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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-K/A

(Amendment No.1)



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FOR ANNUAL AND TRANSITIONAL REPORTS

PURSUANT TO SECTIONS 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934



|x | Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ------------------------------------------------------------------------------------



for the fiscal year ended December 31, 2002.



Commission file number: 0-27778



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PTEK HOLDINGS, INC.

(Exact name of registrant as specified in its charter)



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|Georgia                                                        |  | 59-3074176                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



3399 Peachtree
Road, N.E., The Lenox Building, Suite 700, Atlanta, Georgia 30326

(address of principal executive office)



(Registrants telephone number, including area code): (404) 262-8400



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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)



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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 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. ̈



Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12-b-2)    Yes  x    No ̈



The aggregate market value
of voting and non-voting stock held by non-affiliates of the registrant, based upon the closing sale price of common stock on June 28, 2002 as reported by The Nasdaq Stock Markets National Market, was approximately $313,643,543. As of March
25, 2002 there were 53,458,252 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:  None.



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EXPLANATORY NOTE



Pursuant to Rule 12b-15 of the Securities Exchange Act of 1934, as amended, PTEK Holdings, Inc. hereby amends its Annual
Report on Form 10-K for the year ended December 31, 2002 to respond to certain comments of the Securities and Exchange Commission (SEC) in connection with its review of our Registration Statement on Form S-3 filed on September 24, 2003.
None of the SECs comments affect previously reported net income or earnings per share.



For convenience and ease of reference we are filing this Annual Report in its entirety. Unless otherwise stated, all information contained in this amendment is as of March 31, 2003, the filing date of our Annual
Report on Form 10-K for the year ended December 31, 2002. Accordingly, this Amendment No. 1 to the Annual Report on Form 10-K/A should be read in conjunction with our subsequent filings with the SEC.



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INDEX



|              |  |                                                                                                |  | Page
|------------- |  | ---------------------------------------------------------------------------------------------- |  | ----
|Part I        |  |                                                                                                |  |     
|Item 1.       |  | Business                                                                                       |  | 1   
|Item 2.       |  | Properties                                                                                     |  | 8   
|Item 3.       |  | Legal Proceedings                                                                              |  | 8   
|Item 4.       |  | Submission of Matters to a Vote of Security Holders                                            |  | 11  
|              |  |                                                                                               
|Part II       |  |                                                                                                |  |     
|Item 5.       |  | Market for Registrants Common Equity and Related Stockholder Matters                          |  | 11  
|Item 6.       |  | Selected Financial Data                                                                        |  | 11  
|Item 7.       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations          |  | 13  
|Item 7A.      |  | Quantitative and Qualitative Disclosures About Market Risk                                     |  | 40  
|Item 8.       |  | Financial Statements and Supplementary Data                                                    |  | 41  
|Item 9.       |  | Changes and Disagreements with Accountants on Accounting and Financial Disclosure              |  | 84  
|Item 9A.      |  | Controls and Procedures                                                                        |  | 84  
|              |  |                                                                                               
|Part III      |  |                                                                                                |  |     
|Item 10.      |  | Directors and Executive Officers of the Registrant                                             |  | 85  
|Item 11.      |  | Executive Compensation                                                                         |  | 87  
|Item 12.      |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |  | 98  
|Item 13.      |  | Certain Relationships and Related Transactions                                                 |  | 101 
|              |  |                                                                                               
|Part IV       |  |                                                                                                |  |     
|Item 15.      |  | Exhibits, Financial Statement Schedules and Reports on Form 8-K                                |  | 104 
|              | 
|Signatures    |  | 114                                                                                           
|              | 
|Exhibit Index |  | 115                                                                                           



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PART I



Item 1. Business



Overview



PTEK Holdings, Inc., a Georgia corporation (PTEK or the
Company), is a global provider of outsourced communications services to large- and medium-sized enterprise customers. We have two business units, Premiere Conferencing and Xpedite. Premiere Conferencing offers a variety of audio
conferencing and Web-based collaboration services, and Xpedite offers enhanced electronic messaging services through various modalities, including fax, e-mail, wireless and voice. The Company has a worldwide presence and an established customer base
of over 26,000 corporate accounts spanning virtually every major industry, including almost 70% of the Fortune 500.



A large number of businesses rely on audio and Web conferencing or e-mail, fax, wireless and voice messaging to manage a wide variety of important
business communications. The rapid proliferation of these technologies and the growing complexity of service requirements have motivated companies to outsource these managed group communications requirements. In addition, the current geopolitical
climate and corporate cost-cutting trends have encouraged companies to replace business travel with more convenient, reliable and economical communications such as conferencing and messaging.



For the year ended December 31, 2002, segment revenues for Premiere
Conferencing and Xpedite were 40.6% and 59.5%, respectively, before eliminations of consolidated revenues. Geographic revenues for North America, Asia Pacific and Europe were 67.0%, 16.4% and 16.6%, respectively, of consolidated revenues for 2002.



To better serve PTEKs global corporate customer base,
over the last few years the Company has funded new technology development in each of its business units to help position them in larger market categories. Premiere Conferencing has expanded into automated and Web conferencing services and Xpedite
has developed a suite of e-mail, wireless and voice-based messaging services.



On March 26, 2002, the Company sold substantially all the assets of its Voicecom business unit in exchange for cash and the assumption of certain liabilities. As a result, the Company has exited in all material
respects the IVR, network based voice messaging and unified personal communications businesses. The transaction was accounted for as discontinued operations in the first quarter of 2002. See Managements Discussion and Analysis of
Financial Condition and Results of Operations  Discontinued Operations, and Note 9 to the Consolidated Financial Statements.



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PTEK was incorporated in Florida in 1991 and reincorporated in Georgia in 1995. The corporate
headquarters for PTEK are located at 3399 Peachtree Road, NE, The Lenox Building, Suite 700, Atlanta, GA 30326, and the telephone number is (404) 262- 8400.



Industry Background



Nearly everywhere in the world, the bulk of business communication is done through telephone and Web-based conferencing, e-mail, fax and voice mail
messaging. This explosion of communications in various forms has forced more and more companies to outsource their managed group communications needs.



The conferencing and Web-based collaboration market is projected to reach $4.3 billion by 2006 (Source: Wainhouse Research). The multimedia messaging
segment, which traditionally combines outsourced e-mail, voice and fax, is projected to reach $2.7 billion by 2006 (Source: Davidson Consulting). PTEK provides market leading solutions in both of these categories.



Today, PTEKs services, combined with its global infrastructure, are the
primary conduits for literally billions of business communications each year.



Service Offerings



PTEKs business
communications services solutions are provided through its two business units -- Premiere Conferencing and Xpedite.



Premiere Conferencing offers a full suite of audio conferencing and Web-based collaborated services for all forms of group communications
activities. Customers use Premiere Conferencing for a wide range of communications from very large events such as investor relations calls, press conferences and training seminars with hundreds or thousands of participants, to smaller four-to-six
person daily/weekly meetings. Premiere Conferencing provides group communications services for leading companies in virtually every major industry. Premiere Conferencing hosted approximately three million calls comprising nearly one billion minutes
in 2002.



Through its own proprietary software technology,
Premiere Conferencing offers ReadyConference®, its automated service that does not require
hands-on involvement from an operator. These automated services, which are easily coupled with Premiere Conferencings Web conferencing products, allow users to begin and conduct their conference calls without the assistance of an operator, or
the need of a reservation, via a dedicated dial-in number and passcode available for use anytime. ReadyConference can be used for a variety of group communications, including any meeting requiring instant access by a number of participants.



Premiere Conferencing has a complete product line of
operator-assisted conferences that can be easily integrated with Premiere Conferencings Web products. Premiere Conferencings PremiereCall services include assistance from an operator or operators to introduce the speakers and topics,
give participants instructions, and monitor all facets of a conference. In addition, complete event management services, which include a dedicated team and professional announcer to work with any customization requests, are available. Typical
PremiereCall applications include sales meetings, investor relations calls, press conferences, customer seminars, product rollouts, and continuing medical education, continuing legal education, and branded customer seminars. Premiere
Conferencings semiautomated operator-assisted service, PremiereCall AuditoriumSM, experienced strong growth in
2002, as more customers leveraged their ability to start a larger-scale conference immediately, while still utilizing the resource of a dedicated operator during the entire call. Premiere Conferencings client services team understands the
importance of professional, secure communications and works closely with its customers to ensure a successful conference.



Premiere Conferencing also offers Web conferencing services, VisionCast®and ReadyCast®, that efficiently combine the visual power of the Internet with its audio conferencing capabilities to provide real-time, multimedia presentation solutions. VisionCast gives customers the
interactivity and collaborative nature of an in-person meeting while maintaining the cost and time savings of a traditional conference call. Customers use VisionCast to conduct distance learning, training, seminars, company meetings, focus groups
and media conferences. VisionCast also includes features such as chat, Web tours, polling, whiteboarding functions, record and playback capabilities, roll call and live demo options. ReadyCast combines similar data collaboration capabilities with
the cost efficiency and convenience of Premiere Conferencings ReadyConference automated conferencing service. As part of its Web-based services, Premiere Conferencing also offers SoundCast®, an audio streaming technology that provides live Internet streaming to simulcast a live conference call or recorded presentation
over the Web.



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Premiere Conferencing services are available globally through its network of operations centers and
international toll free numbers. Premiere Conferencing has bridging and sales infrastructure in the United States, Canada, Australia, New Zealand, Hong Kong, Singapore, Japan, France, Germany, Ireland and the United Kingdom.



Xpedite offers a comprehensive suite of business services that
enable actionable two-way communications which allow companies to better acquire and retain customers as well as automate their core business processes. Xpedite provides tailored solutions to customers to help them manage the electronic delivery of
critical time-sensitive information, such as inventory availability reports, updated mortgage rates and equity research reports/updates. In addition, the Xpedite solution set enables two-way communications for order and reservation confirmations,
bank account statements and invoice and collection notices. By automating key business processes, Xpedite can also help global enterprise customers better manage their electronic order fulfillment and account payment settlement. Xpedite provides
services to almost half of the global Fortune 500 companies across nearly every business sector, including financial services, professional associations, travel, hospitality, publishing, technology and manufacturing. Xpedite processed more than two
billion messages in 2002 through its proprietary communications platform.



In 2002, Xpedite added several significant service enhancements to messageREACH®, its e-mail service that provides control, tracking, security, personalization and automated administration for high volume e-mail and e-commerce applications. These enhancements include improved HTML message support,
transactional message support for applications such as trade and account balance confirmations, billing and invoicing, as well as campaign management capabilities for large scale e-marketing applications. Among the advanced features built into the
service are support for the distribution and collection of forms, multiple layers of encryption and levels of password protection, anti-spam, opt-out protection, automated personalization of messages with text and graphical inserts,
opt-in list building, viral marketing and the hosting of customer databases for campaign management.



messageREACH customers can access a proprietary software tool, intelliSENDSMWizard, to help with the creation of graphically rich HTML documents for e-mail, and for the insertion of trackable hyperlinks to documents or Web sites. The
proprietary messageREACH delivery engine and infrastructure operate solely for the support of messageREACH customers and were custom designed by Xpedites technical team, incorporating leading Internet technology. Xpedite also provides Short
Message Services (SMS) for wireless users which allows text messages to be delivered to GSM phones using existing Xpedite access methods.



Xpedite also provides voiceREACHSM, an automated service that simultaneously delivers large volumes of prerecorded voice messages to any size list of phone numbers, voice mailboxes or other answering devices. Typical users of voiceREACH services include associations,
political organizations, securities firms, trade show operators and collections companies.



Xpedite services support multiple protocols and can be accessed through a variety of methods including ftp, TCP/IP, PC-Xpedite software, or Simple Mail Transfer Protocol (SMTP). Xpedite services are available
throughout the world with local sales and customer support available in 17 countries throughout Europe, Asia, Australia and North America.



Customer Base



PTEK customers represent nearly every major industry, serving almost 70% of the Fortune 500. Millions of business people worldwide depend on PTEK services
everyday.



Premiere Conferencing has approximately 6,500
domestic and international corporate accounts, supporting approximately 71,000 active conferencing hosts. The business unit has successfully penetrated key accounts in various industries including technology, healthcare, investor relations,
financial services, public relations and market research.



Premiere Conferencing has historically relied on sales through a particular customer, IBM, for a significant portion of its revenues. Sales to that customer accounted for approximately 12% of consolidated revenues from continuing operations
(29% of Premiere Conferencings revenues) in 2002, 10% of consolidated revenues from



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continuing operations (29% of Premiere Conferencings revenues) in 2001, and 5% of consolidated revenues from continuing operations (22% of Premiere
Conferencings revenues) in 2000. The initial term of the IBM agreement ends December 31, 2004. Thereafter, it will automatically renew for additional one-month periods unless IBM provides 30 days notice of non-renewal prior to the
expiration of the initial term. During the initial term, neither party can terminate the agreement without cause. IBM may terminate the agreement without cause upon 30 days notice during any renewal term. The agreement does not contain any
revenue commitments, termination charges or use requirements. Premiere Conferencings relationship with IBM may not continue at historical levels, and there is no long-term price protection for services provided to IBM.



Xpedite has more than 19,500 corporate accounts, representing over 175,000
users. This business unit has successfully targeted industries such as securities, banking, mortgage, publishing, healthcare, associations, investor relations, public relations, travel and hospitality.



While the Companys business is generally not seasonal, it has
experienced and can expect to continue to experience lower levels of sales and usage during periods which have reduced numbers of working days. For example, the Companys operating results have decreased around the summer months (particularly
in our international operations), as well as during Thanksgiving, December and New Year holidays. The Company expects that its revenues during these periods will not grow at the same rates as compared with other periods of the year because of
decreased use of its services by business customers.



The
Company typically does not enter into long-term contracts with its customers, with most customer agreements having terms of one to three years. Customers may generally terminate without penalty, unless their agreement contains an annual minimum
revenue commitment that would require payment by the customer of any unused minimum amount upon termination.



Sales and Marketing



Each of PTEKs business units markets its services through direct sales employing a regional reporting structure and a centrally managed national and global accounts program. The Companys sales force targets large and mid-size
enterprises. The centrally managed national and global accounts program focuses on multi-location businesses that are better served by dedicated representatives with responsibility across different geographic regions. The direct sales force is
organized by services and by industry on a global scale. The company employs nearly 550 sales professionals around the world.



As a service organization, PTEKs customer service teams play a major role in managing customer relationships, as well as selling additional
value-added services to existing accounts. PTEK employs more than 750 customer service professionals deployed in local markets.



Suppliers



The Company purchases telecommunications services and equipment for use in its operations from a variety of suppliers. Some of the Companys
telecommunications supply agreements contain commitments that require that the Company purchase a minimum amount of services through 2006. These costs are approximately $13.7 million, $9.5 million, $1.4 million and $0.5 million in 2003 through 2006,
respectively. The Company purchases telecommunications and other network services from MCI WorldCom, Inc. (MCI) under service agreements which do not contain minimum commitments. The Companys ability to maintain network connections
is dependent upon access to transmission facilities provided by MCI or an alternative provider. See also Managements Discussion and Analysis of Financial Condition and Results of Operations  Commitments and Contingencies, and
Note 20 to the Consolidated Financial Statements.



Platforms and
Network Infrastructure



The Company, through its two
business units, operates global Internet and telecom-based networks that allow customers to access the Companys various services through the Internet and through local and/or 800 telephone numbers.



Premiere Conferencing services are provided from full-service
operations centers in Colorado Springs, Colorado; Lenexa, Kansas; Sydney, Australia; and Clonakilty, Ireland. Automated bridging nodes are maintained in



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the United States, Canada, Australia, New Zealand, Hong Kong, Singapore, Japan, France, Germany Ireland, and the United Kingdom. Complex, operator-assisted
calls are supported on various commercially available bridging platforms. Internally developed conference bridges are used to support automated conferencing services. Customers access these conferencing platform through direct inward dialing, 800
numbers, the Internet and virtual network access.



Xpedite services are provided through its enhanced messaging network with more than 35,000 messaging ports that uses servers to perform all primary processing and switching functions. Xpedites proprietary platform
supports multiple input methods including, but not limited to, priority PC-based software, e-mail gateways and high speed IP based interconnects. Outgoing communications are delivered through line group controllers, which are deployed in a
decentralized fashion to exploit local delivery costs. The remote line group controllers are connected to servers over a wide area network via either private lines or Xpedites global TCP/IP based network. Mission critical information is
transported from one location domain to another using MCP to MCP protocol. The current domains include Australia, Japan, Korea, Switzerland, the United Kingdom, the United States, Germany and France. Remote nodes on the network are located in
Belgium, Canada, Denmark, Italy, Malaysia, the Netherlands, New Zealand, Taiwan, Hong Kong and Singapore.



Research and Development



PTEKs ability to design, develop, test and support new software technology for product enhancements in a timely manner is an important ingredient to
its future success. New or next generation versions of the Companys services recently released include Auditorium, SecureTouchSM, messageREACH and voiceREACH. Services currently in development include VisionCast and SecureMail. These services are critical additions to the suite of communications and data services PTEK provides to its customers, not
only to position the operating units in larger market segments, but more importantly to meet changing customer needs and respond to the overall technological changes in the marketplace.



The Company devotes significant resources to the development of enhancements for existing services and to introduce new
services. Each PTEK operating unit includes research, development and engineering personnel who are responsible for designing, developing, testing and supporting proprietary software applications, as well as creating and improving enhanced system
features and services. The Companys research and development strategy is to focus its efforts on enhancing its proprietary software and integrating it with readily available industry standard software and hardware when feasible. Research,
development and engineering personnel also engage in joint development efforts with the Companys strategic partners and vendors. PTEK employs 69 research and development professionals. The Companys research and development costs for
2002, 2001 and 2000 were $7.2 million, $11.1 million and $8.6 million, respectively.



Competition



PTEK competes with major
telecommunications service providers around the world such as AT&T Corp., MCI, Global Crossing Limited, Sprint Corporation and the international PTTs. Because these telecommunications providers own the underlying telecommunications network, they
may have lower per minute long distance costs than the Company. Although these providers hold a large market share, conferencing and messaging are not primary focuses of their business. The Company believes that it has been able to compete with
these providers on the basis of quality of customer service.



The Company also competes with smaller companies in each of its service categories. For example, Premiere Conferencing competes with West Corporations conferencing services segment, Raindance Communications, Inc., ACT
Teleconferencing, Inc., WebEx Communications, Inc. and Genesys Telecommunications Laboratories, Inc. The Company believes that Premiere Conferencing is the third largest independent audio conferencing provider. While the multimedia messaging
industry is highly fragmented, the Company believes that Xpedite is the largest worldwide provider of these services. As Xpedite evolves into more of a business services company, its solution set will be positioned to displace existing services
provided by companies such as West, TeleTech Holdings, Inc. and others in the customer relationship management (CRM) category, and it will continue to compete with EasyLink Services Corporation, Captaris, Inc., Critical Path, Inc.,
DoubleClick Inc. and j2 Global Communications, Inc. in the multimedia messaging category. The Companys newer service offerings, particularly those services that will compete in the CRM market, may not achieve the market acceptance of existing
providers services.



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In all cases, PTEKs strategy is to gain a competitive advantage in winning and keeping customers by
enabling its business units to deliver leading technology-driven solutions to its customers and support them with superior customer service. The Company believes that its comprehensive package of conferencing and messaging services provide it an
advantage over many of its competitors that have more limited service offerings. In addition, the Company believes that its global reach allows it to pursue contract opportunities with multinational enterprises providing an advantage over
competitors that only focus on limited geographies.



Government Regulation



One of the Companys subsidiaries, Premiere
Communications, Inc. (PCI), provides long distance telecommunications services and is subject to federal, state and local telecommunications regulations in the United States. In addition, other PTEK subsidiaries may be affected by
regulatory decisions, trends or policies issued or implemented by federal, state or local regulatory authorities. Various international authorities may also seek to regulate, or impose requirements with respect to, the services provided by PCI or
such other PTEK subsidiaries.



The Federal Communications
Commission (FCC) classifies PCI as a non-dominant common carrier for its domestic interstate and international telecommunications services. Generally, such common carriers must maintain and publicly disclose price lists, describing
rates, terms and conditions of service, must comply with federal regulatory programs such as universal service, and must comply with decisions and policies adopted or enforced by the FCC. Most state public service or utility commissions
(PUCs) also subject carriers such as PCI that provide intrastate, common carrier telecommunications services to various compliance and approval requirements, such as those in connection with entry certification, tariff filings, transfers
of control, mergers or other acquisitions, issuance of debt instruments, periodic reporting and payment of regulatory fees, as well as others. FCC or state PUC authorizations can generally be conditioned, modified or revoked for failure to comply
with applicable laws, rules, regulations or regulatory policies. Fines or other penalties also may be imposed for such violations. Management believes that the Company and its subsidiaries exercise reasonable efforts to comply with applicable FCC
and state PUC decisions, policies and regulatory programs. However, there can be no assurance that the Company and its subsidiaries are currently in compliance with all applicable FCC or state PUC requirements, or that the FCC, state PUCs or third
parties will not raise issues in the future with regard to the Company or its subsidiaries compliance with applicable laws or regulations.



Federal and state laws regulate telemarketing practices, and may adversely impact the Companys business and that of its customers and potential
customers. The FCC promulgated rules in 1992 to implement the Telephone Consumer Protection Act of 1991 (the TCPA). These rules, among others, regulate telemarketing methods and activities, including the use of prerecorded messages, the
time of day when telemarketing calls may be made, maintenance of company-specific do not call databases, and restrictions on unsolicited facsimile advertising. The FCC is currently in the process of considering amendments to its rules
under the TCPA. The FCC has also sought comment on the issue of a national do not call list and whether it should adopt such a list in conjunction with the Federal Trade Commission (the FTC).



Under the Federal Telemarketing Consumer Fraud and Abuse Act of 1994, the FTC
has issued regulations designed to prevent deceptive and abusive telemarketing acts and practices. The FTC recently significantly amended its regulations, and these changes could impose additional costs on the Company and affect the industry
adversely. As part of these rule amendments, the FTC has ordered that a national do not call registry be established, whereby telemarketers will be barred from calling consumers who register their telephone numbers in the national
database. The do not call registry is expected to become effective approximately seven months after the FTC receives funding from Congress and awards the contract to create the registry. The Company will have to take the necessary steps
to ensure compliance with the do not call registry and other FTC rule amendments.



In addition to the federal legislation and regulations, there are numerous state statutes and regulations governing telemarketing activities, including state do not call list requirements, and state
registration and bonding requirements. The Company has compliance policies in place with regarding to telemarketing laws and regulations; however, there can be no assurance that the Company would not be subject to litigation alleging a violation of
state or federal telemarketing laws or regulations.



A number
of states have adopted laws restricting and/or governing the distribution of unsolicited e-mails, or spam. Other states are considering similar legislation. Congress has also considered such legislation, and could enact legislation governing spam at
some future point. The Company monitors such legislation and regulatory developments to minimize the risk of its participation in activities that violate anti-spam legislation. In addition, a



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number of legislative and regulatory proposals are under consideration by federal and state lawmakers and regulatory bodies and may be adopted with respect
to the Internet. Some of the issues that such laws or regulations may cover include user privacy, obscenity, fraud, pricing and characteristics and quality of products and services. The adoption of any such laws or regulations may decrease the
growth of the Internet, which could in turn decrease the projected demand for the Companys products and services or increase its cost of doing business. In addition, the sending of spam through the Companys network could result in third
parties asserting claims against the Company. Moreover, the applicability to the Internet of existing U.S. and international laws governing issues such as property ownership, copyright, trade secret, libel, taxation and personal privacy is uncertain
and developing. Any new legislation or regulation, or application or interpretation of existing laws, could have a material adverse effect on the Companys business, financial condition and results of operations.



In addition, the Companys operations may be subject to state laws and
regulations regulating the unsolicited transmission of facsimiles. The Company monitors such laws and regulations and its service agreements with customers state that customers are responsible for their compliance with all applicable laws and
regulations. The Company could, nevertheless, be subject to litigation, fines, losses, and possible other relief under such laws and regulations.



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. 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 international activities also are 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 currently has three issued U.S. patents relating to its fax distribution services, each of which will expire in 2013, and multiple pending U.S. patents covering aspects of its teleconferencing services. In
addition, the Company owns and uses a number of registered trademarks in connection with its products and services, such as PTEK, ReadyCast, ReadyConference, SoundCast, VisionCast, messageREACH and Xpedite. Applications for Auditorium, ReadyClick
& Conference, intelliSEND and voiceREACH are pending in the U.S. Many of these trademarks are either registered in or have applications pending in other countries. 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 that the Company attempts to protect through confidentiality and nondisclosure provisions in its agreements. The Company typically attempts to protect its confidential information and
trade secrets through these contractual provisions for the terms of the applicable agreement and, to the extent permitted by applicable law, for some negotiated period of time following termination of the agreement. PTEK currently has seven patents,
five 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 communications and data services, 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.



Available Information



The Companys corporate Internet address is www.ptek.com. We have made available free of charge through our Internet
Web site (follow the Invest tab to Investor Relations to link to SEC Filings) our annual report on Form 10-K, quarterly report on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act as soon as practicable after such material was electronically filed with, or furnished to, the Securities and Exchange Commission (the SEC).



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Employees



As of December 31, 2002, PTEK employed 1,927 people. PTEK employees are not represented by a labor union or covered by any collective bargaining
agreements.



Item 2. Properties



PTEKs
corporate headquarters occupy approximately 19,600 square feet of office space in Atlanta, Georgia under a lease expiring August 31, 2007. Xpedite occupies approximately 90,000 square feet of office space in Tinton Falls, New Jersey under a 15-year
lease expiring in May 2016. Premiere Conferencing occupies approximately 106,000 square feet of office space in Colorado Springs, Colorado under a lease expiring August 31, 2006, and approximately 46,000 square feet of office space in Lenexa, Kansas
under a lease expiring August 31, 2004.



The Company also
leases various data and switching centers and sales offices within and outside the United States. The Company believes that its current facilities and office space are 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.



A lawsuit was filed on November 4, 1998 against the Company and certain of
its officers and directors in the Southern District of New York. Plaintiffs are shareholders of Xpedite Systems, Inc. (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 Systems, the Companys roll-out of Orchestrate, the Companys relationship with customers Amway Corporation and DigiTEC, 2000, and the Companys 800-based
calling card service. 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 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. The defendants motion to transfer venue to Georgia has been granted. The defendants motion to dismiss has been granted in part and denied in part. The defendants filed an answer on March
30, 2000. On January 22, 2002, the court ordered the parties to mediate. The parties did so on February 8, 2002. On October 17, 2002, the Defendants filed a Motion for Summary Judgment and a Motion in Limine to exclude the testimony of the
Plaintiffs expert. Both motions are pending.



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). 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



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the corporate stock in Xpedite, compensatory damages of approximately $4.9 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. This case has been dismissed without prejudice and compelled to NASD arbitration, which has commenced. In August 2000, the plaintiffs filed a statement of claim with the
NASD against 12 named respondents, including Xpedite (the Nobis Respondents). The claimants allege that the 12 named respondents engaged in wrongful activities in connection with the management of the claimants investments with
Equitable. The statement of claim asserts wrongdoing in connection with the claimants investment in securities of Xpedite and in unrelated investments involving insurance-related products. The allegations in the statement of claim against
Xpedite are limited to claimants investment in Xpedite. Claimants seek, among other things, an accounting of the corporate stock in Xpedite, compensatory damages of not less than $415,000, a fair conversion rate on stock options, losses on the
investments, plus interest and all dividends, punitive damages, attorneys fees and costs. Hearings before the NASD panel were held on November 27-29, 2001, January 22-24, 2002, February 4-7, 2002, April 9-19, 2002, and May 30, 2002. On July
31, 2002, the NASD Panel issued its Award. The Award was subsequently amended on September 9, 2002. The Panel, among other things, held Xpedite, along with co-Respondents Angrisani, Erb, and CEA Financial, jointly and severally liable to Claimant
Constance Nobis for $50,000, plus 9% simple interest from January 1, 1999 until September 9, 2002. The Panel also held Angrisani, Erb, and CEA Financial jointly and severally liable to Xpedite for $50,000, plus 9% simple interest from January 1,
1999 until September 9, 2002. Xpedite has filed a Notice of Petition, Verified Petition to Vacate Arbitration Award, and Request for Judicial Intervention in New York State. That proceeding is pending. At a hearing on January 10, 2003, the New
Jersey Superior Court affirmed the NASD Award. No order or judgment, however, has been issued by the New Jersey Superior Court.



On September 3, 1999, Elizabeth Tendler filed a complaint in the Superior Court of New Jersey Law Division, Union County, against 17 named defendants
including PTEK and Xpedite, and various alleged current and former officers, directors, agents and representatives of Xpedite. The plaintiff alleges that the defendants engaged in wrongful activities in connection with the management of the
plaintiffs investments, including investments in Xpedite. The allegations against Xpedite and PTEK are limited to plaintiffs investment in Xpedite. Plaintiffs claims against Xpedite and PTEK include breach of contract, breach of
fiduciary duty, unjust enrichment, conversion, fraud, interference with economic advantage, liability for ultra vires acts, violation of the New Jersey Consumer Fraud Act and violation of New Jersey RICO. Plaintiff seeks an accounting of the
corporate stock of Xpedite, compensatory damages of approximately $1.3 million, accrued interest and/or dividends, a constructive trust on the proceeds of the sale of any Xpedite or PTEK stock, shares of Xpedite and/or PTEK to satisfy
defendants obligations to plaintiff, attorneys fees and costs, punitive and exemplary damages in an unspecified amount, and treble damages. On February 25, 2000, Xpedite filed its answer, as well as cross claims and third party claims.
This case has been dismissed without prejudice and compelled to NASD arbitration, which has commenced. In August 2000, a statement of claim was also filed with the NASD against all but one of the Nobis Respondents making virtually the same
allegations on behalf of claimant Elizabeth Tendler. Claimant seeks an accounting of the corporate stock in Xpedite, compensatory damages of not less than $265,000, a fair conversion rate on stock options, losses on other investments, interest
and/or unpaid dividends, punitive damages, attorneys fees and costs. Hearings before the NASD panel were held on November 27-29, 2001, January 22-24, 2002, February 4-7, 2002, April 9-19, 2002, and May 30, 2002. On July 31, 2002, the NASD
Panel issued its Award. The Award was subsequently amended on September 9, 2002. The Panel, among other things, held Xpedite, along with co-respondents Angrisani, Erb, and CEA Financial, jointly and severally liable to claimant Elizabeth Tendler for
$57,500, plus 9% simple interest from March 1, 1999 until September 9, 2002. The Panel also held Angrisani, Erb, and CEA Financial jointly and severally liable to Xpedite for $57,500, plus 9% simple interest form March 1, 1999 until September 9,
2002. Xpedite has filed a Notice of Petition, Verified Petition to Vacate Arbitration Award, and Request for Judicial Intervention in New York State. That proceeding is pending. At a hearing on January 10, 2003, the New Jersey Superior Court
affirmed the NASD Award. No order or judgment, however, has been issued by the New Jersey Superior Court.



On December 10, 2001, Voice-Tel filed a Complaint against Voice-Tel franchisees JOBA, Inc. (JOBA) and Digital Communication Services, Inc.
(Digital) in the U.S. District Court for the Northern District of Georgia. The Complaint sought injunctive relief and a declaratory judgment with respect to Voice-Tels right to terminate the franchise agreements with JOBA and
Digital. On January 7, 2002, JOBA and Digital answered Voice-Tels Complaint and asserted counterclaims against Voice-Tel for alleged breach of franchise agreements and other alleged franchise-related agreements. JOBA and Digital also asserted
claims alleging tortious interference of contract against Premiere Communications, Inc. (PCI) and PTEK. On January 18, 2002, Voice-Tel, PCI and



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PTEK filed responses and answers to the counterclaims and filed additional breach of contract and tort claims against JOBA and Digital. In March 2002,
Voice-Tel and JOBA and Digital sought leave of court to file amended complaints and answers, which the court granted as to JOBA and Digital and granted in part and denied in part as to Voice-Tel. The Digital Franchise Agreement contained a mandatory
arbitration provision, which was not found in the JOBA Franchise Agreement. Therefore, on April 10, 2002, the federal court severed the Digital breach of franchise agreement claims and ordered them to be arbitrated. The Court ordered that all
remaining claims, including but not limited to the breach of franchise agreement claims as to JOBA, would remain in federal court. The arbitration is currently scheduled for July 13, 2002 and will be held in Atlanta, Georgia. There is a proposal
outstanding that all parties agree to submit all claims to arbitration including the Federal Court claims. At this time, this proposal has not been agreed to by any of the parties. Discovery with respect to the arbitration will end on June 25, 2003.
On July 10, 2002, JOBA and Digital moved to amend their Complaint to add claims for constructive termination of their franchises, which was subsequently denied by the court on September 11, 2002. On July 16, 2002, Voicecom Telecommunications, LLC
(Voicecom) was added as a party Plaintiff in the lawsuit against JOBA and Digital. With the exception of expert and damages testimony, discovery has now concluded and the parties are awaiting a trial date contingent on the parties
agreeing to submit all claims to arbitration. The parties have filed motions and cross motions for partial summary judgment, including responses thereto. A mediation of all claims between all parties was held on March 24, 2003, which failed to
resolve any of the issues in litigation.



On January 30, 2002,
a complaint was filed by 15 Lake Bellevue, LLC in the Superior Court of King County, Washington. Plaintiff sought to enforce a Lease Guaranty Agreement entered into by the Company on behalf of Webforia, Inc. with respect to a lease for commercial
real estate located in Bellevue, King County, Washington. The Companys potential liability under the Guaranty was limited to the lesser of the lease obligations or $2,000,000, together with attorneys fees, interest and collection
expenses. The Company filed an answer to the lawsuit, and on May 17, 2002, the plaintiff filed a motion for partial summary judgment. On June 18, 2002, the court entered an order finding unconditional liability on the part of the Company with
respect to the guaranty but reserving the issue of the amount of the Companys liability for trial. On December 31, 2002 the parties entered into a settlement agreement resolving in full all claims asserted by each party against the other.



On March 25, 2003, EasyLink Services Corporation
(EasyLink) filed an amended complaint against the Company, Xpedite and AT&T Corp. (AT&T), in the Superior Court of New Jersey, Chancery Division: Middlesex County. EasyLinks complaint alleges, among other
things, that the Company entered into an agreement to purchase a secured promissory note in the original principal amount of $10 million and 1,423,980 shares of EasyLinks Class A common stock for the purpose of obtaining EasyLinks
business by using the acquired securities to block a debt restructuring that EasyLink was allegedly pursuing with its creditors, including AT&T, and for other improper motives. EasyLinks complaint alleges that it pursued such debt
restructuring in reliance on its understanding that AT&T would participate in the restructuring on certain terms to which EasyLink and AT&T allegedly had agreed, and that AT&T misled EasyLink as to its intentions with respect to such
restructuring. The complaint further alleges that AT&T disclosed confidential information of EasyLink to the Company in violation of AT&Ts agreements with EasyLink, and that such information was used by AT&T and the Company in
furtherance of a joint scheme to force EasyLink out of the marketplace. EasyLinks complaint also alleges that employees of the Company and Xpedite have knowingly made false statements to EasyLinks customers, investors and creditors
regarding EasyLink and its financial stability. EasyLink claims that these various actions have impaired its ability to restructure its debt effectively and caused it to suffer various other commercial losses. EasyLinks complaint seeks to (i)
enjoin AT&T from selling the secured promissory note to the Company, improperly interfering with EasyLinks business and contracts and disclosing EasyLinks confidential information without EasyLinks consent; (ii) compel AT&T
to consummate EasyLinks proposed restructuring; (iii) enjoin the Company and Xpedite from making false statements to EasyLinks customers and creditors regarding EasyLink and its financial position; (iv) enjoin the Company from contacting
EasyLinks creditors and preventing the restructuring of EasyLinks debt; and (v) enjoin the Company and Xpedite from using EasyLinks confidential information and contacting EasyLinks current and former employees to obtain such
confidential information. EasyLinks complaint also seeks unspecified damages from AT&T and the Company. The Company intends to answer and defend this lawsuit.



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.



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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.



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 closing sales prices of the Common Stock as reported on the Nasdaq National Market for the periods indicated.



|2002           |  | High |      | Low
|-------------- |  | ---- | ---- | ---
|First Quarter  |  | $    | 4.40 |    
|Second Quarter |  |      | 5.73 |    
|Third Quarter  |  |      | 5.82 |    
|Fourth Quarter |  |      | 4.69 |    



|2001           |  | High |      | Low
|-------------- |  | ---- | ---- | ---
|First Quarter  |  | $    | 3.13 |    
|Second Quarter |  |      | 2.95 |    
|Third Quarter  |  |      | 3.70 |    
|Fourth Quarter |  |      | 3.87 |    



The closing price of
the Common Stock as reported on the Nasdaq National Market on March 12, 2003 was $3.68. As of March 12, 2003 there were 487 record holders and approximately 11,600 beneficial 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. 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, 2002, certain
current and former employees exercised options to purchase an aggregate of 47,080 shares of Common Stock at prices ranging from $0.71 per share to $1.61 per share in transactions exempt from registration pursuant to Section 4(2) and Rule 701 of the
Securities Act. In the third quarter of 2002, the Company issued 601,997 shares of Common Stock, of which 352,997 shares were returned in November 2002, pursuant to the terms of a settlement to multiple class action lawsuits in the United Stated
District Court for the Northern District of Georgia brought by a class of individuals (including a subclass of former Voice-Tel Enterprises, Inc. franchisees and a subclass of former Xpedite Systems, Inc. shareholders) who purchased or otherwise
acquired the Companys Common Stock from as early as February 11, 1997 through June 10, 1998. The remaining 249,000 shares were exempt from registration pursuant to Section 3(a)(10) of the Securities Act.



Item 6. Selected Financial Data



The following selected consolidated statement of operations data, balance sheet data, and cash flow data as of and for the years ended December 31, 2002, 2001, 2000, 1999 and 1998 have been derived from the audited consolidated financial
statements of the Company. 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.



