursements will be paid in advance of the final disposition of such litigation within ten (10) days after the Executive submits requests for reimbursement along with supporting invoices. Section 5.2. Termination by the Executive. The Executive may terminate ---------------------------- his employment under this Agreement thirty (30)days after giving written notice to the Company. If the Executive terminates his employment under this Agreement, then he will be entitled to pro rata portions of his base salary and bonus compensation with respect to the fiscal year in which the termination occurs (based on the number of days the Executive is employed by the Company during such fiscal year) as well as any accrued but unpaid compensation. Section 6. Restrictive Covenants. --------------------- Section 6.1. Prohibited Activities. During the term of his employment --------------------- under this Agreement and for a period of one (1) year thereafter, the Executive will not, as a shareholder, owner, operator, employee, partner, independent contractor, consultant, lender, financier, officer, director or by any other means whatsoever participate in any of the following activities: (i) Engage in or be associated with any business that directly or indirectly competes with the Company with respect to personal communications services; -11- (ii) Induce any person who is an employee, officer, agent, affiliate, supplier, client or customer of the Company to terminate such relationship or refuse to do business with the Company; or (iii) Solicit, direct, take away, serve, interfere with, or endeavor to entice away from the Company any person, company, firm, institution, or other entity that has purchased products or services from the Company. Section 6.2. Trade Secrets. The Executive acknowledges and recognizes ------------- that during his employment with the Company he may acquire secret or confidential information, knowledge, or data with respect to the business or products of the Company which may provide advantage to the Company over others not having such information. During his employment hereunder and for a period of one (1) year thereafter, the Executive will not communicate, disclose or divulge any such secret or confidential information to the detriment of the Company. Following the termination of the Executive's employment hereunder, the provisions of this Section 6.2 shall not apply to any information that becomes generally available to the telecommunications industry other than as a result of disclosure by the Executive. Section 6.3. Property of the Company. The Executive acknowledges that all ----------------------- confidential information relating to computer software or hardware currently utilized by the Company or incorporated into its products and all such information the Company currently plans to utilize or incorporate into its products is the exclusive property of the Company. Furthermore, the Executive agrees that all discoveries, inventions, creations and designs of the Executive during the course of his employment pursuant to this Agreement will be the exclusive property of the Company. Section 6.4. Remedies. In the event the Executive violates or threatens -------- to violate the provisions of this Section 6, damages at law will be an insufficient remedy and the Company will be entitled to equitable relief in addition to any other remedies or rights available to the Company and no bond or security will be required in connection with such equitable relief. Section 6.5. Counterclaims. The existence of any claim or cause of action ------------- the Executive may have against the Company will not at any time constitute a defense to the enforcement by the Company of the restrictions or rights provided by this Section 6. Section 7. Service as Director. ------------------- The Executive agrees to be nominated to serve as a director of the Company, and subject to his election by the shareholders, to serve as a director. -12- Section 8. Indemnification. --------------- The indemnification rights provided under this Agreement are intended to be in addition to, not in lieu of, the indemnification rights provided in the Officer's Indemnification Agreement and the Director's Indemnification Agreement, both dated May 22, 1998, between the Company and the Executive, and should in no way be interpreted to limit the Executive's rights under those Agreements or applicable provisions of Georgia law. Section 8.1. Non-Derivative Actions. The Company will indemnify the ---------------------- Executive if he becomes a party to any proceeding (other than an action by, or in the right of, the Company), by reason of the fact that he is or was a director, officer, employee, or agent of the Company or is or was serving at the request of the Company as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise against liability incurred in connection with such proceeding, including any appeal, provided he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Company and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any proceeding by judgment, order, settlement, or conviction or upon a plea of nolo contendere or its equivalent will not, of itself, create a presumption that he did not act in good faith and in a manner which he reasonably believed to be in, and not opposed to, the best interests of the Company or, with respect to any criminal proceeding, had reasonable cause to believe that his conduct was unlawful. Section 8.2. Derivative Actions. The Company will indemnify the Executive ------------------ if he becomes a party to any proceeding by or in the right of the Company to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee, or agent of the Company or is or was serving at the request of the Company as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against expenses and amounts paid in settlement not exceeding, in the judgment of the Board, the estimated expense of litigating the proceeding to conclusion, actually and reasonably incurred in connection with the defense or settlement of such proceeding, including any appeal; provided that he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Company. Section 8.3. Advancement of Expenses. Expenses incurred by the Executive ----------------------- in defending a civil or criminal proceeding described in this Section 8 will be paid by the Company in advance of the final disposition of the proceeding within ten (10) days after the Executive submits a request for payment; provided however, that the Executive has undertaken in writing to repay such amounts if he is ultimately found not to be entitled to indemnification by the Company. Section 8.4. Non-Exclusivity; Continuity. The indemnification provided --------------------------- for by this Agreement will not be exclusive and the Company may make any other indemnification allowed by law. The indemnification provided for by this Agreement will continue after the Executive has ceased to be a director, officer, employee, or agent of the Company or ceases to serve at the request of the Company as a director, officer, employee, or agent of another corporation, -13- partnership, joint venture, trust, or other enterprise and will inure to the Executive's heirs, executors, and administrators. Section 8.5. No Subrogation. The indemnification provided for by this -------------- Agreement will be personal in nature and the Company will not have any liability under this Section 8 to any insurer or any person, corporation, partnership, trust or association or other entity (other than heirs, executors or administrators) by reason of subrogation, assignment, or succession by any other means to the claim of the Executive. Section 9. Compliance With Other Agreements. -------------------------------- The Executive represents and warrants to the Company that he is free to enter this Agreement and that the execution of this Agreement and the performance of the obligations under this Agreement will not, as of the date of this Agreement or with the passage of time, conflict with, cause a breach of or constitute a default under any agreement to which the Executive is a party or may be bound. Section 10. Severability. ------------ Every provision of this Agreement is intended to be severable. If any provision or portion of a provision is illegal or invalid, then the remainder of this Agreement will not be affected. Moreover, any provision of this Agreement which is determined to be unreasonable, arbitrary or against public policy will be modified as necessary so that it is not unreasonable, arbitrary or against public policy. Section 11. Waivers. ------- A waiver by a party to this Agreement of any breach of this Agreement by the other party will not operate or be construed as a waiver of any other breach or of the same breach on a future occasion. No delay or omission by either party to enforce any rights it may have under this Agreement will operate or be construed as a waiver. Section 12. Modification. ------------ This Agreement may not be modified or amended except by a writing signed by both parties. -14- Section 13. Headings. -------- The various headings contained in this Agreement are inserted only as a matter of convenience and in no way define, limit or extend the scope or intent of any of the provisions of this Agreement. Section 14. Counterparts. ------------ This Agreement may be executed in several counterparts, each of which will be deemed an original, but all of which taken together will constitute one and the same instrument. Section 15. Number and Pronouns. ------------------- Wherever from the context it appears appropriate, each term stated in either the singular or the plural will include the singular and the plural and pronouns stated in the masculine, feminine or neuter gender will include the masculine, feminine and neuter genders. Section 16. Survival of Representations and Warranties. ------------------------------------------ The respective representations and warranties of the parties to this Agreement will survive the execution of this Agreement and continue without limitation. Section 17. Assignment; Binding Effect. -------------------------- Neither this Agreement nor any right or interest hereunder shall be assignable by either the Executive or the Company without the other party's prior written consent; provided, however, that nothing in this Section 17 shall preclude (a) the Executive from designating a beneficiary to receive any benefits payable hereunder upon his death, or (b) the executors, administrators or other legal representatives of the Executive or his estate from assigning any rights hereunder to the person or persons entitled thereto In addition, this Agreement may be assigned by the Company to Orchestrate.com without the consent of the Executive, provided that the Company shall remain liable for all payments hereunder. In addition, at the request of the Executive, the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance satisfactory to the Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession will be a breach of this Agreement and will entitle the Executive to compensation -15- from the Company in the same amount and on the same terms as he would be entitled to hereunder if his employment was terminated by the Company without cause. Except as otherwise provided herein, this Agreement will be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, administrators, executors, successors and assigns. Section 18. Waiver of Jury. -------------- With respect to any dispute which may arise in connection with this Agreement each party to this Agreement hereby irrevocably waives all rights to demand a jury trial. Section 19. Entire Agreement. ---------------- With respect to the subject matter hereof, this Agreement and that certain Memorandum of Understanding, effective as of July 6, 1998, by and among the Executive, the Company and Endeavor, constitute the entire understanding of the parties superseding all prior agreements, understandings, negotiations and discussions between them, whether written or oral, and there are no other understandings, representations, warranties or commitments with respect thereto. Section 20. Governing Law; Venue. -------------------- This Agreement will be governed by and interpreted in accordance with the substantive laws of the State of Georgia without reference to conflicts of law. Venue for the purposes of any litigation in connection with this Agreement will lie solely in the state courts in and for Fulton County, Georgia or the United States District Court in and for the Northern District of Georgia, Atlanta Division. Section 21. Notices. ------- Any notices or other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given and delivered when delivered in person, two (2) days after being mailed postage prepaid by certified or registered mail with return receipt requested, or when delivered by overnight delivery service or by facsimile to the recipient at the following address or facsimile number, or to such other address or facsimile number as to which the other party subsequently shall have been notified in writing by such recipient: If to the Company: Premiere Technologies, Inc. 3399 Peachtree Road -16- The Lenox Building Suite 600 Atlanta, GA 30326 Attn: Chief Executive Officer With a copy to: Premiere Technologies, Inc. 3399 Peachtree Road The Lenox Building Suite 600 Atlanta, GA 30326 Attn: Chief Legal Officer Facsimile: (404) 262-8540 If to the Executive: William Porter Payne 5373 Forest Springs Dunwoody, Georgia 30308 With a copy to: Horace H. Sibley, Esq. King & Spalding 191 Peachtree Street Atlanta, GA 30303-1763 The parties have executed this Agreement effective as of the 6th day of July, 1998. PREMIERE TECHNOLOGIES, INC. By: /s/ Boland T. Jones ------------------- Boland T. Jones THE EXECUTIVE /s/ William P. Payne ----------------------- William Porter Payne -17- EXHIBIT A [DATE] Premiere Technologies, Inc. 3399 Peachtree Road Suite 600 Atlanta, Georgia 30326 Attention: Stock Option Plan Administrator Re: Exercise of Stock Option To whom it may concern: The undersigned, William Porter Payne, pursuant to that certain Executive Employment and Incentive Option Agreement dated as of July 6, 1998, by and between Premiere Technologies, Inc. ("PTEK") and the undersigned (the "Agreement"), hereby exercises the options granted under the Agreement for the following number of option shares, subject to the terms and conditions of the Agreement: Number of option shares being purchased _______________ Total purchase price $______________ Purchase price paid by check $______________ Purchase price paid by tendering PTEK stock $______________ Very truly yours, William Porter Payne EX-10.13 4 MEMORANDUM OF UNDERSTANDING EXHIBIT 10.13 MEMORANDUM OF UNDERSTANDING --------------------------- This Memorandum of Understanding ("MOU") is entered into effective as of the 6th day of July, 1998, by and among William Porter Payne, a resident of the State of Georgia ("Payne"), Premiere Technologies, Inc., a Georgia corporation ("Premiere"), and Endeavor Technologies, Inc., a Georgia corporation ("Endeavor"). WHEREAS, effective May 22, 1998, Premiere and Payne agreed that Payne would be employed by Premiere's wholly-owned subsidiary, Orchestrate.com, Inc. ("Orchestrate"), and, in respect of such service, would enter into a two-year employment agreement with Premiere providing for (i) a salary of $750,000 per year, (ii) a minimum bonus of $250,000 per year, (iii) a car allowance of $1,000 per month and (iv) options to purchase 500,000 shares of Common Stock of Premiere, in addition to certain other benefits and remuneration agreed upon by the parties at such time, which agreement was reflected in and subsumed by an Executive Employment and Incentive Option Agreement dated July 6, 1998 between Premiere and Payne (the "Payne Employment Agreement"); WHEREAS, as Chairman of Orchestrate, one of Payne's principal duties is to assist Endeavor in the development of its business for the purpose of increasing revenue opportunities for Premiere and enhancing the value of Premiere's interest in Endeavor, recognizing that (i) Premiere is a substantial shareholder of Endeavor and (ii) Endeavor represents an important channel for the distribution of Premiere's "Orchestrate" family of products; WHEREAS, in entering into the Payne Employment Agreement, the parties contemplated that Payne, acting in his capacity as Chairman of Orchestrate, would play a significant role in the development of Endeavor's "WebMD" product, and that Endeavor would also compensate for such assistance through the grant to Payne of an option to purchase 200,000 shares of Common Stock of Endeavor at an exercise price of $2.00 per share; WHEREAS, Premiere and Endeavor have determined that Payne's services to Endeavor are so valuable to Endeavor that it is both useful and appropriate for Endeavor to reimburse Premiere for a portion of his services as an employee of Premiere; WHEREAS, Premiere and Endeavor are prepared to share Payne's services on the basis described herein; and WHEREAS, to avoid future disputes, ambiguities and conflicts of interest, each of Payne, Premiere and Endeavor desire to set forth in writing the nature of the sharing arrangement they are prepared to enter into with respect to Payne's services. NOW, THEREFORE, in consideration of the mutual promises and covenants contained in this MOU, the parties hereto agree as follows: 1. SHARING ARRANGEMENT. Each of Payne, Premiere and Endeavor agrees that, notwithstanding that Payne is a full-time employee of Premiere or the contrary provisions of the Payne Employment Agreement, Payne may devote up to 60% of his time (or roughly three days a week) directly to the business of Endeavor. As an employee of Premiere, Payne shall have the title of Chairman of Orchestrate. In his service to Endeavor, Payne may serve as a member of its Board of Directors and have the title of Vice Chairman, but shall not otherwise serve as an officer or employee of Endeavor. Without Premiere's prior written consent, in his service to Endeavor, Payne shall not carry any title that implies that he serves as an employee of Endeavor. The Board of Directors of Endeavor shall act expeditiously to create a vacancy on the Board and to appoint Payne to fill that vacancy as soon as possible. Payne's appointment to the Board of Directors of Endeavor shall not fulfill Endeavor's obligation to appoint a Premiere designated director to the Board of Endeavor pursuant to Section 2 of the First Amendment to Restated Shareholders Agreement of Endeavor Technologies, Inc. dated December 15, 1997. 2. COMPENSATION. Effective as of August 6, 1998, for the balance of the two-year term of Payne's agreed-upon employment with Premiere, Endeavor agrees to reimburse Premiere for one-half of (i) Payne's salary of $750,000 per year, (ii) minimum bonus of $250,000 per year and (iii) automobile allowance of $1,000 per month provided under the Payne Employment Agreement. Endeavor shall be obligated to indemnify Payne for his service to Endeavor pursuant to a standard form of Indemnification Agreement between Endeavor and its directors. Endeavor has previously agreed to provide Payne options to purchase 200,000 shares of Common Stock of Endeavor at an exercise price of $2.00 per share in connection with its efforts to recruit Payne to Endeavor's Board of Directors, and it will honor this agreement. Except as set forth in this Section 2, Endeavor shall have no further compensation obligations to Payne or Premiere relating to Payne's employment, but shall reimburse Payne in accordance with its corporate policies for expenses incurred by Payne in discharging the business of Endeavor. 3. OFFICE AND STAFF RESOURCES. As Payne's employer, Premiere shall provide Payne (i) an office at Premiere's headquarters in Atlanta, Georgia and (ii) a secretary. All of the expenses associated with such arrangements shall be borne by Premiere. 4. RESPONSIBILITIES. Premiere and Endeavor agree that the principal services offered by Payne to them involve the establishment and/or continuation of sales and marketing efforts and the creation of strategic relationships principally with large corporations. In order to reduce the potential that Payne's sales and marketing efforts on -2- behalf of one company may conflict with his efforts on behalf of the other company, each of Payne, Premiere and Endeavor agrees that: (a) On behalf of Endeavor, Payne's responsibilities will be directed toward the establishment of Endeavor as a leading provider of healthcare-related Internet services, including healthcare content and turnkey solutions, delivered (at least in part) through Premiere's Orchestrate(R) service and network. In this capacity, Payne will seek to create strategic relationships and/or sales relationships with healthcare organizations, providers and insurers and the providers of healthcare information and other healthcare-related "content" delivered via the Internet. Payne and Endeavor agree with Premiere that business opportunities and potential strategic relationships that involve the marketing, sale or provision of communications services or solutions via the Internet, private data networks or the public switched telephone network, including without limitation long distance calling cards, voice messaging services, enhanced document distribution services, conferencing services, unified messaging services, or other services commonly understood by Premiere and Endeavor as elements of Premiere's Orchestrate(R) service (whether involving the provision of communications services through the Internet, private data networks or via the public switched telephone network) (collectively, "Enhanced Communications Services") shall be directed to Premiere; and (b) On behalf of Premiere, Payne's marketing and sales efforts will be directed to the continuation of Premiere as a leading provider of Enhanced Communications Services, including without limitation, the establishment of Orchestrate(R) as the leading Web-enabled enhanced communications solution. In this capacity, Payne will provide marketing and sales services, as directed by the Chairman or President of Premiere, on behalf of Premiere and each of its subsidiaries, and will seek to create strategic relationships and/or sales relationships with entities or organizations who may themselves, or whose customers may, seek Enhanced Communications Services, including without limitation, Orchestrate(R) services. Payne and Premiere agree with Endeavor that business opportunities and potential strategic relationships that involve the marketing, sale or provision of healthcare- related Internet services such as content and turnkey solutions shall be directed to Endeavor. Any facts raising conflicts or potential conflicts in terms of Payne's allegiances shall be reported to the Chief Executive Officers of the Company and Endeavor for an appropriate, mutually acceptable resolution. Such conflicts or potential conflicts shall -3- include, without limitation, any such conflicts or potential conflicts arising from the expansion of either party's business beyond the scope of such business as presently conducted. 5. EXCULPATORY PROVISION. Premiere shall not be liable for, and Payne and Endeavor hereby agree to hold Premiere harmless against, any loss, cost, liability or expense (including attorneys' fees and costs and expenses of investigation) directly or indirectly occurring or arising from actions taken by Payne (or omissions or failures to act on his part) occurring in the course of Payne's service to Endeavor or any subsidiary or affiliate thereof. Endeavor shall not be liable for, and Payne and Premiere hereby agree to hold Endeavor harmless against, any loss, cost, liability or expense (including attorneys' fees and costs and expenses of investigation) directly or indirectly occurring or arising from actions taken by Payne (or omissions or failures to act on his part) occurring in the course of Payne's employment to Premiere or any subsidiary or affiliate thereof. 6. BINDING INTENT; GOVERNING LAW. This MOU shall constitute a binding and enforceable agreement among the parties hereto with respect to the subject matter hereof. This MOU shall be governed by and construed in accordance with the laws of the State of Georgia, and may be executed in counterparts, all of which shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties have executed this MOU effective as of the 6th day of July, 1998. WILLIAM PORTER PAYNE /s/ William Porter Payne -------------------------- ENDEAVOR TECHNOLOGIES, INC. By: /s/ W. Michael Heekin --------------------- Its: COO -------------------- PREMIERE TECHNOLOGIES, INC. By: /s/ Boland Jones --------------------- Its: CEO -------------------- -4- EX-10.14 5 EXECUTIVE EMPLOYMENT AGREEMENT EXHIBIT 10.14 PREMIERE TECHNOLOGIES, INC. --------------------------- EXECUTIVE EMPLOYMENT AGREEMENT ------------------------------ THIS AGREEMENT is made and entered into by and between Premiere Technologies, Inc. (the "Company"), a Georgia corporation, and Harvey A. Wagner (the "Executive"), effective as of May 4, 1998. BACKGROUND STATEMENT -------------------- The Company and its subsidiaries are in the business of designing, developing, marketing, selling and providing enhanced communications services, and in connection therewith the Company and its subsidiaries have developed, and expect to develop, trade secrets and methods of conducting business which are worthy of protection. The Executive has substantial business experience and expertise. The Company considers it to be in its best interest to have the benefit of the Executive's services as provided in this Agreement, and the Executive is willing to render such services to the Company in accordance with the provisions of this Agreement. THEREFORE, in consideration of and reliance upon the foregoing background statement and the representations and warranties contained in this Agreement, the Company and the Executive agree to the following provisions: TERMS ----- Section 1. Duties. ------ The Company hereby agrees to employ the Executive as its Executive Vice President of Finance and Administration and Chief Financial Officer. The Executive will have the powers, duties and responsibilities from time to time assigned to him by the Company's board of directors (the "Board") or its Chief Executive Officer, and the Executive will report directly to the Chief Executive Officer of the Company. During the term of his employment under this Agreement, the Executive will devote substantially all of his business time to faithfully and industriously perform his duties and promote the business and best interests of the Company. Section 2. Compensation. ------------ Section 2.1. Base Salary. During the term of the Executive's employment ----------- under this Agreement, the Company will pay the Executive a base salary at the annual rate of $350,000, payable in accordance with the Company's standard payroll practices. At the beginning of each year after 1998 during the term of this Agreement, the Executive will be entitled to an increase in his base salary equal to 5% of the previous year's base salary. Section 2.2. Bonus Compensation. In addition to his base salary, the ------------------ Executive will be entitled to receive an annual bonus equal to one-third (1/3) of his base salary, with the specific requirements of such bonus to be mutually agreed upon by the Company and the Executive. The Executive will also be entitled to any other bonus compensation provided for by resolution of the Board or its Compensation Committee. Section 2.3. Employee Benefits. During the term of his employment under ----------------- this Agreement, the Executive will be entitled to participate in all employee benefit programs, including any pension, profit-sharing, or deferred compensation plans, any medical, health, dental, disability and other insurance programs and any fringe benefits, such as club dues (including Standard Club, Buckhead Club and airline club dues), professional dues, the cost of an annual medical examination and the cost of professional fees associated with tax planning and the preparation of tax returns, on a basis at least equal to the other senior executives of the Company. In addition to such benefits, the Company will purchase and maintain a variable life insurance policy in the minimum amount of $1,000,000 on the life of and in the name of the Executive, and such other insurance as the Board may determine. The Executive or the Company as his designee shall be the owner of such insurance policy. The Executive shall have all rights pursuant thereto, including, without limitation, the right to transfer ownership and designate beneficiaries. Notwithstanding anything else contained in this Agreement, after termination or expiration of his employment under this Agreement, the Executive will be entitled to participate for an additional eighteen (18) months in any medical, health, dental, disability or similar programs on the same basis as during his employment (including payment by the Company of the costs and expenses associated with such programs on the same terms as during the time the Executive was employed with the Company), and in meeting its obligations under this provision the Company will take all actions which may be necessary or appropriate to comply with criteria set forth by the Company's insurance carriers and other program providers (including the continued employment of the Executive in some nominal capacity, if necessary). Section 2.4. Reimbursement of Expenditures. The Company will reimburse ----------------------------- the Executive for all reasonable expenditures incurred by the Executive in the course of his employment or in promoting the interests of the Company, including expenditures for (i) transportation, lodging and meals during overnight business trips, (ii) business meals and entertainment, (iii) supplies and business equipment, (iv) long-distance telephone calls and (v) membership dues of business associations. Notwithstanding the foregoing, the Company will have no obligation to pay reimbursements under this Section 2.4 unless the Executive submits timely reports of his expenditures to the Company in the manner prescribed by the Board and the rules and regulations underlying Section 162 of the Internal Revenue Code (the "Code"). Section 2.5. Transition Loan. The Company will make a $100,000 loan to the --------------- Executive, which will be paid to the Executive at his request, and which will be evidenced by a Promissory Note in substantially the form attached hereto as Exhibit A (the "Note"). The Company shall forgive 50% of the outstanding amount of the Note, including accrued interest thereon, on the first anniversary of the date of this Agreement if the Executive is employed by the Company on that date, and shall forgive the remaining amount of the Note, including accrued interest thereon, on the second anniversary of the date of this Agreement if the Executive is employed by the -2- Company on that date. The foregoing notwithstanding, if the Company terminates the Executive's employment without "cause" (as defined in Section 5.1 hereof), then in addition to any other rights or remedies the Executive may have, the entire amount of the Note then outstanding, including accrued interest thereon, will be forgiven by the Company. Likewise, the Loan will be forgiven in its entirety by the Company if there is a Change in Control of the Company. For the purposes of this Agreement, a "Change in Control" shall mean the occurrence of any of the following events: (a) An acquisition (other than directly from the Company) of any voting securities of the Company ("Voting Securities") by any "Person" (as the term person is used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934 (the "1934 Act")) immediately after which such Person has "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of 25% or more of the combined voting power of the Company's then outstanding Voting Securities; provided, however, that in determining whether a Change in Control has occurred, Voting Securities that are acquired in an acquisition by (i) an employee benefit plan (or a trust forming a part thereof) maintained by (A) the Company or (B) any corporation or other person of which a majority of its voting power or its equity securities or equity interests are owned directly or indirectly by the Company (a "Subsidiary"), or (ii) the Company or any Subsidiary, or (iii) any Person in connection with a "Non-Control Transaction" (as hereinafter defined), shall not constitute an acquisition for purposes for this clause (a); or (b) The individuals who, as of the date of this Agreement, are members of the Board (the "Incumbent Board") cease for any reason to constitute at least 60% of the Board; provided, however, that if the election, or nomination for election by the Company's shareholders, of any new director was approved by a vote of at least 80% of the Incumbent Board, such new director shall for purposes of this Agreement, be considered as a member of the Incumbent Board; provided, further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened "Election Contest" (as described in Rule 14a-11 promulgated under the 1934 Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board (a "Proxy Contest"), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or (c) Approval by the shareholders of the Company of: (i) a merger, consolidation, reorganization or other business combination involving the Company, unless: (A) the shareholders of the Company, immediately before such merger, consolidation, reorganization or other business combination, own, directly or indirectly, immediately following such a merger, consolidation, reorganization or other business combination, at least two-thirds of the combined voting power of the outstanding voting securities of the corporation resulting from such merger, consolidation, -3- reorganization or other business combination (the "Surviving Corporation") in substantially the same proportion as their ownership of the Voting Securities immediately before such merger, consolidation, reorganization or other business combination, and (B) the individuals who were members of the Incumbent Board immediately prior to the execution of the Agreement providing for such merger, consolidation, reorganization or other business combination constitute at least 80% of the members of the board of directors of the Surviving Corporation. (A transaction described in clauses (A) and (B) above shall hereinafter be referred to as a "Non-Control Transaction.") (ii) A complete liquidation or dissolution of the Company; or (iii) An agreement for the sale or other disposition of all or substantially all of the assets of the Company to any Person (other than a transfer to a Subsidiary). Section 2.6. Severance Pay. If the Executive terminates his employment with ------------- the Company after November 4, 1998 but on or before May 4, 1999, or if the Company terminates the Executive's employment at any time on or before May 4, 1999, the Executive will be entitled to receive severance pay equal to the Executive's base salary in effect on the date of termination, payable in accordance with the Company's standard payroll practices over the next twelve (12) month period following the date of termination. If (a) the Company terminates the Executive's employment under this Agreement without "cause" after May 4, 1999 but before a Change in Control of the Company, or (b) during the twenty-four (24) month period following a Change in Control of the Company the Executive's employment with the Company is terminated (i) by the Executive for any reason or (ii) by the Company for any reason other than "cause," then in addition to any other rights or remedies the Executive may have, the Executive will be entitled to receive severance pay equal to two and one-half (2 1/2) times the Executive's base salary in effect at the date of termination, payable in accordance with the Company's standard payroll practices over the twelve (12) month period following the date of termination. In addition, the Executive shall be entitled to any prorated bonus payment to which the Executive is entitled as of the date of termination as calculated pursuant to Section 5.2 hereof. Section 2.7. Disability of Executive. If during the term of the ----------------------- Executive's employment under this Agreement, the Executive, in the opinion of a majority of the Board (excluding the Executive if he is serving on the Board), as confirmed by competent medical evidence, becomes physically or mentally unable to perform his duties for a continuous period ("Disability"), then for the first year of his Disability the Executive will receive his full base salary and for the next six months of his Disability he will receive one-half of his base salary. (The Company may satisfy this obligation in whole or in part by payments to the Executive provided through disability insurance.) The Company will not, however, be obligated to pay any salary to the Executive under this Section beyond expiration of his term of employment hereunder. Nor will the Company be obligated to pay bonus compensation or an automobile allowance with respect to the period of Disability. Bonus compensation in this circumstance will be a pro rata portion of the bonus the Executive would have earned absent the period of Disability based upon the number of -4- days during the fiscal year the Executive was not Disabled. When the Executive is again able to perform his duties he will be entitled to resume his full position and salary. If the Executive's Disability endures for a continuous period of 18 months, then the Company may terminate the Executive's employment under this Agreement after delivery of ten days written notice. The Executive hereby agrees to submit himself for appropriate medical examination by a physician selected by the Company for the purposes of this Section 2.7. Section 2.8. Death of Executive. In addition to any other rights and ------------------ benefits inuring to the estate of the Executive upon his death under this Agreement, any benefit plan maintained by the Company or otherwise, within forty-five (45) days after the Executive's death during the term of this Agreement, the Company will pay to the Executive's estate, or his heirs, the amount of any accrued and unpaid base salary (determined as of the date of death) and accrued and unpaid bonus compensation determined as if the Company's fiscal year ended at the date of death. In addition, the Company will pay to the Executive's spouse (or if she is not alive, to his estate or heirs) a death benefit of $5,000. Section 2.9. Automobile Allowance. During the term of his employment -------------------- under this Agreement, the Company will pay the Executive a monthly automobile allowance of $1,000. Section 2.10. Vacation. The Executive will be entitled to three weeks -------- paid vacation annually. Unused vacation time will accumulate and carryover to subsequent years. Any unused vacation at the date of termination of this Agreement (for any reason) will be paid to the Executive. Section 3. Certain Additional Payments by the Company. ------------------------------------------ Section 3.1. Amount of Additional Payment. Anything in this Agreement to ---------------------------- the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 3) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Section 3.2. Determinations. Subject to the provisions of Section 3.3, -------------- all determinations required to be made under this Section 3, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Arthur Andersen LLP or such other certified public -5- accounting firm as may be designated by the Executive (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within fifteen (15) business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the change in control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 3, shall be paid by the Company to the Executive within five (5) days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 3.3 and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. Section 3.3. Contest of Claims. The Executive shall notify the Company in ----------------- writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten (10) business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the thirty (30)day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (a) give the Company any information reasonably requested by the Company relating to such claim, (b) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (c) cooperate with the Company in good faith in order effectively to contest such claim, and (d) permit the Company to participate in any proceedings relating to such claim; -6- provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses, including reasonable attorneys' fees incurred by the Executive. Without limitation of the foregoing provisions of this Section 3.3, the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. Section 3.4. Refunds. If, after the receipt by the Executive of an amount ------- advanced by the Company pursuant to Section 3.3, the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 3.3) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 3.3, a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. Section 4. Term of Employment. ------------------ The Executive's initial term of employment under this Agreement will begin on May 4, 1998 and will expire on May 4, 2001. The initial term of employment will automatically renew for an additional one-year period upon the foregoing expiration, and thereafter upon the expiration of any renewal term provided by this Section 4, unless the Company or the Executive provides written notice to the other party at least thirty (30) days prior to expiration that such party does not want this Agreement to renew. -7- Section 5. Termination of Employment. ------------------------- Section 5.1. Termination by the Company. The Company may terminate the -------------------------- Executive's employment under this Agreement for "cause," as defined herein, or for Disability, as described in Section 2.7 of this Agreement. For purposes of this Agreement, "cause" is defined to mean such act, omission or course of conduct of the Executive that is (a) continuing willful misconduct that is demonstratably injurious to the Company, monetarily or otherwise; (b) the commission of a felony involving the Company and/or its business and suggesting moral turpitude on the part of the Executive; (c) improper or unethical business activity, which is defined as the Executive's fraud, misappropriation, embezzlement, dishonesty, unlawful harassment or gross negligence; or (d) a breach of any material term or covenant of this Agreement. Termination for cause will not be effective unless the Company delivers to the Executive thirty (30) days advance written notice setting forth in reasonable detail the allegations of cause, and the Executive does not correct the acts or omissions documented in such notice within such 30-day period. For purposes of this Agreement, any significant change to the Executive's title, his powers, duties or responsibilities, or his employee benefits or working conditions, or any relocation of his workplace outside of Atlanta, Georgia, will, at the option of the Executive, constitute a termination of his employment by the Company without cause. Notwithstanding anything else contained in this Agreement, if, for any reason whatsoever, the Company terminates the Executive's employment, then the Company will reimburse the Executive for all reasonable costs and expenses incurred by him (including attorneys' fees, court costs and the costs of paralegal and other legal or investigative support personnel) connected with investigating, preparing, defending or appealing any litigation or similar proceeding arising out of this Agreement, whether commenced or threatened. Such reimbursements will be paid in advance of the final disposition of such litigation within 10 days after the Executive submits requests for reimbursement along with supporting invoices. Section 5.2. Termination by the Executive. The Executive may terminate ---------------------------- his employment under this Agreement thirty (30)days after giving written notice to the Company. If the Executive terminates his employment under this Agreement, then he will be entitled to pro rata portions of his base salary and bonus compensation with respect to the fiscal year in which the termination occurs (based on the number of days the Executive is employed by the Company during such fiscal year) as well as any accrued but unpaid base salary, and if the conditions of Section 2.6 hereof are met, he shall be entitled to severance payments thereunder. Section 6. Restrictive Covenants. --------------------- Section 6.1. Prohibited Activities. During the term of his employment --------------------- under this Agreement and for a period of one (1) year thereafter, the Executive will not, within the United States, either directly or indirectly, on his own behalf or on behalf of or in conjunction with any person or entity: (a) Perform financial or administrative services for any other person or entity engaged in the design, development, marketing, sale or provisioning of enhanced communications services, including enhanced calling services, voice messaging services, -8- enhanced electronic documentation distribution services, video and data conferencing services, computer telephony services, and Internet telephony services; (b) Induce any person who is an employee, officer, agent, affiliate, supplier, client or customer of the Company to terminate such relationship or refuse to do business with the Company; or (c) Solicit, direct, take away, interfere with, or endeavor to entice away from the Company any person, company, firm, institution, or other entity that has purchased products or services from the Company. Section 6.2. Trade Secrets. The Executive acknowledges and recognizes ------------- that during his employment with the Company he may acquire Trade Secrets or Confidential Business Information. (a) The Executive agrees to maintain in strict confidence, and not use or disclose except pursuant to written instructions from the Company, any Trade Secret (as hereinafter defined) of the Company, for so long as the pertinent data or information remains a Trade Secret, provided that the obligation to protect the confidentiality of any such information or data shall not be excused if such information or data ceases to qualify as a Trade Secret as a result of the acts or omissions of the Executive. (b) The Executive agrees to maintain in strict confidence and not to use or disclose any Confidential Business Information (as hereinafter defined) during his employment with the Company and for a period of one (1) year thereafter. (c) The Executive may disclose Trade Secrets or Confidential Business Information pursuant to any order or legal process requiring him (in his legal counsel's reasonable opinion) to do so, provided that the Executive shall first have notified the Company in writing of the request or order to so disclose the Trade Secrets or Confidential Business Information in sufficient time to allow the Company to seek an appropriate protective order. (d) "Trade Secret" shall mean any information, including, but not limited to, technical or non-technical data, a formula, a pattern, a compilation, a program, a plan, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans, or a list of actual or potential customers or suppliers which (i) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. (e) "Confidential Business Information" shall mean any non-public information of a competitively sensitive or personal nature, other than Trade Secrets, acquired by the Executive, directly or indirectly, in connection with the Executive's employment with the -9- Company, including without limitation oral and written information concerning the Company's financial positions and results of operations (revenues, margins, assets, net income, etc.), annual and long-range business plans, marketing plans and methods, account invoices, oral or written customer information, and personnel information. Section 6.3. Property of the Company. The Executive acknowledges that all ----------------------- confidential information relating to computer software or hardware currently utilized by the Company or incorporated into its products and all such information the Company currently plans to utilize or incorporate into its products is the exclusive property of the Company. Furthermore, the Executive agrees that all discoveries, inventions, creations and designs of the Executive during the course of his employment pursuant to this Agreement will be the exclusive property of the Company. Section 6.4. Remedies. In the event the Executive violates or threatens -------- to violate the provisions of this Section 6, damages at law will be an insufficient remedy and the Company will be entitled to equitable relief in addition to any other remedies or rights available to the Company and no bond or security will be required in connection with such equitable relief. Section 6.5. Counterclaims. The existence of any claim or cause of action ------------- the Executive may have against the Company will not at any time constitute a defense to the enforcement by the Company of the restrictions or rights provided by this Section 6. Section 7. Service as Director. ------------------- Subject to his election by the shareholders, the Executive agrees to serve as a director of the Company if nominated. Section 8. Indemnification. --------------- The indemnification rights provided under this Agreement are intended to be in addition to, not in lieu of, the indemnification rights provided in that certain Officer's Indemnification Agreement dated April 1, 1998 by and between the Company and the Executive, and should in no way be interpreted to limit the Executive's rights under that Agreement or applicable provisions of Georgia law. Section 8.1. Non-Derivative Actions. The Company will indemnify the ---------------------- Executive if he becomes a party to any proceeding (other than an action by, or in the right of, the Company), by reason of the fact that he is or was a director, officer, employee, or agent of the Company or is or was serving at the request of the Company as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise against liability incurred in connection with such proceeding, including any appeal, provided he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Company and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any proceeding by judgment, order, settlement, or conviction or upon a plea of nolo contendere or its equivalent will not, of itself, create a presumption that he did -10- not act in good faith and in a manner which he reasonably believed to be in, and not opposed to, the best interests of the Company or, with respect to any criminal proceeding, had reasonable cause to believe that his conduct was unlawful. Section 8.2. Derivative Actions. The Company will indemnify the Executive ------------------ if he becomes a party to any proceeding by or in the right of the Company to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee, or agent of the Company or is or was serving at the request of the Company as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against expenses and amounts paid in settlement not exceeding, in the judgment of the Board, the estimated expense of litigating the proceeding to conclusion, actually and reasonably incurred in connection with the defense or settlement of such proceeding, including any appeal; provided that he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Company. Section 8.3. Advancement of Expenses. Expenses incurred by the Executive ----------------------- in defending a civil or criminal proceeding described in this Section 8 will be paid by the Company in advance of the final disposition of the proceeding within ten (10) days after the Executive submits a request for payment; provided however, that the Executive has undertaken in writing to repay such amounts if he is ultimately found not to be entitled to indemnification by the Company. Section 8.4. Non-Exclusivity; Continuity. The indemnification provided --------------------------- for by this Agreement will not be exclusive and the Company may make any other indemnification allowed by law. The indemnification provided for by this Agreement will continue after the Executive has ceased to be a director, officer, employee, or agent of the Company or ceases to serve at the request of the Company as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise and will inure to the Executive's heirs, executors, and administrators. Section 8.5. No Subrogation. The indemnification provided for by this -------------- Agreement will be personal in nature and the Company will not have any liability under this Section 8 to any insurer or any person, corporation, partnership, trust or association or other entity (other than heirs, executors or administrators) by reason of subrogation, assignment, or succession by any other means to the claim of the Executive. -11- Section 9. Compliance With Other Agreements. -------------------------------- The Executive represents and warrants to the Company that he is free to enter this Agreement and that the execution of this Agreement and the performance of the obligations under this Agreement will not, as of the date of this Agreement or with the passage of time, conflict with, cause a breach of or constitute a default under any agreement to which the Executive is a party or may be bound. Section 10. Severability. ------------ Every provision of this Agreement is intended to be severable. If any provision or portion of a provision is illegal or invalid, then the remainder of this Agreement will not be affected. Moreover, any provision of this Agreement which is determined to be unreasonable, arbitrary or against public policy will be modified as necessary so that it is not unreasonable, arbitrary or against public policy. Section 11. Waivers. ------- A waiver by a party to this Agreement of any breach of this Agreement by the other party will not operate or be construed as a waiver of any other breach or of the same breach on a future occasion. No delay or omission by either party to enforce any rights it may have under this Agreement will operate or be construed as a waiver. Section 12. Modification. ------------ This Agreement may not be modified or amended except by a writing signed by both parties. Section 13. Headings. -------- The various headings contained in this Agreement are inserted only as a matter of convenience and in no way define, limit or extend the scope or intent of any of the provisions of this Agreement. Section 14. Counterparts. ------------ This Agreement may be executed in several counterparts, each of which will be deemed an original, but all of which taken together will constitute one and the same instrument. Section 15. Number and Pronouns. ------------------- Wherever from the context it appears appropriate, each term stated in either the singular or the plural will include the singular and the plural and pronouns stated in the masculine, feminine or neuter gender will include the masculine, feminine and neuter genders. -12- Section 16. Survival of Representations and Warranties. ------------------------------------------ The respective representations and warranties of the parties to this Agreement will survive the execution of this Agreement and continue without limitation. Section 17. Assignment; Binding Effect. -------------------------- Neither this Agreement nor any right or interest hereunder shall be assignable by either the Executive or the Company without the other party's prior written consent; provided, however, that nothing in this Section 17 shall preclude (a) the Executive from designating a beneficiary to receive any benefits payable hereunder upon his death, or (b) the executors, administrators or other legal representatives of the Executive or his estate from assigning any rights hereunder to the person or persons entitled thereto. In addition, at the request of the Executive, the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance satisfactory to the Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession will be a breach of this Agreement and will entitle the Executive to compensation from the Company in the same amount and on the same terms as he would be entitled to hereunder if his employment was terminated by the Company without cause. Except as otherwise provided herein, this Agreement will be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, administrators, executors, successors and assigns. Section 18. Arbitration. ----------- The Company and the Executive hereby consent to the resolution by arbitration of all disputes, claims or controversies for which a court otherwise would be authorized by law to grant relief, in any way arising out of, relating to or associated with the Executive's employment with the Company or the termination of the Executive's employment, that the Company may have against the Executive or that the Executive may have against the Company or against its officers, directors, employees or agents in their capacity as such or otherwise, whether or not such dispute, claim or controversy concerns the terms of this Agreement. Any such arbitration shall be in accordance with the procedures of the American Arbitration Association ("AAA"). The arbitration hearing will be held before an experienced employment arbitrator or panel of arbitrators licensed to practice law in the State of Georgia and selected by and in accordance with the rules of the AAA, as the exclusive remedy for such dispute, claim or controversy. The forum for such arbitration shall be Atlanta, Georgia. The party seeking arbitration of a dispute, claim or controversy as required by this Section 18 must give specific written notice of any such dispute, claim or controversy to the other party within six (6) months of the date the party seeking arbitration first has knowledge of the event giving rise to such dispute, claim or controversy; -13- otherwise, the dispute, claim or controversy shall be void and deemed waived, even if there is a federal or state statute of limitations which would have given more time to pursue the dispute, claim or controversy. Notwithstanding the foregoing, the Company shall have the right to seek temporary and/or preliminary injunctive relief in a court of competent jurisdiction to enforce the terms of Section 6 hereof. Moreover, this agreement to arbitrate does not apply to or cover other claims by the Company or any non-party to this Agreement for injunctive and/or other equitable relief for unfair competition and/or the use and/or unauthorized disclosure of trade secrets or confidential information. The ultimate resolution of the underlying issues in such litigation shall, however, be subject to this agreement by the parties to resolve any disputes, claims or controversies by arbitration as set forth herein. Section 19. Entire Agreement. ---------------- With respect to its subject matter, this Agreement constitutes the entire understanding of the parties superseding all prior agreements, understandings, negotiations and discussions between them, whether written or oral, and there are no other understandings, representations, warranties or commitments with respect thereto. Section 20. Governing Law; Venue. -------------------- This Agreement will be governed by and interpreted in accordance with the substantive laws of the State of Georgia without reference to conflicts of law. Venue for the purposes of any litigation in connection with this Agreement will lie solely in the state or superior courts in and for Fulton County, Georgia or the United States District Court in and for the Northern District of Georgia. Section 21. Notices. ------- Any notices or other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given and delivered when delivered in person, two (2) days after being mailed postage prepaid by certified or registered mail with return receipt requested, or when delivered by overnight delivery service or by facsimile to the recipient at the following address or facsimile number, or to such other address or facsimile number as to which the other party subsequently shall have been notified in writing by such recipient: If to the Company: Premiere Technologies, Inc. 3399 Peachtree Road, N.E. The Lenox Building Suite 600 Atlanta, GA 30326 Attn: Chief Executive Officer Facsimile: (404) 262-8522 -14- With a copy to (which shall not constitute notice): Premiere Technologies, Inc. 3399 Peachtree Road, N.E. The Lenox Building Suite 600 Atlanta, GA 30326 Attn: Chief Legal Officer Facsimile: (404) 262-8540 If to the Executive: Harvey A. Wagner 2660 Peachtree Road, N.E. Unit 32G Atlanta, Georgia 30305 The parties have executed this Agreement effective as of the 4th day of May, 1998. PREMIERE TECHNOLOGIES, INC. By: /s/ Patrick G. Jones ------------------- Patrick G. Jones THE EXECUTIVE /s/ Harvey A. Wagner -------------------- Harvey A. Wagner -15- EXHIBIT A PROMISSORY NOTE $100,000.00 ____________, 1998 HARVEY A. WAGNER (hereinafter referred to as "Debtor"), for value received, hereby promises to pay to the order of PREMIERE TECHNOLOGIES, INC., a Georgia corporation (hereinafter referred to as "Payee"), the principal sum of ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00), on ___________, 2000, together with interest on the unpaid principal balance at the rate of _________ percent (____%) per annum [the applicable Federal rate under IRC (S)1274(d) in effect on the date of this Note], compounded annually. Any principal of or interest on this Note not paid when due shall bear interest after such due date until paid at the rate of __________ percent (____%) per annum [two points higher than the primary interest rate], and Debtor shall pay all costs of collection. The principal hereof and the interest thereon are payable at 3399 Peachtree Road, Suite 600, Atlanta, GA 30326, or at such other place as Payee may from time to time designate to Debtor in writing, in coin or currency of the United States of America. PREPAYMENT. Debtor may, at any time and from time to time, prepay all or any portion of the principal of this Note remaining unpaid, without penalty or premium. EVENTS OF DEFAULT. If any of the following events (an "Event of Default") shall occur and be continuing for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or come about or be effected by operation of law or otherwise), then this Note shall thereupon be and become, forthwith due and payable, without any further notice or demand of any kind whatsoever, all of which are hereby expressly waived: (a) If Debtor defaults in the payment of principal or interest on this Note when and as the same shall become due and payable and such default continues for ten (10) days after Debtor receives notice from Payee of such default; or (b) If Debtor makes an assignment for the benefit of creditors or admits in writing her inability to pay his debts generally as they become due; or (c) If an order, judgment or decree is entered adjudicating Debtor bankrupt or insolvent; or (d) If Debtor petitions or applies to any tribunal for the appointment of a trustee or receiver of Debtor, or of any substantial part of the assets of Debtor, or commences any proceedings relating to Debtor under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect; or (e) If any such petition or application is filed, or any such proceedings are commenced, against Debtor, and Debtor by any act indicates its approval thereof, consent thereto, or acquiescence therein, or an order is entered appointing any such trustee or receiver, or approving the petition in any such proceedings, and such order remains unstayed and in effect for more than ninety (90) days. CANCELLATION OF DEBT. If Debtor is employed by Payee on the first anniversary of this Note, one-half (1/2) of the unpaid principal of this Note and all accrued interest thereon shall be cancelled, and if Debtor is employed by Payee on the second anniversary of this Note, the balance of the unpaid principal of this Note and all accrued interest thereon shall be cancelled. If Debtor's employment is terminated by Payee without "cause" (as defined in Debtor's Executive Employment and Incentive Option Agreement with Payee) prior to the second anniversary of this Note, then the entire amount of the unpaid principal of this Note and all accrued interest thereon shall be cancelled as of the termination date. WAIVER. Any failure on the part of Payee at any time to require the performance by Debtor of any of the terms or provisions hereof, even if known, shall in no way affect the right thereafter to enforce the same, nor shall any failure of Payee to insist on strict compliance with the terms and conditions hereof be taken or held to be a waiver of any succeeding breach or of the right of Payee to insist on strict compliance with the terms and conditions hereof. TIME. Time is of the essence. NOTICES. All notices, requests, demands and other communications to Debtor hereunder shall be in writing and shall be deemed to have been duly given and delivered when delivered in person, when mailed postage prepaid by registered or certified mail with return receipt requested, or when delivered by overnight delivery service to 2660 Peachtree Road, N.W., Unit 32G, Atlanta, GA 30305, or to such other address as Debtor may designate to Payee in writing. APPLICABLE LAW. This Note shall be governed by, and enforced and interpreted in accordance with, the laws of the State of Georgia. IN WITNESS WHEREOF, Debtor has executed this Note under seal as of the date first set forth above. (L.S.) ------------------------- HARVEY A. WAGNER 2 EX-10.15 6 PROMISSORY NOTE EXHIBIT 10.15 PROMISSORY NOTE $100,000.00 May 11, 1998 HARVEY A. WAGNER (hereinafter referred to as "Debtor"), for value received, hereby promises to pay to the order of PREMIERE TECHNOLOGIES, INC., a Georgia corporation (hereinafter referred to as "Payee"), the principal sum of ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00), on May 11, 2000, together with interest on the unpaid principal balance at the rate of five and one-half percent (5.5%) per annum, compounded annually. Any principal of or interest on this Note not paid when due shall bear interest after such due date until paid at the rate of seven and one-half percent (7.5%) per annum, and Debtor shall pay all costs of collection. The principal hereof and the interest thereon are payable at 3399 Peachtree Road, Suite 600, Atlanta, GA 30326, or at such other place as Payee may from time to time designate to Debtor in writing, in coin or currency of the United States of America. PREPAYMENT. Debtor may, at any time and from time to time, prepay all or any portion of the principal of this Note remaining unpaid, without penalty or premium. EVENTS OF DEFAULT. If any of the following events (an "Event of Default") shall occur and be continuing for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or come about or be effected by operation of law or otherwise), then this Note shall thereupon be and become, forthwith due and payable, without any further notice or demand of any kind whatsoever, all of which are hereby expressly waived: (a) If Debtor defaults in the payment of principal or interest on this Note when and as the same shall become due and payable and such default continues for ten (10) days after Debtor receives notice from Payee of such default; or (b) If Debtor makes an assignment for the benefit of creditors or admits in writing her inability to pay his debts generally as they become due; or (c) If an order, judgment or decree is entered adjudicating Debtor bankrupt or insolvent; or (d) If Debtor petitions or applies to any tribunal for the appointment of a trustee or receiver of Debtor, or of any substantial part of the assets of Debtor, or commences any proceedings relating to Debtor under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect; or (e) If any such petition or application is filed, or any such proceedings are commenced, against Debtor, and Debtor by any act indicates its approval thereof, consent thereto, or acquiescence therein, or an order is entered appointing any such trustee or receiver, or approving the petition in any such proceedings, and such order remains unstayed and in effect for more than ninety (90) days. CANCELLATION OF DEBT. If Debtor is employed by Payee on the first anniversary of this Note, one-half (1/2) of the unpaid principal of this Note and all accrued interest thereon shall be cancelled, and if Debtor is employed by Payee on the second anniversary of this Note, the balance of the unpaid principal of this Note and all accrued interest thereon shall be cancelled. If Debtor's employment is terminated by Payee without "cause" (as defined in Debtor's Executive Employment and Incentive Option Agreement with Payee) prior to the second anniversary of this Note, then the entire amount of the unpaid principal of this Note and all accrued interest thereon shall be cancelled as of the termination date. WAIVER. Any failure on the part of Payee at any time to require the performance by Debtor of any of the terms or provisions hereof, even if known, shall in no way affect the right thereafter to enforce the same, nor shall any failure of Payee to insist on strict compliance with the terms and conditions hereof be taken or held to be a waiver of any succeeding breach or of the right of Payee to insist on strict compliance with the terms and conditions hereof. TIME. Time is of the essence. NOTICES. All notices, requests, demands and other communications to Debtor hereunder shall be in writing and shall be deemed to have been duly given and delivered when delivered in person, when mailed postage prepaid by registered or certified mail with return receipt requested, or when delivered by overnight delivery service to 2660 Peachtree Road, N.W., Unit 32G, Atlanta, GA 30305, or to such other address as Debtor may designate to Payee in writing. APPLICABLE LAW. This Note shall be governed by, and enforced and interpreted in accordance with, the laws of the State of Georgia. IN WITNESS WHEREOF, Debtor has executed this Note under seal as of the date first set forth above. /s/ Harvey A. Wagner (L.S.) ---------------------- HARVEY A. WAGNER 2 EX-10.16 7 SPLIT-DOLLAR AGREEMENT EXHIBIT 10.16 SPLIT-DOLLAR AGREEMENT ---------------------- THIS AGREEMENT is made and entered into as of the 11th day of November, 1998, by and between PREMIERE TECHNOLOGIES, INC., a Georgia corporation (the "Company"), and HARVEY A. WAGNER (the "Owner" and the "Insured"). WITNESSETH: ---------- WHEREAS, the Insured is employed by the Company as a valuable key executive; and WHEREAS, the Insured wishes to provide life insurance protection for the Insured's family when the Insured is dead, under a policy of life insurance (the "Policy") which is described in Exhibit A attached hereto and by this reference made a part hereof, and which is issued by Mass Mutual Life Insurance Company (the "Insurer"); and WHEREAS, the Company is willing to pay a portion of the premiums due on the Policy, on the terms and conditions hereinafter set forth; and WHEREAS, the Company wishes to have the Policy collaterally assigned to it by the Owner, in order to secure the repayment of the amounts which it will pay toward the premiums on the Policy; NOW, THEREFORE, in consideration of the mutual promises contained herein, the parties hereto agree as follows: 1. By virtue of the Insured's change of employment from Scientific- Atlanta, Inc., the Company has temporarily become the owner of the Policy. However, as of the execution of this Agreement, the Insured (i.e., Harvey Wagner) shall become the Owner of the Policy, subject to the collateral assignment in favor of the Company made herein, and for all purposes under this Agreement, the amount of premiums payments deemed to have been made by the Company shall be determined as provided in paragraph 4 of this Agreement. The total face amount of the Policy (as of the date of this Agreement) is $1,399,502.13. The Policy shall be subject to the terms and conditions of this Agreement and of the collateral assignment relating to the Policy. 