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|                                                                                                                                     |  | Year Ended December 31,               |        
|------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------- | -------
|                                                                                                                                     |  | 2002                                  |        
|                                                                                                                                     |  | (in thousands, except per share data) |        
|Statement of Operations Data:                                                                                                        |  |                                       |        
|Revenues                                                                                                                             |  | $                                     | 341,253
|Gross margin                                                                                                                         |  |                                       | 223,590
|Operating income (loss)                                                                                                              |  |                                       | 24,905 
|Income (loss) from continuing operations attributable to common and common equivalent shares for shareholders for:                   |  |                                       |        
|basic and diluted net income (loss) per share                                                                                       |  |                                       | 14,423 
|Income (loss) from continuing operations per common and common equivalent shares for:                                                |  |                                       |        
|basic (1)                                                                                                                           |  | $                                     | 0.27   
|diluted(1)                                                                                                                          |  | $                                     | 0.26   
|                                                                                                                                     |  |                                       |        
|Loss from discontinued operations                                                                                                    |  |                                       | (12,532
|Net income(loss) attributable to common and common equivalent shares for shareholders for:                                           |  |                                       |        
|basic and diluted net income (loss) per share                                                                                       |  |                                       | 1,891  
|Net income (loss) per common and common equivalent shares for:                                                                       |  |                                       |        
|basic (1)                                                                                                                           |  | $                                     | 0.04   
|diluted (1)                                                                                                                         |  | $                                     | 0.03   
|Shares used in computing income (loss) from continuing operations and net income (loss) per common and common equivalent shares
for: |  |                                       |        
|basic                                                                                                                               |  |                                       | 53,550 
|diluted                                                                                                                             |  |                                       | 56,262 
|                                                                                                                                     |  |                                       |        
|Balance Sheet Data (at period end):                                                                                                  |  |                                       |        
|Cash, cash equivalents and marketable securities                                                                                     |  | $                                     | 69,418 
|Working capital                                                                                                                      |  |                                       | 62,103 
|Total assets                                                                                                                         |  |                                       | 352,093
|Total debt                                                                                                                           |  |                                       | 180,227
|Total shareholders equity                                                                                                           |  |                                       | 84,338 
|                                                                                                                                     |  |                                       |        
|Statement of Cash Flow Data:                                                                                                         |  |                                       |        
|Cash provided by (used in) operating activities from:                                                                                |  |                                       |        
|Continuing operations                                                                                                                |  |                                       | 37,244 
|Discontinued operations                                                                                                              |  |                                       | (5,804 
|                                                                                                                                     |  |                                       |        
|Total                                                                                                                                |  | $                                     | 31,440 
|Cash (used in) provided by investing activities from:                                                                                |  |                                       |        
|Continuing operations                                                                                                                |  |                                       | (6,175 
|Discontinued operations                                                                                                              |  |                                       | (155   
|                                                                                                                                     |  |                                       |        
|Total                                                                                                                                |  | $                                     | (6,330 
|Cash (used in) provided by financing activities from:                                                                                |  |                                       |        
|Continuing operations                                                                                                                |  |                                       | (5,911 
|Discontinued operations                                                                                                              |  |                                       | (1,086 
|                                                                                                                                     |  |                                       |        
|Total                                                                                                                                |  | $                                     | (6,997 



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---

|1) | 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).
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



On
March 26, 2002 the Company sold substantially all of the assets of the Voicecom operating segment, exclusive of its Australian operations, to Gores Technology Group, for a total purchase price of approximately $22.4 million, comprised of cash and
the assumption of certain liabilities. In accordance with Statement of Financial Accounting Standards (SFAS) 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the transaction was accounted for as a
discontinued operation. See Discontinued Operations section of Managements Discussion and Analysis of Financial Condition and Results of Operations.



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations



Overview



PTEK Holdings, Inc., a Georgia corporation, and its subsidiaries (collectively the Company or PTEK) is a global provider of
business communications services, including conferencing (audio conferencing and Web-based collaboration) and multimedia messaging (high-volume actionable communications, including e-mail, wireless messaging, voice message delivery and fax). The
Companys reportable segments align the Company into two operating segments based on product offering. These segments are Premiere Conferencing and Xpedite. Premiere Conferencing offers a full suite of enhanced audio, automated audio and Web
conferencing services for all forms of group communications activities. Xpedite offers a comprehensive suite of business services that enable actionable two-way communications which allow companies to better acquire and retain customers as well as
automate their core business processes. In addition, the Company had one other reportable segment, Voicecom, which the Company exited through a sale, exclusive of its Australian operations, effective March 26, 2002. Voicecom offered a suite of
integrated communications solutions, including voice messaging, interactive voice response services and unified communications. Retail Calling Card Services is a business segment that the Company exited through the sale of its revenue base effective
August 1, 2000. The Company also exited the venture business in 2001, which was conducted through PtekVentures, the Companys investment arm.



Revenues of the Company are recognized when persuasive evidence of an arrangement exists, services have been rendered, the price to the buyer is fixed or
determinable, and collectibility is reasonably assured. Revenues consist of fixed monthly fees, and usage fees generally based on per minute or transaction rates. Unbilled revenue consists of earned but unbilled revenue which results from the weekly
billing cycle that was implemented at Premiere Conferencing during the third quarter of 2002. Deferred revenue consists of payments made by customers in advance of the time services are rendered. The Companys revenue recognition policies are
consistent with the guidance in Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements, as amended by SAB No. 101A and 101B.



Cost of revenues includes telecommunication costs and direct operating costs exclusive of depreciation as
defined below. Telecommunication costs consist primarily of the cost of metered and fixed telecommunication related costs incurred in providing the Companys services. Direct operating costs consist primarily of salaries and wages, travel,
consulting fees and facility costs associated with maintaining and operating the Companys various revenue-generating platforms and telecommunication networks, regulatory fees and non-telecommunication costs directly associated with providing
services and all costs associated with international hardware system sales.



Selling and marketing costs consist primarily of salaries and wages, travel and entertainment, advertising, commissions and facility costs associated with the functions of selling or marketing the
Companys services.



General and
administrative costs consist primarily of salaries and wages associated with billing, customer service, order processing, executive management and administrative functions that support the Companys operations. Bad debt expense associated
with customer accounts is also included in this caption.



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##### Table of Contents

Research and development costs consist primarily of salaries and wages, travel, consulting
fees and facilities costs associated with developing product enhancements and new product development.



Depreciation and amortization includes depreciation of computer and telecommunications equipment, furniture and fixtures, office
equipment, leasehold improvements and amortization of intangible assets. The Company provides for depreciation using the straight-line method of depreciation over the estimated useful lives of property and equipment, generally two to ten years, with
the exception of leasehold improvements which are depreciated on a straight-line basis over the shorter of the term of the lease or the useful life of the assets. Intangible assets being amortized include goodwill (prior to 2002), customer lists,
developed technology and assembled work force (prior to 2002). Intangible assets are amortized over the useful life of the asset generally ranging from three to seven years.



Restructuring costs represent severance, exit costs and contractual obligation costs associated with the
realignment of workforces and the exit of certain businesses.



Asset impairments represent the adjustment of the carrying value of long-lived assets to current fair value under Statement of Financial Accounting Standards (SFAS) No. 144 Accounting for the Impairment or
Disposal of Long-Lived Assets effective January 1, 2002 and SFAS 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, for all periods prior to the adoption of SFAS No. 144. Long-lived
assets subject to this fair value assessment were goodwill, customer lists, developed technology and property, plant and equipment.



Equity based compensation relates primarily to restricted stock granted to employees in exchange for options, restricted stock granted to
certain officers of PTEK and one of its operating units, and the cancellation of notes receivable from certain executive officers of the Company for the taxes owed by such officers with respect to certain restricted stock grants and the taxes
related thereto. In addition, it includes the non-cash cost of stock options and restricted stock issued to consultants for services rendered.



Net legal settlements and related expenses represent the costs incurred or managements estimate of costs that will more likely than not
be incurred related to various legal contingencies and related matters.



Interest expense includes the interest costs associated with the Companys convertible subordinated notes, term equipment loans and various capital lease obligations.



Interest income includes interest earned on highly liquid
investments with a maturity at date of purchase of three months or less and interest on employee loans.



Gain on sale of marketable securities includes proceeds less commissions in excess of original cost on the sale of marketable securities
available for sale. These marketable securities are traded on a national exchange with a readily determinable market price.



Asset impairment and obligations  investments includes the adjustment of the carrying value of non-public investments accounted for
under the cost or equity method to current fair value and obligations incurred by the Company as a result of these investments.



Amortization of goodwill  equity investments relates to the amortization of the excess of purchase price over the pro-rata net carrying
value of investments accounted for under the equity method of accounting. The equity method of accounting for an investment is used when the Company exerts significant management influence over the investee.



The preparation of financial statements in conformity with 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. See also the section entitled Critical Accounting Policies. 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 Companys consolidated financial statements contained herein and notes
thereto.



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##### Table of Contents

On January 1, 2001, management responsibility for international conferencing services was transferred
from Xpedite to Premiere Conferencing. Prior to that date, these international revenues were reported in the Xpedite operating segment. The revenues of the Australian operations of Voicecom that were retained in conjunction with the sale of this
operating segment are reported in the international results of Xpedite effective January 1, 2002. In order to report comparable operating segment financial results, certain financial information for years prior to 2001 has been reclassified in
Managements Discussion and Analysis. Overall, these reclassifications did not have a material impact on the financial results of the operating segments for the periods presented.



Results of Operations



The following table presents the percentage relationship of certain statements of operations items to total revenues for the Companys consolidated
operating results for the periods indicated:



|                                                                    |  | Year Ended December 31, |  
|------------------------------------------------------------------- |  | ----------------------- | -
|                                                                    |  | 2002                    |  
|REVENUES                                                            |  | 100.0                   | %
|COST OF REVENUES (exclusive of depreciation shown separately below) |  | 34.5                    |  
|                                                                    |  |                         |  
|GROSS MARGIN                                                        |  | 65.5                    |  
|                                                                    |  |                         |  
|OPERATING EXPENSES                                                  |  |                         |  
|Selling and marketing                                               |  | 26.2                    |  
|General and administrative                                          |  | 16.4                    |  
|Research and development                                            |  | 2.1                     |  
|Depreciation                                                        |  | 6.3                     |  
|Amortization                                                        |  | 3.2                     |  
|Restructuring costs                                                 |  | 0.5                     |  
|Asset impairments                                                   |  | 0.9                     |  
|Equity based compensation                                           |  | 0.5                     |  
|Legal settlements, net                                              |  | 2.1                     |  
|                                                                    |  |                         |  
|Total operating expenses.                                           |  | 58.2                    |  
|                                                                    |  |                         |  
|OPERATING INCOME (LOSS)                                             |  | 7.3                     |  
|                                                                    |  |                         |  
|OTHER (EXPENSE) INCOME                                              |  |                         |  
|Interest expense                                                    |  | (3.4                    | )
|Interest income                                                     |  | 0.4                     |  
|Gain on sale of marketable securities                               |  | 0.3                     |  
|Asset impairment  investments                                      |  |                        |  
|Amortization of goodwill - equity investments                       |  |                        |  
|Other, net                                                          |  |                        |  
|                                                                    |  |                         |  
|Total other (expense) income                                        |  | (2.7                    | )
|                                                                    |  |                         |  
|INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES        |  | 4.6                     |  
|INCOME TAX EXPENSE (BENEFIT)                                        |  | 0.4                     |  
|                                                                    |  |                         |  
|INCOME (LOSS) FROM CONTINUING OPERATIONS                            |  | 4.2                     | %
|                                                                    |  |                         |  
|DISCONTINUED OPERATIONS:                                            |  |                         |  
|Loss from operations of Voicecom                                    |  | (4.7                    | )
|Income tax benefit                                                  |  | (1.1                    | )
|                                                                    |  |                         |  
|Loss on discontinued operations                                     |  | (3.6                    | )
|                                                                    |  |                         |  
|NET INCOME (LOSS)                                                   |  | 0.6                     | %
|                                                                    |  |                         |  



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The following table presents certain financial information about the Companys operating segments
for the periods presented (amounts in millions), with amortization expense and asset impairments allocated to the appropriate operating segment:



|                                                      |  | Year Ended December 31, |      
|----------------------------------------------------- |  | ----------------------- | -----
|                                                      |  | 2002                    |      
|REVENUES:                                             |  |                         |      
|Revenues from continuing operations:                  |  |                         |      
|Xpedite                                               |  | $                       | 202.9
|Premiere Conferencing                                 |  |                         | 138.5
|Eliminations                                          |  |                         | (0.1 
|                                                      |  |                         |      
|                                                      |  | $                       | 341.3
|                                                      |  |                         |      
|Revenues from discontinued operations:                |  |                         |      
|Retail Calling Card Services                          |  |                         |     
|Voicecom                                              |  |                         | 15.8 
|                                                      |  |                         |      
|                                                      |  | $                       | 357.1
|                                                      |  |                         |      
|OPERATING PROFIT (LOSS):                              |  |                         |      
|Operating profit (loss) from continuing operations:   |  |                         |      
|Xpedite                                               |  | $                       | 22.8 
|Premiere Conferencing                                 |  |                         | 31.5 
|Holding Company                                       |  |                         | (29.4
|Eliminations                                          |  |                         | (0.0 
|                                                      |  |                         |      
|                                                      |  | $                       | 24.9 
|                                                      |  |                         |      
|Operating profit (loss) from discontinued operations: |  |                         |      
|Retail Calling Card Services                          |  |                         |     
|Voicecom                                              |  |                         | (5.7 
|                                                      |  |                         |      
|                                                      |  | $                       | 19.2 
|                                                      |  |                         |      
|NET INCOME (LOSS):                                    |  |                         |      
|Income (loss) from continuing operations:             |  |                         |      
|Xpedite                                               |  | $                       | 26.1 
|Premiere Conferencing                                 |  |                         | 26.8 
|Holding Company                                       |  |                         | (38.2
|Eliminations                                          |  |                         | (0.3 
|                                                      |  |                         |      
|                                                      |  | $                       | 14.4 
|                                                      |  |                         |      
|Income (loss) from discontinued operations:           |  |                         |      
|Retail Calling Card Services                          |  |                         |     
|Voicecom                                              |  |                         | (12.5
|                                                      |  |                         |      
|Net income (loss):                                    |  | $                       | 1.9  
|                                                      |  |                         |      



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##### Table of Contents

The following table presents financial information based on the Companys continuing geographic
segments for the years ended December 31, 2002, 2001 and 2000 (in millions):



|              |  | NetRevenues |       | OperatingIncome (Loss) |   |        | IdentifiableAssets
|------------- |  | ----------- | ----- | ---------------------- | - | ------ | ------------------
|2002          |  |             |       |                        |   |        |                   
|North America |  | $           | 228.8 |                        | $ | 20.5   |                   
|Asia Pacific  |  |             | 55.9  |                        |   | 2.6    |                   
|Europe        |  |             | 56.6  |                        |   | 1.8    |                   
|              |  |             |       |                        |   |        |                   
|Total         |  | $           | 341.3 |                        | $ | 24.9   |                   
|              |  |             |       |                        |   |        |                   
|2001          |  |             |       |                        |   |        |                   
|North America |  | $           | 223.8 |                        | $ | (157.8 | )                 
|Asia Pacific  |  |             | 56.2  |                        |   | (6.1   | )                 
|Europe        |  |             | 50.4  |                        |   | (13.2  | )                 
|              |  |             |       |                        |   |        |                   
|Total         |  | $           | 330.4 |                        | $ | (177.1 | )                 
|              |  |             |       |                        |   |        |                   
|2000          |  |             |       |                        |   |        |                   
|North America |  | $           | 187.6 |                        | $ | (63.4  | )                 
|Asia Pacific  |  |             | 64.8  |                        |   | (1.6   | )                 
|Europe        |  |             | 50.8  |                        |   | 6.8    |                   
|              |  |             |       |                        |   |        |                   
|Total         |  | $           | 303.2 |                        | $ | (58.2  | )                 
|              |  |             |       |                        |   |        |                   



Revenues



Consolidated revenues from continuing operations increased 3.3% to $341.3
million in 2002 from $330.4 million in 2001, and increased 9.0% in 2001 from $303.2 million in 2000. Revenues in the Companys operating segments are as follows:



Xpedite revenue was 59.5%, 65.3% and 75.9% of consolidated revenues for 2002, 2001 and 2000, respectively. Xpedite revenue
decreased 5.9% to $202.9 million in 2002 from $215.7 million in 2001 and decreased 6.3% in 2001 from $230.1 million in 2000. The decline in revenue in 2002 is mainly attributable to decreased rates of approximately 23.9% from 2001 in Xpedites
traditional or legacy store and forward fax business as a result of price compression in this market from increased competition and decreased demand. In addition, volumes for these products decreased approximately 5.5% as a percentage of
total volumes from 2001. The decline in revenue in 2001 is primarily attributable to a general decline in the second half of 2001 in demand and price compression in the traditional store and forward fax business primarily caused by weakness in the
hospitality and financial services industries worldwide along with a general weakness in foreign currencies against the U.S. dollar. In the fourth quarter of 2000 and the first quarter of 2001, Xpedite made three customer base acquisitions which
generated approximately $12.0 million and $9.9 million in revenue in 2002 and 2001, respectively.



Premiere Conferencing revenue was 40.6%, 34.8% and 24.2% of consolidated revenues for 2002, 2001 and 2000, respectively. Premiere Conferencing revenue
increased 20.2% to $138.5 million in 2002 from $115.1 million in 2001 and increased 57.0% in 2001 from $73.4 million in 2000. The increases in 2002 and 2001 are attributable to growth in Premiere Conferencings automated conferencing service,
ReadyConference, of approximately 8.2% of segment revenue over the prior year in 2002 and approximately 18.5% of segment revenue in 2001. In addition, this increase is related to an expansion of these services into key foreign markets and growth in
Web conferencing services. Management expects revenue growth in this operating segment to continue, primarily driven by growth in minutes of use. The Company believes audio conferencing revenue will continue to grow through minute volume with some
decline in average revenue per minute.



Consolidated revenues
on a geographic region basis increased in North America to $228.8 million or 67.0% of consolidated revenues in 2002 from $223.8 million or 67.7% of consolidated revenues in 2001 and increased from $187.6 million or 61.9% of consolidated revenues in
2000. As a percentage of consolidated revenues, North America revenue decreased 0.7% from 2001 to 2002 and increased 5.9% from 2000 to 2001. Consolidated revenues in Europe increased $6.2 million, from $50.4 million or 15.3% of consolidated revenues
in 2001 to $56.6 million or 16.6% of consolidated revenues in 2002. In 2001, European revenues decreased $0.4 million, from $50.8 million for the comparable period in 2000. As a percentage of consolidated revenues, European revenue increased 1.3%



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from 2001 to 2002 and decreased 1.5% from 2000 to 2001. Consolidated revenues in Asia Pacific decreased $0.3 million, from $56.2 million or 17.0% of
consolidated revenues in 2001 to $55.9 million or 16.4% of consolidated revenues in 2002. In 2001, Asia Pacific revenues decreased $8.6 million, from $64.8 million in 2000. As a percentage of consolidated revenues, Asia Pacific revenue decreased
0.6% from 2001 to 2002 and decreased 4.4% from 2000 to 2001. In 2002, the Company experienced revenue growth in the European region mainly as a result of the expansion of Premiere Conferencing in that region and a customer base acquisition at
Xpedite, which also accounted for a majority of the domestic growth in 2002. International revenue declines in 2001 were mainly caused by weakness in the hospitality and financial services industry along with significant declines in real-time fax
pricing in Asia Pacific in 2000 due to deregulation of most Asian telecommunication markets. The Company believes it will have continued growth in revenues in both the European and Asia Pacific regions as it continues to expand internationally.



Cost of revenues



Consolidated cost of revenues were 34.5%, 37.9% and 41.6% of consolidated
revenues in 2002, 2001 and 2000, respectively. Consolidated cost of revenues from continuing operations decreased 6.1% to $117.7 million in 2002 from $125.3 million in 2001, and decreased 0.6% in 2001 from $126.0 million in 2000. Cost of revenues in
the Companys operating segments are as follows:



Xpedite
cost of revenue were 30.3%, 34.0%, and 38.0% of segment revenue in 2002, 2001 and 2000, respectively. Xpedite cost of revenue decreased 16.2% to $61.4 million in 2002 from $73.3 million in 2001, and decreased 16.3% in 2001 from $87.5 million in
2000. In 2002 and 2001 cost of revenue decreased due to decreases in per minute telecommunications rates for the Xpedite worldwide network, as well as increased sales of messageREACH and voiceREACH products, which carry lower cost of revenues. Lower
telecommunications costs have become the general industry trend over the past several years. Xpedite utilizes several telecommunication service providers and, accordingly, can direct traffic to providers offering the lowest rates. These decreases
were slightly offset by direct operating costs increases from 2001 to 2002 of approximately 1.0% as a result of the increase in Xpedites hardware sales in Japan, which carries a 70% direct cost, and an increase in message volume related to
messageREACH and voiceREACH products of approximately 5.5% of consolidated volumes compared to 2001. In 2001, direct operating costs increased 0.9% primarily due to increased message volume from messageREACH and voiceREACH products of 12.2% of
consolidated volumes compared to 2000.



Premiere Conferencing
cost of revenue were 40.7%, 45.1% and 52.9% of segment revenue in 2002, 2001 and 2000, respectively. Premiere Conferencings cost of revenue increased 8.4% to $56.3 million in 2002 from $52.0 million in 2001, and increased 34.0% in 2001 from
$38.8 million in 2000. In 2002, cost of revenue declined as a percentage of segment revenue as the decline in the average price per minute for its services was greater than the decrease in telecommunications costs. Cost of revenue decreased as a
percent of segment revenue in 2001 primarily due to significant decreases in per minute telecommunications transport costs. The significant decreases in telecommunication costs are the result of the general industry price declines seen for long
distance delivery. Premiere Conferencing utilizes several telecommunication service providers and, accordingly, can direct traffic to providers offering the lowest rates. In addition, in 2002 and 2001, direct operating costs as a percentage of
segment revenue decreased 5.0% and 5.1%, respectively, due to the growth in the automated ReadyConference product, which carries a low direct cost compared to the operator-assisted product because it does not require an operator to facilitate the
conference call. Revenue from this product grew to approximately 69% of segment revenue in 2002 from approximately 60% in 2001.



Gross margin



Consolidated gross margin from continuing operations as a percentage of consolidated revenues was 65.5%, 62.1%, and 58.4% in 2002, 2001 and 2000,
respectively. Consolidated gross margin from continuing operations increased 9.0% to $223.6 million in 2002 from $205.1 million in 2001, and increased 15.8% in 2001 from $177.2 million in 2000. Gross margin in the Companys operating segments
were as follows:



Xpedites gross margin as a percentage
of segment revenue was 69.7%, 66.0%, and 62.0% in 2002, 2001 and 2000, respectively. Xpedites gross margin decreased 0.6% to $141.5 million in 2002 from $142.4 million in 2001, and decreased 0.1% in 2001 from $142.6 million in 2000.



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Premiere Conferencings gross margin as a percentage of segment revenue was 59.3%, 54.9%, and 47.1%
in 2002, 2001 and 2000, respectively. Premiere Conferencings gross margin increased 30.0% to $82.2 million in 2002 from $63.2 million in 2001, and increased 82.2% in 2001 from $34.6 million in 2000.



Selling and marketing



Consolidated selling and marketing costs from continuing operations as a percent of consolidated revenues were 26.2%, 22.8%
and 22.4% in 2002, 2001 and 2000, respectively. Consolidated selling and marketing costs from continuing operations increased 17.8% to $89.0 million in 2002 from $75.5 million in 2001, and increased 11.2% in 2001 from $67.9 million in 2000. Selling
and marketing costs in the Companys operating segments were as follows:



Xpedite selling and marketing costs as a percentage of segment revenue were 30.4%, 24.8% and 23.5% in 2002, 2001 and 2000, respectively. Xpedite selling and marketing costs increased 15.0% to $61.6 million in 2002
from $53.6 million in 2001, and decreased 0.6% in 2001 from $53.9 million in 2000. In 2002, the increase was due primarily to an increased sales and marketing headcount of 29 employees. In 2001, the increase as a percentage of segment revenue was
primarily due to the higher costs of launching messageREACH globally.



Premiere Conferencing selling and marketing costs as a percentage of segment revenue were 19.8%, 18.5% and 17.7% in 2002, 2001 and 2000, respectively. Premiere Conferencing selling and marketing costs increased 28.3% to $27.4 million in
2002 from $21.3 million in 2001, and increased 64.8% in 2001 from $13.0 million in 2000. In 2002 and 2001, the 1.3% and 0.8%, increases as a percent of segment revenue were due primarily to increased sales and marketing headcount of 86 and 74
employees in 2002 and 2001, respectively.



General and administrative



Consolidated general and administrative costs from
continuing operations as a percentage of consolidated revenues were 16.4%, 17.6% and 15.7% in 2002, 2001 and 2000, respectively. Consolidated general and administrative costs from continuing operations decreased 4.2% to $55.8 million in 2002 from
$58.3 million in 2001, and increased 17.4% in 2001 from $49.6 million in 2000. General and administrative costs in the Companys operating segments were as follows:



Xpedite general and administrative costs as a percentage of segment revenue were 13.6%, 14.5% and 11.9% in 2002, 2001 and
2000 respectively. Xpedite general and administrative costs decreased 12.3% to $27.5 million in 2002 from $31.4 million in 2001, and increased 14.5% in 2001 from $27.4 million in 2000. The decrease in general and administrative costs as a percentage
of segment revenue from 2001 to 2002 of 0.9% is due primarily to reductions in headcount in administration and customer service during early 2002. The increase from 2000 to 2001 of 2.6% of segment revenue is primarily due to increased headcount in
administration and customer service.



Premiere Conferencing
general and administrative costs as a percentage of segment revenue were 9.1%, 9.6% and 8.1% in 2002, 2001 and 2000, respectively. Premiere Conferencing general and administrative costs increased 13.2% to $12.5 million in 2002 from $11.1 million in
2001, and increased 86.9% in 2001 from $5.9 million in 2000. In 2002, general and administrative costs as a percentage of segment revenue declined despite an overall dollar increase of $1.4 million. This is primarily due to the growth in Premiere
Conferencing automated revenue as a percentage of consolidated revenues. The Company believes that its ReadyConference product is highly scalable and does not require proportional increases in back office support. The increase from 2001 to 2000 is
primarily due to infrastructure support increases related to the overall expansion of the Premiere Conferencing operating segment.



Holding Company general and administrative costs as a percentage of consolidated revenues were 4.6%, 4.9% and 5.6% in 2002, 2001 and 2000, respectively.
Holding Company general and administrative costs were $15.8 million, $16.3 million and $15.6 million in 2002, 2001 and 2000, respectively. The $0.5 million decrease from 2001 to 2002 is primarily due to salary reductions, which were offset in part
by approximately $1.6 million in acquisition-related costs that could not be applied to a specific transaction during 2002. The $0.7 million increase from 2000 to 2001 is primarily the result of costs associated with the PtekVentures business.



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Research and development



Consolidated research and development costs from continuing operations as a percentage of consolidated revenues were 2.1%, 3.4% and 2.8% in 2002, 2001
and 2000, respectively. Consolidated research and development costs from continuing operations decreased 34.7% to $7.2 million in 2002 from $11.1 million in 2001, and increased 28.8% in 2001 from $8.6 million in 2000. Research and development costs
in the Companys operating segments were as follows:



Xpedite research and development costs as a percentage of segment revenue were 2.7%, 4.1% and 3.3% in 2002, 2001 and 2000, respectively. Xpedite research and development costs decreased 39.2% to $5.4 million in 2002 from $8.9 million in
2001, and increased 18.7% in 2001 from $7.5 million in 2000. In 2002, research and development costs as a percentage of segment revenue decreased as a result of a reduction in headcount, increased capitalized development costs of approximately $1.6
million and managements continued policy of initiating only those development projects with a high probability of economic benefit. The increase in 2001 was attributable to continued development of the messageREACH and voiceREACH products.



Premiere Conferencing research and development costs as a
percentage of segment revenue were 1.3%, 1.9% and 1.5% in 2002, 2001 and 2000, respectively. Premiere Conferencing research and development costs decreased 16.0% to $1.8 million in 2002 from $2.2 million in 2001, and increased 98.6% in 2001 from
$1.1 million in 2000. In 2002, the slight decrease as a percentage of segment revenue is due to managements continued policy of initiating only those development projects with a high probability of economic benefit. The slight increase in 2001
was primarily attributable to increased headcount of eight employees needed for the continued development of ReadyConference, ReadyCast and VisionCast.



Depreciation



Consolidated depreciation costs from continuing operations as a percentage of consolidated revenues were 6.3%, 6.3% and 6.5% in 2002, 2001 and 2000,
respectively. Consolidated depreciation costs from continuing operations increased 4.0% to $21.5 million in 2002 from $20.7 million in 2001, and increased 4.6% in 2001 from $19.8 million in 2000. Depreciation costs in the Companys operating
segments were as follows:



Xpedite depreciation costs were
6.5%, 6.3% and 5.1% of segment revenue in 2002, 2001 and 2000, respectively. Xpedite depreciation costs decreased 3.2% to $13.1 million in 2002 from $13.6 million in 2001, and increased 16.4% in 2001 from $11.7 million in 2000. This represents a
$0.5 million decrease in costs from 2001 to 2002 and a $1.9 million increase from 2000 to 2001. The $0.5 million decrease is attributable to the timing of depreciation for capital expenditures purchased in the later half of 2001. The $1.9 million
increase in 2001 is related to increased capital expenditures in the latter half of 2000 and first half of 2001 related to messageREACH and voiceREACH.



Premiere Conferencing depreciation costs were 5.4%, 6.0% and 8.2% of segment revenue in 2002, 2001 and 2000, respectively. Premiere Conferencing
depreciation costs increased 6.1% to $7.5 million in 2002 from $7.1 million in 2001, and increased 18.0% in 2001 from $6.0 million in 2000. This represents a $0.4 million increase from 2001 to 2002 and a $1.1 million increase from 2000 to 2001. The
2002 percentage decrease is due to the significant segment revenue growth in 2002. In 2001 the increase in depreciation in terms of dollars is attributable to increased capital expenditures in 2000 and 2001 to provide additional capacity to
accommodate the growth of the business.



Holding Company
depreciation costs were $0.9 million, $0.8 million and $2.2 million in 2002, 2001 and 2000, respectively. This represents a $0.1 million increase from 2001 to 2002 and a $1.4 million decrease from 2000 to 2001. The decrease in depreciation from 2000
to 2001 was associated with the normal run out of depreciable assets not replaced.



Amortization



Consolidated amortization from
continuing operations as a percentage of consolidated revenues was 3.2%, 26.8% and 29.8% in 2002, 2001 and 2000, respectively. Consolidated amortization from continuing operations was $10.9 million, $88.6 million and $90.2 million in 2002, 2001 and
2000, respectively. Goodwill amortization was $0.0 million, $65.1 million and $65.1 million in 2002, 2001 and 2000, respectively. Other intangibles amortization, which consist primarily of customer lists, developed technology and assembled workforce
was $10.9 million, $23.5



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million and $25.1 million in 2002, 2001 and 2000, respectively. With the adoption of SFAS No. 142, Accounting for Goodwill and Other Intangible
Assets, which became effective January 1, 2002, the Company no longer records amortization expense associated with goodwill,but instead goodwill is subject to a periodic impairment assessment by applying a fair value based test. This
analysis was completed for the year ended December 31, 2002 and no impairment was identified. Amortization as a percentage of revenues, exclusive of goodwill amortization, would have been 3.2%, 7.1% and 8.3%, for 2002, 2001 and 2000, respectively.
The decline in amortization in 2001 is primarily related to the impairment of certain other intangibles during the fourth quarter of 2001. Other intangibles amortization decreased in 2002 and 2001 due to customer list impairments associated with the
Xpedite operating segment. See Asset impairments below for a further discussion related to these impairments.



Restructuring costs



Realignment of Workforce  Fourth Quarter 2002



In the fourth quarter of 2002, Xpedite and the Holding Company terminated employees pursuant to a plan to shrink headcount and reduce sales and
administration costs. The plan called for the reduction of 54 and 5 employees at Xpedite and the Holding Company, respectively. The combined costs associated with the restructuring plan are $1.5 million, of which $0.3 million was paid in 2002. Of
the remaining balance, $0.8 million, $0.3 million and $0.1 million will be paid in 2003, 2004 and 2005, respectively. Virtually all costs will be paid in cash. This restructuring plan will eliminate approximately $1.4 million and $0.6 million in
annual costs at Xpedite and the Holding Company, respectively. Also, in the fourth quarter of 2002 Xpedite decided to exit the voice messaging business in Australia due to declining revenue and the need to make substantial capital investments. The
costs associated with exiting this business of $0.3 million are primarily non-cash and represent the loss on disposal of the voice messaging assets.



Realignment of Workforce and Facilities  Fourth Quarter 2001



Due to continued revenue declines not anticipated by management in both the Voicecom and Xpedite operating segments in the second half of 2001, plans
for additional workforce cost reductions were established and personnel were notified during the fourth quarter of 2001. The plan commitment reduces annual operating expenses by $7.6 million. The plan eliminated, through involuntary separation,
approximately 120 non-sales force employees in both Voicecom and Xpedite and eliminated 143 network equipment sites in the Voicecom operating segment. The overall management plan allowed for reinvesting these cost savings into additional sales force
employees in order to stabilize the decline in revenues in both operating segments. Accordingly, the Company accrued restructuring costs of approximately $4.1 million associated with this plan commitment. Cash payments in 2002 and 2001 associated
with this plan were $2.1 million and $1.0 million, respectively. The Company expects to incur $0.4 million of additional cash payments in 2003 to satisfy this plan obligation. Of the $4.1 million of costs associated with this plan, approximately
$0.7 million of non-cash charges were incurred for severance cost obligations paid through immediately vested stock options issued below market price on the date of grant. Accordingly, this portion of the restructuring costs was recorded as
additional paid-in-capital. The remaining costs at December 31, 2002 and 2001 were $0.4 million and $2.4 million, respectively.



Realignment of Workforce and Facilities  Second Quarter 2001



During the second quarter of 2001, management committed to a plan to reduce annual operating expenses by approximately $13.7 million through the
elimination of certain operating activities in its Voicecom and Xpedite operating segments, and at the Holding Company, and the corresponding reductions in personnel costs relating to the Companys operations, sales and administration. The plan
eliminated, through involuntary separation, approximately 168 non-sales force employees and allowed the Company to exit duplicative facilities in the Voicecom business segments. Accordingly, the Company accrued restructuring costs of approximately
$6.7 million associated with this plan commitment. The Company expects to incur a total of approximately $5.0 million of cash payments related to severance, exit costs and contractual obligations associated with the $6.7 million plan costs.
Approximately $0.8 million and $3.8 million of these cash payments were made by December 31, 2002 and 2001, respectively, and were primarily related to severance and exit cost activities. The remaining cash payments are associated with severance
costs, exit costs and contractual obligations and are expected to be paid in 2003. Approximately $1.7 million of non-cash charges recorded in 2001 are related to certain executive management severance costs from employee stock option modifications
and forgiveness of employee notes receivable. Accordingly, this portion of the restructuring costs was recorded as additional paid-in-capital. The remaining costs at December 31, 2002 and 2001 were approximately $40,000 and $1.2 million,
respectively.



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Exit from Asia Real-Time Fax and Telex Business



During the fourth quarter of 2000, the Company recorded a charge of $0.6
million for costs associated with Xpedites decision to exit its legacy real-time fax and telex business in Asia. This service depended on significant price disparities between regulated incumbent telecommunications carriers and Xpedites
cost of delivery over its fixed-cost network. With the deregulation of most Asian telecommunications markets, Xpedites cost advantage dissipated, and the Company decided to exit this service and concentrate on higher value-added services such
as transactional messaging and messageREACH. The $0.6 million charge included contractual and other obligations totaling $0.4 million and severance costs of $0.2 million. During 2001, the Company paid the remaining severance obligations planned for
and does not expect any further payments.



Decentralization of Company



In the third quarter of 1999, the Company recorded
restructuring, merger costs and other special charges of approximately $8.2 million in connection with its reorganization from the two EES (Emerging Enterprise Solutions) and CES (Corporate Enterprise Solutions) operating units into three operating
business units, a retail calling card business, and a holding company. The $8.2 million charge is comprised of $7.3 million of severance and exit costs, $0.7 million of lease termination costs and $0.2 million of facility exit costs. The
decentralization plan of the Company was completed and all payments were made during 2000.



Reorganization of Company into EES and CES Business Groups



In the fourth quarter of 1998, the Company recorded a charge of $11.4 million to reorganize the Company into two business segments that focused on
specific groups of customers. The balance of severance and exit costs at December 31, 2002, 2001 and 2000 of $0.0 million, $0.1 million and $0.6 million, respectively, represents remaining severance reserve for a former executive manager. Cash
severance payments in 2002 and 2001 were $0.1 and $0.5 million, respectively. The Company paid the remaining severance obligations during 2002 and does not expect any further payments.



Asset impairments



The following table summarizes the asset impairments from continuing operations incurred by operating segment for the years ended December 31, 2002, 2001
and 2000 (in thousands):



|                            |  | Xpedite |        | Conferencing |   | Holding Co. |  | Total
|--------------------------- |  | ------- | ------ | ------------ | - | ----------- |  | -----
|2002                        |  |         |        |              |   |             |  |      
|Other intangibles           |  | $       | 3,202  |              | $ |            |  | $    
|                            |  |         |        |              |   |             |  |      
|2001                        |  |         |        |              |   |             |  |      
|Goodwill                    |  | $       | 91,571 |              |   |             |  |      
|Other intangibles           |  |         | 6,679  |              |   |             |  |      
|Property and equipment, net |  |         | 777    |              |   | 984         |  |      
|                            |  |         |        |              |   |             |  |      
|                            |  | $       | 99,027 |              | $ | 984         |  | $    
|                            |  |         |        |              |   |             |  |      
|2000                        |  |         |        |              |   |             |  |      
|Property and equipment, net |  | $       | 800    |              | $ |            |  | $    
|                            |  |         |        |              |   |             |  |      



Effective January 1,
2002, the Company adopted SFAS No. 144, Accounting for the Impairment of Disposal of Long Lived Assets. During the fourth quarter of 2002 the Company assessed the carrying value of the customer lists at Xpedite pursuant to SFAS No. 144
as Xpedite experienced a decline in revenues in certain international markets during the later half of 2002. Using the best estimate approach, the fair value of certain customer lists associated with the markets experiencing the decline were
determined to be less than the carrying value at December 31, 2002, resulting in a $3.2 million asset impairment. The remaining amortization of the other intangible assets will be approximately $3.9 million, $2.0 million and $1.9 million in 2003,
2004 and 2005, respectively.



During the second half of
2001, business conditions declined significantly in the Xpedite operating segment. The following is a comparison of revenue performance for the first six months of 2001 versus the second six months of 2001 (in thousands).