2. The Owner shall be the sole and absolute owner of the Policy, and may exercise all ownership rights granted to the owner thereof by the terms of the Policy, except as may otherwise be provided herein. The Company shall have no "incidents of ownership" in the Policy within the meaning of I.R.C. (S) 2042. In particular, the Company may not borrow against the Policy or pledge it as security for any indebtedness. 3. Any dividend declared on the Policy shall be applied in accordance with the dividend election currently in force. 4. On or before the due date of each Policy premium, or within the grace period provided therein, the Owner shall remit (or the Insured may remit on the Owner's behalf) to the Company an amount of such premium equal to the one-year term cost of the life insurance protection to which the Owner is entitled in that year, determined in accordance with the principles of Rev. Rul. 64-328, 1964-2 C.B. 11, and Rev. Rul. 66-110, 1966-1 C.B. 12 (and the Company shall cooperate with the Owner in obtaining this information from the Insurer). The Company shall use such remittance for the payment of such premium to the Insurer and shall pay the balance of the premium to the Insurer from its own funds, and the Company shall also have the authority to pay the Insured taxable bonuses or other taxable compensation to enable the Insured to pay the Owner's remittance hereunder. If the Owner fails to pay its share of the premium as required by this paragraph, the Company may elect to pay the full premium, and in such case the Company shall be considered to have paid the full amount of such premium even if such payment results in taxable income to the Insured and/or a taxable gift from the Insured to the Owner. For all purposes under this Agreement, the amount of premium payments deemed to have been made by the Company shall be (1) the payment of $72,382.54 paid to Scientific-Atlanta, Inc., in connection with the Insured's change of employment, plus (2) any premium payments subsequently made by the Company pursuant to this Agreement or during the period between the Company's acquisition of the policy from Scientific-Atlanta, Inc. and the date of execution of this Agreement. -2- 5. To secure the repayment to the Company of the amount of the premiums on the Policy paid by it hereunder, the Owner has, contemporaneously herewith, assigned the Policy to the Company as collateral, under the form used by the Insurer for such assignments. The collateral assignment of the Policy to the Company hereunder shall not be terminated, altered or amended by the Owner without the express written consent of the Company. The parties shall take all action necessary to cause such collateral assignment to conform to the provisions of this Agreement. 6. a. Except as otherwise provided herein, the Owner shall not sell, assign, transfer, borrow against, surrender or cancel the Policy, change the beneficiary designation provision thereof, nor terminate the dividend election thereof, without the express written consent of the Company. b. Notwithstanding any provision hereof to the contrary, (1) if the Owner is the Insured, the Owner may transfer all of its right, title and interest in and to the Policy to a trust created by the Insured for the exclusive benefit (disregarding any remote and contingent beneficial interests) of the Owner's spouse and/or one or more descendants of the Owner, and (2) if the Owner is a trust created by the Insured, the Owner may distribute to a beneficiary all of its right, title and interest in and to the Policy, in either case subject to the collateral assignment of the Policy to the Company pursuant hereto. The Owner may exercise such right by executing a written transfer of ownership in the form used by the Insurer for such transfers of insurance policies, and delivering this form to the Company. Upon receipt of such form, executed by the Owner and duly accepted by the transferee or distributee thereof, the Company shall consent thereto in writing, and shall thereafter treat the Owner's transferee or distributee as the sole owner of all of the Owner's right, title and interest in and to the Policy, subject to this Agreement and the collateral assignment of the Policy to the Company pursuant hereto, whereupon the Owner shall be considered a "former Owner" and such transferee or distributee shall be considered the new Owner for all purposes under this Agreement. Thereafter, the former Owner shall have no right, title or interest in and to the Policy, all such rights being vested in and exercisable only by such distributee or transferee. -3- 7. a. Upon the death of the Insured, the Owner shall promptly take all action necessary to obtain the death benefit provided under the Policy, and the Company shall cooperate with the Owner in this regard. b. The Company shall have the unqualified right to receive a portion of such death benefit equal to the total amount of the premiums paid by it hereunder. The balance of the death benefit provided under the Policy, if any, shall be paid directly to the beneficiary or beneficiaries designated by the Owner (or the Owner's estate if the Company is inadvertently named as beneficiary of such balance), in the manner and in the amount or amounts provided in the beneficiary designation provision of the Policy. In no event shall the amount payable to the Company hereunder exceed the Policy proceeds payable at the death of the Insured. No amount shall be paid from such death benefit to the beneficiary or beneficiaries designated by the Owner until the full amount due the Company hereunder has been paid. The beneficiary designation provision of the Policy shall conform to the provisions hereof. c. Notwithstanding paragraph 6(a) of this Agreement, the Owner may surrender, partially surrender, make withdrawals from or borrow against the Policy at any time if the proceeds of such surrender, withdrawal or loan are at least equal to the amount that the Company would be entitled to receive if the Insured had died on the date of such borrowing or surrender and such amount is immediately paid to the Company. The Owner may pay the Company the full amount to which it would be entitled pursuant to the preceding sentence from other sources at any time. Upon payment to the Company of the full amount to which it is entitled, this Agreement shall terminate, and the Company shall release the collateral assignment of the Policy to it. d. In addition to the borrowing and withdrawals permitted under paragraph 7(c), and notwithstanding paragraph 6(a) of this Agreement, the Owner may make withdrawals from or borrow against the Policy at any time and continue such borrowing provided such withdrawals and borrowing, including any accrued but unpaid interest thereon, do not reduce the Policy's interpolated terminal reserve (net of outstanding policy loans and accrued interest thereon) below the amount that the Company would be entitled to receive if the Insured had died on the date of such withdrawal or borrowing or any later date while any policy loan remains outstanding. -4- 8. This Agreement shall terminate, without notice, (1) upon the total cessation of the business of the Company, or the bankruptcy, receivership or dissolution of the Company; (2) upon the failure of the Owner to pay its share of premium in accordance with paragraph 4 if the Company does not elect to pay the full premium as provided in paragraph 4; (3) upon the termination of the Insured's employment with the Company for "cause" as defined in the Owner's Executive Employment Agreement with the Company (the "Employment Agreement"), or upon the Insured's voluntary termination of employment with the Company prior to Disability (as defined in the Employment Agreement) or normal retirement; (4) at the election of the Company upon the violation by the Owner of the policy loan conditions specified in paragraph 7(d); or (5) upon death of the Insured or as provided in paragraph 7(c). In addition, the Owner may terminate this Agreement by written notice to the Company. Such termination shall be effective as of the date of such notice. 9. In the event this Agreement is terminated, the Company shall have no further obligation to pay any share of premiums on the Policy which subsequently become due. The Owner shall continue to hold the Policy subject to the Company's right to a share of death proceeds or proceeds of any surrender or loan as provided in this Agreement, except that in the case of termination under clause (2), (3) or (4) of paragraph 8 (failure to pay share of premium, certain terminations of employment, or excessive borrowing), the Company shall be entitled to immediately have the Owner take all necessary steps to cause the cancellation of the Policy and enable the Company to receive out of the cancellation proceeds the amount that the Company would be entitled to receive if the Insured had died on the date of such termination (or the Company may allow the Owner to pay the Company such amount from other sources). 10. The Insurer shall be fully discharged from its obligations under the Policy by payment of the Policy death benefit to the beneficiary or beneficiaries named in the Policy, except insofar as the provisions hereof are made a part of the Policy by the collateral assignment executed by the Owner and filed with the Insurer in connection herewith. In no event shall the Insurer be considered a party to this Agreement, or any modification or amendment hereof. No provision of this Agreement, nor of any modification or amendment hereof, shall in any way be -5- construed as enlarging, changing, varying, or in any other way affecting the obligations of the Insurer as expressly provided in the Policy. 11. This Agreement may not be amended, altered or modified, except by a written instrument signed by the parties hereto, or their respective successors or assigns, and may not otherwise be terminated except as provided herein. 12. This Agreement shall be binding upon and inure to the benefit of the Company and the Owner and their successors and assigns, and the Insured, his successors, assigns, heirs, executors, administrators, and beneficiaries. 13. Any notice, consent, or demand required or permitted to be given under the provisions of this Agreement must be in writing, and must be signed by the party giving or making the same. If such notice, consent or demand is mailed to a party hereto, it shall be sent by United States certified mail, postage prepaid, addressed to such party's last known address. The date of such mailing shall be deemed the date of notice, consent, or demand. 14. This Agreement, and the rights of the parties hereunder, shall be governed by and construed in accordance with the laws of the State of Georgia. IN WITNESS WHEREOF, the parties hereto have executed this Agreement, in duplicate, as of the day and year first above written. PREMIERE TECHNOLOGIES, INC. By: /s/ Patrick G. Jones -------------------- Title: Senior Vice President /s/ Harvey A. Wagner -------------------- Harvey A. Wagner, Owner and Insured -6- EXHIBIT A DESCRIPTION OF POLICY Mass Mutual Policy Number 0 020 173 Insured: Harvey A. Wagner Level Death Benefit to Age 65: $1,399,502.13 Level Death Benefit from Age 65 on: $ 233,247.00 Annual premium based on above benefits: $ 4,016.64 -7- EX-10.50 8 CREDIT AGREEMENT EXHIBIT 10.50 ================================================================================ $150,000,000 CREDIT AGREEMENT Dated as of December 17, 1997 As Amended and Restated as of December 16, 1998 Among XPEDITE SYSTEMS, INC. and XPEDITE SYSTEMS HOLDINGS (UK) LIMITED, as Borrowers, the GUARANTORS party hereto, the BANKS listed on the signature pages hereof, NATIONSBANK, N.A., as Documentation Agent, and THE BANK OF NEW YORK, as Administrative Agent Arranged by NATIONSBANC MONTGOMERY SECURITIES LLC, as Sole Lead Arranger and BNY CAPITAL MARKETS, INC. ================================================================================ TABLE OF CONTENTS Page ---- ARTICLE 1 CREDIT FACILITY Section 1.01 Commitment to Lend.................................. 7 Section 1.02 Manner of Borrowing................................. 8 Section 1.03 Interest............................................ 9 (a) Rates......................................... 9 (b) Payment....................................... 9 (c) Conversion and Continuation................... 9 (d) Maximum Interest Rate......................... 10 Section 1.04 Repayment........................................... 11 Section 1.05 Prepayments......................................... 11 (a) Optional Prepayments.......................... 11 (b) Mandatory Prepayments......................... 11 (c) Application to Types of Loans................. 11 Section 1.06 Limitation on Types of Loans........................ 12 Section 1.07 Reduction of Commitments............................ 12 (a) Mandatory Reductions.......................... 12 (b) Optional Reductions........................... 12 Section 1.08 Fees................................................ 13 (a) Commitment Fees............................... 13 (b) Agents' Fees................................. 13 (c) Fees Non-Refundable........................... 13 Section 1.09 Computation of Interest and Fees.................... 13 Section 1.10 Evidence of Indebtedness............................ 13 Section 1.11 Payments by the Borrowers........................... 13 (a) Time, Place and Manner........................ 13 (b) No Reductions................................. 14 (c) Extension of Payment Dates.................... 14 Section 1.12 Distribution of Payments by the Administrative Agent 14 Section 1.13 Taxes............................................... 15 (a) Taxes Payable by the Borrowers................ 15 (b) Credits and Deductions........................ 17 Section 1.14 Pro Rata Treatment.................................. 17 ARTICLE 2 CONDITIONS TO LOANS Section 2.01 Conditions to Effectiveness of Amendment and Restatement.......................................... 17 Section 2.02 Conditions to Each Loan.............................. 19
ARTICLE 3 CERTAIN REPRESENTATIONS AND WARRANTIES Section 3.01 Organization; Power; Qualification..................................... 20 Section 3.02 Subsidiaries........................................................... 20 Section 3.03 Authorization; Enforceability; Required Consents; Absence of Conflicts. 20 Section 3.04 Taxes.................................................................. 21 Section 3.05 Litigation............................................................. 21 Section 3.06 No Adverse Change or Event............................................. 21 Section 3.07 Additional Adverse Facts............................................... 22 Section 3.08 Investment Company Act................................................. 22 Section 3.09 Compliance With Applicable Law and Contracts........................... 22 Section 3.10 Substance Release and Disposal......................................... 22 Section 3.11 Senior Obligations..................................................... 22 ARTICLE 4 CERTAIN COVENANTS Section 4.01 Preservation of Existence and Properties, Scope of Business, Compliance With Law, Preservation of Enforceability.................... 23 Section 4.02 Insurance.............................................................. 23 Section 4.03 Additional Significant Subsidiaries.................................... 23 Section 4.04 Use of Proceeds........................................................ 24 Section 4.05 Indebtedness........................................................... 24 Section 4.06 Guaranties............................................................. 24 Section 4.07 Liens.................................................................. 25 Section 4.08 Merger or Consolidation; Acquisitions.................................. 25 Section 4.09 Disposition of Assets.................................................. 25 Section 4.10 Restricted Payments.................................................... 26 Section 4.11 Limitation on Restrictive Covenants.................................... 26 Section 4.12 Issuance or Disposition of Capital Securities.......................... 26 Section 4.13 Investments............................................................ 26 Section 4.14 Taxes of Other Persons................................................. 27 Section 4.15 Benefit Plans.......................................................... 27 Section 4.16 Transactions With Affiliates........................................... 27 Section 4.17 Substance Storage and Disposal......................................... 27 Section 4.18 Capital Expenditures................................................... 27 Section 4.19 Premiere Leverage Ratio................................................ 28 Section 4.20 Premiere Interest Coverage Ratio....................................... 28 Section 4.21 Minimum Consolidated Revenues.......................................... 28 Section 4.22 Xpedite Leverage Ratio................................................. 28 Section 4.23 Xpedite Interest Coverage Ratio........................................ 28
-2- ARTICLE 5 INFORMATION Section 5.01 Information to Be Furnished........................................ 28 (a) Quarterly Financial Statements................................. 28 (b) Year-End Financial Statements; Accountants' Certificate........ 29 (c) Monthly Financial Statements................................... 29 (d) Officer's Certificate as to Financial Statements and Defaults.. 30 (e) Reports and Filings............................................ 30 (f) Requested Information.......................................... 30 (g) Notice of Defaults, Material Adverse Changes and Other Matters........................................................ 30 Section 5.02 Accuracy of Financial Statements and Information.................. 31 (a) Financial Statements........................................... 31 (b) Other Information.............................................. 32 Section 5.03 Additional Covenants Relating to Disclosure........................ 33 (a) Accounting Methods and Financial Records....................... 33 (b) Fiscal Year.................................................... 33 (c) Visits, Inspections and Discussions............................ 33 Section 5.04 Authorization of Third Parties to Deliver Information.............. 33 ARTICLE 6 DEFAULT Section 6.01 Events of Default................................................. 33 Section 6.02 Remedies Upon Event of Default.................................... 36 ARTICLE 7 ADDITIONAL CREDIT FACILITY PROVISIONS Section 7.01 Mandatory Suspension and Conversion of Eurocurrency Rate Loans.... 37 Section 7.02 Regulatory Changes................................................ 38 Section 7.03 Funding Losses.................................................... 38 Section 7.04 Certain Determinations............................................ 39 Section 7.05 Change of Lending Office.......................................... 39 Section 7.06 Replacement of Banks.............................................. 39 ARTICLE 8 GUARANTY Section 8.01 Guaranty of Payment and Performance; Limitation of Guaranty...... 40 Section 8.02 Continuance and Acceleration of Guaranteed Obligations Upon Certain Events................................................... 41 Section 8.03 Recovered Payments............................................... 41 Section 8.04 Nature of Guarantors' Obligations................................ 41 Section 8.05 No Release of Guarantors......................................... 42
-3- Section 8.06 Certain Waivers.................................................. 43 Section 8.07 Subordination of Rights Against the Borrowers and Collateral..... 44 ARTICLE 9 THE AGENTS Section 9.01 Appointment and Powers............................................ 44 Section 9.02 Limitation on Administrative Agent's Liability.................... 44 Section 9.03 Defaults.......................................................... 45 Section 9.04 Rights as a Bank.................................................. 45 Section 9.05 Indemnification................................................... 46 Section 9.06 Non-Reliance on Administrative Agent and Other Banks.............. 46 Section 9.07 Resignation of the Administrative Agent........................... 46 Section 9.08 Execution and Amendment of Loan Documents on Behalf of the Banks.. 47 ARTICLE 10 MISCELLANEOUS Section 10.01 Notices and Deliveries............................................ 47 Section 10.02 Expenses; Indemnification......................................... 49 Section 10.03 Amounts Payable Due Upon Request for Payment...................... 50 Section 10.04 Remedies of the Essence........................................... 50 Section 10.05 Rights Cumulative................................................. 50 Section 10.06 Confidentiality and Disclosures................................... 50 Section 10.07 Amendments; Waivers............................................... 51 Section 10.08 Set-Off; Suspension of Payment and Performance.................... 51 Section 10.09 Sharing of Recoveries............................................. 52 Section 10.10 Assignments and Participations.................................... 52 (a) Assignments.................................................. 52 (b) Participations............................................... 53 Section 10.11 Governing Law..................................................... 54 Section 10.12 Judicial Proceedings; Waiver of Jury Trial........................ 54 Section 10.13 Reference Bank.................................................... 55 Section 10.14 Severability of Provisions........................................ 55 Section 10.15 Counterparts...................................................... 55 Section 10.16 Survival of Obligations........................................... 55 Section 10.17 Entire Agreement.................................................. 55 Section 10.18 Successors and Assigns............................................ 55 Section 10.19 No Fiduciary Relationship Established by Loan Documents........... 55 Section 10.20 Judgment Currency................................................. 56 Section 10.21 Worldwide UK Security Agreement................................... 56
-4- ARTICLE 11 INTERPRETATION Section 11.01 Defined Terms........................................... 56 Section 11.02 Other Interpretive Provisions........................... 72 Section 11.03 Accounting Matters...................................... 72 Section 11.04 Representations and Warranties.......................... 73 Section 11.05 Captions................................................ 73 Section 11.06 Interpretation and Related Documents.................... 73 Section 11.07 Undertaking by Premiere................................. 73 ANNEX A BANKS, LENDING OFFICES AND NOTICE ADDRESSES Schedule 1.02 NOTICE OF BORROWING FOR LOANS Schedule 1.03(c)(iv) NOTICE OF CONVERSION OR CONTINUATION Schedule 1.05(a) NOTICE OF PREPAYMENT Schedule 2.01(a)(i) CERTIFICATE AS TO RESOLUTIONS, ETC. Schedule 2.01(a)(iv) FORM OF OPINION OF COUNSEL FOR THE LOAN PARTIES Schedule 2.01(a)(v) FORM OF OPINION OF ENGLISH COUNSEL FOR XPEDITE SYSTEMS HOLDINGS (UK) LIMITED Schedule 2.01(a)(vi) FORM OF OPINION OF WINTHROP, STIMSON, PUTNAM & ROBERTS Schedule 3.02 SCHEDULE OF SUBSIDIARIES Schedule 3.03 SCHEDULE OF REQUIRED CONSENTS AND GOVERNMENTAL APPROVALS Schedule 3.10 SCHEDULE OF ENVIRONMENTAL MATTERS Schedule 4.03 FORM OF SUBSIDIARY GUARANTY SUPPLEMENT Schedule 4.05 SCHEDULE OF EXISTING INDEBTEDNESS Schedule 4.06 SCHEDULE OF EXISTING GUARANTIES Schedule 4.07 SCHEDULE OF EXISTING LIENS Schedule 4.11 SCHEDULE OF PERMITTED RESTRICTIVE COVENANTS Schedule 4.13 SCHEDULE OF EXISTING INVESTMENTS Schedule 4.15 SCHEDULE OF EXISTING BENEFIT PLANS Schedule 5.02(a) SCHEDULE OF HISTORICAL FINANCIAL INFORMATION Schedule 10.10(a) NOTICE OF ASSIGNMENT Schedule 11.01(a) SCHEDULE OF SUBSIDIARIES THAT ARE GUARANTORS AS OF THE AGREEMENT DATE Schedule 11.01(b) SECURITIES AND EXCHANGE COMMISSION FILINGS Schedule 11.01(c) CALCULATION OF ADDITIONAL STERLING COST EXHIBIT A FORM OF NOTE EXHIBIT B FORM OF SECURITY AGREEMENT -7- CREDIT AGREEMENT Dated as of December 17, 1997 As Amended and Restated as of December 16, 1998 XPEDITE SYSTEMS, INC., a Delaware corporation (the "Company"), XPEDITE SYSTEMS HOLDINGS (UK) LIMITED, an English corporation ("Xpedite UK", with each of the Company and Xpedite UK individually a "Borrower" and collectively the "Borrowers"), the GUARANTORS party hereto, the BANKS listed on the signature pages hereof, NATIONSBANK, N.A., as Documentation Agent, and THE BANK OF NEW YORK, as Administrative Agent, agree that the Credit Agreement among them dated as of December 17, 1997, as amended by Amendment No. 1 dated as of February 27, 1998, shall be amended and restated as of December 16, 1998, subject to the conditions to effectiveness set forth in Section 2.01, to read in its entirety as follows (with certain terms used herein being defined in Article 11): ARTICLE 1 CREDIT FACILITY --------------- Section 1.01 Commitment to Lend. ------------------ (a) Upon the terms and subject to the conditions of this Agreement, each Bank agrees to make, from time to time during the period from the Restated Agreement Date through the Commitment Termination Date, one or more Loans to either Borrower in an aggregate unpaid principal amount (with respect to all Loans made by such Bank to either Borrower and with the outstanding principal amount of each Loan to Xpedite UK being, for these purposes, the Dollar Equivalent thereof at such time) not exceeding at any time such Bank's Commitment at such time; provided, however, that the Banks shall not make Loans -------- ------- to Xpedite UK if, after giving effect to such Loans, the Dollar Equivalent at such time of the aggregate principal amount of all Loans to Xpedite UK then outstanding would exceed the Sterling Sub-limit. Loans made to the Company shall be denominated in Dollars and Loans made to Xpedite UK shall be denominated in Sterling. Subject to Section 1.03 and the other terms and conditions of this Agreement, (i) the Loans may, at the option of the applicable Borrower, be made as, and from time to time continued as or converted into, Eurocurrency Rate Loans of any permitted Type, or any combination thereof and (ii) Loans made to the Company may, at the option of the Company, be made as, and from time to time continued as or converted into, Base Rate Loans. The aggregate amount of the Commitments on the Restated Agreement Date is $150,000,000 and the Sterling Sub-limit on the Restated Agreement Date is $70,000,000. (b) Prior to April 30, 1999, the aggregate amount of the Commitments may be increased to an amount not in excess of $200,000,000 (less the amount of any mandatory reduction of the aggregate amount of the Commitments pursuant to Section 1.07(a)) so long as additional lending commitments in respect of this Agreement from lenders and in amounts 1 satisfactory to the Banks and the Managing Agents have been obtained, subject to the agreement related thereto among the Company and the Managing Agents. Section 1.02 Manner of Borrowing. (a) The applicable Borrower shall give ------------------- the Administrative Agent notice (which shall be irrevocable) no later than 11:00 a.m. (New York City time) on (1) in the case of Eurocurrency Rate Loans to be made to the Company, the third Eurocurrency Business Day, (2) in the case of Eurocurrency Rate Loans to be made to Xpedite UK, the fourth Eurocurrency Business Day and (3) in the case of Base Rate Loans to be made to the Company, the Business Day, before the requested date for the making of Loans. Each such notice shall be in the form of Schedule 1.02 and shall specify (i) the requested ------------- date for the making of the requested Loans, which shall be a Eurocurrency Business Day (or, in the case of Base Rate Loans to be made to the Company, a Business Day), (ii) the Type or Types of Loans requested and (iii) the amount of each such Type of Loan, the aggregate of which amounts for all Types of Loans requested shall be, in the case of Loans made to the Company, $1,000,000 or any integral multiple of $1,000,000 in excess thereof, or, if less than $1,000,000, the aggregate amount of the unused Commitments and, in the case of Loans made to Xpedite UK, (Pounds)500,000 or any integral multiple of (Pounds)500,000 in excess thereof, or, if less than (Pounds)500,000, the aggregate amount of the unused Sterling Sub-limit. Upon receipt of any such notice, the Administrative Agent shall promptly notify each Bank of the contents thereof and of the amount and Type of each Loan to be made by such Bank on the requested date specified therein. (b) Not later than 11:00 a.m. (New York City time) on each requested date for the making of Loans, each Bank shall make available to the Administrative Agent, in Dollars or Sterling, as the case may be, in funds immediately available to the Administrative Agent (or, in the case of Loans disbursed in Sterling, in funds as may then be customary for the settlement of international transactions in Sterling) at the Administrative Agent's Office, the Loans to be made by such Bank on such date. Any Bank's failure to make any Loan to be made by it on the requested date therefor shall not relieve any other Bank of its obligation to make any Loan to be made by such other Bank on such date, but such other Bank shall not be liable for such failure. (c) Unless the Administrative Agent shall have received notice from a Bank prior to 10:00 a.m. (New York City time) on the requested date for the making of any Loans that such Bank will not make available to the Administrative Agent the Loans requested to be made by such Bank on such date, the Administrative Agent may assume that such Bank has made such Loans available to the Administrative Agent on such date in accordance with Section 1.02(b) and the Administrative Agent in its sole discretion may, in reliance upon such assumption, make available to the applicable Borrower on such date a corresponding amount on behalf of such Bank. If and to the extent such Bank shall not have so made available to the Administrative Agent the Loans requested to be made by such Bank on such date and the Administrative Agent shall have so made available to the applicable Borrower a corresponding amount on behalf of such Bank, such Bank shall, on demand, pay to the Administrative Agent such corresponding amount together with interest thereon, for each day from the date such amount shall have been so made available by the Administrative Agent to the applicable Borrower until the date such amount shall have been repaid to the Administrative Agent, at a rate per annum equal to, in the case of Loans denominated in Dollars, the Federal Funds Rate until (and including) the third Business Day after demand is made and thereafter at the Base Rate and, in the case of Loans denominated in Sterling, the overnight London interbank Sterling rate, as determined by the -2- Administrative Agent. If such Bank does not pay such corresponding amount promptly upon the Administrative Agent's demand therefor, the Administrative Agent shall promptly notify the applicable Borrower and such Borrower shall immediately repay such corresponding amount to the Administrative Agent together with accrued interest thereon at the applicable rate or rates provided in Section 1.03(a). Nothing in this Section 1.02(c) shall be deemed to limit the obligation of any Bank to make Loans hereunder or to limit the rights that the Borrowers may have against any Bank for its failure to make any Loans hereunder. (d) All Loans made available to the Administrative Agent in accordance with Section 1.02(b) shall be disbursed by the Administrative Agent not later than 12:00 noon (New York City time) on the requested date therefor in Dollars or Sterling, as the case may be, in funds immediately available to the applicable Borrower (or, in the case of Loans disbursed in Sterling, in funds as may then be customary for the settlement of international transactions in Sterling) by credit to an account of such Borrower at the Administrative Agent's Office or in such other manner as may have been specified in the applicable notice of borrowing and as shall be acceptable to the Administrative Agent. Section 1.03 Interest. -------- (a) Rates. ----- (i) Subject to Section 1.03(a)(ii), each Loan shall bear interest on the outstanding principal amount thereof at a rate per annum equal to (A) in the case of Loans made to the Company, for so long as it is a Base Rate Loan, the Base Rate as in effect from time to time plus 2.125% ---- and (B) for so long as it is a Eurocurrency Rate Loan, the applicable Eurocurrency Rate plus 3.250%. ---- (ii) If all or any part of a Loan or any other amount due and payable under the Loan Documents is not paid when due (whether at maturity, by reason of notice of prepayment or acceleration or otherwise), such unpaid amount shall, to the maximum extent permitted by Applicable Law, bear interest for each day during the period from the date such amount became so due until it shall be paid in full (whether before or after judgment) at a rate per annum equal to the applicable Post-Default Rate. (b) Payment. ------- Interest shall be payable, in the case of Loans that are (i) Base Rate Loans, on each Interest Payment Date, (ii) Eurocurrency Rate Loans, on the last day of each applicable Interest Period (and, if an Interest Period is longer than three months, at intervals of three months after the first day of such Interest Period), (iii) any Loan, when such Loan shall be due (whether at maturity, by reason of notice of prepayment or acceleration or otherwise) or converted, but only to the extent then accrued on the amount then so due or converted. Interest at the Post-Default Rate shall be payable on demand. Interest on Loans denominated in Sterling shall be paid in Sterling. (c) Conversion and Continuation. --------------------------- (i) Subject to Section 7.03, all or any part of the principal amount of Loans of any Type may, on any Business Day, be converted into any other Type or Types of Loans (except that Loans made to Xpedite UK may not be converted into Base Rate Loans), except that Base Rate Loans may be converted into Eurocurrency Rate Loans only on a Eurocurrency Business Day. (ii) Base Rate Loans shall continue as Base Rate Loans unless and until such Loans are converted into Loans of another Type. Eurocurrency Rate Loans of any Type shall -3- continue as Loans of such Type until the end of the then current Interest Period therefor, at which time they shall be automatically converted into, in the case of Loans made to the Company, Base Rate Loans and, in the case of Loans made to Xpedite UK, Eurocurrency Rate Loans having a one month Interest Period unless, in either case, the applicable Borrower shall have given the Administrative Agent notice in accordance with Section 1.03(c)(iv) requesting either that such Loans continue as Loans of such Type for another Interest Period or that such Loans be converted into Loans of another Type at the end of such Interest Period. (iii) Notwithstanding anything to the contrary contained in Section 1.03(c)(i) or (ii), during a Default, the Administrative Agent may notify the Borrowers that Loans may only be converted into or continued as Loans of certain specified Types and, thereafter, until no Default shall continue to exist, Loans may not be converted into or continued as Loans of any Type other than one or more of such specified Types. (iv) The applicable Borrower shall give the Administrative Agent notice (which shall be irrevocable) of each conversion of Loans or continuation of Eurocurrency Rate Loans no later than 11:00 a.m. (New York City time) on, in the case of a conversion of Loans made to the Company into Base Rate Loans, the Business Day before, and, in the case of a conversion into or continuation of Eurocurrency Rate Loans, the third Eurocurrency Business Day before, the requested date of such conversion or continuation. Each notice of conversion or continuation shall be in the form of Schedule 1.03(c)(iv) and shall specify (A) -------------------- the requested date of such conversion or continuation, (B) the amount and Type and, in the case of Eurocurrency Rate Loans, the last day of the applicable Interest Period of the Loans to be converted or continued and (C) the amount and Type or Types of Loans into which such Loans are to be converted or as which such Loans are to be continued. Upon receipt of any such notice, the Administrative Agent shall promptly notify each Bank of (x) the contents thereof, (y) the amount and Type and, in the case of Eurocurrency Rate Loans, the last day of the applicable Interest Period of each Loan to be converted or continued by such Bank and (z) the amount and Type or Types of Loans into which such Loans are to be converted or as which such Loans are to be continued. (d) Maximum Interest Rate. --------------------- Nothing contained in the Loan Documents shall require either Borrower at any time to pay interest at a rate exceeding the Maximum Permissible Rate. If interest payable by either Borrower on any date would exceed the maximum amount permitted by the Maximum Permissible Rate, such interest payment shall automatically be reduced to such maximum permitted amount, and interest for any subsequent period, to the extent less than the maximum amount permitted for such period by the Maximum Permissible Rate, shall be increased by the unpaid amount of such reduction. Any interest actually received from a Borrower for any period in excess of such maximum amount permitted for such period shall be deemed to have been applied as a prepayment of the Loans of such Borrower. Section 1.04 Repayment. --------- The Loans shall mature and become due and payable, and shall be repaid by the applicable Borrower in full, on the Commitment Termination Date. Section 1.05 Prepayments. ----------- (a) Optional Prepayments. -------------------- Either Borrower may, at any time and from time to time, prepay the Loans made to it in whole or in part, without premium or penalty (but subject to Section 7.03), except that any partial prepayment of Loans shall be in an -4- aggregate principal amount of, in the case of Loans denominated in Dollars, $1,000,000 or any integral multiple of $1,000,000 in excess thereof and, in the case of Loans denominated in Sterling, (Pounds)500,000 or any integral multiple of (Pounds)500,000 in excess thereof. The applicable Borrower shall give the Administrative Agent notice of each prepayment pursuant to this Section 1.05(a) no later than 11:00 a.m. (New York City time) on, in the case of a prepayment of Base Rate Loans, the Business Day before, and, in the case of a prepayment of Eurocurrency Rate Loans, the third Eurocurrency Business Day before, the date of such prepayment. Each such notice of prepayment shall be in the form of Schedule 1.05(a) and shall specify (i) the date such prepayment is to be made - - ---------------- and (ii) the amount and Type and, in the case of Eurocurrency Rate Loans, the last day of the applicable Interest Period of the Loans to be prepaid. Upon receipt of any such notice, the Administrative Agent shall promptly notify each Bank of the contents thereof and the amount and Type and, in the case of Eurocurrency Rate Loans, the last day of the applicable Interest Period of each Loan of such Bank to be prepaid. Amounts to be prepaid pursuant to this Section 1.05(a) shall irrevocably be due and payable on the date specified in the applicable notice of prepayment, together with interest thereon as provided in Section 1.03(b). Any Loan that shall have been prepaid prior to the Commitment Termination Date may, subject to the terms and conditions hereof, be reborrowed prior to the Commitment Termination Date. (b) Mandatory Prepayments. --------------------- If, after giving effect to any partial or total reduction of the Commitments pursuant to Section 1.07, the aggregate unpaid principal amount of the Loans (with the unpaid principal amount of the Loans made to Xpedite UK being, for these purposes, the Dollar Equivalent thereof at such time) exceeds the aggregate Commitments, either or both of the Borrowers shall prepay the Loans on the date of such reduction in an aggregate amount (with the amount of any such prepayment of the Loans made to Xpedite UK being, for these purposes, the Dollar Equivalent thereof at such time) equal to the amount of such excess, together with interest thereon as provided in Section 1.03. (c) Application to Types of Loans. ----------------------------- Amounts prepaid by either Borrower pursuant to this Section 1.05 shall be applied, unless otherwise specified by such Borrower, to prepay (i) in the case of prepayments by the Company, Base Rate Loans of the Company, and (ii) (in the case of the Company, to the extent that the amount of any such prepayment exceeds the then outstanding aggregate principal amount of such Base Rate Loans) the Eurocurrency Rate Loans of such Borrower in the order that the Interest Periods for such Loans end. Amounts to be prepaid pursuant to this Section 1.05 shall be paid on the day specified therefor, whether or not such payment would require a prepayment of Eurocurrency Rate Loans prior to the last day of an applicable Interest Period or would result in losses, costs or expenses compensable under Section 7.03. Section 1.06 Limitation on Types of Loans. ---------------------------- Notwithstanding anything to the contrary contained in this Agreement, the Borrowers shall borrow, prepay, convert and continue Loans in a manner such that (a) the aggregate principal amount of Eurocurrency Rate Loans of the same Type and having the same Interest Period shall at all times be not less than, in the case of Loans denominated in Dollars, $1,000,000 and, in the case of Loans denominated in Sterling, (Pounds)500,000, (b) there shall not be, at any one time, more than six Interest Periods in effect with respect to Eurocurrency Rate Loans of all Types and (c) no payment of Eurocurrency Rate Loans will have to be made prior to the last day of an applicable Interest Period in order to repay the Loans (subject to Section 1.11(c)) on the date specified in Section 1.04. -5- Section 1.07 Reduction of Commitments. ------------------------ (a) Mandatory Reductions. -------------------- In the event of any sale or disposition of investment securities by Premiere or any Subsidiary permitted pursuant to Section 4.09(d)(i) (other than any sale or disposition the Net Proceeds of which, together with the Net Proceeds of all other such sales or dispositions since the Restated Agreement Date, are not in excess of $5,000,000) (the Net Proceeds of such sale or disposition in excess of $5,000,000 being hereinafter referred to for the purposes of this Section 1.07(a) as "Recapture Proceeds"), the aggregate Commitments shall, on the first Business Day following such sale or disposition, be automatically reduced by an amount equal to (i) 100% of the first $10,000,000 of Recapture Proceeds and (ii) 50% of all other Recapture Proceeds. (b) Optional Reductions. ------------------- The Company may reduce the Commitments by giving the Administrative Agent notice (which shall be irrevocable) thereof no later than 11:00 a.m. (New York City time) on the third Business Day before the requested date of such reduction, except that no reduction may reduce the Commitments to an amount less than the aggregate unpaid principal amount of the Loans at such time (with the amount of the unpaid Loans made to Xpedite UK being, for these purposes, the Dollar Equivalent thereof at such time) and no partial reduction of the Commitments shall be in an aggregate amount other than $1,000,000 or any integral multiple of $1,000,000 in excess thereof. Upon receipt of any such notice, the Administrative Agent shall promptly notify each Bank of the contents thereof and the amount to which such Bank's Commitment is to be reduced. No reduction of the Commitments shall reduce the Sterling Sub-limit except that if, after giving effect to any such reduction of the Commitments, the aggregate amount of the remaining Commitments would be less than the Sterling Sub-limit, the Sterling Sub-limit thenceforth shall be such lesser amount. Section 1.08 Fees. ---- (a) Commitment Fees. --------------- The Borrowers shall pay to the Administrative Agent for the account of each Bank a commitment fee on the daily amount of the unused Commitments (with the amount of the utilization thereof consisting of Loans made to Xpedite UK being, for these purposes, the Dollar Equivalent thereof on each such day) for each day from the Restated Agreement Date through the Commitment Termination Date at a rate per annum of 0.375%, payable in arrears on successive Quarterly Dates and on the Commitment Termination Date. To the extent accrued and unpaid prior to the Restated Agreement Date, the commitment fee payable pursuant to this Section 1.08 prior to the amendment and restatement of this Agreement as of the Restated Agreement Date shall be paid on the Restated Agreement Date. (b) Agents' Fees. ------------ The Company or Premiere shall pay the fees payable pursuant to the Agents' Fee Letters. Such fees shall be paid to the Persons, in the amounts and at the times provided therein. (c) Fees Non-Refundable. ------------------- None of the fees payable under this Section 1.08 shall be refundable in whole or in part. Section 1.09 Computation of Interest and Fees. -------------------------------- Interest calculated on the basis of the Eurocurrency Rate or the Federal Funds Rate and the commitment fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed. Interest calculated on the basis of the Prime Rate shall be computed on the basis of a year of 365 or 366 days, as -6- applicable, and paid for the actual number of days elapsed. Interest for any period shall be calculated from and including the first day thereof to but excluding the last day thereof. Section 1.10 Evidence of Indebtedness. ------------------------ Each Bank's Loans and each Borrower's obligation to repay such Loans with interest in accordance with the terms of this Agreement shall be evidenced by this Agreement, the records of such Bank and a single Note of each Borrower payable to the order of such Bank. The records of each Bank shall be prima facie evidence of such Bank's Loans, and of accrued interest thereon and of all payments made in respect thereof. Section 1.11 Payments by the Borrowers. ------------------------- (a) Time, Place and Manner. ---------------------- All payments due to the Administrative Agent under the Loan Documents shall be made to the Administrative Agent at the Administrative Agent's Office or at such other address as the Administrative Agent may designate by notice to the applicable Borrower. All payments due to any Bank under the Loan Documents shall, in the case of payments on account of principal of or interest on the Loans or fees, be made to the Administrative Agent at the Administrative Agent's Office and, in the case of all other payments, be made directly to such Bank at its Domestic Lending Office or at such other address as such Bank may designate by notice to the applicable Borrower. All payments due to any Bank under the Loan Documents, whether made to the Administrative Agent or directly to such Bank, shall be made for the account of, in the case of payments in respect of Eurocurrency Rate Loans, such Bank's Eurocurrency Lending Office and, in the case of all other payments, such Bank's Domestic Lending Office. A payment shall not be deemed to have been made on any day unless such payment has been received by the required Person, at the required place of payment, in Dollars (or, in the case of the principal of and interest on the Loans made to Xpedite UK, in Sterling) in funds immediately available to such Person at such place, no later than 2:00 p.m. (New York City time) on such day. (b) No Reductions. ------------- All payments due to the Administrative Agent or any Bank under the Loan Documents shall be made by the applicable Borrower without any reduction or deduction whatsoever, including any reduction or deduction for any set-off, recoupment, counterclaim or Tax, except, subject to Section 1.13, for any withholding or deduction for Taxes required to be withheld or deducted under Applicable Law. (c) Extension of Payment Dates. -------------------------- Whenever any payment to the Administrative Agent or any Bank under the Loan Documents would otherwise be due on a day that is not a Business Day, or, in the case of payments of the principal of Eurocurrency Rate Loans, a Eurocurrency Business Day, such payment shall instead be due on the next succeeding Business or Eurocurrency Business Day, as the case may be, unless, in the case of a payment of the principal of Eurocurrency Rate Loans, such extension would cause payment to be due in the next succeeding calendar month, in which case such due date shall be advanced to the next preceding Eurocurrency Business Day. If the date any payment under the Loan Documents is due is extended (whether by operation of any Loan Document, Applicable Law or otherwise), such payment shall bear interest for such extended time at the rate of interest applicable hereunder. Section 1.12 Distribution of Payments by the Administrative Agent. ---------------------------------------------------- (a) The Administrative Agent shall promptly distribute to each Bank its ratable share of each payment received by the Administrative Agent under the Loan Documents for the account of the Banks by -7- credit to an account of such Bank at the Administrative Agent's Office or by wire transfer to an account of such Bank at an office of any other commercial bank located in the United States. (b) Unless the Administrative Agent shall have received notice from the applicable Loan Party prior to the date on which any payment is due to the Banks under the Loan Documents that such Loan Party will not make such payment in full, the Administrative Agent may assume that such Loan Party has made such payment in full to the Administrative Agent on such date and the Administrative Agent in its sole discretion may, in reliance upon such assumption, cause to be distributed to each Bank on such due date a corresponding amount with respect to the amount then due such Bank. If and to the extent such Loan Party shall not have so made such payment in full to the Administrative Agent and the Administrative Agent shall have so distributed to any Bank a corresponding amount, such Bank shall, on demand, repay to the Administrative Agent the amount so distributed together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Administrative Agent, at, in the case of any such payment denominated in Sterling, the overnight London interbank Sterling rate, as determined by the Administrative Agent, or, in all other cases, the Federal Funds Rate until (and including) the third Business Day after demand is made and thereafter at the Base Rate. Section 1.13 Taxes. ----- (a) Taxes Payable by the Borrowers. ------------------------------ If under Applicable Law any Tax (other than a Bank Tax) is required to be withheld or deducted by either Borrower from, or is otherwise payable by such Borrower in connection with, any payment to the Administrative Agent or any Bank under the Loan Documents, such Borrower shall, subject to Section 1.13(a)(ii), pay to the Administrative Agent or such Bank, as applicable, such additional amounts as may be necessary so that the net amount received by the Administrative Agent, or such Bank with respect to such payment, after withholding or deducting all Taxes (other than Bank Taxes) required to be withheld or deducted by the Borrower, is equal to the full amount payable under the Loan Documents. (i) Taxes Payable by the Administrative Agent or any Bank. ----------------------------------------------------- The applicable Borrower shall, promptly upon request by the Administrative Agent or any Bank for the payment thereof, but subject to Section 1.13(a)(ii), pay to the Administrative Agent or such Bank, as the case may be, (A) all Taxes (other than Bank Taxes, payable by the Administrative Agent or such Bank, as the case may be) with respect to any payment due to the Administrative Agent or such Bank under the Loan Documents from such Borrower and (B) all Taxes payable by the Administrative Agent or such Bank as a result of payments made by such Borrower (whether made to a taxing authority or to the Administrative Agent or such Bank) pursuant to this Section 1.13(a)(i). (ii) Limitations. ----------- Notwithstanding anything to the contrary contained herein, neither Borrower shall be required to pay any additional amount in respect of any Taxes pursuant to this Section 1.13 to any Bank (A) except to the extent such Taxes are required to be withheld as a result of (1) in the case of a Person that is a Bank on the Restated Agreement Date, a Regulatory Change Enacted after the Restated Agreement Date and (2) in the case of a Person that becomes a Bank after the Restated Agreement Date, a Regulatory Change Enacted after such Person becomes a Bank or (B) to the extent such withholding is required because such Bank (including any Person that becomes a Bank or -8- a participant pursuant to Section 10.10) has failed to submit or submitted incorrectly any form or certificate that it is entitled to so submit under Applicable Law or required to submit pursuant to Section 1.13(a)(iii). (iii) Exemption From U.S. Withholding Taxes. ------------------------------------- There shall be submitted to the Company and the Administrative Agent, (A) on or before the first date that interest or fees are payable to a Bank (including any Person that becomes a Bank or a participant pursuant to Section 10.10) under the Loan Documents, (or at any other time upon the reasonable written request of the Company or the Administrative Agent) (1) if at the time the same are applicable, by each Bank that is not a United States Person, (aa) two duly completed and signed copies of Internal Revenue Service Form 1001 or 4224, entitling such Bank to a complete exemption from withholding of any United States federal income taxes on all amounts to be received by such Bank under the Loan Documents, and (bb) two duly completed and signed copies of Internal Revenue Service Form W-8 establishing a full exemption from U.S. backup withholding in respect of amounts to be received by such Bank under the Loan Documents, or (2) if at the time any of the foregoing are inapplicable, duly completed and signed copies of such form, if any, as entitles such Bank to exemption from withholding of United States federal income taxes to the maximum extent to which such Bank is then entitled under Applicable Law, and (B) from time to time thereafter, prior to the expiration or obsolescence of any previously delivered form or upon any previously delivered form becoming inaccurate or inapplicable, such further duly completed and signed copies of such form, if any, as entitles such Bank to exemption from withholding of United States federal income taxes to the maximum extent to which such Bank is then entitled under Applicable Law. Each Bank (including any Person that becomes a Bank or a participant pursuant to Section 10.10) shall promptly notify the Company and the Administrative Agent if (A) it is required to withdraw or cancel any form or certificate previously submitted by it or any such form or certificate has otherwise become ineffective or inaccurate or (B) payments to it are or will be subject to withholding of United States federal income taxes (or any other Taxes (other than Bank Taxes)) to a greater extent than the extent to which payments to it were previously subject. On or before the first date that interest or fees are payable to a Bank (including any Person that becomes a Bank or a participant pursuant to Section 10/10), or upon the request of the Company or the Administrative Agent, each Bank that is a United States Person shall from time to time submit to the Company and the Administrative Agent a certificate to the effect that it is such a United States Person and a duly completed Internal Revenue Service Form W-9. A Borrower shall be entitled to rely upon the accuracy of any such forms, documents, certificates or other information furnished to it by any Bank pursuant to this Section 1.13(a)(iii) and shall have no obligation to make any additional payments or indemnify the Administrative Agent or any Bank for any Taxes under Section 1.13(a)(i) that would not have become payable by such Person had such documentation been accurate. (b) Credits and Deductions. ---------------------- If the Administrative Agent or any Bank (i) is, in its sole, reasonable, good-faith opinion, able to apply for any credit, refund, deduction or other reduction in Taxes in respect of any payment made by a Borrower under Section 1.13(a)(i), the Administrative Agent or such Bank, as the case may be, shall use reasonable efforts to obtain such credit, refund, deduction or other reduction or, (ii) realizes a Tax benefit (whether by way -9- of credit, deduction or otherwise) in respect of or receives a refund of, or in respect of, any Taxes for which a