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|        |  | First SixMonths 2001 Xpedite |         | Second SixMonths 2001 Xpedite |   | % ChangeXpedite | 
|------- |  | ---------------------------- | ------- | ----------------------------- | - | --------------- | 
|Revenue |  | $                            | 112,552 |                               | $ | 103,113         | 



During the fourth
quarter of 2001, the Company assessed the outlook of various service offering revenues and evaluated the potential impairment of various assets associated with the operating equipment, goodwill and other intangible assets of Xpedite pursuant to SFAS
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. Management reviewed the identifiable undiscounted future cash flows, including the estimated residual value to be generated by the
assets to be held and used by the business acquired in Xpedite at their asset grouping level. Based on the results of these assessments, the Company recorded the $100.8 million impairment in the fourth quarter of 2001 from continuing operations
($99.0 million of which was related to Xpedite, as discussed further below).



Xpedite impairment - 2001



In Xpedite,
a decline in the legacy store and forward fax revenues and weakness in the European and Asia Pacific regions of the business began to occur in the latter part of the third quarter and the early part of the fourth quarter of 2001. Accordingly,
management was concerned that a fair value assessment would potentially be lower than the carrying value on the balance sheet. A third party appraisal was performed using a discounted cash flow income approach to valuing the business, using a 15%
discount rate. The valuation resulted in an asset impairment related to the Xpedite operating segment of $99.0 million to reflect the carrying value in excess of fair value at December 31, 2001. Of the $99.0 million, property and equipment
impairments of $0.7 million at Xpedite related primarily to the abandonment of its Indonesian operations due to declining revenues and profits. Indonesia represented less than 1% of Xpedites revenues.



Other impairments - 2001



Additionally, management recorded asset impairments totaling $1.8 million
related to the carrying value of capitalized software associated with certain internal information systems at both Premiere Conferencing and the Holding Company that have been taken out of service.



Real-time fax impairment - 2000



With the deregulation of most Asian telecommunications markets,
Xpedites cost advantage dissipated, and Xpedite decided to exit this service and concentrate on higher value-added services such as transactional messaging and messageREACH. The asset impairments of $0.8 million included the write-down of
furniture and fixtures and real-time fax equipment including autodialers, faxpads and computers. The valuation was based on the fair value of the assets as of December 31, 2000. All equipment costs were incurred in conjunction with the closing of
the real-time fax operations in Malaysia, Singapore, Hong Kong, Taiwan and Korea.



Equity based compensation charges



The
following summarizes the components of equity-based compensation expense for the years ended December 31, 2002, 2001 and 2000 (in thousands, except share data):



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|                                                                                                   |  | Earned    |  | Unearned
|-------------------------------------------------------------------------------------------------- |  | --------- |  | --------
|                                                                                                   |  | Shares    |  | Dollars 
|2002                                                                                               |  |           |  |         
|Deferred compensation for the vesting of restricted shares issued in option exchange               |  | 401,950   |  | $       
|Deferred compensation for the vesting of restricted shares issued to executive management          |  | 160,000   |  |         
|                                                                                                   |  | 561,950   |  | $       
|                                                                                                   |  |           |  |         
|2001                                                                                               |  |           |  |         
|Options exchanged for restricted shares                                                            |  | 1,765,969 |  | $       
|Restricted shares issued to executive management                                                   |  | 826,194   |  |         
|Note forgiveness related to restricted shares in former affiliates and related taxes (see Note 19) |  |           |  |         
|Compensation to management in association with restricted shares in former affiliates              |  |           |  |         
|Options and restricted shares issued for services rendered                                         |  | 15,000    |  |         
|                                                                                                   |  | 2,607,163 |  | $       
|                                                                                                   |  |           |  |         
|2000                                                                                               |  |           |  |         
|Deferred compensation for restricted shares in former Affiliates (see Note 19)                     |  |           |  | $       
|                                                                                                   |  |           |  |         



Options exchanged for restricted
shares



Due to declines in the Companys share
price over the course of the last several years, most of the employee and director option holders had options with exercise prices in excess of the market price of Company stock. In order to provide better performance incentives for employees and
directors and to align the employees and directors interests with those of the shareholders, in the fourth quarter of 2001 the Company offered an exchange program in which it granted one restricted share of common stock in exchange for
every 2.5 options tendered. Approximately 6.0 million employee and director stock options were exchanged for approximately 2.4 million shares of restricted stock on December 28, 2001, the date of the exchange. The restricted shares maintain the same
vesting schedules as those of the original options exchanged, except that in the case of tendered options that were vested on the exchange date, the restricted shares received in exchange therefore vested on the day after the exchange date. To the
extent options were vested at the exchange date, the Company recognized equity based compensation expense determined by using the closing price of the Companys common stock at December 28, 2001, which was $3.32 a share. To the extent that
restricted shares were received for unvested options exchanged, this cost was deferred on the balance sheet under the caption Unearned restricted share compensation. This value was also determined using the closing price of the
Companys common stock at the date of the exchange. The unearned restricted share compensation will be recognized as equity based compensation expense as these shares vest. In 2002 approximately 402,000 shares vested and equity based
compensation expense of $1.3 million was recognized. Assuming all employees at December 31, 2002 will remain employed by the Company through their vesting period, the equity based compensation expense in future years resulting from the restricted
shares issued in the option exchange will be $0.4 million in 2003 and $0.2 million in 2004. See further discussion in the Restricted Stock Exchange Offer section of Note 17Equity Based Compensation Plans.



In addition, approximately 890,000 options that were eligible to be exchanged
for restricted shares pursuant to the exchange offer were not tendered. At December 31, 2002, the option count was approximately 627,000 due to the sale of Voicecom and other cancellations of these options. These options will be subject to variable
accounting until such options are exercised, are forfeited, or expire unexercised. These options have exercise prices ranging from $5.32 to $29.25. At December 31, 2002 and 2001, no charge was recorded because the exercise price of each of the
options was greater than the market value of the Companys common stock.



Restricted shares issued to management



Certain members of management of the Company were awarded discretionary bonuses in the form of restricted shares in November 2001. The purpose of these discretionary bonuses was to better align managements performance with the
interests of the shareholders. Certain of these restricted shares vested immediately in 2001 and were restricted from trading for a one-year period. The remaining restricted shares vest straight line through



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2004 and the equity based compensation expense recorded in 2002 was $0.5 million. The anticipated remaining equity based compensation expense resulting
therefrom will be approximately $0.6 million per year for 2003 and 2004.



Loans and note forgiveness associated with restricted shares in former affiliates and related taxes



During the second quarter of 1999, the Company awarded restricted share grants to the CEO, COO and certain other officers of Company-owned shares held in
certain investments in affiliates made in connection with its PtekVentures activities. The vesting periods for these shares ranged from immediately upon grant to three years, contingent on the executive being employed by the Company. In connection
with this action, the Company recorded a non-cash charge of $1.2 million in 2000 related to the vesting of these grants.



In 1999 and 2000, the Company loaned $6.3 million with recourse to the current CEO and COO to pay taxes in connection with these restricted share grants.
These loans were due on December 31, 2006, accrued interest at 6.20% and were secured by the restricted shares granted. In March 2000, the Company agreed to forgive one-seventh of the principal plus accrued interest on such loans as of December 31,
2000, provided that the executives were employees of the Company on that date. Such amounts were forgiven as of December 31, 2000.



In 2001, the Company agreed to forgive the remaining balance of the recourse tax loans to the CEO and COO, effective as of December 31, 2001, provided
that the executives were employees of the Company on that date. The principal and interest forgiven was $5.8 million and the employee tax liability assumed by the Company was $5.3 million. The tax liability was paid primarily in the first quarter of
2002.



Notes receivable  employees



During 2002, the Company loaned approximately $2.0 million with recourse to
certain members of management to pay taxes in connection with the restricted shares issued in exchange for options in December 2001 and the discretionary restricted shares issued in November 2001. These loans are due in 2012, accrue interest at a
weighted average rate of 5.5%, and are secured by the restricted shares granted. The total interest accrued on these loans as of December 31, 2002 was approximately $0.1 million. The Company is obligated to make additional loans to pay taxes
associated with the future vesting of restricted shares, but the dollar amount of such loans cannot be determined at this time.



Compensation to management in association with restricted shares in former affiliates



In 2001, the Company approved discretionary bonuses in the aggregate amount of $0.5 million to two executive vice presidents
of the Company who were awarded restricted share grants in affiliates during the second quarter of 1999, which shares had lost significant market value since the dates of grant.



Options and restricted shares issued for services rendered



In 2001, the Company issued stock options and restricted shares of Company Common Stock to consultants for various
consulting services performed for the Company.



Net legal settlements
and related expenses



Net legal settlements and related
expenses were $7.3 million, $2.3 million and $(1.5) million in 2002, 2001 and 2000, respectively. See Note 20Commitments and Contingencies to the Consolidated Financial Statements and Legal Proceedings under Item 3 of
Part I of this report. Net legal settlements and related expenses in 2002 consisted of approximately $3.3 million attributable to the settlement of the shareholder class action lawsuit and $4.0 million for the settlement of the Cowan lawsuit. Net
legal settlements and related expenses in 2001 were primarily related to $1.6 million of costs incurred that relate to shareholder litigation matters. Net legal settlements and related expenses in 2000 related primarily to the favorable settlement
of a contractual dispute with MCI.



Interest expense



Interest expense from continuing operations was $11.5 million, $11.5 million
and $11.3 million in 2002, 2001 and 2000, respectively. Interest expense remained constant in 2002, and increased slightly in 2001 primarily due to long term financing for facility improvements to Xpedites new headquarters and Premiere
Conferencing entering into a term equipment loan for $6.5 million in late 2001.



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Interest income



Interest income was $1.5 million, $0.6 million and $0.9 million in 2002, 2001 and 2000, respectively. Interest income increased in 2002 primarily due to
growth in cash and cash equivalents of approximately $19.9 million from 2001 to 2002 that was invested in interest bearing accounts, and from interest accrued for employee loans. Interest income remained primarily flat from 2000 to 2001 with minor
fluctuations due to average outstanding balances of cash and cash equivalents and interest rate fluctuations.



Asset impairment and obligations  investments



The Company, through its PtekVentures investment arm, made investments in various companies engaged in emerging technologies related to internet commerce. These investments were classified initially as either cost or
equity investments in accordance with APB Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock, and evaluated based upon activity. The Company continually evaluated the carrying value of its ownership interests
in non-public investments in the PtekVentures portfolio for impairment that was other than temporary based on achievement of business plan objectives and current market conditions. The business plan objectives the Company considered
include, among others, those related to financial performance such as achievement of planned financial results, forecasted operating cash flows and completion of capital raising activities, and those that are not primarily financial in nature such
as the development of technology or the hiring of key employees. The Company has previously taken impairment charges on certain of these investments when it has determined that an other than temporary decline in the carrying value of the
investment has occurred. Many Internet based businesses experienced difficulty in raising additional capital necessary to fund operating losses and make continued investments that their management teams believed necessary to sustain operations.
Valuations of public companies operating in the Internet sector declined significantly during 2000 and 2001. During 2001, market conditions declined for the non-public companies in the PtekVentures portfolio, with certain of these companies filing
for bankruptcy and subsequently being liquidated. The remaining portfolio companies financial performance and updated financial forecasts for the near term led management to the conclusion that there was an other than temporary
decline in the carrying value of these companies. Accordingly, the Company decided to exit the venture business and cease future funding in its portfolio companies. As a result, the Company recorded an impairment charge of approximately $29.2
million during the second quarter of 2001 for the remaining carrying value of its non-public company investment portfolio. During 2000, the Company made similar evaluations of the portfolio companies and recorded approximately $15.0 million in
impairments.



Further, during the fourth quarter of 2001, one
of the portfolio companies that was previously impaired defaulted on its credit facility and lease obligation. The Company had provided a standby letter of credit on this credit facility and is a guarantor of the lease obligation. Accordingly, an
obligation expense for these guarantees in the entire amount of $2.5 million was recorded at December 31, 2001. During the first quarter of 2002, the Company paid its commitment on the standby letter of credit in the amount of $0.5 million. See
Legal Proceedings under Item 3 of Part I of this report.



Additionally, during the fourth quarter of 2001, the Company sold a significant portion of its interest in PtekVentures for proceeds and a gain of $0.2 million, primarily in the form of two notes that accrue interest at 5.05% annually and
are due in full on December 31, 2011. A third party appraisal was performed to value the portfolio companies owned by PtekVentures. The purchaser is primarily owned by two former executives of PtekVentures. The Company has received an income tax
refund of approximately $9.2 million from the capital loss carryback associated with the sale of this interest.



Amortization of goodwill equity investments



During the first quarter of 2001 and the latter half of 2000, the Company amortized goodwill created by investments that were accounted for under the
equity method of accounting. The amount by which the Companys investment exceeds its share of the underlying net assets is considered to be goodwill, and is amortized over a three-year period. Amortization related to equity investments totaled
$1.6 million and $4.9 million in 2001 and 2000, respectively, and is included in the Consolidated Statements of Operations as Amortization of goodwill-equity investments. The decline in amortization in 2001 is the result of full
impairments to these investments during the second quarter of 2001.



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Discontinued operations



Consistent with the Companys increased focus on extending its market leadership in conferencing and multimedia messaging services for global
enterprise customers, the Company retained a financial advisor to assist in evaluating strategic alternatives for portions of its business during 2001. As a result of that evaluation, the Company decided to pursue the separation of Voicecom from the
rest of PTEK and on March 26, 2002 the Company sold substantially all the assets of its Voicecom business unit to an affiliate of Gores Technology Group for a total purchase price of approximately $22.4 million, comprised of cash and the assumption
of certain Voicecom liabilities. In accordance with SFAS No. 144, the transaction was accounted for as a discontinued operation in the first quarter of 2002. The Voicecom discontinued operations included the loss from operations through the closing
date and the loss on disposal. See Note 9  Acquisitions and Dispositions to the Consolidated Financial Statements.



During the fourth quarter of 2002, the Company assessed the Voicecom liabilities that were retained at the time of the sale and determined, based upon the
activity in these accounts and the passage of time, that certain of these liabilities were no longer required. Thus, in the fourth quarter of 2002 an adjustment was made to these estimates reducing the loss on discontinued operations of
approximately $2.9 million, net of taxes.



Of the Voicecom
liabilities, approximately $4.3 million represents capital leases guaranteed by the Company.



Effective income tax rate



In 2002, 2001 and 2000, the Companys effective income tax rate varied from the statutory rate, primarily as a result of nondeductible goodwill amortization and asset impairments associated with the Companys acquisitions that
have been accounted for under the purchase method of accounting, and changes in calculating allowances and estimates. Changes in valuations allowances and estimates are required when facts and circumstances indicate that realization of tax benefits
or the actual amount of taxes expected to be paid has changed. During the year ending December 31, 2002 the Company realized tax benefits of approximately $5.6 million of which approximately $1.0 million and $4.6 million were realized in the third
and fourth quarters, respectively, due to changes in previous estimate. See Note 21Income Taxes to the Notes to Consolidated Financial Statements for additional information.



The deferred tax assets and liabilities contain a significant accrual for
certain tax events in 2003. If future facts and circumstances indicate this accrual is unnecessary, the elimination of this accrual will have a material impact on the Companys financial statements in the future.



Liquidity and capital resources



As of December 31, 2002, the Company had $68.8 million of cash and cash
equivalents compared to $48.0 million at December 31, 2001. Cash balances residing outside of the United States at December 31, 2002 were $10.3 million compared to $14.5 million at December 31, 2001. Net working capital at December 31, 2002 was
$62.1 million compared to $13.1 million at December 31, 2001.



Cash
provided by operating activities



Consolidated
operating cash flows from continuing operations were $37.2 million, $29.0 million and $7.5 million in 2002, 2001 and 2000, respectively. Consolidated operating cash flows from continuing operations increased $8.2 million from 2001 to 2002 to $37.2
million. In 2002, net income from continuing operations, adjusted for the non-cash items of depreciation, amortization and asset impairment, and gain on sale of marketable securities, generated cash of $49.1 million. Other significant generators of
operating cash were non-cash expenses paid with equity, consisting of employee compensation of $1.9 million and a legal settlement of $1.3 million. Other significant areas in which cash was generated (consumed) in the balance sheet were through the
increase in accounts receivable of $(2.4) million, payment of accrued expenses of $(17.7) million, a decrease in prepaid expenses and other assets of $3.6 million and a decrease in deferred income taxes of $2.5 million. Consolidated operating cash
flows from continuing operations increased $21.5 million from 2000 to 2001 to $29.0 million. In 2001, net income from continuing operations, adjusted for the non-cash items of depreciation, amortization and asset impairment, and gain on sale of
marketable securities, generated cash of $30.7 million. Other significant generators of operating cash



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were non-cash expenses consisting of employee compensation of $20.4 million and a legal settlement of $0.7 million. Other significant areas in which cash was
generated (consumed) in 2001 in the balance sheet were through a decrease in accounts receivable of $6.4 million, an increase in accrued expenses of $0.6, a decrease in prepaid expenses and other assets of $2.9 million and an increase in deferred
income taxes and taxes receivable of $(34.4) million. Consolidated operating cash flows from continuing operations 2000 were $7.5 million. In 2000 net income from continuing operations plus the non-cash items of depreciation, amortization, asset
impairment and gain on sale of marketable securities generated cash of $24.4 million. Other significant generators of operating cash were the non cash expense of employee compensation of $2.1 million and positive net legal settlements of $10.5
million. Other significant areas in which cash was generated (consumed) in 2000 in the balance sheet were through an increase in accounts receivable of $(4.6) million, a decrease in accrued expenses and restructuring costs of $(20.3) million, a
decrease in prepaid expenses and other assets of $4.5 million and an increase in deferred income taxes $(9.2) million.



Cash provided by (used in) investing activities



Consolidated investing activities from continuing operations (used) provided cash of approximately $(6.2) million, $(32.5) million and $3.6 million in
2002, 2001 and 2000, respectively. The decrease in cash used in investing activities from continuing operations of $26.3 million from 2001 to 2002 was the result of proceeds from sale of Voicecom of approximately $7.2 million and the decrease in
capital expenditures of approximately $11.8 as part of the Companys continued efforts to expend resources only on necessary expenditures or those with a high probability of economic benefit. The increase in cash used in investing activities of
$(36.1) million from 2000 to 2001 is related to decreased proceeds from the sale of marketable securities of $(57.6) million, increased capital expenditures of $(2.8) million, reduced investments in PtekVentures portfolio companies of $30.0
million and increased acquisitions of business assets of $(3.3) million.



Cash provided by (used in) financing activities



Consolidated financing activities (used) or provided cash of approximately $(5.9) million, $1.7 million and $(0.6) million in 2002, 2001 and 2000, respectively. The increase in cash used of $(7.5) million from 2001 to 2002 is primarily the
result of additional treasury stock purchases of $(3.5) million in 2002, increased payments under borrowing arrangements of $(2.6) million from the term loans at Premiere Conferencing and the decrease in the proceeds from long term borrowings of
$(2.5) million as a result of a new $4.0 million loan in 2002 for Premiere Conferencing compared to $6.5 million of borrowings in 2001. The Companys financing activities increased $2.2 million from 2000 to 2001 primarily due to proceeds from
borrowing arrangements of $6.5 million, a decrease in the issuance of notes receivables to shareholders of $2.0 million and a decrease in proceeds from the exercise of stock options of $(6.9) million. Principal payments under borrowing arrangements
were primarily attributable to capital lease obligations at Xpedite and an equipment term loan at Premiere Conferencing. Proceeds from borrowing arrangements of $6.5 million are associated with an equipment term loan at Premiere Conferencing. The
shareholder notes receivable issued during 2001 were for prior years taxes on Company stock option exercises by the CEO. In the second quarter of 2000, the Companys Board of Directors authorized a stock repurchase program under which
PTEK may purchase up to 10% of the then outstanding shares of its Common Stock, or approximately 4.8 million shares. During 2002, the Company repurchased approximately 1.8 million shares of its Common Stock under this program for approximately $6.6
million. During 2001, the Company repurchased approximately 1.1 million shares of its Common Stock under this program for approximately $3.1 million. In January 2003, the Companys Board of Directors approved an increase in its 2000 stock
repurchase program by authorizing the repurchase of up to an additional 10% of the Companys outstanding Common Stock, or approximately 5.3 million additional shares of Common Stock.



Commitments and contingencies



At December 31, 2002, the Companys had the following contractual obligations. The Company is primarily obligated under capital leases for networking
equipment, operating leases for network facilities and operating segment headquarters, convertible subordinated notes due on July 1, 2004, semiannual interest payments on the convertible subordinated notes, a lease guaranty in association with its
investment in Webforia, remaining cash payments on prior year acquisitions and telecommunications contractual minimum purchase agreements.



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The following table displays contractual obligations as of December 31, 2002 (in thousands):



|Contractual obligation                            |  | Total Amounts Committed  |         | Payments due by period
|------------------------------------------------- |  | ------------------------ | ------- | ----------------------
|                                                  |  | Years ended December 31,
|                                                  |  | 2003                     |         | 2004                  
|Capital lease obligations                         |  | $                        | 635     |                       
|Operating leases                                  |  |                          | 57,745  |                       
|Convertible subordinated notes                    |  |                          | 172,500 |                       
|Annual interest on convertible subordinated notes |  |                          | 14,878  |                       
|Restructuring Costs                               |  |                          | 1,898   |                       
|United Missouri Bank equipment term loan          |  |                          | 3,748   |                       
|Commercial Federal equipment term loan            |  |                          | 3,756   |                       
|Webforia obligations                              |  |                          | 2,000   |                       
|Telecommunications supply agreements              |  |                          | 25,062  |                       
|Notes payable                                     |  |                          | 75      |                       
|Acquisitions                                      |  |                          | 214     |                       
|                                                  |  |                          |         |                       
|                                                  |  | $                        | 282,511 |                       
|                                                  |  |                          |         |                       



The Company purchases
telecommunication and other network services from MCI under numerous transmission agreements. The Company currently has significant outstanding disputes with MCI regarding charges billed by MCI under these agreements. The Company has asserted that
MCI and its affiliates owe credits exceeding $5.9 million to the Company as of December 31, 2002. MCI, in turn, has disputed a portion of those credits claimed by the Company. In accordance with SFAS No. 5, Accounting for Contingencies,
the Company believes it has appropriately accrued a reasonable estimate for this dispute. If the Company is unable to resolve its billing dispute with MCI or is required to pay MCI an amount greater than is accrued, the Companys financial
condition and results of operations could be materially impacted.



In addition, subsequent to December 31, 2002 Xpedite acquired substantially all of the assets related to the U.S. based e-mail and facsimile messaging business of Cable & Wireless USA, Inc. (C&W), and assumed certain
liabilities, for a total purchase price of $11.0 million. The Company paid $6.0 million in cash at closing, and will pay $5.0 million in 16 equal quarterly installments commencing March 31, 2003.



Capital resources



In June 2002, the Company entered into a term equipment loan with Commercial Federal Bank. The loan proceeds of $4.0 million
were used for equipment purchases associated with the Premiere Conferencing operating segment. The term of the loan is thirty-six months and the annual interest rate is 5.5%. The loan is collateralized by certain fixed assets of the Company. The
loan agreement contains certain covenants that are usual and customary. At December 31, 2002, the Company was in compliance with all covenants under the loan agreement. At December 31, 2002 amounts outstanding on this term loan were $3.5 million.



In September 2001, the Company entered into a term equipment
loan with United Missouri Bank. The loan proceeds of $6.5 million were used for equipment purchases associated with the Premiere Conferencing operating segment. The term of the loan is thirty months and the annual interest rate is 6.0%. The loan is
collateralized by certain fixed assets of the Company. The loan agreement contains certain covenants that are usual and customary. At December 31, 2002, the Company was in compliance with all covenants under the loan agreement. At December 31, 2002
and 2001, amounts outstanding on this term loan were $3.6 million and $6.1 million, respectively.



In June 2001, the Company entered into a capital lease obligation for headquarter expansion at Xpedite for approximately $1.1 million. The term of the
lease is thirty-six months with a yield of 12.75%. At December 31, 2002 and 2001, amounts outstanding on this lease were approximately $0.6 million and $0.9 million, respectively.



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In September 2000, the Company entered into a credit agreement (the Agreement) for a one-year
revolving credit facility with ABN AMRO Bank N.V. (the Bank or Agent). The Agreement provides for borrowings of up to $20.0 million, and is subject to certain covenants that are usual and customary for credit agreements of
this nature. The commitment to provide revolving credit loans under the Agreement terminates 364 days from September 29, 2000, subject to extension. The Company extended the agreement at September 30, 2001 for 364 days. The agreement was amended to
provide for borrowings up to $13.5 million and is subject to certain covenants that management believes are usual and customary for credit agreements of this nature. Amounts outstanding under the Agreement on the expiration date may, at the option
of the Company, either be paid in full or converted to a one-year term loan payable in four equal quarterly installments. Proceeds drawn under the Agreement may be used for capital expenditures, working capital, acquisitions, investments,
refinancing of existing indebtedness, and other general corporate purposes. The annual interest rate applicable to borrowings under the Agreement is, at the Companys option, (i) the Agents Base Rate plus 1.25 percent or (ii) the Euro
Rate (LIBOR) plus 3.50 percent. Amounts committed but not drawn under the Agreement are subject to a commitment fee equal to 0.50 percent per annum. The Company terminated the Agreement on March 26, 2002 in connection with the sale of its Voicecom
business unit.



In July 1997, the Company issued convertible
subordinated notes (Convertible Notes) of $172.5 million that mature on July 1, 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. Beginning in July 2000, the Convertible Notes were redeemable by the Company at a price equal to 103% of the conversion price, declining to 100% at maturity with accrued
interest. The annual interest commitment associated with these notes is $9.9 million and is paid semiannually on July 1 and January 1 of each year.



Liquidity



As of December 31, 2002, the Company had $68.8 million of cash and cash equivalents, and $0.6 million of marketable securities available for sale. The
Company generated positive operating cash flows from each of its operating segments for the year ended December 31, 2002. Each operating segment had sufficient cash flows from operations to fund capital expenditure requirements and to service
existing debt obligations of the Company. Management believes that the Company will generate adequate operating cash flows for capital expenditure needs and contractual commitments for at least the next 12 months.



In July 1997, the Company issued convertible subordinated notes
(Convertible Notes) of $172.5 million that mature on July 1, 2004 and bear interest at 53/4%. 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. Beginning in July 2000, the Convertible Notes were
redeemable by the Company at a price equal to 103% of the conversion price, declining to 100% at maturity with accrued interest. The outstanding balance of the Convertible Notes at December 31, 2002 was $ 172.5 million. The annual interest
commitment associated with the remaining Convertible Notes is $9.9 million and is paid semi-annually on July 1 and January 1 of each year. In addition to the Convertible Notes, the Company had $7.7 million of other indebtedness outstanding on
December 31, 2002.



We cannot assure that we will
generate sufficient cash flow from operations to enable us to repay our indebtedness or to fund our other liquidity needs. If we cannot generate sufficient cash flow from operations in the future, we may need to refinance or restructure all or a
portion of our indebtedness on or before maturity. We will continue to evaluate the most efficient use of our capital, and will likely seek strategic alternatives for portions of our business or a refinancing arrangement to address the maturity of
the convertible notes on July 1, 2004. Depending upon market conditions, these alternatives may include purchasing, refinancing or otherwise retiring a portion of the convertible notes in the open market. We cannot assure, however, that we will be
able to timely refinance any of our indebtedness, including the convertible notes, on commercially reasonable terms or at all.



Restricted Stock Exchange Offer



Due to declines in the Companys share price over the course of the last several years, most of the employee and director option holders had options
with exercise prices in excess of the market price of Company stock. In order to provide better performance incentives for employees and directors and to align the employees and directors interests with those of the shareholders, in the
fourth quarter of 2001 the Company offered an



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exchange program in which it granted one restricted share of common stock in exchange for every 2.5 options tendered. Approximately 6.0 million employee and
director stock options were exchanged for approximately 2.4 million shares of restricted stock on December 28, 2001, the date of the exchange. The restricted shares maintain the same vesting schedules as those of the original options exchanged,
except that in the case of tendered options that were vested on the exchange date, the restricted shares received in exchange therefore vested on the day after the exchange date. To the extent options were vested at the exchange date, the Company
recognized equity based compensation expense determined by using the closing price of the Companys common stock at December 28, 2001, which was $3.32 a share. To the extent that restricted shares were received for unvested options exchanged,
this cost was deferred on the balance sheet under the caption Unearned restricted share compensation. This value was also determined using the closing price of the Companys common stock at the date of the exchange. The unearned
restricted share compensation will be recognized as equity based compensation expense as these shares vest. In 2002 approximately 402,000 shares vested and equity based compensation expense of $1.3 million was recognized. Assuming all employees at
December 31, 2002 will remain employed by the Company through their vesting period, the equity based compensation expense in future years resulting from the restricted shares issued in the option exchange will be $0.4 million in 2003 and $0.2
million in 2004. See further discussion in Restricted Stock Exchange Offer section of Note 17Equity Based Compensation Plans.



In accordance with FASB Interpretation No. 44, Accounting For Certain Transactions Involving Stock CompensationAn Interpretation of APB
Opinion No. 25, the Company recorded approximately $2.1 million as unearned compensation for the intrinsic value of the restricted stock on the effective date of the exchange offer, calculated using the closing price of the Companys
common stock on December 28, 2001. The unearned compensation will be amortized to Equity based compensation expense over the vesting period of the restricted stock, of which approximately $1.3 million vested in 2002.



In addition, approximately 890,000 options at December 31, 2001 that were
eligible to be exchanged for restricted stock pursuant to the exchange offer were not tendered. At December 31, 2002 the option count was approximately 627,000 due to the sale of Voicecom and other cancellations of these options. These options will
be subject to variable accounting until such options are exercised, are forfeited, or expire unexercised. These options have exercise prices ranging from $5.32 to $29.25. At December 31, 2002 and 2001, no charge was recorded because the exercise
price of each of the options was greater than the market value of the Companys common stock.



Related Party Transactions



The Company has in the past entered into agreements and arrangements with certain officers, directors and principal shareholders of the Company.



Notes receivable  shareholder



The Company has made loans to the CEO of the Company and a limited partnership in which he has an indirect interest. These loans were made pursuant to the
CEOs then current employment agreement for the exercise price of certain stock options and the taxes related thereto. Each of these loans is evidenced by a recourse promissory note bearing interest at the applicable Federal rate and secured by
the common stock purchased. These loans mature between 2007 and 2010. These loans, including accrued interest, are recorded in the equity section of the balance sheet under the caption Notes receivable, shareholder. At December 31, 2002,
the aggregate amount of these loans was $5.0 million.



Notes receivable
 employees



During 2002, the Company loaned
approximately $2.0 million with recourse to certain members of management to pay taxes in connection with the restricted shares issued in exchange for options in December 2001 and the discretionary restricted shares issued in November 2001. These
loans are due in 2012, accrue interest at a weighted average rate of 5.5%, and are secured by the restricted shares granted. The total interest accrued on these loans as of December 31, 2002 was approximately $0.1 million. The Company is obligated
to make additional loans to pay taxes associated with the future vesting of restricted shares, but the dollar amount of such loans cannot be determined at this time.



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Use of airplane



During 2002, 2001 and 2000, the Company leased the use of an airplane from a limited liability company that is owned 99% by the Companys CEO and
1% by the Company. In connection with this lease arrangement, the Company has incurred costs of $1.9 million, $2.2 million and $1.8 million in 2002, 2001 and 2000, respectively, to pay the expenses of maintaining and operating the airplane.



Loans associated with restricted shares in former affiliates



During the second quarter of 1999, the Company
awarded restricted share grants to the CEO, COO and certain other officers of Company-owned shares held in certain investments in affiliates. For a full discussion of these loans see Loans and note forgiveness associated with restricted shares
in former affiliates and related taxes under Equity Based Compensation Charges in Managements Discussion and Analysis of Financial Condition and Results of Operations above.



Strategic co-marketing arrangement



The Company had a strategic co-marketing arrangement with WebMD, a former
affiliate. The terms of the agreement provided for WebMD to make an annual minimum commitment of $2.5 million for four years to purchase the Companys products. The Company in turn was obligated to purchase portal rights from WebMD for $4.0
million over four years to assist in marketing its products. Under this agreement, which expired on February 17, 2003, the Company recognized revenue of approximately $2.5 million in each of 2002, 2001 and 2000. WebMD also subleased floor space in
the Companys headquarters for approximately $0.7 million in each of the two years ended December 31, 2001 and 2000.



Critical Accounting Policies



Managements Discussion and Analysis of Financial Condition and Results of Operations are based upon the Companys consolidated
financial statements and the notes thereto, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires management to make estimates and judgments
that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. On an ongoing
basis, management evaluates its estimates and judgments, including those related to revenue recognition, allowance for uncollectible accounts, goodwill and other intangible assets, income taxes, investments, restructuring costs and legal
contingencies.



Management bases its estimates and judgments on
historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent
from other sources. There can be no assurance that actual results will not differ from those estimates.



The Company has identified the policies below as critical to its business operations and the understanding of its results of operations. For a detailed
discussion on the application of these and other accounting policies, see Note 1 to the Consolidated Financial Statements.



Revenue recognition.The Company recognizes revenues when persuasive evidence of an arrangement exists, services have been rendered,
the price to the buyer is fixed or determinable, and collectibility is reasonably assured. Revenues consist of fixed monthly fees and usage fees generally based on per minute or transaction rates. Unbilled revenue consists of earned but unbilled
revenue which results from the weekly billing cycle that was implemented at the Premiere Conferencing operating segment during the third quarter of 2002. Deferred revenue consists of payments made by customers in advance of the time services are
rendered. The Companys revenue recognition policies are consistent with the guidance in Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements, as amended by SAB No. 101A and 101B.



Should changes in conditions cause management to determine
these criteria are not met for certain future transactions, revenue recognized for any reporting period could be adversely affected.



Allowance for uncollectible accounts receivable. Prior to the recognition of revenue, the Company makes a decision that collectibility is
reasonably assured. Over time, management analyzes accounts receivable balances,



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historical bad debts, customer concentrations, customer creditworthiness, current economic trends, and changes in the Companys customer payment terms
and trends when evaluating the adequacy of the allowance for uncollectible accounts receivable. Significant management judgment and estimates must be made and used in connection with establishing the allowance for uncollectible accounts receivable
in any accounting period. The accounts receivable balance was $51.9 million and $58.6 million, net of allowance for uncollectible accounts receivable of $7.1 million and $8.3 million, as of December 31, 2002 and 2001, respectively.



If the financial condition of the Companys customers were to
deteriorate, resulting in an impairment to their ability to make payments, additional allowances may be required.



Goodwill and other intangible assets. Purchase accounting requires extensive use of accounting estimates and judgments
to allocate the purchase price to the fair market value of the assets and liabilities purchased. The Company evaluates acquired businesses for potential impairment indicators whenever events or changes in circumstances indicate that the carrying
value may not be recoverable. Factors that management considers important which could trigger an impairment review include the following:



| |  | Significant decrease in the market value of an asset;
| | - | -----------------------------------------------------



| |  | Significant adverse change in physical condition or manner of use of an asset;
| | - | ------------------------------------------------------------------------------



| |  | Significant adverse change in legal factors or negative industry or economic trends;
| | - | ------------------------------------------------------------------------------------



| |  | A current period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with
the use of a long lived asset;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Significant decline in the Companys stock price for a sustained period; and
| | - | ----------------------------------------------------------------------------



| |  | An expectation that, more likely than not, an asset will be sold or otherwise disposed of before the end of its previously estimated useful life.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------



In 2002, Statement of Financial Accounting Standards (SFAS) No.
142, Goodwill and Other Intangible Assets, became effective and as a result, the Company ceased to amortize approximately $123.1 million of goodwill. The Company recorded approximately $67.4 million of goodwill amortization during 2001.
In lieu of amortization, the Company is required to perform an initial impairment review of its goodwill in 2002 and an annual impairment review thereafter. A third party review was completed in the fourth quarter of 2002 and no impairment was
identified. Other intangible assets with finite lives that do not meet the criteria of SFAS No. 142 continue to be amortized in accordance with the adoption of SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.
This pronouncement became effective in 2002. The Company recognizes an impairment loss when the fair value is less than the carrying value of such assets and the carrying value of these assets is not recoverable. The impairment loss, if applicable,
is calculated based on the estimated future cash flows compared to the carrying value of the long-lived asset.



Prior to 2002, when the Company determined that the carrying value of long-lived assets, intangibles and related goodwill may not have been recoverable in
accordance with the indicators of impairment, as stated in SFAS No. 121 Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of the Company recognized an impairment loss when the sum of undiscounted
expected future cash flow was less than the carrying value of such assets. The impairment loss, if applicable, was calculated based on the fair value or sum of the discounted cash flows compared to the carrying value. The discounted cash flow method
uses a discount rate determined by management to be commensurate with the risk inherent in the Companys business model.



See the Asset impairments section of Managements Discussion and Analysis above for a discussion of impairments recorded
during 2002 and 2001. Net intangible assets, long-lived assets and goodwill amounted to $130.9 million and $144.9 million as of December 31, 2002 and 2001, respectively.



Future events could cause the Company to conclude that the current estimates used should be changed and that goodwill
associated with acquired businesses is impaired. Any resulting impairment loss could have a material adverse impact on the Companys financial condition and results of operations.



Income taxes.As part of the process of preparing the Companys consolidated financial statements
the Company is required to estimate its taxes in each of the jurisdictions of operation. This process involves management estimating the actual current tax exposure together with assessing temporary differences resulting from differing treatment of
items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within the consolidated balance sheets. The Company must then assess the likelihood



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that the deferred tax assets will be recovered from future taxable income and to the extent we believe that recovery is not likely, the Company must
establish a valuation allowance. To the extent the Company establishes a valuation allowance or increases this allowance in a period, an expense is recorded within the tax provision in the consolidated statement of operations.



Significant management judgment is required in determining the Companys
provision for income taxes, its deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. The net deferred tax asset as of December 31, 2002 and 2001 was $22.4 million and $20.7 million, net of a
valuation allowance of $5.2 million and $28.2 million, respectively. The Company has recorded the valuation allowance due to uncertainties related to its ability to utilize some of the deferred tax assets, primarily consisting of certain net
operating losses carried forward and foreign tax credits, before they expire. The valuation allowance is based on the Companys estimates of taxable income by jurisdiction in which it operates and the period over which the deferred tax assets
will be recoverable.



In the event that actual results differ
from these estimates or the Company adjusts these estimates in future periods, the Company may need to establish an additional valuation allowance that could materially impact the Companys financial condition and results of operations.



The Company also records a provision for certain
international, federal and state tax contingencies based on the likelihood of obligation, when needed. In the normal course of business, the Company is subject to challenges from U.S. and non-U.S. tax authorities regarding the amount of taxes due.
These challenges may result in adjustments of the timing or amount of taxable income or deductions or the allocation of income among tax jurisdictions. Further, during the ordinary course of business other changing facts and circumstances may impact
the Companys ability to utilize tax benefits as well as the estimated taxes to be paid in future periods. Management believes it has appropriately accrued for tax exposures. If the Company is required to pay an amount less than or exceeding
its provisions for uncertain tax matters, the financial impact will be reflected in the period in which the matter is resolved. In the event that actual results differ from these estimates, the Company may need to adjust tax accounts which could
materially impact its financial condition and results of operations.



Investments.The Company has historically made investments in various companies that are engaged in emerging technologies related to the Internet. Either the cost or equity method is used to account for these
investments in accordance with Accounting Principles Board (APB) Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock. In addition, the Company has investments in equity securities of companies with
readily determinable fair values accounted for in accordance with FASB 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 re-evaluation of such designation as of each balance sheet date.



The Company records an investment impairment charge when it believes an investment has experienced a decline in value that
is other than temporary. See the Asset impairments and obligations  investments section of Managements Discussion and Analysis above for a discussion of investment impairments recorded during 2001 and 2000. Total
investments, in the form of marketable securities available for sale, as of December 31, 2002 and 2001 were $0.6 million and $1.5 million, respectively.



Future adverse changes in market conditions could result in losses or an inability to recover the carrying value of the investments that may not be
reflected in an investments current carrying value, thereby possibly requiring an impairment charge in the future.



Restructuring costs. The restructuring accruals are based on certain estimates and judgments related to contractual obligations and related
costs. The restructuring accruals related to contractual lease obligations could be materially affected by factors such as the Companys ability to secure sublessees, the creditworthiness of sublessees and the success at negotiating early
termination agreements with lessors.



In the event that actual
results differ from these estimates, the Company may need to establish additional restructuring accruals or reverse accrual amounts accordingly.



Legal contingencies. The Company is currently involved in certain legal proceedings as disclosed in Item 3, Legal Proceedings,
of this report. Management has accrued an estimate of the probable costs for the resolution of these claims. This estimate has been developed in consultation with outside counsel handling these matters and is based upon an analysis of potential
results, assuming a combination of litigation and settlement strategies.



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The Company does not believe these proceedings 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.



The above listing is not intended to be a comprehensive list of all of the Companys estimates and judgments or accounting policies. In many cases,
the accounting treatment of a particular transaction is specifically dictated by generally accepted accounting principles, with no need for managements judgment in their application. There are also areas in which managements judgment in
selecting any available alternative would not produce a materially different result. These estimates are subject to change and the Company adjusts the financial impact in the period in which they are resolved. See the audited consolidated financial
statements and notes thereto which contain accounting policies and other disclosures required by generally accepted accounting principles.



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New Accounting Pronouncements



In January 2003, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 46 (FIN
46), Consolidation of Variable Interest Entities. This interpretation of Accounting Research Bulletin 51, Consolidated Financial Statements, addresses consolidation by business enterprises of variable interest entities
that possess certain characteristics. The interpretation requires that if a business enterprise has a controlling financial interest in a variable interest entity, the assets, liabilities, and results of the activities of the variable interest
entity must be included in the consolidated financial statements with those of the business enterprise. This interpretation applies immediately to variable interest entities created after January 31, 2003 and to variable interest entities in which
an enterprise obtains an interest after that date. We do not have any ownership in any variable interest entities as of December 31, 2002. We will apply the consolidation requirement of the interpretation in future periods if we should own any
interest in any variable interest entity.



In December 2002,
the FASB issued SFAS No. 148, Accounting for Stock Based Compensation - Transition and Disclosure (SFAS No. 148), which amends SFAS No. 123, Accounting for Stock Based Compensation (SFAS No. 123). SFAS
No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock based employee compensation. SFAS No. 148 also requires that disclosures of the pro forma effect of using the fair value
method of accounting for stock based employee compensation be displayed more prominently and in a tabular format. Additionally, SFAS No. 148 requires disclosure of the pro forma effect in interim financial statements. See Equity Based
Compensation Plans section of Note 2 Significant Accounting Policies for the additional annual disclosures made to comply with SFAS No. 148. The interim disclosure provisions are effective for financial reports containing
financial statements for interim periods beginning after December 15, 2002. As the Company does not intend to adopt the provisions of SFAS No. 123, it does not expect the transition provisions of SFAS No. 148 to have a material effect on its results
of operations or financial condition.



In November 2002, the
Emerging Issues Task Force (EITF) reached a consensus on issue 00-21, Revenue Arrangements with Multiple Deliverables (EITF 00-21). EITF 00-21 addresses revenue recognition on arrangements encompassing multiple
elements that are delivered at different points in tine, defining criteria that must be met for elements to be considered to be a separate unit of accounting. If an element is determined to be a separate unit of accounting, the revenue for the
element is recognized at the time of delivery. EITF 00-21 is effective for revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The Company does not expect that the pronouncements will have a material impact on its
results of operations or financial condition.



In November
2002, the FASB issued FASB Interpretation No. 45 (FIN 45), Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, an interpretation of FASB Statements No. 5, 57,
and 107 and Rescission of FASB interpretation No. 34. The disclosure provisions of the interpretation are effective for financial statements of interim or annual periods that end after December 15, 2002. However, the provisions for initial
recognition and measurement are effective on a prospective basis for guarantees that are issued or modified after December 31, 2002, irrespective of a guarantors year-end.



In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities
(SFAS No. 146), which addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring) (EITF 94-3). The principal difference between SFAS No. 146 and EITF 94-3 relates to SFAS No. 146 requirements for recognition of a liability for a cost
associated with an exit or disposal activity. SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under EITF 94-3, a liability for an exit cost as generally
defined in EITF 94-3 was recognized at the date of an entitys commitment to an exit plan. The Company will be required to adopt SFAS No. 146 for the fiscal year beginning January 1, 2003, and is currently evaluating this standard and the
impact it will have on the consolidated financial statements.



In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements Nos. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections (SFAS No. 145). Among other things, this statement rescinds
SFAS No. 4, Reporting Gains and Losses from Extinguishment of Debt (SFAS No. 4), which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of the related
income tax effect. As a result, the criteria in Accounting Principles Board Opinion No. 30, Reporting the Results of Operations  Reporting the Effects of Disposal of a Segment of a



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Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, which requires gains and losses on extinguishments of debt to
be classified as income or loss from continuing operations, will now be applied. The Company will be required to adopt SFAS No. 145 for the fiscal year beginning January 1, 2003, and is currently evaluating this standard and the impact it will have
on the consolidated financial statements.



In October 2001, the
FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long- Lived Assets (SFAS No. 144). SFAS No. 144 establishes accounting and reporting standards for the impairment and disposition of long- lived assets,
and is effective for financial statements issued for fiscal years beginning after December 15, 2001. The Company adopted SFAS No. 144 for the fiscal year beginning January 1, 2002.



In August 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations. It addresses
accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This statement requires that the fair value of a liability for an asset retirement obligation be
recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. The liability is accreted to its
present value each period while the cost is depreciated over its useful life. SFAS No. 143 is effective for financial statements issued for fiscal years beginning after June 15, 2002. The Company adopted SFAS No. 143 for the fiscal year beginning
January 1, 2002.



In June 2001, the FASB issued SFAS No. 142,
Accounting for Goodwill and Other Intangible Assets (SFAS No. 142). It requires that goodwill and certain intangible assets will no longer be subject to amortization, but instead will be subject to a periodic impairment
assessment by applying a fair value based test. The Companys required adoption date is January 1, 2002. Adoption of SFAS No. 142 will have a material effect on the Companys results of operations due to the cessation of goodwill
amortization on January 1, 2002. The balance of goodwill is $123.1 million as of December 31, 2002 and 2001. The Company adopted SFAS No. 142 for the fiscal year beginning January 1, 2002.



Subsequent Events



On January 16, 2003, Xpedite acquired substantially all of the assets related to the U.S. based e-mail and facsimile
messaging business of Cable & Wireless USA, Inc. (C&W), and assumed certain liabilities, for a total purchase price of $11.4 million. The Company paid $6.0 million in cash at closing, $0.4 million in transaction and closing costs
and will pay $5.0 million in 16 equal quarterly installments commencing with the quarter ended March 31, 2003. The Company followed SFAS No. 141, Business Combinations, and approximately $1.1 million of the aggregate purchase price has
been allocated to acquire property, plant and equipment, and approximately $10.3 million of the aggregate purchase price has been allocated to identifiable customer lists which are being amortized over a five-year useful life.



On February 27, 2003, the Company entered into a Share Purchase Agreement and
Note Purchase Agreement with AT&T Corp. (AT&T) pursuant to which the Company has agreed to purchase from AT&T, and AT&T has agreed to sell to the Company, 1,423,980 shares of the Class A Common Stock (the
Shares) and a Promissory Note of EasyLink Services Corporation (NASDAQ: EASY) (EasyLink) in the stated principal amount of $10.0 million (the Note). The obligation of each party to consummate the transactions
contemplated by each such purchase agreement is conditioned upon, among other things, the satisfaction or waiver of the conditions to such partys obligation to consummate the transactions contemplated by the other purchase agreement.



The Note is secured by assets representing the substantial
portion of EasyLinks operations. Principal and accrued interest on the Note, aggregating over $12.0 million, is payable in 13 quarterly installments beginning June 1, 2003. The principal and accrued interest obligations bear interest at a rate
of 12% per annum until paid. The shares to be purchased represent approximately 8.9% of the outstanding Class A common shares and 8.4% of the total outstanding common shares of EasyLink.



As consideration for the sale of the Shares and the Note, the Company has agreed to pay AT&T $4.0 million in cash and to
issue to AT&T a warrant to acquire 250,000 shares of the Common Stock of the Company. The warrant will be exercisable at any time during the seven years following the date of issuance, at an exercise price to be determined on the basis of
trading prices of the Companys Common Stock during the ten trading days prior to the issuance of the warrant. The aggregate purchase price for the Shares, as set forth in the Share Purchase Agreement, is $825,908, or $0.58 per share, which
amount equals the average of the high and low selling price of the Class A Common Stock on the Nasdaq National Market during the five trading days immediately preceding the



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date of the Share Purchase Agreement. Despite the Share Purchase Agreement stating such separate purchase price for the Shares, the Company views its
purchase of the Shares and the Note as a single transaction, for the total consideration set forth above. The cash consideration for the purchase of the Shares and the Note will be paid out of the working capital of PTEK.



On March 3, 2003, EasyLink demanded that the Company and AT&T terminate
their agreements for the purchase and sale of the Note and the Shares. In connection with such demand, EasyLink has asserted that AT&T and PTEK may have violated commitments of AT&T and the Company to EasyLink and that the Company has
engaged in certain improper activities with respect to EasyLink and in connection with the transaction. The Company considers these allegations to be groundless and has denied each of them. PTEK expects to consummate the purchase of the Note and
Shares, subject to the conditions set forth in the respective purchase agreements.



On March 25, 2003, EasyLink filed a lawsuit against the Company, Xpedite and AT&T. See Item 3 Legal Proceedings for a detailed discussion of this litigation.



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FORWARD LOOKING STATEMENTS



When used in this Form 10-K/A and elsewhere by management or PTEK from time to time, the words believes,
anticipates, expects, will may, should, intends, plans, estimates, predicts, potential, continue and similar
expressions are intended to identify forward-looking statements concerning our operations, economic performance and financial condition. These include, but are not limited to, forward-looking statements about our business strategy and means to
implement the strategy, our objectives, the amount of future capital expenditures, the likelihood of our success in developing and introducing new products and services and expanding our business, and the timing of the introduction of new and
modified products and services. For those statements, we claim 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 that are inherently subject to significant risks and uncertainties, many of which are beyond our control, 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 PTEKs forward-looking statements, including the following factors, which are updated through the date of filing of this Form 10-K/A:



| |  | Our ability to respond to rapid technological change, the development of alternatives to our products and services and the risk of obsolescence of our products, services and
technology;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Market acceptance of new products and services;
| | - | -----------------------------------------------



| |  | Our ability to manage our growth;
| | - | ---------------------------------



| |  | Costs or difficulties related to the integration of businesses and technologies, if any, acquired or that may be acquired by us 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 our 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 or adverse results of current or future infringements claims;
| | - | ----------------------------------------------------------------------------------------------------------------------



| |  | Our ability to service or repay all or a portion of our convertible notes issued to the public, a portion of which mature on July 1, 2004 and the remainder of which mature on August
15, 2008;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The failure of the purchaser to pay the liabilities assumed in, or incurred after, the sale of the Voicecom business unit;
| | - | --------------------------------------------------------------------------------------------------------------------------



| |  | Our services may be interrupted due to failure of the platforms and network infrastructure utilized in providing our services;
| | - | ------------------------------------------------------------------------------------------------------------------------------



| |  | Our services may be interrupted and our costs may increase due to the filing by MCI and Global Crossing for protection under Chapter 11 of the United States Bankruptcy Code and
MCIs notice of rejection of some (if not all) of our telecommunication service agreements;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Competitive pressures among communications services providers, including pricing pressures, may increase significantly, particularly after the emergence of MCI and Global Crossing
from protection under Chapter 11 of the United States Bankruptcy Code;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Domestic and international terrorist activity, war and political instability may adversely affect the level of services utilized by our customers and the ability of those customers
to pay for services utilized;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  | Risks associated with expansion of our international operations;
| | - | ----------------------------------------------------------------



| |  | General economic or business conditions, internationally, nationally or in the local jurisdiction in which we are doing business, may be less favorable than expected;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Legislative or regulatory changes, such as the recent Federal Communications Commissions revisions to the rules interpreting the Telephone Consumer Protection Act of 1991, may
adversely affect the businesses in which we are engaged;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Changes in the securities markets may negatively impact us;
| | - | -----------------------------------------------------------



| |  | Increased leverage in the future may harm our financial condition and results of operations;
| | - | --------------------------------------------------------------------------------------------



| |  | Our dependence on our subsidiaries for cash flow may negatively affect our business and our ability to pay amounts due under our indebtedness;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  | Our Risk Factors filed as Exhibit 99.1 to our current Report on Form 8-K dated December 19, 2003; and
| | - | -----------------------------------------------------------------------------------------------------



| |  | Factors described from time to time in our press releases, reports and other filings made with the Securities and Exchange Commission.
| | - | --------------------------------------------------------------------------------------------------------------------------------------



PTEK cautions that these factors are not exclusive. Consequently, all of the
forward-looking statements made in this Form 10-K/A and in other documents filed with the Securities and Exchange Commission 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/A. PTEK 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/A, or the date of the statement, if a different date.



Item 7A. Quantitative and Qualitative Disclosures About Market Risk



The Company is exposed to market risk from changes in interest rates and foreign currency exchange rates. The Company manages its exposure to these market
risks through its regular operating and financing activities. Derivative instruments are not currently used and, if utilized, are employed as risk management tools and not for trading purposes.



At December 31, 2002, no derivative financial instruments were outstanding to
hedge interest rate risk. 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, 2002 and 2001, by $17.7 million and $22.2
million, respectively.



Approximately 33.0% and 32.7% of the
Companys sales from continuing operations and 33.2% and 19.2% of its operating costs and expenses from continuing operations were transacted in foreign currencies in 2002 and 2001, respectively. As a result, fluctuations in exchange rates
impact the amount of the Companys reported sales and operating income. A hypothetical positive or negative change of 10% in foreign currency exchange rates would positively or negatively change revenue for 2002 and 2001 by approximately $11.2
million and $10.8 million and operating expenses for 2002 and 2001 by approximately $10.5 million and $9.8 million, respectively. Historically, the Companys principal exposure has been related to local currency sales, operating costs and
expenses in Europe and Asia (principally the United Kingdom, Germany and Japan). The Company has not used derivatives to manage foreign currency exchange risk and no foreign currency exchange derivatives were outstanding at December 31, 2002.



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Item 8. Financial Statements and Supplementary Data



PTEK Holdings, Inc. and Subsidiaries Index to Consolidated Financial Statements



|                                                                                              |  | Page
|--------------------------------------------------------------------------------------------- |  | ----
|Report of Independent Accountants                                                             |  | 42  
|Consolidated Balance Sheets, December 31, 2002 and 2001                                       |  | 43  
|Consolidated Statements of Operations, Years Ended December 31, 2002, 2001 and 2000           |  | 44  
|Consolidated Statements of Shareholders Equity, Years Ended December 31, 2002, 2001 and 2000 |  | 45  
|Consolidated Statements of Cash Flows, Years Ended December 31, 2002, 2001 and 2000           |  | 46  
|Notes to Consolidated Financial Statements                                                    |  | 47  



41



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##### Table of Contents

Report of Independent Accountants



To the Board of
Directors and Shareholders of PTEK Holdings, Inc.:



In our
opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations, shareholders equity, and cash flows present fairly, in all material respects, the financial position of PTEK Holdings, Inc. and its
subsidiaries at December 31, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2002 in conformity with accounting principles generally accepted in the United
States of America. These financial statements are the responsibility of the Companys management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.



As discussed in Note 2 to the consolidated financial statements, the Company adopted Financial Accounting Standards Board Statement No. 142 on January 1, 2002.



/s/ PricewaterhouseCoopers LLP



Atlanta, Georgia

March 27, 2003



42



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PTEK HOLDINGS, INC. AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEETS

December 31, 2002 and 2001

(in thousands, except share data)



|                                                                                                                                                                                                                     |  | 2002 |          |   | 2001 |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | -
|ASSETS                                                                                                                                                                                                               |  |      |          |   |      |  
|CURRENT ASSETS                                                                                                                                                                                                       |  |      |          |   |      |  
|Cash and cash equivalents                                                                                                                                                                                            |  | $    | 68,777   |   |      | $
|Marketable securities, available for sale                                                                                                                                                                            |  |      | 641      |   |      |  
|Accounts receivable (less allowances of $7,074 and $8,278, respectively)                                                                                                                                             |  |      | 51,909   |   |      |  
|Federal income tax receivable                                                                                                                                                                                        |  |      |         |   |      |  
|Prepaid expenses and other current assets                                                                                                                                                                            |  |      | 8,872    |   |      |  
|Deferred income taxes, net                                                                                                                                                                                           |  |      | 15,801   |   |      |  
|                                                                                                                                                                                                                     |  |      |          |   |      |  
|Total current assets                                                                                                                                                                                                 |  |      | 146,000  |   |      |  
|                                                                                                                                                                                                                     |  |     
|PROPERTY AND EQUIPMENT, NET                                                                                                                                                                                          |  |      | 63,148   |   |      |  
|                                                                                                                                                                                                                     |  |     
|OTHER ASSETS                                                                                                                                                                                                         |  |      |          |   |      |  
|Goodwill, net of amortization                                                                                                                                                                                        |  |      | 123,066  |   |      |  
|Intangibles, net of amortization                                                                                                                                                                                     |  |      | 7,802    |   |      |  
|Deferred income taxes, net                                                                                                                                                                                           |  |      | 6,648    |   |      |  
|Notes receivable-employees                                                                                                                                                                                           |  |      | 2,083    |   |      |  
|Other assets                                                                                                                                                                                                         |  |      | 3,346    |   |      |  
|                                                                                                                                                                                                                     |  |      |          |   |      |  
|                                                                                                                                                                                                                     |  | $    | 352,093  |   |      | $
|                                                                                                                                                                                                                     |  |      |          |   |      |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                                                                                 |  |      |          |   |      |  
|                                                                                                                                                                                                                     |  |     
|CURRENT LIABILITIES                                                                                                                                                                                                  |  |      |          |   |      |  
|Accounts payable                                                                                                                                                                                                     |  | $    | 37,110   |   |      | $
|Deferred revenue                                                                                                                                                                                                     |  |      |         |   |      |  
|Accrued taxes                                                                                                                                                                                                        |  |      | 8,250    |   |      |  
|Accrued expenses                                                                                                                                                                                                     |  |      | 32,319   |   |      |  
|Current maturities of long-term debt and capital lease obligations                                                                                                                                                   |  |      | 4,320    |   |      |  
|Accrued restructuring costs                                                                                                                                                                                          |  |      | 1,898    |   |      |  
|                                                                                                                                                                                                                     |  |      |          |   |      |  
|Total current liabilities                                                                                                                                                                                            |  |      | 83,897   |   |      |  
|                                                                                                                                                                                                                     |  |      |          |   |      |  
|LONG-TERM LIABILITIES                                                                                                                                                                                                |  |      |          |   |      |  
|Convertible subordinated notes                                                                                                                                                                                       |  |      | 172,500  |   |      |  
|Long-term debt and capital lease obligations                                                                                                                                                                         |  |      | 3,407    |   |      |  
|Accrued expenses                                                                                                                                                                                                     |  |      | 7,951    |   |      |  
|                                                                                                                                                                                                                     |  |      |          |   |      |  
|Total long-term liabilities                                                                                                                                                                                          |  |      | 183,858  |   |      |  
|                                                                                                                                                                                                                     |  |      |          |   |      |  
|COMMITMENTS AND CONTINGENCIES (Note 20)                                                                                                                                                                              |  |      |          |   |      |  
|                                                                                                                                                                                                                     |  |     
|SHAREHOLDERS EQUITY                                                                                                                                                                                                 |  |      |          |   |      |  
|Common stock, $.01 par value; 150,000,000 shares authorized, 58,733,628 and 56,984,575 shares issued in 2002 and 2001,
respectively, and 53,540,828 and 53,584,639 shares outstanding in 2002 and 2001, respectively |  |      | 587      |   |      |  
|Unrealized gain on marketable securities, available for sale                                                                                                                                                         |  |      | 276      |   |      |  
|Additional paid-in capital                                                                                                                                                                                           |  |      | 603,883  |   |      |  
|Unearned restricted share compensation                                                                                                                                                                               |  |      | (1,913   | ) |      |  
|Treasury stock, at cost (5,192,800 and 3,399,936 shares for 2002 and 2001, respectively)                                                                                                                             |  |      | (22,112  | ) |      |  
|Notes receivable, shareholder                                                                                                                                                                                        |  |      | (5,042   | ) |      |  
|Cumulative translation adjustment                                                                                                                                                                                    |  |      | (2,810   | ) |      |  
|Accumulated deficit                                                                                                                                                                                                  |  |      | (488,531 | ) |      |  
|                                                                                                                                                                                                                     |  |      |          |   |      |  
|Total shareholders equity                                                                                                                                                                                           |  |      | 84,338   |   |      |  
|                                                                                                                                                                                                                     |  |      |          |   |      |  
|                                                                                                                                                                                                                     |  | $    | 352,093  |   |      | $
|                                                                                                                                                                                                                     |  |      |          |   |      |  



Accompanying notes are
integral to these consolidated financial statements



43



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##### Table of Contents

PTEK HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31, 2002, 2001 and 2000

(in thousands, except share and per share data)



|                                                                                 |  | 2002 |         |   | 2001 |   |          | 2000 | 
|-------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | -------- | ---- | 
|Revenues                                                                         |  | $    | 341,253 |   |      | $ | 330,416  |      | 
|Cost of revenues (exclusive of depreciation shown separately below)              |  |      | 117,663 |   |      |   | 125,276  |      | 
|Gross Margin                                                                     |  |      | 223,590 |   |      |   | 205,140  |      | 
|                                                                                 |  |      |         |   |      |   |          |      | 
|Operating Expenses                                                               |  |      |         |   |      |   |          |      | 
|Selling and marketing                                                            |  |      | 88,970  |   |      |   | 75,494   |      | 
|General and administrative                                                       |  |      | 55,845  |   |      |   | 58,291   |      | 
|Research and development                                                         |  |      | 7,236   |   |      |   | 11,073   |      | 
|Depreciation                                                                     |  |      | 21,526  |   |      |   | 20,707   |      | 
|Amortization                                                                     |  |      | 10,876  |   |      |   | 88,553   |      | 
|Restructuring costs                                                              |  |      | 1,834   |   |      |   | 4,608    |      | 
|Asset impairments                                                                |  |      | 3,202   |   |      |   | 100,796  |      | 
|Equity based compensation                                                        |  |      | 1,871   |   |      |   | 20,429   |      | 
|Net legal settlements and related expenses                                       |  |      | 7,325   |   |      |   | 2,331    |      | 
|                                                                                 |  |      |         |   |      |   |          |      | 
|Total operating expenses                                                         |  |      | 198,685 |   |      |   | 382,282  |      | 
|                                                                                 |  |      |         |   |      |   |          |      | 
|Operating Income (Loss)                                                          |  |      | 24,905  |   |      |   | (177,142 | )    | 
|                                                                                 |  |      |        
|Other (Expense) Income                                                           |  |      |         |   |      |   |          |      | 
|Interest expense                                                                 |  |      | (11,510 | ) |      |   | (11,544  | )    | 
|Interest income                                                                  |  |      | 1,482   |   |      |   | 647      |      | 
|Gain on sale of marketable securities                                            |  |      | 930     |   |      |   | 2,971    |      | 
|Asset impairment and obligations - investments                                   |  |      |        |   |      |   | (31,695  | )    | 
|Amortization of goodwill - equity investments                                    |  |      |        |   |      |   | (1,612   | )    | 
|Other, net                                                                       |  |      | (8      | ) |      |   | (2,626   | )    | 
|                                                                                 |  |      |         |   |      |   |          |      | 
|Total other (expense) income                                                     |  |      | (9,106  | ) |      |   | (43,859  | )    | 
|                                                                                 |  |      |         |   |      |   |          |      | 
|Income (Loss) From Continuing Operations Before Income Taxes                     |  |      | 15,799  |   |      |   | (221,001 | )    | 
|Income Tax Expense (Benefit)                                                     |  |      | 1,376   |   |      |   | (11,343  | )    | 
|                                                                                 |  |      |         |   |      |   |          |      | 
|Income (Loss) from Continuing Operations                                         |  | $    | 14,423  |   |      | $ | (209,658 | )    | 
|                                                                                 |  |      |         |   |      |   |          |      | 
|Discontinued Operation:                                                          |  |      |         |   |      |   |          |      | 
|Loss from operations of Voicecom (including loss on disposal of $10,343 in 2002) |  |      | (16,172 | ) |      |   | (53,162  | )    | 
|Income tax benefit                                                               |  |      | (3,640  | ) |      |   | (20,700  | )    | 
|                                                                                 |  |      |         |   |      |   |          |      | 
|Loss on discontinued operations                                                  |  |      | (12,532 | ) |      |   | (32,462  | )    | 
|                                                                                 |  |      |         |   |      |   |          |      | 
|Net Income (Loss)                                                                |  | $    | 1,891   |   |      | $ | (242,120 | )    | 
|                                                                                 |  |      |         |   |      |   |          |      | 
|Basic Earnings (Loss) Per Share:                                                 |  |      |         |   |      |   |          |      | 
|Continuing operations                                                            |  | $    | 0.27    |   |      | $ | (4.19    | )    | 
|Discontinued operations                                                          |  |      | (0.23   | ) |      |   | (0.65    | )    | 
|                                                                                 |  |      |         |   |      |   |          |      | 
|Net income (loss)                                                                |  | $    | 0.04    |   |      | $ | (4.84    | )    | 
|                                                                                 |  |      |         |   |      |   |          |      | 
|Diluted Earnings (Loss) Per Share:                                               |  |      |         |   |      |   |          |      | 
|Continuing operations                                                            |  | $    | 0.26    |   |      | $ | (4.19    | )    | 
|Discontinued operations                                                          |  |      | (0.23   | ) |      |   | (0.65    | )    | 
|                                                                                 |  |      |         |   |      |   |          |      | 
|Net income (loss)                                                                |  | $    | 0.03    |   |      | $ | (4.84    | )    | 
|                                                                                 |  |      |         |   |      |   |          |      | 
|Weighted Average Shares Outstanding:                                             |  |      |         |   |      |   |          |      | 
|Basic                                                                            |  |      | 53,550  |   |      |   | 49,998   |      | 
|                                                                                 |  |      |         |   |      |   |          |      | 
|Diluted                                                                          |  |      | 56,262  |   |      |   | 49,998   |      | 
|                                                                                 |  |      |         |   |      |   |          |      | 



Accompanying notes are
integral to these consolidated financial statements.



44



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##### Table of Contents

PTEK HOLDINGS, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY

Years Ended December 31, 2002, 2001 and 2000

(in thousands)



|                                                                          |  | CommonStockIssued |     |   | AdditionalPaid-InCapital |   |         | NoteReceivableShareholder |  |   | TreasuryStock |   |  | Accumulated Deficit |         |   | UnrealizedGain onMarketableSecurities |   |          | UnearnedRestricted ShareCompensation |  |   | CumulativeTranslationAdjustment |   |  | TotalShareholdersEquity |       
|------------------------------------------------------------------------- |  | ----------------- | --- | - | ------------------------ | - | ------- | ------------------------- |  | - | ------------- | - |  | ------------------- | ------- | - | ------------------------------------- | - | -------- | ------------------------------------ |  | - | ------------------------------- | - |  | ------------------------ | ------
|BALANCE, December 31, 1999                                                |  | $                 | 481 |   |                          | $ | 570,054 |                           |  | $ | (1,047        | ) |  | $                   | (9,133  | ) |                                       | $ | (189,436 | )                                    |  | $ | 50,774                          |   |  | $                        |      
|                                                                          |  |                   |     |   |                          |   |         |                           |  |   |               |   |  |                     |         |   |                                       |   |          |                                      |  |   |                                 |   |  |                          |       
|Comprehensive Loss:                                                       |  |                   |     |   |                          |   |         |                           |  |   |               |   |  |                     |         |   |                                       |   |          |                                      |  |   |                                 |   |  |                          |       
|Net loss                                                                  |  |                   |    |   |                          |   |        |                           |  |   |              |   |  |                     |        |   |                                       |   | (58,866  | )                                    |  |   |                                |   |  |                          |      
|Translation adjustments                                                   |  |                   |    |   |                          |   |        |                           |  |   |              |   |  |                     |        |   |                                       |   |         |                                      |  |   |                                |   |  |                          |      
|Change in unrealized net gain (loss) on marketable securities, net of tax |  |                   |    |   |                          |   |        |                           |  |   |              |   |  |                     |        |   |                                       |   |         |                                      |  |   | (48,458                         | ) |  |                          |      
|                                                                          |  |                   |     |   |                          |   |         |                           |  |   |               |   |  |                     |         |   |                                       |   |          |                                      |  |   |                                 |   |  |                          |       
|Comprehensive Loss                                                        |  |                   |     |   |                          |   |         |                           |  |   |               |   |  |                     |         |   |                                       |   |          |                                      |  |   |                                 |   |  |                          |       
|                                                                          |  |                   |     |   |                          |   |         |                           |  |   |               |   |  |                     |         |   |                                       |   |          |                                      |  |   |                                 |   |  |                          |       
|Issuance of common stock:                                                 |  |                   |     |   |                          |   |         |                           |  |   |               |   |  |                     |         |   |                                       |   |          |                                      |  |   |                                 |   |  |                          |       
|Exercise of stock options                                                 |  |                   | 24  |   |                          |   | 6,869   |                           |  |   |              |   |  |                     |        |   |                                       |   |         |                                      |  |   |                                |   |  |                          |      
|Treasury stock purchase                                                   |  |                   |    |   |                          |   |        |                           |  |   |              |   |  |                     | (3,265  | ) |                                       |   |         |                                      |  |   |                                |   |  |                          |      
|401K plan match                                                           |  |                   | 3   |   |                          |   | 1,605   |                           |  |   |              |   |  |                     |        |   |                                       |   |         |                                      |  |   |                                |   |  |                          |      
|Employee stock purchase plan                                              |  |                   | 5   |   |                          |   | 1,373   |                           |  |   |              |   |  |                     |        |   |                                       |   |         |                                      |  |   |                                |   |  |                          |      
|Income tax benefit from exercise of stock options                         |  |                   |    |   |                          |   | 1,573   |                           |  |   |              |   |  |                     |        |   |                                       |   |         |                                      |  |   |                                |   |  |                          |      
|Issuance of shareholder note receivable                                   |  |                   |    |   |                          |   |        |                           |  |   | (2,787        | ) |  |                     |        |   |                                       |   |         |                                      |  |   |                                |   |  |                          |      
|                                                                          |  |                   |     |   |                          |   |         |                           |  |   |               |   |  |                     |         |   |                                       |   |          |                                      |  |   |                                 |   |  |                          |       
|BALANCE, December 31, 2000                                                |  | $                 | 513 |   |                          | $ | 581,474 |                           |  | $ | (3,834        | ) |  | $                   | (12,398 | ) |                                       | $ | (248,302 | )                                    |  | $ | 2,316                           |   |  | $                        |      
|                                                                          |  |                   |     |   |                          |   |         |                           |  |   |               |   |  |                     |         |   |                                       |   |          |                                      |  |   |                                 |   |  |                          |       
|Comprehensive Loss:                                                       |  |                   |     |   |                          |   |         |                           |  |   |               |   |  |                     |         |   |                                       |   |          |                                      |  |   |                                 |   |  |                          |       
|Net loss                                                                  |  |                   |    |   |                          |   |        |                           |  |   |              |   |  |                     |        |   |                                       |   | (242,120 | )                                    |  |   |                                |   |  |                          |      
|Translation adjustments                                                   |  |                   |    |   |                          |   |        |                           |  |   |              |   |  |                     |        |   |                                       |   |         |                                      |  |   |                                |   |  |                          |      
|Change in unrealized net gain (loss) on marketable securities, net of tax |  |                   |    |   |                          |   |        |                           |  |   |              |   |  |                     |        |   |                                       |   |         |                                      |  |   | (1,594                          | ) |  |                          |      
|                                                                          |  |                   |     |   |                          |   |         |                           |  |   |               |   |  |                     |         |   |                                       |   |          |                                      |  |   |                                 |   |  |                          |       
|Comprehensive Loss                                                        |  |                   |     |   |                          |   |         |                           |  |   |               |   |  |                     |         |   |                                       |   |          |                                      |  |   |                                 |   |  |                          |       
|                                                                          |  |                   |     |   |                          |   |         |                           |  |   |               |   |  |                     |         |   |                                       |   |          |                                      |  |   |                                 |   |  |                          |       
|Issuance of common stock:                                                 |  |                   |     |   |                          |   |         |                           |  |   |               |   |  |                     |         |   |                                       |   |          |                                      |  |   |                                 |   |  |                          |       
|Exercise of stock options                                                 |  |                   | 1   |   |                          |   | 10      |                           |  |   |              |   |  |                     |        |   |                                       |   |         |                                      |  |   |                                |   |  |                          |      
|Treasury stock purchase                                                   |  |                   |    |   |                          |   |         |                           |  |   |              |   |  |                     | (3,096  | ) |                                       |   |         |                                      |  |   |                                |   |  |                          |      
|401K plan match                                                           |  |                   | 11  |   |                          |   | 1,584   |                           |  |   |              |   |  |                     |        |   |                                       |   |         |                                      |  |   |                                |   |  |                          |      
|Employee stock purchase plan                                              |  |                   | 5   |   |                          |   | 794     |                           |  |   |              |   |  |                     |        |   |                                       |   |         |                                      |  |   |                                |   |  |                          |      
|Restricted stock issued                                                   |  |                   | 38  |   |                          |   | 11,316  |                           |  |   |              |   |  |                     |        |   |                                       |   |         |                                      |  |   |                                |   |  |                          | (3,860
|Stock options issued for severance                                        |  |                   |    |   |                          |   | 1,871   |                           |  |   |              |   |  |                     |        |   |                                       |   |         |                                      |  |   |                                |   |  |                          |      
|Stock options and warrants for service                                    |  |                   |     |   |                          |   | 568     |                           |  |   |              |   |  |                     |        |   |                                       |   |         |                                      |  |   |                                |   |  |                          |      
|Stock issued for accrued legal settlement                                 |  |                   | 1   |   |                          |   | 268     |                           |  |   |              |   |  |                     |        |   |                                       |   |         |                                      |  |   |                                |   |  |                          |      
|Issuance of shareholder note receivable                                   |  |                   |    |   |                          |   |        |                           |  |   | (759          | ) |  |                     |        |   |                                       |   |         |                                      |  |   |                                |   |  |                          |      
|                                                                          |  |                   |     |   |                          |   |         |                           |  |   |               |   |  |                     |         |   |                                       |   |          |                                      |  |   |                                 |   |  |                          |       
|BALANCE, December 31, 2001                                                |  | $                 | 569 |   |                          | $ | 597,885 |                           |  | $ | (4,593        | ) |  | $                   | (15,494 | ) |                                       | $ | (490,422 | )                                    |  | $ | 722                             |   |  | $                        | (3,860
|                                                                          |  |                   |     |   |                          |   |         |                           |  |   |               |   |  |                     |         |   |                                       |   |          |                                      |  |   |                                 |   |  |                          |       
|Comprehensive Income:                                                     |  |                   |     |   |                          |   |         |                           |  |   |               |   |  |                     |         |   |                                       |   |          |                                      |  |   |                                 |   |  |                          |       
|Net income                                                                |  |                   |    |   |                          |   |        |                           |  |   |              |   |  |                     |        |   |                                       |   | 1,891    |                                      |  |   |                                |   |  |                          |      
|Translation adjustments                                                   |  |                   |    |   |                          |   |        |                           |  |   |              |   |  |                     |        |   |                                       |   |         |                                      |  |   |                                |   |  |                          |      
|Change in unrealized net gain (loss) on marketable securities, net of tax |  |                   |    |   |                          |   |        |                           |  |   |              |   |  |                     |        |   |                                       |   |         |                                      |  |   | (446                            | ) |  |                          |      
|                                                                          |  |                   |     |   |                          |   |         |                           |  |   |               |   |  |                     |         |   |                                       |   |          |                                      |  |   |                                 |   |  |                          |       
|Comprehensive Income                                                      |  |                   |     |   |                          |   |         |                           |  |   |               |   |  |                     |         |   |                                       |   |          |                                      |  |   |                                 |   |  |                          |       
|                                                                          |  |                   |     |   |                          |   |         |                           |  |   |               |   |  |                     |         |   |                                       |   |          |                                      |  |   |                                 |   |  |                          |       
|Issuance of common stock:                                                 |  |                   |     |   |                          |   |         |                           |  |   |               |   |  |                     |         |   |                                       |   |          |                                      |  |   |                                 |   |  |                          |       
|Exercise of stock options                                                 |  |                   | 5   |   |                          |   | 289     |                           |  |   |              |   |  |                     |        |   |                                       |   |         |                                      |  |   |                                |   |  |                          |      
|Treasury stock purchase                                                   |  |                   |    |   |                          |   |        |                           |  |   |              |   |  |                     | (6,618  | ) |                                       |   |         |                                      |  |   |                                |   |  |                          |      
|401K plan match                                                           |  |                   | 4   |   |                          |   | 1,625   |                           |  |   |              |   |  |                     |        |   |                                       |   |         |                                      |  |   |                                |   |  |                          |      
|Employee stock purchase plan                                              |  |                   | 4   |   |                          |   | 904     |                           |  |   |              |   |  |                     |        |   |                                       |   |         |                                      |  |   |                                |   |  |                          |      
|Restricted stock issued                                                   |  |                   | 2   |   |                          |   | 825     |                           |  |   |              |   |  |                     |        |   |                                       |   |         |                                      |  |   |                                |   |  |                          | (95   
|Stock issued for legal settlement                                         |  |                   | 3   |   |                          |   | 1,307   |                           |  |   |              |   |  |                     |        |   |                                       |   |         |                                      |  |   |                                |   |  |                          |      
|Restricted stock cancelled                                                |  |                   | (0  | ) |                          |   | (171    | )                         |  |   |              |   |  |                     |        |   |                                       |   |         |                                      |  |   |                                |   |  |                          | 171   
|Stock compensation in exchange for services                               |  |                   |    |   |                          |   | 10      |                           |  |   |              |   |  |                     |        |   |                                       |   |         |                                      |  |   |                                |   |  |                          |      
|Stock compensation expense                                                |  |                   |    |   |                          |   |        |                           |  |   |              |   |  |                     |        |   |                                       |   |         |                                      |  |   |                                |   |  |                          | 1,871 
|Income tax benefit from exercise of stock options                         |  |                   |    |   |                          |   | 1,209   |                           |  |   |              |   |  |                     |        |   |                                       |   |         |                                      |  |   |                                |   |  |                          |      
|                                                                          |  |                   |     |   |                          |   |         |                           |  |   |               |   |  |                     |         |   |                                       |   |          |                                      |  |   |                                 |   |  |                          |       
|Interest related to shareholder note receivable                           |  |                   |    |   |                          |   |        |                           |  |   | (449          | ) |  |                     |        |   |                                       |   |         |                                      |  |   |                                |   |  |                          |      
|                                                                          |  |                   |     |   |                          |   |         |                           |  |   |               |   |  |                     |         |   |                                       |   |          |                                      |  |   |                                 |   |  |                          |       
|BALANCE, December 31, 2002                                                |  | $                 | 587 |   |                          | $ | 603,883 |                           |  | $ | (5,042        | ) |  | $                   | (22,112 | ) |                                       | $ | (488,531 | )                                    |  | $ | 276                             |   |  | $                        | (1,913
|                                                                          |  |                   |     |   |                          |   |         |                           |  |   |               |   |  |                     |         |   |                                       |   |          |                                      |  |   |                                 |   |  |                          |       



Accompanying notes are
integral to these consolidated financial statements.