Borrower has made any payments to or on behalf of such Administrative Agent or Bank pursuant to Section 1.13(a)(i), then, upon receipt or realization thereof, the Administrative Agent or such Bank will pay to such Borrower, as promptly as practicable after the receipt or realization thereof, such amount, not exceeding the increased amount paid by such Borrower, as is equal to the net after-tax value to the Administrative Agent or such Bank, in its sole, reasonable and good-faith opinion, of such part of such credit, deduction or other reduction as it reasonably considers to be allocable to such payment by such Borrower, having regard to all of the Administrative Agent's or such Bank's dealings giving rise to similar credits, refunds, deductions or other reductions in relation to the same tax period and to the cost of obtaining the same; provided, however, that (i) the Administrative Agent or such Bank, as -------- ------- the case may be, shall not be obligated to disclose to the Borrowers any information regarding its tax affairs or computations and (ii) nothing in this Section 1.13(b) shall interfere with the right of the Administrative Agent or such Bank to arrange its tax affairs as it deems appropriate. Section 1.14 Pro Rata Treatment. ------------------ Except to the extent otherwise provided herein, (a) Loans of each Type to be made on any day shall be made by the Banks pro rata in accordance with their respective Commitments, (b) Loans of the Banks shall be converted and continued pro rata in accordance with their respective amounts of Loans of the Type and, in the case of Eurocurrency Rate Loans, having the Interest Period being so converted or continued, (c) each reduction in the Commitments shall be made pro rata in accordance with the respective amounts thereof and (d) each payment of the principal of or interest on the Loans or of fees shall be made for the account of the Banks pro rata in accordance with the respective amounts thereof then due and payable. ARTICLE 2 CONDITIONS TO LOANS ------------------- Section 2.01 Conditions to Effectiveness of Amendment and Restatement. -------------------------------------------------------- The effectiveness of the amendment and restatement of this Agreement as of the Restated Agreement Date is subject to the determination of each Bank in its sole and absolute discretion, that each of the following conditions has been fulfilled: (a) the Administrative Agent shall have received each of the following, in form and substance and, in the case of the materials referred to in clauses (i), (ii), (iii), (vii), (viii) and (xiv), certified in a manner satisfactory to the Managing Agents: (i) a certificate of the Secretary or an Assistant Secretary of each Loan Party, dated the Restated Agreement Date, substantially in the form of Schedule 2.01(a)(i), to which shall be attached copies of the ------------------- resolutions and by-laws (or equivalent corporate governing document) referred to in such certificate; (ii) a copy of the certificate of incorporation (or other constitutive document) of each Loan Party, certified, as of a recent date, by the Secretary of State or other appropriate official of such Loan Party's jurisdiction of organization; -10- (iii) a good standing certificate (or other analogous document) with respect to each Loan Party, issued as of a recent date by the Secretary of State or other appropriate official of such Person's jurisdiction of organization; (iv) an opinion of counsel for the Loan Parties, dated the Restated Agreement Date, substantially in the form of Schedule 2.01(a)(iv); -------------------- (v) an opinion of English counsel for Xpedite UK, dated the Restated Agreement Date, substantially in the form of Schedule 2.01(a)(v); ------------------- (vi) an opinion of Winthrop, Stimson, Putnam & Roberts, special counsel for the Administrative Agent, dated the Restated Agreement Date, substantially in the form of Schedule 2.01(a)(vi); -------------------- (vii) a copy of each Governmental Approval and other consent or approval, and each Governmental Registration, listed on Schedule 3.03; ------------- (viii) a certificate of the chief financial officer of Premiere, dated the Restated Agreement Date, with respect to the conditions set forth in Sections 2.02(b) and (c) and setting forth the calculation of the Premiere Leverage Ratio and the Xpedite Leverage Ratio in effect on the Restated Agreement Date (and giving effect to the making of any Loans and the application of the proceeds thereof on such day); (ix) duly executed copies of the Security Agreements to which Premiere, Voice-Tel and American Teleconferencing are party; (x) either (A) such duly executed UCC-1 financing statements and other documents as the Administrative Agent may request, the filing or recordation of which is necessary or appropriate in the Administrative Agent's reasonable determination to create or perfect a security interest in the Collateral under Applicable Law, or (B) evidence of the filing or recordation of the same in such offices as the Administrative Agent shall have reasonably specified; (xi) such instruments and other documents as the Administrative Agent may reasonably request, the execution, delivery, filing or possession of which is necessary or appropriate in the Administrative Agent's determination to create or perfect a security interest in the Collateral under Applicable Law, including but not limited to share certificates and stock powers executed in blank with respect to the Capital Securities subject to the Security Interest; (xii) such instruments of termination, release and discharge and other documents, including UCC-3 financing statements, as the Administrative Agent may request, the delivery of which is necessary or appropriate in the Administrative Agent's determination to effect the termination of all Liens other than Permitted Liens; (xiii) to the extent not previously delivered to the Banks pursuant to this Agreement certificates of insurance and loss payee endorsements with respect to all -11- insurance policies required under the Security Agreements and the UK Security Agreements. (b) all fees payable on or prior to the Restated Agreement Date pursuant to Section 1.08, and all amounts payable pursuant to Section 10.02 for which invoices (in reasonable detail) have been delivered to the Company on or prior to such date, shall have been paid in full or arrangements satisfactory to the Managing Agents shall have been made to cause them to be paid in full concurrently with the disbursement of the proceeds of the Loans to be made on such date. Section 2.02 Conditions to Each Loan. ----------------------- The obligation of each Bank to make each Loan requested to be made by it is subject to the fulfillment of each of the following conditions: (a) the Administrative Agent shall have received a notice of borrowing with respect to such Loan complying with the requirements of Section 1.02; (b) each Loan Document Representation and Warranty shall be true and correct at and as of the time such Loan is to be made, both with and without giving effect to such Loan and all other Loans to be made or issued at such time and to the application of the proceeds thereof; and (c) no Default shall have occurred and be continuing at the time such Loan is to be made or would result from the making of such Loan and all other Loans to be made at such time or from the application of the proceeds thereof. Except to the extent that the applicable Borrower shall have disclosed in the notice of borrowing or in a subsequent notice given to the Banks prior to 5:00 p.m. (New York City time) on the Business Day before the requested date for the making of the requested Loans, that a condition specified in clause (b) or (c) above will not be fulfilled as of the requested time for the making of such Loans, such Borrower shall be deemed to have made a Representation and Warranty as of the time of the making of such Loans that the conditions specified in such clauses have been fulfilled as of such time. ARTICLE 3 CERTAIN REPRESENTATIONS AND WARRANTIES -------------------------------------- In order to induce the Administrative Agent and each Bank to enter into this Agreement and to make each Loan requested to be made by it, Premiere represents and warrants as follows: Section 3.01 Organization; Power; Qualification. ---------------------------------- Premiere and each Subsidiary are Persons duly organized, validly existing and, where applicable, in good standing under the laws of their respective jurisdictions of organization, have the corporate or legal power and authority to own their respective properties and to carry on their respective businesses as now being and hereafter proposed to be conducted and, where applicable, are duly qualified and in good standing as foreign corporations, and are authorized to do business, in all jurisdictions in which the character of their respective properties or the nature of their respective businesses requires -12- such qualification or authorization, except for qualifications and authorizations the lack of which, singly or in the aggregate, has not had and will not have a Materially Adverse Effect on (x) Premiere and its Consolidated Subsidiaries taken as a whole, (y) any Loan Document or (z) the Collateral. Section 3.02 Subsidiaries. ------------ Schedule 3.02 sets forth, as of the Restated Agreement Date, all of the ------------- Subsidiaries, their jurisdictions of organization and the percentages of the various classes of their Capital Securities owned by Premiere or another Subsidiary and indicates which Subsidiaries are Consolidated Subsidiaries of Premiere, which Subsidiaries are Consolidated Subsidiaries of the Company and which Subsidiaries are Significant Subsidiaries. Except as otherwise set forth on Schedule 3.02, Premiere or another Subsidiary, as the case may be, has the ------------- unrestricted right to vote, and (subject to limitations imposed by Applicable Law) to receive dividends and distributions on, all Capital Securities of the Subsidiaries indicated on Schedule 3.02 as owned by Premiere or such Subsidiary. ------------- All such Capital Securities have been duly authorized and issued and are fully paid and nonassessable. Section 3.03 Authorization; Enforceability; Required Consents; Absence of ------------------------------------------------------------ Conflicts. - - --------- Each of the Loan Parties has the power, and has taken all necessary action (including, if a corporation, any necessary stockholder action) to authorize it, to execute, deliver and perform in accordance with their respective terms the Loan Documents and, in the case of the Company, to borrow hereunder in the amount of the unused Commitments and, in the case of Xpedite UK, to borrow hereunder in the amount of the Sterling Sub-limit. This Agreement has been, and each of the other Loan Documents when delivered to the Administrative Agent will have been, duly executed and delivered by each of the Loan Parties and is, or when so delivered will be, a legal, valid and binding obligation of each such Person, enforceable against such Person in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity. The execution, delivery and performance in accordance with their respective terms by each Loan Party of the Loan Documents, and each borrowing hereunder, whether or not in the amount of the unused Commitments, do not and (absent any change in any Applicable Law or applicable Contract) will not (a) require any Governmental Approval or any other consent or approval, including any consent or approval of the stockholders of any such Person, to have been obtained or any Governmental Registration to have been made, by any such Person, other than Governmental Approvals and other consents and approvals and Governmental Registrations that have been obtained or made, as the case may be, are final and not subject to review on appeal or to collateral attack, are in full force and effect and, in the case of any such required under any Applicable Law or Contract as in effect on the Restated Agreement Date, are listed on Schedule -------- 3.03, or (b) violate, conflict with, result in a breach of, constitute a default - - ---- under, or result in or require the creation of any Lien upon any assets of any such Person or any Subsidiary under, (i) any Contract to which any such Person or any Subsidiary is a party or by which any such Person or any Subsidiary or any of their respective properties may be bound or (ii) any Applicable Law binding on such Person. Section 3.04 Taxes. ----- Premiere and each Subsidiary have (a) filed all material Tax returns required to have been filed by it under Applicable Law, (b) paid all Taxes indicated on such returns as due and payable by it or have been assessed against it except for (i) Taxes the -13- failure to have paid which does not contravene Section 4.01; or (ii) Taxes which are being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with Generally Accepted Accounting Principles, and (c) to the extent required by Generally Accepted Accounting Principles, reserved against all Taxes that are payable by it but are not yet due or that are due and payable by it or have been assessed against it but have not yet been paid. Section 3.05 Litigation. ---------- Except for the Disclosed Matters, there are not, in any court or before any arbitrator of any kind or before or by any governmental or non-governmental body, any actions, suits or proceedings pending or (to the knowledge of Premiere) threatened against (a) Premiere or any Subsidiary or any of their respective businesses or properties or (b) any Loan Document, except actions, suits or proceedings that, if adversely determined, would not, singly or in the aggregate, reasonably be expected to have a Materially Adverse Effect on (x) Premiere and the Consolidated Subsidiaries taken as a whole, (y) any Loan Document or (z) the Collateral. Section 3.06 No Adverse Change or Event. -------------------------- Except for the Disclosed Matters, since December 31, 1997 no change in the business, assets, Liabilities, financial condition, results of operations or business prospects of Premiere or any Subsidiary has occurred, and no event has occurred or failed to occur, that has had or could reasonably be expected to have, either alone or in conjunction with all other such changes, events and failures, a Materially Adverse Effect on (a) Premiere and the Consolidated Subsidiaries taken as a whole, (b) any Loan Document or (c) the Collateral. Such an adverse change may have occurred, and such an event may have occurred or failed to occur, at any particular time notwithstanding the fact that at such time no Default shall have occurred and be continuing. Section 3.07 Additional Adverse Facts. ------------------------ Except for the Disclosed Matters, no fact or circumstance is known to Premiere, as of the Restated Agreement Date, that, either alone or in conjunction with all other such facts and circumstances, has had or could reasonably be expected to have (so far as Premiere and the Subsidiaries can foresee) a Materially Adverse Effect on (a) Premiere and the Consolidated Subsidiaries taken as a whole, (b) any Loan Document or (c) the Collateral. If a fact or circumstance disclosed on such Schedules or in such notes should in the future have a Materially Adverse Effect on (x) Premiere and the Consolidated Subsidiaries taken as a whole, (y) any Loan Document or (z) the Collateral, such Materially Adverse Effect shall be a change or event subject to Section 3.06 notwithstanding such disclosure. Section 3.08 Investment Company Act. ---------------------- Neither Premiere nor any Subsidiary is an "investment company" or a Person "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940. Section 3.09 Compliance With Applicable Law and Contracts. -------------------------------------------- Premiere and each Subsidiary is, to the best of Premiere's knowledge, in compliance with all Applicable Law and the terms of all Contracts to which such Person is a party or by which it or any of its properties may be bound, except for non-compliances that, either singly or in the aggregate, would not reasonably be expected to have a Materially Adverse Effect on (a) Premiere and its Consolidated Subsidiaries taken as a whole, (b) any Loan Document or (c) the Collateral. -14- Section 3.10 Substance Release and Disposal. ------------------------------ Except as set forth on Schedule 3.10, there have been no releases or ------------- disposals of hazardous wastes, environmental contaminants or other substances in quantities or locations that, singly or in the aggregate, could result in the incurrence by Premiere or any Subsidiary of remedial obligations under Applicable Law that would reasonably be expected to have a Materially Adverse Effect on Premiere and the Consolidated Subsidiaries taken as a whole. Except as set forth on Schedule 3.10, neither Premiere nor any Subsidiary has received ------------- any notice or order advising it that it has or may have any remedial obligation with respect to any such releases or disposals or that it is or may be responsible for the costs of any remedial action taken or to be taken by any other Persons with respect to any such releases or disposals that, singly or in the aggregate, could reasonably be expected to have a Materially Adverse Effect on Premiere and the Consolidated Subsidiaries taken as a whole. Section 3.11 Senior Obligations. ------------------ The obligations of Premiere under the Loan Documents constitute "Senior Indebtedness" within the meaning and pursuant to the terms of the Indenture dated as of June 15, 1997 between Premiere and IBJ Schroder Bank and Trust Company, as Trustee. The obligations of Premiere under the Loan Documents are hereby designated to constitute "Designated Senior Indebtedness" within the meaning and pursuant to the terms of such Indenture. Premiere hereby agrees to give written notice to such Trustee of such designation, such notice to be given promptly following the Restated Agreement Date and in no event later than December 31, 1998. Premiere shall give a copy of such notice to the Administrative Agent, together with evidence reasonably satisfactory to the Administrative Agent of the giving of such notice to such Trustee. ARTICLE 4 CERTAIN COVENANTS ----------------- From the Restated Agreement Date and until the Repayment Date, A. Premiere shall and shall cause each Subsidiary to: ------------------------------------------------- Section 4.01 Preservation of Existence and Properties, Scope of Business, ------------------------------------------------------------ Compliance With Law, Preservation of Enforceability. - - --------------------------------------------------- (a) Preserve and maintain its corporate existence (except as contemplated by Section 4.08) and all of its other franchises, licenses, rights and privileges, (b) preserve, protect and obtain all Intellectual Property, and preserve and maintain in good repair, working order and condition all other properties, required for the conduct of its business, (c) engage only in businesses in substantially the same fields as the businesses conducted on the Restated Agreement Date and in businesses directly related thereto, (d) comply with Applicable Law and (e) take all action and obtain all consents and Governmental Approvals and make all Governmental Registrations required so that its obligations under the Loan Documents will at all times be legal, valid and binding and enforceable in accordance with their respective terms, except that this Section 4.01 (other than clauses (a), insofar as it requires any Loan Party to preserve its corporate existence, (c) and (e)) shall not apply in any circumstance where noncompliance, together with all other noncompliances with this Section 4.01, will not have a Materially Adverse Effect on -15- (x) Premiere and the Consolidated Subsidiaries taken as a whole, (y) any Loan Document or (z) the Collateral. Section 4.02 Insurance. --------- Maintain insurance with responsible insurance companies against at least such risks and in at least such amounts as is customarily maintained by similar businesses, or, if greater in scope or coverage, as may be required by Applicable Law. Section 4.03 Additional Significant Subsidiaries. ----------------------------------- Not later than the tenth day after the date it forms or acquires any new Significant Subsidiary or any Subsidiary becomes a Significant Subsidiary (as determined on the basis of the most recent financial statements of Premiere and the Consolidated Subsidiaries furnished to the Banks pursuant to Section 5.01), deliver to the Administrative Agent (i) certificates representing all (or, in the case of any such new Significant Subsidiary that is not a United States Person and that is not a Subsidiary of Xpedite UK, such lesser amount as is the maximum amount that can be subjected to the Security Interest without, in the reasonable opinion of Premiere, resulting in a material adverse tax consequence to Premiere) of the issued and outstanding shares of capital stock of such new Significant Subsidiary held by Premiere and the Subsidiaries (other than directors' qualifying shares), together with appropriate stock powers, duly endorsed in blank, (ii) if the owner or owners of such shares of capital stock have not executed and delivered a Security Agreement or UK Security Agreement that subjects such shares of capital stock to the Security Interest, a Security Agreement in the form of Exhibit B or a UK Security Agreement in the form of --------- Exhibit E, as the case may be, duly executed by the owner or owners of such - - --------- shares of capital stock, (iii) a Security Agreement in the form of Exhibit B if --------- such new Significant Subsidiary is a United States Person, or a UK Security Agreement in the form of Exhibit E if such new Significant Subsidiary is --------- created, incorporated or organized under the laws of the United Kingdom or any jurisdiction therein, or, in any other case, a security agreement substantially similar in purpose and effect as the UK Security Agreements and in form reasonably satisfactory to the Managing Agents, as the case may be, duly executed by such new Significant Subsidiary, (iv) a Subsidiary Guaranty Supplement in the form of Schedule 4.03, duly executed by such new Significant ------------- Subsidiary and (v) such certificates, resolutions, legal opinions, copies of filings and notices, and other materials, relating to such new Significant Subsidiary or such owner or owners, the documents referred to above and the actions required thereunder, as the Administrative Agent may reasonably request; provided however, that so long as Premiere Communications and VoiceCom would be - - -------- ------- required to obtain a Governmental Approval in order for it to lawfully execute and deliver a Security Agreement, such Persons shall not be required to execute and deliver a Security Agreement. Section 4.04 Use of Proceeds. --------------- Use the proceeds of the Loans for general corporate purposes of Premiere and its Subsidiaries, including the payment of transaction fees and expenses. None of the proceeds of any of the Loans shall be used (i) to purchase or carry, or to reduce or retire or refinance any credit incurred to purchase or carry, any margin stock (within the meaning of Regulations U and X of the Board of Governors of the Federal Reserve System) or to extend credit to others for the purpose of purchasing or carrying any such margin stock or (ii) for the purpose of reducing or discharging, directly or indirectly, any existing liability of Worldwide in relation to the acquisition of shares in Xpedite UK. If requested by any Bank, the Borrowers shall complete and sign Part I of a copy of Federal Reserve Form U-1 referred to in Regulation U and deliver such copy to such Bank. -16- B. Premiere shall not, and shall not permit any Subsidiary to, directly or ----------------------------------------------------------------------- indirectly: - - ---------- Section 4.05 Indebtedness. ------------ Have any Indebtedness at any time, except that this Section 4.05 shall not apply to (a) the Loans, (b) Guaranties permitted pursuant to Section 4.06(a), (c) Existing Indebtedness, (d) Intercompany Indebtedness, (e) Indebtedness of Premiere or any Subsidiary owed to Premiere or any Subsidiary and incurred in the ordinary course of business pursuant to customary cash management practices of Premiere and the Subsidiaries, (f) Purchase Money Indebtedness in an aggregate outstanding amount not in excess of $10,000,000 at any time and (g) other Indebtedness in an aggregate outstanding amount not in excess of $15,000,000 at any time. Section 4.06 Guaranties. ---------- Be obligated, at any time, in respect of any Guaranty, except that this Section 4.06 shall not apply to (a) Existing Guaranties and (b) Permitted Guaranties. Section 4.07 Liens. ----- Permit to exist, at any time, any Lien upon any of its properties or assets of any character, whether now owned or hereafter acquired, or upon any income or profits therefrom, except that this Section 4.07 shall not apply to Permitted Liens; provided, however, that if, notwithstanding this Section 4.07, -------- ------- any Lien to which this Section is applicable shall be created or arise, the Liabilities of the Loan Parties under the Loan Documents shall, to the extent such Lien attaches to any asset that does not constitute Collateral or to any asset with respect to which such Lien would be prior to the Security Interest, automatically be secured by such Lien equally and ratably with the other Liabilities secured thereby, and the holder of such other Liabilities, by accepting such Lien, shall be deemed to have agreed thereto and to share with the Banks, on that basis, the proceeds of such Lien, whether or not the Banks' security interest shall be perfected; provided further, however, that -------- ------- ------- notwithstanding such equal and ratable securing and sharing, the existence of such Lien shall constitute a default by the Borrower in the performance or observance of this Section 4.07. Section 4.08 Merger or Consolidation; Acquisitions. ------------------------------------- Merge or consolidate with any Person, or acquire any assets or business from or Capital Securities of any Person, except that, if after giving effect thereto no Default would exist, this Section 4.08 shall not apply to (a) any merger or consolidation of Premiere or any Subsidiary (other than Xpedite UK or XSL) with Premiere or any Subsidiary (other than Xpedite UK or XSL), provided that, in the case of a merger to which the Company is party, the Company shall be the continuing Person and, in the case of any merger to which any Guarantor that is a United States Person and any Subsidiary that is not a Guarantor or is not a United States Person are party, the Guarantor that is a United States Person shall be the continuing Person, (b) any acquisition of assets in the ordinary course of business, (c) any other acquisition, so long as the aggregate consideration paid or otherwise provided by Premiere and its Subsidiaries for all such other acquisitions since the Restated Agreement Date (excluding any such consideration paid in the form of common stock of Premiere) does not exceed $10,000,000 plus the lesser of (i) $5,000,000 and (ii) the amount by which $35,000,000 exceeds the aggregate consideration actually expended for the acquisitions referred to in clause (d) below, (d) the acquisition of the Capital Securities of Xpedite Systems S.A. or Xpedite International Hong Kong Limited not owned by Premiere or any of its Subsidiaries on the Restated Agreement Date, so long as the aggregate consideration therefor is -17- not in excess of $35,000,000 and (e) acquisitions constituting Investments permitted pursuant to Section 4.13. Section 4.09 Disposition of Assets. --------------------- Sell, lease, license, transfer or otherwise dispose of any asset or any interest therein, except that this Section 4.09 shall not apply to (a) any disposition of any asset or any interest therein in the ordinary course of business, (b) any disposition of any obsolete or retired property not used or useful in its business, (c) any disposition of any asset or any interest therein to Premiere or a Guarantor that is a United States Person, (d) other dispositions subsequent to the Restated Agreement Date for cash in an aggregate amount with respect to (i) all such dispositions of investment securities listed on Schedule 4.13 not in excess of $30,000,000 or (ii) all other such ------------- dispositions not in excess of $10,000,000 and (e) any transaction to which any of the other provisions of this Agreement (other than Section 4.16) is by its express terms inapplicable. Section 4.10 Restricted Payments. ------------------- Make or declare or otherwise become obligated to make any Restricted Payment, except that this Section 4.10 shall not apply to any Restricted Payment (a) made by any Subsidiary in the ordinary course of business pursuant to customary cash management practices of Premiere and the Subsidiaries, (b) consisting of purchases of common stock of Premiere in an aggregate amount not in excess of $1,000,000 for use in connection with Premiere's employee benefit programs or (c) made by any Subsidiary to Premiere or any Guarantor that is a United States Person, so long as, in the case of any such Restricted Payment made by the Company or any of its Subsidiaries pursuant to this clause (c), no Default shall have occurred and be continuing either before or after giving effect to such Restricted Payment. Section 4.11 Limitation on Restrictive Covenants. ----------------------------------- Permit to exist, at any time, any consensual restriction limiting the ability (whether by covenant, event of default, subordination or otherwise) of any Subsidiary to (a) pay dividends or make any other distributions on shares of its capital stock held by Premiere or any other Subsidiary, (b) pay any obligation owed to Premiere or any other Subsidiary, (c) make any loans or advances to or investments in Premiere or in any other Subsidiary, (d) transfer any of its property or assets to Premiere or any other Subsidiary or (e) create any Lien upon its property or assets whether now owned or hereafter acquired or upon any income or profits therefrom unless such restriction permits the creation of such a Lien to secure the obligations of the Loan Parties with respect to the Loans and all other amounts payable under the Loan Documents, except that this Section 4.11 shall not apply to Permitted Restrictive Covenants. Section 4.12 Issuance or Disposition of Capital Securities. --------------------------------------------- Issue any of its Capital Securities or sell, transfer or otherwise dispose of any Capital Securities of any Significant Subsidiary, except that this Section 4.12 shall not apply to (a) any issuance of Capital Securities of a Significant Subsidiary (i) that are subjected to the Security Interest in a manner reasonably satisfactory to the Managing Agents or (ii) for the purpose of effecting a disposition contemplated or permitted by Section 4.09(d), (b) any issuance by Premiere of its capital stock to any present or former employee of Premiere or other Persons pursuant to any stock plan of Premiere in effect on the Restated Agreement Date or (c) any issuance, sale, transfer or other disposition of such Capital Securities as consideration for an acquisition permitted by Section 4.08(c). -18- Section 4.13 Investments. ----------- Make or acquire any Investment or have any Investment outstanding, except that this Section 4.13 shall not apply to (a) Money Market Investments, (b) Investments constituting acquisitions permitted under Section 4.08, (c) Investments by Premiere or any Subsidiary in Premiere or any Guarantor that is a United States Person, (d) Investments existing on the Restated Agreement Date and set forth on Schedule 4.13, (e) Investments by Premiere or any Subsidiary in ------------- Premiere or any Subsidiary made in the ordinary course of business of Premiere or any Subsidiary pursuant to customary cash management practices of Premiere and the Subsidiaries, (f)(i) loans to Mr. Boland Jones to fund tax liabilities incurred by Mr. Jones arising from his exercise of employee stock options in an aggregate amount with respect to all such loans not in excess of $15,000,000 at any time and (ii) other Investments in an aggregate amount with respect to all such Investments not in excess of $15,000,000 at any time, in each case with respect to clause (f)(i) and (f)(ii) for so long as (x) no Default shall have occurred and be continuing or would result therefrom and (y) after giving effect thereto, Premiere and the Company and/or any of their respective Subsidiaries would collectively be entitled to incur not less than $10,000,000 of additional Indebtedness and remain in compliance with Sections 4.19 and 4.22, respectively. Section 4.14 Taxes of Other Persons. ---------------------- (a) File a consolidated, combined, unitary or similar group tax return with any other Person other than, in the case of Premiere, a Consolidated Subsidiary and, in the case of any such Subsidiary, Premiere or a Consolidated Subsidiary, or (b) enter into any tax sharing agreement or similar Contract to pay, or make payments with respect to, any Taxes owing by any Person other than Premiere or a Consolidated Subsidiary. Section 4.15 Benefit Plans. ------------- Have, or permit any of its ERISA Affiliates to have, any Benefit Plan other than an Existing Benefit Plan. Section 4.16 Transactions With Affiliates. ---------------------------- Effect any transaction (or series of related transactions) with any Affiliate (other than Premiere and any Guarantor that is a United States Person) that is on a basis less favorable than would at the time be obtainable with an unrelated third party in a commercially reasonable transaction, except that this Section 4.16 shall not apply to (a) the provision of customary overhead and corporate managerial services by Premiere or a Subsidiary to Premiere or to any of the Subsidiaries and (b) transactions in the ordinary course of business of Premiere or any Subsidiary pursuant to customary cash management practices of Premiere and the Subsidiaries. Section 4.17 Substance Storage and Disposal. ------------------------------ Permit any hazardous wastes, environmental contaminants or other substances the improper release or disposal of which could result in the incurrence by Premiere or any Subsidiary of remedial obligations under Applicable Law, to be brought onto or stored on the properties owned or leased by it if such remedial obligations could reasonably be expected to have a Materially Adverse Effect on Premiere and the Consolidated Subsidiaries taken as a whole. Section 4.18 Capital Expenditures. -------------------- Make or be obligated at any time to make Capital Expenditures in an amount, together with the aggregate amount of all other Capital Expenditures made or obligated to be made since January 1, 1999, in excess of $70,000,000. -19- C. Premiere shall not: ------------------ Section 4.19 Premiere Leverage Ratio. ----------------------- Permit the Premiere Leverage Ratio to be greater than 4.10 to 1 at any time prior to June 30, 1999, or 3.25 to 1 at any time on or after June 30, 1999. Section 4.20 Premiere Interest Coverage Ratio. -------------------------------- Permit the Premiere Interest Coverage Ratio to be less than 3.00 to 1 at any time. Section 4.21 Minimum Consolidated Revenues. ----------------------------- Permit Consolidated Revenues to be less than (i) $105,000,000 with respect to the fiscal quarter of Premiere ending December 31, 1998, (ii) $111,000,000 with respect to the fiscal quarter of Premiere ending March 31, 1999, (iii) $117,000,000 with respect to the fiscal quarter of Premiere ending June 30, 1999, and (iv) $125,000,000 with respect to the fiscal quarter of Premiere ending September 30, 1999. D. The Company shall not: --------------------- Section 4.22 Xpedite Leverage Ratio. ---------------------- Permit the Xpedite Leverage Ratio to be greater than 3.00 to 1 at any time prior to June 30, 1999, or 2.75 to 1 at any time on or after June 30, 1999. Section 4.23 Xpedite Interest Coverage Ratio. ------------------------------- Permit the Xpedite Interest Coverage Ratio to be less than 3.00 to 1 at any time. ARTICLE 5 INFORMATION ----------- Section 5.01 Information to Be Furnished. --------------------------- From the Restated Agreement Date and until the Repayment Date, Premiere and the Company shall furnish to each Bank: (a) Quarterly Financial Statements. ------------------------------ As soon as available and in any event within 55 days after the close of each of the first three quarterly accounting periods in each fiscal year of Premiere or the Company, as the case may be, commencing with the quarterly period ending March 31, 1999: (i) a consolidated balance sheet of Premiere and the Consolidated Subsidiaries as at the end of such quarterly period and the related consolidated statements of income, retained earnings and cash flows of Premiere and the Consolidated Subsidiaries for such quarterly period and for the elapsed portion of the fiscal year ended with the last day of such quarterly period, setting forth in each case in comparative form the figures for the corresponding periods of the previous fiscal year; and (ii) a consolidated balance sheet of the Company and its Consolidated Subsidiaries as at the end of such quarterly period and the related consolidated statements of income, retained earnings and cash flows of the Company and its Consolidated Subsidiaries for such quarterly period and for the elapsed portion of the fiscal year ended -20- with the last day of such quarterly period, setting forth in each case in comparative form the figures for the corresponding periods of the previous fiscal year. (b) Year-End Financial Statements; Accountants' Certificate. ------------------------------------------------------- As soon as available and in any event within 105 days after the end of each fiscal year of Premiere or the Company, as the case may be, commencing with the fiscal year ending December 31, 1998: (i) a consolidated balance sheet of Premiere and the Consolidated Subsidiaries as at the end of such fiscal year and the related consolidated statements of income, retained earnings and cash flows of Premiere and the Consolidated Subsidiaries for such fiscal year, setting forth in comparative form the figures as at the end of and for the previous fiscal year; (ii) a consolidated balance sheet of the Company and its Consolidated Subsidiaries as at the end of such fiscal year and the related consolidated statements of income, retained earnings and cash flows of the Company and its Consolidated Subsidiaries for such fiscal year, setting forth in comparative form the figures as at the end of and for the previous fiscal year; and (iii) audit reports of Ernst & Young, or other independent certified public accountants of recognized standing reasonably satisfactory to the Required Banks, with respect to the financial statements delivered pursuant to clauses (i) and (ii) above. (c) Monthly Financial Statements. ---------------------------- As soon as available and in any event within 45 days after the end of each month, financial statements and other financial information with respect to Premiere and the Consolidated Subsidiaries satisfactory in form and content to the Managing Agents. The Managing Agents acknowledge that Premiere's current monthly statements are satisfactory in form. (d) Officer's Certificate as to Financial Statements and Defaults. ------------------------------------------------------------- At the time that financial statements are furnished pursuant to Section 5.01(a) or (b), a certificate of the president or chief financial officer of Premiere or the Company, as the case may be, stating that to the best of his or her knowledge after due inquiry, no Default or Event of Default exists or, if one exists, the actions being taken to remedy it. At the time that financial statements are furnished pursuant to Section 5.01(a) and (b), a certificate of the president or chief financial officer of Premiere calculating the Premiere Leverage Ratio and the Xpedite Leverage Ratio. (e) Reports and Filings. ------------------- (i) As soon as practicable upon receipt thereof, copies of all material reports, if any, submitted to Premiere or any Subsidiary, or the Board of Directors of Premiere or any Subsidiary, by its independent certified public accountants, including any management letter; (ii) as soon as practicable, copies of all such financial statements and reports as Premiere or any Subsidiary shall send to its public stockholders, if any, and of all registration statements and all regular or periodic reports that Premiere or any Subsidiary shall file with the Securities and Exchange Commission or any successor commission. (f) Requested Information. --------------------- From time to time and promptly upon request of any Bank, such Information regarding the Loan Documents, the Loans or the business, assets, -21- Liabilities, financial condition, results of operations or business prospects of Premiere and the Subsidiaries as such Bank through the Administrative Agent may reasonably request. (g) Notice of Defaults, Material Adverse Changes and Other Matters. -------------------------------------------------------------- Prompt notice, after a senior officer of any Loan Party shall have become aware thereof, of: (i) any Default, (ii) the acquisition or formation of a new Subsidiary and, in the case of each such new Subsidiary, its name, jurisdiction of incorporation, the percentages of the various classes of its Capital Securities owned by Premiere or another Subsidiary and whether or not such new Subsidiary is a Consolidated Subsidiary or a Significant Subsidiary, (iii) any change in the name of any Subsidiary, its jurisdiction of incorporation, the percentages of the various classes of its Capital Securities owned by Premiere or another Subsidiary or its status as a Consolidated or non-Consolidated Subsidiary, (iv) the threatening or commencement of, or the occurrence or nonoccurrence of any change or event relating to, any action, suit or proceeding that would cause the Representation and Warranty contained in Section 3.05 to be incorrect if made at such time, (v) the occurrence or nonoccurrence of any change or event that would cause the Representation and Warranty contained in Section 3.06 or Section 3.10 to be incorrect if made at such time, (vi) any event or condition referred to in clauses (i) through (vi) of Section 6.01(g), whether or not such event or condition shall constitute an Event of Default, and (vii) any amendment of the certificate of incorporation or by- laws of Premiere or any Subsidiary that is a Loan Party. Section 5.02 Accuracy of Financial Statements and Information. ------------------------------------------------- (a) Financial Statements. -------------------- (i) Premiere hereby represents and warrants that (A) Schedule 5.02(a) ---------------- sets forth a complete and correct list of the financial statements submitted by Premiere to the Banks in order to induce them to execute and deliver this Agreement, (B) such financial statements are complete and correct and fairly present in all material respects, in accordance with Generally Accepted Accounting Principles, the consolidated financial position of Premiere and the Consolidated Subsidiaries as at their respective dates and the consolidated results of operations, retained earnings and, as applicable, changes in financial position or cash flows of Premiere and such Subsidiaries for the respective periods to which such statements relate (except that the interim financial statements included therein may omit footnotes and are subject to year-end adjustments), (C) except for the Disclosed Matters, neither Premiere nor any Subsidiary had any Liability, contingent or otherwise, or any unrealized or anticipated loss, that, -22- singly or in the aggregate, has had or could reasonably be expected to have a Materially Adverse Effect on Premiere and the Consolidated Subsidiaries taken as a whole, and (D) the financial statements furnished pursuant to Section 5.01(a)(i) or (b)(i) will fairly present in all material respects, in accordance with Generally Accepted Accounting Principles except for changes therein or departures therefrom that are described in the certificate or report accompanying such statements and that have been approved in writing by Premiere's then current independent certified public accountants), the consolidated financial position of Premiere and the Consolidated Subsidiaries as at their respective dates and the consolidated results of operations, retained earnings and (in the case of audited financial statements included therein) cash flows of Premiere and such Subsidiaries for the respective periods to which such statements relate (except that the interim financial statements included therein may omit footnotes and are subject to year-end adjustments) and the furnishing of the same to the Banks shall constitute a representation and warranty by Premiere made on the date the same are furnished to the Banks to that effect and to the further effect that, except as disclosed or reflected in such financial statements, as at the respective dates thereof, neither Premiere nor any Subsidiary had any Liability, contingent or otherwise, or any unrealized or anticipated loss, that, singly or in the aggregate, has had or could reasonably be expected to have a Materially Adverse Effect on Premiere and the Consolidated Subsidiaries taken as a whole. (ii) The Company hereby represents and warrants that (A) Schedule -------- 5.02(a) sets forth a complete and correct list of the financial statements ------- submitted by the Company to the Banks in order to induce them to execute and deliver this Agreement, (B) such financial statements are complete and correct and fairly present in all material respects, in accordance with Generally Accepted Accounting Principles, the consolidated financial position of the Company and its Consolidated Subsidiaries as at their respective dates and the consolidated results of operations, retained earnings and, as applicable, changes in financial position or cash flows of the Company and such Subsidiaries for the respective periods to which such statements relate (except that the interim financial statements included therein may omit footnotes and are subject to year-end adjustments), (C) except as disclosed or reflected in such financial statements, as at September 30, 1998, neither the Company nor any Subsidiary of the Company had any Liability, contingent or otherwise, or any unrealized or anticipated loss, that, singly or in the aggregate, has had or could reasonably be expected to have a Materially Adverse Effect on the Company and its Consolidated Subsidiaries taken as a whole, and (D) the financial statements furnished pursuant to Section 5.01(a)(i) or (b)(i) will fairly present in all material respects, in accordance with Generally Accepted Accounting Principles except for changes therein or departures therefrom that are described in the certificate or report accompanying such statements and that have been approved in writing by Premiere's then current independent certified public accountants), the consolidated financial position of the Company and its Consolidated Subsidiaries as at their respective dates and the consolidated results of operations, retained earnings and (in the case of audited financial statements included therein) cash flows of the Company and such Subsidiaries for the respective periods to which such statements relate (except that the interim financial statements included therein may omit footnotes and are subject to year-end adjustments) and the furnishing of the same to the Banks shall constitute a representation and warranty -23- by the Company made on the date the same are furnished to the Banks to that effect and to the further effect that, except for the Disclosed Matters, neither the Company nor any Subsidiary had any Liability, contingent or otherwise, or any unrealized or anticipated loss, that, singly or in the aggregate, has had or could reasonably be expected to have a Materially Adverse Effect on the Company and its Consolidated Subsidiaries taken as a whole. (b) Other Information. ----------------- Premiere or the Company, as the case may be, hereby represents and warrants that the Information furnished to the Administrative Agent or the Banks by or on behalf of Premiere or the Company, as the case may be, on or prior to the Restated Agreement Date (other than the financial statements referred to in Section 5.02(a)), and the Information furnished to the Administrative Agent or the Banks by or on behalf of Premiere or the Company, as the case may be, after the Restated Agreement Date (other than the financial statements referred to in Section 5.02(a)), in the case of any Information prepared in the ordinary course of business, was or shall be, as the case may be, complete and correct in all material respects in the light of the purpose prepared, and, in the case of any Information the preparation of which was requested by any Bank, was or shall be, as the case may be, complete and correct in all material respects to the extent necessary to give such Bank true and accurate knowledge of the subject matter thereof and, in each case, did not or will not, as the case may be, contain any untrue statement of a material fact. Section 5.03 Additional Covenants Relating to Disclosure. ------------------------------------------- From the Restated Agreement Date and until the Repayment Date, Premiere shall and shall cause each Subsidiary to: (a) Accounting Methods and Financial Records. ---------------------------------------- Maintain a system of accounting, and keep such books, records and accounts, as may be required or necessary to permit (i) the preparation of financial statements required to be delivered pursuant to Section 5.01(a) and (b) and (ii) the determination of the compliance of Premiere and the Subsidiaries with the terms of the Loan Documents. (b) Fiscal Year. ----------- Maintain the same opening and closing date for each fiscal year as for the fiscal year reflected in the Base Financial Statements. (c) Visits, Inspections and Discussions. ----------------------------------- Subject to Section 10.06, permit representatives of any Bank, from time to time during normal business hours, as often as may be reasonably requested, upon reasonable prior notice, to (i) visit any of its premises or property, (ii) inspect, and verify the amount, character and condition of, any of its property, (iii) review and make copies from its books and records, including management letters prepared by its independent certified public accountants, and (iv) discuss with its senior financial officers its business, assets, Liabilities, financial condition, results of operation and business prospects. Section 5.04 Authorization of Third Parties to Deliver Information. ----------------------------------------------------- Premiere and the Company hereby authorize and direct each Person whose preparation or delivery to the Administrative Agent or the Banks of any opinion, report or other Information is a condition or covenant under the Loan Documents (including under Article 2 or this Article 5) to so prepare or deliver such Information for the benefit of the Administrative Agent and the Banks. Premiere -24- and the Company agree to promptly execute and deliver from time to time such further authorizations to effect the purposes of this Section 5.04 as the Administrative Agent or any Bank may reasonably request. ARTICLE 6 DEFAULT ------- Section 6.01 Events of Default. ----------------- Each of the following shall constitute an Event of Default, whatever the reason for such event and whether it shall be voluntary or involuntary, or within or without the control of Premiere, any Subsidiary or any other Loan Party, or be effected by operation of law or pursuant to any judgment or order of any court or any order, rule or regulation of any governmental or nongovernmental body: (a) Any payment of principal of or interest on any of the Loans or the Notes, or any payment of any fees shall not be made (i) in the case of principal of Loans when and as due (whether at maturity, by reason of notice of prepayment or acceleration or otherwise) and in any case in accordance with the terms of this Agreement and the Notes and (ii) in all other cases, within 5 days of the date on which such payment is due; (b) Any Loan Document Representation and Warranty shall at any time prove to have been incorrect or misleading in any material respect when made; (c) (i) Premiere or the Company, as the case may be, shall default in the performance or observance of: (A) any term, covenant, condition or agreement contained in Section 4.01(a) (insofar as such Section requires the preservation of the corporate existence of each of the Loan Parties), 4.01(e), 4.04 through 4.23, 5.01(g)(i) or 11.07; or (B) any term, covenant, condition or agreement contained in this Agreement (other than a term, covenant, condition or agreement a default in the performance or observance of which is elsewhere in this Section specifically dealt with) and, if capable of being remedied, such default shall continue unremedied for a period of 30 days after notice of such default from the Administrative Agent; or (ii) Any Loan Party shall default in the performance or observance of: (A) any term, covenant, condition or agreement contained in Section 8.01 hereof or in Sections 1.02, 2.01(a)(i), 2.01(a)(iii)(B), 2.01(a)(vii), 2.01(b)(i), 2.01(b)(ii), 2.01(b)(iv) or 2.01(c)(v) of any Security Agreement to which such Loan Party is a party, or, in the case of Xpedite UK, Sections 6.1.2(A), 9.1.1(A), 9.1.1(B), 9.1.2, 23.3.1 of the Xpedite UK Security Agreement, or, in the case of XSL or any Significant Subsidiary of Xpedite UK other than XSL, Sections 6.1.2(A), 9.1.1(A), 9.1.1(B), 9.1.2, 21.3.1 of the XSL Security Agreement or the UK Security Agreement to which such Significant Subsidiary is a party, as the case may be, or, in the case of any other security -25- agreement executed and delivered pursuant to Section 4.03(iii), the sections thereof directly analogous to such Sections in the UK Security Agreements; or (B) any term, covenant, condition or agreement contained in any Loan Document (other than any term, covenant, condition or agreement a default in the performance or observance of which is elsewhere in this Section specifically dealt with) and, if capable of being remedied, such default shall continue unremedied for a period of 30 days after notice of such default from the Administrative Agent; (d) (i) Premiere, any Subsidiary or any other Loan Party shall fail to pay, in accordance with its terms and when due and payable (after giving effect to applicable grace periods), any of the principal of or interest on any of its Indebtedness having a then outstanding principal amount in excess of $2,500,000, (ii) the maturity of any such Indebtedness shall, in whole or in part, have been accelerated, or any such Indebtedness shall, in whole or in part, have been required to be prepaid prior to the stated maturity thereof, in accordance with the provisions of any Contract evidencing, providing for the creation of or concerning such Indebtedness, or (iii) any event shall have occurred and be continuing that permits any holder or holders of any Indebtedness of any such Person (other than the Loans), any trustee or Administrative Agent acting on behalf of such holder or holders or any other Person so to accelerate such maturity or require any such prepayment; (e) (i) Premiere, any Subsidiary or any other Loan Party shall (A) commence a voluntary case under the Federal bankruptcy laws (as now or hereafter in effect), (B) file a petition seeking to take advantage of any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts, (C) consent to or fail to contest in a timely and appropriate manner any petition filed against it in an involuntary case under such bankruptcy laws or other laws, (D) apply for, or consent to, or fail to contest in a timely and appropriate manner, the appointment of, or the taking of possession by, a receiver, custodian, trustee, liquidator or the like of itself or of a substantial part of its assets, domestic or foreign, (E) admit in writing its inability to pay, or generally not be paying, its debts (other than those that are the subject of bona fide disputes) as they become due, (F) make a general assignment for the benefit of creditors, or (G) take any corporate action for the purpose of authorizing any of the foregoing; (ii) (A) A case or other proceeding shall be commenced against Premiere, any Subsidiary or any other Loan Party seeking (1) relief under the Federal bankruptcy laws (as now or hereafter in effect) or under any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts, or (2) the appointment of a trustee, receiver, custodian, liquidator or the like of Premiere, any Subsidiary or any other Loan Party, or of all or any substantial part of the assets, domestic or foreign, of Premiere, any Subsidiary or any other Loan Party, and, with respect to both clauses (1) and (2), such case or proceeding shall continue undismissed and unstayed for a period of 60 days, or (B) an order granting the relief requested in such case or proceeding against Premiere, any Subsidiary or any other Loan Party (including an order for relief under such Federal bankruptcy laws) shall be entered; -26- (f) A judgment or order shall be entered against Premiere, any Subsidiary or any other Loan Party by any court, and shall continue undischarged, unbonded or unstayed for a period of 45 days (i) in which the aggregate amount of all such judgments and orders in excess of Premiere's applicable insurance coverage (so long as the insurer in respect thereof is not disputing, and could not reasonably be expected to dispute, the applicability of such insurance coverage) exceeds $2,500,000 or (ii) in the case of any judgment or order for other than the payment of money, such judgment or order could, in the reasonable judgment of the Required Banks, together with all other such judgments or orders, have a Materially Adverse Effect on (A) Premiere and the Consolidated Subsidiaries taken as a whole, (B) any Loan Document or (C) the Collateral; or (g) (i) any Termination Event shall occur with respect to any Benefit Plan of Premiere, any Subsidiary, any other Loan Party or any of their respective ERISA Affiliates, (ii) any Accumulated Funding Deficiency, whether or not waived, shall exist with respect to any such Benefit Plan, (iii) any Person shall engage in any Prohibited Transaction involving any such Benefit Plan, (iv) Premiere, any Subsidiary, any other Loan Party or any of their respective ERISA Affiliates shall be in "default" (as defined in ERISA Section 4219(c)(5)) with respect to payments owing to any such Benefit Plan that is a Multiemployer Benefit Plan as a result of such Person's complete or partial withdrawal (as described in ERISA Section 4203 or 4205) therefrom, (v) Premiere, any Subsidiary, any other Loan Party or any of their respective ERISA Affiliates shall fail to pay when due an amount that is payable by it to the PBGC or to any such Benefit Plan under Title IV of ERISA or (vi) a proceeding shall be instituted by a fiduciary of any such Benefit Plan against Premiere, any Subsidiary, any other Loan Party or any of their respective ERISA Affiliates to enforce ERISA Section 515 and such proceeding shall not have been dismissed within 30 days thereafter, except that no event or condition referred to in clauses (i) through (vi) shall constitute an Event of Default if it, together with all other such events or conditions at the time existing, has not subjected, and in the reasonable determination of the Required Banks will not subject, Premiere, any Subsidiary or any other Loan Party to any Liability that, alone or in the aggregate with all such Liabilities for all such Persons, exceeds $1,000,000; or (h) Any Loan Party or any Affiliate of any Loan Party asserts, or any Loan Party or any Affiliate of any Loan Party institutes any proceedings seeking to establish, that (i) any provision of the Loan Documents is invalid, not binding or unenforceable or (ii) the Security Interest is not a valid and perfected first priority security interest in the Collateral subject only to Permitted Liens; or (i) (i) Premiere shall at any time cease to own and control all of the Capital Securities of the Company outstanding at such time or (ii) any person or group of persons acting together (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934) shall have or acquire at any time after the Agreement Date beneficial ownership (within the meaning of rule 13d-3 promulgated by the Securities and Exchange Commission under said Act) of, or the right to exercise voting power with respect to, more than 30% of the Capital Securities of Premiere outstanding at such time. Section 6.02 Remedies Upon Event of Default. ------------------------------ During the continuance of any Event of Default (other than one specified in Section 6.01(e)) and in every such event, the -27- Administrative Agent may and, if the Required Banks shall so request, shall, upon notice to Premiere, do either or both of the following: (a) declare, in whole or, from time to time, in part, the principal of and interest on the Loans and the Notes and all other amounts owing under the Loan Documents to be, and the Loans and the Notes and all such other amounts shall thereupon and to that extent become, immediately due and payable or (b) terminate, in whole or, from time to time, in part, the Commitments. Upon the occurrence of an Event of Default specified in Section 6.01(e), automatically and without any notice to the Borrower or the Guarantor, (a) the principal of and interest on the Loans and the Notes and all other amounts owing under the Loan Documents shall be immediately due and payable and (b) the Commitments shall terminate. Presentment, demand, protest or notice of any kind (other than the notice provided for in the first sentence of this Section 6.02) are hereby expressly waived. ARTICLE 7 ADDITIONAL CREDIT FACILITY PROVISIONS ------------------------------------- Section 7.01 Mandatory Suspension and Conversion of Eurocurrency Rate -------------------------------------------------------- Loans. - - ----- A Bank's obligations to make, continue or convert into Eurocurrency Rate Loans of any Type shall be suspended, all such Bank's outstanding Loans of that Type shall be converted (or, in the case of Loans to Xpedite UK, shall be repaid (unless Xpedite UK and such Bank shall have agreed to an alternative interest rate on such Bank's Loans to Xpedite UK, which alternative interest rate they agree to negotiate in good faith)) on the last day of their applicable Interest Periods (or, if earlier, in the case of clause (c) below, (or, in the case of Loans to Xpedite UK, shall be repaid) on the last day such Bank may lawfully continue to maintain Loans of that Type or, in the case of clause (d) below, on the day determined by such Bank to be the last Business Day before the effective date of the applicable restriction) into, and all pending requests for the making or continuation of or conversion into Loans of such Type by such Bank shall be deemed requests for, Base Rate Loans (or, in the case of Loans to Xpedite UK, shall be deemed withdrawn (unless Xpedite UK and such Bank shall have agreed to an alternative interest rate on such Bank's Loans to Xpedite UK)), if: (a) on or prior to the determination of an interest rate for a Eurocurrency Rate Loan of that Type for any Interest Period, the Administrative Agent reasonably determines that for any reason appropriate information is not available to it for purposes of determining the Eurocurrency Rate for such Interest Period; (b) on or prior to the first day of any Interest Period for a Eurocurrency Rate Loan of that Type, the Required Banks have informed the Administrative Agent of their determination that the Eurocurrency Rate as determined by the Administrative Agent for such Interest Period would not accurately reflect the cost to such Banks of making, continuing or converting into a Eurocurrency Rate Loan of such Type for such Interest Period; or (c) at any time such Bank reasonably determines that any Regulatory Change Enacted after the Restated Agreement Date makes it unlawful or impracticable for such Bank or its applicable Lending Office to make, continue or convert into, or fund, any Eurocurrency Rate Loan of that Type, or to comply with its obligations hereunder in respect