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PTEK HOLDINGS, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2002, 2001 and 2000

(in thousands)



|                                                                                         |  | 2002 |         |   | 2001 |   |          | 2000 | 
|---------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | -------- | ---- | 
|CASH FLOWS FROM OPERATING ACTIVITIES                                                     |  |      |         |   |      |   |          |      | 
|Net income (loss)                                                                        |  | $    | 1,891   |   |      | $ | (242,120 | )    | 
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |      |         |   |      |   |          |      | 
|Loss on discontinued operation                                                           |  |      | 12,532  |   |      |   | 32,462   |      | 
|Depreciation                                                                             |  |      | 21,526  |   |      |   | 20,707   |      | 
|Amortization                                                                             |  |      | 10,876  |   |      |   | 88,553   |      | 
|Gain on sale of marketable securities, available for sale                                |  |      | (930    | ) |      |   | (2,971   | )    | 
|Non-cash legal settlements and related expenses, net                                     |  |      | 1,310   |   |      |   | 718      |      | 
|Deferred income taxes                                                                    |  |      | 2,516   |   |      |   | (25,241  | )    | 
|Restructuring costs, net                                                                 |  |      | (1,074  | ) |      |   | 1,669    |      | 
|Equity based compensation                                                                |  |      | 1,871   |   |      |   | 20,429   |      | 
|Asset impairments                                                                        |  |      | 3,202   |   |      |   | 100,796  |      | 
|Asset impairment and obligations  investments                                           |  |      |        |   |      |   | 31,695   |      | 
|Amortization of goodwill  investments                                                   |  |      |        |   |      |   | 1,612    |      | 
|Federal income tax receivable                                                            |  |      |        |   |      |   | (9,208   | )    | 
|Changes in assets and liabilities:                                                       |  |      |         |   |      |   |          |      | 
|Accounts receivable, net                                                                 |  |      | (2,365  | ) |      |   | 6,434    |      | 
|Prepaid expenses and other                                                               |  |      | 3,605   |   |      |   | 2,879    |      | 
|Accounts payable and accrued expenses                                                    |  |      | (17,716 | ) |      |   | 620      |      | 
|                                                                                         |  |      |         |   |      |   |          |      | 
|Total adjustments                                                                        |  |      | 35,353  |   |      |   | 271,154  |      | 
|                                                                                         |  |      |         |   |      |   |          |      | 
|Net cash provided by operating activities from continuing operations                     |  |      | 37,244  |   |      |   | 29,034   |      | 
|                                                                                         |  |      |         |   |      |   |          |      | 
|Net cash (used in) provided by operating activities from discontinued operations         |  |      | (5,804  | ) |      |   | 31,871   |      | 
|                                                                                         |  |      |         |   |      |   |          |      | 
|Net cash provided by operating activities                                                |  |      | 31,440  |   |      |   | 60,905   |      | 
|                                                                                         |  |      |         |   |      |   |          |      | 
|CASH FLOWS FROM INVESTING ACTIVITIES                                                     |  |      |         |   |      |   |          |      | 
|Capital expenditures                                                                     |  |      | (13,760 | ) |      |   | (25,628  | )    | 
|Proceeds from sale of discontinued operation                                             |  |      | 7,248   |   |      |   |         |      | 
|Sale of marketable securities                                                            |  |      | 1,038   |   |      |   | 5,196    |      | 
|Acquisitions                                                                             |  |      | (701    | ) |      |   | (5,828   | )    | 
|Investments                                                                              |  |      |        |   |      |   | (3,791   | )    | 
|Other                                                                                    |  |      |        |   |      |   | (2,497   | )    | 
|                                                                                         |  |      |         |   |      |   |          |      | 
|Net cash (used in) provided by investing activities from continuing operations           |  |      | (6,175  | ) |      |   | (32,548  | )    | 
|                                                                                         |  |      |         |   |      |   |          |      | 
|Net cash used in investing activities from discontinued operations                       |  |      | (155    | ) |      |   | (2,857   | )    | 
|                                                                                         |  |      |         |   |      |   |          |      | 
|Net cash used in investing activities                                                    |  |      | (6,330  | ) |      |   | (35,405  | )    | 
|                                                                                         |  |      |         |   |      |   |          |      | 
|CASH FLOWS FROM FINANCING ACTIVITIES                                                     |  |      |         |   |      |   |          |      | 
|Principal payments under borrowing arrangements                                          |  |      | (3,587  | ) |      |   | (996     | )    | 
|Proceeds from long term borrowing arrangements                                           |  |      | 4,000   |   |      |   | 6,500    |      | 
|Purchase of treasury stock, at cost                                                      |  |      | (6,618  | ) |      |   | (3,096   | )    | 
|Exercise of stock options                                                                |  |      | 294     |   |      |   | 11       |      | 
|Issuance of shareholder note receivable                                                  |  |      |        |   |      |   | (759     | )    | 
|                                                                                         |  |      |         |   |      |   |          |      | 
|Net cash (used in) provided by financing activities from continuing operations           |  |      | (5,911  | ) |      |   | 1,660    |      | 
|                                                                                         |  |      |         |   |      |   |          |      | 
|Net cash used in financing activities from discontinued operations                       |  |      | (1,086  | ) |      |   | (1,964   | )    | 
|                                                                                         |  |      |         |   |      |   |          |      | 
|Net cash used in financing activities                                                    |  |      | (6,997  | ) |      |   | (304     | )    | 
|                                                                                         |  |      |         |   |      |   |          |      | 
|Effect of exchange rate changes on cash and equivalents                                  |  |      | 2,641   |   |      |   | (164     | )    | 
|                                                                                         |  |      |         |   |      |   |          |      | 
|NET INCREASE IN CASH AND EQUIVALENTS                                                     |  |      | 20,754  |   |      |   | 25,032   |      | 
|CASH AND CASH EQUIVALENTS, beginning of period                                           |  |      | 48,023  |   |      |   | 22,991   |      | 
|                                                                                         |  |      |         |   |      |   |          |      | 
|CASH AND CASH EQUIVALENTS, end of period                                                 |  | $    | 68,777  |   |      | $ | 48,023   |      | 
|                                                                                         |  |      |         |   |      |   |          |      | 



Accompanying notes are
integral to these consolidated financial statements.



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PTEK HOLDINGS, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.
THE COMPANY AND ITS BUSINESS



PTEK Holdings, Inc., a
Georgia corporation, and its subsidiaries (collectively the Company or PTEK), is a global provider of business communications services, including conferencing (audio conferencing and Web-based collaboration) and multimedia
messaging (high-volume actionable communications, including e-mail, wireless messaging, voice message delivery and fax). The Companys reportable segments align the Company into two decentralized operating segments based on product offering.
These segments are Premiere Conferencing and Xpedite. Through a series of acquisitions from April 1998 through September 1999, PTEK assembled a suite of communications and data services, an international private data network and points-of-presence
in regions covering North America, Asia/Pacific and Europe. In addition, the Company had one other reportable segment, Voicecom, which the Company exited through a sale of substantially all its assets, effective March 26, 2002. Voicecom offered a
suite of integrated communications solutions, including voice messaging, interactive voice response services and unified communications.



2. SIGNIFICANT ACCOUNTING POLICIES



Accounting Estimates



Preparation of financial statements in conformity with accounting principles generally accepted in the United States 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.
Financial statement line items that include significant estimates consist of goodwill, net; intangibles, net; restructuring costs; tax accounts and the allowance for uncollectible accounts receivable. Changes in the facts or circumstances underlying
these estimates could result in material changes and actual results could differ from those estimates. These changes in estimates are recognized in the period they are realized.



Principles of Consolidation



The financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions
have been eliminated in consolidation.



Cash and Cash Equivalents



Cash and cash equivalents include cash on hand and highly
liquid investments with a maturity at date of purchase of three months or less.



Marketable Securities, Available for Sale



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 re-evaluation of such designation as of each balance sheet date. At December
31, 2002 and 2001, investments consisted primarily of common stock. Management considers all such investments as available for sale. Common stock investments are carried at fair value based on quoted market prices. Unrealized holding
gains and losses, net of the related income tax effect are excluded from earnings and are reported as a separate component of shareholders equity until realized. Realized gains and losses are included in earnings and are derived using the
specific identification method for determining the cost of the securities sold.



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PTEK HOLDINGS, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Investments



The Company has made investments in various companies that were engaged in emerging technologies related to the Internet through its investment arm,
PtekVentures. During 2001, market conditions declined for the non-public companies in the PtekVentures portfolio, with certain of these companies filing for bankruptcy and subsequently being liquidated. Accordingly, the Company decided to exit the
venture business and cease future funding in its portfolio companies. Either the cost or equity method was used to account for these investments in accordance with Accounting Principles Board (APB) Opinion No. 18, The Equity Method
of Accounting for Investments in Common Stock. Based on the Companys ownership interest, the consolidation method was not used for any investments.



Cost Method



The cost method of accounting was used for any investment in which the Company owned less than 20% and did not exercise significant influence. Significant
influence is generally determined by, but not limited to, representation on the affiliates Board of Directors, voting rights associated with the Companys holdings in common, preferred and other convertible instruments in the affiliate,
and any legal obligations. As there was no quoted market price for these investments and the Company owned less than 20%, the investment was carried at cost unless circumstances suggest that an impairment should have been recognized.



Equity Method



Affiliated companies in which the Company owned 50% or less of the equity ownership, but over which significant influence
was exercised, were accounted for using the equity method of accounting. The amount by which the Companys investment exceeded its share of the underlying net assets was considered to be goodwill, and was amortized over a three-year period.



Accounts Receivable



Included in accounts receivable at December 31, 2002 was earned but unbilled
revenue of approximately $1.9 million at Premiere Conferencing, which results from weekly cycle billing that was implemented during the third quarter of 2002. Earned but unbilled revenue is billed within thirty days. Bad debt expense was
approximately $5.1 million, $6.1 million and $1.3 million in 2002, 2001 and 2000, respectively.



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 five to
seven years for furniture and fixtures, two to five years for software and three 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.



Research and Development



The Company incurs research and development costs primarily related to developing enhancements and new service features and are expensed as incurred.



Software Development Costs



Pursuant to the American Institute of Certified Public Accountants Statement
of Position (SOP) 98-1, Accounting for the Costs of Software Developed or Obtained for Internal Use, costs incurred to develop significant enhancements to software features to be sold as part of services offerings at Xpedite
and costs incurred to implement a new billing system at Premiere Conferencing are being capitalized. For the twelve months ended



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PTEK HOLDINGS, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



December 31, 2002 the Company capitalized approximately $2.9 million related to these projects. There were no costs capitalized for the comparable periods in
2001. These capitalized costs are being amortized on a straight line basis over the estimated life of the related software, not to exceed three years. Amortization expense recorded for phases completed for the twelve months ended December 31, 2002
was approximately $0.3 million.



Goodwill



Goodwill represents the 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 7 years. With the adoption of SFAS No. 142, Accounting for Goodwill and Other Intangible
Assets, which became effective January 1, 2002, the Company no longer records amortization expense associated with goodwill, but instead goodwill is subject to a periodic impairment assessment by applying a fair value based test based upon a
two-step method. The first step is to identify potential goodwill impairment by comparing the estimated fair value of the reporting units to their carrying amounts. The second step measures the amount of the impairment based upon a comparison of
implied fair value of goodwill with its carrying amount. This analysis was completed for the year ended December 31, 2002 and no impairment was identified.



The Company amortized the goodwill of its non-public equity investments in its PtekVentures portfolio over a
three-year useful life until the second quarter of 2001, at which time the Company wrote off the remaining carrying value of such investments. The amortization is included in Amortization of goodwill equity investments and the write off
is included in Asset impairment and obligation investments in the accompanying consolidated statements of operations. See Note 6Investments.



Valuation of Long-Lived Assets



Management evaluates the carrying values of long-lived assets when significant adverse changes in the economic value of these assets requires an analysis,
including property and equipment and other intangible assets. Effective in January 2002, with the adoption of SFAS No. 144 Accounting for the Impairment or Disposal of Long-Lived Assets, (FAS No. 144) a long lived asset is
considered impaired when its fair value is less than its carrying value. In that event, a loss is calculated based on the amount the carrying value exceeds the future cash flows, as calculated under the best-estimate approach, of such asset. Prior
to adopting FAS No. 144, a long-lived asset was considered impaired when undiscounted cash flows or fair value, whichever was more readily determinable, to be realized from such asset was less than its carrying value. In that event, a loss was
determined based on the amount the carrying value exceeded the discounted cash flows or fair value of such asset. Management believes that long-lived assets in the accompanying consolidated balance sheets are appropriately valued. See Note
12Asset Impairments.



Equity Based Compensation Plans



The Company accounts for stock based compensation using
the intrinsic value method prescribed in Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees, and related Interpretations. Accordingly, no compensation expense has been recognized for
awards (other than restricted share awards) issued under the Companys stock based compensation plans where the exercise price of such award is equal to the market price of the underlying common stock at the date of grant. The Company provides
the additional disclosures required under SFAS No. 123, Accounting for Stock Based Compensation (SFAS No. 123), as amended by SFAS No. 148, Accounting for Stock Based Compensation  Transition and Disclosure.



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PTEK HOLDINGS, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



The Company has adopted the disclosure only provision of SFAS No. 123. Had compensation expense for
the Companys stock option grants described above been determined based on the fair value at the grant date for awards in 2002, 2001 and 2000, consistent with the provisions of SFAS No. 123, the Companys net loss and loss per share would
have been increased to the pro forma amounts indicated below for the years ended December 31 (in thousands, except per share data):



|                                                                                                                                  |  | 2002 |        |   | 2001 |   |          | 2000 | 
|--------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | -------- | ---- | 
|Net income (loss):                                                                                                                |  |      |        |   |      |   |          |      | 
|As reported                                                                                                                       |  | $    | 1,891  |   |      | $ | (242,120 | )    | 
|Deduct: total stock-based compensation expense determined under fair value based method for all awards net of related tax
effects |  |      | (4,642 | ) |      |   | (11,256  | )    | 
|                                                                                                                                  |  |      |        |   |      |   |          |      | 
|Pro forma                                                                                                                         |  | $    | (2,751 | ) |      | $ | (253,376 | )    | 
|Basic net income (loss) per share:                                                                                                |  |      |        |   |      |   |          |      | 
|As reported                                                                                                                       |  | $    | 0.27   |   |      | $ | (4.84    | )    | 
|Pro forma                                                                                                                         |  | $    | (0.05  | ) |      | $ | (5.07    | )    | 
|Diluted net income (loss) per share:                                                                                              |  |      |        |   |      |   |          |      | 
|As reported                                                                                                                       |  | $    | 0.26   |   |      | $ | (4.84    | )    | 
|Pro forma                                                                                                                         |  | $    | (0.05  | ) |      | $ | (5.07    | )    | 



Significant
assumptions used in the Black-Scholes option pricing model computations are as follows:



|                               |  | 2002       |  | 2001       |  | 2000      
|------------------------------ |  | ---------- |  | ---------- |  | ----------
|Risk-free interest rate        |  | 3.95%      |  | 4.18%      |  | 5.13-5.61%
|Dividend yield                 |  | 0%         |  | 0%         |  | 0%        
|Volatility factor              |  | 76%        |  | 90%        |  | 99%       
|Weighted average expected life |  | 3.95 years |  | 3.79 years |  | 3.75 years



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.



Revenue Recognition



The Company recognizes revenues when persuasive evidence of an arrangement exists, services have been rendered, the price to the buyer is fixed or
determinable, and collectibility is reasonably assured. Revenues consist of fixed monthly fees and usage fees generally based on per minute or transaction rates. Unbilled revenue consists of earned but unbilled revenue which results from the weekly
billing cycle that was implemented at the Premiere Conferencing operating segment during the third quarter of 2002. Deferred revenue consists of payments made by customers in advance of the time services are rendered. The Companys revenue
recognition policies are consistent with the guidance in Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements, as amended by SAB 101A and 101B.



Income Taxes



The provision for income taxes and corresponding balance sheet accounts are determined in accordance with SFAS No. 109,
Accounting for Income Taxes (FAS 109). Under FAS 109, the deferred tax liabilities and assets are determined based on temporary differences between the basis of certain assets and liabilities for income tax and financial
reporting purposes, in addition to net operating loss carryforwards which are reasonably assured of being utilized. These differences are primarily attributable to differences in the recognition of depreciation and amortization of property,
equipment and intangible assets. Deferred tax assets and liabilities are measured by applying enacted statutory tax rates applicable to future years in which the deferred tax assets or liabilities are expected to be settled or realized. Valuation
allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.



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PTEK HOLDINGS, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



The Company also records a provision for certain international, federal and state tax contingencies
based on the likelihood of obligation, when needed. In the normal course of business, the Company is subject to challenges from U.S. and non-U.S. tax authorities regarding the amount of taxes due. These challenges may result in adjustments of the
timing or amount of taxable income or deductions or the allocation of income among tax jurisdictions. Further, during the ordinary course of business other changing facts and circumstances may impact the Companys ability to utilize tax
benefits as well as the estimated taxes to be paid in future periods. Management believes it has appropriately accrued for tax exposures. If the Company is required to pay an amount less than or exceeding its provisions for uncertain tax matters,
the financial impact will be reflected in the period in which the matter is resolved. In the event that actual results differ from these estimates, the Company may need to adjust tax accounts which could materially impact its financial condition and
results of operations.



Basic and Diluted Income (Loss) Per Share



Basic earnings per share is computed by dividing net
income (loss) available to common shareholders by the weighted-average number of common shares outstanding during the period. The weighted-average number of common shares outstanding does not include any potentially dilutive securities or any
unvested restricted shares of common stock. These unvested restricted shares, although classified as issued and outstanding at December 31, 2002 and 2001, are considered contingently returnable until the restrictions lapse and are not included in
the basic net income (loss) per share calculation until the shares are vested. Diluted net income (loss) per share gives effect to all potentially dilutive securities. The Companys convertible subordinated notes, unvested restricted shares and
stock options are all potentially dilutive securities during 2002. For the twelve months ended December 31, 2002, the difference between basic and diluted weighted-average shares outstanding was the dilutive effect of stock options and the unvested
restricted shares, computed as follows:



|                                                    |  | December 31, 2002
|--------------------------------------------------- |  | -----------------
|Total weighted-average shares outstanding  Basic   |  | 53,550,029       
|Add common stock equivalents:                       |  |                  
|Stock options                                       |  | 1,633,347        
|Unvested restricted shares                          |  | 1,078,909        
|                                                    |  |                  
|Total weighted-average shares outstanding  Diluted |  | 56,262,285       
|                                                    |  |                  



For the twelve months
ended December 31, 2001, the Companys convertible subordinated notes and stock options were potentially dilutive securities, but these securities were antidilutive due to the Companys net loss and, therefore, are not included in the
diluted per share calculation. Such potentially dilutive securities as of December 31, 2001 were 5.2 million, 1.2 million and 10.3 million shares related to convertible subordinated notes, unvested restricted shares and stock options outstanding,
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 in the Cumulative
translation adjustment component of shareholders equity.



Treasury Stock



Treasury stock transactions
are recorded at cost.



Comprehensive Income (Loss)



Comprehensive income (loss) represents the change in equity of a business
during a period, except for investments by owners and distributions to owners. Cumulative translation adjustments and unrealized gains on available-for-sale marketable securities represent the Companys components of other comprehensive income
(loss) at December 31, 2002 and 2001. For the years ended December 31, 2002, 2001 and 2000, total comprehensive income (loss) was approximately $4.4 million, $(243.1) million and $(114.2) million, respectively.



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PTEK HOLDINGS, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



New Accounting Pronouncements



In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46), Consolidation of Variable Interest
Entities. This interpretation of Accounting Research Bulletin 51, Consolidated Financial Statements, addresses consolidation by business enterprises of variable interest entities that possess certain characteristics. The
interpretation requires that if a business enterprise has a controlling financial interest in a variable interest entity, the assets, liabilities, and results of the activities of the variable interest entity must be included in the consolidated
financial statements with those of the business enterprise. This interpretation applies immediately to variable interest entities created after January 31, 2003 and to variable interest entities in which an enterprise obtains an interest after that
date. We do not have any ownership in any variable interest entities as of December 31, 2002. We will apply the consolidation requirement of the interpretation in future periods if we should own any interest in any variable interest entity.



In December 2002, the FASB issued SFAS No. 148,
Accounting for Stock Based Compensation - Transition and Disclosure (SFAS No. 148) which amends SFAS No. 123. SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of
accounting for stock based employee compensation. SFAS No. 148 also requires that disclosures of the pro forma effect of using the fair value method of accounting for stock based employee compensation be displayed more prominently and in a tabular
format. Additionally, SFAS No. 148 requires disclosure of the pro forma effect in interim financial statements. See Equity Based Compensation Plans section of Note 2Significant Accounting Policies for the additional
annual disclosures made to comply with SFAS No. 148. The interim disclosure provisions are effective for financial reports containing financial statements for interim periods beginning after December 15, 2002. As the Company does not intend to adopt
the provisions of SFAS No. 123, it does not expect the transition provisions of SFAS No. 148 to have a material effect on its results of operations or financial condition.



In November 2002, the Emerging Issues Task Force (EITF) reached a consensus on issue 00-21, Revenue
Arrangements with Multiple Deliverables (EITF 00-21). EITF 00-21 addresses revenue recognition on arrangements encompassing multiple elements that are delivered at different points in tine, defining criteria that must be met for
elements to be considered to be a separate unit of accounting. If an element is determined to be a separate unit of accounting, the revenue for the element is recognized at the time of delivery. EITF 00-21 is effective for revenue arrangements
entered into in fiscal periods beginning after June 15, 2003. The Company does not expect that this pronouncement will have a material impact on results of operations or financial condition.



In November 2002, the FASB issued FASB Interpretation No. 45 (FIN
45), Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, an interpretation of FASB Statements No. 5, 57, and 107 and Rescission of FASB interpretation No. 34. The
disclosure provisions of the interpretation are effective for financial statements of interim or annual periods that end after December 15, 2002. However, the provisions for initial recognition and measurement are effective on a prospective basis
for guarantees that are issued or modified after December 31, 2002, irrespective of a guarantors year-end. See Note 9Discounted Operations.



In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities
(SFAS No. 146), which addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring) (EITF 94-3). The principal difference between SFAS No. 146 and EITF 94-3 relates to SFAS No. 146 requirements for recognition of a liability for a cost
associated with an exit or disposal activity. SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under EITF 94-3, a liability for an exit cost as generally
defined in EITF 94-3 was recognized at the date of an entitys commitment to an exit plan. The Company will be required to adopt SFAS No. 146 for the fiscal year beginning January 1, 2003, and is currently evaluating this standard and the
impact it will have on the consolidated financial statements.



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In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements Nos. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical Corrections (SFAS No. 145). Among other things, this statement rescinds SFAS No. 4, Reporting Gains and Losses from Extinguishment of Debt (SFAS No. 4), which required
all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of the related income tax effect. As a result, the criteria in Accounting Principles Board Opinion No. 30, Reporting
the Results of Operations  Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, which requires gains and losses on extinguishments of debt to be
classified as income or loss from continuing operations, will now be applied. The Company will be required to adopt SFAS No. 145 for the fiscal year beginning January 1, 2003, and is currently evaluating this standard and the impact it will have on
the consolidated financial statements.



In October 2001, the
FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long- Lived Assets (SFAS No. 144). SFAS No. 144 establishes accounting and reporting standards for the impairment and disposition of long- lived assets,
and is effective for financial statements issued for fiscal years beginning after December 15, 2001. The Company adopted SFAS No. 144 for the fiscal year beginning January 1, 2002.



In August 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations (SFAS No.
142). It addresses accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This statement requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. The liability
is accreted to its present value each period while the cost is depreciated over its useful life. SFAS No. 143 is effective for financial statements issued for fiscal years beginning after June 15, 2002. The Company adopted SFAS No. 143 for the
fiscal year beginning January 1, 2002.



In June 2001, the FASB
issued SFAS No. 142, Accounting for Goodwill and Other Intangible Assets. It requires that goodwill and certain intangible assets will no longer be subject to amortization, but instead will be subject to a periodic impairment assessment
by applying a fair value based test. The Companys required adoption date is January 1, 2002. Adoption of SFAS No. 142 will have a material effect on the Companys results of operations due to the cessation of goodwill amortization on
January 1, 2002. The balance of goodwill is $123.1 million as of December 31, 2002 and 2001. The Company adopted SFAS No. 142 for the fiscal year beginning January 1, 2002.



Reclassifications



Certain prior year amounts in the Companys consolidated financial statements have been reclassified to conform to the 2002 presentation.



On January 1, 2001, management responsibility for international
conferencing services was transferred from Xpedite to Premiere Conferencing. Prior to that date, these international revenues were reported in the Xpedite operating segment. The revenues of the Australian operations of Voicecom that were retained in
conjunction with the sale of this operating segment are reported in the international results of Xpedite effective January 1, 2002. In order to report comparable operating segment financial results, certain financial information for years prior to
2001 has been reclassified. Overall these reclassifications did not have a material impact on the financial results of the operating segments for the periods presented.



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3. EXCLUSION OF SFAS NO. 142 AMORTIZATION



Effective January 1, 2002, the Company adopted SFAS No. 142 which requires that goodwill and certain intangible assets no
longer be subject to amortization, but instead be subject to a periodic impairment by applying a fair value based test based upon a two-step method. The balance of goodwill was $123.1 million as of December 31, 2002 and 2001. During the fourth
quarter of 2002, the Company determined there was no impairment of these assets as of December 31, 2002. Exclusive of SFAS No. 142 amortization, basic and diluted net income (loss) per share for the twelve months ended December 31, 2002, 2001 and
2000 would have been (in thousands, except per share data):



|                                                    |  | Twelve Months Ended |        
|--------------------------------------------------- |  | ------------------- | -------
|                                                    |  | December 31,2002    |        
|Adjusted net income (loss):                         |  |                     |        
|Income (loss) from continuing operations            |  | $                   | 14,423 
|Add goodwill amortization for Xpedite               |  |                     |       
|Add goodwill amortization for Premiere Conferencing |  |                     |       
|                                                    |  |                     |        
|Adjusted income (loss) from continuing operations   |  | $                   | 14,423 
|                                                    |  |                     |        
|Add goodwill amortization for Voicecom              |  |                     |       
|Loss from discontinued operations                   |  |                     | (12,532
|                                                    |  |                     |        
|Adjusted net income (loss)                          |  | $                   | 1,891  
|                                                    |  |                     |        



|                                                    |  | Twelve Months Ended |      
|--------------------------------------------------- |  | ------------------- | -----
|                                                    |  | December 31,2002    |      
|Adjusted basic net income (loss) per share:         |  |                     |      
|Income (loss) from continuing operations            |  | $                   | 0.27 
|Add goodwill amortization for Xpedite               |  |                     |     
|Add goodwill amortization for Premiere Conferencing |  |                     |     
|                                                    |  |                     |      
|Adjusted income (loss) from continuing operations   |  | $                   | 0.27 
|                                                    |  |                     |      
|Add goodwill amortization for Voicecom              |  |                     |     
|Loss from discontinued operations                   |  |                     | (0.23
|                                                    |  |                     |      
|Adjusted basic net income (loss) per share          |  | $                   | 0.04 
|                                                    |  |                     |      
|Adjusted diluted net income (loss) per share:       |  |                     |      
|Income (loss) from continuing operations            |  | $                   | 0.26 
|Add goodwill amortization for Xpedite               |  |                     |     
|Add goodwill amortization for Premiere Conferencing |  |                     |     
|                                                    |  |                     |      
|Adjusted income (loss) from continuing operations   |  | $                   | 0.26 
|                                                    |  |                     |      
|Add goodwill amortization for Voicecom              |  |                     |     
|Loss from discontinued operations                   |  |                     | (0.23
|                                                    |  |                     |      
|Adjusted diluted net income (loss) per share        |  | $                   | 0.03 
|                                                    |  |                     |      



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4. RESTRUCTURING COSTS



Consolidated restructuring costs for the years ended December 31, 2002, 2001 and 2000 are as follows (in thousands):



|Consolidated                                  |  | AccruedCosts atDecember 31,1999 |       | 2000Charge ToContinuingOperations |   |      | PaymentsIncurred |  |   | Reversal of AccruedCosts |   |  | AccruedCosts atDecember 31,2000 |      | 2001Charge ToContinuingOperations |  |   | 2001 Charges toDiscontinuedOperations
|--------------------------------------------- |  | ------------------------------- | ----- | --------------------------------- | - | ---- | ---------------- |  | - | ------------------------ | - |  | ------------------------------- | ---- | --------------------------------- |  | - | -------------------------------------
|Accrued restructuring costs:                  |  |                                 |       |                                   |   |      |                  |  |   |                          |   |  |                                 |      |                                   |  |   |                                      
|Severance and exit costs                      |  | $                               | 5,616 |                                   | $ | 197  |                  |  | $ | (4,474                   | ) |  | $                               | (641 | )                                 |  | $ | 698                                  
|Contractual obligations                       |  |                                 |      |                                   |   | 290  |                  |  |   |                         |   |  |                                 |     |                                   |  |   | 290                                  
|Other                                         |  |                                 | 82    |                                   |   | 93   |                  |  |   | (82                      | ) |  |                                 |     |                                   |  |   | 93                                   
|                                              |  |                                 |       |                                   |   |      |                  |  |   |                          |   |  |                                 |      |                                   |  |   |                                      
|Total Restructuring costs                     |  | $                               | 5,698 |                                   |   | 580  |                  |  | $ | (4,556                   | ) |  | $                               | (641 | )                                 |  | $ | 1,081                                
|                                              |  |                                 |       |                                   |   |      |                  |  |   |                          |   |  |                                 |      |                                   |  |   |                                      
|Reversal of charge                            |  |                                 |       |                                   | $ | (641 | )                |  |   |                          |   |  |                                 |      |                                   |  |   |                                      
|                                              |  |                                 |       |                                   |   |      |                  |  |   |                          |   |  |                                 |      |                                   |  |   |                                      
|Restructuring costs  statement of operations |  |                                 |       |                                   | $ | (61  | )                |  |   |                          |   |  |                                 |      |                                   |  |   |                                      
|                                              |  |                                 |       |                                   |   |      |                  |  |   |                          |   |  |                                 |      |                                   |  |   |                                      



|Consolidated                 |  | PaymentsIncurred |        |   | Non CashCosts |   |        | ReversalofAccruedCosts |  |   | AccruedCosts atDecember 31,2001 |   | 2002 Charge ToContinuingOperations |   | PaymentsIncurred | 
|---------------------------- |  | ---------------- | ------ | - | ------------- | - | ------ | ---------------------- |  | - | ------------------------------- | - | ---------------------------------- | - | ---------------- | 
|Accrued restructuring costs: |  |                  |        |   |               |   |        |                        |  |   |                                 |   |                                    |   |                  | 
|Severance and exit costs     |  | $                | (4,814 | ) |               | $ | (2,059 | )                      |  | $ |                                |   |                                    | $ | 2,668            | 
|Contractual obligations      |  |                  | (663   | ) |               |   | (386   | )                      |  |   | (109                            | ) |                                    |   | 888              | 
|Other                        |  |                  | (65    | ) |               |   | (3     | )                      |  |   | (75                             | ) |                                    |   | 172              | 
|                             |  |                  |        |   |               |   |        |                        |  |   |                                 |   |                                    |   |                  | 
|Total Restructuring costs    |  | $                | (5,542 | ) |               | $ | (2,448 | )                      |  | $ | (184                            | ) |                                    | $ | 3,728            | 
|                             |  |                  |        |   |               |   |        |                        |  |   |                                 |   |                                    |   |                  | 



|Consolidated                 |  | Accrued Costs at December 31,2002
|---------------------------- |  | ---------------------------------
|Accrued restructuring costs: |  |                                  
|Severance and exit costs     |  | $                                
|Contractual obligations      |  |                                  
|Other                        |  |                                  
|                             |  |                                  
|Total Restructuring costs    |  | $                                
|                             |  |                                  



Realignment of Workforce 
Fourth Quarter 2002



In the fourth quarter of 2002,
Xpedite and the Holding Company terminated employees pursuant to a plan to shrink headcount and reduce sales and administration costs. The plan called for the reduction of 54 and 5 employees at Xpedite and the Holding Company, respectively. The
combined costs associated with the restructuring plan are $1.5 million, of which $0.3 million was paid in 2002. Of the remaining balance, $0.8 million, $0.3 million and $0.1 million will be paid in 2003, 2004 and 2005, respectively. Virtually all
costs will be paid in cash. Also, in the fourth quarter of 2002 Xpedite decided to exit the voice messaging business in Australia due to declining revenue and the need to make substantial capital investments. The costs associated with exiting this
business of $0.3 million are primarily non-cash and represent the loss on disposal of the voice messaging assets.



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Realignment of Workforce and Facilities  Fourth Quarter 2001



Due to continued revenue declines not anticipated by management in both the
Voicecom and Xpedite operating segments in the second half of 2001, plans for additional workforce cost reductions were established and personnel were notified during the fourth quarter of 2001. The plan eliminated, through involuntary separation,
approximately 120 non-sales force employees in both Voicecom and Xpedite and eliminated 143 network equipment sites in the Voicecom operating segment. The overall management plan allowed for reinvesting these cost savings into additional sales force
employees in order to stabilize the decline in revenues in both operation segments. Accordingly, the Company accrued restructuring costs of approximately $4.1 million associated with this plan commitment. Cash payments in 2002 and 2001 associated
with this plan were $2.1 million and $1.0 million, respectively. The Company expects to incur $0.4 million of additional cash payments in 2003 to satisfy this plan obligation. Of the $4.1 million of costs associated with this plan, approximately
$0.7 million of non-cash charges were incurred for severance cost obligations paid through immediately vested stock options issued below market price on the date of grant. Accordingly, this portion of the restructuring costs was recorded as
additional paid-in-capital. The remaining costs at December 31, 2002 and 2001 were $0.4 million and $2.4 million, respectively.



Realignment of Workforce and Facilities  Second Quarter 2001



During the second quarter of 2001, management committed to a plan to reduce annual operating expenses through the elimination of certain operating
activities in its Voicecom and Xpedite operating segments, and at the Holding Company, and the corresponding reductions in personnel costs relating to the Companys operations, sales and administration. The plan eliminated, through involuntary
separation, approximately 168 non-sales force employees and allowed the Company to exit duplicative facilities in the Voicecom business segment. Accordingly, the Company accrued restructuring costs of approximately $6.7 million associated with this
plan commitment. The Company expects to incur a total of approximately $5.0 million of cash payments related to severance, exit costs and contractual obligations associated with the $6.7 million plan costs. Approximately $0.8 million and $3.8
million of these cash payments were made by December 31, 2002 and 2001, respectively, and were primarily related to severance and exit cost activities. The remaining cash payments are associated with severance costs, exit costs and contractual
obligations are expected to be paid in 2003. Approximately $1.7 million of non-cash charges recorded in 2001 are related to certain executive management severance costs from employee stock option modifications and forgiveness of employee notes
receivables. Accordingly, this portion of the restructuring costs was recorded as additional paid-in-capital. The remaining costs at December 31, 2002 and 2001 were approximately $40,000 and $1.2 million, respectively.



Exit from Asia Real-Time Fax and Telex Business



During the fourth quarter of 2000, the Company recorded a charge of $0.6
million for costs associated with Xpedites decision to exit its legacy real-time fax and telex business in Asia. This service depended on significant price disparities between regulated incumbent telecommunications carriers and Xpedites
cost of delivery over its fixed-cost network. With the deregulation of most Asian telecommunications markets, Xpedites cost advantage dissipated, and the Company decided to exit this service and concentrate on higher value-added services such
as transactional messaging and messageREACH. The $0.6 million charge included contractual and other obligations totaling $0.4 million and severance costs of $0.2 million. During 2001, the Company paid the remaining severance obligations planned for
and does not expect any further payments.



Decentralization of Company



In the third quarter of 1999, the Company recorded
restructuring, merger costs and other special charges of approximately $8.2 million in connection with its reorganization from the two EES (Emerging Enterprise Solutions) and CES (Corporate Enterprise Solutions) operating units into three operating
business units, a retail calling card business, and a holding company. The $8.2 million charge was comprised of $7.3 million of severance and exit costs, $0.7 million of lease termination costs and $0.2 million of facility exit costs. The
decentralization plan of the Company was completed and all payments were made during 2000.



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Reorganization of Company into EES and CES Business Groups



In the fourth quarter of 1998, the Company recorded a charge of $11.4
million to reorganize the Company into two business segments that focused on specific groups of customers. The balance of severance and exit costs at December 31, 2002, 2001 and 2000 of $0.0 million, $0.1 million and $0.6 million, respectively,
represents remaining severance reserve for a former executive manager. Cash severance payments in 2002 and 2001were $0.1 million and $0.5 million. The Company paid the remaining severance obligations during 2002 and does not expect any future
payments.



5. MARKETABLE SECURITIES, AVAILABLE FOR SALE



Marketable securities, available for sale at December 31, 2002 and 2001 are
principally common stock investments carried at fair value based on quoted market prices.



The cost, gross unrealized gains, fair value, proceeds from sale and realized gains and losses are as follows for the years ended December 31, 2002 and 2001 (in thousands):



|                        |  | Cost |     | Gross Unrealized Gains |   | Fair Value |  | Proceeds FromSale |       | Gross Realized Gains/ (Losses)
|----------------------- |  | ---- | --- | ---------------------- | - | ---------- |  | ----------------- | ----- | ------------------------------
|2002                    |  |      |     |                        |   |            |  |                   |       |                               
|WebMD Corporation       |  | $    | 192 |                        | $ | 449        |  | $                 | 641   |                               
|                        |  |      |     |                        |   |            |  |                   |       |                               
|2001                    |  |      |     |                        |   |            |  |                   |       |                               
|WebMD Corporation       |  | $    | 300 |                        | $ | 1,174      |  | $                 | 1,474 |                               
|S1 Corporation          |  |      |    |                        |   |           |  |                   |      |                               
|WebEx, Inc.             |  |      |    |                        |   |           |  |                   |      |                               
|Other equity securities |  |      | 3   |                        |   |           |  |                   | 3     |                               
|                        |  |      |     |                        |   |            |  |                   |       |                               
|                        |  | $    | 303 |                        | $ | 1,174      |  | $                 | 1,477 |                               
|                        |  |      |     |                        |   |            |  |                   |       |                               



During 2002, the
Company sold 133,857 shares of its investment in WebMD for aggregate proceeds less commissions of approximately $0.9 million. At December 31, 2002, the Company held 75,000 shares of WebMD.



During 2001, the Company sold 200,000 shares of its investment in WebMD,
88,596 shares of its investment in S1 Corporation and 120,000 shares of its investment in WebEx, Inc. for aggregate proceeds less commissions of approximately $5.2 million. At December 31, 2001, the Company held 208,857 shares of WebMD.



6. INVESTMENTS



The following summarizes the principal components of investments at December 31, 2001 (in thousands):



|                           |  | Equity |         |   | Cost |   |         | Total | 
|-------------------------- |  | ------ | ------- | - | ---- | - | ------- | ----- | 
|Balance, December 31, 2000 |  | $      | 14,681  |   |      | $ | 12,385  |       | 
|Investments                |  |        | 3,186   |   |      |   | 1,505   |       | 
|Amortization               |  |        | (1,612  | ) |      |   |        |       | 
|Impairment                 |  |        | (16,255 | ) |      |   | (12,941 | )     | 
|Sale                       |  |        |        |   |      |   | (949    | )     | 
|                           |  |        |         |   |      |   |         |       | 
|Balance, December 31, 2001 |  | $      |        |   |      | $ |        |       | 
|                           |  |        |         |   |      |   |         |       | 



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The Company continually evaluated the carrying value of its ownership interests in non-public
investments in the PtekVentures portfolio for possible impairment that was other than temporary based on achievement of business plan objectives and current market conditions. The business plan objectives the Company considered include,
among others, those related to financial performance such as achievement of planned financial results, forecasted operating cash flows and completion of capital raising activities and those that are not primarily financial in nature such as the
development of technology or the hiring of key employees. The Company has previously taken impairment charges on certain of these investments when it has determined that an other than temporary decline in the carrying value of the
investment has occurred. Many Internet based businesses experienced difficulty in raising additional capital necessary to fund operating losses and make continued investments that their management teams believed were necessary to sustain operations.
Valuations of public companies operating in the Internet sector declined significantly during 2000 and 2001. During 2001, market conditions declined for the non-public companies in the PtekVentures portfolio, with certain of these companies filing
for bankruptcy and subsequently being liquidated. The remaining portfolio companies financial performance and updated financial forecasts for the near term led management to the conclusion that there was an other than temporary
decline in the carrying value of these companies. Accordingly, the Company decided to exit the venture business and cease future funding in its portfolio companies. As a result, the Company recorded an impairment charge of approximately $29.2
million during the second quarter of 2001 for the remaining carrying value of its non-public company investment portfolio. During 2000, the Company made similar evaluations of the portfolio companies and recorded approximately $15.0 million in
impairments.



During the first quarter of 2001 and the latter
half of 2000, the Company amortized goodwill created by investments that were accounted for under the equity method of accounting. The amount by which the Companys investment exceeds its share of the underlying net assets is considered to be
goodwill, and is amortized over a three-year period. Amortization related to equity investments totaled $1.6 million and $4.9 million in 2001 and 2000, respectively, and is included in the Consolidated Statements of Operations as Amortization
of goodwill-equity investments. The decline in amortization in 2001 is the result of full impairments to these investments during the second quarter of 2001.



Further, during the fourth quarter of 2001, one of the portfolio companies that was previously impaired defaulted on its
credit facility and lease obligation. The Company had provided a standby letter of credit on this credit facility and is a guarantor of the lease obligation. Accordingly, an obligation expense for these guarantees in the entire amount of $2.5
million was recorded at December 31, 2001. During the first quarter of 2002, the Company paid its commitment on the standby letter of credit in the amount of $0.5 million. See Note 20, Commitments and Contingencies.



Additionally, during the fourth quarter of 2001, the Company sold a
significant portion of its interest in PtekVentures for proceeds and a gain of $0.2 million, primarily in the form of two notes that accrue interest at 5.05% annually and are due in full on December 31, 2011. A third party appraisal was performed to
value the portfolio companies owned by PtekVentures. The purchaser is primarily owned by two former executives of PtekVentures. The Company has received an income tax refund of approximately $9.2 million from the capital loss carryback associated
with the sale of this interest.



7. SALE OF RETAIL CALLING CARD REVENUE BASE



Effective August 1, 2000, the Company sold its Retail
Calling Card operating segments revenue base to Telecare, Inc. (Telecare). The sale was valued at approximately $6.5 million and was financed by the Company in the form of two promissory notes with recourse to Telecare. The Company
had extended the due date of the notes during the second half of 2001 until Telecare could obtain third party financing.



Effective August 1, 2000, the Company entered into a management services agreement with Telecare. This agreement was undertaken to ensure an effective
transition of the revenue base by both the Company and Telecare. Under the terms of this agreement, the Company continued to provide telecommunications transport services, operational support and administrative support for the revenue base. The
telecommunications transport services are



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provided on a wholesale basis similar to other customers in the Voicecom operating segment. Accordingly, the Company recognized these services as revenue in
the Voicecom operating segment. The Company maintained the management services agreement with Telecare throughout 2001 while Telecare sought financing to pay its obligations to the Company.



During the first quarter of 2002, Telecare sought protection under Chapter 11
of the United States Bankruptcy Code. As of December 31, 2001, the Company had written off the uncollectible note receivable of $6.5 million and eliminated the deferred gain of $6.5 million associated with the original sale.



8. STRATEGIC ALLIANCE CONTRACT



In November 1996, the Company entered into a strategic alliance agreement
with MCI, the second largest long-distance carrier in the United States. Under the agreement, MCI was required, among other things, to provide the Company with the right of first opportunity to provide enhanced computer telephone products for a
period of at least 25 years. In connection with this agreement, the Company issued to MCI 2,050,000 shares of common stock valued at approximately $25.2 million (based on the average closing price of the Companys shares for the five days
through the effective date of the transaction, adjusted in consideration of the restrictions placed upon the shares), and paid MCI approximately $4.7 million in cash.



In the fourth quarter of 1998, the Company recorded a non-cash charge of $13.9 million to write-down the value of its
strategic alliance intangible asset with MCI. This charge was required based upon managements evaluation of revenue levels expected from this alliance. The Company reevaluated the carrying value and remaining life of the MCI strategic alliance
in light of the expiration of certain minimum revenue requirements under the strategic alliance agreement and the level of revenues expected to be achieved from the alliance following the merger of WorldCom and MCI in the third quarter of 1998.
Accordingly, The Company recorded a write-down in the carrying value of this investment based on estimated future cash flows discounted at a rate of 12%. 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 write-down.



In the second quarter of 2000, the Company expensed the remaining balance of the strategic alliance intangible asset as a result of the Companys
favorable settlement of a contractual dispute with MCI. As part of the settlement, the Company received $12.0 million in cash for terminating the strategic alliance contract with MCI. Accordingly, the Company expensed the net book value of this
contract of approximately $6.9 million against the settlement proceeds of $12.0 million. In addition, the Company expensed approximately $1.3 million in legal costs associated with this settlement.



9. ACQUISITIONS AND DISPOSITIONS



Discontinued Operations



On March 26, 2002, the Company sold substantially all the assets of the
Voicecom operating segment, exclusive of its Australian operations, to an affiliate of Gores Technology Group, for a total purchase price of approximately $22.4 million, comprised of cash and the assumption of certain liabilities.



During the fourth quarter of 2002, the Company assessed the Voicecom
liabilities that were retained at the time of the sale and determined, based upon the activity in these accounts and the passage of time, that certain of these liabilities were no longer required. Thus, in the fourth quarter of 2002 an adjustment
was made to these estimates reducing the loss on discontinued operations of approximately $2.9 million, net of taxes.



Of the Voicecom liabilities, approximately $4.3 million represents capital leases guaranteed by the Company.



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In accordance with SFAS No, 144, Accounting for the Impairment or Disposal of Long-Lived
Assets, the transaction was accounted for as a discontinued operation. The revenues and pre-tax loss for the Voicecom operating segment for the twelve months ended December 31, 2002, 2001 and 2000 were (in millions:)



|             |  | 2002 |      |   | 2001 |   |       | 2000 | 
|------------ |  | ---- | ---- | - | ---- | - | ----- | ---- | 
|Revenue      |  | $    | 15.8 |   |      | $ | 92.5  |      | 
|Pre-tax loss |  |      | (5.8 | ) |      |   | (53.2 | )    | 



In connection with the sale, the
Company terminated its credit agreement with ABN AMRO Bank in all material respects.



Customer base acquisitions - Xpedite  2001



During the first quarter of 2001, the Company acquired the store and forward fax customer base of Western Union in North America and the store and forward fax customer base of GN Comtext. The aggregate cash purchase price for these customer
base assets was $5.8 million in 2001 with residual payments for GN Comtext of approximately $0.6 million and $0.2 million in 2002 and 2003, respectively.



Customer base acquisitions - Xpedite 2000



During 2000, the Company acquired various store and forward fax customer bases in both the United States and Switzerland. The aggregate cash purchase
price for these customer base assets was $2.6 million.



10. PROPERTY AND
EQUIPMENT



Property and equipment at December 31 is as
follows (in thousands):



|                                          |  | 2002 |         | 2001
|----------------------------------------- |  | ---- | ------- | ----
|Computer and telecommunications equipment |  | $    | 103,517 |     
|Furniture and fixtures                    |  |      | 18,715  |     
|Office equipment                          |  |      | 9,598   |     
|Leasehold improvements                    |  |      | 14,859  |     
|Construction in progress                  |  |      |        |     
|Building                                  |  |      |        |     
|                                          |  |      |         |     
|                                          |  |      | 146,689 |     
|Less accumulated depreciation             |  |      | 83,541  |     
|                                          |  |      |         |     
|Property and equipment, net               |  | $    | 63,148  |     
|                                          |  |      |         |     



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Assets under capital leases included in property and equipment at December 31 are as follows (in
thousands):



|                                          |  | 2002 |       | 2001
|----------------------------------------- |  | ---- | ----- | ----
|Computer and telecommunications equipment |  | $    |      |     
|Furniture and fixtures                    |  |      | 1,055 |     
|                                          |  |      |       |     
|Subtotal                                  |  |      | 1,055 |     
|Less accumulated depreciation             |  |      | 214   |     
|                                          |  |      |       |     
|Property and equipment, net               |  | $    | 841   |     
|                                          |  |      |       |     



In 2001, the Company
made additions to assets under capital lease obligations of approximately $5.9 million primarily associated to continued network equipment acquisitions associated with Voicecoms network upgrade and consolidation and Xpedites worldwide
headquarters build-out. The capital leases associated with Voicecom were included in the 2002 sale of the operating unit to Gores Technology.



11. GOODWILL AND INTANGIBLE ASSETS



Goodwill and intangible assets consist of the following amounts for December 31, 2002 and 2001 (in thousands):



|                              |  | 2002 |         | 2001
|----------------------------- |  | ---- | ------- | ----
|Goodwill                      |  | $    | 377,961 |     
|Less accumulated amortization |  |      | 254,895 |     
|                              |  |      |         |     
|                              |  | $    | 123,066 |     
|                              |  |      |         |     
|Customer lists                |  | $    | 56,633  |     
|Developed technology          |  |      | 34,300  |     
|Assembled workforce           |  |      |        |     
|                              |  |      |         |     
|                              |  |      | 90,933  |     
|Less accumulated amortization |  |      | 83,131  |     
|                              |  |      |         |     
|                              |  | $    | 7,802   |     
|                              |  |      |         |     



Intangible assets by
reportable segment at December 31, 2002 and 2001 (in thousands):



|                                             |  | Conferencing |        | Xpedite |   | Total 
|-------------------------------------------- |  | ------------ | ------ | ------- | - | ------
|Goodwill carrying value at December 31, 2001 |  | $            | 25,523 |         | $ | 97,543
|Additions                                    |  |              |       |         |   |      
|Impairment                                   |  |              |       |         |   |      
|Amortization                                 |  |              |       |         |   |      
|                                             |  |              |        |         |   |       
|Goodwill carrying value at December 31, 2002 |  | $            | 25,523 |         | $ | 97,543
|                                             |  |              |        |         |   |       



|                                                |  | Conferencing |        |   | Xpedite |   |        | Total | 
|----------------------------------------------- |  | ------------ | ------ | - | ------- | - | ------ | ----- | 
|Intangibles carrying value at December 31, 2001 |  | $            | 2,561  |   |         | $ | 19,319 |       | 
|Additions                                       |  |              |       |   |         |   |       |       | 
|Impairment                                      |  |              |       |   |         |   | (3,202 | )     | 
|Amortization                                    |  |              | (1,464 | ) |         |   | (9,412 | )     | 
|                                                |  |              |        |   |         |   |        |       | 
|Intangibles carrying value at December 31, 2002 |  | $            | 1,097  |   |         | $ | 6,705  |       | 
|                                                |  |              |        |   |         |   |        |       | 



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Intangible assets are amortized on a straight-line basis with an estimated useful life between three
and five years. Amortization expense on existing intangible assets is expected to be approximately $3.9 million, $2.0 million and $1.9 million in 2003, 2004 and 2005, respectively. See Note 12Asset Impairments for further
discussion.



12. ASSET IMPAIRMENTS



The following table summarizes the asset impairments from continuing
operations incurred by operating segment for the years ended December 31, 2002, 2001 and 2000 (in thousands):



|                            |  | Xpedite |        | Conferencing |   | Holding Co. |  | Total
|--------------------------- |  | ------- | ------ | ------------ | - | ----------- |  | -----
|2002                        |  |         |        |              |   |             |  |      
|Other intangibles           |  | $       | 3,202  |              | $ |            |  | $    
|                            |  |         |        |              |   |             |  |      
|2001                        |  |         |        |              |   |             |  |      
|Goodwill                    |  | $       | 91,571 |              |   |             |  |      
|Other intangibles           |  |         | 6,679  |              |   |             |  |      
|Property and equipment, net |  |         | 777    |              |   | 984         |  |      
|                            |  |         |        |              |   |             |  |      
|                            |  | $       | 99,027 |              | $ | 984         |  | $    
|                            |  |         |        |              |   |             |  |      
|2000                        |  |         |        |              |   |             |  |      
|Property and equipment, net |  | $       | 800    |              |   |            |  |      
|                            |  |         |        |              |   |             |  |      



Effective January 1,
2002, the Company adopted SFAS No. 144, Accounting for the Impairment of Disposal of Long Lived Assets. During the fourth quarter of 2002 the Company assessed the carrying value of the customer lists at Xpedite pursuant to SFAS No. 144,
as Xpedite experienced a decline in revenue in certain international markets during the later half of 2002. Using the best-estimate approach, the fair value of certain customer lists associated with the markets experiencing the declines were
determined to be less than the carrying value at December 31, 2002, resulting in a $3.2 million asset impairment.



During the second half of 2001, the Company experienced declines in revenue at its Xpedite operating segment. During the fourth quarter of 2001, the
Company assessed the outlook of various service offering revenues and evaluated the potential impairment of various assets associated with the operating equipment, goodwill and other intangible assets of Xpedite pursuant to SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. Management reviewed the identifiable undiscounted future cash flows, including the estimated residual value to be generated by the assets to
be held and used by the business acquired in Xpedite at their asset grouping level. Based on the results of these assessments, the Company recorded the $100.8 million impairment in the fourth quarter of 2001 from continuing operations ($99.0 million
of which was related to Xpedite, as discussed further below).



Xpedite
impairment - 2001



In Xpedite, a decline in the legacy
store and forward fax revenues and weakness in the European and Asia Pacific regions of the business began to occur in the latter part of the third quarter and the early part of the fourth quarter of 2001. Accordingly, management was concerned that
a fair value assessment would potentially be lower than the carrying value on the balance sheet. A third party appraisal was performed using a discounted cash flow income approach to valuing the business using a 15% discount rate. The valuation
resulted in an asset impairment related to the Xpedite operating segment of $99.0 million to reflect the carrying value in excess of fair value at December 31, 2001. Of the $99.0 million, property and equipment impairments of $0.7 million at Xpedite
related primarily to the abandonment of its Indonesian operations due to declining revenues and profits. Indonesia represented less than 1% of Xpedites revenues.



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Other impairments - 2001



Additionally, management recorded asset impairments totaling $1.8 million related to the carrying value of capitalized
software associated with certain internal information systems at both Premiere Conferencing and the Holding Company that have been taken out of service.



Real-time fax impairment - 2000



With the deregulation of most Asian telecommunications markets, Xpedites cost advantage dissipated, and Xpedite decided to exit this service and
concentrate on higher value-added services such as transactional messaging and messageREACH. The asset impairments of $0.8 million included the write-down of furniture and fixtures and real-time fax equipment including autodialers, faxpads and
computers. The valuation was based on the fair value of the assets as of December 31, 2000. All equipment costs were incurred in conjunction with the closing of the real-time fax operations in Malaysia, Singapore, Hong Kong, Taiwan and Korea.



13. INDEBTEDNESS



Long term debt and capital lease obligations at December 31 is as follows
(in thousands):



|                          |  | 2002 |       | 2001
|------------------------- |  | ---- | ----- | ----
|Notes payable to banks    |  | $    | 75    |     
|Equipment term loan       |  |      | 7,081 |     
|Capital lease obligations |  |      | 571   |     
|                          |  |      |       |     
|Subtotal                  |  | $    | 7,727 |     
|Less current portion      |  |      | 4,320 |     
|                          |  |      |       |     
|                          |  | $    | 3,407 |     
|                          |  |      |       |     



In June 2002, the
Company entered into a term equipment loan with Commercial Federal Bank. The loan proceeds of $4.0 million were used for equipment purchases associated with the Premiere Conferencing operating segment. The term of the loan is thirty-six months and
the annual interest rate is 5.5%. The loan is collateralized by certain fixed assets of the Company. The loan agreement contains certain covenants that are usual and customary. At December 31, 2002, the Company was in compliance with all covenants
under the loan agreement. At December 31, 2002 amounts outstanding on this term loan were $3.5 million.



In September 2001, the Company entered into a term equipment loan with United Missouri Bank. The loan proceeds of $6.5 million were used for equipment
purchases associated with the Premiere Conferencing operating segment. The term of the loan is thirty months and the annual interest rate is 6.0%. The loan is collateralized by certain fixed assets of the Company. The loan agreement contains certain
covenants that are usual and customary. At December 31, 2002, the Company was in compliance with all covenants under the loan agreement. At December 31, 2002 and 2001, amounts outstanding on this term loan were $3.6 million and $6.1 million,
respectively.



In June 2001, the Company entered into a capital
lease obligation for headquarter expansion at Xpedite for approximately $1.1 million. The term of the lease is thirty-six months with a yield of 12.6%. At December 31, 2002 and 2001, amounts outstanding on this lease were approximately $0.6 million
and 0.9 million, respectively.



During 2001, the Company also
entered into four capital lease obligations in the aggregate amount of $4.8 million. The interest rates implied in these capital leases are both fixed and variable in nature and on average yield approximately 7.7% interest. The leases were to fund
the network equipment used in consolidating and upgrading Voicecoms voice messaging network. The terms of these capital leases range from 36 to 60 months. These leases were transferred with the sale of the Voicecom business unit. See Note
9Acquisitions and Dispositions.



In September
2000, the Company entered into a credit agreement (the Agreement) for a one-year revolving credit facility with ABN AMRO Bank N.V. (the Bank or Agent). The Agreement provides for



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borrowings of up to $20.0 million, and is subject to certain covenants that are usual and customary for credit agreements of this nature. The commitment to
provide revolving credit loans under the Agreement terminates 364 days from September 29, 2000, subject to extension. The Company extended the agreement at September 30, 2001 for 364 days. The agreement was amended to provide for borrowings up to
$13.5 million and is subject to certain covenants that management believes are usual and customary for credit agreements of this nature. Amounts outstanding under the Agreement on the expiration date may, at the option of the Company, either be paid
in full or converted to a one-year term loan payable in four equal quarterly installments. Proceeds drawn under the Agreement may be used for capital expenditures, working capital, acquisitions, investments, refinancing of existing indebtedness, and
other general corporate purposes. The annual interest rate applicable to borrowings under the Agreement is, at the Companys option, (i) the Agents Base Rate plus 1.25 percent or (ii) the Euro Rate (LIBOR) plus 3.50 percent. Amounts
committed but not drawn under the Agreement are subject to a commitment fee equal to 0.50 percent per annum. The Company terminated the Agreement on March 26, 2002 in connection with the sale of its Voicecom business unit.



In July 1997, the Company issued convertible subordinated notes
(Convertible Notes) of $172.5 million that mature on July 1, 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. Beginning in July 2000, the Convertible Notes were redeemable by the Company at a price equal to 103% of the conversion price, declining to 100% at maturity with accrued interest. The annual
interest commitment associated with these notes is $9.9 million and is paid semiannually on July 1 and January 1 of each year.



As of December 31, 2002, future minimum capital lease payments and principal maturities under indebtedness, excluding notes payable to banks, are as
follows (in thousands):



|Year                                                                            |  | CapitalLeases |     | Term Loan |   | ConvertibleSubordinatedNotes |  | Total
|------------------------------------------------------------------------------- |  | ------------- | --- | --------- | - | ---------------------------- |  | -----
|2003                                                                            |  | $             | 424 |           | $ | 4,260                        |  | $    
|2004                                                                            |  |               | 211 |           |   | 2,386                        |  |      
|2005                                                                            |  |               |    |           |   | 858                          |  |      
|2006                                                                            |  |               |    |           |   |                             |  |      
|2007                                                                            |  |               |    |           |   |                             |  |      
|Thereafter                                                                      |  |               |    |           |   |                             |  |      
|                                                                                |  |               |     |           |   |                              |  |      
|Net minimum payments                                                            |  | $             | 635 |           | $ | 7,504                        |  | $    
|                                                                                |  |               |     |           |   |                              |  |      
|Less amount representing interest                                               |  |               | 64  |           |   | 423                          |  |      
|                                                                                |  |               |     |           |   |                              |  |      
|Present value of net minimum payments                                           |  |               | 571 |           |   | 7,081                        |  |      
|Less current portion                                                            |  |               | 367 |           |   | 3,953                        |  |      
|                                                                                |  |               |     |           |   |                              |  |      
|Obligations under capital lease and equipment term loan, net of current portion |  | $             | 204 |           | $ | 3,128                        |  |      
|                                                                                |  |               |     |           |   |                              |  |      



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14. ACCRUED EXPENSES



Accrued expenses at December 31 are as follows: (in thousands):



|                                               |  | 2002 |        | 2001
|---------------------------------------------- |  | ---- | ------ | ----
|Accrued wages, wage related taxes and benefits |  | $    | 11,679 |     
|Interest payable                               |  |      | 4,994  |     
|Accrued commissions                            |  |      | 3,511  |     
|Accrued regulatory surcharges                  |  |      |       |     
|Accrued obligations  investments              |  |      | 2,000  |     
|Accrued professional fees                      |  |      | 2,050  |     
|Other                                          |  |      | 8,085  |     
|                                               |  |      |        |     
|                                               |  | $    | 32,319 |     
|                                               |  |      |        |     



15. FINANCIAL INSTRUMENTS



The estimated fair value of certain financial instruments
at December 31, 2002 and 2001 is as follows (in thousands):



|                                                               |  | 2002            |         | 2001      
|-------------------------------------------------------------- |  | --------------- | ------- | ----------
|                                                               |  | Carrying Amount |         | Fair Value
|Cash and cash equivalents                                      |  | $               | 68,777  |           
|Marketable securities, available for sale                      |  |                 | 641     |           
|Convertible subordinated notes (see Note 13)                   |  |                 | 172,500 |           
|Notes payable, long-term debt and capital leases (see Note 13) |  |                 | 7,727   |           



The carrying amount of
cash and cash equivalents, marketable securities, accounts receivable and payable, and accrued expenses approximates fair value due to their short maturities. The fair value of the Convertible 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, 2002 and 2001.



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16. EQUITY BASED COMPENSATION CHARGES AND SHAREHOLDERS EQUITY



Equity Based Compensation Charges



The following summarizes the components of equity-based compensation expense
for the years ended December 31, 2002, 2001 and 2000 (in thousands, except share data):



|                                                                                                   |  | Earned    |  | Unearned
|-------------------------------------------------------------------------------------------------- |  | --------- |  | --------
|                                                                                                   |  | Shares    |  | Dollars 
|2002                                                                                               |  |           |  |         
|Deferred compensation for the vesting of restricted shares issued in option exchange               |  | 401,950   |  | $       
|Deferred compensation for the vesting of restricted shares issued to executive management          |  | 160,000   |  |         
|                                                                                                   |  | 561,950   |  | $       
|                                                                                                   |  |           |  |         
|2001                                                                                               |  |           |  |         
|Options exchanged for restricted shares                                                            |  | 1,765,969 |  | $       
|Restricted shares issued to executive management                                                   |  | 826,194   |  |         
|Note forgiveness related to restricted shares in former affiliates and related taxes (see Note 19) |  |           |  |         
|Compensation to management in association with restricted shares in former affiliates              |  |           |  |         
|Options and restricted shares issued for services rendered                                         |  | 15,000    |  |         
|                                                                                                   |  | 2,607,163 |  | $       
|                                                                                                   |  |           |  |         
|2000                                                                                               |  |           |  |         
|Deferred compensation for restricted shares in former Affiliates (see Note 19)                     |  |           |  | $       
|                                                                                                   |  |           |  |         



Options exchanged for restricted
shares



Due to declines in the Companys share
price over the course of the last several years, most of the employee and director option holders had options with exercise prices in excess of the market price of Company stock. In order to provide better performance incentives for employees and
directors and to align the employees and directors interests with those of the shareholders, in the fourth quarter of 2001 the Company offered an exchange program in which it granted one restricted share of common stock in exchange for
every 2.5 options tendered. Approximately 6.0 million employee and director stock options were exchanged for approximately 2.4 million shares of restricted stock on December 28, 2001, the date of the exchange. The restricted shares maintain the same
vesting schedules as those of the original options exchanged, except that in the case of tendered options that were vested on the exchange date, the restricted shares received in exchange therefore vested on the day after the exchange date. To the
extent options were vested at the exchange date, the Company recognized equity based compensation expense determined by using the closing price of the Companys common stock at December 28, 2001, which was $3.32 a share. To the extent that
restricted shares were received for unvested options exchanged, this cost was deferred on the balance sheet under the caption Unearned restricted share compensation. This value was also determined using the closing price of the
Companys common stock at the date of the exchange. The unearned restricted share compensation will be recognized as equity based compensation expense as these shares vest. In 2002 approximately 402,000 shares vested and equity based
compensation expense of $1.3 million was recognized. Assuming all employees at December 31, 2002 will remain employed by the Company through their vesting period, the equity based compensation expense in future years resulting from the restricted
shares issued in the option exchange will be $0.4 million in 2003 and $0.2 million in 2004. See further discussion in Restricted Stock Exchange Offer section of Note 17Equity Based Compensation Plans.



In addition, approximately 890,000 options that were eligible to be exchanged
for restricted shares pursuant to the exchange offer were not tendered. At December 31, 2002 the option count was approximately 627,000 due to



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the sale of Voicecom and other cancellations of these options. These options will be subject to variable accounting until such options are exercised, are
forfeited, or expire unexercised. These options have exercise prices ranging from $5.32 to $29.25. At December 31, 2002 and 2001, no charge was recorded because the exercise price of each of the options was greater than the market value of the
Companys common stock.



Restricted shares issued to executive
management



Certain members of the executive
management of the Company were awarded discretionary bonuses in the form of restricted shares in November 2001. The purpose of these discretionary bonuses was to better align executive managements performance with the interests of the
shareholders. Certain of these restricted shares vested immediately in 2001 and were restricted from trading for a one-year period. The remaining restricted shares vest straight line through 2004 and the equity based compensation expense recorded in
2002 was $0.5 million. The anticipated remaining equity based compensation expense resulting therefrom will be approximately $0.6 million per year for 2003 and 2004.



Loans and note forgiveness associated with restricted shares in former affiliates and related taxes



During the second quarter of 1999, the Company awarded restricted share
grants to the CEO, COO and certain other officers of Company-owned shares held in certain investments in affiliates made in connection with its PtekVentures activities. The vesting periods for these shares ranged from immediately upon grant to three
years, contingent on the executive being employed by the Company. In connection with this action, the Company recorded a non-cash charge of $1.2 million in 2000 related to the vesting of these grants.



In 1999 and 2000, the Company loaned $6.3 million with recourse to the
current CEO and COO to pay taxes in connection with these restricted share grants. These loans were due on December 31, 2006, accrued interest at 6.20% and were secured by the restricted shares granted. In March 2000, the Company agreed to forgive
one-seventh of the principal plus accrued interest on such loans as of December 31, 2000, provided that the executives were employees of the Company on that date. Such amounts were forgiven as of December 31, 2000.



In 2001, the Company agreed to forgive the recourse tax loans to the CEO and
COO, effective as of December 31, 2001, provided that the executives were employees of the Company on that date. The principal and interest forgiven was $5.8 million and the employee tax liability assumed by the Company was $5.3 million. The tax
liability was paid primarily in the first quarter of 2002.



Compensation
to management in association with restricted shares in former affiliates



In 2001, the Company approved discretionary bonuses in the aggregate amount of $0.5 million to two executive vice presidents of the Company who were awarded restricted share grants in affiliates during the second
quarter of 1999, which shares had lost significant market value since the dates of grant.



Options and restricted shares issued for services rendered



In 2001, the Company issued stock options and restricted shares to consultants for various consulting services performed for the Company.



Shareholders Equity Components



Stock option exercises



During 2002, 2001 and 2000, 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 $1.2 million, $0.0 million and $1.6 million was
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, 2002, 2001 and 2000, respectively.



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Stock repurchase program



In the second quarter of 2000, the Companys Board of Directors authorized a stock repurchase program under which PTEK
may purchase up to 10% of the then outstanding shares of its Common Stock, or approximately 4.8 million shares. During 2002, the Company repurchased approximately 1.8 million shares of its Common Stock under the program for approximately $6.6
million. During 2001, the Company repurchased approximately 1.1 million shares of its Common Stock under this program for approximately $3.1 million. In January 2003 the Board of Directors of the Company approved an increase in its 2000 stock
repurchase program by authorizing the repurchase of up to an additional 10% of the Companys outstanding Common Stock, or approximately 5.4 million shares.



401(k) plan



The Company issued 405,241 and 1,108,109 shares of its common stock during 2002 and 2001 respectively at a value of $1.6 million in each year to fund its
discretionary employee contribution match under the Companys 401(k) plan.



Associate stock purchase plan



The
Company offers an Associate Stock Purchase Plan to provide eligible employees an opportunity to purchase shares of its common stock through payroll deductions. See Note 17Equity Based Compensation Plans for plan details.
Approximately 378,002, 480,965 and 479,000 shares of common stock valued at approximately $0.9 million, $0.8 million and $1.4 million were issued under this plan in 2002, 2001 and 2000, respectively. The ASPP was terminated effective January 14,
2003.



Options exchanged for restricted shares



See description of activity included in Equity Based Compensation
Charges section above.



Options and restricted shares issued for
services rendered



See description of activity
included in Equity Based Compensation Charges section above.



Shares issued for legal settlement



During 2002, the Company issued approximately 249,000 shares and $1.8 million in cash as payment of the class action lawsuit, net of legal expenses. The aggregate value of the shares was approximately $1.3 million and is included in common
stock and additional paid in capital. During 2001, the Company issued 100,000 shares as part of a legal settlement with a former executive of the Company. This legal settlement was accrued for in prior years. The aggregate value of the shares issued
on the date of the settlement was approximately $0.3 million and appears as an increase in common stock and additional paid in capital.



Shareholder notes receivable



The shareholder notes receivable relates to transactions where the Company made loans to the CEO of the Company and to a limited partnership in which the
CEO has an indirect interest in association with exercises of options to purchase the Companys common stock. Loan advances totaled $0.8 million and $2.8 million during 2001 and 2000, respectively. See Note 19Related Party
Transactions.



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17. EQUITY BASED COMPENSATION PLANS



The Company has four equity based compensation plans, the 1994 Stock Option Plan, the 1995 Stock Plan (the 1995
Plan), the 1998 Stock Plan (the 1998 Plan) and the 2000 Directors Stock Plan (the Directors Plan), which provide for the issuance of restricted stock, stock options, warrants or stock appreciation rights to employees,
directors, non-employee consultants and advisors of the Company. These plans are administered by committees consisting of members of the board of directors of the Company.



Options for all 960,000 shares of common stock available under the 1994 Stock Option Plan have been granted. 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 Plan provides for the issuance of stock options, stock appreciation rights (SARs) and restricted stock
to employees. A total of 9,650,000 shares of common stock has been reserved in connection with the 1995 Plan. Options issued under the 1995 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 the Companys common
stock on such date. While the vesting schedules remained unchanged, the repriced and regranted options were generally subject to a twelve-month black-out period, during which the options could not be exercised. If an optionees employment was
terminated during the black-out period, he or she would 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 the Companys common stock on such date. Again, the vesting
schedules remained the same and the repriced or regranted options were generally subject to a twelve-month black-out period during which the options could not be exercised. If the optionees employment was terminated during the black-out
period, he or she would 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 intended to provide added incentive for the optionees to continue service.



On July 22, 1998, the Board of Directors approved the 1998 Plan, which essentially mirrors the terms of the 1995 Plan except that it is not intended to be
used for executive officers or directors. In addition, the 1998 Plan, because the shareholders did not approve it, does not provide for the grant of incentive stock options. Under the 1998 Plan, 8,000,000 shares of common stock are reserved for the
grant of nonqualified stock options and other incentive awards to employees and consultants of the Company.



The Company has adopted the Associate Stock Purchase Plan (ASPP) to encourage associates of PTEK to acquire a proprietary interest, or to
increase their existing interest in the Company. The company has reserved 1,750,000 shares of common stock for purchase by associates under the plan. All employees who have worked a minimum of 20 hours per week for at least five months of each
calendar year and who have completed two months of consecutive service are eligible to participate and purchase stock through payroll deductions. The purchase price of the stock is equal to 85% of the fair market value of the common stock on either
the purchase date or the offering date of each six month subscription period, whichever is lower. Purchases under the ASPP are limited to 20% of an associates compensation for any pay period and a maximum fair market value of $25,000 for a
calendar year. Approximately 378,000, 481,000 and 479,000 shares of common stock valued at approximately $0.9 million, $0.8 million and $1.4 million were issued under the ASPP in 2002, 2001 and 2000 respectively. The ASPP was terminated effective
January 14, 2003.



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On April 26, 2000 the Board of Directors approved the Directors Plan which was subsequently approved
by the shareholders on June 7, 2000. On June, 5, 2002, the shareholders approved an increase in the shares available for awards by 1.0 million. The class of persons to participate in this plan consists solely of persons who, at the date of grant of
Options, are Directors of the Company and are not employed by the Company or any of its subsidiaries or affiliates. Under the Directors Plan, the maximum number of shares that may be issued is 2.0 million, of which no more than 10% shall be granted
in the form of restricted stock, subject to antidilution adjustments as defined by the Plan.



Restricted Stock Exchange Offer



Due to declines in the Companys share price over the course of the last several years, most of the employee and director option holders had options with exercise prices in excess of the market price of Company stock. In order to
provide better performance incentives for employees and directors and to align the employees and directors interests with those of the shareholders, in the fourth quarter of 2001 the Company offered an exchange program in which it
granted one restricted share of common stock in exchange for every 2.5 options tendered. Approximately 6.0 million employee and director stock options were exchanged for approximately 2.4 million shares of restricted stock on December 28, 2001, the
date of the exchange. The restricted shares maintain the same vesting schedules as those of the original options exchanged, except that in the case of tendered options that were vested on the exchange date, the restricted shares received in exchange
therefore vested on the day after the exchange date. To the extent options were vested at the exchange date, the Company recognized equity based compensation expense determined by using the closing price of the Companys common stock at
December 28, 2001, which was $3.32 a share. To the extent that restricted shares were received for unvested options exchanged, this cost was deferred on the balance sheet under the caption Unearned restricted share compensation. This
value was also determined using the closing price of the Companys common stock at the date of the exchange. The unearned restricted share compensation will be recognized as equity based compensation expense as these shares vest. In 2002
approximately 402,000 shares vested and equity based compensation expense of $1.3 million was recognized. Assuming all employees at December 31, 2002 will remain employed by the Company through their vesting period, the equity based compensation
expense in future years resulting from the restricted shares issued in the option exchange will be $0.4 million in 2003 and $0.2 million in 2004. See further discussion in Restricted Stock Exchange Offer section of Note
17Equity Based Compensation Plans.