thereof. -28- If, as a result of this Section 7.01, any Loan of any Bank that would otherwise be made or maintained as or converted into a Eurocurrency Rate Loan of any Type for any Interest Period is instead made or maintained as or converted into a Base Rate Loan (or, in the case of Loans to Xpedite UK, if such Bank and Xpedite UK have agreed to an alternative interest rate on such Bank's Loans to Xpedite UK), then, unless the corresponding Loan of each of the other Banks is also to be made or maintained as or converted into a Base Rate Loan, such Loan shall be treated as being a Eurocurrency Rate Loan of such Type for such Interest Period for all purposes of this Agreement (including the timing, application and proration among the Banks of interest payments, conversions and prepayments) except for the calculation of the interest rate borne by such Loan. The Administrative Agent shall promptly notify the applicable Borrower and each Bank of the existence or occurrence of any condition or circumstance specified in clause (a) or (b) above, and each Bank shall promptly notify the applicable Borrower and the Administrative Agent of the existence or occurrence of any condition or circumstance specified in clause (c) above applicable to such Bank's Loans, but the failure by the Administrative Agent or such Bank to give any such notice shall not affect such Bank's rights hereunder. Section 7.02 Regulatory Changes. ------------------ If in the reasonable determination of any Bank, (a) any Regulatory Change Enacted after the Restated Agreement Date shall directly or indirectly (i) reduce the amount of any sum received or receivable by such Bank with respect to any Loan, (ii) impose a cost on such Bank or any Affiliate of such Bank that is attributable to the making, funding or maintaining of, or such Bank's commitment to make or acquire, any Loan, including any reserve requirement, whether under Regulation D or otherwise, (iii) require such Bank or any Affiliate of such Bank to make any payment on or calculated by reference to the gross amount of any amount received by such Bank under any Loan Document in respect of its Loans or its obligations to make Loans or (iv) reduce, or have the effect of reducing, the rate of return on any capital of such Bank or any Affiliate of such Bank that such Bank or such Affiliate is required to maintain on account of any Loan or such Bank's commitment to make or acquire any Loan and (b) such reduction, increased cost or payment shall not result from a Tax to which Section 1.13 is applicable, then the applicable Borrower shall pay to such Bank such additional amounts as such Bank reasonably determines will, together with any adjustment in the applicable rates of interest payable hereunder, fully compensate for such reduction, increased cost or payment. Such additional amounts shall be payable, in the case of those applicable to prior periods, within 15 days after request by such Bank for such payment and, in the case of those applicable to future periods, on the dates specified, or determined in accordance with a method specified, by such Bank. Each Bank will promptly notify the applicable Borrower of any determination made by it referred to in clauses (a) and (b) above, but the failure to give such notice shall not affect such Bank's right to compensation; provided, however, that the applicable Borrower shall not be -------- ------- required to pay such additional amounts in respect of any Regulatory Change for any period ending prior to the date that is 90 days prior to the giving of the notice of the determination of such additional amounts (unless such period shall have commenced after the date that such Bank notified the applicable Borrower of the possibility that additional amounts may be payable as a result of such Regulatory Change), except, if such Regulatory Change shall have been imposed retroactively, for the period from the effective date of such Regulatory Change to the date that is 90 days after the first date on which such Bank reasonably should have had knowledge of such Regulatory Change. -29- Section 7.03 Funding Losses. -------------- The applicable Borrower shall pay to each Bank, upon request, such amount or amounts as such Bank reasonably determines are necessary to compensate it for any loss, cost or expense (excluding loss of the Applicable Margin) incurred by it as a result of (a) any payment, prepayment or conversion of a Eurocurrency Rate Loan on a date other than the last day of an Interest Period for such Eurocurrency Rate Loan or (b) a Eurocurrency Rate Loan for any reason not being made or converted, or any payment of principal thereof or interest thereon not being made, on the date therefor determined in accordance with the applicable provisions of this Agreement. At the election of such Bank, and without limiting the generality of the foregoing, but without duplication, such compensation on account of losses may include an amount equal to the excess of (i) the interest that would have been received from the applicable Borrower under this Agreement (excluding the Applicable Margin) on any amounts to be reemployed during an Interest Period or its remaining portion over (ii) the interest component of the return that such Bank determines it could have obtained had it placed such amount on deposit in the interbank Dollar or Sterling market, as the case may be, selected by it for a period equal to such Interest Period or its remaining portion. Section 7.04 Certain Determinations. ---------------------- In making the determinations contemplated by Sections 7.01, 7.02 and 7.03, each Bank may make such estimates, assumptions, allocations and the like that such Person reasonably determines to be appropriate, and such Person's selection thereof in accordance with this Section 7.04, and the determinations made by such Person on the basis thereof, shall be final, binding and conclusive upon the Borrowers, except, in the case of such determinations, for manifest errors in computation or transmission. Each Bank shall furnish to the applicable Borrower a certificate outlining in reasonable detail the computation of any amounts claimed by it under Sections 7.02 and 7.03 and the assumptions underlying such computations. Section 7.05 Change of Lending Office. ------------------------ If an event occurs with respect to a Lending Office of any Bank that obligates either Borrower to pay any amount under Section 1.13, makes operable the provisions of clause (c) of Section 7.01 or would, absent this Section 7.05, entitle such Bank to make a claim under Section 1.13(a) or 7.02, such Bank shall, if requested by the applicable Borrower, use reasonable efforts to designate another Lending Office or Offices the designation of which will reduce the amount the Borrowers are so obligated to pay, eliminate such operability or reduce the amount such Bank is so entitled to claim, provided that such designation would not, in the sole and absolute discretion of such Bank be disadvantageous to such Bank in any manner or contrary to such Bank's policies. Each Bank may at any time and from time to time change any Lending Office and shall give notice of any such change to the Administrative Agent and the Borrowers. Except in the case of a change in Lending Offices made at the request of a Borrower, the designation of a new Lending Office by any Bank shall not obligate the Borrowers to pay any amount to such Bank under Section 1.13, make operable the provisions of clause (c) of Section 7.01 or entitle such Bank to make a claim under Section 1.13(a) or 7.02 if such obligation, the operability of such clause or such claim results directly from such designation and not from a Regulatory Change Enacted thereafter. Section 7.06 Replacement of Banks. -------------------- If any Bank requests compensation pursuant to Section 1.13 or 7.02, or such Bank's obligation to make or continue, or to convert Loans of any other Type into, any Type of Eurocurrency Rate Loan shall be suspended pursuant to Section 7.01, Premiere, upon three Business Days' notice, may require that such Bank transfer all of its -30- right, title and interest under this Agreement and such Bank's Notes to any bank or financial institution identified by Premiere with the consent of the Administrative Agent (a) if such proposed transferee agrees to assume all of the obligations of such Bank for consideration equal to the outstanding principal amount of such Bank's Loans, together with interest thereon to the date of such transfer, and satisfactory arrangements are made for payment to such Bank of all other amounts payable hereunder to such Bank on or prior to the date of such transfer (including any fees accrued hereunder and any amounts that would be payable under Section 7.03 as if all of such Bank's Loans were being prepaid in full on such date) and (b) if such Bank being replaced has requested compensation pursuant to Section 1.13 or 7.02, such proposed transferee's aggregate requested compensation, if any, pursuant to Section 1.13 or 7.02 with respect to such replaced Bank's Loans is lower than that of the Bank replaced. Without prejudice to the survival of any other agreement of the Borrowers hereunder, the agreements of the Borrowers contained in Sections 1.13, 7.02, 7.03 and 10.02) shall survive for the benefit of any Bank replaced under this Section 7.06 with respect to the time prior to such replacement. ARTICLE 8 GUARANTY -------- Section 8.01 Guaranty of Payment and Performance; Limitation of Guaranty. ----------------------------------------------------------- (a) Each of the Guarantors hereby (a) absolutely, unconditionally and irrevocably guarantees to the Guaranteed Parties the due and punctual payment and performance of all of the Guaranteed Obligations in accordance with their respective terms and when and as due (whether at maturity, by reason of acceleration or otherwise, but giving effect to any applicable grace period set forth in Section 6.01(a)), or deemed to be due pursuant to Section 8.02, and (b) agrees so to pay the same when so due, or deemed to be due, upon demand. (b) It is the intention of the Guarantors and the Guaranteed Parties that the obligations of the Guarantors under this Article 8 shall be in, but not in excess of, the maximum amount permitted by Applicable Law. To that end, but only to the extent such obligations would otherwise be avoidable, the obligations of each Guarantor under this Article 8 shall be limited to the maximum amount that, after giving effect to the incurrence thereof, would not render such Guarantor insolvent or unable to pay its debts as they mature or leave such Guarantor with an unreasonably small capital. The need for any such limitation shall be determined, and any such needed limitation shall be effective, with respect to each Guarantor at the time or times that such Guarantor is deemed, under Applicable Law, to incur obligations thereunder. Any such limitation shall be apportioned amongst the Guaranteed Obligations of the Guaranteed Parties pro rata in accordance with their respective amounts thereof. This Section 8.01(b) is intended solely to preserve the rights of the Guaranteed Parties under this Article 8 to the maximum extent permitted by Applicable Law, and none of the Guarantors or any other Person shall have any right under this Section 8.01(b) that it would not otherwise have under Applicable Law. For the purposes of this Section 8.01(b), "insolvency", "unreasonably small capital" and "inability to pay debts as they mature" shall be determined in accordance with Applicable Law. Section 8.02 Continuance and Acceleration of Guaranteed Obligations Upon ----------------------------------------------------------- Certain Events. If: - - -------------- -31- (a) any Event of Default resulting in the automatic acceleration of any Guaranteed Obligations shall occur; (b) any injunction, stay or the like that enjoins any acceleration, or demand for the payment of any Guaranteed Obligations that would otherwise be required or permitted under the Loan Documents shall become effective; or (c) any Guaranteed Obligations shall be or be determined to be or become discharged (other than by payment or performance in full), disallowed, invalid, illegal, void or otherwise unenforceable (whether by operation of any present or future law or by order of any court or governmental agency) against the applicable Borrower; then (i) such Guaranteed Obligations shall, for all purposes hereunder, be deemed (A) in the case of clause (c), to continue to be outstanding and in full force and effect notwithstanding the unenforceability thereof against the applicable Borrower and (B) if such is not already the case, to have thereupon become immediately due and payable and to have commenced bearing interest at the Post-Default Rate and (ii) the Guaranteed Parties may exercise all of the rights and remedies hereunder that would be available to them during an Event of Default. Section 8.03 Recovered Payments. ------------------ The Guaranteed Obligations shall be deemed not to have been paid, observed or performed, and the Guarantor's obligations hereunder in respect thereof shall continue and not be discharged, to the extent that any payment thereof by either Borrower or any Guarantor, or out of the proceeds of any collateral, is recovered from or paid over by or for the account of the Guaranteed Parties for any reason, including as a preference or fraudulent transfer or by virtue of any subordination (whether present or future or contractual or otherwise) of the Guaranteed Obligations, whether such recovery or payment over is effected by any judgment, decree or order of any court or governmental agency, by any plan of reorganization or by settlement or compromise by the Guaranteed Parties (whether or not consented to by either Borrower, any of the Guarantors or any other guarantor) of any claim for any such recovery or payment over. Each of the Guarantors hereby expressly waives the benefit of any applicable statute of limitations and agrees that it shall be liable hereunder whenever such a recovery or payment over occurs. Section 8.04 Nature of Guarantors' Obligations. --------------------------------- The Guarantors' obligations under the Loan Documents (a) are absolute and unconditional, (b) constitute a guaranty of payment and not a guaranty of collection, (c) are as primary obligor and not as a surety only, (d) shall be a continuing guaranty of all present and future Guaranteed Obligations and all promissory notes and other documentation given in extension or renewal or substitution for any of the Guaranteed Obligations and (e) shall be irrevocable. Section 8.05 No Release of Guarantors. ------------------------ THE OBLIGATIONS OF EACH OF THE GUARANTORS HEREUNDER SHALL NOT BE REDUCED, LIMITED OR TERMINATED, NOR SHALL ANY GUARANTOR BE DISCHARGED FROM ANY THEREOF, FOR ANY REASON WHATSOEVER (other than, subject to Sections 8.03, the payment, observance and performance of the Guaranteed Obligations and except in the event such Guarantor is not a Significant Subsidiary and is disposed of in accordance with Section 4.09(d)), including (and -32- whether or not the same shall have occurred or failed to occur once or more than once and whether or not any Guarantor shall have received notice thereof): (a) (i) any increase in the principal amount of, or interest rate applicable to, (ii) any extension of the time of payment, observance or performance of, (iii) any other amendment or modification of any of the other terms and provisions of, (iv) any release, composition or settlement (whether by way of acceptance of a plan of reorganization or otherwise) of, (v) any subordination (whether present or future or contractual or otherwise) of, or (vi) any discharge, disallowance, invalidity, illegality, voidness or other unenforceability of, the Guaranteed Obligations; (b) (i) any failure to obtain, (ii) any release, composition or settlement of, (iii) any amendment or modification of any of the terms and provisions of, (iv) any subordination of, or (v) any discharge, disallowance, invalidity, illegality, voidness or other unenforceability of, any other guaranties of the Guaranteed Obligations; (c) (i) any failure to obtain or any release of, (ii) any failure to protect or preserve, (iii) any release, compromise, settlement or extension of the time of payment of any obligations constituting, (iv) any failure to perfect or maintain the perfection or priority of any Lien upon, (v) any subordination of any Lien upon, or (vi) any discharge, disallowance, invalidity, illegality, voidness or other unenforceability of any Lien or intended Lien upon, any collateral now or hereafter securing the Guaranteed Obligations or any other guaranties thereof; (d) any termination of or change in any relationship between any Guarantor and any other Loan Party including any such termination or change resulting from a change in the ownership of any Guarantor or any other Loan Party or from the cessation of any commercial relationship between any Guarantor and any other Loan Party; (e) any exercise of, or any election not to exercise or failure to exercise, delay in the exercise of, waiver of, or forbearance or other indulgence with respect to, any right, remedy or power available to the Guaranteed Parties, including (i) any election not to exercise or failure to exercise any right of setoff, recoupment or counterclaim, (ii) any election of remedies effected by the Guaranteed Parties, including the foreclosure upon any real estate constituting election of remedies effected by the Guaranteed Parties, including the foreclosure upon any real estate constituting collateral, whether or not such election affects the right to obtain a deficiency judgment, and (iii) any election by the Guaranteed Parties in any proceeding under the Bankruptcy Code of the application of Section 1111(b)(2) of such Bankruptcy Code; and (f) ANY OTHER ACT OR FAILURE TO ACT OR ANY OTHER EVENT OR CIRCUMSTANCE THAT (i) VARIES THE RISK OF ANY GUARANTOR HEREUNDER OR (ii) BUT FOR THE PROVISIONS HEREOF, WOULD, AS A MATTER OF STATUTE OR RULE OF LAW OR EQUITY, OPERATE TO REDUCE, LIMIT OR TERMINATE THE OBLIGATIONS OF ANY GUARANTOR HEREUNDER OR DISCHARGE ANY GUARANTOR FROM ANY THEREOF. Section 8.06 Certain Waivers. --------------- Each of the Guarantors waives: -33- (a) any requirement, and any right to require, that any right or power be exercised or any action be taken against either Borrower or any collateral for the Guaranteed Obligations; (b) all defenses to, and all setoffs, counterclaims and claims of recoupment against, the Guaranteed Obligations that may at any time be available to any other Guarantor (and agrees that payments due from such Guarantor hereunder shall be made without any reduction or deduction whatsoever, including any reduction or deduction for any setoff, counterclaim or claim of recoupment otherwise available to such Guarantor or to either Borrower); (c) (i) notice of acceptance of and intention to rely hereunder, (ii) notice of the making or renewal of any Loans or other extensions of credit hereunder and of the incurrence or renewal of any other Guaranteed Obligations, (iii) notice of any of the matters referred to in Section 8.05 and (iv) all other notices that may be required by Applicable Law or otherwise to preserve any rights against any Guarantor hereunder, including any notice of default, demand, dishonor, presentment and protest; (d) diligence; (e) any defense based upon, arising out of or in any way related to (i) any claim that any sale or other disposition of any collateral for the Guaranteed Obligations was not conducted in a commercially reasonable fashion or that a public sale, should the Guaranteed Parties have elected so to proceed, was, in and of itself, not a commercially reasonable method of sale, (ii) any claim that any election of remedies by the Guaranteed Parties, including the exercise by the Guaranteed Parties of any rights against any collateral, impaired, reduced, released or otherwise extinguished any right that any Guarantor might otherwise have had against either Borrower or against any collateral, including any right of subrogation, exoneration, reimbursement or contribution or right to obtain a deficiency judgment, (iii) any claim based upon, arising out of or in any way related to any of the matters referred to in Section 8.06 and (iv) any claim that the Loan Documents should be strictly construed against the Guaranteed Parties; and (f) ALL OTHER DEFENSES UNDER ANY APPLICABLE LAW THAT WOULD, BUT FOR THIS CLAUSE (f), BE AVAILABLE TO ANY GUARANTOR AS A DEFENSE AGAINST OR A REDUCTION OR LIMITATION OF ITS LIABILITIES AND OBLIGATIONS HEREUNDER. Section 8.07 Subordination of Rights Against the Borrowers and Collateral. ------------------------------------------------------------ All rights that any Guarantor may at any time have against either Borrower or any collateral for the Guaranteed Obligations (including rights of subrogation, exoneration, reimbursement and contribution and whether arising under Applicable Law or otherwise), and all obligations that either Borrower may at any time have to any Guarantor, arising by virtue of such Guarantor's obligations to pay principal, interest or other amounts payable to Guaranteed Parties hereunder, any payment made pursuant thereto or the exercise by the Guaranteed Parties of their rights with respect to any collateral are hereby expressly subordinated to the prior payment, observance and performance in full of the Guaranteed Obligations. No Guarantor shall enforce any of the rights, -34- or attempt to obtain payment or performance of any of the obligations, subordinated pursuant to this Section 8.07 until the Guaranteed Obligations have been paid, observed and performed in full, except that such prohibition shall not apply to routine acts, such as the giving of notices and the filing of continuation statements, necessary to preserve any such rights. If any amount shall be paid to or recovered by any Guarantor (whether directly or by way of setoff, recoupment or counterclaim) on account of any right or obligation subordinated pursuant to this Section 8.07, such amount shall be held by such Guarantor for the benefit of the Guaranteed Parties. ARTICLE 9 THE AGENTS ---------- Section 9.01 Appointment and Powers. ---------------------- Each Bank hereby irrevocably appoints and authorizes The Bank of New York, and The Bank of New York hereby agrees, to act as the Administrative Agent for such Bank under the Loan Documents with such powers as are delegated to the Administrative Agent and the Secured Party by the terms thereof, together with such other powers as are reasonably incidental thereto. The Administrative Agent's duties shall be purely ministerial and it shall have no duties or responsibilities except those expressly set forth in the Loan Documents. The Administrative Agent shall not be required under any circumstances to take any action that, in its judgment, (a) is contrary to any provision of the Loan Documents or Applicable Law or (b) would expose it to any Liability or expense against which it has not been indemnified to its satisfaction. The Administrative Agent shall not, by reason of its serving as the Administrative Agent, be a trustee or other fiduciary for any Bank. NationsBank, N.A., as Documentation Agent, shall have no rights or duties under, and no liability arising out of, the Loan Documents in its capacity as Documentation Agent. Section 9.02 Limitation on Administrative Agent's Liability. ---------------------------------------------- Neither the Administrative Agent nor any of its directors, officers, employees or agents shall be liable or responsible for any action taken or omitted to be taken by it or them under or in connection with the Loan Documents, except for its or their own gross negligence or willful misconduct. The Administrative Agent shall not be responsible to any Bank for (a) any recitals, statements, representations or warranties contained in the Loan Documents or in any certificate or other document referred to or provided for in, or received by any of the Banks under, the Loan Documents, (b) the validity, effectiveness or enforceability of the Loan Documents or any such certificate or other document or the value or sufficiency of the Collateral or (c) any failure by the Loan Parties to perform any of their obligations under the Loan Documents. The Administrative Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact so long as the Administrative Agent was not grossly negligent in selecting or directing such agents or attorneys-in-fact. The Administrative Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telex, telecopier, telegram or cable) believed by it to be genuine and correct and to have been signed or given by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by the Administrative Agent. As to any matters not expressly provided for by the Loan Documents, the Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under the Loan Documents in accordance with instructions signed by the -35- Required Banks, and such instructions of the Required Banks and any action taken or failure to act pursuant thereto shall be binding on all of the Banks. Section 9.03 Defaults. -------- The Administrative Agent shall not be deemed to have knowledge of the occurrence of a Default (other than the non-payment to it of principal of or interest on Loans or fees) unless the Administrative Agent has received notice from a Bank or a Borrower specifying such Default and stating that such notice is a "Notice of Default". In the event that the Administrative Agent has knowledge of such a non-payment or receives such a notice of the occurrence of a Default, the Administrative Agent shall give prompt notice thereof to the Banks. In the event of any Default, the Administrative Agent shall (a) in the case of a Default that constitutes an Event of Default, take either or both of the actions referred to in clauses (a) and (b) of the first sentence of Section 6.02 if so directed by the Required Banks and (b) in the case of any Default, take such other action with respect to such Default as shall be reasonably directed by the Required Banks. Unless and until the Administrative Agent shall have received such directions, in the event of any Default, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interests of the Banks. Section 9.04 Rights as a Bank. ---------------- Each Person acting as the Administrative Agent that is also a Bank shall, in its capacity as a Bank, have the same rights and powers under the Loan Documents as any other Bank and may exercise the same as though it were not acting as the Administrative Agent, and the term "Bank" or "Banks" shall include such Person in its individual capacity. Each Person acting as the Administrative Agent (whether or not such Person is a Bank) and its Affiliates may (without having to account therefor to any Bank) accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with the Loan Parties and their Affiliates as if it were not acting as the Administrative Agent, and such Person and its Affiliates may accept fees and other consideration from the Loan Parties and their Affiliates for services in connection with the Loan Documents or otherwise without having to account for the same to the Banks. Section 9.05 Indemnification. --------------- The Banks agree to indemnify the Administrative Agent (to the extent not reimbursed by the Loan Parties under the Loan Documents), ratably on the basis of the respective principal amounts of the Loans outstanding made by the Banks (or, if no Loans are at the time outstanding, ratably on the basis of their respective Commitments), for any and all Liabilities, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted against the Administrative Agent (including the costs and expenses that the Loan Parties are obligated to pay under the Loan Documents) in any way relating to or arising out of the Loan Documents or any other documents contemplated thereby or referred to therein or the transactions contemplated thereby or the enforcement of any of the terms thereof or of any such other documents, provided that no Bank shall be liable for any of the foregoing to the extent (a) they are subject to the indemnity contemplated by the last sentence of Section 10.10(b) or (b) they arise from gross negligence or willful misconduct by the Administrative Agent. Section 9.06 Non-Reliance on Administrative Agent and Other Banks. ---------------------------------------------------- Each Bank agrees that it has made and will continue to make, independently and without reliance on the Administrative Agent or any other Bank, and based on such documents and information as it -36- deems appropriate, its own credit analysis of the Loan Parties and its own decision to enter into the Loan Documents and to take or refrain from taking any action in connection therewith. The Administrative Agent shall not be required to keep itself informed as to the performance or observance by the Loan Parties of the Loan Documents or any other document referred to or provided for therein or to inspect the properties or books of any Loan Party or any Subsidiary thereof. Except for notices, reports and other documents and information expressly required to be furnished to the Banks by the Administrative Agent under the Loan Documents, the Administrative Agent shall have no obligation to provide any Bank with any information concerning the business, status or condition of any Loan Party or any Subsidiary thereof or the Loan Documents that may come into the possession of the Administrative Agent or any of its Affiliates. Section 9.07 Resignation of the Administrative Agent. --------------------------------------- The Administrative Agent may at any time give notice of its resignation to the Banks and the Borrowers. Upon receipt of any such notice of resignation, the Required Banks may, with the consent of Premiere (which consent shall not be unreasonably withheld), appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Required Banks and shall have accepted such appointment within 30 days after the retiring Administrative Agent's giving of notice of resignation, then the retiring Administrative Agent may, on behalf of the Banks and with the consent of Premiere (which consent shall not be unreasonably withheld), appoint a successor Administrative Agent. Upon the acceptance by any Person of its appointment as a successor Administrative Agent, such Person shall thereupon succeed to and become vested with all the rights, powers, privileges, duties and obligations of the retiring Administrative Agent and the retiring Administrative Agent shall be discharged from its duties and obligations as Administrative Agent under the Loan Documents. After any retiring Administrative Agent's resignation as Administrative Agent, the provisions of this Article 9 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Administrative Agent. Section 9.08 Execution and Amendment of Loan Documents on Behalf of the ---------------------------------------------------------- Banks. - - ----- Each Bank hereby authorizes the Administrative Agent to (a) execute and deliver, in the name of and on behalf of such Bank, (i) the Security Agreements and the UK Security Agreements, (ii) all UCC financing and continuation statements and other documents the filing or recordation of which are, in the determination of the Administrative Agent, necessary or appropriate to create, perfect or maintain the existence or perfected status of the Security Interest and (iii) any other Loan Document requiring execution by or on behalf of such Bank, and (b) release Collateral from the Security Interest to the extent that such Collateral has been disposed of in accordance with Section 4.09. The Administrative Agent shall consent to any amendment of any term, covenant, agreement or condition of the Security Agreements and the UK Security Agreements, or to any waiver of any right thereunder, if, but only if, the Administrative Agent is directed to do so in writing by the Required Banks; provided, however, that (i) the Administrative Agent shall not be required to - - -------- ------- consent to any such amendment or waiver that affects its rights or duties and (ii) the Administrative Agent shall not, unless directed to do so in writing by each Bank, (A) consent to any assignment by any Loan Party of any of its rights or obligations under any such agreement or (B) release any Collateral from the Security Interest, except as specified in clause (b) above. -37- ARTICLE 10 MISCELLANEOUS ------------- Section 10.01 Notices and Deliveries. ---------------------- Except as otherwise expressly provided, all notices, communications and materials to be given or delivered pursuant to the Loan Documents shall be given or delivered in writing (which shall include telecopy transmissions) at the following respective addresses and telecopier numbers and to the attention of the following individuals or departments or at such other address or telecopier or telephone number or to the attention of such other individual or department as the party to which such information pertains may hereafter specify: (a) if to Premiere, or the Company, to Premiere at: 3399 Peachtree Road NE Lenox Building, Suite 600 Atlanta, Georgia 30326 Telephone No.: Telecopier No.: Attention: Mr. Harvey A. Wagner (b) if to any other Loan Party, to it at: c/o Premiere Technologies, Inc. 3399 Peachtree Road NE Lenox Building, Suite 400 Atlanta, Georgia 30326 Telephone No.: Telecopier No.: Attention: Mr. Harvey A. Wagner -38- (c) if to the Administrative Agent, to it at: One Wall Street New York, NY 10286 Telephone No.: (212) 635-8607 Telecopier No.: (212) 635-8595 Attention: Cindy Rogers with a copy to: The Bank of New York One Wall Street New York, NY 10286 Telephone No.: (212) 635-4695 Telecopier No.: (212) 635-6365 (6,7) Attention: Geneveso Caviness, AFA, 18th Floor (d) if to any Bank, to it at the address or telecopier number and to the attention of the individual or department, set forth below such Bank's name under the heading "Notice Address" on Annex A or, in the case of a Bank that ------- becomes a Bank pursuant to an assignment, set forth under the heading "Notice Address" in the Notice of Assignment given to the Borrowers and the Administrative Agent with respect to such assignment. Notices, communications and materials shall be deemed given or delivered when delivered or received at the appropriate address or telecopy number to the attention of the appropriate individual or department except that notices to be given or items of Collateral to be delivered to the Administrative Agent or any Bank pursuant to Sections 1.02, 1.03(c), 1.05, 1.07 and 1.12(b) or pursuant to any Collateral Document shall not be deemed given or delivered until received by the officer of the Administrative Agent or, in the case of such notices, such Bank responsible, at the time, for the administration of the Loan Documents. Section 10.02 Expenses; Indemnification. ------------------------- Whether or not any Loans are made hereunder, Premiere shall: (a) pay or reimburse the Administrative Agent and each Bank for all transfer, documentary, stamp and similar taxes, and all recording and filing fees and taxes, payable in connection with, arising out of, or in any way related to, the execution, delivery and performance of the Loan Documents or the making of the Loans; (b) pay or reimburse the Administrative Agent for all reasonable costs and expenses (including reasonable fees and disbursements of legal counsel, appraisers, accountants and other experts employed or retained by the Administrative Agent) incurred by the Administrative Agent in connection with, arising out of, or in any way related to (i) the -39- negotiation, preparation, execution and delivery of (A) the Loan Documents and (B) whether or not executed, any waiver, amendment or consent thereunder or thereto, (ii) the administration of and any operations under the Loan Documents, including (A) the protection or preservation of the Collateral, (B) the protection, preservation, exercise or enforcement of any of the rights of the Administrative Agent or the Banks in, under or related to the Collateral or the Loan Documents or (C) the performance of any of the obligations of the Administrative Agent or the Banks under or related to the Loan Documents, (iii) protecting or preserving the Collateral or (iv) protecting, preserving, exercising or enforcing any of the rights of the Administrative Agent or the Banks in, under or related to the Collateral or the Loan Documents, including defending the Security Interest as a valid, perfected, first priority security interest in the Collateral subject to Permitted Liens; (c) pay or reimburse each of the Banks for all reasonable costs and expenses (including reasonable fees and disbursements of legal counsel and other experts employed or retained by such Bank) incurred by such Bank after the occurrence of an Event of Default in connection with, arising out of, or in any way related to protecting, preserving, exercising or enforcing any of its rights in, under or related to the Collateral or the Loan Documents; and (d) indemnify and hold each Indemnified Person harmless from and against all losses (including judgments, penalties and fines) suffered, and pay or reimburse each Indemnified Person for all reasonable costs and expenses (including reasonable fees and disbursements of legal counsel and other experts employed or retained by such Indemnified Person) incurred, by such Indemnified Person in connection with, arising out of, or in any way related to (i) any Loan Document Related Claim (whether asserted by such Indemnified Person, a Borrower, any Guarantor or any other Person), including the prosecution or defense thereof and any litigation or proceeding with respect thereto (whether or not, in the case of any such litigation or proceeding, such Indemnified Person is a party thereto), or (ii) any investigation, governmental or otherwise, arising out of, related to, or in any way connected with, the Loan Documents or the relationships established thereunder, except that the foregoing indemnity shall not be applicable to any loss suffered by any Indemnified Person to the extent such loss is determined by a judgment of a court that is binding on the applicable Borrower and such Indemnified Person, to be the result of acts or omissions on the part of such Indemnified Person constituting (x) gross negligence or (y) willful misconduct. Section 10.03 Amounts Payable Due Upon Request for Payment. -------------------------------------------- All amounts payable by the Borrowers under Section 10.02 and under the other provisions of the Loan Documents shall, except as otherwise expressly provided, be due within five Business Days following written request for the payment thereof. Section 10.04 Remedies of the Essence. ----------------------- The various rights and remedies of the Administrative Agent and the Banks under the Loan Documents are of the essence of those agreements. Section 10.05 Rights Cumulative. ----------------- Each of the rights and remedies of the Administrative Agent, and the Banks under the Loan Documents shall be in addition to all of their other rights and remedies under the Loan Documents and Applicable Law, and nothing in the Loan Documents shall be construed as limiting any such rights or remedies. -40- Section 10.06 Confidentiality and Disclosures. ------------------------------- The Administrative Agent and each Bank agrees to take normal and reasonable precautions and exercise due care to maintain the confidentiality of all non- public information provided to it by the Borrowers or any Guarantor in connection with any Loan Document, provided that the Administrative Agent and -------- the Banks may disclose to, and exchange and discuss with, any other Person who has agreed (to the extent that obtaining such agreement is reasonably practicable) to be bound by the provisions of this Section 10.06 (the Administrative Agent, the Banks and each such other Person being hereby authorized to do so) any information concerning Premiere or any Subsidiary (whether received by the Administrative Agent, the Banks or such other Person in connection with or pursuant to the Loan Documents or otherwise) (a) if such Person is an Affiliate of the Administrative Agent or such Bank or (b) for the purpose of (i) complying with Applicable Law, (ii) protecting or preserving the Collateral or protecting, preserving, exercising or enforcing any of their rights in, under or related to the Collateral or the Loan Documents, (iii) performing any of their obligations under or related to the Loan Documents or (iv) consulting with respect to any of the foregoing matters. Section 10.07 Amendments; Waivers. ------------------- Any term, covenant, agreement or condition of the Loan Documents may be amended, and any right under the Loan Documents may be waived, if, but only if, such amendment or waiver is in writing and is signed by (a) in the case of an amendment or waiver with respect to the Loan Documents referred to in Section 9.08(a), the Administrative Agent, (b) in the case of an amendment or waiver with respect to any other Loan Document, the Required Banks and, if the rights and duties of the Administrative Agent are affected thereby, by the Administrative Agent and (c) in the case of an amendment with respect to any Loan Document, by the Borrowers and, if such amendment amends Article 8 hereof, the Guarantors; provided, however, that no amendment or waiver shall be -------- ------- effective, unless in writing and signed by each Bank affected thereby, to the extent it (i) changes the amount of such Bank's Commitment, (ii) reduces the principal of or the rate of interest on such Bank's Loans or Notes or any fees payable to such Bank hereunder, (iii) postpones any date fixed for any payment of principal of or interest on such Bank's Loans, Notes or any fees payable to such Bank hereunder, (iv) releases any Guarantor from its obligations under Section 8.01 or releases any Collateral from the Security Interest except to the extent that such Collateral has been disposed of in accordance with Section 4.09, or (v) amends Section 1.01(b), Section 1.14, this Section 10.07, the definition of "Required Banks" contained in Section 11.01 or any other provision of this Agreement requiring the consent or other action of all of the Banks. Unless otherwise specified in such waiver, a waiver of any right under the Loan Documents shall be effective only in the specific instance and for the specific purpose for which given. No election not to exercise, failure to exercise or delay in exercising any right, nor any course of dealing or performance, shall operate as a waiver of any right of the Administrative Agent or any Bank under the Loan Documents or Applicable Law, nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right of the Administrative Agent or any Bank under the Loan Documents or Applicable Law. Upon any disposition of assets (including Capital Securities) permitted by Section 4.09, the Administrative Agent shall, and the Banks hereby so direct it to, release its Lien in such assets and shall execute and record, at Premiere's expense, such release documents as Premiere shall reasonably request. Section 10.08 Set-Off; Suspension of Payment and Performance. ---------------------------------------------- The Administrative Agent and each Bank are hereby authorized by the Borrowers, at any time and from time to time, without notice, during any Event of Default under Section 6.01(a) or at any time after amounts -41- payable hereunder shall have been declared immediately due and payable pursuant to Section 6.02, to set off against, and to appropriate and apply to the payment of, the Liabilities of any Loan Party under the Loan Documents (whether owing to such Person or to any other Person that is the Administrative Agent or a Bank and whether matured or unmatured, fixed or contingent) any and all Liabilities owing by such Person or any of its Affiliates to any Loan Party (whether payable in Dollars, Sterling or any other currency, whether matured or unmatured and, in the case of Liabilities that are deposits, whether general or special, time or demand and however evidenced and whether maintained at a branch or office located within or without the United States). Section 10.09 Sharing of Recoveries. --------------------- Each Bank agrees that, if, for any reason, including as a result of (i) the exercise of any right of counterclaim, set-off, banker's lien or similar right, (ii) its claim in any applicable bankruptcy, insolvency or other similar law being deemed secured by a "debt" under Section 101(11) of the Bankruptcy Code owed by it to any Loan Party, including a claim deemed secured under Section 506 of the Bankruptcy Code, or (iii) the allocation of payments by the Administrative Agent or any Loan Party in a manner contrary to the provisions of Section 1.14, such Bank shall receive payment of a proportion of the aggregate amount due and payable to it hereunder as principal of or interest on the Loans or fees that is greater than the proportion received by any other Bank in respect of the aggregate of such amounts due and payable to such other Bank hereunder, then the Bank receiving such proportionately greater payment shall purchase participations (which it shall be deemed to have done simultaneously upon the receipt of such payment) in the rights of the other Banks hereunder so that all such recoveries with respect to such amounts due and payable hereunder (net of costs of collection) shall be pro rata; provided that if all or part of such proportionately greater payment received by the purchasing Bank is thereafter recovered by or on behalf of any Loan Party from such Bank, such purchases shall be rescinded and the purchase prices paid for such participations shall be returned to such Bank to the extent of such recovery, but without interest (unless the purchasing Bank is required to pay interest on the amount recovered to the Person recovering such amount, in which case the selling Bank shall be required to pay interest at a like rate). Each of the Borrowers and the Guarantors expressly consents to the foregoing arrangements and agrees that any holder of a participation in any rights hereunder so purchased or acquired pursuant to this Section 10.09 shall, with respect to such participation, be entitled to all of the rights of a Bank under Sections 7.02, 10.02 and 10.08 (subject to any condition imposed on a Bank hereunder with respect thereto) and may exercise any and all rights of set-off with respect to such participation as fully as though the Loan Parties were directly indebted to the holder of such participation for Loans in the amount of such participation. Section 10.10 Assignments and Participations. ------------------------------ (a) Assignments. ----------- (i) None of the Loan Parties may assign any of its rights or obligations under the Loan Documents without the prior written consent of each Bank, and no assignment of any such obligation shall release such Loan Party therefrom unless each Bank shall have consented to such release in a writing specifically referring to the obligation from which such Loan Party is to be released. (ii) Each Bank may from time to time assign any or all of its rights and obligations under the Loan Documents to one or more Persons, provided that, -------- except in the case of the grant of a security interest to a Federal Reserve Bank (which may be made without condition or restriction) no such assignment shall be effective unless (A) the assignment is consented to by -42- Premiere (unless an Event of Default exists at such time or such assignment is to an Affiliate of such Bank) and the Administrative Agent, (B) a Notice of Assignment with respect to the assignment, duly executed by the assignor and the assignee, shall have been given to the Borrowers and the Administrative Agent and (C) except in the case of an assignment by the Bank that is the Administrative Agent, the Administrative Agent shall have been paid an assignment fee of $3,500. Upon any effective assignment, (1) the assignor shall be released from the obligations so assigned and, in the case of an assignment of all of its Loans and Commitment, shall cease to be a Bank and (2) the assignee shall have all of the rights and shall be obligated to perform all of the obligations of a Bank; provided, however, that no assignee shall be entitled ----------------- to any amounts that would otherwise be payable to it with respect to its assignment under Section 1.13 or 7.02 unless (x) such amounts are payable in respect of a Regulatory Change Enacted after the date the applicable assignment agreement became effective or (y) such amounts would have been payable to the Bank that made such assignment if such assignment had not been made. In the event of any effective assignment by a Bank, each of the Borrowers shall, against (except in the case of a partial assignment) receipt of the existing Note of the assignor Bank, issue a new Note to the assignee Bank. (b) Participations. -------------- Each Bank may from time to time sell or otherwise grant participations in any or all of its rights and obligations under the Loan Documents without the consent of the Borrowers, any Guarantor, the Administrative Agent or any other Bank. In the event of any such grant by a Bank of a participation, such Bank's obligations under the Loan Documents to the other parties thereto shall remain unchanged, such Bank shall remain solely responsible for the performance thereof, and the Loan Parties, the Administrative Agent and the other Banks may continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations thereunder. Each holder of a participation in any rights under the Loan Documents, except to the extent the applicable participation agreement provides to the contrary, shall, with respect to such participation, be entitled to all of the rights of a Bank as fully as though it were a Bank under Sections 1.13, 7.02, 7.03, 10.02(d) and 10.07 (subject to any conditions imposed on a Bank hereunder with respect thereto, including delivery of the forms and certificates required under Section 1.13(a)(iii)) and may exercise any rights of set-off with respect to such participation as fully as though the Loan Parties were directly indebted to the holder of such participation for Loans in the amount of such participation; provided, however, -------- ------- that no holder of a participation shall be entitled to any amounts that would otherwise be payable to it with respect to its participation under Section 1.13 or 7.02 unless such amounts would have been payable to the Bank that granted such participation if such participation had not been granted. In connection with the sale of any participation hereunder, each participant (i) shall represent to the granting Bank for the benefit of the Administrative Agent and the Borrowers that under Applicable Law and treaties no Taxes (other than Bank Taxes) will be required to be withheld by the Administrative Agent or any Borrower with respect to any payments to be made with respect to such participant under this Agreement, (ii) shall furnish to the granting Bank (which Bank shall promptly forward to the Borrowers and the Administrative Agent) all of the forms and statements required by Section 1.13(a)(iii), and (iii) shall covenant to comply with all of the requirements of Section 1.13(a)(iii), provided that any required forms and statements shall be provided to the granting Bank, which Bank shall promptly forward such required forms and statements to the Administrative Agent and the Borrowers. Notwithstanding the above, in the event any Taxes are required to be withheld or deducted by any taxing authority from any payment made to any participant, the Bank that grants such participation shall (A) withhold or -43- deduct from each payment to the participant the amount of any Tax required under applicable law to be withheld or deducted from such payment, and (B) pay any Tax so withheld or deducted by it to the appropriate taxing authority in accordance with Applicable Law. Each Bank selling or granting a participation shall indemnify the Loan Parties and the Administrative Agent for any Taxes (including without limitation, any interest, penalties, additions to tax and additional amounts incurred in connection therewith) and Liabilities that they may sustain as a result of such Bank's failure to withhold and pay any Taxes applicable to payments by such Bank to its participant in respect of such participation. Section 10.11 Governing Law. ------------- The rights and duties of the Borrowers, the Guarantors, the Administrative Agent and the Banks under this Agreement and the Notes shall, pursuant to New York General Obligations Law, Section 5-1401, be governed by the law of the State of New York. Section 10.12 Judicial Proceedings; Waiver of Jury Trial. ------------------------------------------ Any judicial proceeding brought against a Borrower or any Guarantor with respect to any Loan Document Related Claim may be brought in any court of competent jurisdiction in the City of New York, and, by execution and delivery of this Agreement, each of the Borrowers and the Guarantors (a) accepts, generally and unconditionally, the nonexclusive jurisdiction of such courts and any related appellate court and irrevocably agrees to be bound by any judgment rendered thereby in connection with any Loan Document Related Claim and (b) irrevocably waives any objection it may now or hereafter have as to the venue of any such proceeding brought in such a court or that such a court is an inconvenient forum. Each of the Borrowers and the Guarantors hereby waives personal service of process and consents that service of process upon it may be made by certified or registered mail, return receipt requested, at its address specified or determined in accordance with the provisions of Section 10.01, and service so made shall be deemed completed on the third Business Day after such service is deposited in the mail so long as such service is also delivered to Premiere by overnight courier. Nothing herein shall affect the right of any Administrative Agent, any Bank or any other Indemnified Person to serve process in any other manner permitted by law or shall limit the right of any Administrative Agent, any Bank or any other Indemnified Person to bring proceedings against a Borrower or any Guarantor in the courts of any other jurisdiction. To the extent permitted in accordance with Applicable Law relating to jurisdiction and venue, any judicial proceeding by a Borrower or any Guarantor against the Administrative Agent or any Bank involving any Loan Document Related Claim shall be brought only in a court located in the City and State of New York. THE BORROWERS, THE GUARANTORS, THE ADMINISTRATIVE AGENT AND EACH BANK HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING ANY LOAN DOCUMENT RELATED CLAIM. Section 10.13 Reference Bank. -------------- The Reference Bank shall furnish to the Administrative Agent timely information for the purpose of determining the applicable Eurocurrency Rate. If the Reference Bank shall notify the Administrative Agent that thenceforth it shall not be able to furnish such information in a timely manner or shall assign all of its Loans or Commitment to a Person that is not an Affiliate of the Reference Bank, the Administrative Agent shall, with the consent of the Required Banks and Premiere, appoint another Bank as the Reference Bank in place of such Reference Bank. -44- Section 10.14 Severability of Provisions. -------------------------- Any provision of the Loan Documents that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions thereof or affecting the validity or enforceability of such provision in any other jurisdiction. To the extent permitted by Applicable Law, each of the Borrowers and the Guarantors hereby waives any provision of Applicable Law that renders any provision of the Loan Documents prohibited or unenforceable in any respect. Section 10.15 Counterparts. ------------ This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto were upon the same instrument. Section 10.16 Survival of Obligations. ----------------------- Except as otherwise expressly provided therein, the rights and obligations of the Borrowers, the Guarantors, the Administrative Agent, the Banks and the other Indemnified Persons under the Loan Documents shall survive the Repayment Date and the termination of the Security Interest. Section 10.17 Entire Agreement. ---------------- This Agreement, the Notes and the other Loan Documents embody the entire agreement among the Borrowers, the Guarantors, the Administrative Agent and the Banks relating to the subject matter hereof and supersede all prior agreements, representations and understandings, if any, relating to the subject matter hereof. Section 10.18 Successors and Assigns. ---------------------- All of the provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Section 10.19 No Fiduciary Relationship Established by Loan Documents. ------------------------------------------------------- The relationship between each Borrower and the Banks is that of debtor and creditor. The Loan Documents are not intended to, and do not, establish a fiduciary relationship, nor does a fiduciary relationship otherwise exist, between the Loan Parties, on the one hand, and the Administrative Agent and the Banks, on the other hand. The parties hereto have acted at arm's-length in negotiating the Loan Documents. Section 10.20 Judgment Currency. ----------------- If in connection with determining the amount of a judgment to be rendered in a currency (a "Judgment Currency") other than the currency in which the ----------------- relevant amount was due under this Agreement or a Note, it is necessary to convert a sum payable by a Borrower or any other Loan Party under this Agreement, the Notes or any other Loan Document in a currency other than such Judgment Currency into such Judgment Currency, then, unless another rate of exchange is required under Applicable Law, the rate of exchange used shall be the Administrative Agent's spot rate of exchange in New York City on the Business Day preceding the day on which final judgment is to be rendered. The obligations of the applicable Loan Party in respect of any such sum payable by it under the Loan Documents in a currency other than such Judgment Currency shall, notwithstanding any such judgment in such Judgment Currency, be discharged only to the extent that on the Business Day following actual receipt by the Administrative Agent or Banks of the amount of the judgment in such Judgment Currency, such Person is able to purchase the relevant currency in New York City with such sum of Judgment Currency, whether or not at the Administrative Agent's spot rate of exchange. As a -45- separate obligation and notwithstanding any such judgment, the applicable Loan Party shall pay such Person on demand in the relevant currency any difference between the amount originally payable by such Loan Party to such Person in the relevant currency and the amount of the relevant currency that may be so purchased. In the event that the amount that may be so purchased exceeds the amount originally payable, such Person shall promptly remit such excess to the applicable Loan Party. Section 10.21 Worldwide UK Security Agreement. ------------------------------- Notwithstanding anything to the contrary in the Worldwide UK Security Agreement, the Administrative Agent and the Banks hereby agree that no more than 65% (or such other percentage as is the maximum amount that can be subjected to the Security Interest without, in the reasonable opinion of the Company, resulting in any adverse tax consequence to the Company) of the shares of capital stock of Xpedite UK pledged by Worldwide pursuant thereto shall secure the liabilities of the Company or any Subsidiary that is a United States Person under the Loan Documents. ARTICLE 11 INTERPRETATION -------------- Section 11.01 Defined Terms. ------------- For the purposes of this Agreement: "Accumulated Funding Deficiency" has the meaning ascribed to that term in ------------------------------ Section 302 of ERISA. "Additional Sterling Cost" means, with respect to Eurocurrency Rate Loans ------------------------ made to Xpedite UK, for any Interest Period, the rate per annum for such Interest Period determined in accordance with Schedule 11.01(c). ----------------- "Administrative Agent" means The Bank of New York, as Administrative Agent -------------------- for the Banks under the Loan Documents, and any successor Administrative Agent appointed pursuant to Section 9.07. "Administrative Agent's Office" means the address of the Administrative ----------------------------- Agent specified in or determined in accordance with the provisions of Section 10.01. "Affiliate" means, with respect to a Person, any other Person that, --------- directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such first Person; unless otherwise specified, "Affiliate" means an Affiliate of Premiere. "Agents' Fee Letters" means the letter agreements providing for the payment ------------------- of certain fees in connection with this Agreement among Premiere and the Company and (i) The Bank of New York and BNY Capital Markets, Inc., and (ii) NationsBank, N.A. and NationsBanc Montgomery Securities LLC, respectively. "Agreement" means this Credit Agreement, including all schedules, annexes --------- and exhibits hereto. -46- "American Teleconferencing" means American Teleconferencing Services, Ltd., ------------------------- a Missouri corporation. "Annualized Consolidated EBITDA" means, with respect to any Person, at any ------------------------------ time, Consolidated EBITDA of such Person for the fiscal quarter ending on, or most recently ended prior to, such date of determination, times four; provided -------- however, that any non-recurring cash charge included in such Consolidated EBITDA - - ------- shall not be multiplied by four in determining Annualized Consolidated EBITDA unless such annualization properly reflects the relevant circumstances in the judgement of the Managing Agents. "Applicable Law" means, anything in Section 10.11 to the contrary -------------- notwithstanding, (a) all applicable common law and principles of equity and (b) all applicable provisions of all (i) constitutions, statutes, rules, regulations and orders of governmental bodies, (ii) Governmental Approvals and Governmental Registrations and (iii) orders, decisions, judgments and decrees. "Bank" means (a) any Person listed on the signature pages hereof following ---- the Administrative Agent and (b) any Person (other than the Borrower or any of it's Affiliates) that has been assigned any or all of the rights or obligations of a Bank pursuant to Section 10.10(a). "Bank Tax" means any income (including net income), franchise, gains or -------- profits Taxes (or similar Taxes imposed in lieu of such Taxes) that are imposed by any taxing authority in any jurisdiction (including any political subdivision thereof) in which the relevant Bank (or its Lending Office) or the Administrative Agent (as the case may be) is organized, managed or controlled or doing business or would not otherwise be subject to such Taxes but for a present or former connection between such jurisdictions or the taxing authority imposing such Taxes and the Bank or any Person affiliated with such Bank (including, without limitation, a connection arising from such Bank or affiliated Person being or having been a citizen or resident of such jurisdiction, or being or having been, organized, present or engaged in a trade or business in such jurisdiction, or having or having had a permanent establishment or fixed place or business in such jurisdiction). "Bankruptcy Code" means Title 11 of the United States Code. --------------- "Base Financial Statements" means the most recent, audited, consolidated ------------------------- balance sheet of Premiere and the Consolidated Subsidiaries referred to in Section 5.02(a)(i) and the related statements of income, retained earnings and, as applicable, changes in financial position or cash flows for the fiscal year ended with the date of such balance sheet. "Base Rate" means, for any day, a rate per annum equal to the higher of (i) --------- the Prime Rate in effect on such day and (ii) the sum of the Federal Funds Rate in effect on such day plus 1/2%. ---- "Base Rate Loan" means any Loan the interest on which is, or is to be, as -------------- the context may require, computed on the basis of the Base Rate. "Benefit Plan" of any Person, means, at any time, any employee benefit plan ------------ (including a Multiemployer Benefit Plan), the funding requirements of which (under Section 302 of ERISA -47- or Section 412 of the Code) are, or