In
accordance with FASB Interpretation No. 44, Accounting For Certain Transactions Involving Stock CompensationAn Interpretation of APB Opinion No. 25, the Company recorded approximately $2.1 million as unearned compensation for the
intrinsic value of the restricted stock on the effective date of the exchange offer, calculated using the closing price of the Companys common stock on December 28, 2001. The unearned compensation will be amortized to Equity based
compensation expense over the vesting period of the restricted stock of which approximately $1.3 million vested in 2002.



In addition, approximately 890,000 options at December 31, 2001 that were eligible to be exchanged for restricted stock pursuant to the exchange offer
were not tendered. At December 31, 2002 the option count was approximately 627,000 due to the sale of Voicecom and other cancellations of these options. These options will be subject to variable accounting until such options are exercised, are
forfeited, or expire unexercised. These options have exercise prices ranging from $5.32 to $29.25. At December 31, 2002 and 2001, no charge was recorded because the exercise price of each of the options was greater than the market value of the
Companys common stock.



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A summary of the status of the Companys stock plans is as follows:



|Fixed Options                            |  | Shares     |   |  | WeightedAverage Exercise Price
|---------------------------------------- |  | ---------- | - |  | ------------------------------
|Options outstanding at December 31, 1999 |  | 14,370,676 |   |  | $                             
|Granted                                  |  | 3,906,375  |   |  |                               
|Exercised                                |  | (2,374,778 | ) |  |                               
|Forfeited                                |  | (1,410,991 | ) |  |                               
|                                         |  |            |   |  |                               
|Options outstanding at December 31, 2000 |  | 14,491,282 |   |  | $                             
|Granted                                  |  | 3,589,584  |   |  |                               
|Exercised                                |  | (158,551   | ) |  |                               
|Exchanged for restricted shares          |  | (6,008,327 | ) |  |                               
|Forfeited                                |  | (1,649,555 | ) |  |                               
|                                         |  |            |   |  |                               
|Options outstanding at December 31, 2001 |  | 10,264,433 |   |  | $                             
|Granted                                  |  | 933,710    |   |  |                               
|Exercised                                |  | (548,117   | ) |  |                               
|Forfeited                                |  | (1,677,173 | ) |  |                               
|                                         |  |            |   |  |                               
|Options outstanding at December 31, 2002 |  | 8,972,853  |   |  | $                             
|                                         |  |            |   |  |                               



The following table
summarizes information about stock options outstanding at December 31, 2002:



|Range of Exercise
Prices |  | OptionsOutstanding |  | WeightedAverage ExerciseRemaining Life |  | Weighted AverageExercise Price ofOptionsOutstanding |       | OptionsExercisable |           | Weighted Average Exercise Price of OptionsExercisable
|------------------------ |  | ------------------ |  | -------------------------------------- |  | --------------------------------------------------- | ----- | ------------------ | --------- | -----------------------------------------------------
|$0 - $4.99               |  | 4,225,148          |  | 5.92                                   |  | $                                                   | 2.75  |                    | 2,088,378 |                                                      
|$5.00 -  $9.99           |  | 3,927,262          |  | 3.40                                   |  |                                                     | 5.96  |                    | 3,762,744 |                                                      
|$10.00 - $14.99          |  | 438,656            |  | 2.40                                   |  |                                                     | 10.38 |                    | 438,656   |                                                      
|$15.00 - $30.00          |  | 381,787            |  | 1.69                                   |  |                                                     | 22.32 |                    | 381,787   |                                                      
|                         |  |                    |  |                                        |  |                                                     |       |                    |           |                                                      
|                         |  | 8,972,853          |  | 4.46                                   |  | $                                                   | 5.36  |                    | 6,671,565 |                                                      
|                         |  |                    |  |                                        |  |                                                     |       |                    |           |                                                      



For options granted
during 2001 whose exercise price was less than the market price of the stock on the date of the grant, the weighted average exercise price is $0.21 per share and the weighted average fair market value is $2.74. Options exercisable at December 31,
2001 and 2000 were 7,174,254 and 9,221,971, respectively.



18. EMPLOYEE
BENEFIT PLANS



The Company sponsors a defined contribution
retirement plan covering substantially all full-time employees. This plan allows 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 this plan. The Company made contributions of $1.6 million in 2002, 2001 and 2000, respectively.



19. RELATED-PARTY TRANSACTIONS



The Company has in the past entered into agreements and arrangements with certain officers, directors and principal shareholders of the Company.



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Loans and note forgiveness associated with restricted shares in former affiliates and related taxes



During the second quarter of 1999, the Company
awarded restricted share grants to the CEO, COO and certain other officers of Company-owned shares held in certain investments in affiliates made in connection with its PtekVentures activities. The vesting periods for these shares ranged from
immediately upon grant to three years, contingent on the executive being employed by the Company. In connection with this action, the Company recorded a non-cash charge of $1.2 million in 2000 related to the vesting of these grants.



In 1999 and 2000, the Company loaned $6.3 million with recourse to the
current CEO and COO to pay taxes in connection with these restricted share grants. These loans were due on December 31, 2006, accrued interest at 6.20% and were secured by the restricted shares granted. In March 2000, the Company agreed to forgive
one-seventh of the principal plus accrued interest on such loans as of December 31, 2000, provided that the executives were employees of the Company on that date. Such amounts were forgiven as of December 31, 2000.



In 2001, the Company agreed to forgive the remaining balance of the recourse
tax loans to the CEO and COO, effective as of December 31, 2001, provided that the executives were employees of the Company on that date. The principal and interest forgiven was $5.8 million and the employee tax liability assumed by the Company was
$5.3 million. The tax liability was paid primarily in the first quarter of 2002.



Notes receivable  shareholder



The Company has made loans to the CEO of the Company and a limited partnership in which he has an indirect interest. These loans were made pursuant to the CEOs then current employment agreement for the exercise price of certain stock
options and the taxes related thereto. Each of these loans is evidenced by a recourse promissory note bearing interest at the applicable Federal rate and secured by the common stock purchased. These loans mature between 2007 and 2010. These loans,
including accrued interest, are recorded in the equity section of the balance sheet under the caption Notes receivable, shareholder. At December 31, 2002, the aggregate amount of these loans was $5.0 million.



Notes receivable  employees



During 2002, the Company loaned approximately $2.0 million with recourse to
certain members of management to pay taxes in connection with the restricted shares issued in exchange for options in December 2001 and the discretionary restricted shares issued in November 2001. These loans are due in 2012, accrue interest at a
weighted average rate of 5.5%, and are secured by the restricted shares granted. The total interest accrued on these loans as of December 31, 2002 was approximately $0.1 million. The Company is obligated to make additional loans to pay taxes
associated with the future vesting of restricted shares, but the dollar amount of such loans cannot be determined at this time.



Use of airplane



During 2002, 2001 and 2000, the Company leased the use of an airplane from a limited liability company that is owned 99% by the Companys CEO and 1%
by the Company. In connection with this lease arrangement, the Company has incurred costs of $1.9 million, $2.2 million and $1.8 million in 2002, 2001 and 2000, respectively, to pay the expenses of maintaining and operating the airplane.



Strategic co-marketing arrangement



The Company had a strategic co-marketing arrangement with WebMD, a former
affiliate. The terms of the agreement provided for WebMD to make an annual minimum commitment of $2.5 million for four years to purchase the Companys products. The Company in turn was obligated to purchase portal rights from WebMD for $4
million over four years to assist in marketing its products. Under this agreement, which expires on February 17, 2003, the Company recognized revenue of approximately $2.5 million in each of 2002, 2001 and 2000. WebMD also subleased floor space in
the Companys headquarters for approximately $0.7 million in each of the two years ended December 31, 2001 and 2000.



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20. COMMITMENTS AND CONTINGENCIES



Operating 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 lease payments for noncancelable operating leases as of December 31, 2002 are as follows (in thousands):



|2003                       |  | $ | 12,879
|-------------------------- |  | - | ------
|2004                       |  |   | 11,191
|2005                       |  |   | 10,274
|2006                       |  |   | 8,870 
|2007                       |  |   | 6,095 
|Thereafter                 |  |   | 8,436 
|                           |  |   |       
|Net minimum lease payments |  | $ | 57,745
|                           |  |   |       



Rent expense under
operating leases was approximately $10.2 million, $8.0 million and $7.6 million for the years ended December 31, 2002, 2001 and 2000, respectively. Facilities rent is reduced by sublease income of approximately $0.0 million, $0.7 million and $0.6
million for the years ended December 31, 2002, 2001 and 2000, respectively.



Supply Agreements



The Company obtains
telecommunications services pursuant to supply agreements with telecommunications service providers. 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 telecommunications services in the future at favorable prices or at all, and the unavailability of telecommunications services, or a material increase in the price at which
the Company is able to obtain telecommunications services, would have a material adverse effect on the Companys business, financial condition and results of operations. The Company is currently a party to telecommunications service contracts
with certain service providers that require the Company to purchase a minimum amount of services through 2006. These costs are approximately $13.7 million, $9.5 million, $1.4 million and $0.5 million in 2003, 2004, 2005 and 2006, respectively. The
total amount of the minimum purchase requirements in 2002 was approximately $9.1 million, of which the Company incurred costs in excess of these minimums.



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.



A lawsuit was filed on November 4, 1998 against the Company and certain of its officers and directors in the Southern District of New York. Plaintiffs are 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 Systems, the Companys roll-out of Orchestrate, the Companys relationship with customers Amway Corporation and DigiTEC,
2000, and the Companys 800-based



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calling card service. 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 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. The defendants motion to transfer venue to Georgia has been granted. The defendants motion to
dismiss has been granted in part and denied in part. The defendants filed an answer on March 30, 2000. On January 22, 2002, the court ordered the parties to mediate. The parties did so on February 8, 2002. On October 17, 2002, the Defendants filed a
Motion for Summary Judgment and a Motion in Limine to exclude the testimony of the Plaintiffs expert. Both motions are pending.



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). 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 $4.9 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.
This case has been dismissed without prejudice and compelled to NASD arbitration, which has commenced. In August 2000, the plaintiffs filed a statement of claim with the NASD against 12 named respondents, including Xpedite (the Nobis
Respondents). The claimants allege that the 12 named respondents engaged in wrongful activities in connection with the management of the claimants investments with Equitable. The statement of claim asserts wrongdoing in connection with
the claimants investment in securities of Xpedite and in unrelated investments involving insurance-related products. The allegations in the statement of claim against Xpedite are limited to claimants investment in Xpedite. Claimants
seek, among other things, an accounting of the corporate stock in Xpedite, compensatory damages of not less than $415,000, a fair conversion rate on stock options, losses on the investments, plus interest and all dividends, punitive damages,
attorneys fees and costs. Hearings before the NASD panel were held on November 27-29, 2001, January 22-24, 2002, February 4-7, 2002, April 9-19, 2002, and May 30, 2002. On July 31, 2002, the NASD Panel issued its Award. The Award was
subsequently amended on September 9, 2002. The Panel, among other things, held Xpedite, along with co-Respondents Angrisani, Erb, and CEA Financial, jointly and severally liable to Claimant Constance Nobis for $50,000, plus 9% simple interest from
January 1, 1999 until September 9, 2002. The Panel also held Angrisani, Erb, and CEA Financial jointly and severally liable to Xpedite for $50,000, plus 9% simple interest from January 1, 1999 until September 9, 2002. Xpedite has filed a Notice of
Petition, Verified Petition to Vacate Arbitration Award, and Request for Judicial Intervention in New York State. That proceeding is pending. At a hearing on January 10, 2003, the New Jersey Superior Court affirmed the NASD Award. No order or
judgment, however, has been issued by the New Jersey Superior Court.



On September 3, 1999, Elizabeth Tendler filed a complaint in the Superior Court of New Jersey Law Division, Union County, against 17 named defendants including PTEK and Xpedite, and various alleged current and former officers, directors,
agents and representatives of Xpedite. The plaintiff alleges that the defendants engaged in wrongful activities in connection with the management of the plaintiffs investments, including investments in Xpedite. The allegations against Xpedite
and PTEK are limited to plaintiffs investment in Xpedite. Plaintiffs claims against Xpedite and PTEK include breach of contract, breach of fiduciary duty, unjust enrichment, conversion, fraud, interference with economic advantage,
liability for ultra vires acts, violation of the New Jersey Consumer Fraud Act and violation of New Jersey RICO. Plaintiff seeks an accounting of the corporate stock of



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Xpedite, compensatory damages of approximately $1.3 million, accrued interest and/or dividends, a constructive trust on the proceeds of the sale of any
Xpedite or PTEK stock, shares of Xpedite and/or PTEK to satisfy defendants obligations to plaintiff, attorneys fees and costs, punitive and exemplary damages in an unspecified amount, and treble damages. On February 25, 2000, Xpedite
filed its answer, as well as cross claims and third party claims. This case has been dismissed without prejudice and compelled to NASD arbitration, which has commenced. In August 2000, a statement of claim was also filed with the NASD against all
but one of the Nobis Respondents making virtually the same allegations on behalf of claimant Elizabeth Tendler. Claimant seeks an accounting of the corporate stock in Xpedite, compensatory damages of not less than $265,000, a fair conversion rate on
stock options, losses on other investments, interest and/or unpaid dividends, punitive damages, attorneys fees and costs. Hearings before the NASD panel were held on November 27-29, 2001, January 22-24, 2002, February 4-7, 2002, April 9-19,
2002, and May 30, 2002. On July 31, 2002, the NASD Panel issued its Award. The Award was subsequently amended on September 9, 2002. The Panel, among other things, held Xpedite, along with co-respondents Angrisani, Erb, and CEA Financial, jointly and
severally liable to claimant Elizabeth Tendler for $57,500, plus 9% simple interest from March 1, 1999 until September 9, 2002. The Panel also held Angrisani, Erb, and CEA Financial jointly and severally liable to Xpedite for $57,500, plus 9% simple
interest form March 1, 1999 until September 9, 2002. Xpedite has filed a Notice of Petition, Verified Petition to Vacate Arbitration Award, and Request for Judicial Intervention in New York State. That proceeding is pending. At a hearing on January
10, 2003, the New Jersey Superior Court affirmed the NASD Award. No order or judgment, however, has been issued by the New Jersey Superior Court.



On December 10, 2001, Voice-Tel filed a Complaint against Voice-Tel franchisees JOBA, Inc. (JOBA) and Digital Communication Services, Inc.
(Digital) in the U.S. District Court for the Northern District of Georgia. The Complaint sought injunctive relief and a declaratory judgment with respect to Voice-Tels right to terminate the franchise agreements with JOBA and
Digital. On January 7, 2002, JOBA and Digital answered Voice-Tels Complaint and asserted counterclaims against Voice-Tel for alleged breach of franchise agreements and other alleged franchise-related agreements. JOBA and Digital also asserted
claims alleging tortious interference of contract against Premiere Communications, Inc. (PCI) and PTEK. On January 18, 2002, Voice-Tel, PCI and PTEK filed responses and answers to the counterclaims and filed additional breach of contract
and tort claims against JOBA and Digital. In March 2002, Voice-Tel and JOBA and Digital sought leave of court to file amended complaints and answers, which the court granted as to JOBA and Digital and granted in part and denied in part as to
Voice-Tel. The Digital Franchise Agreement contained a mandatory arbitration provision, which was not found in the JOBA Franchise Agreement. Therefore, on April 10, 2002, the federal court severed the Digital breach of franchise agreement claims and
ordered them to be arbitrated. The Court ordered that all remaining claims, including but not limited to the breach of franchise agreement claims as to JOBA, would remain in federal court. The arbitration is currently scheduled for July 13, 2003 and
will be held in Atlanta, Georgia. There is a proposal outstanding that all parties agree to submit all claims to arbitration including the Federal Court claims. At this time, this proposal has not been agreed to by any of the parties. Discovery with
respect to the arbitration will end on June 25, 2003. On July 10, 2002, JOBA and Digital moved to amend their Complaint to add claims for constructive termination of their franchises, which was subsequently denied by the court on September 11, 2002.
On July 16, 2002, Voicecom Telecommunications, LLC (Voicecom) was added as a party Plaintiff in the lawsuit against JOBA and Digital. With the exception of expert and damages testimony, discovery has now concluded and the parties are
awaiting a trial date. The parties have filed motions and cross motions for partial summary judgment, including responses thereto. A mediation of all claims between all parties was held on March 24, 2003, which failed to resolve any of the issues in
litigation.



On January 30, 2002, a complaint was filed by 15
Lake Bellevue, LLC in the Superior Court of King County, Washington. Plaintiff sought to enforce a Lease Guaranty Agreement entered into by the Company on behalf of Webforia, Inc. with respect to a lease for commercial real estate located in
Bellevue, King County, Washington. The Companys potential liability under the Guaranty was limited to the lesser of the lease obligations or $2,000,000, together with attorneys fees, interest and collection expenses. The Company filed an
answer to the lawsuit, and on May 17, 2002, the plaintiff filed a motion for partial summary judgment. On June 18, 2002, the court entered an order finding unconditional liability on the part of the Company with respect to the guaranty but reserving
the issue of the amount of the Companys liability for trial. On December 31, 2002 the parties entered into a settlement agreement resolving in full all claims asserted by each party against the other.



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On March 25, 2003, EasyLink Services Corporation (EasyLink) filed an amended complaint
against the Company, Xpedite and AT&T Corp. (AT&T), in the Superior Court of New Jersey, Chancery Division: Middlesex County. EasyLinks complaint alleges, among other things, that the Company entered into an agreement to
purchase a secured promissory note in the original principal amount of $10 million and 1,423,980 shares of EasyLinks Class A common stock for the purpose of obtaining EasyLinks business by using the acquired securities to block a debt
restructuring that EasyLink was allegedly pursuing with its creditors, including AT&T, and for other improper motives. EasyLinks complaint alleges that it pursued such debt restructuring in reliance on its understanding that AT&T would
participate in the restructuring on certain terms to which EasyLink and AT&T allegedly had agreed, and that AT&T misled EasyLink as to its intentions with respect to such restructuring. The complaint further alleges that AT&T disclosed
confidential information of EasyLink to the Company in violation of AT&Ts agreements with EasyLink, and that such information was used by AT&T and the Company in furtherance of a joint scheme to force EasyLink out of the marketplace.
EasyLinks complaint also alleges that employees of the Company and Xpedite have knowingly made false statements to EasyLinks customers, investors and creditors regarding EasyLink and its financial stability. EasyLink claims that these
various actions have impaired its ability to restructure its debt effectively and caused it to suffer various other commercial losses. EasyLinks complaint seeks to (i) enjoin AT&T from selling the secured promissory note to the Company,
improperly interfering with EasyLinks business and contracts and disclosing EasyLinks confidential information without EasyLinks consent; (ii) compel AT&T to consummate EasyLinks proposed restructuring; (iii) enjoin the
Company and Xpedite from making false statements to EasyLinks customers and creditors regarding EasyLink and its financial position; (iv) enjoin the Company from contacting EasyLinks creditors and preventing the restructuring of
EasyLinks debt; and (v) enjoin the Company and Xpedite from using EasyLinks confidential information and contacting EasyLinks current and former employees to obtain such confidential information. EasyLinks complaint also
seeks unspecified damages from AT&T and the Company. The Company intends to answer and defend this lawsuit.



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.



The Company and certain of its officers and directors were named as defendants in multiple shareholder class action lawsuits filed in the United States
District Court for the Northern District of Georgia. Plaintiffs represented a class of individuals (including a subclass of former Voice-Tel Enterprises, Inc. (Voice-Tel) franchisees and a subclass of former Xpedite Systems, Inc.
(Xpedite) shareholders) who purchased or otherwise acquired the Companys common stock from as early as February 11, 1997 through June 10, 1998. Plaintiffs alleged, among other things, 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. Following a court ordered mediation, the parties reached a proposed settlement of all claims. A final fairness hearing on the proposed settlement before
the court was held on July 8, 2002, and the Order and Final Judgment finally approving the settlement was entered on July 15, 2002. Under the terms of the settlement, the Company contributed 249,000 shares of the Companys Common Stock plus
approximately $1.8 million in cash, and the insurance carriers contributed approximately $17.7 million in cash, for a total settlement amount of $20.75 million.



In May 2000, the Company was served with a Complaint filed by Robert Cowan in the Circuit Court of Jackson County, Missouri, alleging claims for breach
of contract, fraudulent misrepresentation, negligent misrepresentation, breach of duty of good faith and fair dealings, unjust enrichment, and violation of Georgia and Missouri blue sky laws. Plaintiffs claims arise out of the Companys
acquisition of American Teleconferencing Services, Ltd. (ATS) in April 1998. Plaintiff was a shareholder of ATS who received shares of PTEK stock in the transaction. Three other similarly situated plaintiffs later joined the suit. On
August 28, 2002, the parties entered into a Confidential Settlement Agreement and Mutual General Release pursuant to which, among other things, the Company paid the Plaintiffs $3.6 million and all claims were dismissed with prejudice.



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PTEK HOLDINGS, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



21. INCOME TAXES



Income tax (benefit) provision from continuing operations for 2002, 2001 and 2000 is as follows (in thousands):



|              |  | 2002 |        |   | 2001 |   |         | 2000
|------------- |  | ---- | ------ | - | ---- | - | ------- | ----
|Current:      |  |      |        |   |      |   |         |     
|Federal       |  | $    |       |   |      | $ | (9,125  | )   
|State         |  |      | 997    |   |      |   | 241     |     
|International |  |      | (1,216 | ) |      |   | 2,373   |     
|              |  |      |        |   |      |   |         |     
|              |  | $    | (219   | ) |      | $ | (6,511  | )   
|              |  |      |        |   |      |   |         |     
|Deferred:     |  |      |        |   |      |   |         |     
|Federal       |  | $    | 2,192  |   |      | $ | 2,739   |     
|State         |  |      | (597   | ) |      |   | (1,321  | )   
|International |  |      |       |   |      |   | (6,250  | )   
|              |  |      |        |   |      |   |         |     
|              |  |      | 1,595  |   |      |   | (4,832  | )   
|              |  |      |        |   |      |   |         |     
|              |  | $    | 1,376  |   |      | $ | (11,343 | )   
|              |  |      |        |   |      |   |         |     



The difference between
the statutory federal income tax rate and the Companys effective income tax rate applied to income before income taxes from continuing operations for 2002, 2001 and 2000 is as follows (in thousands):



|                                             |  | 2002 |        |   | 2001 |   |         | 2000 | 
|-------------------------------------------- |  | ---- | ------ | - | ---- | - | ------- | ---- | 
|Income taxes at federal statutory rate       |  | $    | 5,528  |   |      | $ | (77,351 | )    | 
|State taxes, net of federal benefit          |  |      | 997    |   |      |   | (1,164  | )    | 
|Foreign taxes                                |  |      | (2,150 | ) |      |   | (3,689  | )    | 
|Change in valuation allowance                |  |      | (5,992 | ) |      |   | 21,743  |      | 
|Other permanent differences                  |  |      | 2,991  |   |      |   | 49,118  |      | 
|                                             |  |      |        |   |      |   |         |      | 
|Income taxes at the Companys effective rate |  | $    | 1,376  |   |      | $ | (11,343 | )    | 
|                                             |  |      |        |   |      |   |         |      | 



During the year ending
December 31, 2002 the Company realized tax benefits of approximately $5.6 million of which approximately $1.0 million and $4.6 million were realized in the third and fourth quarters of 2002, respectively, due to changes in previous estimates. This
$5.6 million tax benefit consisted of approximately $3.4 million related to foreign taxes and approximately $2.2 million related to revised estimates of deferred tax asset and liability values.



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):



|                                 |  | 2002 |        | 2001
|-------------------------------- |  | ---- | ------ | ----
|Deferred tax assets:             |  |      |        |     
|Net operating loss carryforwards |  | $    | 31,648 |     
|Intangible assets                |  |      | 3,418  |     
|Restructuring costs              |  |      | 2,809  |     
|Accrued expenses                 |  |      | 8,264  |     
|Other tax credits                |  |      | 1,820  |     
|Capitalized software             |  |      | 619    |     
|Investments                      |  |      |       |     
|Property and equipment           |  |      |       |     
|                                 |  |      |        |     
|                                 |  | $    | 46,758 |     



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                |  | 2002 |         |   | 2001 |  
|----------------------------------------------- |  | ---- | ------- | - | ---- | -
|Deferred tax liabilities:                       |  |      |         |   |      |  
|Property and equipment                          |  | $    | (3,176  | ) |      | $
|Intangible assets                               |  |      | (427    | ) |      |  
|Unrealized gain on marketable equity securities |  |      | (175    | ) |      |  
|Other liabilities                               |  |      | (15,300 | ) |      |  
|                                                |  |      |         |   |      |  
|                                                |  |      | (19,078 | ) |      |  
|Valuation allowance                             |  |      | (5,231  | ) |      |  
|                                                |  |      |         |   |      |  
|Deferred income taxes, net                      |  | $    | 22,449  |   |      | $
|                                                |  |      |         |   |      |  



The Company is
required to estimate its taxes in each jurisdiction of operation. This process involves management estimating its tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes.
The ultimate recognition of uncertain tax matters is realized in the period of resolution.



At December 31, 2002, the Company had federal income tax net operating loss carryforwards of approximately $73.9 million expiring in 2005 through 2022. The utilization of some of the net operating losses are subject
to Internal Revenue Code Section 382 limitations due to prior ownership changes. Tax benefits of approximately $1.2 million, $0.0 million and $1.6 million in 2002, 2001 and 2000, respectively, are associated with nonqualified stock option exercises,
the benefit of which was credited directly to additional paid-in capital.



The Company was able to carryback capital losses generated in 2001 against prior years capital gains for approximately $9.2 million in federal income tax refunds. This refund due was recorded as federal income
tax receivable on the balance sheet at December 31, 2001.



During the year ended December 31, 2002, the valuation allowance changed by $23.0 million. The change was the result of several factors including a transmutation of $3.0 million of capital loss carryforwards into realizable net operating
loss carryforwards. In addition, $3.4 million and $1.3 million for federal and foreign net operating loss carryforwards were deemed likely to be utilized and $8.3 million and $7.0 million relating to expiring state and foreign net operating loss
carryforwards were written off, for which the correlating assets were also written off.



22. STATEMENT OF CASH FLOW INFORMATION



Supplemental disclosure of cash flow information (in thousands):



|                                                                      |  | 2002 |        |   | 2001 |   |        | 2000
|--------------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | ----
|Cash paid (received) during the year for:                             |  |      |        |   |      |   |        |     
|Interest                                                              |  | $    | 10,403 |   |      | $ | 11,283 |     
|Income taxes, net                                                     |  | $    | (8,217 | ) |      | $ | (4,505 | )   
|Cash paid for acquisitions accounted for as purchases are as follows: |  |      |        |   |      |   |        |     
|Fair value of assets acquired                                         |  | $    |       |   |      | $ | 5,828  |     
|Less liabilities assumed                                              |  |      |       |   |      |   |       |     
|Less common stock issued to sellers                                   |  |      |       |   |      |   |       |     
|Cash paid for transaction costs and liabilities assumed               |  |      | 701    |   |      |   |       |     
|                                                                      |  |      |        |   |      |   |        |     
|Net cash paid                                                         |  | $    | 701    |   |      | $ | 5,828  |     
|                                                                      |  |      |        |   |      |   |        |     





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PTEK HOLDINGS, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Non-cash investing and financing activities:



During 2002 and 2001 the Company made a discretionary contribution of $1.6 million for the benefit of employees in Company
stock. Additionally during 2001, the Company acquired $5.9 million of equipment though capital leases and the Company exchanged options for restricted stock.



23. SEGMENT REPORTING



PTEK Holdings, Inc., a Georgia corporation, and its subsidiaries (collectively the Company or PTEK), is a global provider of
business communications services, including conferencing (audio conferencing and Web-based collaboration) and multimedia messaging (high-volume actionable communications, e-mail, wireless messaging, voice message delivery and fax). The
Companys reportable segments align the Company into two operating segments based on product offering. These segments are Premiere Conferencing and Xpedite. Premiere Conferencing offers a full suite of enhanced audio, automated audio and Web
conferencing services for all forms of group communications activities. Xpedite offers a comprehensive suite of business services that enable actionable two-way communications which allow corporations to better acquire and retain customers as well
as automate their core business processes. In addition, the Company had one other reportable segment, Voicecom, which the Company exited through the sale of that segment effective March 26, 2002. Voicecom offered a suite of integrated communications
solutions including voice messaging, interactive voice response services and unified communications. Retail Calling Card Services is a business segment that the Company exited through the sale of its revenue base effective August 1, 2000. It
primarily consisted of the Premiere WorldLink calling card product, which was marketed primarily through direct response advertising and co-branding relationships to individual retail users.



On January 1, 2001, management responsibility for international conferencing
services was transferred from Xpedite to Premiere Conferencing. Prior to that date, these international revenues were reported in the Xpedite operating segment. The revenues of the Australian operations of Voicecom that were retained in conjunction
with the sale of this operating segment are reported in the international results of Xpedite effective January 1, 2002. In order to report comparable operating segment financial results, certain financial information for years prior to 2001 has been
reclassified. Overall these reclassifications did not have a material impact on the financial results of the operating segments for the periods presented.



Premiere Conferencing has historically relied on sales through a particular customer for a significant portion of its revenues. Sales to that customer
accounted for approximately 12% of consolidated revenues from continuing operations (29% of Premiere Conferencings revenues) in 2002, 10% of consolidated revenues form continuing operations (29% of Premiere Conferencings revenues) in
2001, and 5% of consolidated revenues from continuing operations (22% of Premiere Conferencings revenues) in 2000.



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PTEK HOLDINGS, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Information concerning the operations in these reportable segments is as follows (in millions):



|                                                      |  | Year Ended December 31, |      
|----------------------------------------------------- |  | ----------------------- | -----
|                                                      |  | 2002                    |      
|REVENUES:                                             |  |                         |      
|Revenues from continuing operations:                  |  |                         |      
|Xpedite                                               |  | $                       | 202.9
|Premiere Conferencing                                 |  |                         | 138.5
|Eliminations                                          |  |                         | (0.1 
|                                                      |  |                         |      
|                                                      |  | $                       | 341.3
|                                                      |  |                         |      
|Revenues from discontinued operations:                |  |                         |      
|Retail Calling Card Services                          |  |                         |     
|Voicecom                                              |  |                         | 15.8 
|                                                      |  |                         |      
|                                                      |  | $                       | 357.1
|                                                      |  |                         |      
|OPERATING PROFIT (LOSS):                              |  |                         |      
|Operating profit (loss) from continuing operations:   |  |                         |      
|Xpedite.                                              |  | $                       | 22.8 
|Premiere Conferencing                                 |  |                         | 31.5 
|Holding Company                                       |  |                         | (29.4
|Eliminations                                          |  |                         | (0.0 
|                                                      |  |                         |      
|                                                      |  | $                       | 24.9 
|                                                      |  |                         |      
|Operating profit (loss) from discontinued operations: |  |                         |      
|Retail Calling Card Services                          |  |                         |     
|Voicecom                                              |  |                         | (5.7 
|                                                      |  |                         |      
|                                                      |  | $                       | 19.2 
|                                                      |  |                         |      
|NET INCOME (LOSS):                                    |  |                         |      
|Income (loss) from continuing operations:             |  |                         |      
|Xpedite                                               |  | $                       | 26.1 
|Premiere Conferencing                                 |  |                         | 26.8 
|Holding Company                                       |  |                         | (38.2
|Eliminations                                          |  |                         | (0.3 
|                                                      |  |                         |      
|                                                      |  | $                       | 14.4 
|                                                      |  |                         |      
|Loss from discontinued operations:                    |  |                         |      
|Retail Calling Card Services                          |  |                         |     
|Voicecom                                              |  |                         | (12.5
|                                                      |  |                         |      
|Net income (loss):                                    |  | $                       | 1.9  
|                                                      |  |                         |      



|                             |  | As of December 31,
|---------------------------- |  | ------------------
|                             |  | 2002              
|IDENTIFIABLE ASSETS:         |  |                   
|Xpedite                      |  | $                 
|Voicecom                     |  |                   
|Premiere Conferencing        |  |                   
|Retail Calling Card Services |  |                   
|Holding Company              |  |                   
|                             |  |                   
|Total                        |  | $                 
|                             |  |                   

---

|(1) | Eliminations are primarily comprised of revenue eliminations from business transacted between Xpedite and Premiere Conferencing.
|--- | --------------------------------------------------------------------------------------------------------------------------------



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PTEK HOLDINGS, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Information concerning revenues from groups of similar products and services are as follows (in
millions):



|                                           |  | 2002 |       |   | 2001 |   |       | 2000 | 
|------------------------------------------ |  | ---- | ----- | - | ---- | - | ----- | ---- | 
|E-mail, fax and messaging                  |  | $    | 202.9 |   |      | $ | 215.7 |      | 
|Conferencing                               |  |      | 138.5 |   |      |   | 115.1 |      | 
|Eliminations                               |  |      | (0.1  | ) |      |   | (0.4  | )    | 
|                                           |  |      |       |   |      |   |       |      | 
|Total revenue from continuing operations   |  | $    | 341.3 |   |      | $ | 330.4 |      | 
|                                           |  |      |       |   |      |   |       |      | 
|Voice and unified messaging                |  |      | 15.8  |   |      |   | 70.7  |      | 
|Wholesale calling card services            |  |      |      |   |      |   | 9.6   |      | 
|Retail calling card services               |  |      |      |   |      |   |      |      | 
|Interactive voice response                 |  |      |      |   |      |   | 12.2  |      | 
|                                           |  |      |       |   |      |   |       |      | 
|Total revenue from discontinued operations |  | $    | 15.8  |   |      | $ | 92.5  |      | 
|                                           |  |      |       |   |      |   |       |      | 



Information concerning
depreciation expense for each reportable segment is as follows (in millions):



|                                                      |  | 2002 |      | 2001 |   | 2000
|----------------------------------------------------- |  | ---- | ---- | ---- | - | ----
|Xpedite                                               |  | $    | 13.1 |      | $ | 12.8
|Premiere Conferencing                                 |  |      | 7.5  |      |   | 7.1 
|Holding Company                                       |  |      | 0.9  |      |   | 0.8 
|                                                      |  |      |      |      |   |     
|Total depreciation expense from continuing operations |  | $    | 21.5 |      | $ | 20. 
|                                                      |  |      |      |      |   |     



Information concerning
capital expenditures for each reportable segment is as follows (in millions):



|                                                      |  | 2002 |      | 2001 |   | 2000
|----------------------------------------------------- |  | ---- | ---- | ---- | - | ----
|Xpedite                                               |  | $    | 7.1  |      | $ | 15.8
|Premiere Conferencing                                 |  |      | 6.7  |      |   | 9.8 
|Holding Company                                       |  |      |     |      |   |    
|                                                      |  |      |      |      |   |     
|Total capital expenditures from continuing operations |  | $    | 13.8 |      | $ | 25.6
|                                                      |  |      |      |      |   |     



The following table
presents financial information based on the Companys continuing geographic segments for the years ended December 31, 2002, 2001 and 2000 (in millions):



|              |  | Net Revenues |       | Operating Income (Loss) |   |        | Identifiable Assets
|------------- |  | ------------ | ----- | ----------------------- | - | ------ | -------------------
|2002          |  |              |       |                         |   |        |                    
|North America |  | $            | 228.8 |                         | $ | 20.5   |                    
|Asia Pacific  |  |              | 55.9  |                         |   | 2.6    |                    
|Europe        |  |              | 56.6  |                         |   | 1.8    |                    
|              |  |              |       |                         |   |        |                    
|Total         |  | $            | 341.3 |                         | $ | 24.9   |                    
|              |  |              |       |                         |   |        |                    
|2001          |  |              |       |                         |   |        |                    
|North America |  | $            | 223.8 |                         | $ | (157.8 | )                  
|Asia Pacific  |  |              | 56.2  |                         |   | (6.1   | )                  
|Europe        |  |              | 50.4  |                         |   | (13.2  | )                  
|              |  |              |       |                         |   |        |                    
|Total         |  | $            | 330.4 |                         | $ | (177.1 | )                  
|              |  |              |       |                         |   |        |                    
|2000          |  |              |       |                         |   |        |                    
|North America |  | $            | 187.6 |                         | $ | (63.4  | )                  
|Asia Pacific  |  |              | 64.8  |                         |   | (1.6   | )                  
|Europe        |  |              | 50.8  |                         |   | 6.8    |                    
|              |  |              |       |                         |   |        |                    
|Total         |  | $            | 303.2 |                         | $ | (58.2  | )                  
|              |  |              |       |                         |   |        |                    



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PTEK HOLDINGS, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



24. SUBSEQUENT EVENTS (UNAUDITED)



In January, 2003, Xpedite acquired substantially all of the assets related to the U.S. based e-mail and facsimile messaging
business of Cable & Wireless USA, Inc. (C&W), and assumed certain liabilities, for a total purchase price of $11.4 million. The Company paid $6.0 million in cash at closing, $0.4 million in transaction and closing costs, and will
pay $5.0 million in 16 equal quarterly installments commencing with the quarter ended March 31, 2003. The Company followed SFAS No. 141, Business Combinations, and approximately $1.1 million of the aggregate purchase price has been
allocated to acquire property, plant and equipment, and approximately $10.3 million of the aggregate purchase price has been allocated to identifiable customer lists which are being amortized over a five-year useful life.



On February 27, 2003, the Company entered into a Share Purchase Agreement and
Note Purchase Agreement with AT&T Corp. (AT&T) pursuant to which the Company has agreed to purchase from AT&T, and AT&T has agreed to sell to the Company, 1,423,980 shares of the Class A Common Stock (the
Shares) and a Promissory Note of EasyLink Services Corporation (NASDAQ: EASY) (EasyLink) in the stated principal amount of $10.0 million (the Note). The obligation of each party to consummate the transactions
contemplated by each such purchase agreement is conditioned upon, among other things, the satisfaction or waiver of the conditions to such partys obligation to consummate the transactions contemplated by the other purchase agreement.



The Note is secured by assets representing the substantial
portion of EasyLinks operations. Principal and accrued interest on the note, aggregating over $12.0 million, is payable in 13 quarterly installments beginning June 1, 2003. The principal and accrued interest obligations bear interest at a rate
of 12% per annum until paid. The Shares to be purchased represent approximately 8.9% of the outstanding Class A common shares and 8.4% of the total outstanding common shares of EasyLink.