at any time within six years immediately preceding the time in question were, in whole or in part, the responsibility of such Person. "Borrower" has the meaning ascribed thereto in the preamble hereof. -------- "Business Day" means any day other than a Saturday, Sunday or other day on ------------ which banks in New York City are authorized to close. "Capital Expenditures" means any expenditures in respect of the purchase or -------------------- other acquisition (by way of the acquisition of securities of a Person or otherwise) of fixed or capital assets (excluding any such asset acquired in connection with normal replacement and maintenance programs properly charged to current operations or acquired with proceeds of insurance for the purpose of replacement thereof) and excluding Investments to which Section 4.13 is by its express terms inapplicable. "Capital Security" means, with respect to any Person, (a) any share of ---------------- capital stock of such Person or (b) any security convertible into, or any option, warrant or other right to acquire, any share of capital stock of such Person. "Code" means the Internal Revenue Code of 1986, as amended. ---- "Collateral" means all property in which a Lien is created pursuant to the ---------- Collateral Documents. "Collateral Documents" means the Security Agreements, the UK Security -------------------- Agreements and any other Loan Documents evidencing, governing or perfecting the Security Interest. "Commitment" of any Bank means (a) the amount set forth opposite such ---------- Bank's name under the heading "Commitment" on Annex A or, in the case of a Bank that becomes a Bank pursuant to an assignment, the amount of the assignor's Commitment assigned to such Bank, in either case, as the same may be reduced from time to time pursuant to Section 1.07 or increased or reduced from time to time pursuant to assignments in accordance with Section 10.10(a), or (b) as the context may require, the obligation of such Bank to make Loans in an aggregate unpaid principal amount not exceeding such amount. "Commitment Termination Date" means the 364th day following the Restated --------------------------- Agreement Date. "Company" has the meaning ascribed thereto in the preamble hereof. ------- "Consolidated EBITDA" means, with respect to any Person for any period, the ------------------- sum of (a) Consolidated Net Income of such Person for such period and (b) to the extent deducted in determining such Consolidated Net Income for such period, interest expense, income tax expense, depreciation expense, amortization expense, non-cash charges relating to Premiere's relationship with Digitek, Premiere Network and WorldCom arising from write-offs and other non-cash charges, if any, as agreed to by the Managing Agents. Notwithstanding the foregoing, Consolidated EBITDA for any period shall be calculated after giving effect on a pro forma basis for the period of such calculation to (x) the sale or other disposition of any Subsidiary or of all or -48- substantially all of the assets of any Subsidiary during such period and up to and including the date of determination (the "Reference Period") and (y) the acquisition by Premiere or any Subsidiary during the Reference Period of any other Person which, as a result of such acquisition, becomes a Subsidiary, or the acquisition of assets during the Reference Period from any Person which constitutes all or substantially all of an operating unit or business of such Person, as if such sale or disposition or acquisition occurred on the first day of the period of such calculation. "Consolidated Indebtedness" means, with respect to any Person, at any time, ------------------------- the consolidated Indebtedness of such Person and its Consolidated Subsidiaries as of such time. "Consolidated Net Income" means, with respect to any Person, for any ----------------------- period, the amount of consolidated net income (or loss) of such Person and its Consolidated Subsidiaries for such period (taken as a cumulative whole) provided that there shall be excluded: (a) any net income (or net loss) of a Consolidated Subsidiary (i) for any period during which it was not a Consolidated Subsidiary or (ii), in case of any such net income, to the extent that the declaration or payment of dividends or similar distributions by that Consolidated Subsidiary is not at the time permitted by operation of the terms of any Contract or Applicable Law; (b) any net income (or net loss) of any Person (other than a Consolidated Subsidiary) in which such first Person or any Consolidated Subsidiary has an ownership interest, except to the extent that any such income has actually been received by such first Person or such Subsidiary in the form of cash dividends or similar distributions or, in the case of any Person not less than 50% of the Capital Securities or other ownership interests of which is owned by such first Person or such Subsidiary, to the extent that such first Person or such Subsidiary has the contractual right to cause such Person to pay or declare such dividends or other distributions; (c) any restoration of any contingency reserve, except to the extent that provision for such reserve was made out of income during such period; (d) any net gains or losses on the sale or other disposition of investments and other capital assets other than in the ordinary course of business, provided that there shall also be excluded any related charges for taxes thereon; (e) any net gains or losses resulting from the extinguishment or defeasance of any Indebtedness; (f) any earnings from discontinued businesses; (g) any extraordinary gains or losses; (h) any interest income; and (i) all cash and non-cash nonrecurring charges or gain related to an acquisition by such first Person and the Consolidated Subsidiaries for such period and recorded on such first Person's consolidated statements of operations. "Consolidated Revenues" means, with respect to Premiere and the --------------------- Subsidiaries, for any period, the consolidated revenue of Premiere and the Subsidiaries for such period. "Consolidated Subsidiary" means, with respect to any Person at any time, ----------------------- any Subsidiary or other Person the accounts of which would be consolidated with those of such first Person in its consolidated financial statements as of such time; unless otherwise specified, "Consolidated Subsidiary" means a Consolidated Subsidiary of Premiere. "Contract" means (a) any agreement, including an indenture, lease or -------- license, (b) any deed or other instrument of conveyance, (c) any certificate of incorporation or charter and (d) any by-law. -49- "Default" means any condition or event that constitutes an Event of Default ------- or that with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Disclosed Matters" means the facts and circumstances expressly disclosed ----------------- in Premiere's filings with the Securities and Exchange Commission listed on Schedule 11.01(b); provided, however, that material adverse developments - - ----------------- -------- ------- relating to any such facts or circumstances subsequent to such disclosure thereof, or any ancillary effects thereof occurring subsequent to such disclosure that could have a Material Adverse Effect on (x) Premiere and the Consolidated Subsidiaries taken as a whole, (y) any Loan Document or (z) the Collateral, shall not constitute Disclosed Matters. "Dollar Equivalent" means, on any date, with respect to an amount of ----------------- Sterling, the amount of Dollars that the Administrative Agent determines (which determination shall be conclusive and binding absent manifest error) could then be purchased by it, on a spot basis and in accordance with its customary banking practices, with such amount of Sterling. "Dollars" and the sign "$" mean lawful currency of the United States of ------- - America. "Domestic Lending Office" of any Bank means (a) the branch or office of ----------------------- such Bank set forth below such Bank's name under the heading "Domestic Lending Office" on Annex A or, in the case of a Bank that becomes a Bank pursuant to an ------- assignment, the branch or office of such Bank set forth under the heading "Domestic Lending Office" in the Notice of Assignment given to the Borrower and the Administrative Agent with respect to such assignment or (b) such other branch or office of such Bank designated by such Bank from time to time as the branch or office at which its Base Rate Loans are to be made or maintained. "Enacted", as applied to a Regulatory Change, means the date such ------- Regulatory Change first becomes effective or is implemented or first required or expected to be complied with, whether the same is the result of an enactment by a government or any agency or political subdivision thereof, a determination of a court or regulatory authority, or otherwise. "ERISA" means the Employee Retirement Income Security Act of 1974. ----- "ERISA Affiliate" means, with respect to any Person, any other Person, --------------- including a Subsidiary or other Affiliate of such first Person, that is a member of any group of organizations within the meaning of Code Sections 414(b), (c), (m) or (o) of which such first Person is a member. "Eurocurrency Business Day" means any Business Day on which dealings in ------------------------- Dollar and Sterling deposits are carried on in the London interbank market and on which commercial banks are open for domestic and international business (including dealings in Dollar and Sterling deposits) in London, England. "Eurocurrency Lending Office" of any Bank means (a) the branch or office of --------------------------- such Bank set forth below such Bank's name under the heading "Eurocurrency Lending Office" on Annex A or, in the case of a Bank that becomes a Bank ------- pursuant to an assignment, the branch or office of such Bank set forth under the heading "Eurocurrency Lending Office" in the Notice of -50- Assignment given to the Borrower and the Administrative Agent with respect to such assignment or (b) such other branch or office of such Bank designated by such Bank from time to time as the branch or office at which its Eurocurrency Rate Loans are to be made or maintained. "Eurocurrency Rate" means, for any Interest Period, the sum of (i) the rate ----------------- per annum determined by the Administrative Agent to be the rate per annum (rounded upward, if necessary, to the next higher 1/16 of 1%) at which the Reference Bank offered or would have offered to place with first-class banks in the London interbank market deposits in Dollars or Sterling, as the case may be, in amounts comparable to the Eurocurrency Rate Loan of the Reference Bank to which such Interest Period applies, for a period equal to such Interest Period, at 11:00 a.m. (London time) on the second Eurocurrency Business Day (or such other day as is customary for eurocurrency loans denominated in Sterling) before the first day of such Interest Period plus (ii) in the case of Eurocurrency Rate ---- Loans made to Xpedite UK, the Additional Sterling Cost for such Interest Period. "Eurocurrency Rate Loan" means any Loan the interest on which is, or is to ---------------------- be, as the context may require, computed on the basis of the Eurocurrency Rate. "Event of Default" means any of the events specified in Section 6.01. ---------------- "Existing Benefit Plan" means any Benefit Plan listed on Schedule 4.15. --------------------- ------------- "Existing Guaranty" means (a) any Guaranty outstanding on the Restated ----------------- Agreement Date, to the extent set forth on Schedule 4.06, and (b) any Guaranty ------------- that constitutes a renewal, extension or replacement of an Existing Guaranty, but only if (i) at the time such Guaranty is entered into and immediately after giving effect thereto, no Default would exist, (ii) such Guaranty is binding only on the obligor or obligors under the Guaranty so renewed, extended or replaced, (iii) the principal amount of the obligations Guaranteed by such Guaranty does not exceed the principal amount of the obligations Guaranteed by the Guaranty so renewed, extended or replaced at the time of such renewal, extension or replacement and (iv) the obligations Guaranteed by such Guaranty bear interest at a rate per annum not exceeding the rate borne by the obligations Guaranteed by the Guaranty so renewed, extended or replaced except for any increase that is commercially reasonable at the time of such increase. "Existing Indebtedness" means (a) any Indebtedness of Premiere or any --------------------- Subsidiary outstanding on the Restated Agreement Date, to the extent set forth on Schedule 4.05, and (b) any Indebtedness of Premiere or such Subsidiary ------------- constituting a renewal, extension or refunding of any Existing Indebtedness of Premiere or such Subsidiary, but only if (i) at the time such Indebtedness is incurred and immediately after giving effect thereto, no Default would exist, (ii) the principal amount of such Indebtedness does not exceed the principal amount of the Indebtedness so renewed, extended or refunded (plus accrued interest, fees and transaction costs) and (iii) such Indebtedness bears interest at a rate per annum not exceeding the rate borne by the Indebtedness so renewed, extended or refunded except for any increase that is commercially reasonable at the time such Indebtedness is incurred. "Federal Funds Rate" means, for any day, the weighted average of the rates ------------------ on overnight Federal funds transactions with members of the Federal -51- Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York or, if such rate is not so published for any day that is a Business Day, the average of quotations for such day on such transactions received by The Bank of New York from three Federal funds brokers of recognized standing selected by such bank. "Generally Accepted Accounting Principles" means (a) in the case of the ---------------------------------------- Base Financial Statements, generally accepted accounting principles at the time of the issuance of the Base Financial Statements and (b) in all other cases, the accounting principles followed in the preparation of the Base Financial Statements. "Governmental Approval" means any authority, consent, approval, license (or --------------------- the like) or exemption (or the like) of any governmental unit. "Governmental Registration" means any registration or filing (or the like) ------------------------- with, or report or notice (or the like) to, any governmental unit. "Guaranteed Obligations" means all Liabilities of the Borrowers and the ---------------------- other Loan Parties (including in its capacity as a "debtor in possession" under the Bankruptcy Code) due or owing to, or in favor or for the benefit of, the Guaranteed Parties under the Loan Documents, of every kind, nature and description, direct or indirect, absolute or contingent, due or not due, now existing or hereafter arising, and whether or not (a) due or owing to, or in favor or for the benefit of, Persons that are Guaranteed Parties as of the Restated Agreement Date or that become Guaranteed Parties by reason of any succession or assignment at any time thereafter, (b) ARISING OR ACCRUING BEFORE OR AFTER THE FILING BY OR AGAINST ANY LOAN PARTY OF A PETITION UNDER THE BANKRUPTCY CODE OR (c) ALLOWABLE UNDER SECTION 502(b)(2) OF THE BANKRUPTCY CODE; provided, however, that (i) the Guaranteed Obligations of the Company in its - - -------- ------- capacity as a Guarantor shall not include any of such Liabilities of the Company in its capacity as a Borrower and (ii) solely with respect to the obligations of XSL as a Guarantor hereunder or any other Guarantor that is not a United States Person, Guaranteed Obligations shall not include any such Liabilities of the Company or any Subsidiary that is a United States Person under the Loan Documents. "Guaranteed Parties" means all Persons that are, or at any time were, the ------------------ Administrative Agent, or a Bank. "Guarantor" means Premiere, the Company, all Subsidiaries listed on --------- Schedule 11.01(a) and all Subsidiaries that shall have executed and delivered a - - ----------------- Subsidiary Guaranty Supplement pursuant to Section 4.03 at any time after the Restated Agreement Date. "Guaranty" of any Person means any obligation, contingent or otherwise, of -------- such Person (a) to pay any Liability of any other Person or to otherwise protect, or having the practical effect of protecting, the holder of any such Liability against loss (whether such obligation arises by virtue of such Person being a partner of a partnership or participant in a joint venture or by agreement to pay, to keep well, to purchase assets, goods, securities or services or to take or pay, or otherwise) or (b) incurred in connection with the issuance by a third Person of a Guaranty of any Liability of any other Person (whether such obligation arises by agreement to reimburse or -52- indemnify such third Person or otherwise). The word "Guarantee" when used as a --------- verb has the correlative meaning. "Indebtedness" of any Person means (a) any obligation of such Person for ------------ borrowed money, (b) any obligation of such Person evidenced by a bond, debenture, note or other similar instrument, (c) any obligation of such Person to pay the deferred purchase price of property or services, except a trade account payable that arises in the ordinary course of business, (d) any obligation of such Person as lessee under a capital lease, (e) any Mandatorily Redeemable Stock of such Person, (f) any obligation of such Person to purchase securities or other property that arises out of or in connection with the sale of the same or substantially similar securities or property, (g) any obligation, whether or not contingent, of such Person to reimburse any other Person in respect of amounts paid under a letter of credit or other Guaranty issued by such other Person, (h) any Indebtedness of others secured by a Lien on any asset of such Person and (i) any Indebtedness of others Guaranteed by such Person. "Indemnified Person" means any Person that is, or at any time was, the ------------------ Administrative Agent, a Bank, an Affiliate of the Administrative Agent or a Bank or a director, officer, employee or Administrative Agent of any such Person. "Information" means data, certificates, reports, statements (including ----------- financial statements), documents and other information. "Intellectual Property" means (a) (i) patents and patent rights, (ii) --------------------- trademarks, trademark rights, trade names, trade name rights, corporate names, business names, trade styles, service marks, logos and general intangibles of like nature and (iii) copyrights, in each case whether registered, unregistered or under pending registration and, in the case of any such that are registered or under pending registration, whether registered or under pending registration under the laws of the United States or any other country, (b) reissues, continuations, continuations-in-part and extensions of any Intellectual Property referred to in clause (a), and (c) rights relating to any Intellectual Property referred to in clause (a) or (b), including rights under applications (whether pending under the laws of the United States or any other country) or licenses relating thereto. "Intercompany Indebtedness" means Indebtedness owed by Premiere or any ------------------------- other Guarantor to Premiere or any other Guarantor. "Interest Expense" means, with respect to any Person, for any period, ---------------- without duplication, the sum of all interest expense of such Person and its Consolidated Subsidiaries. "Interest Payment Date" means the last day of each month of each year. --------------------- "Interest Period" means a period commencing, in the case of the first --------------- Interest Period applicable to a Eurocurrency Rate Loan, on the date of the making of, or conversion into, such Loan, and, in the case of each subsequent, successive Interest Period applicable thereto, on the last day of the immediately preceding Interest Period, and ending, depending on the Type of Loan, on the same day, so long as such day is not later than the Commitment Termination Date, in the first, second, third or sixth calendar month thereafter or, in the case of Eurocurrency Rate Loans made to Xpedite UK, or made previously and which have an Interest Period ending, on -53- any day that is less than one month prior to the Commitment Termination Date, ending on the Commitment Termination Date, except that (a) any Interest Period that would otherwise end on a day that is not a Eurocurrency Business Day shall be extended to the next succeeding Eurocurrency Business Day unless such Eurocurrency Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Eurocurrency Business Day and (b) any Interest Period that begins on the last Eurocurrency Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month in which such Interest Period ends) shall end on the last Eurocurrency Business Day of a calendar month. "Investment" of any Person means (a) any Capital Security, evidence of ---------- Indebtedness or other security or instrument issued by any other Person or (b) any loan, advance or extension of credit to, or any contribution to the capital of, any other Person. "Lending Office" of any Bank means the Domestic Lending Office or the -------------- Eurocurrency Lending Office of such Bank. "Liability" of any Person means (in each case, whether with full or limited --------- recourse) any indebtedness, liability, obligation, covenant or duty of or binding upon, or any term or condition to be observed by or binding upon, such Person or any of its assets, of any kind, nature or description, direct or indirect, absolute or contingent, due or not due, contractual or tortious, liquidated or unliquidated, whether arising under Contract, Applicable Law, or otherwise, whether now existing or hereafter arising, and whether for the payment of money or the performance or non-performance of any act. "Lien" means, with respect to any property or asset (or any income or ---- profits therefrom) of any Person (in each case whether the same is consensual or nonconsensual or arises by Contract, operation of law, legal process or otherwise), any mortgage, lien, pledge, attachment, levy or other security interest of any kind thereupon or in respect thereof. For the purposes of this Agreement, a Person shall be deemed to own subject to a Lien any asset that it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Loan" means any amount advanced by a Bank pursuant to Section 1.01. ---- "Loan Document Related Claim" means any claim or dispute (whether arising --------------------------- under Applicable Law, including any "environmental" or similar law, under Contract or otherwise and, in the case of any proceeding relating to any such claim or dispute, whether civil, criminal, administrative or otherwise) in any way arising out of, related to, or connected with, the Loan Documents, the relationships established thereunder or any actions or conduct thereunder or with respect thereto, whether such claim or dispute arises or is asserted before or after the Restated Agreement Date or before or after the Repayment Date. "Loan Document Representation and Warranty" means any "Representation and ----------------------------------------- Warranty" as defined in any Loan Document and any other representation or warranty made or deemed made under any Loan Document. -54- "Loan Documents" means (a) this Agreement, the Notes, the Security -------------- Agreements and the UK Security Agreements and (b) all other agreements, documents and instruments executed or delivered under or in connection with (i) any agreement, document or instrument referred to in clause (a), (ii) any other agreement, document or instrument referred to in this clause (b) or (iii) any of the transactions contemplated by any agreement, document or instrument referred to in clause (a) or in this clause (b). "Loan Party" means any Person (other than the Administrative Agent or a ---------- Bank) that is a party to a Loan Document. "Managing Agents" means The Bank of New York and NationsBank, N.A. --------------- "Mandatorily Redeemable Stock" means, with respect to any Person, any share ---------------------------- of such Person's capital stock to the extent that it is (a) redeemable, payable or required to be purchased or otherwise retired or extinguished, or convertible into any Indebtedness or other Liability of such Person, (i) at a fixed or determinable date, whether by operation of a sinking fund or otherwise, (ii) at the option of any Person other than such Person or (iii) upon the occurrence of a condition not solely within the control of such Person, such as a redemption required to be made out of future earnings or (b) convertible into Mandatorily Redeemable Stock. "Materially Adverse Effect" means, (a) with respect to a group of Persons ------------------------- "taken as a whole", any materially adverse effect on such Persons' business, assets, Liabilities, financial conditions, results of operations or business prospects taken as a whole on a consolidated basis in accordance with Generally Accepted Accounting Principles, (b) with respect to any Loan Document, any materially adverse effect, on the binding nature, validity or enforceability thereof as an obligation of any Loan Party that is a party thereto and (c) with respect to any Collateral, or any category of Collateral, pledged by any Loan Party, a materially adverse effect on the validity, perfection, priority or enforceability of the Security Interest therein. "Maximum Permissible Rate" means, with respect to interest payable on any ------------------------ amount, the rate of interest on such amount that, if exceeded, could, under Applicable Law, result in (a) civil or criminal penalties being imposed on the payee or (b) the payee's being unable to enforce payment of (or, if collected, to retain) all or any part of such amount or the interest payable thereon. "Money Market Investment" means (a) any security issued or directly and ----------------------- fully guaranteed or insured by the United States government or any agency or instrumentality thereof having a remaining maturity of not more than one year, (b) any certificate of deposit, eurodollar time deposit and bankers' acceptance with remaining maturity of not more than one year, any overnight bank deposit, and any demand deposit account, in each case with any Bank or with any United States or United Kingdom commercial bank having capital and surplus in excess of $500,000,000 or (Pounds)500,000,000, (c) any repurchase obligation with a term of not more than seven days for underlying securities of the types described in clauses (a) and (b) above entered into with any financial institution meeting the qualifications specified in clause (b) above, (d) any commercial paper issued by any Bank or the parent corporation of any Bank and any other commercial paper rated A-1 or higher by Standard & Poor's, a division of the McGraw Hill Companies, Inc., or Prime-1 by Moody's Investors Service, Inc. and in any case having a -55- remaining maturity of not more than one year, (e) any money market fund that invests solely in any or all of the Money Market Investments described in clauses (a) through (d) of this definition and (f) foreign currency investments of credit quality similar to the foregoing by any Subsidiary that is not a United States Person made in the ordinary course of business and reasonably related to the business needs of such Subsidiary. "Multiemployer Benefit Plan" means any Benefit Plan that is a multiemployer -------------------------- plan as defined in Section 4001(a)(3) of ERISA. "Net Consolidated Indebtedness" means, at any time, Consolidated ----------------------------- Indebtedness of Premiere at such time less the amount of cash and cash- equivalents owned and held by Premiere and the Consolidated Subsidiaries at such time in excess of $10,000,000. "Net Proceeds" means proceeds received by Premiere or any of its ------------ Subsidiaries in cash from the sale or other disposition of any investment security in any calendar year permitted pursuant to Section 4.09(d)(i), net of the amount of (i) brokers' and advisors' fees and commissions payable in connection with such sale or other disposition, (ii) all Federal, state and local taxes payable as a direct consequence of such sale or other disposition and (iii) the fees and expenses attributable to such sale or other disposition, to the extent not included in clause (i), except to the extent payable to any Affiliate of Premiere. "Note" means any promissory note in the form of Exhibit A. ---- --------- "Notice of Assignment" means any notice to the Borrowers and the -------------------- Administrative Agent with respect to an assignment pursuant to Section 10.10(a) in the form of Schedule 10.10(a). ----------------- "PBGC" means the Pension Benefit Guaranty Corporation. ---- "Permitted Guaranty" means any Guaranty that is (a) an endorsement for ------------------ deposit or collection in the ordinary course of business, (b) a Guaranty of and only of the obligations of the Loan Parties under the Loan Documents, (c) a Guaranty of obligations of Premiere or any Subsidiary not constituting Indebtedness of such Person and not otherwise prohibited by this Agreement, (d) a Guaranty of Indebtedness permitted pursuant to Section 4.05 (other than Premiere's 5-3/4% Convertible Subordinated Notes due 2004) or (e) Guaranties by Premiere of obligations and Indebtedness of its Subsidiaries (including real property leases and other ordinary course obligations) not prohibited to be incurred hereunder. "Permitted Lien" means (a) with respect to any asset that does not -------------- constitute Collateral, (i) any Lien existing on the Restated Agreement Date, to the extent set forth on Schedule 4.07; (ii) any Lien existing on any asset of -------------- any Person at the time such Person becomes a Subsidiary or on any asset at the time such asset is acquired by Premiere or a Subsidiary, but only, in either case, if such Lien was not created in contemplation of such Person becoming a Subsidiary or such asset being acquired and such Lien secures only the obligation secured thereby at the time such Person becomes a Subsidiary or such asset is acquired; (iii) any Lien on any asset securing Indebtedness incurred or assumed for the purpose of financing all or any part of the cost of acquiring such asset, provided that such Lien attaches to such asset concurrently with or -------- within 30 days after the acquisition thereof; (iv) any Lien arising out of the refinancing, extension, renewal or refunding of any Liability secured by any Lien permitted by any of the foregoing -56- clauses of this Section, provided that such Liability is not increased and is -------- not secured by any additional assets; (v) Liens on the assets of Premiere or any Subsidiary incidental to conduct of its business or the ownership of its assets that do not secure Indebtedness; (vi) any Lien securing and only securing the obligations of the Loan Parties under the Loan Documents; (vii) Liens securing Indebtedness of Premiere or any Subsidiary under a capital lease to the extent that such Liens attach solely to the assets subject to such capital lease or acquired with the proceeds of such Indebtedness; (viii) other Liens securing Indebtedness of Premiere and its Subsidiaries not prohibited by this Agreement in an aggregate principal amount outstanding at any time not in excess of $1,000,000 and (b) with respect to any asset that constitutes Collateral, any Lien that constitutes a "Permitted Lien" under the applicable Security Agreement or UK Security Agreements; and (ix) any Liens for Taxes which are being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with Generally Accepted Accounting Principles. "Permitted Restrictive Covenants" means (a) any covenant or restriction ------------------------------- contained in any Loan Document, (b) any covenant or restriction described in Schedule 4.11, but only to the extent that such covenant or restriction is there - - ------------- identified by specific reference to the provision of the Contract in which such covenant or restriction is contained, or (c) any covenant or restriction that (i) is not more burdensome than an existing Permitted Restrictive Covenant that is such by virtue of clause (b), (ii) is contained in a Contract constituting a renewal, extension or replacement of the Contract in which such existing Permitted Restrictive Covenant is contained and (iii) is binding only on the Person or Persons bound by such existing Permitted Restrictive Covenant. "Person" means any individual, sole proprietorship, corporation, ------ partnership, limited liability company, trust, unincorporated organization, mutual company, joint stock company, estate, union, employee organization, government or any agency or political subdivision thereof or, for the purpose of the definition of "ERISA Affiliate", any trade or business. "Post-Default Rate" means the rate otherwise applicable under Section ----------------- 1.03(a)(i) plus 2.00%. "Premiere" means Premiere Technologies, Inc., a Georgia corporation. -------- "Premiere Communications" means Premiere Communications, Inc., a Florida ----------------------- corporation. "Premiere Interest Coverage Ratio" means, at any time, the ratio of (x) -------------------------------- Consolidated EBITDA of Premiere for the fiscal quarter of Premiere ending on, or most recently ended prior to, such date of determination to (y) Interest Expense of Premiere minus interest income and minus, to the extent included in Interest ----- ----- Expense, amortization of financing costs of Premiere and the Consolidated Subsidiaries for such period. "Premiere Leverage Ratio" means, at any time, the ratio of Net Consolidated ----------------------- Indebtedness of Premiere at such time to Annualized Consolidated EBITDA of Premiere at such time. -57- "Prime Rate" means the prime commercial lending rate of The Bank of New ---------- York, as publicly announced to be in effect from time to time. The Prime Rate shall be adjusted automatically, without notice, on the effective date of any change in such prime commercial lending rate. The Prime Rate is not necessarily The Bank of New York's lowest rate of interest. "Prohibited Transaction" means any transaction that is prohibited under ---------------------- Code Section 4975 or ERISA Section 406 and not exempt under Code Section 4975 or ERISA Section 408. "Purchase Money Indebtedness" means (a) Indebtedness that is incurred to --------------------------- finance part or all of (but not more than) the purchase price of a tangible asset, provided that (i) neither Premiere nor any Subsidiary had at any time -------- prior to such purchase any interest in such asset other than a security interest or an interest as lessee under an operating lease and (ii) such Indebtedness is incurred within 30 days after such purchase, or (b) Indebtedness that (i) constitutes a renewal, extension or refunding of, but not an increase in the principal amount of, Purchase Money Indebtedness that is such by virtue of clause (a) or (b) and (ii) bears interest at a rate per annum that is commercially reasonable at the time such Indebtedness is incurred. "Quarterly Date" means the last day of each March, June, September and -------------- December of each year. "Reference Bank" means The Bank of New York and any replacement Reference -------------- Bank appointed pursuant to Section 10.13. "Regulation D" means Regulation D of the Board of Governors of the Federal ------------ Reserve System. "Regulation U" means Regulation U of the Board of Governors of the Federal ------------ Reserve System. "Regulatory Change" means any Applicable Law, interpretation, directive, ----------------- request or guideline (whether or not having the force of law), or any change therein or in the administration or enforcement thereof, that is Enacted after the Restated Agreement Date, including any such that imposes, increases or modifies any Tax, reserve requirement, insurance charge, special deposit requirement, assessment or capital adequacy requirement, but excluding any such that imposes, increases or modifies any Bank Tax. "Repayment Date" means the later of (a) the termination of the Commitments -------------- (whether as a result of the occurrence of the Commitment Termination Date, reduction to zero pursuant to Section 1.07 or termination pursuant to Section 6.02) and (b) the payment in full of all principal of and interest on the Loans and all other amounts payable or accrued hereunder. "Reportable Event" means, with respect to any Benefit Plan of any Person, ---------------- (a) the occurrence of any of the events set forth in ERISA Sections 4043(c), other than an event as to which the requirement of 30 days' notice, or the penalty for failure to provide such notice, has been waived by the PBGC, (b) the existence of conditions sufficient to require advance notice to the PBGC pursuant to ERISA Section 4043(b), (c) the occurrence of any of the events set forth in ERISA Sections 4062(e) or 4063(a) or the regulations thereunder, (d) any event requiring such Person or any of its ERISA Affiliates to provide security to such Benefit Plan under Code -58- Section 401(a)(29) or (e) any failure to make a payment required by Code Section 412(m) with respect to such Benefit Plan. "Representation and Warranty" means any representation or warranty made --------------------------- pursuant to or under (a) Section 2.02, Article 3, Section 5.02 or any other provision of this Agreement or (b) any amendment to, or waiver of rights under, this Agreement. "Required Banks" means, at any time, Banks having more than 75% of the -------------- aggregate amount of the Commitments or, if the Commitments shall have expired or been terminated, Banks having more than 75% of the aggregate amount of the Loans outstanding. "Restated Agreement Date" means the date set forth as such on the signature ----------------------- pages hereof, which date is the date the executed copies of this Agreement, as amended and restated, were delivered by all parties hereto and, accordingly, this Agreement, as amended and restated, became effective. If no such date is there set forth, the Restated Agreement Date shall be the date as of which this Agreement is dated. "Restricted Payment" means (a) any payment with respect to or on account of ------------------ any of Premiere's or any Subsidiary's Capital Securities, including any dividend or other distribution on any such Capital Securities or (b) any payment on account of any purchase, redemption, retirement, exchange, defeasance or conversion of, or on account of any claim relating to or arising out of the offer, sale or purchase of, any such Capital Security, other than any such payment with respect to Premiere's 5-3/4% Convertible Subordinated Notes due 2004 required to be made in accordance with the terms thereof as in effect on the Restated Agreement Date. For the purposes of this definition, a "payment" shall include the transfer of any asset or the incurrence of any Indebtedness or other Liability (the amount of any such payment to be the fair market value of such asset or the amount of such obligation, respectively) but shall not include the issuance of any capital stock of Premiere or any Subsidiary other than Mandatorily Redeemable Stock. "Secured Party" has the meaning ascribed to such term in the Security ------------- Agreements and to the term "Agent" in the UK Security Agreements and to any analogous term in any other security agreement executed and delivered pursuant to Section 4.03(iii). "Security Agreements" means collectively (a) each of the Security ------------------- Agreements between Premiere and the Administrative Agent, American Teleconferencing and the Administrative Agent, Voice-Tel and the Administrative Agent, Worldwide and the Administrative Agent and the Company and the Administrative Agent, in each case in substantially the form of Exhibit B and --------- (b) any other security agreement entered into by a Significant Subsidiary and the Administrative Agent pursuant to Section 4.03, in each case in substantially the form of Exhibit B. --------- "Security Interest" means the Liens created, or purported to be created, by ----------------- the Loan Documents. "Significant Subsidiary" means, at any time, any Subsidiary whose assets ---------------------- (after elimination of intercompany items) equal or exceed [5%] of the total consolidated assets of Premiere and the Consolidated Subsidiaries, or whose revenues (after elimination of -59- intercompany items) equal or exceed [5%] of the total consolidated revenues of Premiere and the Consolidated Subsidiaries, in each case as shown on the most recent financial statements of Premiere and its Consolidated Subsidiaries furnished to the Banks pursuant to Section 5.01. "Sterling" and the sign "(Pounds)" mean lawful currency of the United -------- -------- Kingdom. "Sterling Sub-limit" means $70,000,000, as such amount may be decreased ------------------ from time to time pursuant to Section 1.07. "Subsidiary" means, with respect to any Person, any other Person (a) ---------- securities of which having ordinary voting power to elect a majority of the board of directors (or other persons having similar functions) or (b) other ownership interests of which ordinarily constituting a majority voting interest, are at the time, directly or indirectly, owned or controlled by such first Person, or by one or more of its Subsidiaries, or by such first Person and one or more of its Subsidiaries; unless otherwise specified, "Subsidiary" means a Subsidiary of Premiere. "Tax" means any Federal, State or foreign tax, assessment or other --- governmental charge (including any withholding tax) upon a Person or upon its assets, revenues, income or profits. "Termination Event" means, with respect to any Benefit Plan, (a) any ----------------- Reportable Event with respect to such Benefit Plan, (b) the termination of such Benefit Plan, or the filing of a notice of intent to terminate such Benefit Plan, or the treatment of any amendment to such Benefit Plan as a termination under ERISA Section 4041(c), (c) the institution of proceedings to terminate such Benefit Plan under ERISA Section 4042 or (d) the appointment of a trustee to administer such Benefit Plan under ERISA Section 4042. "Type" means, with respect to Loans, any of the following, each of which ---- shall be deemed to be a different "Type" of Loan: Base Rate Loans, Eurocurrency Rate Loans having a one-month Interest Period, Eurocurrency Rate Loans having a two-month Interest Period, Eurocurrency Rate Loans having a three-month Interest Period, and Eurocurrency Rate Loans having a six-month Interest Period. Any Eurocurrency Rate Loan having an Interest Period that differs from the duration specified for a Type of Eurocurrency Rate Loan listed above solely as a result of the operation of clauses (a) and (b) of the definition of "Interest Period" shall be deemed to be a Loan of such above-listed Type notwithstanding such difference in duration of Interest Periods. "UK Security Agreements" means collectively (a) the Worldwide UK Security ---------------------- Agreement, (b) the Xpedite UK Security Agreement, (c) the XSL Security Agreement and (d) any other security agreement entered into by a Subsidiary of Xpedite UK that is a Significant Subsidiary and the Administrative Agent pursuant to Section 4.03, in each case in substantially the form of Exhibit E. --------- "United States Person" means a corporation, partnership or other entity -------------------- created, organized or incorporated under the laws of the United States of America or a State thereof (including the District of Columbia). "VoiceCom" means VoiceCom Systems, Inc., a Washington corporation. -------- -60- "Voice-Tel" means Voice-Tel Enterprises, Inc., a Delaware corporation. --------- "Worldwide" means Xpedite Systems Worldwide, Inc. --------- "Worldwide UK Security Agreement" means the Deed of Charge over Shares and ------------------------------- Securities dated December 17, 1997 between Worldwide, as Chargor, and The Bank of New York, as Agent. "Xpedite Interest Coverage Ratio" means, at any time, the ratio of (x) ------------------------------- Consolidated EBITDA for the fiscal quarter of the Company ending on, or most recently ended prior to, such date of determination to (y) Interest Expense of the Company minus interest income and minus, to the extent included in Interest ----- ----- Expense, amortization of financing costs of the Company and its Consolidated Subsidiaries for such period. "Xpedite Leverage Ratio" means, at any time, the ratio of Consolidated ---------------------- Indebtedness of Xpedite at such time to Annualized Consolidated EBITDA of Xpedite at such time. "Xpedite UK" has the meaning ascribed thereto in the preamble hereto. ---------- "Xpedite UK Security Agreement" means the Fixed and Floating Charge dated ----------------------------- December 17, 1997 between Xpedite UK and The Bank of New York, as Agent. "XSL" means Xpedite Systems Limited., an English corporation. --- "XSL Security Agreement" means the Fixed and Floating Charge dated December ---------------------- 17, 1997 between XSL and The Bank of New York, as Agent. Section 11.02 Other Interpretive Provisions. ----------------------------- (a) Except as otherwise specified herein, all references herein or in any other Loan Document (i) to any Person shall be deemed to include such Person's successors and assigns, (ii) to any Applicable Law defined or referred to herein shall be deemed references to such Applicable Law or any successor Applicable Law as the same may have been or may be amended or supplemented from time to time and (iii) to any Loan Document or Contract defined or referred to herein shall be deemed references to such Loan Document or Contract (and, in the case of any Note or any other instrument, any instrument issued in substitution therefor) as the terms thereof may have been or may be amended, supplemented, waived or otherwise modified from time to time. (b) When used in this Agreement, the words "herein", "hereof" and "hereunder" and words of similar import shall refer to this Agreement as a whole and not to any provision of this Agreement, and the words "Article", "Section", "Annex", "Schedule" and "Exhibit" shall refer to Articles and Sections of, and Annexes, Schedules and Exhibits to, this Agreement unless otherwise specified. (c) Whenever the context so requires, the neuter gender includes the masculine or feminine, the masculine gender includes the feminine, and the singular number includes the plural, and vice versa. -61- (d) Any item or list of items set forth following the word "including", "include" or "includes" is set forth only for the purpose of indicating that, regardless of whatever other items are in the category in which such item or items are "included", such item or items are in such category, and shall not be construed as indicating that the items in the category in which such item or items are "included" are limited to such items or to items similar to such items. (e) Except as otherwise specified herein, all references herein to the Agent, any Bank or any Loan Party shall be deemed to refer to such Person however designated in Loan Documents, so that (i) a reference to rights or duties of the Administrative Agent under the Loan Documents shall be deemed to include the rights or duties of such Person as the Security Party under the Security Agreements and the UK Security Agreements, (ii) a reference to costs incurred by a Bank in connection with the Loan Documents shall be deemed to include costs incurred by such Person as a Principal under (and as defined in) the Security Agreements and the UK Security Agreements, and (iii) a reference to the obligations of the Borrowers or any other Loan Party under the Loan Documents shall be deemed to include the obligations of such Person in any capacity under the Loan Documents. Section 11.03 Accounting Matters. ------------------ All accounting determinations hereunder and all computations utilized by Premiere or the Company in complying with the covenants contained herein shall be made, all accounting terms used herein shall be interpreted, and all financial statements required to be delivered hereunder shall be prepared, in accordance with Generally Accepted Accounting Principles, except, in the case of such financial statements, for changes in Generally Accepted Accounting Principles that may from time to time be approved by a significant segment of the accounting profession. Section 11.04 Representations and Warranties. ------------------------------ All Representations and Warranties shall be deemed made (a) in the case of any Representations and Warranties contained in this Agreement at the time of its initial execution and delivery, at and as of the Restated Agreement Date and (b) in the case of any particular Representation and Warranty, wherever contained, at such other time or times as such Representation and Warranty is made or deemed made in accordance with the provisions of this Agreement or the document pursuant to, under or in connection with which such Representation and Warranty is made or deemed made. Section 11.05 Captions. -------- Captions to Articles, Sections and subsections of, and Annexes, Schedules and Exhibits to, this Agreement are included for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or in any way affect the meaning or construction of any provision of this Agreement. Section 11.06 Interpretation and Related Documents. ------------------------------------ Except as otherwise specified therein, terms that are defined herein that are used in Notes, certificates, opinions and other documents delivered in connection herewith shall have the meanings ascribed to them herein and such documents shall be otherwise interpreted in accordance with the provisions of this Article 11. Section 11.07 Undertaking by Premiere. ------------------------ Notwithstanding the provisions of Section 2.01(a) hereto, the amendment and restatement of this Agreement as of the Restated Agreement -62- Date shall be effective notwithstanding that the Administrative Agent shall not have received the following, and Premiere agrees to deliver or cause to be delivered each of the following to the Administrative Agent, no later than the date that is, in the case of items (i) and (ii) below, 30 days and, in the case of item (iii) below, 10 days, after the Restated Agreement Date: (i) opinions of local counsel for the Loan Parties in Florida, Missouri, Washington and each other state, if any, in which the chief executive office of any Loan Party or any substantial portion of Collateral is located or deemed located, in form and substance reasonably satisfactory to the Managing Agents; (ii) Uniform Commercial Code, tax and judgement lien searches for each of the Loan Parties that are United States Persons, in such jurisdictions as shall have been reasonably requested by the Administrative Agent; and (iii) the items referred to in Section 2.01(a)(x). -63- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers all as of the Restated Agreement Date. PREMIERE TECHNOLOGIES, INC. By /s/ ------------------------------------ Name: Title: XPEDITE SYSTEMS, INC. By /s/ ------------------------------------ Name: Title: XPEDITE SYSTEMS HOLDINGS (UK) LIMITED By /s/ ------------------------------------ Name: Title: XPEDITE SYSTEMS WORLDWIDE, INC. By /s/ ------------------------------------ Name: Title: i XPEDITE SYSTEMS LIMITED By /s/ ------------------------------------ Name: Title: AMERICAN TELECONFERENCING SERVICES, LTD. By /s/ ------------------------------------ Name: Title: PREMIERE COMMUNICATIONS, INC By /s/ ------------------------------------ Name: Title: VOICECOM SYSTEMS, INC. By /s/ ------------------------------------ Name: Title: ii VOICE-TEL ENTERPRISES, INC. By /s/ ------------------------------------ Name: Title: iii THE BANK OF NEW YORK, as Administrative Agent and as a Bank By /s/ ------------------------------------ Name: Title: NATIONSBANK, N.A., as Documentation Agent and as a Bank By /s/ ------------------------------------ Name: Title: Agreement Date: iv ANNEX A ------- BANKS, LENDING OFFICES AND NOTICE ADDRESSES COMMITMENTS - - --------------------- ----------- THE BANK OF NEW YORK $50,000,000 Domestic Lending Office: The Bank of New York One Wall Street, 16th Floor New York, NY 10286 Eurocurrency Lending Office: The Bank of New York One Wall Street, 16th Floor New York, NY 10286 Notice Address: The Bank of New York One Wall Street, 16th Floor New York, NY 10286 Telephone: (212) 635-8607 Telecopy No.: (212) 635-8595 Attention: Ms. Cindy Rogers BANKS, LENDING OFFICES AND NOTICE ADDRESSES COMMITMENTS - - --------------------- ----------- NATIONSBANK, N.A. $100,000,000 Domestic Lending Office: NationsBank, N.A. 101 North Tryon Street NC1-001-15-03 Charlotte, NC 28255 Eurocurrency Lending Office: NationsBank, N.A. 101 North Tryon Street NC1-001-15-03 Charlotte, NC 28255 Notice Address: NationsBank, N.A. 101 North Tryon Street NC1-001-15-03 Charlotte, NC 28255 Telephone: (704) 386-8389 Telecopy No.: (704) 386-8694 Attention: Schedule 1.02 ------------- NOTICE OF BORROWING FOR LOANS [Name and address of Administrative Agent in accordance with Section 10.01] Date: Ladies and Gentlemen: Reference is made to the Amended and Restated Credit Agreement, dated as of December 16, 1998, among Xpedite Systems, Inc. and Xpedite Systems Holdings (UK) Limited, as Borrowers, the Guarantors party thereto, the Banks listed on the signature pages thereof, NationsBank, N.A., as Documentation Agent, and The Bank of New York, as Administrative Agent (the "Credit Agreement"). Terms defined in the Credit Agreement that are not otherwise defined herein are used herein with the meanings therein ascribed to them. The undersigned hereby gives notice pursuant to Section 1.02 of the Credit Agreement of its request to have the following Loans made to it on [insert requested date of borrowing or issuance]: Type of Loan/1/ Amount ------------ ------ _________________________________ ______________ _________________________________ ______________ _________________________________ ______________ [Please disburse the proceeds of the Loans by [insert requested method of disbursement].]/2/ The undersigned represents and warrants that (a) the borrowing requested hereby complies with the requirements of Section 1.02 of the Credit Agreement and (b) [except to the extent set forth on Annex A hereto,]/3/ (i) each Loan Document Representation and Warranty is true and correct at and as of the date hereof and (except to the extent the undersigned gives notice to the Banks to the contrary prior to 5:00 p.m. on the Business Day before the requested date for the making of the Loans) will be true and correct at and as of the time the Loans are made, in each case both with and without giving effect to the Loans and the application of the proceeds thereof, and (ii) no Default has occurred and is continuing as of the date hereof or would result from the making of the Loans or from the application of the proceeds thereof if the Loans were made on the date hereof, and (except to the extent the undersigned gives notice to the Banks to the contrary prior to 5:00 p.m. on the Business Day before the requested date for the making of the Loans) no Default will have occurred and be continuing at the time the Loans are to be made or would result from the making of the Loans or from the application of the proceeds thereof. [XPEDITE SYSTEMS, INC.] [XPEDITE SYSTEMS HOLDINGS (UK) LIMITED] By , --------------------------- Name: Title: _____________________ 1. Be sure to specify the duration of the Interest Period in the case of Eurocurrency Rate Loans (e.g., one-month Eurocurrency Rate). ---- 2. Include and complete this sentence if the proceeds of the requested Loans are to be disbursed in a manner other than by credit to an account of the Borrower at the Administrative Agent's Office. 3. If the representation and warranty in either clause (b)(i) or (b)(ii) would be incorrect, include the material in brackets and set forth the reasons such representation and warranty would be incorrect on an attachment labeled Annex A. 2 Schedule 1.03(c)(iv) -------------------- NOTICE OF CONVERSION OR CONTINUATION [Name and address of Administrative Agent in accordance with Section 10.01] Date: Ladies and Gentlemen: Reference is made to the Amended and Restated Credit Agreement, dated as of December 16, 1998, among Xpedite Systems, Inc. and Xpedite Systems Holdings (UK) Limited, as Borrowers, the Guarantors party thereto, the Banks listed on the signature pages thereof, NationsBank, N.A., as Documentation Agent, and The Bank of New York, as Administrative Agent (the "Credit Agreement"). The undersigned hereby gives notice pursuant to Section 1.03(c)(iv) of the Credit Agreement of its desire to convert or continue the Loans specified below into or as Loans of the Types and in the amounts specified below on [insert date of conversion or continuation]:
Loans to be Converted or Continued Converted or Continued Loans - - -------------------------------------------------- ---------------------------------------- Type Last Day of Current Type of Loan/1/ Interest Period Amount of Loan/1/ Amount - - ------------ ------------------- --------------- ------------------- ------------------- - - ------------ ------------------- --------------- ------------------- ------------------- - - ------------ ------------------- --------------- ------------------- ------------------- - - ------------ ------------------- --------------- ------------------- -------------------
The undersigned represents and warrants that conversions and continuations requested hereby comply with the requirements of the Credit Agreement. [XPEDITE SYSTEMS, INC.] [XPEDITE SYSTEMS HOLDINGS (UK) LIMITED] By: ------------------------------- Name: Title: ______________ /1/ Be sure to specify the duration of the Interest Period in the case of Eurocurrency Rate Loans (e.g., one-month Eurocurrency Rate). Schedule 1.05(a) ---------------- NOTICE OF PREPAYMENT [Name and address of Administrative Agent in accordance with Section 10.01] Date: Ladies and Gentlemen: Reference is made to the Amended and Restated Credit Agreement, dated as of December 16, 1998, among Xpedite Systems, Inc. and Xpedite Systems Holdings (UK) Limited, as Borrowers, the Guarantors party thereto, the Banks listed on the signature pages thereof, NationsBank, N.A., as Documentation Agent, and The Bank of New York, as Administrative Agent (the "Credit Agreement"). The undersigned hereby gives notice pursuant to Section 1.05(a) of the Credit Agreement that it will prepay the Loans specified below on [insert date of prepayment]:
[Last Day of Current Type of Loan/1/ Interest Period] Amount - - ---------------------------- ------------------------------ ----------------------------- - - ---------------------------- ------------------------------ ----------------------------- - - ---------------------------- ------------------------------ ----------------------------- - - ---------------------------- ------------------------------ -----------------------------
The undersigned represents and warrants that the prepayment requested hereby complies with the requirements of the Credit Agreement. [XPEDITE SYSTEMS, INC.] [XPEDITE SYSTEMS HOLDINGS (UK) LIMITED] By --------------------------------- Name: Title: - - ----------------- /1/ Be sure to specify the duration of the Interest Period in the case of Eurocurrency Rate Loans (e.g., one-month Eurocurrency Rate). ---- 2 Schedule 2.01(a)(i) ------------------- [INSERT NAME OF LOAN PARTY] CERTIFICATE AS TO RESOLUTIONS, ETC. I, __________, [Assistant] Secretary of [insert name of loan party], a [__________] corporation (the "Company"), hereby certify, pursuant to Section 2.01(a)(i) of the Amended and Restated Credit Agreement, dated as of December 16, 1998, among Xpedite Systems, Inc. and Xpedite Systems Holdings (UK) Limited, as Borrowers, the Guarantors party thereto, the Banks listed on the signature pages thereof, NationsBank, N.A., as Documentation Agent, and The Bank of New York, as Administrative Agent (the "Credit Agreement"), that: 1. The below named persons have been duly elected (or appointed) and have duly qualified as, and on this day are, officers of the Company holding their respective offices below set opposite their names, and the signatures below set opposite their names are their genuine signatures: Name Office Signature ---- ------ --------- [Insert names and offices _______________________________ of persons authorized to sign _______________________________ the Loan Documents to which ______________________________ the Company is a party _______________________________ and any related documents] _______________________________ 2. (a) Attached as Annex A is a true and correct copy of resolutions duly adopted by [unanimous written consent of] the Board of Directors of the Company. Such resolutions have not been amended, modified or revoked and are in full force and effect on the date hereof. [(b) Attached as Annex A-1 is a true and correct copy of resolutions duly adopted by [unanimous written consent of] the stockholders of the Company. Such resolutions have not been amended, modified or revoked and are in full force and effect on the date hereof.]/1/ 3. The loan documents to which the Company is a party, in each case as executed and delivered on behalf of the Company, are in the forms thereof approved by [unanimous written consent of] the Board of Directors of the Company. 4. There has been no amendment to the Certificate of Incorporation of the Company since __________, 19__./2/ 5. Attached as Annex B is a true and correct copy of the By-laws of the Company as in effect on __________, 19__/3/ and at all subsequent times to and including the date hereof. IN WITNESS WHEREOF, I have signed this certificate this __ day of __________, 1997. ___________________________ [Assistant] Secretary I, __________, [title] of the Company, hereby certify that [name of the above [Assistant] Secretary] has been duly elected or appointed and has been duly qualified as, and on this day is, [Assistant] Secretary of the Company, and the signature in paragraph 1 above is his genuine signature. IN WITNESS WHEREOF, I have signed this certificate this __ day of __________, 19__. ___________________________ [Title] ____________________ 1. Omit if not applicable. 2. Insert date of the Secretary of State's Certificate of Incorporation required by Section 2.01(a)(ii). 3. Insert date of the Board of Directors' meeting adopting the resolutions referred to in paragraph 2(a). 2 Schedule 2.01(a)(iv) -------------------- FORM OF OPINION OF COUNSEL FOR THE LOAN PARTIES Schedule 2.01(a)(iv) FORM OF OPINION OF COUNSEL FOR THE LOAN PARTIES December 16, 1998 To the Persons Listed on the Schedule A hereto Re: $150,000,000 Amended and Restated Credit Agreement to Xpedite Systems, Inc. and Xpedite Systems Holdings (UK) Limited Ladies and Gentlemen: We have acted as special counsel to Premiere Technologies, Inc. ("Premiere"), a Georgia corporation, Xpedite Systems, Inc. ("Xpedite"), a Delaware corporation, Xpedite Systems Holdings (UK) Limited ("Xpedite UK"), an English corporation, Xpedite Systems Limited ("Xpedite Systems"), an English corporation, Xpedite Systems Worldwide, Inc. ("Worldwide"), a Delaware corporation, Premiere Communications, Inc. ("Premiere Communications"), a Florida corporation, Voice-Tel Enterprises, Inc. ("Voice-Tel"), a Delaware corporation, VoiceCom Systems, Inc. ("VoiceCom"), a Washington corporation, and American Teleconferencing Services, Ltd., ("American Teleconferencing"), a Missouri corporation in connection with the execution and delivery of that certain Credit Agreement dated as of December 17, 1997, as Amended and Restated as of December 16, 1999 (the "Credit Agreement"), by and among Xpedite and Xpedite UK , as Borrowers, Xpedite Systems, Worldwide, Premiere, Premiere Communications, Voice-Tel, VoiceCom and American Teleconferencing, as Guarantors, the signatory banks thereto (collectively, the "Banks"), and The Bank of New York, as administrative agent (the "Administrative Agent") for the Banks, and NationsBank, N.A., as documentation agent, pursuant to which and subject to the terms and conditions of which the Banks agree to make Loans to the Borrowers on the terms and conditions set forth therein. Unless otherwise defined herein, terms defined in the Credit Agreement are used herein as therein defined. This opinion is being rendered pursuant to Section 2.01(a)(iv) of the Credit Agreement. In our capacity as special counsel to the Borrowers and Guarantors, we have examined originals, or copies identified to our satisfaction as being true copies of such originals of the following: (a) The Certificate of Incorporation of each of Xpedite, Worldwide, Premiere, Premiere Communications, Voice-Tel, VoiceCom and American Teleconferencing (collectively, the "Domestic Credit Parties"), as amended to date; (b) The Bylaws of each of the Domestic Credit Parties, as amended to date; (c) Certificates of the Secretary of State of the respective states of incorporation for each of the Domestic Credit Parties, of recent date, certifying as to the good standing of each of the Domestic Credit Parties, (d) Resolutions of the Boards of Directors of each of the Domestic Credit Parties relating to the Credit Agreement, the other Loan Documents (as defined below) and the transactions contemplated thereby; (e) The Credit Agreement; (f) The Notes; (g) A Security Agreement dated as of December 17, 1997 between Xpedite and The Bank of New York, as Secured Party; (h) A Security Agreement dated as of December 17, 1997 between Worldwide and The Bank of New York, as Secured Party; (i) Security Agreements dated as of the date hereof by each of Premiere, Voice-Tel and American Teleconferencing in favor of The Bank of New York, as Secured Party (the Security Agreements referred to in subparagraphs (g), (h) and (i) referred to herein as the "Security Agreements"); (j) A Deed of Charge over Shares and Securities dated as of December 17, 1997 between Worldwide and The Bank of New York, as Agent (the "Deed of Charge"); and (k) Form of financing statements on Form UCC-1 naming each of the Domestic Credit Parties, as debtors, and the Administrative Agent, as secured party (the "Financing Statements"). The documents set forth in clauses (e) through (k) are hereinafter referred to collectively as the "Loan Documents". In rendering this opinion we have assumed (i) that the signatures on all documents examined by us are genuine, (ii) that any individual executing such documents had the legal capacity to execute such documents, (iii) the authenticity of all documents submitted to us as originals, (iv) the conformity to original documents of all documents submitted to us as photostatic or certified copies, (v) the authenticity of such copies, and (vi) that the rights set forth in the Loan Documents have been granted for adequate consideration, and that the grants of such rights were not made with the intent to hinder, delay or defeat any of the rights of any creditors of the Loan Parties. As to certain factual matters which were not independently established, we have relied to the extent we have deemed proper, on certificates and other information of the Loan Parties or public officials. We have also assumed, without independent investigation, that and relied upon the fact that: (i) the representations and warranties set forth in the Loan Documents are true and correct as to factual matters; (ii) each of the parties to the Loan Documents (other than the Domestic Credit Parties) has been duly organized and is validly existing and in good standing under the jurisdiction of its incorporation or organization; (iii) the execution and delivery of? and performance by, each party to the Loan Documents (other than the Domestic Credit Parties) are within its power and authority; (iv) the execution, delivery and performance of the Loan Documents by each of the parties thereto (other than the Domestic Credit Parties) do not conflict with or violate such Person's organizational documents or bylaws or any provision of any order, writ, judgment, injunction, decree, determination or award applicable to such Person; (v) the execution, delivery and performance of the Loan Documents by each of the parties thereto (other than the Domestic Credit Parties and, as to Xpedite UK and Xpedite Systems, New York and Federal law) do not violate any applicable law with respect to such Person; (vi) each of the parties to the Loan Documents (other than the Domestic Credit Parties) has duly authorized, executed and delivered the Loan Documents; (vii) each of the Loan Documents is a legal, valid and binding obligation of each party thereto, enforceable in accordance with their respective terms against the parties thereto (other than, under New York, Georgia and Federal law, with respect to the Domestic Credit Parties, Xpedite UK and Xpedite Systems); (viii) all authorizations, approvals or other actions by, and all notices to or filings with, any governmental authority, regulatory body or other Person that are required for the due execution, delivery and performance by the respective parties thereto (other than the Domestic Credit Parties), if required, have been duly obtained or made and are in full force and effect; (ix) there is no agreement or course of prior dealing between any of the parties which would supplement the relationships set forth in the Loan Documents; (x) the pledgors under the Security Agreements own, legally and beneficially, the Shares, (as hereinafter defined) and otherwise have and continue to have rights in such Collateral within the meaning of Section 9-203 (1) (c) of the Uniform Commercial Code, as adopted in the State of Georgia (the "UCC"); and (xi) that there has not been any fraud, duress, undue influence or material mistake of fact. We have also examined such corporate records, certificates of corporate and governmental representatives, and such questions of law and other matters as we have considered necessary or appropriate for the purpose of enabling us to express this opinion. Based on the foregoing, and subject to all of the qualifications, exceptions and assumptions set forth herein, we are of the opinion that: 1. Each of the Domestic Credit Parties is validly existing and in good standing under the laws of their respective jurisdictions of incorporation, with full corporate power and authority to enter into and perform its respective obligations under the Loan Documents and to consummate the transactions contemplated thereby. 2. The execution and delivery by each of the Domestic Credit Parties of each of the Loan Documents to which it is a party, and the consummation of the transactions contemplated thereby, have been duly authorized by all necessary corporate action by the Domestic Credit Parties. 3. The execution and delivery by each of the Domestic Credit Parties of each of the Loan Documents to which it is a party, and the consummation of the transactions contemplated thereby, do not violate any provision of the Certificate of Incorporation or By-laws of such Domestic Credit Party, as the case may be. The execution and delivery by the Domestic Credit Parties of the Loan Documents do not require any such Person to obtain any authorization, approval or consent of any Georgia or United States Governmental Authority for the legality, validity, or binding effect of the Loan Documents or violate any law, rule or regulation of the State of Georgia or the United States applicable to the Domestic Credit Parties; provided, however, that, notwithstanding the foregoing, we express no opinion as to (i) the necessity of obtaining any authorization, approval or consent from any Governmental Authority having specific jurisdiction over the regulation of Persons engaged in the telecommunications business or (ii) whether the execution and delivery of the Loan Documents violate any law, rule or regulation specifically relating to the regulation of Persons engaged in the business of telecommunications. 4. Each of the Loan Documents to which any of the Domestic Credit Parties is a party has been duly executed and delivered by such Domestic Credit Party. 5. The Loan Documents (other than any Loan Document governed by the laws of the United Kingdom as to which we express no opinion) constitute the legal, valid and binding obligation of each such Loan Party, as applicable, enforceable against such applicable party in accordance with their respective terms. 6. To our knowledge, the execution and delivery by the Domestic Credit Parties of each of the Loan Documents to which it is a party, and the consummation of the transactions contemplated thereby, do not (a) cause any Domestic Credit Party to violate any material order, writ, judgment, injunction, decree, determination or award of any court, arbitrator or governmental commission, board, bureau or agency to which any Domestic Credit Party is a party or is bound or (b) require any consent or approval under, or otherwise breach, any material agreement to which any Domestic Credit Party is a party or is bound. 7. To our knowledge, there are no legal actions, suits or proceedings pending or threatened against any Domestic Credit Party before any court, arbitrator or governmental commission, board, bureau or agency which question the validity of the Loan Documents to which any Domestic Credit Party is a party. 8. Each of the Security Agreements is in proper form to create a valid security interest under the UCC in favor of The Bank of New York, as Secured Party thereunder (the "Secured Party") in such portion of the Collateral, a lien or security interest in which is governed by, and subject to, the UCC, to secure the Secured Obligations (as defined in the Security Agreements) purported to be secured thereby. 9. Assuming the Secured Party is holding and continues to hold the certificates representing the shares listed on Schedule 2.01(c) (v) to each of the Security Agreements (the "Shares"), endorsed in blank or endorsed to the Secured Party, in the State of New York and assuming that the Secured Party and each Bank have taken such Shares in good faith and without notice of an adverse claim the Security Agreements create a perfected security interest in such Shares under the UCC. Please note, however, that, without limitation, perfection of the applicable security interests will be terminated if the Secured Party no longer has possession of any collateral described above as being in its possession. For purposes of the opinion set forth in paragraph 1 hereof we have relied solely on certificates of existence or good standing issued by the secretary of state of the jurisdiction of each of the Domestic Credit Parties and our opinion is limited to, or qualified by, the substance of the certifications of such certificates. We note that we are admitted to practice only in the States of Georgia, North Carolina and the District of Columbia and express no opinions other than the laws of such jurisdictions, the General Corporation Law of the State of Delaware and the federal laws of the United States of America. We note that Premiere Communications, Voice-Com and American Teleconferencing are corporations organized under the laws of Florida, Washington and Missouri, respectively. Accordingly, with respect to these entities, for purposes of paragraph 1 hereof relating to the opinion regarding corporate power, for purposes of paragraph 2 hereof, and for purposes of the opinion set forth in paragraph 4 hereof with respect to the due execution of the Loan Documents, we have assumed that the corporation. Laws of the States of Florida, Washington and Missouri are the same as the General Corporation Law of the State of Delaware. We understand that you will obtain local counsel opinions with respect to these matters after the date hereof However, to our knowledge, we have no reason to believe that our opinions with respect to these entities is not correct. This opinion is limited to the specific opinions set forth above and is further limited as follows: (a) The opinions expressed herein are subject to the qualification that enforceability of the Loan Documents may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and transfer and other laws of general application affecting the rights and remedies of creditors and by general principles of equity (whether applied in a proceeding at law or in equity), including, without limitation, principles of materiality, reasonableness and good faith, and the application of equitable principles to limit the availability of equitable remedies, such as specific performance of remedies granted under the Loan Documents. (b) We express no opinion with respect to "proceeds" (within the meaning of Section 9-306 of the UCC) of any Collateral. Notwithstanding any provision of any Security Agreement, any enforcement of any security interest in the Collateral purported to be created by any Security Agreement must be effected in a "commercially reasonable manner: as prescribed by the UCC. Further, we express no opinion as to the creation of any security interest in any of the Collateral where federal law may have preempted the UCC including, but not limited to, the Assignment of Claims Act of 1940, as amended. (c) We express no opinion with respect to perfection of any security interests (except as expressly set forth in Paragraph 10 above) and, in particular, we express no opinion on the provisos contained in Section 4.07 of the Credit Agreement, or the priority of the security interests of the Secured Party in, or as to the ownership (including intellectual property) of, or as to the absence of any Liens on, any of the Collateral. We express no opinion as to the accuracy or adequacy of the description of any intellectual property purported to be covered by the Security Agreements. (d) We express no opinion with respect to any documents, agreements, or instruments executed and delivered in connection with the loan transaction evidenced by the Notes other than the Loan Documents. (e) We note that the UCC provides that perfection, the effect of perfection and non-perfection, and priority of security interests are governed by the laws of the jurisdiction in which collateral or the debtor is located and we are not opining as to whether Georgia substantive law would apply in any such other jurisdiction. Further, we express no opinion s to where the debtor, other than Premiere, is located. For purposes of the UCC, Premiere is located in Fulton County, Georgia. In this connection, we advise you to file Financing Statements for each Domestic Credit Party with the Clerk of the Superior Court of Fulton County, Georgia, with the appropriate filing office in each jurisdiction where a Domestic Credit Party has represented such jurisdiction to be the location of its chief executive office (if different from Fulton County, Georgia) and with the appropriate filing office in each jurisdiction where any tangible Collateral is located. Further, we have assumed that none of the Collateral constitutes "farm products", "minerals" or accounts arising therefrom or constitutes "fixtures", as each is defined in the UCC. Further, we have assumed that the name of each debtor appearing on each Financing Statement is the exact corporate name of each such debtor, that the taxpayer identification number for each debtor set forth on each Financing Statement is correct, that the address of the secured party for each Financing Statement is an address where information regarding the security interest may be obtained, that each Financing Statement has been signed by the applicable debtor, that any and all attachments to each Financing Statement are so attached and filed and that each Financing Statement adequately describes the Collateral. (f) We express no opinion with respect to the effect of any amendments supplements, renewals, extensions or modifications of the Loan Documents which may be made at any time or from time to time, or with respect to the lien of the Security Agreements with respect to any advances made pursuant to the Credit Agreement following any such amendments, supplements, renewals, extensions or modifications. (g) We express no opinion as to the effect of the laws of any jurisdiction other than the State of New York, the State of Georgia, the General Corporation Law of the State of Delaware and the Federal laws of the United States of America in effect on the date hereof (but exclusive of (i) Federal and state securities, tax, banking and antitrust laws, (ii) ERISA and (iii) criminal laws), and we do not undertake any obligation to advise you of any changes therein subsequent to the date hereof. (h) We express no opinion as to the effect of compliance by the Administrative Agent or any Bank with any state or Federal laws, rules or regulations applicable to the transactions because of the nature of any such Person's business or facts relating specifically to any of them, or as to the effect of any such non-compliance on the opinions set forth above. (i) Without limiting the qualifications set forth in paragraph (a) above, certain of the provisions contained in the Loan Documents may be limited or rendered unenforceable under applicable laws and judicial decisions including, but not limited to (i) waivers of notices, defenses, remedies or demands (or the delay or omission of enforcement thereof), including waiver of notice of set-off or actions with respect to the Collateral, (ii) exculpation clauses in your favor, (iii) clauses providing for recovery of attorneys' fees, (iv) provisions for late payment fees and additional interest after default, (v) liability limitations with respect to third parties or liquidated damages, (vi) indemnification provisions, (vii) provisions appointing you as attorney-in-fact for various purposes or similar provisions similar to Section 11.02(e) of the Credit Agreement, (viii) remedial provisions of the Security Agreements, (ix) provisions that purport to establish evidentiary standards, (x) waivers of trial by jury and the defense of inconvenient forum, (xi) clauses regarding the specification of methods of service of process; (xii) clauses relating to the exercise of right of set-off other than in accordance with applicable law; and (xiii) various waivers of rights of guarantors. Nevertheless, subject to compliance with applicable procedural requirements and subject to the qualifications in paragraph (a) above, such laws and decisions would not, in our opinion, make the remedy of acceleration afforded by the Credit Agreement or the remedies provided in the Security Agreement inadequate for the practical realization of the essential benefit of enforcement of the obligations of the Domestic Credit Parties upon a material default by such Loan Parties. We express no opinion on the jurisdiction of or the acceptance of jurisdiction by, a Federal court located in the State of Georgia with respect to disputes arising under the Loan Documents. (k) We express no opinion on the rights or obligations of third parties, and, in particular, we express no opinion on the provisos contained in Section 4.07 of the Credit Agreement in this regard. (l) As used herein, the phrase "to our knowledge" or any similar references means that, while we have made no inquiry or other investigation or examination of the Loan Parties, their records, our records, public records or otherwise, whether in connection with the transaction contemplated by the Loan Documents, the rendering of this opinion or otherwise, to determine the existence or absence of matters as to which reference is made (and no inference as to our knowledge of the existence or absence of such matters should be drawn from our representation of the Loan Parties), we have obtained no actual knowledge to the contrary in our representation of the Loan Parties in connection with their execution and delivery of the Loan Documents. Moreover, "knowledge" of this Firm is limited to the knowledge of the individual attorneys in the Firm who have represented the Loan Parties in connection with the execution and delivery of the Loan Documents. We express no opinion as to the enforceability of any provision of the Agreements which requires that amendments or waivers be in writing. The opinion in paragraph 5 regarding the enforceability of the Agreements is also subject to the following: (i) the effect of course of dealing, course of performance, or the like, that would modify the terms of such agreements or the respective rights or obligations of the parties under such agreements; (ii) the possible unenforceability of provisions that enumerated remedies are not exclusive or that a party has the rigid to pursue multiple remedies without regard to other remedies elected or that all remedies are cumulative; (iii) the possible unenforceability of provisions that determinations by a party or a party's designee are conclusive; (iv) the possible unenforceability of provisions that the provisions of an agreement are severable, and (v) the effect of laws requiring mitigation of damages. The opinions expressed herein are valid only as of the date of this opinion. We have no obligation to update this letter as to any subsequent matters, facts or events coming to our attention. Opinions are as expressly set forth herein and no opinion is implied, or may be inferred, other than the express language of such opinion. This opinion may be relied upon only by you, and is solely for your benefit in connection with the transactions contemplated by the Loan Documents and is not to be relied upon by any other Person or be used, circulated, quoted or otherwise referred to for any other purpose without our prior written consent. Very truly yours, ALSTON & BIRD LLP By: ----------------------------- Schedule 2.01(a)(v) ------------------- FORM OF OPINION OF ENGLISH COUNSEL FOR XPEDITE SYSTEMS HOLDINGS (UK) LIMITED 16 December 1998 To: The Bank of New York as Administrative Agent and Security Agent for itself and for the financial institutions for whom the Bank of New York is agent as at the date hereof. Dear Sirs, 1. We have acted as English legal advisers to Xpedite Systems Holdings (UK) Limited ("Holdings") and Xpedite Systems Limited ("Systems") in connection with an amendment and restatement of a credit agreement (the "Credit Agreement") originally dated 17 December 1997 made between Xpedite Systems, Inc. and Xpedite Systems Holdings (UK) Limited as Borrowers, the Guarantors party thereto, the Banks party thereto, Nationsbank, N.A. as Documentation Agent and The Bank of New York as Administration Agent. Terms defined in the Finance Documents shall have the same meanings herein. 2. We have examined copies of the following documents in the form signed by the parties thereto: (i) an amended and restated credit agreement (the "Amended Credit Agreement") dated 16 December 1998 made between Xpedite Systems, Inc. and Xpedite Systems Holdings (UK) Limited as Borrowers, the Guarantors party thereto, the Banks party thereto, Nationsbank, N.A. as Documentation Agent and The Bank of New York as Administration Agent; (ii) a fixed and floating charge (the "Holdings Charge") dated 17 December 1997 and made between Holdings and The Bank of New York; (iii) a fixed and floating charge (the "Systems Charge") dated 17 December 1997 and made between Systems and The Bank of New York; (iv) the deed of charge over shares and securities (the "Share Charge") dated 17 December 1997 and made between Xpedite Systems Worldwide, Inc. and The Bank of New York; and such other documents as we considered it necessary or desirable to examine in order that we may give this opinion. The Holdings Charge, the Systems Charge and the Share Charge are hereinafter referred to as the "English Documents". The English Documents and the Amended Credit Agreement are referred to as the "Finance Documents". 3. The opinion relates only to English law as it exists at the date hereof and assumes: (i) the genuineness of all signatures; (ii) the completeness and conformity to originals of all documents supplied to us as certified or photostatic copies and the authenticity of the originals of such documents: (iii) the capacity, power and authority of each of the parties other than Holdings and Systems respectively to the Finance Documents; (iv) the due execution and delivery of the Finance Documents by each of the parties thereto (other than Holdings and Systems) on the date thereof; (v) that there have been no amendments to the Memorandum and Articles of Association of either Holdings or Systems in the form certified as being in force by a duly authorised officer thereof; (vi) that the resolutions of the board of directors of each of Holdings and Systems certified by a duly authorised officer of Holdings and Systems were duly passed at properly convened meetings of duly appointed directors of each such company and have not been amended or rescinded and are in full force and effect and that due disclosure (if any) had been made by each director of any interest he might have in the Finance Documents in accordance with the provisions of Section 317 of the Companies Act 1985 (the "Act") and such company's Articles of Association and that no director of either of the companies had any interest in the Finance Documents except to the extent permitted by the relevant company's Articles of Association; (vii) that neither of Holdings or Systems have passed a voluntary winding- up resolution, no petition has been presented or order made by a Court for the winding-up, dissolution or administration of either of Holdings or Systems and no receiver, trustee, administrator or similar officer has been appointed in relation to either of Holdings or Systems or any of its assets or revenues; (viii) that the execution and delivery of each of the Finance Documents to which they are a party by each of Holdings and Systems and the exercise of its rights thereunder and the performance of its respective obligations thereunder will materially benefit it; (ix) there is no matter under the laws of any jurisdiction (other than England) which would or might affect the opinions herein expressed: (x) that the information disclosed by our enquiry of 16 December 1998 of the Central Registry of Winding-up Petitions in relation to each of Holdings and Systems was then accurate and has not since been altered; (xi) that for the purposes of Section 155(2) of the Act, each of Holdings and Systems had, at the time it gave any financial assistance (if any) under or pursuant to or in connection with any Finance Document (other than the Share Charge), net assets (as defined in Section 154(2) of the Act) which were not thereby reduced or, to the extent that they were reduced, that the relevant financial assistance was provided out of distributable profits; (xii) that when Systems gave any financial assistance under or pursuant to or in connection with any Finance Document (other than the Share Charge) it was not at any relevant time a subsidiary of a public company if that public company was itself a subsidiary of the company in respect of the acquisition of whose shares such financial assistance was given; (xiii) that the statutory declaration made on or about 17 December 1997 by the director of Systems under Section 155(6) of the Act was duly made by the sole director of that company (and that there were no other directors of the company), that in forming his opinion for the purpose of Section 156(2) of the Act the director has complied with the provisions of Section 156(3) of the Act and that the statutory declaration and accompanying auditors report was, within the prescribed time period, duly delivered by such company to the registrar of companies in accordance with Section 156(5) of the Act; and (xiv) that the statements of fact in the statutory declaration were correct and that the statements of opinion in the statutory declaration and the auditors' report were reasonable. 4. Our opinion is confined to and given on the basis of English law as currently applied by the English courts and we have made no investigation of the laws of any country other than England and we do not express or imply any opinion on any such law. Furthermore. our opinion is to be construed in accordance with and is governed by English law. 5. On the above assumptions and subject to the reservations set out below, we are of the opinion that: (i) each of Holdings and Systems is a company duly incorporated as a private limited company in England with power to enter into the Amended Credit Agreement and to exercise its rights and perform its obligations thereunder and all corporate action required to authorise the execution and delivery by it of the Amended Credit Agreement and the performance by it of its obligations thereunder have been duly taken; (ii) the Amended Credit Agreement will be duly executed if signed by any director (or in the case of a deed) if signed by any two directors or any director and the secretary; (iii) the amendment and restatement of the Credit Agreement will not affect the legality, validity and enforceability of the English Documents; (iv) save for the registration of the English Documents with the Registrar of Companies pursuant to Section 395 of the Companies Act 1985 and the registration with the relevant office of H.M. Land Registry in relation to such of the property as is described in the English Documents as being registered land from time to time as appropriate, no further acts, conditions and things were or, as the case may be, are required by English law to be done, fulfilled and performed in order to enable either of Holdings or Systems lawfully to enter into, exercise its rights under and perform the obligations expressed to be assumed by it in each of the Finance Documents to which it is a party to ensure that the obligations expressed to be assumed by each of Holdings and Systems in the Finance Documents to which it is a party are or continue to be legal, valid and binding and to make or ensure that each such Finance Document is admissible in evidence in England; (v) in any proceedings taken in England neither Holdings or Systems shall be entitled to claim for itself or any of its assets immunity from suit, execution, attachment or other legal process; (vi) under English law, the claims of the Security Agent and the Banks against either of Holdings or Systems under the Finance Documents to which it is a party will rank at least pari passu with the claims of all its other unsecured creditors other than those whose claims are preferred by any administration, bankruptcy, insolvency or other similar laws of general application; (vii) in any proceedings taken in England for the enforcement of the English Documents, the choice of English law as the governing law of the English Documents and any judgment on or in respect thereof obtained in England will be recognised and enforced; and (viii) the performance by either of the Holdings or Systems of its obligations under the Finance Documents to which it is a party will not violate any provision of any law or regulation of England or the Memorandum and Articles of Association of such company. 6. The opinion set forth above is subject to the following reservations: (i) provisions in the Finance Documents as to severability may not be binding under English law and the question of whether or not provisions relating to invalidity on account of illegality may be severed from other provisions in order to save such other provisions would be determined by an English court at its discretion; (ii) undertakings and indemnities contained in the Finance Documents as to the payment of any stamp duties may be void in respect of stamp duties payable in the United Kingdom: (iii) the English Documents together with prescribed particulars of the charges constituted thereby must, as a matter of English law, be delivered to or received by the Registrar of Companies for registration within 21 days after the date of creation of the charges constituted thereby if such charges are not to be void against the liquidator or administrator or any creditor of the company creating the security constituted thereby. The English Documents were so delivered to the Registrar of Companies within 21 days of the creation of the charges constituted thereby; (iv) under English law, any additional interest imposed upon either Holdings or Systems by Clause 2.2.2 of each of the Holdings Charge and the Systems Charge might be held to be irrecoverable on the grounds that they are penalties and thus void but the fact that they were held to be void would not of itself prejudice the legality or validity of any other provision of such Finance Documents; (v) there is some possibility that an English court would hold that a judgment on the Finance Documents, whether given in an English court or elsewhere, would supersede the Finance Documents to all intents and purposes so that the obligations set forth in Clause 2.2.2 of the Holdings Charge and the Systems Charge would not be held to survive such a judgment; (vi) the power of the English courts to order specific performance of any obligation or to order any other equitable remedy is discretionary and, accordingly, an English court might make an award of damages where specific performance of an obligation or any other equitable remedy was sought; (vii) the enforcement of the rights and obligations of the parties to the English Documents may be limited by the provision of English law applicable to contracts held to have been frustrated by events happening after their execution; (viii) where any party to a Finance Document is vested with a discretion or may determine a matter in its opinion, English law may require that such discretion is exercised reasonably or that such opinion is based upon reasonable grounds; (ix) any provision in any Finance. Document providing that any calculation or certification is to be conclusive and binding will not be effective if such calculation or certification is fraudulent and will not necessarily prevent judicial enquiry into the merits of any claim by any party thereto; (x) our opinion as regards the binding effect of the obligations of each of Holdings and Systems under the Finance Documents to which it is expressed to be a party is subject to any limitations arising from administration, bankruptcy, insolvency, liquidation, reorganisation, moratoria and other laws and general equitable principles relating to or affecting the enforcement of creditors' rights (including, but without limitation, the effect of the appointment of an administrator or administrative receiver within the meaning of the Insolvency Act 1986); (xi) the exercise by the Security Agent of the powers and remedies conferred on it by any of the English Documents or otherwise vested in it by law will be subject to general equitable principles regarding the enforcement of security and the general supervisory powers and discretion of the English courts in the context thereof and we express no opinion as to the efficacy of any powers conferred upon the Security Agent or any receiver appointed under any of the English Documents insofar as these powers go beyond those conferred by statute or by common law; (xii) an English court may refuse to give effect to a purported contractual obligation to pay costs imposed upon another party in respect of the costs of any unsuccessful litigation brought against that party and such a court might not award by way of costs all of the expenditure incurred by a successful litigant in proceedings brought before that court; (xiii) claims may become barred pursuant to the provisions the Limitation Acts or may be or become subject to defences of set-off or counterclaim; (xiv) we express no opinion as to, whether any provision in the English Documents conferring a right of set-off or similar right would be effective against a liquidator or a creditor of a company in liquidation; (xv) the opinion expressed in paragraph 5(i) above that each of Holdings and Systems is a company duly incorporated under English law and the fact that the English documents were delivered to the Registrar of Companies within 21 days of the date thereof is based solely upon our examination of the company microfiche of each of Holdings and Systems obtained from the Registrar of Companies. It should be noted that: (a) a search at Companies Registry is not capable of revealing whether or not a winding-up petition or a petition for the making of an administration order has been presented; and (b) notice of a winding-up order or resolution, notice of an administration order and notice of the appointment of a receiver may not be filed at the Companies Registry immediately and there may be delay in the relevant notice appearing on the file of the relevant party; (xvi) We express no opinion as to whether the English Courts would recognise any of the security constituted by the English Documents which are expressed to be by way of fixed or specific charge as a fixed charge since they may hold security to be by way of floating charge for example, to the extent that each of the Holdings and Systems is given liberty to deal with the sums standing to the credit of any accounts which are charged, it may be that the security constituted in respect of those accounts will be construed by the courts as being of a floating rather than a fixed nature since it is of the essence of a fixed security that the person creating the security does not have liberty to deal with the assets which are the subject of the security; (xvii) We express no opinion as to the priority of any of the security created by the English Documents (in particular you should note that the security constituted by any floating charge will rank after preferential debts afforded priority under Section 175(2) of the Insolvency Act 1986) and whether such constitutes a legal or equitable security interest and whether any charge over future property is a fixed or floating charge; (xviii) We express no opinion as to the existence of any property or assets purporting to be comprised in any security expressed to be created by the English Documents, whether any such property or assets is owned by either of Holdings or Systems or Xpedite Systems Worldwide Inc. whether the same is now or may hereafter become subject to any equities, liens, rights or interests in favour of any other person ranking in priority to or free from such security or whether the same could be transferred to any other person free of such security in particular you should note that a company is not required to file notice of all charges and mortgages with the Companies Registry including security afforded over shares and accordingly it is not possible to verify whether the security comprised in the English Documents is subject to any prior existing encumbrances; (xix) We express no opinion as to the efficacy of the English Documents in relation to any property or assets situated outside England and Wales; (xx) We express no opinion as to whether the English Documents will constitute effective security over any cash deposited or credit balances maintained with the Security Agent for the purposes of securing the obligations expressed to be secured thereby by a charge in favour of the Security Agent; (xxi) Under English law, the provision of a guarantee and/or security by a company in respect of the obligations of its parent, or other subsidiary of its parent, is only valid and binding upon the guaranteeing company if it can be shown that (a) such company is duly authorised to provide guarantees and/or security of that nature in its Memorandum of Association or other constitutive documents (which each of Holdings and Systems are so authorised) and (b) that it has derived some benefit from so doing. In the case of (b), this is a question of fact in each case, relating to the nature of each of Holdings and Systems and its business and operations and we do not express any opinion as to whether the English courts would determine that either of the companies actually derived a benefit from the transaction concerned and accordingly that it is valid and binding under English law: (xxii) This opinion is not to be taken to imply that any obligation would necessarily be capable of enforcement in all circumstances in accordance with its terms. Also, the term "enforceability" assumes that the obligations assumed by the companies under the English Documents are of the type which an English court enforces. In particular: (a) enforcement of obligations of a party to be performed after the date hereof may be limited by bankruptcy, insolvency, liquidation, administration moratoria, reorganisation and other laws of general application relating to or affecting the rights of creditors as such law may be applied in the event of bankruptcy, insolvency, liquidation administration, moratoria, reorganisation or other similar proceedings with respect to such party; (b) an English court will not necessarily grant any remedy, the availability of which is subject to equitable considerations or which is otherwise in the discretion of the court. In particular, orders for specific performance and injunctions are, in general, discretionary remedies under English law and specific performance is not available where damages are considered by the court to be an adequate alternative remedy; (c) claims may become barred under the Limitation Act 1980 or the Foreign Limitation Periods Act 1984 or may be or become subject to the defence or rights of set-off and notwithstanding provisions in the English Documents purporting to exclude such defences or rights; (d) where obligations are to be performed in a jurisdiction outside England, they may not be enforceable in England to the extent that performance would be illegal under the laws, or contrary to the exchange control regulations of the other jurisdiction; and (e) the enforcement of the obligations of the parties to the English Documents may be limited by the provisions of English law applicable to agreements held to have been frustrated by events happening after their execution; (xxiii) The opinion expressed in paragraph 5(iii) above is subject also to the following provisions of the Insolvency Act 1986: (a) under Section 238 of the Insolvency Act 1986 a gift given or transaction entered into by either of Holdings or Systems with a person on terms that provide for either of Holdings or Systems to receive either no consideration or a consideration the value of which, in money or money's worth, is significantly less than the value, in money or money's worth of the consideration provided by Holdings or Systems may be set aside in the event of either of Holdings or Systems subsequent insolvency; (b) under Section 245 of the Insolvency Act 1986 a floating charge created by either of Holdings or Systems within twelve months of the commencement of the winding-up of either of Holdings or Systems may be held to be invalid unless it is proved that either of Holdings or Systems immediately after the creation of the charge was solvent, and except to the amount of any cash paid to either of Holdings or Systems at the time of or subsequently to the creation of, and in consideration for the charge; (c) under Sections 239 or 240 of the Insolvency Act 1986 a charge created by either of Holdings or Systems within six months of the commencement of the winding-up of either of Holdings or Systems will be subject to review as a preference. The charge will be liable to be set aside if at the time the charge was given that such either of Holdings or Systems was insolvent and the charge has the effect of putting any person in a better position, in the event of either of Holdings or Systems going into insolvent liquidation, than he would have been in if the charge had not been created in his favour. However, no order will be made to set aside the charge in such a case unless the company which gave the preference was influenced in deciding to give it by a desire to obtain a preference; and (d) under Sections 178 (Power to disclaim onerous property) and Section 186 (Recissions of contracts by courts) of the Insolvency Act; (xxiv) Where any obligations of any person are to be performed in any jurisdiction outside England, such obligations may not be enforceable under English law to the extent that such performance thereof would be illegal or contrary to public policy under the laws of such jurisdiction; and (xxv) we express no opinion as to any agreement, instrument or other document other than as specified in this letter, or as to any liability to tax which may arise or be suffered as a result of or in connection with the Finance Documents. 7. This opinion is addressed to The Bank of New York as Security Agent and Administrative Agent for itself and for the Banks and it may not be relied upon by any other firm person or corporation whatsoever. Yours faithfully Clifford Chance Schedule 2.01 (a)(vi) --------------------- FORM OF OPINION OF WINTHROP, STIMSON, PUTNAM & ROBERTS [WSP&R LETTERHEAD] December 16, 1998 To the Administrative Agent and each Bank party to the Credit Agreement referred to below Ladies and Gentlemen: We have acted as counsel to The Bank of New York, as Administrative Agent, and NationsBank, N.A., as Documentation Agent, in connection with the negotiation, execution and delivery of the Credit Agreement, dated as of December 17, 1997 as amended and restated as of December 16, 1998, among Xpedite Systems, Inc. and Xpedite Systems Holdings (UK) Limited, as Borrowers, the Guarantors party thereto, the Banks listed on the signature pages thereof, NationsBank, N.A., as Documentation Agent, and The Bank of New York, as Administrative Agent (the "Credit Agreement"). Terms defined in the Credit ---------------- Agreement that are not otherwise defined herein are used herein with the meanings therein ascribed to them. For the purposes of rendering the opinions contained in this letter, we have examined executed counterparts of the Credit Agreement, the Notes delivered on the date hereof, and the Security Agreements (collectively, the "Loan ---- Documents"). - - --------- For the purposes of this opinion, we have assumed (i) the authenticity of all such documents submitted to us as originals, (ii) the due authorization, execution and delivery by the Administrative Agent and the Banks of the Loan Documents to which they are parties, (iii) that each of the Loan Parties has the corporate power, and has taken all necessary corporate action to authorize it, to execute, deliver and perform each of the Loan Documents to which it is a party, (iv) that the Loan Documents have been duly executed and delivered by each of the Loan Parties and (v) that the execution, delivery and performance in accordance with their respective terms by each of the Loan Parties of the Loan Documents to which it is a party do not and will not (A) require any Governmental Approval or any other consent or approval, other than Governmental Approvals and other consents or approvals that have been obtained, are final and not subject to review or collateral attack and are in full force and effect, or (B) violate or conflict with, result in a breach of, or constitute a default under (1) any Contract to which any of the Loan Parties is a party or by which it or its properties may be bound or (2) any Applicable Law referred to in clause (ii)(B) or (C) of the definition thereof contained in the Credit Agreement. Based upon the foregoing, and subject to the qualifications and limitations set forth herein, we are of the opinion that the Loan Documents are legal, valid and binding obligations of the Loan Parties party thereto, enforceable against such Loan Parties in accordance with their respective terms. Our opinion above is subject to the following qualifications and limitations: (a) Our opinion is subject to the effect of applicable bankruptcy, insolvency, reorganization, fraudulent conveyance and other laws affecting the enforcement of creditors' rights generally and to the effect of general equitable principles (whether considered in a proceeding in equity or at law). Such principles applied by a court might include a requirement that a creditor act with reasonableness and good faith. Furthermore, a court may refuse to enforce a covenant where a court deems such covenant to be violative of applicable public policy. (b) Our opinions are limited to the law of the State of New York and the Federal law of the United States. Without limiting the generality of the foregoing, we express no opinion as to the effect of the law of any jurisdiction other than the State of New York wherein any Bank may be located or wherein enforcement of the Loan Documents may be sought that limits the rates of interest legally chargeable or collectable. (c) Certain remedial provisions of the Security Agreements may be unenforceable in whole or in part, but the inclusion of such provisions does not affect the validity of any of the Security Agreements, and each of the Security Agreements taken as a whole contains adequate provisions for enforcing the obligations of the Loan Parties pursuant thereto and for the practical realization of the benefits created thereby. In addition, certain remedial provisions of the Security Agreements may be subject to procedural requirements not set forth therein. (d) Our opinion (to the extent it relates to the Security Agreements) is also subject to the limitation that we express no opinion with respect to: (i) the perfection or priority of the Security Interest; (ii) each Loan Party's rights in or title to or legal or beneficial ownership of any of the Collateral; and (iii) the validity or enforceability of the Security Interest except to the extent that the creation thereof is governed by Article 8 or 9 of the Uniform Commercial Code as in effect on the date hereof in the State of New York. This opinion is intended for the sole benefit of the Administrative Agent and the Banks and no other Person shall be entitled to rely hereon for any purpose. Very truly yours, Schedule 3.02 SUBSIDIARIES LISTING Existing Subsidiaries of Premiere Technologies, Inc. ("PTEK")
Jurisdiction of % Ownership by Premiere or Subsidiary Organization Another Subsidiary Consolidated Significant - - -------------------------------------------------------------------------------------------------------------- Premiere Florida, US 100% owned by PTEK Yes Yes Communications, Inc. - - -------------------------------------------------------------------------------------------------------------- Xpedite Systems, Inc. Delaware, US 100% owned by PTEK Yes Yes - - -------------------------------------------------------------------------------------------------------------- Xpedite Systems Delaware, US 100% owned by Xpedite Yes Yes Worldwide, Inc. Systems, Inc. - - -------------------------------------------------------------------------------------------------------------- Xpedite Systems United Kingdom 100% owned by Xpedite Yes Yes Holdings (UK) Limited Systems Worldwide, Inc. - - -------------------------------------------------------------------------------------------------------------- Xpedite Systems Limited United Kingdom 100% owned by Xpedite Yes Yes Systems Holdings (UK) Limited - - -------------------------------------------------------------------------------------------------------------- Voice-Tel Enterprises, Delaware, US 100% owned by PTEK Yes Yes Inc. - - -------------------------------------------------------------------------------------------------------------- VoiceCom Systems, Inc. Washington, US 100% owned by PTEK Yes Yes - - -------------------------------------------------------------------------------------------------------------- American Missouri, US 100% owned by PTEK Yes Yes Teleconferencing Services, Ltd. - - -------------------------------------------------------------------------------------------------------------- Xpedite Systems Canada, Canada, New Brunswick 100% owned by Xpedite Yes No Inc. Systems Worldwide, Inc. - - -------------------------------------------------------------------------------------------------------------- Vitel Scandinavia A/S Denmark 100% owned by Xpedite Yes No Systems Worldwide, Inc. - - -------------------------------------------------------------------------------------------------------------- PT Transtelindo Tritamo Indonesia 80% owned by Xpedite Yes No Systems Worldwide, Inc. - - -------------------------------------------------------------------------------------------------------------- Xpedite Holdings GmbH Germany 100% owned by Xpedite Yes No Systems Worldwide, Inc. - - -------------------------------------------------------------------------------------------------------------- Xpedite Systems Switzerland 99.9% owned by Xpedite Yes No Switzerland AG Systems Worldwide, Inc. - - -------------------------------------------------------------------------------------------------------------- Xpedite International Australia 72% owned by Xpedite Yes No Australia Pty Limited Systems Worldwide, Inc. 28% owned by Comwave AG - - --------------------------------------------------------------------------------------------------------------
Jurisdiction of % Ownership by Premiere or Subsidiary Organization Another Subsidiary Consolidated Significant - - -------------------------------------------------------------------------------------------------------------- Xpedite Systems Korea South Korea 100% owned by Xpedite Yes No Ltd. Systems Worldwide, Inc. - - -------------------------------------------------------------------------------------------------------------- Xpedite International New Zealand 100% owned by Xpedite Yes No New Zealand Pty Limited Systems Worldwide, Inc. - - -------------------------------------------------------------------------------------------------------------- Xpedite Systems Japan, Japan 100% owned by Xpedite Yes No Inc. Systems Worldwide, Inc. - - -------------------------------------------------------------------------------------------------------------- Xpedite Taiwan Ltd. Taiwan 99.9% owned by Xpedite Yes No Systems Worldwide, Inc. - - -------------------------------------------------------------------------------------------------------------- Comvave GmbH Germany 100% owned by Comwave AG Yes No but no shares outstanding - - -------------------------------------------------------------------------------------------------------------- Xpedite Systems SA France 18.8% owned by Xpedite No No Systems Worldwide, Inc. - - -------------------------------------------------------------------------------------------------------------- Comwave UK Ltd. United Kingdom 100% owned by Comwave AG Yes No - - -------------------------------------------------------------------------------------------------------------- Vitel Limited United Kingdom 100% owned by Xpedite Yes No Systems Holdings (UK) Limited - - -------------------------------------------------------------------------------------------------------------- Xpedite International Hong Kong 99.9% owned by Vitel Yes No (HK) Ltd. Limited* - - -------------------------------------------------------------------------------------------------------------- Xpedite Malaysia Sdn Bhd Malaysia 99.9% owned by Xpedite Yes No International (HK) Ltd.* - - -------------------------------------------------------------------------------------------------------------- Xpedite Global Singapore 50% owned by Xpedite No No Communications Pte. International (HK) Ltd. - - -------------------------------------------------------------------------------------------------------------- Xpedite Systems GmbH Germany 41% owned by APA Expert Yes No Beteiligungsgesellschaft mbH; 59% owned by Xpedite Systems Worldwide, Inc. - - -------------------------------------------------------------------------------------------------------------- Transmit International United Kingdom 100% owned by Xpedite Yes No Limited Systems Worldwide, Inc. - - -------------------------------------------------------------------------------------------------------------- Connaught Commercial United Kingdom 100% owned by Xpedite Yes No Services Limited Systems Worldwide, Inc. - - -------------------------------------------------------------------------------------------------------------- Voice-Tel Canada Limited Canada 100% owned by PTEK Yes No - - --------------------------------------------------------------------------------------------------------------
Jurisdiction of % Ownership by Premiere or Subsidiary Organization Another Subsidiary Consolidated Significant - - -------------------------------------------------------------------------------------------------------------- Voice-Tel Pty Ltd. Australia, New 100% owned by Voice-Tel Yes No Zealand Enterprises, Inc. - - -------------------------------------------------------------------------------------------------------------- Voice Partners Company Ohio, US General Partnership - Yes No Premiere Communications, Inc. and Voice-Tel Enterprises, Inc., General Partners - - ------------------------------------------------------------------------------------------------------------ Voice-Tel Network Delaware, US PTEK and Voice-Tel Yes No Limited Partnership Enterprises, Inc. Limited Partners - - ------------------------------------------------------------------------------------------------------------ Orchestrate.com, Inc. Georgia, US 100% owned by PTEK Yes No - - ------------------------------------------------------------------------------------------------------------ PCI Acquisition Corp. Georgia, US 100% owned by PTEK No No - - ------------------------------------------------------------------------------------------------------------ EBIS Communications, Georgia, US 100% owned by PTEK No No Inc. - - ------------------------------------------------------------------------------------------------------------ Charp-Tel Enterprises, Rhode Island, US 100% owned by PTEK No No Inc. - - ------------------------------------------------------------------------------------------------------------
* Shares not owned by local directors for statutory reasons. Schedule 3.03 REQUIRED CONSENTS AND GOVERNMENT APPROVALS None. Schedule 3.05 Material Litigation See attached listing. Schedule 3.10 ------------- Schedule of Environmental Matters None. Schedule 4.03 ------------- FORM OF SUBSIDIARY GUARANTY SUPPLEMENT Amended and Restated Credit Agreement, dated as of December 16, 1998, ---------------------------------------------------------------------- among Xpedite Systems, Inc. and Xpedite Systems Holdings (UK) ------------------------------------------------------------- Limited, as Borrowers, the Guarantors party thereto, the Banks party -------------------------------------------------------------------- thereto, NationsBank, N.A., as Documentation Agent, and The Bank of ------------------------------------------------------------------- New York, as Administrative Agent (the "Credit Agreement") ---------------------------------------------------------- Reference is made to the Credit Agreement as defined above; capitalized terms used herein and not otherwise defined herein shall have the meanings given to such terms in the Credit Agreement. The undersigned hereby agrees that, upon delivery hereof to the Administrative Agent referred to above, the undersigned Subsidiary shall be and become a Guarantor for all purposes of the Credit Agreement as fully and to the same extent as if it were an original signatory thereto and, without limiting the foregoing, shall be deemed to have made on the date hereof the representations and warranties set forth in Article 3 of the Credit Agreement. [Name of Subsidiary] By: ---------------------------- Name: Title: Dated: --------------------------- Notice Address: Attention: Telephone: Telecopy: Schedule 4.05 Existing Indebtedness Xpedite International Pty Limited has an overdraft facility of approximately $38,000 with no outstanding value as of November 30, 1998. Xpedite Systems, Inc. certain third party debt as shown on the attached Third Party Debt Analysis. Premiere Technologies, Inc. has $172,500,000 in 5 3/4% convertible bond debt @ $33.00/share. Voice-Tel Enterprises, Inc., Voice-Tel network, L.P., Voice-Tel Pty Limited and Voice-Tel of Canada, Ltd. have certain third party indebtedness as shown on the attached schedule. Expedite Systems, Inc. September 30, 1998 - - ----------------------------------------- Third Party Debt Analysis
Int. Obligor Guarantor Lender US$ Local Due Date Rate Commitment Comments - - ------------------------------------------------------------------------------------------------------------------------------- XSI XSWW BONY/Nations 62,000,000 12/16/98 L+1% 150,000,000 XSH XSL BONY/Nations 62,903,774 37,000,000(1) 12/16/98 (Pounds)L+1% Submit - (Pounds) equivalent of $70M Japan XSWW Mitsubishi Trust BK - - 9/30/98 2.8% - 3.6% 30,000,000 Commit Hypo Bank, Munich 120,726 201,564 2/28/99 7.0% ----------- Total current 125,024,500 ----------- Commit Hypo Bank, Munich 2,198,356 3,670,375 5/30/00 6.5% Commit Hypo Bank, LFA 404,288 675,000 6/30/02 7.5% Commit Stadtsparkasse, Munich 718,735 1,200,000 3/30/07 4.75% Commit Stadtsparkasse, Munich 278,510 465,000 4/30/02 8.00% XSG Hypo Bank, Munich 1,796,838 3,000,000 4/30/01 4.8% ----------- Total long-term 5,396,727 ----------- Other 3rd Party Notes (included in Acquisition liabilities) Commit TBG-Bonn 2,153,210 3,595,000 12/31/05 6.00% Commit Baypern Kapital 1,602,180 2,675,000 6/30/06 6.75% Singapore Michael Tan 1,237,356 2,089,276 5/31/99 6.00% ----------- 4,992,746 ----------- Cap. Leases Japan PBX (Nihon Lease) 21,773 2,975,427 12/27/00 2.47% XSI Various 294,755 Singapore Hitachi leasing 158,496 ----------- 475,024 ----------- ----------- Grand Total 135,888,997 ===========
(1) As of December 14, 1998, local amount 35,000,000. Schedule 4.06 Guarantees A. Leased Properties: ------------------ 1. Location: 40 University Avenue, Toronto, Ontario, Canada --------------------------------------------------------- a. Landlord: MRC Properties b. Tenant: Premier Communications, Inc. c. Guarantor: Premier Technologies, Inc. d. Square Footage: 4,500 e. Annual Rent: $36,000 (plus estimated operating expenses of 150% of annual rent) f. Commencement: 2/1/98 (Term: 5 years) 2. Location: 165 Halsey Street, 7th Floor, Newark, New Jersey ----------------------------------------------------------- a. Landlord: Market Halsey Urban Renewal b. Tenant: Premier Communications, Inc. c. Guarantor: Premier Technologies, Inc. d. Square Footage: 21,180 e. Annual Rent: $189,000 f. Commencement: 3/1/99 (Term: 20 years) 3. Location: 100 South Biscayne Boulevard, Suite 470, Miami, Florida ------------------------------------------------------------------ a. Landlord: Northwestern Capital Corporation b. Tenant: Premier Communications, Inc. c. Guarantor: Premier Technologies, Inc. d. Square Footage: 8,673 e. Annual Rent: $158,282.28 f. Commencement: 11/1/98 (Term: 20 years) 4. Location: Level 5 and Part Level 3, 55 Clarence Street, Sydney, ---------------------------------------------------------------- Australia (Pending) ------------------- a. Landlord: CIC Insurance Ltd. b. Tenant: : Xpedite Systems, Inc. c. Guarantor: Premier Technologies, Inc. d. Square Footage: 1,300 e. Annual Rent: $500,000 f. Commencement: 2/1/99 (Term: 6 years) 5. Location: Canary Warf, One Canada Square, London E14, England (Pending) ----------------------------------------------------------------------- a. Landlord: CWE SPVc Ltd. b. Tenant: Premier Communications, Inc. c. Guarantor: Premier Technologies, Inc. d. Square Footage: 8,803 e. Annual Rent: (Pounds) 198,465 (plus estimated operating expenses of 33% of annual rent) f. Commencement: 11/1/98 (Term: 15 years) 6. Location: Cranberry Office Commons, 446 Highway 35, Eatontown, New ------------------------------------------------------------------- Jersey ------ a. Landlord: WHMBL Real Estate Ltd. Partners b. Tenant: Xpedite Systems, Inc. c. Guarantor: Premier Technologies, Inc. d. Square Footage: 4,500 e. Annual Rent: $183,910.68 (plus estimated operating expenses of 33% of annual rent) f. Commencement: 10/1/98 (Term: 3 years and 1 month) B. Contracts: ---------- 1. Type of Agreement: Carrier Services (Guaranty for Payment for -------------------------------------------------------------- services to be rendered) ------------------------ a. Provider: Frontier Communications, Inc., d/b/a West Coast Telecommunications, Inc. b. Customer: Premiere Communications, Inc. c. Guarantor: Premiere Technologies, Inc. d. Annual Payment: $720,000 (estimated) e. Commencement: 10/6/98 (Term: Annual/Evergreen) SCHEDULE 4.07 Existing Liens Customary restrictions contained in equipment leases entered into in the ordinary course of business. Liens in the form of capital leases or purchase money security interests in various equipment of Premiere Technologies, Inc. and its subsidiaries not to exceed $3,765,000. Schedule 4.11 Restrictive Covenants None. Schedule 4.13 Existing Investments Premiere Technologies, Inc. has investments in its subsidiaries (see Schedule 3.02). Xpedite Systems, Inc. has investments in its subsidiaries (See Schedule 3.02). Premiere Technologies, Inc. has investments as listed on the attached Schedule of Existing Investments at 11/30/98. Premiere Technologies, Inc. has a 1% ownership interest in Prado Aviation, LLC. Premiere Technologies, Inc. loan to Prado Aviation, LLC in the amount of $450,000. Loans or advances outstanding on the date hereof or to be made after the date hereof by Premiere Technologies, Inc. to various officers (or trusts or family partnerships controlled by such officers) pursuant to employment agreements existing on the date hereof between Premiere Technologies, Inc. and such officers, the proceeds of which shall be used by such officers to finance the exercise of various stock options. (Such advances made after the date hereof pursuant to existing employment agreements shall be deemed to be existing Investments for purposes of Section 4.13(d).) Such loans or advances are not cash loans or advances. Premiere Technologies, Inc. is currently in negotiations with VerticalOne in anticipation of investing $700,000 in VerticalOne within the next 30 days. Approximately $900,000 loan from Premiere Technologies, Inc. to Boland T. Jones. Schedule 4.13 Premiere Technologies, Inc. Schedule of Existing Investments at 11/30/98
Equity Investments WebMD common stock (less than) 20% $ 4,200,000 USA Net common stock (less than) 20% 5,999,999 Imaging Technology common stock (less than) 20% 101,259 DigiTec 2000 common stock (less than) 20% 6,255,638 Intellivoice common stock (less than) 20% 2,000,000 Webforia common stock (less than) 20% 1,034,000 ----------- Total $19,590,896
Schedule 4.15 Existing Benefit Plans Premiere Technologies, Inc. Premiere Communications, Inc. Voice-Tel Enterprises, Inc. VoiceCom Systems, Inc. Major Medical - CIGNA HealthCare Dental - CIGNA Dental Group Life Insurance - Phoenix Home Life Insurance Company Voluntary Life AD&D - UNUM Insurance Company Vision - CIGNA Long Term Disability - UNUM Insurance Company Short Term Disability - UNUM Insurance Company Xpedite Systems, Inc. Major Medical - Guardian Insurance Company Dental - Guardian Insurance Company Group Life Insurance - Paul Revere Insurance Company Long Term Disability - Paul Revere Insurance Company Short Term Disability - Paul Revere Insurance Company American Teleconferencing Services, Ltd. Major Medical - CIGNA Healthcare Dental - Delta Dental Group Life Insurance - Phoenix Home Life Insurance Company Voluntary Life and AD&D - Life Insurance Company of North America Premiere Technologies, Inc. 401(k) Plan Various 401(k) plans assumed by Premiere Technologies, Inc. in the acquisitions of Xpedite Systems, Inc., Voice-Tel Enterprises, Inc. and VoiceCom Systems, Inc. Premiere Technologies, Inc. 1994 Stock Plan Premiere Technologies, Inc. 1995 Amended and Restated Stock Plan Premiere Technologies, Inc. 1998 Stock Plan Xpedite Systems, Inc. 1993 Incentive Stock Option Plan Xpedite Systems, Inc. 1996 Incentive Stock Option Plan VoiceCom Holdings, Inc. 1985 Stock Option Plan VoiceCom Holdings, Inc. 1995 Stock Option Plan Non-Qualified and Incentive Stock Option Plan of Voice-Tel Enterprises, Inc. Non-Qualified and Incentive Stock Option Plan of VTN, Inc. Premiere Technologies, Inc. Stock Option Agreements with certain employees Schedule 5.02(a) Financial Statements Premiere Technologies, Inc. Audited Financial Statement for the year ended December 31, 1997. Xpedite Systems, Inc. Audited Financial Statement for the year ended December 31, 1997. Premiere Technologies, Inc. Form 10-Q, filed on November 16, 1998 Premiere Technologies, Inc. Form 10-Q, filed on August 14, 1998 Premiere Technologies, Inc. Form 10-Q, filed on May 15, 1998 Monthly financial statements for August 1998 for the following business segments: Voice Messaging, Xpedite (US), ATS, and PTEK Enhanced Calling Card Services. Management projections for October dated September 29, 1998, October 12, 1998 and November 9, 1998. Xpedite Systems, Inc. compliance packages for the period ending December 31, 1997, March 31, 1998, June 30, 1998 and September 30, 1998. Schedule 10.10(a) ----------------- NOTICE OF ASSIGNMENT [Name and address of each Borrower in accordance with Section 10.01] [Name and address of each Guarantor in accordance with Section 10.01] [Name and address of Administrative Agent in accordance with Section 10.01] Date: Ladies and Gentlemen: Reference is made to the Amended and Restated Credit Agreement, dated as of December 16, 1998, among Xpedite Systems, Inc. and Xpedite Systems Holdings (UK) Limited, as Borrowers, the Guarantors party thereto, the Banks listed on the signature pages thereof, NationsBank, N.A., as Documentation Agent, and The Bank of New York, as Administrative Agent (the "Credit Agreement"). The undersigned hereby give notice pursuant to Section 10.10(a) of the Credit Agreement that [name of Assignor] [(the "Assignor")]/1/ has made the following assignment to [name of Assignee] [(the "Assignee")]/2/: Rights and Obligations Assigned: Effective Date of Assignment: [The Assignee's Lending Offices and address for notices are as follows: Domestic Lending Office: Eurocurrency Lending Office: Notice Address:]/3/ [The Assignor hereby requests that [each Borrower] [each Guarantor] [and the Administrative Agent] consent to the assignment described above by signing a copy of this letter in the space provided below and returning it to the Assignor. Such consent shall release the Assignor from all of the obligations described above as having been assigned to the Assignee.]/4/ [NAME OF ASSIGNOR] By -------------------------------- Name: Title: [NAME OF ASSIGNEE] By -------------------------------- Name: Title: Assignment and release consented to:/4/ XPEDITE SYSTEMS, INC. By ------------------------------- Name: Title: XPEDITE SYSTEMS HOLDINGS (UK) LIMITED By -------------------------------- Name: Title: [GUARANTORS] By ------------------------------- Name: Title: THE BANK OF NEW YORK, as Administrative Agent By ------------------------------- Name: Title: - - --------------- 1. Include definition if Footnote 4 material is to be included. 2. Include definition if Footnote 3 or Footnote 4 material is to be included. 3. Omit if the Assignee is a Bank. 4. Include the appropriate portion of the bracketed provision if (i) the Assignor desires to be released from the assigned obligations, (ii) the consent of the Borrowers and/or the Guarantors and/or the Administrative Agent is required for such release and (iii) the Assignor has not otherwise obtained such consents. NOTE GRID Amount of Amount of Notation Date Loan Principal Repaid - - ---- ---- ---------------- Made By ------- - - ------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------ Schedule 11.01(a) Subsidiary Guarantors Subsidiaries of Premiere Technologies, Inc. that are Guarantors as of the Agreement Date: Premiere Communications, Inc. Xpedite Systems, Inc. Xpedite Systems Worldwide, Inc. Xpedite Systems Holdings (UK) Limited Xpedite Systems Limited Voice-Tel Enterprises, Inc. VoiceCom Systems, Inc. American Teleconferencing Services, Ltd. Schedule 11.01(b) Securities and Exchange Commission Filings Premiere Technologies, Inc. has filed the following reports with the Securities and Exchange Commission: Form 10-Q, filed on November 16, 1998 Form 10-Q, filed on August 14, 1998 Rule 424B3 Prospectus, filed on August 7, 1998 Form 8-K, filed on July 31, 1998 Schedule 13G/A, filed on July 31, 1998 Schedule 14A Definitive Proxy, filed on July 8, 1998 Form 8-A12G, filed on June 26, 1998 Form 8-K, filed on June 26, 1998 Schedule 13G/A, filed June 22, 1998 Form 8-K, filed on June 11, 1998 Rule 424B3 Prospectus, filed on June 5, 1998 Rule 424B3 Prospectus, filed on May 27, 1998 Rule 424B3 Prospectus, filed on May 18, 1998 Form 10-Q, filed on May 15, 1998 Form 8-K, filed on May 15, 1998 Form S-3 Registration Statement, filed on May 11, 1998 Form S-8 Registration Statement, filed on May 11, 1998 Form 8-K, filed on April 28, 1998 Form 10-K/A, filed on April 22, 1998 Form S-3 Registration Statement, filed on April 22, 1998 Form 8-K/A, filed on April 13, 1998 Form S-3 Registration Statement, filed on April 13, 1998 Rule 424B3 Prospectus, filed on April 9, 1998 Form 10-K, filed on March 31, 1998 Form 8-K, filed on March 13, 1998 Rule 424B3 Prospectus, filed on March 6, 1998 Form 8-K, filed on February 20, 1998 Schedule 13G, filed on February 12, 1998 Rule 424B3 Prospectus, filed on February 26, 1998 Form S-4 Registration Statement, filed on January 28, 1998 Form 8-K/A, filed on January 27, 1998 Rule 424B3 Prospectus, filed on January 15, 1998 Rule 424B3 Prospectus, filed on January 2, 1998 Xpedite Systems, Inc. has filed the following reports with the Securities and Exchange Commission: Schedule 13D/A, filed on April 2, 1998 Form 15-12G, filed on March 4, 1998 Schedule 13D, filed on February 17, 1998 Schedule 13D/A, filed on February 6, 1998 Schedule 13D/A, filed on January 12, 1998 Schedule 11.01(c) ----------------- CALCULATION OF ADDITIONAL STERLING COST --------------------------------------- 1 The Additional Sterling Cost for any period shall (subject to paragraph 5 below) be calculated in accordance with the following formula: BY + L(Y-X) + S(Y-Z) per cent per annum -------------------- 100 - (B+S) where on the day of application of the formula: B is the percentage of the Administrative Agent's eligible liabilities which the Bank of England then requires the Administrative Agent to hold on a non-interest-bearing deposit account in accordance with its cash ratio requirements; Y is the rate at which Sterling deposits are offered by the Administrative Agent to leading banks in the London Interbank Market at or about 11 a.m. on that day for the relevant period; L is the percentage of eligible liabilities which (as a result of the requirements of the Bank of England) the Administrative Agent maintains as secured money with members of the London Discount Market Association or in certain marketable or callable securities approved by the Bank of England, which percentage shall (in the absence of evidence that any other figure is appropriate) be conclusively presumeed to be 5 per cent; X is the rate at which secured Sterling investments may be placed by the Administrative Agent with members of the London Discount Market Association at or about 11 a.m. on that day for the relevant period or, if greater, the rate at which Sterling bills of exchange (of a tenor equal to the duration of the relevant period) eligible for rediscounting at the Bank of England can be discounted in the London Discount Market at or about 11 a.m. on that day; S is the percentage of the Administrative Agent's eligible liabilities which the Bank of England requires the Administrative Agent to place as a special deposit; and Z is the interest rate expressed as a percentage per annum allowed by the Bank of England on special deposits. 2 For the purposes of this schedule 5: (a) "eligible liabilities" and "special deposits" have the meanings given to them at the time of application of the formula by the Bank of England; and (b) "relevant period" in relation to each period for which Additional Sterling Cost falls to be calculated means: (i) if it is 3 months or less, that period; or (ii) if it is more than 3 months, 3 months. 3 In the application of the formula, B, Y, L, X, S and Z are included in the formula as figures and not as percentages, e.g. if B = 0.5 per cent and Y = 15 per cent BY is calculated as 0.5 x 15. 4 The formula shall be applied on the first day of each relevant period. Each amount shall be rounded up to the nearest four decimal places. 5 If the Administrative Agent (acting reasonably) determines that a change in circumstances has rendered, or will render, the formula inappropriate, the Administrative Agent (after consultation with the Banks) shall notify the Borrowers of the manner in which the Additional Cost will subsequently be calculated. The manner of calculation so notified by the Administrative Agent shall, in the absence of manifest error, be binding on all parties. 2 EXHIBIT A [XPEDITE SYSTEMS, INC.]/[XPEDITE SYSTEMS HOLDINGS (UK) LIMITED] NOTE _______________, 19__ FOR VALUE RECEIVED, [NAME OF BORROWER] (the "Borrower") hereby promises to pay to the order of __________ (the "Bank"), for the account of its applicable Lending Office, the unpaid principal amount of each Loan made by such Bank to the Borrower under the Credit Agreement referred to below, on the dates and in the amounts specified in Section 1.04 of such Credit Agreement, and to pay interest on the principal amount of each such Loan on the dates and at the rates specified in Section 1.03 of such Credit Agreement. All payments due the Bank hereunder shall be made to the Bank at the place, in the type of money and funds and in the manner specified in Section 1.11 of such Credit Agreement. Each holder hereof is authorized to endorse on the grid attached hereto, or on a continuation thereof, each Loan of the Bank and each payment, with respect thereto, provided that the failure of the Bank to make any such endorsement shall not affect the obligations of the Borrower hereunder or under such Credit Agreement. Presentment, demand, protest, notice of dishonor and notice of intent to accelerate are hereby waived by the undersigned. This Note evidences Loans made under, and is entitled to the benefits of, the Amended and Restated Credit Agreement, dated as of December 16, 1998, among the Borrower, [Xpedite Systems, Inc.][Xpedite Systems Holdings (UK) Limited], the Guarantors party thereto, the Banks listed on the signature pages thereof, NationsBank, N.A., as Documentation Agent, and The Bank of New York, as Administrative Agent, as the same may be amended from time to time (the "Credit Agreement"). Reference is made to such Credit Agreement, as so amended, for provisions relating to the prepayment and the acceleration of the maturity hereof. i This Note shall, pursuant to New York General Obligations Law Section 5- 1401, be governed by the law of the State of New York. [XPEDITE SYSTEMS, INC.] [XPEDITE SYSTEMS HOLDINGS (UK) LIMITED] By ------------------------------------ Name: Title: ii Exhibit B ================================================================================ SECURITY AGREEMENT Dated as of ___________, 199_ Between [PLEDGOR] and THE BANK OF NEW YORK, as Secured Party ================================================================================ TABLE OF CONTENTS Page ---- ARTICLE I SECURITY INTEREST
Section 1.01 Grant of Security Interest..................................... 1 Section 1.02 Validity and Priority of Security Interest; Authorized Action.. 1 Section 1.03 Pledgor Remains Obligated; Secured Party and Other Principals Not Obligated.................................................. 2 Section 1.04 Proceeds of Collateral......................................... 2 Section 1.05 Limitation of Pledgor's Obligations............................ 2 ARTICLE II CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS Section 2.01 Collateral.................................................... 3 (c)........................................................... 4 Section 2.02 Consent to Pledge; Control Letters............................ 5 Section 2.03 New Accounts.................................................. 5 Section 2.04 Change of Jurisdiction........................................ 5 Section 2.05 Jurisdictions of Securities and Commodity Intermediaries...... 6 Section 2.06 Requirement of Materially Adverse Effect...................... 6 ARTICLE III EVENT OF DEFAULT Section 3.01 Application of Proceeds....................................... 6 Section 3.02 .............................................................. 7 (a) Use of Premises and Intellectual Property................ 7 (b) Directors, Officers and Employees........................ 7 (c) Power of Sale............................................ 7 (d) Foreclosure.............................................. 7 (e) Receiver................................................. 7 (f) Collection of Collateral Proceeds by Pledgor............. 7 (g) Notification............................................. 8 (h) Secured Party's Rights with Respect to Proceeds and Other Collateral......................................... 8 (i) Enforcement by Secured Party............................. 8 (j) Adjustments.............................................. 8 (k) Warehousing.............................................. 8 Section 3.03 Securities and Instrument Collateral.......................... 8 (a) Registration and Indemnification......................... 8 (b) Restricted Offering Dispositions......................... 9
ARTICLE IV MISCELLANEOUS
Section 4.01 Expenses of Pledgor's Agreements and Duties.............................. 9 Section 4.02 Secured Party's Right to Perform on Pledgor's Behalf..................... 9 Section 4.03 Secured Party's Right to Use Agents and to Act in Name of Pledgor........ 9 Section 4.04 No Interference, Compensation or Expense................................. 9 Section 4.05 Limitation of Obligations with Respect to Collateral..................... 9 Section 4.06 Rights of Secured Party under Uniform Commercial Code and Applicable Law. 10 Section 4.07 Waivers of Rights Inhibiting Enforcement................................. 10 Section 4.08 Power of Attorney........................................................ 10 Section 4.09 Termination of Security Interest......................................... 11 Section 4.10 Notices and Deliveries................................................... 11 (a) Notices and Materials Other than Collateral.......................... 11 (b) Collateral........................................................... 13 Section 4.11 Governing Law............................................................ 13 Section 4.12 LIMITATION OF LIABILITY.................................................. 13 Section 4.13 Counterparts............................................................. 14 Section 4.14 Entire Agreement......................................................... 14 Section 4.15 Successors and Assigns................................................... 14 Section 4.16 Delivery of Opinions Authorized.......................................... 14 ARTICLE V INTERPRETATION Section 5.01 Definitional Provisions.................................................. 14 (a) Certain Terms Defined by Reference................................... 14 (b) Other Defined Terms.................................................. 14 Section 5.02 Other Interpretive Provisions............................................ 19 Section 5.03 Representations and Warranties........................................... 21 Section 5.04 Captions................................................................. 21 Schedule 1.02 Schedule of Required Action Schedule 1.02(a) Form of UCC-1 Financing Statement Schedule 1.02(c) Form of Financial Intermediary Agreement Schedule 1.02(d)-A Memorandum of Security Agreement; Patents Schedule 1.02(d)-B Memorandum of Security Agreement; Trademarks Schedule 1.02(d)-C Memorandum of Security Agreement; Copyrights Schedule 1.02A Schedule of Permitted Liens Schedule 2.01(c)(v) Schedule of Initial Securities and Instrument Collateral Schedule 2.01(c)(vi) Form of Security Agreement Questionnaire Schedule 5.01(a)-1 Securities Account Control Agreement Schedule 5.01(a)-2 Commodity Account Control Agreement
2 SECURITY AGREEMENT Dated as of December 16, 1998 In consideration of the execution and delivery of the Credit Agreement, dated as of December 17, 1997, as amended and restated as of the date hereof, by the Banks listed on the signature pages thereof and The Bank of New York, as Administrative Agent, [PLEDGOR], a [JURISDICTION] corporation, hereby agrees with THE BANK OF NEW YORK, as Secured Party, as follows (with certain terms used herein being defined in Article 5): ARTICLE 12 SECURITY INTEREST ----------------- Section 12.01 Grant of Security Interest. -------------------------- To secure the payment, observance and performance of the Secured Obligations, the Pledgor hereby mortgages, pledges and assigns the Collateral to the Secured Party, and grants to the Secured Party a continuing security interest in, and a continuing lien upon, the Collateral. Section 12.02 Validity and Priority of Security Interest; Authorized ------------------------------------------------------ Action. - - ------ (a) The Pledgor agrees that the Security Interest shall, and that the Pledgor shall take all action necessary or desirable, or that the Secured Party may reasonably request, including the actions specified on Schedule 1.02, (a) to ------------- ensure that the Security Interest shall, at all times be valid, perfected and enforceable against the Pledgor and all third parties, in accordance with the terms hereof, as security for the Secured Obligations, and that neither the Collateral, including, if the Collateral includes any securities accounts or commodity accounts, any financial asset or commodity contract carried therein, nor, if the Collateral includes any securities entitlements, any financial asset subject thereto, shall at any time be subject to (x) control by any Person other than the Secured Party or (y) any Lien, other than a Permitted Lien, that is prior to, on a parity with or junior to such Security Interest, except that, unless an Event of Default exists, this Section 1.02, shall not require the continuation of the perfection of the Security Interest in Collateral that the Pledgor is entitled to, and does, receive or retain pursuant to Section 1.04, (b) to protect and preserve the Collateral and (c) to protect and preserve, and to enable the exercise or enforcement of, the rights of the Secured Party therein and hereunder and under the other Collateral Documents. (b) (i) The Secured Party is hereby authorized to file one or more financing or continuation statements or amendments thereto with respect to the Collateral without the signature of or in the name of the Pledgor. A carbon, photographic or other reproduction of this Agreement or of any financing statement filed in connection with this Agreement shall be sufficient as a financing statement. (ii) Each (A) issuer of an uncertificated security registered in the name of the Pledgor, (B) each securities intermediary maintaining a security account for the Pledgor and (C) each commodity intermediary maintaining a commodity account for the Pledgor, in each case to the extent it constitutes Collateral, is hereby authorized and directed by the Pledgor to disclose to the Secured Party, at any time and from time to time, all agreements pursuant to which any such issuer, securities intermediary or commodity intermediary has agreed, without further consent by the Pledgor, to (1) comply with, (aa) in the case of any such issuer, instructions with respect to such a security originated by a Person other than the Pledgor and (bb) in the case of any such securities intermediary, entitlement orders originated by a Person other than the Pledgor and (2) apply, in the case of any such commodity intermediary, any value distributed on account of any commodity contract carried in such commodity account as directed by the Secured Party. Section 12.03 Pledgor Remains Obligated; Secured Party and Other -------------------------------------------------- Principals Not Obligated. - - ------------------------ The grant by the Pledgor to the Secured Party of the Security Interest shall not (a) relieve the Pledgor of any Liability to any Person under or in respect of any of the Collateral or (b) impose on the Secured Party or the other Principals any such Liability or any Liability for any act or omission on the part of the Pledgor relative thereto. Section 12.04 Proceeds of Collateral. ---------------------- (a) Except during an Event of Default, the Pledgor shall be entitled to receive and retain all Account Proceeds, Ordinary Distributions and proceeds of dispositions of Collateral not prohibited under Section 4.09 of the Credit Agreement. (b) Subject to the Pledgor's rights under Section 1.04(a), the Secured Party shall be entitled to receive and retain all proceeds of Collateral and all Distribution Collateral. The Secured Party is hereby irrevocably authorized, upon the occurrence and continuation of an Event of Default, either in the name and on behalf of the Pledgor or in its own name, to endorse and deposit, or cause to be deposited, for collection, present, draw upon or under, or otherwise take action to realize upon, all instruments, chattel paper, securities, letters of credit and documents constituting part of the Collateral for the purpose of holding and disposing of the proceeds thereof in accordance with the terms hereof. Section 12.05 Limitation of Pledgor's Obligations. ----------------------------------- It is the intention of the Pledgor and the Secured Party that the obligations of the Pledgor under this Agreement shall be in, but not in excess of, the maximum amount permitted by Applicable Law. To that end, but only to the extent such obligations would otherwise be avoidable, the obligations of the Pledgor under this Agreement shall be limited to the maximum amount that, after giving effect to the incurrence thereof, would not render the Pledgor insolvent or unable to pay its debts as they mature or leave the Pledgor with an unreasonably small capital. The need for any such limitation shall be determined, and any such needed limitation shall be effective, at the time or times that the Pledgor is deemed, under Applicable Law, to incur obligations thereunder. This Section 1.05 is intended solely to preserve the rights of the Secured Party under this Agreement to the maximum extent permitted by Applicable Law, and neither the Pledgor nor any other Person shall have any right under this Section 1.05 that it would not otherwise have under Applicable Law. For the purposes of this Section 1.05, "insolvency", "unreasonably small capital" and "inability to pay debts as they mature" shall be determined in accordance with Applicable Law. ARTICLE 13 CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS ------------------------------------------------- 2 The Pledgor represents, warrants and covenants as follows: Section 13.01 Collateral. ---------- (a) Except as permitted under the Credit Agreement, the Pledgor shall: (i) be the sole owner of each and every item of Collateral free from any right, title or interest of any third Person (other than the holder of a Permitted Lien), (ii) defend the Collateral against the claims and demands of all third Persons (other than holders of Permitted Liens), (iii) in the case of tangible property constituting part of the Collateral, (A) properly maintain such property and keep it in good order and repair, subject to normal wear and tear, and (B) keep such property fully insured with responsible companies of recognized national standing or otherwise acceptable to the Secured Party against such risks as such Collateral may be subject to under policies containing loss payable clauses naming the Secured Party as loss payee, (iv) comply with (A) all Applicable Laws relating to or affecting the Collateral and (B) the terms of all deeds and leases, mortgages and other Contracts relating to premises where any Collateral is located and (C) all license and franchise agreements and other Contracts pertaining to any of the Collateral, (v) duly fulfill all obligations on its part to be fulfilled under or in connection with all Receivables and General Intangibles and do nothing intentionally to impair the security interests of the Secured Party therein, (vi) subject, during an Event of Default, to the Secured Party's rights under Sections 3.02(f) and 3.02(i) hereof, endeavor to collect from the Collateral Debtor of each Collateral Obligation when due all amounts owing thereunder, except that this clause (vi) shall not require the Pledgor to take any action not in accordance with its customary collection practices, (vii) maintain its chief executive office and, if different from its chief executive office, each office where the books and records relating to any Receivables or General Intangibles are kept, only at and shall keep all tangible property constituting part of the Collateral only at or in transit to, (A) in the case of such chief executive office or other office, the location thereof specified in, and in the case of any such tangible property constituting part of the Collateral, any of the respective locations therefor specified in, the Questionnaire, or (B) in any case, a location of which the Secured Party has received not less than 30 days prior written notice and which is located within one of the States of the United States, (viii) give the Secured Party (A) prompt notice of (1) the location of each new place of business opened by the Pledgor and (2) each new location of any Collateral, (ix) deliver to the Secured Party all certificates and instruments evidencing Securities and Instrument Collateral, duly endorsed in favor of the Secured Party or accompanied by stock powers duly executed in blank, in either case as reasonably requested by the Secured Party and (x) provide the Secured Party with such other information as to the Collateral as the Secured Party may reasonably request. (b) Except as permitted by the Credit Agreement, the Pledgor shall not (i) sell, lease, transfer or otherwise dispose of any Collateral, including, if the Collateral includes any securities accounts or commodity accounts, any financial asset or commodity contract carried therein, or, if the Collateral includes any security entitlements, any financial asset subject thereto, or any interest therein or thereunder, including any license or sublicense, except for, in the case of General Intangibles, the grant of any license or sublicense therein in the ordinary course of business; or in the case of Inventory, sales of Inventory in the ordinary course of business; or in the case of Machinery and Equipment, sales of any thereof that Pledgor intends to no longer use or is no longer useful in the operation of the Pledgor's business, (ii) rescind or cancel any obligation evidenced by any Receivable or General Intangible or modify any term thereof or make any adjustment with respect thereto or extend or renew the same, or compromise or settle any dispute, claim, suit or legal proceeding relating thereto, except in the ordinary course of 3 business and subject, during an Event of Default, to the rights of the Secured Party under Sections 3.02(i) and 3.02(j), (iii) (A) enter into any Contract providing for any deduction from any Receivable that is an Account except for agreements made in the ordinary course of business, or (B) subject to the penultimate sentence of Section 2.01(d), cancel or terminate, or amend, modify or waive in any manner materially adverse to the holder thereof any provision of, any Securities and Instrument Collateral that constitutes Indebtedness, or (C) subject to the penultimate sentence of Section 2.01(d), enter into or permit to exist any restriction with respect to any rights under any Securities and Instrument Collateral, or any other such asset referred to in clause (B), other than restrictions arising under the Loan Documents or the Premiere Merger Agreement, (iv) without giving at least 30 days' prior written notice to the Secured Party, (A) change its name, identity or corporate structure or (B) do business under any name, trade name or trade style not listed on the Questionnaire, or (v) agree with any securities intermediary that such securities intermediary may grant any Lien on any financial asset with respect to which the Pledgor is an entitlement holder. (c) (i) Each Receivable that is an Account (A) is and shall at all times represent the legal, valid and binding obligation of its Collateral Debtor and, subject to clause (B)(1), is and shall at all times be enforceable in accordance with its terms, (B) shall at no time be subject to (1) any defense, setoff or counterclaim other than one arising in the ordinary course of business, (2) any agreement prohibiting assignment or requiring notice of or consent to assignment, or (3) any stamp or other Tax, (C) shall comply with all Applicable Laws, and (D) shall be genuine and in all respects what it purports to be and shall arise out of a bona fide transaction. (ii) All Inventory (A) is and at all times shall be in good condition, (B) meets and at all times shall meet all governmental standards applicable thereto or to its manufacture, use or sale, and (C) is and shall at all times be currently either usable or saleable in the ordinary course of the Pledgor's business. (iii) All Machinery and Equipment (A) is and shall at all times be in good operating condition and repair, normal wear and tear excepted, and (B) complies and is operated and shall at all times comply and be operated in compliance with all Applicable Laws. (iv) All General Intangibles that constitute Intellectual Property shall at all times be subsisting, valid and enforceable against third Persons. (v) (A) All Securities and Instrument Collateral is and at all times shall be duly authorized, validly issued, fully paid and non-assessable, and (B) as of the Agreement Date, the shares of capital stock or other units of ownership interests that constitute Securities and Instrument Collateral listed on Schedule 2.01(c)(v) represent the respective percentages of the outstanding shares of such capital stock or other units of ownership interests that are set forth on such Schedule. (vi) The Questionnaire is, as of the Agreement Date, complete and correct in all material respects. 4 (d) The Secured Party shall have the right, during an Event of Default, (i) in the name of the Secured Party, in the name and on the stationery of the Pledgor or any such other name as the Secured Party may select, to verify the validity, amount or any other matter relating to any Receivable or General Intangible by mail, telegram, telephone or any other means, (ii) after a notice to the Pledgor that it intends to exercise its rights under this Section 2.01(d)(ii), to transfer into or register in its name or the name of its nominee any or all of the Securities and Instrument Collateral and, in its own or the Pledgor's name, to exercise any and all rights, powers and privileges with respect to the Securities and Instrument Collateral, and with the same force and effect, as could the Pledgor. Unless and until the Secured Party exercises its rights under Section 2.01(d)(ii), the Pledgor may, with respect to any of the Securities and Instrument Collateral, vote and give consents, ratifications and waivers with respect thereto, except to the extent that any such action would (x) be for a purpose that would constitute or result in an Event of Default or (y) in the reasonable judgment of the Required Banks, detract from the value thereof as Collateral, and from time to time, upon request from the Pledgor, the Secured Party shall deliver to the Pledgor suitable proxies confirming the right of the Pledgor to cast such votes, consents, ratifications and waivers. Each such request from the Pledgor shall constitute a Representation and Warranty by the Pledgor hereunder that no Event of Default exists or would result therefrom. Section 13.02 Consent to Pledge; Control Letters. ---------------------------------- (a)(i) As of the Agreement Date, the Pledgor has not agreed with any securities intermediary that such securities intermediary may grant any Lien on any financial asset with respect to which the Pledgor is an entitlement holder. (ii) No financial asset with respect to which the Pledgor is the entitlement holder is subject to any Lien other than the Security Interest. (b) As of the Agreement Date, the Pledgor is not a party to any Control Letter or similar agreement relating to any investment property that constitutes Collateral, except for those to which the Secured Party is a party. Section 13.03 New Accounts. ------------ The Pledgor shall give to the Secured Party not less than 15 days' prior notice of the opening of each new securities account or commodity account that itself will constitute Collateral, or to which financial assets are to be credited (or with respect to which there will be security entitlements), or in which commodity contracts are to be carried, that constitute or are to constitute Collateral, specifying, as appropriate, the securities intermediary or the commodity intermediary maintaining such account, the account number and the jurisdiction of each such Person, determined in accordance with, in the case of a securities intermediary, Section 8-110(e) of the Uniform Commercial Code and, in the case of a commodity intermediary, Section 9-103(6)(e) of the Uniform Commercial Code. Section 13.04 Change of Jurisdiction. ---------------------- Promptly upon its obtaining knowledge thereof, the Pledgor shall give to the Secured Party notice of any change of the jurisdiction of a securities intermediary or a commodity intermediary maintaining a securities account or commodity account that itself constitutes Collateral, or to which financial assets are credited (or with respect to which there are security entitlements), or in which commodity contracts are carried, that constitute Collateral, specifying such new jurisdiction. 5 Section 13.05 Jurisdictions of Securities and Commodity Intermediaries. -------------------------------------------------------- (a) The Pledgor shall not, after the Agreement Date, enter into any Contract with any securities intermediary or with any commodity intermediary with respect to any investment property that is or is to be Collateral, unless such Contract or another agreement specifies effectively with respect to such investment property that such securities intermediary's or commodity intermediary's jurisdiction shall be the State of New York. (b) The Pledgor shall use its best effort to cause each Contract with each securities intermediary or commodities intermediary in effect on the Agreement Date that relates to investment property that is or is to be Collateral, and that does not so provide, to be amended so that thereafter such Contract shall specify effectively with respect to such investment property that such securities intermediary's or commodity intermediary's jurisdiction shall be the State of New York. If in any case such an amendment shall not be effective within 30 days of the Agreement Date, the Pledgor shall terminate such Contract, and enter into a new Contract relating to such investment property with another securities intermediary or commodity intermediary, as the case may be, which does effectively so provide. Section 13.06 Requirement of Materially Adverse Effect. ---------------------------------------- Clauses (i), (ii), (iii), (iv), (v), (vi) and (viii) of Section 2.01(a), clauses (i), (ii), (iii) and (iv)(B) of Section 2.01(b), and clauses (i), (ii), (iii) and (iv) of Section 2.01(c), shall not apply in any circumstances where noncompliance, together with all other noncompliances with this Agreement will not have a Materially Adverse Effect on the Collateral taken as a whole. ARTICLE 14 EVENT OF DEFAULT ---------------- During an Event of Default, and in each such case: (A) Proceeds. -------- Section 14.01 Application of Proceeds. ----------------------- All cash proceeds received by the Secured Party upon any sale of, collection of, or other realization upon, all or any part of the Collateral and all cash held by the Secured Party as Collateral shall, subject to the Secured Party's right to continue to hold the same as cash Collateral, be applied as follows: First: To the payment of all out-of-pocket costs and expenses incurred in connection with the sale of or other realization upon Collateral, including attorneys' fees and disbursements; Second: To the payment of the Secured Obligations owing to the Secured Party in such order as the Secured Party may elect (with the Pledgor remaining liable for any deficiency); Third: To the payment of the other Secured Obligations ratably in accordance with the amounts owed to each holder thereof and in such order as the Required Banks may elect (with the Pledgor remaining liable for any deficiency); and 6 Fourth: To the extent of the balance (if any) of such proceeds, to the payment to the Pledgor, subject to Applicable Law and to any duty to pay such balance to the holder of any subordinate Lien in the Collateral. (A) Remedies. -------- Section 14.02 (a) Use of Premises and Intellectual Property. ----------------------------------------- The Secured Party may (i) enter the Pledgor's premises and, until the Secured Party completes the enforcement of its rights in the Collateral, take exclusive possession of such premises or place custodians in exclusive control thereof, remain on such premises and use the same and all machinery and equipment for the purpose of (A) completing any work in process, preparing Collateral for disposition and disposing thereof and (B) collecting Collateral Obligations, and (ii) in the exercise of its rights under this Agreement, use the Pledgor's rights in, to and under all patents, trademarks and copyrights and licenses and sublicenses thereof, to the extent of the rights of the Pledgor therein, and the Pledgor hereby grants a license to the Secured Party for such purpose, subject to the consent, if required, of any licensor, franchisor or other third Person. (b) Directors, Officers and Employees. --------------------------------- The Secured Party may retain the Pledgor's directors, officers and employees, in each case upon such terms as the Secured Party and any such Person may agree, notwithstanding the provisions of any employment, confidentiality or non-disclosure agreement between any such Person and the Pledgors, and the Pledgor hereby waives its rights under any such agreement and consents to each such retention. (c) Power of Sale. ------------- The Secured Party (i) may sell the Collateral in one or more parcels at public or private sale, at any of its offices or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as it may deem commercially reasonable, (ii) shall not be obligated to make any sale of Collateral regardless of notice of sale having been given, and (iii) may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. (d) Foreclosure. ----------- The Secured Party, instead of exercising the power of sale conferred upon it by Section 3.02(c) and Applicable Law, may proceed by a suit or suits at law or in equity to foreclose the Security Interest and sell the Collateral, or any portion thereof, under a judgment or a decree of a court or courts of competent jurisdiction. (e) Receiver. -------- The Secured Party may obtain the appointment of a receiver of the Collateral and the Pledgor consents to and waives any right to notice of such appointment. (f) Collection of Collateral Proceeds by Pledgor. -------------------------------------------- The Secured Party may, by notice to the Pledgor, direct it to, and thereupon the Pledgor shall, receive all proceeds of Collateral in trust for the Secured Party, not commingle the same with any other property or funds of the Pledgor and, unless the Secured Party shall have otherwise instructed the Pledgor, deliver or cause to be delivered all such proceeds in the exact form received, together with any necessary endorsements, to the Secured Party or to such Person or Persons as the Secured Party may designate. 7 (g) Notification. ------------ The Secured Party may notify, or request the Pledgor to notify, in writing or otherwise, each Collateral Debtor to make payment directly to the Secured Party. If, notwithstanding the giving of any notice, any such Person shall make payments to the Pledgor, the Pledgor shall hold all such payments it receives in trust for the Secured Party, without commingling the same with other funds or property of the Pledgor or any other Person, and shall deliver the same to the Secured Party immediately upon receipt by the Pledgor in the identical form received, together with any necessary endorsements. (h) Secured Party's Rights with Respect to Proceeds and Other --------------------------------------------------------- Collateral. - - ---------- All payments and other deliveries received by or for the account of the Secured Party from time to time pursuant to Section 3.02(f) or (g), together with the proceeds of all other Collateral from time to time held by or for the account of the Secured Party may, at the election of the Secured Party, (i) be or continue to be held by the Secured Party, or any Person designated by the Secured Party to receive or hold the same, as Collateral, (ii) be applied as provided in Section 3.01 or (iii) be disposed of in accordance with the provisions of this Agreement and Applicable Law. (i) Enforcement by Secured Party. ---------------------------- The Secured Party may, with only such notice to the Pledgor as is required by, and not waivable under, Applicable Law and at such time or times as the Secured Party in its sole discretion may determine, exercise any or all of the Pledgor's rights in, to and under, or in any way connected with or related to, any or all of the Collateral. (j) Adjustments. ----------- The Secured Party may settle or adjust disputes and claims directly with Collateral Debtors for amounts and on terms that the Secured Party considers advisable and in all such cases only the net amounts received by the Secured Party in payment of such amounts, after deduction of out-of-pocket costs and expenses of collection, including reasonable attorney's fees, shall be subject to the other provisions of this Agreement. The Pledgor shall have no further right under Section 2.01(b) or otherwise to make any such settlements or adjustments or to accept any returns of merchandise. (k) Warehousing. ----------- The Secured Party may cause any or all of the Inventory and the Machinery and Equipment to be placed in a public or field warehouse. Section 14.03 Securities and Instrument Collateral. ------------------------------------ (a) Registration and Indemnification. -------------------------------- If the Secured Party elects to sell or otherwise dispose of any Securities and Instrument Collateral, the Pledgor shall, if it controls the issuer or if it otherwise has the right to effect such registration, and if the Secured Party deems such registration to be desirable, (i) cause the same to be registered under the Securities Act of 1933 and take all other action, including complying with the "blue sky" or securities laws of the several States of the United States and delivering to the Secured Party appropriate quantities of prospectuses, necessary or appropriate so as to permit the public sale or other disposition thereof by the Secured Party in such jurisdictions as the Secured Party may select, and (ii) indemnify, in the form then customary, all Persons that are underwriters (whether statutory or otherwise) and all Affiliates of all such Persons, in connection with such sale or disposition, such indemnity, to the extent applicable to the Principals, to be in addition to and supplementary of (and not to be construed as being in derogation of) that afforded the Principals under Article 8 and Section 10.02 of the Credit Agreement. 8 (b) Restricted Offering Dispositions. -------------------------------- Whether or not the Pledgor controls the issuer or otherwise has the right to effect the registrations and compliances referred to in Section 3.03(a) and as an alternative to its rights thereunder, in connection with any sale of any of the Securities and Instrument Collateral, the Secured Party may, at its election, comply with any limitation or restriction (including any restrictions on the number of prospective bidders and purchasers or any requirement that they have certain qualifications or that they represent and agree that they are purchasing for their own account for investment and not with a view to the distribution or resale of such Securities and Investment Collateral) as it may be advised by counsel is necessary in order to avoid any violation of Applicable Law or to obtain any Governmental Approval, and such compliance shall not result in such sale being considered or deemed not to have been made in a commercially reasonable manner, nor shall any Principal be liable or accountable to the Pledgor for any discount allowed by reason of the fact that such Securities and Instrument Collateral is sold in compliance with any such limitation or restriction. ARTICLE 15 MISCELLANEOUS ------------- Section 15.01 Expenses of Pledgor's Agreements and Duties. ------------------------------------------- The terms, conditions, covenants and agreements to be observed or performed by the Pledgor under the Collateral Documents shall be observed or performed by it at its sole cost and expense. Section 15.02 Secured Party's Right to Perform on Pledgor's Behalf. ---------------------------------------------------- If the Pledgor shall fail to observe or perform any of the terms, conditions, covenants and agreements to be observed or performed by it under the Collateral Documents, the Secured Party, upon five business days notice to the Pledgor specifying the action to be taken, may (but shall not be obligated to) do the same or cause it to be done or performed or observed, either in its name or in the name and on behalf of the Pledgor, and the Pledgor hereby authorizes the Secured Party so to do. Section 15.03 Secured Party's Right to Use Agents and to Act in Name of --------------------------------------------------------- Pledgor. - - ------- The Secured Party may exercise its rights and remedies under the Collateral Documents through an agent or other designee and, in the exercise thereof, the Secured Party or any such other Person may act in its own name or in the name and on behalf of the Pledgor. Section 15.04 No Interference, Compensation or Expense. ---------------------------------------- The Secured Party may exercise its rights and remedies under the Collateral Documents (a) without resistance or interference by the Pledgor, (b) without payment of any rent, license fee or compensation of any kind to the Pledgor and (c) during an Event of Default, for the account, and at the expense, of the Pledgor. Section 15.05 Limitation of Obligations with Respect to Collateral. ---------------------------------------------------- (a) Neither the Secured Party nor any other Principal shall have any obligation to protect or preserve any Collateral or to preserve rights pertaining thereto other than the obligation to use reasonable care in the custody and preservation of any Collateral in its actual possession. The Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of any Collateral in its possession if such Collateral is accorded treatment substantially equal to that which the Secured Party accords its own property. The Secured Party shall be relieved of all 9 responsibility for any Collateral in its possession upon surrendering it, or tendering surrender of it, to the Pledgor. (b) Nothing contained in the Collateral Documents shall be construed as requiring or obligating the Secured Party or any other Principal, and neither the Secured Party nor any other Principal shall be required or obligated, to (i) make any demand, or to make any inquiry as to the nature or sufficiency of any payment received by it, or to present or file any claim or notice or take any action, with respect to any Collateral Obligation or any other Collateral or the monies due or to become due thereunder or in connection therewith, (ii) ascertain or take action with respect to calls, conversions, exchanges, maturities, tenders, offers or other matters relating to any Collateral, whether or not the Secured Party or any other Principal has or is deemed to have knowledge or notice thereof, (iii) take any necessary steps to preserve rights against any prior parties with respect to any Collateral or (iv) notify the Pledgor of any decline in the value of any Collateral. Section 15.06 Rights of Secured Party under Uniform Commercial Code and --------------------------------------------------------- Applicable Law. - - -------------- The Secured Party shall have, with respect to the Collateral, in addition to all of its rights and remedies under the Collateral Documents, (a) the rights and remedies of a secured party under the Uniform Commercial Code, whether or not the Uniform Commercial Code would otherwise apply to the Collateral in question, and (b) the rights and remedies of a secured party under all other Applicable Law. Section 15.07 Waivers of Rights Inhibiting Enforcement. ---------------------------------------- The Pledgor waives (a) any claim that, as to any part of the Collateral, a public sale, should the Secured Party elect so to proceed, is, in and of itself, not a commercially reasonable method of sale for such Collateral, (b) the right to assert in any action or proceeding between it and the Secured Party any offsets or counterclaims (other than compulsory counterclaims) that it may have, (c) except as otherwise provided in any of the Collateral Documents, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE OR JUDICIAL HEARING IN CONNECTION WITH THE SECURED PARTY'S TAKING POSSESSION OR DISPOSITION OF ANY OF THE COLLATERAL INCLUDING ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT THAT THE PLEDGOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, AND ALL OTHER REQUIREMENTS AS TO THE TIME, PLACE AND TERMS OF SALE OR OTHER REQUIREMENTS WITH RESPECT TO THE ENFORCEMENT OF THE SECURED PARTY'S RIGHTS HEREUNDER, (d) all rights of redemption, appraisement, valuation, stay and extension or moratorium to the extent permitted by Applicable Law and (e) all other rights the exercise of which would, directly or indirectly, prevent, delay or inhibit the enforcement of any of the rights or remedies under the Collateral Documents or the absolute sale of the Collateral, now or hereafter in force under any Applicable Law, and the Pledgor, for itself and all who may claim under it, insofar as it or they now or hereafter lawfully may, hereby waive the benefit of all such laws and rights. Section 15.08 Power of Attorney. ----------------- In addition to the other powers granted the Secured Party by the Pledgor under the Collateral Documents, the Pledgor hereby appoints the Secured Party, and any other Person that the Secured Party may designate, as the Pledgor's attorney-in- 10 fact to act, in the name, place and stead of the Pledgor in any way in which the Pledgor itself could do, with respect to each of the following during an Event of Default: (a) endorsing the Pledgor's name on (i) any checks, notes, acceptances, money orders, drafts or other forms of payment, (ii) any proxies, documents, instruments, notices, freight bills, bills of lading or other documents or agreements relating to the Collateral, (iii) notices of assignment, financing statements and other public records, and endorsing and depositing, or causing to be deposited, for collection, presenting, drawing upon or under, or otherwise taking action to realize upon, all instruments, chattel paper, securities, letters of credit and documents constituting part of the Collateral for the purpose of holding and disposing of the proceeds thereof in accordance with the terms of this Agreement; (b) claiming for, adjusting, and instituting legal proceedings to collect, any amounts payable under insurance, and applicable loss payable endorsements, required to be maintained under any of the Collateral Documents; (c) taking any actions or exercising any rights, powers or privileges that the Pledgor is entitled to take or exercise and that, under the terms of any of the Collateral Documents, the Secured Party is authorized to take or exercise; (d) doing or causing to be done any or all things necessary or, in the determination of the Secured Party, desirable to observe or perform the terms, conditions, covenants and agreements to be observed or performed by the Pledgor under the Collateral Documents and otherwise to carry out the provisions of the Collateral Documents; and (e) notifying the post office authorities to change the address for delivery of the Pledgor's mail to an address designated by the Secured Party, and receiving, opening and disposing of all mail addressed to the Pledgor (with all mail not constituting, evidencing or relating to the Collateral to be forwarded by the Secured Party to the Pledgor). The Pledgor hereby ratifies and approves all acts of the attorney pursuant to the foregoing other than any acts that are determined by a judgment of a court that is binding on the Pledgor to constitute gross negligence or willful misconduct. Section 15.09 Termination of Security Interest. -------------------------------- The Security Interest and all of the Pledgor's obligations under Articles 1, 2, 3 and 4 shall terminate upon (a) the payment in full of the Secured Obligations and (b) the discharge, dismissal with prejudice, settlement, release or other termination of any Loan Document Related Claims that may then be pending against the Indemnified Persons. Section 15.10 Notices and Deliveries. ---------------------- (a) Notices and Materials Other than Collateral. Except as provided ------------------------------------------- in Section 4.10(b): (i) Manner of Delivery. ------------------ All notices, communications and materials (including all Information) to be given or delivered pursuant to the Collateral Documents shall, except in those cases where giving notice by telephone is expressly permitted, be given or delivered in writing (which shall include telex and telecopy transmissions). In the event of a discrepancy between any telephonic notice and any written confirmation thereof, such written confirmation shall be deemed the effective notice except to the extent the Secured Party has acted in reliance on such telephonic notice. (ii) Addresses. --------- All notices, communications and materials to be given or delivered pursuant to the Collateral Documents shall be given or delivered at the following respective addresses and telex, telecopier and telephone numbers and to the attention of the following individuals or departments: 11 A. if to the Pledgor, to it at: [PLEDGOR] [c/o Premiere Technologies, Inc. 3399 Peachtree Road NE Lenox Building, Suite 400 Atlanta, Georgia 30326 Telecopier No.: Telephone No.: Attention: Mr. Harvey A Wagner Chief Financial Officer with a copy to: Alston & Bird LLP One Atlantic Center 1201 West Peachtree Street Atlanta, Georgia 30309-3424 Telecopier No.: (404) 881-7000 Telephone No.: (40) 881-7777 B. if to the Secured Party, to it at: The Bank of New York One Wall Street, 16th Floor New York, NY 10286 Telecopier No.: (212) 635-8595 Telephone No.: (212) 635-8606 Attention: Cindy Rogers with a copy to: The Bank of New York One Wall Street New York, NY 10286 Telecopier No.: (212) 635-6365(6, 7) Telephone No.: (212) 635-4695 Attention: Geneveso Caviness, AFA, 18th Floor or at such other address or telex, telecopier or telephone number or to the attention of such other individual or department as the party to which such information pertains may hereafter specify for the purpose in a notice to the other specifically captioned "Notice of Change of Address." 12 (iii) Effectiveness. ------------- Each notice and communication and any material to be given or delivered pursuant to the Collateral Documents shall be deemed so given or delivered (A) if sent by any means of physical delivery, when such notice, communication or material is delivered or received at the appropriate address as above provided, (B) if sent by telecopier, when such notice, communication or material is transmitted to the appropriate telecopier number as above provided and is received at such number and (C) if given by telephone, when communicated to the individual or any member of the department specified as the individual or department to whose attention notices, communications and materials are to be given or delivered except that notices, communications and materials to be given or delivered to the Secured Party pursuant to the Collateral Documents shall not be deemed given or delivered until received by the officer of the Secured Party responsible, at the time, for the administration of the Collateral Documents. (iv) Reasonable Notice. ----------------- Any requirement under Applicable Law of reasonable notice by the Secured Party to the Pledgor of any event in connection with, or in any way related to, the Loan Documents or the exercise by the Secured Party of any of its rights thereunder shall be met if notice of such event is given to the Pledgor in the manner prescribed above at least 10 days before (A) the date of such event or (B) the date of the day after which such event will occur. (b) Collateral. ---------- Until the Secured Party shall otherwise specify, all Collateral to be delivered to the Secured Party pursuant to the Collateral Documents consisting of instruments, securities, chattel paper, letters of credit or documents shall be delivered to the Secured Party at the Secured Party's Office either by hand delivery or by registered or certified mail, postage prepaid, return receipt requested, in either case insured in an amount not less than the greater of the aggregate face amount and the aggregate fair market value of the Collateral so being delivered. All other Collateral to be delivered to the Secured Party pursuant to the Collateral Documents shall be delivered to such Person, at such address, by such means and in such manner as the Secured Party may designate. Section 15.11 Governing Law. ------------- The rights and duties of the Pledgor, the Secured Party and the Principals under the Collateral Documents (including matters relating to the Maximum Permissible Rate) shall, pursuant to New York General Obligations Law Section 5- 1401, be governed by the law of the State of New York. Section 15.12 LIMITATION OF LIABILITY. ----------------------- NEITHER THE SECURED PARTY NOR ANY OTHER PRINCIPAL SHALL HAVE ANY LIABILITY WITH RESPECT TO, AND THE PLEDGOR HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE FOR ANY LOSS OR DAMAGE SUSTAINED BY THE PLEDGOR, OR ANY LOSS, DAMAGE, DEPRECIATION OR OTHER DIMINUTION IN THE VALUE OF ANY COLLATERAL, THAT MAY OCCUR AS A RESULT OF, IN CONNECTION WITH, OR THAT IS IN ANY WAY RELATED TO, ANY EXERCISE OF ANY RIGHT OR REMEDY UNDER THE COLLATERAL DOCUMENTS, EXCEPT FOR ANY SUCH LOSS, DAMAGE, DEPRECIATION OR DIMINUTION TO THE EXTENT THAT THE SAME IS DETERMINED BY A JUDGMENT OF A COURT THAT IS BINDING ON THE PLEDGOR AND SUCH PRINCIPAL, TO BE THE RESULT OF (i) A BREACH BY SUCH PRINCIPAL OF ITS OBLIGATIONS HEREUNDER OR (ii) ACTS OR OMISSIONS ON THE PART OF SUCH PRINCIPAL CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. Section 15.13 Counterparts. ------------ Each Collateral Document may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto were upon the same instrument. Section 15.14 Entire Agreement. ---------------- This Agreement embodies the entire agreement among the Pledgor, the Secured Party and the Banks relating to the subject matter hereof and supersedes all prior agreements, representations and understandings, if any, relating to the subject matter hereof. Section 15.15 Successors and Assigns. ---------------------- All of the provisions of each Collateral Document shall be binding upon and inure to the benefit of the Pledgor, the Secured Party and the other Principals and their respective successors and assigns. Section 15.16 Delivery of Opinions Authorized. ------------------------------- The Pledgor hereby acknowledges and agrees that each Person that has rendered or may render an opinion, report or similar communication, including legal opinions and accountant's reports, to any Person in connection with the Collateral Documents, has been and is hereby authorized and directed to so deliver such opinion, report or communication. ARTICLE 16 INTERPRETATION -------------- Section 16.01 Definitional Provisions. ----------------------- (a) Certain Terms Defined by Reference. ---------------------------------- (i) Except where the context clearly indicates a different meaning, all terms defined in Article 1, 8 or 9 of the Uniform Commercial Code, as in effect on the date of this Agreement, are used herein with the meanings therein ascribed to them. In addition, the terms "account", "collateral" and "security interest", when capitalized, have the meanings specified in subsection (b) below and the term "deposit account" includes an account evidenced by a certificate of deposit. (ii) Except in the case of "Agreement", "Agreement Date", "Collateral", "Intellectual Property", "Permitted Lien", "Representation and Warranty" and "Security Interest" and as otherwise specified herein, all terms defined in the Credit Agreement are used herein with the meanings therein ascribed to them. (b) Other Defined Terms. ------------------- For purposes of this Agreement: "Account" means a Receivable that represents the right to payment for goods ------- sold or leased or for services rendered, in each case in the ordinary course of business. "Account Proceeds" means proceeds of an Account other than an Account ---------------- representing the sale or other disposition of Machinery and Equipment pursuant to Section 2.02(b)(i). 14 "Agreement" means this Security Agreement, including all schedules, annexes --------- and exhibits hereto. "Agreement Date" means the date set forth as such on the last signature -------------- page hereof, which date is the date the executed copies of this Agreement were delivered by all parties hereto and, accordingly, the date this Agreement became effective and, for the first time, binding upon such parties. "Collateral" means the Pledgor's interest (WHATEVER IT MAY BE) in each of ---------- the following, IN EACH CASE WHETHER NOW OR HEREAFTER EXISTING OR NOW OWNED OR HEREAFTER ACQUIRED BY THE PLEDGOR AND WHETHER OR NOT THE SAME IS NOW CONTEMPLATED, ANTICIPATED OR FORESEEABLE, whether or not the same is subject to Article 8 or 9 of the Uniform Commercial Code, whether or not the same constitutes Collateral by reason of one or more than one of the following clauses, AND WHEREVER THE SAME MAY BE LOCATED: (i) all Receivables; (ii) all General Intangibles; (iii) all Inventory; (iv) all Machinery and Equipment; (v) all Securities and Instrument Collateral; (vi) all Securities Accounts; (vii) all Commodity Accounts; (viii) all books, records, ledgercards, files, correspondence, computer programs, tapes, disks and related data processing software (owned by the Pledgor or in which it has an interest) that at any time evidence or contain information relating to any Collateral or are otherwise necessary or helpful in the collection thereof or realization thereupon; (ix) all goods and other property, whether or not delivered, (A) the sale, lease or furnishing of which gives or purports to give rise to any Receivable, including all merchandise returned or rejected by or repossessed from customers, or (B) securing any Receivable, including all of the Pledgor's rights as an unpaid vendor or lienor, including stoppage in transit, replevin and reclamation with respect to such goods and other properties; (x) all documents of title, policies and certificates of insurance, securities, chattel paper and other documents or instruments evidencing or pertaining to any Collateral; 15 (xi) all guaranties, Liens on real or personal property, leases and other agreements and property that in any way secure or relate to any Collateral, or are acquired for the purpose of securing and enforcing any item thereof; (xii) all claims (including the right to sue or otherwise recover on such claims) (A) to items referred to in the definition of Collateral, (B) under warranties relating to any Collateral and (C) against third parties for (1)(aa) loss, destruction, requisition, confiscation, condemnation, seizure, forfeiture or infringement of, or damage to, any Collateral, (bb) payments due or to become due under leases, rentals and hires of any Collateral, (cc) proceeds payable under or unearned premiums with respect to policies of insurance relating to any Collateral and (2) breach of any Contract constituting Collateral; and (xiii) all products and proceeds of Collateral in whatever form. The inclusion of "proceeds" of Collateral in the definition of "Collateral" shall not be deemed a consent by the Secured Party to any sale or other disposition of any Collateral not otherwise specifically permitted by the terms hereof or of the Credit Agreement. "Collateral Debtor" means a Person (including an issuer of any share of ----------------- capital stock or other unit of ownership interest constituting Securities and Instrument Collateral) obligated on, bound by, or subject to, a Collateral Obligation. "Collateral Documents" means (i) this Agreement and (ii) all other -------------------- agreements, documents and instruments executed or delivered under or in connection with, (A) this Agreement, (B) any other agreement, document or instrument referred to in this clause (ii), or (C) any of the transactions contemplated by this Agreement or any such other agreement, document or instrument, in each case whether now or hereafter executed. "Collateral Obligation" means a Liability constituting part of the --------------------- Collateral and includes any such constituting or arising under any Receivable, General Intangible or Securities and Instrument Collateral. "Commodity Account" means any commodity account. ----------------- "Commodity Account Control Letter" means a control letter substantially in -------------------------------- the form of Schedule 5.01(a)1. ----------------- "Control Letter" means a Securities Account Control Letter and a Commodity -------------- Account Control Letter. "Credit Agreement" means the Credit Agreement, dated as of December 17, ---------------- 1997, as amended and restated as of the date hereof, among Xpedite Systems, Inc. and Xpedite Systems Holdings (UK) Limited, as Borrowers, the Guarantors party thereto, the Banks listed on the signature pages thereof, NationsBank, N.A., as Documentation Agent, and The Bank of New York, as Administrative Agent. "Distribution Collateral" means (i) all Distributions on or in respect of ----------------------- (A) the instruments and securities listed on Schedule 2.01(c)(v), (B) any shares ------------------- of capital stock of or 16 other units of ownership interests in any Significant Subsidiary which the Pledgor forms or acquires, or of any Subsidiary that becomes a Significant Subsidiary, after the date hereof that constitute Securities and Instrument Collateral or (C) any instruments, securities or property that constitute Distribution Collateral by virtue of any provision of this definition, including this clause (i)(C) and (ii) all other instruments or securities and other property issued with respect to or in exchange for (A) the instruments or securities listed on Schedule 2.01(c)(v), (B) any shares of capital ------------------- stock of or other units of ownership interests in any Significant Subsidiary which the Pledgor forms or acquires, or of any Subsidiary that becomes a Significant Subsidiary, after the date hereof that constitute Securities and Instrument Collateral or (C) any instruments, securities or other property that constitute Distribution Collateral by virtue of any provision of this definition, including this clause (ii)(C) (whether, in either case, upon conversion of convertible securities included therein or through stock split, spin-off, reclassification, merger, consolidation, sale of assets, combination of shares or otherwise). "Distributions" means Ordinary Distributions and Extraordinary ------------- Distributions. "Extraordinary Distributions" means (in each case whether or not in cash) --------------------------- all dividends, interest, principal payments, other distributions and other property (including cash, instruments and securities payable in connection with calls, conversions, redemptions and the like or otherwise) on or in respect of or in exchange for, and all proceeds (including cash, instruments and securities receivable in connection with tender or other offers or otherwise) of, Securities and Instrument Collateral other than Ordinary Distributions. "General Intangibles" means general intangibles (except to the extent that ------------------- the terms of any lease or other contract would prohibit the Pledgor from conveying the Security Interest in its interest in such lease or contract). "Intellectual Property" means (i) (A) patents and patent rights, (B) --------------------- trademarks, trademark rights, trade names, trade name rights, corporate names, business names, trade styles, service marks, logos and general intangibles of like nature, together with, in the case of each item referred to in or contemplated by clauses (A), (B) or (C), the goodwill of the business connected with the use of or symbolized by the same, and (C) copyrights, in each case whether registered, unregistered or under pending registration and, in the case of any such that are registered or under pending registration, whether registered or under pending registration under the laws of the United States or any other country, (ii) reissues, continuations, continuations-in-part and extensions of any Intellectual Property referred to in clause (i), and (iii) rights relating to any Intellectual Property referred to in clause (i) or (ii), including rights under applications (whether pending under the laws of the United States or any other country) or licenses relating thereto. "Inventory" means all inventory. --------- "Machinery and Equipment" means all equipment wherever located and whether ----------------------- or not the same constitutes "fixtures." "Ordinary Distributions" means cash dividends to the extent paid out of ---------------------- retained earnings or capital surplus, and interest paid in cash, in each case with respect to Securities and Instrument Collateral or other securities or instruments, except to the extent that any such dividend is made 17 in connection with partial or total liquidation or a reduction of capital, or any such interest is penalty interest, or, in each case, to the extent the same is not declared or paid in the ordinary course. "Permitted Lien" means (i) (A) a Lien listed on Schedule 1.02A and (B) a -------------- -------------- Lien described in clause (a)(v) of the definition of "Permitted Lien" in the Credit Agreement, including (1) a Lien for Taxes either not yet due or that are being contested in good faith by appropriate proceedings and with respect to which foreclosure, distraint, sale or other similar proceedings shall not have been commenced or shall have been stayed and adequate reserves have been established therefor in accordance with Generally Accepted Accounting Principles and (2) in the case of any Collateral other than Securities and Instrument Collateral and its proceeds, any other Lien, such as those in favor of a landlord, warehouseman, carrier, or the like, arising by operation of law and incurred in the ordinary course of business that does not (aa) arise under ERISA or under any environmental law or (bb) secure an obligation for borrowed money, (ii) any interest or title of a lessor under any lease (including UCC filings relating to any such leasehold interest), (iii) any Lien securing a judgment (or any equivalent prejudgment attachment) so long as, and to the extent that, such judgment (or requested judgment) does not constitute an Event of Default under Section 6.01(f) of the Credit Agreement, (iv) any easements, rights-of-way, restrictions, minor defects or irregularities in title and other similar charges or encumbrances not interfering in any material respect with the ordinary conduct of the business of the Loan Parties (v) deposits made to secure Liabilities other than Indebtedness or constituting Indebtedness (such as in connection with letters of credit or surety bonds) incurred to provide a substitute for, or similar security as, such a deposit and (vi) a Lien created in favor of the Secured Party under the Collateral Documents. "Pledgor" means [PLEDGOR], a [JURISDICTION] corporation. ------- "Principals" means all Persons that are, or at any time were, the Secured ---------- Party, an Administrative Agent, a Bank or any other Indemnified Person. "Questionnaire" means the Questionnaire in the form attached hereto as ------------- Schedule 2.01(c)(vi) executed and delivered by the Pledgor to the Secured Party - - -------------------- in connection with this Agreement. "Receivables" means (i) all accounts and (ii) all other rights to the ----------- payment of money. "Representation and Warranty" means each representation or warranty made --------------------------- pursuant to or under (i) Article 2 or any other provision of this Agreement, (ii) any of the other Collateral Documents or (iii) any amendment to, or waiver of rights under, this Agreement or any of the other Collateral Documents. "Secured Obligations" means all Liabilities of the Pledgor owing to, or in ------------------- favor or for the benefit of, or purporting to be owing to, or in favor or for the benefit of, the Principals under the Loan Documents or any interest rate swap or similar hedging agreement, in each case (i) WHETHER NOW EXISTING OR HEREAFTER ARISING OR ACQUIRED, and (ii) whether owing to, or in favor or for the benefit of, or purporting to be owing to, or in favor or 18 for the benefit of, Persons that are Principals as of the Agreement Date or that become Principals by reason of any permitted succession or assignment at any time thereafter. "Secured Party" means the Administrative Agent, acting both on its own ------------- behalf as Administrative Agent and as the agent for and representative (within the meaning of Section 9-105(m) of the Uniform Commercial Code) of the other Principals. "Secured Party's Office" means the address of the Secured Party specified ---------------------- in or determined in accordance with the provisions of Section 4.10. "Securities Account" means any securities account. ------------------ "Securities and Instrument Collateral" means (i) all securities and ------------------------------------ instruments listed on Schedule 2.01(c)(v), (ii) without limiting the Loan ------------------- Parties' obligations under the Loan Documents, (A) all other Capital Securities at any time created, issued or granted to Pledgor by any Person named on Schedule 2.01(c)(v) that is a United States Person and (B) 65% (or such other percentage which in the reasonable determination of the Company constitutes the maximum percentage which may be pledged hereunder without adversely affecting the United States taxation treatment of the Company) of all other Capital Securities at any time created, issued or granted to Pledgor by any Person named on Schedule 2.01(c)(v) that is not a United States Person, (iii) all shares of capital stock of or other units of ownership interests in any Significant Subsidiary that is a United States Person which the Pledgor forms or acquires, or in any Subsidiary that is a United States Person that becomes a Significant Subsidiary, after the date hereof, (v) 65% (or such other percentage which in the reasonable determination of the Company constitutes the maximum percentage which may be pledged hereunder without adversely affecting the United States taxation treatment of the Company) of the outstanding shares of capital stock or other units of ownership interests in any Significant Subsidiary that is not a United States Person which the Pledgor forms or acquires, or in any Subsidiary that is not a United States Person that becomes a Significant Subsidiary, after the date hereof, (vi) all Indebtedness described on Schedule 2.01(c)(v), (vii) ------------------- all other Indebtedness from time to time owed to the Pledgor by a Significant Subsidiary, (viii) all Distribution Collateral, (ix) all replacements and substitutions for any Collateral that constitutes (whether by virtue of clause (i), clause (ii), clause (iii), clause (iv), clause (v), clause (vi), clause (vii), clause (viii) or this clause (ix)) Securities and Instrument Collateral and (x) the certificates, if any, representing the foregoing; provided, however, -------- ------- that Capital Securities of any Subsidiary that is not a Significant Subsidiary shall not constitute Securities and Instrument Collateral. "Security Account Control Letter" means a control letter substantially in ------------------------------- the form of Schedule 5.01(a)-2. ------------------- "Security Interest" means the mortgages, pledges and assignments to the ----------------- Secured Party of, the continuing security interest of the Secured Party in, and the continuing lien of the Secured Party upon, the Collateral intended to be effected by the terms of this Agreement or any of the other Collateral Documents. Section 16.02 Other Interpretive Provisions. ----------------------------- (a) Except as otherwise specified herein or in the Credit Agreement, all references herein (i) to any Person shall be deemed to include such 19 Person's permitted successors and assigns, (ii) to any Applicable Law defined or referred to herein shall be deemed references to such Applicable Law or any successor Applicable Law as the same may have been or may be amended or supplemented from time to time and (iii) to any Loan Document or Contract defined or referred to herein shall be deemed references to such Loan Document or Contract (and, in the case of any instrument, any other instrument issued in substitution therefor) as the terms thereof may have been or may be amended, supplemented, waived or otherwise modified from time to time. (b) When used in this Agreement, the words "herein", "hereof" and "hereunder" and words of similar import shall refer to this Agreement as a whole and not to any provision of this Agreement, and the words "Article", "Section", "Annex", "Schedule" and "Exhibit" shall refer to Articles and Sections of, and Annexes, Schedules and Exhibits to, this Agreement unless otherwise specified. (c) Whenever the context so requires, the neuter gender includes the masculine or feminine, the masculine gender includes the feminine, and the singular number includes the plural, and vice versa. (d) Any item or list of items set forth following the word "including", "include" or "includes" is set forth only for the purpose of indicating that, regardless of whatever other items are in the category in which such item or items are "included", such item or items are in such category, and shall not be construed as indicating that the items in the category in which such item or items are "included" are limited to such items or to items similar to such items. (e) Each power of attorney in favor of the Secured Party or any other Person granted by or pursuant to this Agreement shall be deemed to be irrevocable and coupled with an interest. (f) Except as otherwise indicated, any reference herein to the "Collateral", the "Secured Obligations", the "Loan Documents", the "Collateral Documents", the "Principals" or any other collective or plural term shall be deemed a reference to each and every item included within the category described by such collective or plural term, so that (i) a reference to the "Collateral", the "Secured Obligations" or the "Principals" shall be deemed a reference to any or all of the Collateral, the Secured Obligations or the Principals, as the case may be, and (ii) a reference to the "obligations" of the Pledgor under the "Loan Documents" or the "Collateral Documents" shall be deemed a reference to each and every obligation under each and every Loan Document or Collateral Document, as the case may be, whether any such obligation is incurred under one, some or all of the Loan Documents or the Collateral Documents, as the case may be. (g) Except where the context clearly indicates a different meaning, references in this Agreement to Receivables, General Intangibles, Inventory and Machinery and Equipment means the same to the extent they constitute Collateral. (h) Except as otherwise specified therein, all terms defined in this Agreement shall have the meanings herein ascribed to them when used in the other Collateral Documents or any certificate, opinion or other document delivered pursuant hereto or thereto. 20 Section 16.03 Representations and Warranties. ------------------------------ All Representations and Warranties shall be deemed made (a) in the case of any Representation and Warranty contained in this Agreement at the time of its initial execution and delivery, at and as of the Agreement Date, (b) in the case of any Representation and Warranty contained in this Agreement at the time any Loan is made at and as of such time and (c) in the case of any particular Representation and Warranty, wherever contained, at such other time or times as such Representation and Warranty is made or deemed made in accordance with the provisions of this Agreement or the document pursuant to, under or in connection with which such Representation and Warranty is made or deemed made. Section 16.04 Captions. -------- Captions to Articles, Sections and subsections of, and Annexes, Schedules and Exhibits to, the Collateral Documents are included for convenience of reference only and shall not constitute a part of the Collateral Documents for any other purpose or in any way affect the meaning or construction of any provision of the Collateral Documents. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers all as of the Agreement Date. [PLEDGOR] By: --------------------------------- Name: Title: THE BANK OF NEW YORK, as Secured Party By: --------------------------------- Name: Title: Agreement Date: 21 Schedule 1.02 ------------- SCHEDULE OF REQUIRED ACTION Pursuant to, and without thereby limiting, its obligations under Section 1.02, the Pledgor hereby agrees that it will: (a) file UCC-1 financing statements in the form of Schedule 1.02(a); ---------------- (b) within five Business Days (or, during an Event of Default, such shorter period as the Secured Party may specify) after receipt by the Pledgor or any of its agents, deliver or caused to be delivered to the Secured Party, stamped, marked, endorsed or accompanied by such instruments of assignment as the Secured Party may specify, all instruments, chattel paper, certificated securities, letters of credit and documents evidencing or forming a part of the Collateral and not constituting Account Proceeds; (c)(i) in the case of each Securities Account or Commodity Account that is Collateral, deliver to the Secured Party a Securities Account Control Letter or Commodity Account Control Letter, as the case may be, duly executed by the securities intermediary or commodity intermediary, as the case may be, and the Pledgor; (d) in the case of any Collateral constituting Intellectual Property, cause a duly executed copy of Schedule 1.02(d)-A, -B or -C, as appropriate, with ------------------ -- -- respect thereto to be filed in the appropriate filing office; and (e) at all times mark its books and records as may be necessary or appropriate to evidence, protect and perfect the Security Interest. Schedule 1.02(a) STANDARD FORM UCC-1 FINANCING STATEMENT 1. Debtor: [Insert Pledgor's name and address] 2. Secured Party: The Bank of New York, as Secured Party, One Wall Street, New York, New York 10286 3. "Collateral" as defined in Annex A attached hereto, whether now or hereafter existing or now owned or hereafter acquired, including certain accounts, contract rights and general intangibles; certain goods, including certain machinery, fixtures and attachments, accessories, components and parts installed therein or affixed thereto, finished goods, work-in-process and raw materials; certificated and uncertificated securities and instruments; securities account and commodity accounts; and proceeds of the foregoing (including, in the case of securities and instruments, all payments and distributions on or with respect thereto, whether constituting principal, interest or dividends). Signature Lines: Debtor: [Insert Pledgor's name] Secured Party: The Bank of New York, as Secured Party ANNEX A TO UCC-1 FINANCING STATEMENT DEBTOR: SECURED PARTY: THE TERMS "RECEIVABLES", "GENERAL INTANGIBLES", "INVENTORY", "MACHINERY AND EQUIPMENT", "SECURITIES AND INSTRUMENTS COLLATERAL" "SECURITIES ACCOUNTS" AND "COMMODITY ACCOUNTS" ARE DEFINED IN THE SECURITY AGREEMENT DATED AS OF DECEMBER 16, 1997 BETWEEN DEBTOR AND SECURED PARTY, AS AMENDED FROM TIME TO TIME. COLLATERAL DESCRIPTION "Collateral" means the Debtor's interest (whatever it may be) in each of ---------- the following, in each case whether now or hereafter existing or now owned or hereafter acquired by the Debtor and whether or not the same is now contemplated, anticipated or foreseeable, or constitutes Collateral by reason of one or more than one of the following clauses, and wherever the same may be located: (a) all Receivables; (b) all General Intangibles; (c) all Inventory; (d) all Machinery and Equipment; (e) all Securities and Instruments Collateral; (f) all Securities Accounts; (g) all Commodity Accounts; (h) all books, records, ledgercards, files, correspondence, computer programs, tapes, disks and related data processing software (owned by the Debtor or in which it has an interest) that at any time evidence or contain information relating to any Collateral or are otherwise necessary or helpful in the collection thereof or realization thereupon; (i) all goods and other property, whether or not delivered, (i) the sale, lease or furnishing of which gives or purports to give rise to any Receivable, including all merchandise returned or rejected by or repossessed from customers, or (ii) securing any Receivable, including all of the Debtor's rights as an unpaid vendor or lienor, including stoppage in transit, replevin and reclamation with respect to such goods and other properties; (j) all documents of title, policies and certificates of insurance, securities, chattel paper and other documents or instruments evidencing or pertaining to any Collateral; (k) all guaranties, liens on real or personal property, leases and other agreements and property that in any way secure or relate to any Collateral, or are acquired for the purpose of securing and enforcing any item thereof; (l) all claims (including the right to sue or otherwise recover on such claims) (i) to items referred to in the definition of Collateral, (ii) under warranties relating to any Collateral, (iii) against third parties for (A) (1) loss, destruction, requisition, confiscation, condemnation, seizure, forfeiture or infringement of, damage to, (2) payments due or to become due under leases, rentals or hires of, and (3) proceeds payable under or unearned premiums with respect to policies of insurance relating to, any Collateral and (B) breach of any Contract constituting Collateral; and (m) all products and proceeds of Collateral in whatever form. Some of the Collateral may be located at: [Insert locations of Collateral] Schedule 1.02(d)-A ------------------ MEMORANDUM OF SECURITY AGREEMENT -------------------------------- PATENTS ------- Pursuant to a Security Agreement dated as of ____, 199_ (the "Security Agreement"), [name of Pledgor], whose chief executive office is located at [insert address] (the "Pledgor"), has granted to The Bank of New York, whose chief executive office is located at One Wall Street, New York, NY 10286, as Administrative Agent (the "Secured Party"), a continuing security interest in, and a continuing lien upon, all of Pledgor's right, title and interest in and to the patents and patent applications listed on the attached Schedule and all reissues, divisions, continuations, continuations-in-part, extensions and renewals thereof. Such security interest and lien can be terminated only in accordance with the terms of the Security Agreement. Dated: ____, 19__ [name of Pledgor] By: ---------------------------------- Name: Title: SCHEDULE Patent Registrations --------------------
Title Inventor(s) Patent No. Issue Date Expiration Date - - --------------------- ------------------------- ---------------------- ---------------------- ---------------------- Patent Applications ------------------- Title Inventor(s) Application Serial No. Filing Date - - --------------------------- ------------------------------- ---------------------------- ----------------------------
Schedule 1.02(d)-B ------------------ MEMORANDUM OF SECURITY AGREEMENT -------------------------------- TRADEMARKS ---------- Pursuant to a Security Agreement dated as of ____, 199_ (the "Security Agreement"), [name of Pledgor], whose chief executive office is located at [insert address] (the "Pledgor"), has granted to The Bank of New York, whose chief executive office is located at One Wall Street, New York, NY 10286, as Administrative Agent (the "Secured Party"), a continuing security interest in, and a continuing lien upon, all of Pledgor's right, title and interest in and to the trademarks and trademark applications listed on the attached Schedule, together with the goodwill connected with the use of and symbolized by each of such trademarks, and all renewals thereof. Such security interest and lien can be terminated only in accordance with the terms of the Security Agreement. Dated: ____, 19__ [name of Pledgor] By: ----------------------------------- Name: Title: SCHEDULE Trademark Registrations -----------------------
Trademark Registration No. Registration Date - - -------------------------- --------------------------------------------------- ---------------------------------- Trademark Applications ---------------------- Trademark Application Serial No. Filing Date --------- ---------------------- -----------
Schedule 1.02(d)-C ------------------ MEMORANDUM OF SECURITY AGREEMENT -------------------------------- COPYRIGHTS ---------- Pursuant to a Security Agreement dated as of _____, 199_ (the "Security Agreement"), [name of Pledgor], whose chief executive office is located at [insert address] (the "Pledgor"), has granted to The Bank of New York, whose chief executive office is located at One Wall Street, New York, NY 10286, as Administrative Agent (the "Secured Party"), a continuing security interest in, and a continuing lien upon, all of Pledgor's right, title and interest in and to the copyrights and copyright applications listed on the attached Schedule and all renewals and extensions thereof. Such security interest and lien can be terminated only in accordance with the terms of the Security Agreement. Dated: _________, 19__ [name of Pledgor] By: ---------------------------------- Name: Title: SCHEDULE Copyright Registrations ----------------------- Title Registration No. Registration Date ----- ---------------- ----------------- Copyright Applications ---------------------- Title _________________________ Filing Date ----- ----------- SCHEDULE 1.02A Voice-Tel Enterprises, Ltd. SCHEDULE OF PERMITTED LIENS Customary restrictions contained in equipment leases entered into in the ordinary course of business. Liens in the form of capital leases or purchase money security interests in various equipment of Voice-Tel Enterprises, Inc. not to exceed $2,000,000. SCHEDULE 1.02A American Teleconferencing Services, Ltd. SCHEDULE OF PERMITTED LIENS Customary restrictions contained in equipment leases entered into in the ordinary course of business. Liens in the form of capital leases or purchase money security interests in various equipment of American Teleconferencing Services, Ltd. not to exceed $0. SCHEDULE 1.02A Xpedite Systems, Inc. SCHEDULE OF PERMITTED LIENS Customary restrictions contained in equipment leases entered into in the ordinary course of business. Liens in the form of capital leases or purchase money security interests in various equipment of Xpedite Systems, Inc. not to exceed $1,765,000. Schedule 2.01(c)(v) ------------------- Voice-Tel Enterprises, Inc. Schedule of Initial Securities and Instrument Collateral None Schedule 2.01(c)(v) -------------------- American Teleconferencing Services, Inc. Schedule of Initial Securities and Instrument Collateral None Schedule 2.01(c)(v) ------------------- Premiere Technologies, Inc. Schedule of Initial Securities and Instrument Collateral Capital Securities ------------------
Jurisdiction of Number of Certificate Date of Name Incorporation Shares Number % Ownership Issue - - ---------------------------------------- --------------- --------- ----------- ------------ ------- Premiere Communications, Inc. Florida 6,000 3 100% 5/21/92 American Teleconferencing Services, Ltd. Missouri 100 2 100% 4/23/98 Voice-Tel Enterprises, Inc. Delaware 1,000 500 100% 4/30/97 Voicecom Systems, Inc. Washington 1,000 100 100% 9/30/97 Xpedite Systems, Inc. Delaware 100 500 100% 2/27/98
Indebtedness ------------ None Other Securities and Instrument Collateral ------------------------------------------ None Schedule 2.01(c)(vi) -------------------- SECURITY AGREEMENT QUESTIONNAIRE The undersigned (the "Pledgor") is entering into a Security Agreement with The Bank of New York, as Administrative Agent. In connection with the Security Agreement the Pledgor is required to answer the following questions. 1. What is the Pledgor's exact corporate name as it appears in its certificate of incorporation (or, if not a corporation, the Pledgor's complete name)? --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- 2. Has the Pledgor ever changed its name? If so, state each other name the Pledgor has had. --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- 3a. Does the Pledgor do business under any other name? If so, state each such name. --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- b. Does the Pledgor use or has the Pledgor used any trade names or trade styles? If so, list each of them. --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- c. If the Pledgor has at any time during the preceding five years done business under any name or used any trade name or trade style not listed under a. or b., list each such name or style. --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- 4. Has the Pledgor changed its identity or corporate structure in any way within the past five years? Changes in corporate structure would include incorporation of a partnership or sole proprietorship, reincorporation in a different state, mergers, consolidations and acquisitions. If any such change has taken place, indicate the nature of such change and give the names of each corporation or other entity that was incorporated, merged or consolidated with or acquired by the Pledgor in such transaction (including each name under which each such corporation or entity has done business) and the address of each place of business of each such corporation or entity immediately prior to such incorporation, merger, consolidation or acquisition and within five years prior to the date of this Questionnaire. --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- 5a. State the complete address (including the county) of the Pledgor's place of business or, if the Pledgor has more then one place of business, its chief executive office and, if different from its chief executive office, of the office where the Pledgor keeps its books and records relating to its accounts or contract rights, specifying in each case whether such location is owned or leased by the Pledgor and, if leased, specifying the name and address of the landlord. --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- b. If the Pledgor maintains any records relating to any of the Collateral with an independent computer service firm or the like specify the address (including the county) of each such Person. --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- 6. Has the Pledgor's place of business, chief executive office or office where the Pledgor keeps its books and records relating to its accounts or contract rights been located at any other address (including that of any independent computer service firm or the like) during the past four months? If so, specify each such address (including the county) and whether such location was owned or leased by the Pledgor and, if leased, specifying the name and address of the landlord. --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- 7. State the complete address (including the county) of each other place of business that the Pledgor presently has, specifying in each case whether such location is owned or leased by the Pledgor and, if leased, specifying the name and address of the landlord. --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- 8. State the complete address (including the county) of each place of business that the Pledgor has had in the past four months, other than those listed in the answers to questions 5, 6 and 7, specifying in each case whether such location was owned or leased by the Pledgor and, if leased, specifying the name and address of the landlord. --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- 9. State the complete address (including the county) of each location where the Pledgor keeps any inventory or machinery and equipment, specifying (a) in each case whether such location is owned or leased by the Pledgor and, if leased, specifying the name and address of the landlord and (b) the approximate book value of the (i) inventory and (ii) machinery and equipment maintained at each such location. --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- 10. Has any of the Pledgor's inventory or machinery and equipment been located during the past four months at any location other than the locations listed in the answers to questions 5, 6, 7, 8 and 9? If so, state the complete address (including the county) of each such location, specifying in each case whether such location was owned or leased by the Pledgor and, if leased, specifying the name and address of the landlord. --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- 11. Are any of the Pledgor's accounts receivables payable by the United States Government or any department or agency thereof? If so, please state the aggregate amount thereof and the percentage that those accounts receivables are of all of the Pledgor's accounts receivables, in each case as of a recent, specified date. --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- 12a. Please supply the following information with respect to each patent and patent application in which the Pledgor has any interest (whether as owner, licensee or otherwise): Patents -------
Nature of Interest (e.g., owner, licensee) Registered Patent No. Issue Date Country of Issue - - -------------------------- --------------------- --------------------- ------------------------ - - ------------------------------------------------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------------------------------------------------
Patent Applications -------------------
Nature of Interest (e.g., owner, licensee) Serial No. Filing Date Country of Issue - - -------------------------- --------------------- --------------------- ------------------------ - - ------------------------------------------------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------------------------------------------------
b. If the Pledgor's interest in any of the foregoing is otherwise than as owner, please describe the nature of such interest. -------------------------------------------------------------------------- -------------------------------------------------------------------------- -------------------------------------------------------------------------- 13a. Please supply the following information with respect to each registered trademark and trademark application in which the Pledgor has any interest (whether as owner, licensee or otherwise): Registered Trademarks ---------------------
Nature of Interest (e.g., owner, Registered Registration Int'l Services Goods or Date Country of licensee) Trademark No. Class Covered Covered Registered Registration - - --------------- ------------ --------------- ------------- -------------- -------------- ------------ - - --------------------------------------------------------------------------------------------------------------------------- - - --------------------------------------------------------------------------------------------------------------------------- - - ---------------------------------------------------------------------------------------------------------------------------
Trademark Applications ----------------------
Trademark Nature of Application Interest (e.g., relates to Goods or Services Country of owner, licensee) following Trademark Serial No. Int'l Class Covered Covered Application - - ----------------- ------------------- ---------- ------------------- ----------------- ----------- - - --------------------------------------------------------------------------------------------------------------------------- - - --------------------------------------------------------------------------------------------------------------------------- - - ---------------------------------------------------------------------------------------------------------------------------
b. If the Pledgor's interest in any of the foregoing is otherwise than as owner, please describe the nature of such interest. -------------------------------------------------------------------------- -------------------------------------------------------------------------- -------------------------------------------------------------------------- 14a. Please supply the following information with respect to each copyright and copyright application in which the Pledgor has any interest (whether as owner, licensee or otherwise): Copyrights ----------
Nature of Interest (e.g., owner, Date of Country of licensee) Copyright Copyright No. Property Covered Copyright Docket No. Registration - - ------------- --------- ------------- ---------------- --------- ---------- ------------ - - --------------------------------------------------------------------------------------------------------------------------- - - --------------------------------------------------------------------------------------------------------------------------- - - ---------------------------------------------------------------------------------------------------------------------------
Copyright Applications ----------------------
Copyright application Nature of Interest (e.g., relates to following owner, licensee) Copyright Property Covered Country of Registration - - -------------------------- --------------------- ---------------- ------------------------ - - ------------------------------------------------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------------------------------------------------
b. If the Pledgor's interest in any of the foregoing is otherwise than as owner, please describe the nature of such interest. -------------------------------------------------------------------------- -------------------------------------------------------------------------- -------------------------------------------------------------------------- 15. State the following information, in each case as of the Agreement Date, with respect to each security that is to constitute Collateral on the Agreement Date.
Number of Shares or Percent of Certificated or Class or Principal Outstanding Issuer Debt or Equity Uncertificated Series Amount Owned Class or Series - - ------------ ---------------- ----------------- ---------- -------------- -----------------
16. State the following information, in each case as of the Agreement Date, with respect to each instrument that is to constitute Collateral on the Agreement Date.
Percent of Certificated or Class or Principal Amount Outstanding Class Maker or Drawer Uncertificated Series Owned or Series - - ----------------- ---------------- ---------- ------------------ ------------------
17. State the following information, in each case as of the Agreement Date, with respect to each securities account that is to constitute Collateral on the Agreement Date.
Securities Intermediary's Jurisdiction (Determined Under Uniform Commercial Code Account No. Section 8-110(e)) ----------- -----------------------------------------
18. State the following information, in each case as of the Agreement Date, with respect to each security entitlement that is to constitute Collateral on the Agreement Date.
Securities Intermediary Financial Asset(s) ----------------------- ------------------ No. of Shares % on Agreement Date Class or or Principal of Outstanding Class Issuer Series Amount or Series --------- ---------- --------------- ---------------------
1(a) [Insert here name of applicable Securities Intermediary] [Security Account(s): No. _______ No. _______] (b) [Insert here Securities Intermediary's Jurisdiction (Determined Under Uniform Commercial Code Section 8-110(e))] 2(a) [Insert here name of applicable Securities Intermediary] [Security Account(s): No _______ No _______] (b) [Insert here Securities Intermediary's Jurisdiction (Determined Under Uniform Commercial Code Section 8-110(e))] 19. State the following information, in each case as of the Agreement Date, with respect to each commodity account that is to constitute Collateral on the Agreement Date.
Commodity Intermediary's Jurisdiction (Determined Account No. Under Uniform Commercial Code Section 9-103(e)) ------------ -------------------------------------------------
20. State the following information, in each case as of the Agreement Date, with respect to each commodity contract that is to constitute collateral on the Agreement Date. Commodity Intermediary's Jurisdiction (Determined Under Uniform Commercial Code Section 9-103(e)) If Commodity Contract Is Maintained With Such Commodity Description of Commodity Contract Intermediary - - --------------------------------- ----------------------------------------------------
21. Does the Pledgor have any existing lockbox arrangements? If so, please identify each bank or other entity with which any such arrangement is maintained. ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- The Pledgor hereby certifies that its answers to the foregoing questions are complete and correct and confirms that such answers constitute representations and warranties under the Security Agreement. Date: _______________, 199_ [Pledgor]: By ------------------------------ Name: Title: Schedule 5.01(a)-1 ------------------ Securities Account Control Agreement _______________, 19__ [Insert here name and address of Securities Intermediary] Attention: Re: Securities Accounts ------------------- You ("Securities Intermediary") hereby represent and warrant to, and agree with, [insert here name of Secured Party] (the "Secured Party") as follows: 1. [Insert here name of pledgor] (the "Pledgor") maintains the following securities accounts with Securities Intermediary at the specified offices of the Securities Intermediary: Account Number Office --------------- ------ 2. Until the Secured Party shall have notified the Securities Intermediary in writing to the contrary, the Securities Intermediary: (a) will comply, without further consent by the Pledgor, with entitlement orders originated by the Secured Party relating to any one or more of the present or future security entitlements carried in any of the securities accounts listed in paragraph 1 above or in any securities account that the Pledgor may in the future maintain with the Securities Intermediary, whether at its main office or any of its branch offices; (b) will make all payments due to the Pledgor representing dividends, interest or other distributions on, or proceeds of the sale or other disposition of, any securities or other financial assets that are now or hereafter the subject of any of present or future security entitlements carried in any of the Pledgor's present or future securities accounts with the Securities Intermediary, directly to the Secured Party at its address set forth below or at such other address as the Pledgor may hereafter specify, without any reduction or deduction for any set-off, or counter claim; (c) will not execute and deliver, or otherwise become bound by, any agreement (a "control agreement") under which the Securities Intermediary agrees with any party other than the Pledgor or the Secured Party to comply with entitlement orders originated by such party relating to any of the security accounts or security entitlements that are the subject of this Securities Account Control Agreement; (d) will not grant any security interest in any financial asset that is the subject of any security entitlement that is the subject of this Securities Account Control Agreement; and (e) hereby subordinates any security interest it may now or hereafter have in any securities account, security entitlement, or financial asset that is the subject of a security entitlement, that is the subject of this Securities Account Control Agreement to the security interest therein, if any, of the Secured Party. 3. Except for those listed on Annex A hereto, as of the date hereof, there ------- are no (i) control agreements outstanding or (ii) any security interests in any of the securities accounts, securities entitlements, or financial assets that are the subject of any security entitlement, that are the subjects of this Securities Account Control Agreement. 4. The copy of the securities account agreement between the Pledgor and the Securities Intermediary relating to the securities accounts listed in paragraph 1 above delivered to the Secured Party is, as of the date hereof, accurate and complete. 5. The rights and duties of the Secured Party, the Securities Intermediary and the Pledgor under this Securities Account Control Agreement shall be governed by the law of the State of New York. 6. This Securities Account Control Agreement may be signed in any number of counterparts each of which shall be an original, with the same effect as if the signatures thereto were upon the same instrument. 7. All of the provisions of this Securities Account Control Agreement shall be binding upon and inure to the benefit of parties hereto and their respective successors and assigns. The Securities Intermediary hereby acknowledges that it has been informed that (1) the securities accounts and the security entitlements carried therein that are the subject of this Securities Account Control Agreement are the subject of a security interest granted by the Pledgor to the Secured Party and (2) the Pledgor has agreed with the Secured Party that such assets shall be subject to no other security interests. Very truly yours, [Insert here name of Secured Party] [Insert here address of Secured Party to which payments are to be made] Executed and Agreed to: [Insert here name of the Securities Intermediary] By:_________________________________ (Authorized Signature) Consented to: [Insert here name of the Pledgor] By:__________________________________ (Authorized Signature) Schedule 5.01(a)-2 ------------------ Commodity Account Control Agreement _______________, 19__ [Insert here name and address of Commodity Intermediary] Attention: Re: Commodity Accounts ------------------ You ("Commodity Intermediary") hereby represent and warrant to, and agree with, [insert here name of Secured Party] (the "Secured Party") as follows: 1. [Insert here name of pledgor] (the "Pledgor") maintains the following commodity accounts with Commodity Intermediary at the specified offices of the Commodity Intermediary: Account Number Office --------------- ------ 2. Until the Secured Party shall have notified the Commodity Intermediary in writing to the contrary, the Commodity Intermediary: (a) will apply as directed by the Secured Party, without further consent by the Pledgor, any value distributed on account of any one or more of the present or future commodity contracts carried in any of the commodity accounts listed in paragraph 1 above or in any commodity account that the Pledgor may in the future maintain with the Commodity Intermediary, whether at its main office or any of its branch offices; (b) will make all payments due to the Pledgor of any value distributed on account of any commodity contracts carried in any of the Pledgor's present or future commodity accounts with the Commodity Intermediary, directly to the Secured Party at its address set forth below or at such other address as the Pledgor may hereafter specify, without any reduction or deduction for any set-off, or counter claim; (c) will not execute and deliver, or otherwise become bound by, any agreement (a "control agreement") under which the Commodity Intermediary agrees with any party other than the Pledgor or the Secured Party to apply as directed by such party any value distributed on account of any of the commodity accounts or commodity contracts that are the subject of this Commodity Account Control Agreement; (d) will not grant any security interest in any commodity account or commodity contract that is the subject of this Commodity Account Control Agreement; and (e) hereby subordinates any security interest it may now or hereafter have in any commodity account or commodity contract that is the subject of this Commodity Account Control Agreement to the security interest therein, if any, of the Secured Party. 3. Except for those listed on Annex A hereto, as of the date hereof, there ------- are no (i) control agreements outstanding or (ii) any security interests in any of the commodity accounts or commodity contracts that are the subjects of this Commodity Account Control Agreement. 4. The copy of the commodity account agreement between the Pledgor and the Commodity Intermediary relating to the commodity accounts listed in paragraph 1 above delivered to the Secured Party is, as of the date hereof, accurate and complete. 5. The rights and duties of the Secured Party, the Commodity Intermediary and the Pledgor under this Commodity Account Control Agreement shall be governed by the law of the State of New York. 6. This Commodity Account Control Agreement may be signed in any number of counterparts each of which shall be an original, with the same effect as if the signatures thereto were upon the same instrument. 7. All of the provisions of this Commodity Account Control Agreement shall be binding upon and inure to the benefit of parties hereto and their respective successors and assigns. The Commodity Intermediary hereby acknowledges that it has been informed that (1) the commodity accounts and the contracts carried therein that are the subject of this Commodity Account Control Agreement are the subject of a security interest granted by the Pledgor to the Secured Party and (2) the Pledgor has agreed with the Secured Party that such assets shall be subject to no other security interests. Very truly yours, [Insert here name of Secured Party] [Insert here address of Secured Party to which payments are to be made] Executed and Agreed to: [Insert here name of the Commodity Intermediary] By:_________________________________ (Authorized Signature) Consented to: [Insert here name of the Pledgor] By:__________________________________ (Authorized Signature) Execution Copy EX-11.1 9 COMPUTATION OF PER SHARE EARNINGS Exhibit 11.1 PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES STATEMENT RE COMPUTATION OF NET INCOME (LOSS) PER SHARE FOR THE YEAR ENDED DECEMBER 31, 1998, 1997 AND 1996 (IN THOUSANDS)
For the Years Ended December 31 ----------------------------------------------------------------------------------- 1998 1997 1996 ---------------------------- ---------------------------- ------------------------- Weighted Weighted Net Weighted Net Average Net Loss Average Income Net Average Income Net Loss Shares Per Share Net Loss Shares Per Share Income Shares Per Share -------- -------- --------- -------- -------- --------- ------ -------- --------- (in thousands, except per share data) Net income (loss)....... $(74,206) -- $ -- $(25,375) -- $ -- $3,458 -- $ -- Less: Preferred stock dividends.............. -- -- -- -- -- -- 29 -- -- -------- ------ ------ -------- ------ ------ ------ ------ ----- Basic net income (loss)................. $(74,206) 44,325 $(1.67) $(25,375) 32,443 $(0.78) $3,429 27,670 $0.12 Dilutive Securities Stock options.......... -- -- -- -- -- -- -- 3,618 0.01 Series A convertible redeemable 8% cumulative preferred stock.................. -- -- -- -- -- -- -- -- -- -------- ------ ------ -------- ------ ------ ------ ------ ----- Diluted net income (loss)................. $(74,206) 44,325 $(1.67) $(25,375) 32,443 $(0.78) $3,429 31,288 $0.11 ======== ====== ====== ======== ====== ====== ====== ====== =====
1 EX-21.1 10 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21.1 SUBSIDIARIES LISTING Existing Subsidiaries of Premiere Technologies, Inc. ("PTEK")
Jurisdiction of % Ownership by Premiere or Subsidiary Organization Another Subsidiary Consolidated Significant - - -------------------------------------------------------------------------------------------------------------- Premiere Florida, US 100% owned by PTEK Yes Yes Communications, Inc. - - -------------------------------------------------------------------------------------------------------------- Xpedite Systems, Inc. Delaware, US 100% owned by PTEK Yes Yes - - -------------------------------------------------------------------------------------------------------------- Xpedite Systems Delaware, US 100% owned by Xpedite Yes Yes Worldwide, Inc. Systems, Inc. - - -------------------------------------------------------------------------------------------------------------- Phonetech, Inc. Delaware 100% owned by Xpedite Yes No Systems, Inc. - - -------------------------------------------------------------------------------------------------------------- USComwave New York 100% owned by Xpedite Yes No Communications, Inc. Systems, Inc. - - -------------------------------------------------------------------------------------------------------------- Xpedite Systems United Kingdom 100% owned by Xpedite Yes Yes Holdings (UK) Limited Systems Worldwide, Inc. - - -------------------------------------------------------------------------------------------------------------- Xpedite Systems Limited United Kingdom 100% owned by Xpedite Yes Yes Systems Holdings (UK) Limited - - -------------------------------------------------------------------------------------------------------------- Voice-Tel Enterprises, Delaware, US 100% owned by PTEK Yes Yes Inc. - - -------------------------------------------------------------------------------------------------------------- VoiceCom Systems, Inc. Washington, US 100% owned by PTEK Yes Yes - - -------------------------------------------------------------------------------------------------------------- American Missouri, US 100% owned by PTEK Yes Yes Teleconferencing Services, Ltd. - - -------------------------------------------------------------------------------------------------------------- Xpedite Systems Canada, Canada, New Brunswick 100% owned by Xpedite Yes No Inc. Systems Worldwide, Inc. - - -------------------------------------------------------------------------------------------------------------- Vitel Scandinavia A/S Denmark 100% owned by Xpedite Yes No Systems Worldwide, Inc. - - -------------------------------------------------------------------------------------------------------------- PT Transtelindo Tritamo Indonesia 80% owned by Xpedite Yes No Systems Worldwide, Inc. - - -------------------------------------------------------------------------------------------------------------- Xpedite Holdings GmbH Germany 100% owned by Xpedite Yes No Systems Worldwide, Inc. - - -------------------------------------------------------------------------------------------------------------- Xpedite Systems Switzerland 99.9% owned by Xpedite Yes No Switzerland AG Systems Worldwide, Inc. - - -------------------------------------------------------------------------------------------------------------- Xpedite International Australia 72% owned by Xpedite Yes No Australia Pty Limited Systems Worldwide, Inc. 28% owned by Comwave AG - - -------------------------------------------------------------------------------------------------------------- Xpedite Systems Korea South Korea 100% owned by Xpedite Yes No Ltd. Systems Worldwide, Inc. - - --------------------------------------------------------------------------------------------------------------
Jurisdiction of % Ownership by Premiere or Subsidiary Organization Another Subsidiary Consolidated Significant - - -------------------------------------------------------------------------------------------------------------- Xpedite International New Zealand 100% owned by Xpedite Yes No New Zealand Pty Limited Systems Worldwide, Inc. - - -------------------------------------------------------------------------------------------------------------- Xpedite Systems Japan, Japan 100% owned by Xpedite Yes No Inc. Systems Worldwide, Inc. - - -------------------------------------------------------------------------------------------------------------- Xpedite Taiwan Ltd. Taiwan 99.9% owned by Xpedite Yes No Systems Worldwide, Inc. - - -------------------------------------------------------------------------------------------------------------- Comvave GmbH Germany 100% owned by Comwave AG Yes No but no shares outstanding - - -------------------------------------------------------------------------------------------------------------- Xpedite Systems SA France 18.8% owned by Xpedite No No Systems Worldwide, Inc. - - -------------------------------------------------------------------------------------------------------------- Comwave UK Ltd. United Kingdom 100% owned by Comwave AG Yes No - - -------------------------------------------------------------------------------------------------------------- Vitel Limited United Kingdom 100% owned by Xpedite Yes No Systems Holdings (UK) Limited - - -------------------------------------------------------------------------------------------------------------- Xpedite International Hong Kong 99.9% owned by Vitel Yes No (HK) Ltd. Limited* - - -------------------------------------------------------------------------------------------------------------- Xpedite Malaysia Sdn Bhd Malaysia 99.9% owned by Xpedite Yes No International (HK) Ltd.* - - -------------------------------------------------------------------------------------------------------------- Xpedite Global Singapore 50% owned by Xpedite No No Communications Pte. International (HK) Ltd. - - -------------------------------------------------------------------------------------------------------------- Xpedite Systems GmbH Germany 41% owned by APA Expert Yes No Beteiligungsgesellschaft mbH; 59% owned by Xpedite Systems Worldwide, Inc. - - -------------------------------------------------------------------------------------------------------------- Transmit International United Kingdom 100% owned by Xpedite Yes No Limited Systems Worldwide, Inc. - - -------------------------------------------------------------------------------------------------------------- Connaught Commercial United Kingdom 100% owned by Xpedite Yes No Services Limited Systems Worldwide, Inc. - - -------------------------------------------------------------------------------------------------------------- Voice-Tel Canada Limited Canada 100% owned by PTEK Yes No - - -------------------------------------------------------------------------------------------------------------- Voice-Tel Pty Ltd. Australia, New 100% owned by Voice-Tel Yes No Zealand Enterprises, Inc. - - --------------------------------------------------------------------------------------------------------------
-2-
Jurisdiction of % Ownership by Premiere or Subsidiary Organization Another Subsidiary Consolidated Significant - - -------------------------------------------------------------------------------------------------------------- Voice Partners Company Ohio, US General Partnership Yes No Premiere Communications, Inc. and Voice-Tel Enterprises, Inc., General Partners - - ------------------------------------------------------------------------------------------------------------ Voice-Tel Network Delaware, US PTEK and Voice-Tel Yes No Limited Partnership Enterprises, Inc. Limited Partners - - ------------------------------------------------------------------------------------------------------------ Orchestrate.com, Inc. Georgia, US 100% owned by PTEK Yes No - - ------------------------------------------------------------------------------------------------------------ PCI Acquisition Corp. Georgia, US 100% owned by PTEK No No - - ------------------------------------------------------------------------------------------------------------ EBIS Communications, Georgia, US 100% owned by PTEK No No Inc. - - ------------------------------------------------------------------------------------------------------------ Charp-Tel Enterprises, Rhode Island, US 100% owned by PTEK No No Inc. - - ------------------------------------------------------------------------------------------------------------
* Shares not owned by local directors for statutory reasons. -3- EX-23.1 11 CONSENT OF ARTHUR ANDERSEN Exhibit 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our report dated March 15, 1999, included in this Annual Report on Form 10-K, into Premiere Technologies, Inc.'s previously filed Registration Statements (Files Nos. 333-11281, 333-17593, 333-29787, 333-36557, 333-39693, and 333-52357). It should be noted that we have not audited any financial statements of the Company subsequent to December 31, 1998 or performed any audit procedures subsequent to the date of our report. /s/ Arthur Andersen Atlanta, Georgia March 31, 1999 EX-27.1 12 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the financial statements of Premiere Technologies, Inc. for the year ended December 31, 1998 and is qualified in its entirety by reference to such financial statements. 1,000 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 19,226 20,769 65,097 9,437 0 127,183 245,009 110,309 802,751 218,363 172,500 0 0 469 400,425 802,009 444,818 444,818 135,036 135,036 384,364 0 20,102 (88,960) (14,754) (74,206) 0 0 0 (74,206) (1.67) (1.67)
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