As consideration for the sale of the Shares and the Note, the Company has agreed to pay AT&T $4.0 million in cash and to
issue to AT&T a warrant to acquire 250,000 shares of the Common Stock of the Company. The warrant will be exercisable at any time during the seven years following the date of issuance, at an exercise price to be determined on the basis of
trading prices of the Companys Common Stock during the ten trading days prior to the issuance of the warrant. The aggregate purchase price for the Shares, as set forth in the Share Purchase Agreement, is $825,908, or $0.58 per share, which
amount equals the average of the high and low selling price of the Class A Common Stock on the Nasdaq National Market during the five trading days immediately preceding the date of the Share Purchase Agreement. Despite the Share Purchase Agreement
stating such separate purchase price for the Shares, the Company views its purchase of the Shares and the Note as a single transaction, for the total consideration set forth above. The cash consideration for the purchase of the Shares and the Note
will be paid out of the working capital of PTEK.



On March 3,
2003, EasyLink demanded that the Company and AT&T terminate their agreements for the purchase and sale of the Note and the Shares. In connection with such demand, EasyLink has asserted that AT&T and PTEK may have violated commitments of
AT&T and the Company to EasyLink and that the Company has engaged in certain improper activities with respect to EasyLink and in connection with the transaction. The Company considers these allegations to be groundless and has denied each of
them. PTEK expects to consummate the purchase of the Note and Shares, subject to the conditions set forth in the respective purchase agreements.



On March 25, 2003, EasyLink filed a lawsuit against the Company, Xpedite and AT&T. See Note 20 Commitments and Contingencies for a
detailed discussion of this litigation.



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SELECTED QUARTERLY FINANCIAL DATA (Unaudited)



The following table presents certain unaudited quarterly consolidated statement of operations data for each of the eight
quarters in the period ended December 31, 2002. Certain prior quarter results have been reclassified to conform with current period presentation. The information has been derived from the Companys unaudited financial statements, which have
been prepared on substantially the same basis as the audited consolidated financial statements contained in this Form 10-K. The results of operations for any quarter are not necessarily indicative of the results to be expected for any future period.



|                                                                  |  | First Quarter |         |   | Second Quarter |   |         | Third Quarter |  |   | Fourth Quarter |   |  | Total |         
|----------------------------------------------------------------- |  | ------------- | ------- | - | -------------- | - | ------- | ------------- |  | - | -------------- | - |  | ----- | --------
|Year ended December 31, 2002                                      |  |               |         |   |                |   |         |               |  |   |                |   |  |       |         
|Revenues                                                          |  | $             | 83,321  |   |                | $ | 87,408  |               |  | $ | 86,012         |   |  | $     | 84,512  
|Gross profit                                                      |  |               | 66,520  |   |                |   | 70,331  |               |  |   | 69,622         |   |  |       | 70,015  
|Operating income                                                  |  |               | 5,944   |   |                |   | 7,868   |               |  |   | 6,723          |   |  |       | 4,370   
|Net income from continuing operations                             |  |               | 2,080   |   |                |   | 2,899   |               |  |   | 2,760          |   |  |       | 6,684   
|Net income from continuing operations per share  basic           |  | $             | 0.04    |   |                | $ | 0.05    |               |  | $ | 0.05           |   |  | $     | 0.12    
|Net income from continuing operations per share  diluted         |  | $             | 0.04    |   |                | $ | 0.05    |               |  | $ | 0.05           |   |  | $     | 0.12    
|Net income (loss)                                                 |  |               | (9,915  | ) |                |   | 2,079   |               |  |   | 2,760          |   |  |       | 6,967   
|Net income (loss) per share - basic                               |  | $             | (0.19   | ) |                | $ | 0.04    |               |  | $ | 0.05           |   |  | $     | 0.13    
|Net income (loss) per share - diluted                             |  | $             | (0.19   | ) |                | $ | 0.04    |               |  | $ | 0.05           |   |  | $     | 0.12    
|                                                                  |  |               |         |   |               
|Year ended December 31, 2001                                      |  |               |         |   |                |   |         |               |  |   |                |   |  |       |         
|Revenues                                                          |  | $             | 82,334  |   |                | $ | 84,053  |               |  | $ | 81,062         |   |  | $     | 82,967  
|Gross profit                                                      |  |               | 62,078  |   |                |   | 65,005  |               |  |   | 63,647         |   |  |       | 66,733  
|Operating loss                                                    |  |               | (12,809 | ) |                |   | (15,887 | )             |  |   | (13,136        | ) |  |       | (135,310
|Net loss from continuing operations                               |  |               | (19,035 | ) |                |   | (35,277 | )             |  |   | (13,571        | ) |  |       | (141,775
|Net loss from continuing operations per share  basic and diluted |  | $             | (0.38   | ) |                | $ | (0.71   | )             |  | $ | (0.27          | ) |  | $     | (2.80   
|Net loss                                                          |  |               | (23,551 | ) |                |   | (42,931 | )             |  |   | (17,625        | ) |  |       | (158,013
|Net loss per share - basic and diluted                            |  | $             | (0.48   | ) |                | $ | (0.86   | )             |  | $ | (0.35          | ) |  | $     | (3.12   



The results of
operations for the fourth quarter of 2002 include an adjustment made to the Voicecom liabilities that were retained at the time of sale based upon the determination that certain of these liabilities were no longer required of approximately $2.9
million, net of taxes. In addition, the Company realized tax benefits of approximately $1.0 million and $4.6 million in the third and fourth quarters of 2002, respectively, due to changes in previous estimates.



The results of operations in all the quarters in 2002 and the 2001 second and
fourth quarters include charges associated with some or all of the following; asset impairments, equity based compensation, restructuring costs, net legal settlements and related expenses and asset impairments and obligations  investments. For
a further discussion of these charges and gains see Managements Discussion and Analysis of Financial Condition and Results of Operations.



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Item 9. Changes and Disagreements with Accountants on Accounting and Financial Disclosure



On October 2, 2001, PTEK dismissed Arthur Andersen, LLP as its independent accountants and engaged PricewaterhouseCoopers, LLP as its new independent
accountants. The decision to change accountants was recommended by the Audit Committee of the Companys Board of Directors and approved by the Companys Board of Directors. The change in certifying accountants was reported in PTEKs
Current Report on Form 8-K, dated October 2, 2001 and filed with the SEC on October 9, 2001. Due to the discontinued operations in 2002 resulting from the sale of the Companys Voicecom operations, PricewaterhouseCoopers was engaged to re-audit
the Company for 2000. Thus, this Annual Report does not include any reports of Arthur Andersen, LLP.



Item 9A. Controls and Procedures.



The Companys management, with the participation of the Companys Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Companys disclosure controls and procedures as of December 31, 2002.
Based on that evaluation, the Companys Chief Executive Officer and Chief Financial Officer have concluded that the Companys disclosure controls and procedures were effective, as of December 31, 2002, to provide reasonable assurance that
the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and
forms.



There were no changes in the Companys
internal control over financial reporting during the fourth quarter of the year ended December 31, 2002 that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.



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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



Directors



|Boland T. Jones        |  | Mr. Jones, age 43, a founder of the Company, has served as a director and Chief Executive Officer of the Company since its inception in July 1991. Mr. Jones is a Class III
director whose current term of service expires at the 2006 annual meeting of shareholders. From February 1993 until August 1998, Mr. Jones served as President of the Company. Since September 1993, Mr. Jones has also served as the Chairman of the
Board of Directors. From 1986 until founding the Company, Mr. Jones served as Chairman, Chief Executive Officer and President of American Network Exchange, a diversified transmission provider specializing in niche markets.                                                                                                                                                                                                                            
|---------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                       | 
|Jeffrey A. Allred      |  | Mr. Allred, age 49, has been a director of the Company since May 1998 and has served as President and Chief Operating Officer of the Company since January 1999. Mr. Allred is a
Class I director whose current term of service expires at the 2004 annual meeting of shareholders. Mr. Allred served as Executive Vice President of Strategic Development of the Company from August 1997 until January 1999. From June 1996 until July
1997, Mr. Allred was a partner in the Atlanta, Georgia office of the law firm of Alston & Bird LLP.                                                                                                                                                                                                                                                                                                                                                
|                       | 
|Raymond H. Pirtle, Jr. |  | Mr. Pirtle, age 61, has been a director of the Company since June 1997. Mr. Pirtle is a Class II director whose current term of service expires at the 2005 annual meeting of
shareholders. He is a founder and has served as Senior Managing Director of Avondale Partners, LLC since June 2001. Mr. Pirtle served as Managing Director and as a director of SunTrust Equitable Securities Corporation from February 1989 to June
2001. Prior to that time, he was a General Partner of J.C. Bradford & Co. from 1980 to 1989. Mr. Pirtle was previously a director and chairman of the compensation committee of Sirrom Capital Corporation, which was acquired by Finova
Group.                                                                                                                                                                                                          
|                       | 
|Jeffrey T. Arnold      |  | Mr. Arnold, age 33, has been a director of the Company since April 1999. Mr. Arnold is a Class III director whose current term of service expires at the 2006 annual meeting of
shareholders. Mr. Arnold is the Chairman and Chief Executive Officer of The Convex Group. From November 1999 to October 2000, Mr. Arnold served as a director and Chief Executive Officer of WebMD Corporation (formerly Healtheon/WebMD Corporation).
Prior to that time, he was Chairman of the Board and Chief Executive Officer of WebMD, Inc. from October 1996 until November 1999, and he served as President of WebMD, Inc. from October 1996 to September 1997. WebMD, Inc. was acquired by Healtheon
Corporation in November 1999. Mr. Arnold is also a member of several private and charitable boards of directors.                                                                             
|                       | 
|Jeffrey M. Cunningham  |  | Mr. Cunningham, age 50, has been a director of the Company since November 2000 and Vice Chairman since March 2002. Mr. Cunningham is a Class II director whose current term of
service expires at the 2005 annual meeting of shareholders. Mr. Cunningham has served as Chairman and Chief Executive Officer of Federated Holdings (f/k/a Cunningham Partners, Inc.), a private venture investment and business development consultant
to the media and technology industry, since April 2001. From September 2000 to April 2001, Mr. Cunningham served as Managing Director of Schroders Ventures IFP Fund. From 1998 to May 2000, Mr. Cunningham was a President of CMGI, an Internet
technology holding company. From 1980 to 1998, Mr. Cunningham was the Group Publisher of Forbes, Inc., publisher of Forbes Magazine. He also serves as a director of Countrywide Financial Services.





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|J. Walker Smith, Jr. |  | Mr. Smith, age 47, has been a director of the Company since June 2001. Mr. Smith is a Class I director whose current term of service expires at the 2004 annual meeting of
shareholders. He has served as President of Yankelovich Partners since May 1999, and previously served as Managing Partner and Head of Yankelovich Monitor from September 1995 until May 1999, and as Senior Vice President and Managing Partner of
Yanklelovichs Atlanta, Georgia office from 1991 until September 1995. Prior to that time, he was Director of Marketing Research of DowBrands from September 1987 until 1990. Mr. Smith is a director of Yankelovich Partners, and he serves as a
member of the Board of Advisors of PlanetJam Media Group. He previously served as a director of Cyber Dialogue and as a member of the Board of Advisors of Screen4Me.com, and was on the Board of Advisors of A.C. Nielsen Masters in Marketing Research
Program.                                                                                
|-------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                     | 
|George M. Miller, II |  | Mr. Miller, II, age 43, has been a director of the Company since April 2003. Mr. Miller is a Class III director whose current term of service expires at the 2006 annual meeting of
shareholders. Mr. Miller currently serves as Chairman of Capital Cash LLC, a consumer finance company, and is in the process of forming InBank, which will provide financial services to working class Americans. From 1999 to 2002, Mr. Miller served as
Senior Vice President Corporate Development of ITC Holding Company, a privately-held holding company. From 1992 to 1999, Mr. Miller served as Chief Executive Officer and director of Sirrom Capital Corporation, a publicly held small business
investment company founded by Mr. Miller in 1992. Prior to that time, Mr. Miller held various positions in the corporate finance departments of two regional investment banking firms, Equitable Securities and J.C. Bradford & Co. Mr. Miller also
serves on the board of directors of PRE-Solutions, Inc. and eCompanyStore, Inc.
|                     | 
|Executive Officers   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                     | 
|Boland T. Jones      |  | Mr. Jones, age 43, a founder of the Company, has served as a director and Chief Executive Officer of the Company since its inception in July 1991. Please refer to the additional
information provided about Mr. Jones under Item 10. Directors and Executive Officers of the Registrant  Directors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                     | 
|Jeffrey A. Allred    |  | Mr. Allred, age 49, has been a director of the Company since May 1998 and has served as President and Chief Operating Officer of the Company since January 1999. Please refer to
the additional information provided about Mr. Allred under Item 10. Directors and Executive Officers of the Registrant  Directors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                     | 
|Patrick G. Jones     |  | Mr. Jones, age 52, has served as Executive Vice President and Chief Legal Officer of the Company since January 2000, and also served as the Companys Chief Financial Officer
from January 2000 until October 2001. From May 1998 until January 2000, Mr. Jones served as Senior Vice President and Chief Legal Officer of the Company. From November 1995 until May 1998, Mr. Jones served as Senior Vice President of Finance and
Legal of the Company. Since December 1995, Mr. Jones has also served as the Companys Corporate Secretary. From February 1993 until November 1995, Mr. Jones was a partner in the Atlanta, Georgia office of the law firm of Nelson Mullins Riley
& Scarborough. From February 1989 until February 1993, Mr. Jones was a partner in the Atlanta, Georgia law firm of Long Aldridge & Norman.                                                                                                                                                                                                  
|                     | 
|William E. Franklin  |  | Mr. Franklin, age 47, has served as Executive Vice President and Chief Financial Officer of the Company since October 2001, and from February 2001 to October 2001, he served as
the Chief Financial Officer of the Companys Premiere Conferencing business unit. From May 1995 to September 2000, Mr. Franklin served as President and Chief Executive Officer of Clifford Electronics, which filed for protection under Chapter 11
of the United States Bankruptcy Code in June 2000. Prior to that time, he held positions of Executive Vice President and Chief Financial Officer for various oil & gas and manufacturing companies, and was a CPA at Grant Thornton from 1977 to
1980.                                                                                                                                                                                                                                                                                                                                      





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|Richard J. Buyens    |  | Mr. Buyens, age 46, has served as President of Global Services of the Company since August 2001. From January 1999 to August 2001, Mr. Buyens was Senior Vice President of
Intermedia Communications, which was acquired by MCI, and from June 1999 to August 2001 he was also President of Shared Technologies Fairchild, a subsidiary of Intermedia. Prior to that time, Mr. Buyens spent almost 18 years in various senior
management positions in sales, marketing and finance with AT&T business services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                     | 
|Theodore P. Schrafft |  | Mr. Schrafft, age 47, has served as President of the Companys Premiere Conferencing business unit since January 2000, and from March 1999 until January 2000 Mr. Schrafft was
Senior Vice President and General Manager of Premiere Conferencing. Mr. Schrafft served as President of the Companys Voice and Data Messaging Division from August 1998 to March 1999. From October 1997 until August 1998, Mr. Schrafft served as
Vice President of Corporate Messaging for the Company. From June 1996 until October 1997, he served as President and Chief Operating Officer of VoiceCom Systems, Inc., an integrated messaging and 800-based services company which was acquired by the
Company in October 1997. Mr. Schrafft served as President of EA Systems, a subsidiary of Digital Equipment Corporation, from 1992 to 1994, and prior to that time, he held various sales and marketing positions with Digital.                                                                                                                                                                                                                                                                                       
|                     | 
|Robert P. Mainor     |  | Mr. Mainor, age 50, has served as President of the Companys Xpedite business unit since March 2002. From August 1999 to March 2002, he was Managing Director and President of
COLT Telecom, Internet Division. From August 1996 to August 1999, Mr. Mainor held several positions with Bell Atlantic, where he served as Vice President, Marketing and Product Management, Data Solutions Group; Senior Vice President, Sales and
Marketing, Internet Solutions, Inc.; and Vice President, Web Services and Business Development. From May 1991 to August 1996, he was with CompuServe Incorporated, where he held positions of Vice President, Product Marketing and Business Information
Services; General Manager and Group Director, Business Services Group and Electronic Communications; and General Manager, Systems Integration Group. Mr. Mainor founded and was Chief Executive Officer of SEARA Information Strategy Corporation from
September 1986 until May 1991 when he sold the company to CompuServe. Prior to that time, he served in various management and engineering positions with The Marketing Institute International Corp., Compuware Corporation, and Electronic Data Systems,
Inc.



Section 16(a) Beneficial Ownership
Reporting Compliance



All of the Companys directors,
all officers subject to the reporting requirements and each beneficial owner of more than ten percent of any class of the Companys Common Stock satisfied all applicable filing requirements of Section 16(a) of the Exchange Act during the year
ended December 31, 2002 except for the following: Mr. Cunningham failed to timely file a Form 5 for the calendar year 2002 to report one grant of stock options exempt from Section 16. This report has now been filed. The foregoing is based upon
reports furnished to the Company.



Item 11. Executive Compensation



Summary
Compensation Table



The following table sets forth the
compensation earned during the last three fiscal years by the Companys Chief Executive Officer and its four most highly compensated other executive officers who were serving as executive officers at December 31, 2002 (collectively, the
Named Executive Officers).



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|                                                                                           |  | Annual Compensation |  | Long-Term Compensation |                         |        
|------------------------------------------------------------------------------------------ |  | ------------------- |  | ---------------------- | ----------------------- | -------
|Name And Principal Position                                                                |  | Year                |  | Salary($)              |                         | Bonus $
|Boland T. Jones Chief Executive Officer and Chairman of the Board of Directors             |  | 2002 2001 2000      |  | $                      | 750,000 787,500 745,672 |        
|                                                                                           |  |                     |  |                        |                         |        
|Jeffrey A. Allred President and Chief Operating Officer and Director                       |  | 2002 2001 2000      |  | $                      | 500,000 525,000 497,482 |        
|                                                                                           |  |                     |  |                        |                         |        
|Richard J. Buyens (4) President of Global Services                                         |  | 2002 2001           |  | $                      | 350,000 121,154         |        
|                                                                                           |  |                     |  |                        |                         |        
|Patrick G. Jones (5) Executive Vice President, Chief Legal Officer and Corporate Secretary |  | 2002 2001 2000      |  | $                      | 393,750 393,750 373,341 |        
|                                                                                           |  |                     |  |                        |                         |        
|Theodore P. Schrafft President, Premiere Conferencing Business Unit                        |  | 2002 2001 2000      |  | $                      | 306,000 293,870 235,348 |        

---

|(1) | Other Annual Compensation for the Named Executive Officers included the following: (i) for Mr. Boland Jones, various perquisites, including personal use of Company aircraft ($82,953
in 2002, $97,635 in 2001 and $160,897 in 2000) and professional fees for tax and estate planning ($50,384 in 2002, $54,137 in 2001 and $84,909 in 2000); and forgiveness of certain tax loans ($956,821 in 2002, $6,015,116 in 2001 and $841,315 in
2000), and (ii) for Mr. Allred, forgiveness of certain tax loans ($478,647 in 2002, $3,009,042 in 2001 and $606,586 in 2000). The table excludes perquisites and other personal benefits the dollar value of which, in the aggregate, was less than the
lesser of $50,000 or 10% of the executives salary and bonus with respect to the applicable year.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The restricted stock issued in 2001 to the Named Executive Officers was subject to varying vesting schedules, as follows: (i) for Mr. Boland Jones, 476,841 shares
vested on the day after grant, and 280,000 shares will vest on January 1, 2005, subject to accelerated vesting upon a change in control of the Company or termination of Mr. Jones employment without cause; (ii) for Mr. Allred, 569,623 shares
vested on the day after grant; 26,667 shares vested on February 18, 2002; 280,000 shares will vest on January 1, 2005, subject to accelerated vesting based upon a change in control of the Company or termination of Mr. Allreds employment
without cause; and 30,000 shares vest each quarter beginning March 31, 2002 through December 31, 2004, subject to accelerated vesting upon a change in control of the Company or termination of Mr. Allreds employment without cause; (iii) for Mr.
Buyens, 1,000 shares vested on the day after grant; (iv) for Mr. Patrick Jones, 98,678 shares vested on the day after grant; 13,333 shares vested on January 2, 2002; 10,000 shares vested on February 18, 2002; and 13,334 shares vested on January 2,
2003; and (v) for Mr. Schrafft, 77,206 shares vested on the day after grant; 10,000 shares vested on January 2, 2002; and 10,000 shares vested on January 7, 2003. As of December 31, 2002, (i) Mr. Boland Jones held a total of 280,000 shares of
restricted stock having an aggregate value of $1,232,000, (ii) Mr. Allred held a total of 340,000 shares of restricted stock having an aggregate value of $1,496,000, (iii) Mr. Patrick Jones held a total of 13,334 shares of restricted stock having an
aggregate value of $58,670, and (iv) Mr. Schrafft held a total of 10,000 shares of restricted stock having an aggregate value of $44,000. Under the terms of their respective restricted stock award agreements and except as noted above, the Named
Executive Officer must remain employed with the Company for the duration of the restriction period in order for the shares to
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | be released. During the restriction period, the Named Executive Officer is eligible to receive dividends and exercise voting privileges on such restricted
shares. The restricted shares are not transferable during the restriction period.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | For 2002, All Other Compensation for the Named Executive Officers consisted of the following: (i) for Mr. Boland Jones, $6,000 in matching contributions to the Companys 401(k)
plan, $26,724 representing the premium paid by the Company in excess of the term component for a split-dollar life insurance benefit plan for Mr. Boland Jones, and $540 in premiums on other term life insurance; (ii) for Mr. Allred, $6,000 in
matching contributions to the Companys 401(k) plan and $2,570 in premiums on term life insurance; (iii) for Mr. Buyens, $2,055 in premiums on term life insurance; (iv) for Mr. Patrick Jones, $6,000 in matching contributions to the
Companys 401(k) plan, $26,500 representing the premium paid by the Company (term and excess component) for a split-dollar life insurance benefit plan for Mr. Patrick Jones, and $4,020 in premiums on other term life insurance; and (v) for Mr.
Schrafft, $6,000 in matching contributions to the Companys 401(k) plan and $763 in premiums on term life insurance.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Mr. Buyens became an executive officer in August 2001.
|--- | ------------------------------------------------------

|(5) | Mr. Patrick Jones also served as Chief Financial Officer of the Company from January 2000 to October 2001.
|--- | ----------------------------------------------------------------------------------------------------------



Option Grants in 2002



The following table provides information with regard to stock option grants to the Named Executive Officers during 2002.



|Name                 |  | Number ofSecuritiesUnderlyingOptionsGranted(#)(1) |  | Percent ofTotal OptionsGranted toEmployees InFiscal Year(%) |       | Exercise orBase Price ($/Sh) |        | ExpirationDate |        | Potential Realizable Value atAssumed Annual Rates ofStock Price Appreciation orOptions
Terms(2)
|-------------------- |  | ------------------------------------------------- |  | ----------------------------------------------------------- | ----- | ---------------------------- | ------ | -------------- | ------ | -----------------------------------------------------------------------------------------------
|                     |  |                                                   |  |                                                             | 5%($) |                              | 10%($)
|Boland T. Jones      |  |                                                  |  |                                                            |       |                              |       |                |       |                                                                                                
|Jeffrey A. Allred    |  |                                                  |  |                                                            |       |                              |       |                |       |                                                                                                
|Richard J. Buyens    |  | 250,000                                           |  | 48.86                                                       |       | $                            | 3.40   |                | 1/1/10 |                                                                                                
|Patrick G. Jones     |  |                                                  |  |                                                            |       |                              |       |                |       |                                                                                                
|Theodore P. Schrafft |  |                                                  |  |                                                            |       |                              |       |                |       |                                                                                                

---

|(1) | All options have an exercise price equal to the market value of the underlying Common Stock on the date of grant. The options vest one-third on each of January 1, 2003, 2004 and
2005, subject to accelerated vesting of all or a portion of the options upon a change in control of the Company or termination of Mr. Buyens employment without cause.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Amounts reported in these columns represent hypothetical amounts that may be realized upon exercise of options immediately prior to the expiration of their term assuming the
specified compounded rates of appreciation of the Common Stock over the term of the options. These numbers are calculated based on rules promulgated by the Securities and Exchange Commission and do not reflect the Companys estimate of future
stock price growth. Actual gains, if any, on stock option exercises and Common Stock holdings are dependent on the timing of such exercises and the future performance of the Common Stock. There can be no assurances that the rates of appreciation
assumed in this table can be achieved or that the amounts reflected will be received by the individuals. This table does not take into account any appreciation of the price of the Common Stock from the date of grant to the current date.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Option Exercises in 2002 and Year-End Option Values



The following table sets forth information regarding (a)
the number of shares of Common Stock received upon exercise of options by the Named Executive Officers during 2002, (b) the net value realized upon such exercise, (c) the number of unexercised options held at December 31, 2002 and (d) the aggregate
dollar value of unexercised options held at December 31, 2002.



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|Name                 |  | SharesAcquiredOnExercise # |             | ValueRealized($) |               | Number of SecuritiesUnderlying UnexercisedOptions at FY End(#) |             | Value of Unexercised In-The-Money Options AtFY-End($)(1)
|-------------------- |  | -------------------------- | ----------- | ---------------- | ------------- | -------------------------------------------------------------- | ----------- | --------------------------------------------------------
|                     |  |                            | Exercisable |                  | Unexercisable |                                                                | Exercisable |                                                         
|Boland T. Jones      |  | - 0 -                      |             | - 0 -            |               | - 0 -                                                          |             | - 0 -                                                   
|Jeffrey A. Allred    |  | - 0 -                      |             | - 0 -            |               | - 0 -                                                          |             | - 0 -                                                   
|Richard J. Buyens    |  | - 0 -                      |             | - 0 -            |               | 166,666                                                        |             | 333,334                                                 
|Patrick G. Jones     |  | - 0 -                      |             | - 0 -            |               | 193,000                                                        |             | - 0 -                                                   
|Theodore P. Schrafft |  | - 0 -                      |             | - 0 -            |               | - 0 -                                                          |             | - 0 -                                                   

---

|(1) | These values have been calculated by subtracting the option exercise price from the market price of the Common Stock on The Nasdaq Stock Markets National Market on December
31, 2002, and multiplying that figure by the total number of exercisable/unexercisable options.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Directors Compensation



Directors are reimbursed for reasonable expenses incurred by them in connection with their attendance at Board meetings, and outside directors receive a base retainer of $20,000 per Board year, which increases to $40,000 per Board year if
an outside director attends all Board meetings and all of his Board committee meetings during such Board year. The Chair of the Audit Committee receives an additional retainer of $10,000 and each member of the Audit Committee receives an additional
retainer of $5,000 per Board year. The Chair of each other standing committee of the Board, with the exception of the 1994 Stock Option Plan Committee, receives an additional retainer of $5,000 per Board year; provided, that if a director is the
Chair of more than one other standing committee, that director receives a total additional retainer of $5,000 for the Board year.



The Company generally grants an option to purchase 100,000 shares of Common Stock at an exercise price equal to the fair market value of the shares of
Common Stock on the date of grant to each new director upon his or her initial appointment or election to the Board of Directors. Generally, one-third of these options vest and become exercisable on the date of each of the annual meetings of
shareholders of the Company subsequent to the directors initial election, provided that the director is a member of the Board on those dates, and subject to acceleration upon a change of control in the Company, as such term is defined in the
respective stock option agreements.



A Special Committee of
outside directors was established by the Board of Directors on September 27, 2002 to review and make recommendations regarding a proposed business transaction. The Special Committee, which consisted of Messrs. Booth (Chair), Buerger and Smith, met
seven times in 2002. The Chair of the Special Committee received $15,000, and each other member received $10,000 for serving on the Special Committee, plus $500 for each meeting attended. The Special Committee is currently inactive.



In March 2002, the Board of Directors approved an arrangement with Jeffrey M.
Cunningham pursuant to which he became Vice Chairman, a non-employee position, and in such position he provides certain services to the Company. In connection therewith, the Company granted to Mr. Cunningham an option to purchase 200,000 shares of
the Companys Common Stock, and the Company agreed to pay Mr. Cunningham a maximum of $200,000 in cash compensation, payable $10,000 per month for the first twelve months and up to $80,000 in the event certain revenue targets are achieved. Mr.
Cunningham received a total of $90,000 in 2002 under the monthly payment arrangement. See Certain Relationships and Related Transactions.



Employment Agreements



The Company or its subsidiaries have entered into employment agreements or employment letters with the following Named Executive Officers, which in 2002
provided as follows:



Boland T. Jones. Pursuant to the
terms of his employment agreement, Mr. Jones base salary for 2002 was $750,000. He is also entitled to any additional compensation provided for by resolution of the Board of Directors of the Company or its Compensation Committee. In addition
to his base salary, Mr. Jones is entitled under his employment agreement to earn an annual bonus based on the Company achieving its quarterly and annual targets for revenue and EBITDA (earnings before interest, taxes, depreciation and amortization).
Mr. Jones target bonus for



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each calendar year is equal to 100% of his base salary for such year, subject to a sliding scale, with 80% of the target bonus allocated to achievement of
cumulative quarterly targets (20% per quarter) and 20% allocated to achievement of annual targets. His bonus is based two-thirds on achievement of EBITDA targets and one-third on achievement of revenue targets. The maximum amount of Mr. Jones
bonus is 150% of his target bonus. Mr. Jones agreed to reduce his base salary for 2002 from $826,875 to $750,000, and to reduce his target bonus for 2002 from $826,875 to $200,000, in exchange for a grant of 156,125 shares of common stock of the
Company in November 2001. Mr. Jones received a $96,000 cash bonus for 2002 based on the achievement of quarterly and annual targets.



The term of Mr. Jones employment agreement expires on January 1, 2005. Thereafter, it renews automatically for successive one-year terms unless
either party elects not to renew at least 30 days prior to expiration of the term. Mr. Jones employment agreement provides that he will not compete with the Company during the term of his employment and for one year thereafter. The Company may
terminate Mr. Jones employment only for cause. Notwithstanding such provision, if the Company terminates his employment for any reason, either (1) before a change in control of the Company or (2) after the twenty-four month period following a
change in control, or if the Company terminates his employment for cause during such twenty-four month period following a change in control, Mr. Jones will be entitled to severance compensation equal to 2.99 times the greater of (a) the sum of his
annual base salary in effect at the date of his termination plus his target bonus for the year in which his termination occurs, and (b) the sum of the highest annual base salary and annual cash bonus paid to him for any of the three calendar years
prior to the date of termination (the Severance Amount). In addition, if, during the twenty-four month period following a change in control of the Company, Mr. Jones employment is terminated by him or the Company for any reason
other than cause, then Mr. Jones will be entitled to severance compensation equal to the greater of (1) the Severance Amount and (2) an amount equal to (a) 3% of any positive amount determined by subtracting the market value of the Company based on
a stock price of $6.125 per share from the actual market value of the Company at the date of the change in control, multiplied by (b) 0.6, with the maximum amount payable under this second calculation not to exceed $25 million.



Under the terms of his then effective employment agreement, in November 1995
Mr. Jones was granted options to acquire 1,440,000 shares of Common Stock. That employment agreement also set forth the terms of certain other stock options granted to him, and permitted him to borrow funds from the Company for the exercise of all
such options and the payment of related taxes. All of these options have been exercised.



Jeffrey A. Allred. Pursuant to the terms of his employment agreement, Mr. Allreds base salary for 2002 was $500,000. He is also entitled to
any additional compensation provided for by resolution of the Board of Directors of the Company or its Compensation Committee. In addition to his base salary, Mr. Allred is entitled under his employment agreement to earn an annual bonus based on the
Company achieving its quarterly and annual targets for revenue and EBITDA. Mr. Allreds target bonus for each calendar year is equal to 100% of his base salary for such year, subject to a sliding scale, with 80% of the target bonus allocated to
achievement of cumulative quarterly targets (20% per quarter) and 20% allocated to achievement of annual targets. His bonus is based two-thirds on achievement of EBITDA targets and one-third on achievement of revenue targets. The maximum amount of
Mr. Allreds bonus is 150% of his target bonus. Mr. Allred agreed to reduce his base salary for 2002 from $551,250 to $500,000, and to reduce his target bonus for 2002 from $551,250 to $150,000, in exchange for a grant of 100,750 shares of
common stock of the Company in November 2001. Mr. Allred received a $72,000 cash bonus for 2002 based on the achievement of quarterly and annual targets.



The term of Mr. Allreds employment agreement expires on January 1, 2005. Thereafter, it renews automatically for successive one-year terms unless
either party elects not to renew at least 30 days prior to expiration of the term. Mr. Allreds employment agreement provides that he will not compete with the Company during the term of his employment and for one year thereafter. The Company
may terminate Mr. Allreds employment only for cause. Notwithstanding such provision, if the Company terminates his employment without cause, either (1) before a change in control of the Company or (2) after the twenty-four month period
following a change in control, Mr. Allred will be entitled to severance compensation equal to 2.99 times the greater of (a) the sum of his annual base salary in effect at the date of his termination plus his target bonus for the year in which his
termination occurs, and (b) the sum of the highest annual base salary and annual cash bonus paid to him for any of the three calendar years prior to the date of termination (the Severance Amount). In addition, if, during the twenty-four
month period following a change in control of the Company, Mr. Allreds employment is terminated by him or the Company for any reason other than cause, then Mr. Allred will be entitled to severance compensation equal to the greater of (1) the
Severance Amount and (2) an amount equal to (a) 3% of any positive amount determined by subtracting the market value of the Company based on a stock price of $6.125 per share from the actual market value of the Company at the date of the change in
control, multiplied by (b) 0.4, with the maximum amount payable under this second calculation not to exceed $15 million.



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As a material inducement to his employment by the Company, in July 1997 Mr. Allred was granted options to
acquire 450,000 shares of Common Stock. All of these options were exchanged for shares of restricted stock pursuant to the restricted stock exchange program in 2001.



Richard J. Buyens. Mr. Buyens has accepted a written offer of employment from the Company. Pursuant to the terms of
his employment letter, Mr. Buyens is eligible for targeted aggregate cash compensation of $700,000 for each full calendar year of employment based on achievement of a Board approved plan and individually assigned management objectives, and he has
the opportunity to earn up to an aggregate cash compensation of $875,000 per annum upon the over-achievement of all plan objectives. His arrangement provides for: (1) the payment of 50% of targeted compensation as base salary, (2) the payment of up
to 50% of targeted compensation as targeted bonus compensation, and (3) the payment of up to an additional 25% of targeted compensation as incentive bonus. Mr. Buyens bonus plan allocates 80% of his target to achievement of cumulative
quarterly targets (20% per quarter) and 20% allocated to the achievement of annual targets. His bonus is based two-thirds on achievement of EBITDA targets and one-third on achievement of revenue targets. In 2002, Mr. Buyers base salary was
$350,000, and he received a $165,600 cash bonus based on the achievement of quarterly and annual targets.



Pursuant to his employment letter, the term of Mr. Buyens employment expires on January 1, 2005. Thereafter, it renews automatically for successive
one-year terms unless either party elects not to renew at least 30 days prior to expiration of the term. If the Company terminates Mr. Buyens employment without cause, he will be entitled to severance compensation equal to one times the greater of
(1) his targeted compensation for the year in which such termination occurs or (2) the highest amount of actual cash compensation (base salary and bonus) paid to him during the two years prior to the one in which he is terminated. If, during the
two-year period following a change in control of the Company, Mr. Buyens employment is terminated by him or the Company for any reason other than cause, then Mr. Buyens will be entitled to severance compensation equal to two times the greater
of (1) his targeted compensation for the year in which the change in control occurs or (2) the highest actual cash compensation (base salary and bonus) paid to him for any of the two years preceding the year in which the change in control occurs.
Mr. Buyens employment letter also provides that he will be granted options to purchase at least 750,000 shares of Common Stock. He was granted options to purchase 500,000 shares of Common Stock in August 2001 and 250,000 shares in January
2002.



Patrick G. Jones. Pursuant to the terms of
his employment agreement, Mr. Jones base salary for 2002 was $393,750. The term of Mr. Jones employment agreement expires on January 1, 2005. Thereafter, it renews automatically for successive one-year terms unless either party elects
not to renew at least 30 days prior to expiration of the term. Mr. Jones employment agreement provides that he will not compete with the Company during the term of his employment and for one year thereafter. The Company may terminate Mr.
Jones employment only for cause. Notwithstanding such provision, if his employment is terminated without cause, Mr. Jones will be entitled to severance compensation equal to two and one-half times his base annual salary plus target bonus in
effect on the date of termination. In addition, if, during the two-year period following a change in control of the Company, Mr. Jones employment is terminated by him or the Company for any reason other than cause, then Mr. Jones is entitled
to severance compensation equal to two and one-half times his base annual salary plus target bonus in effect on the date of termination. In 2002 Mr. Jones was eligible to receive bonus compensation equal to $49,000, based on the achievement of
quarterly and annual targets for revenue and EBITDA of the Company, which was subject to increase if such targets were exceeded. Mr. Jones received a $13,475 cash bonus for 2002 based on the achievement of annual targets.



As a material inducement to his employment by the Company, in November 1995
Mr. Jones was granted options to acquire 240,000 shares of Common Stock. Mr. Jones employment agreement permits him to borrow funds from the Company for the exercise of such options.



Theodore P. Schrafft.Pursuant to the terms of his employment
agreement with Premiere Conferencing, Mr. Scraffts base salary for 2002 was $306,000. The term of Mr. Schraffts employment agreement expires on December 31, 2003. Thereafter, it renews automatically for successive one-year terms unless
either party elects not



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to renew at least 90 days prior to expiration of the term. Mr. Schraffts employment agreement provides that he will not compete with Premiere
Conferencing or any of its affiliates during the term of his employment and for one year thereafter. Premiere Conferencing may terminate Mr. Schraffts employment for cause. If his employment is terminated without cause either before a change
in control of Premiere Conferencing or more than twenty-four months after such a change in control, Mr. Schrafft will be entitled to severance compensation equal to his base annual salary in effect on the date of termination. In addition, if, during
the twenty-four month period following a change in control of Premiere Conferencing, Mr. Schraffts employment is terminated by him with adequate justification or by Premiere Conferencing for any reason other than cause, then Mr. Schrafft is
entitled to severance compensation equal to two times his base annual salary in effect on the date of termination. In 2002, Mr. Schrafft was eligible to receive bonus compensation equal to $74,000, based on the achievement of quarterly and annual
targets for revenue and EBITDA of Premiere Conferencing, which was subject to increase if such targets were exceeded. Mr. Schrafft received a $45,000 discretionary cash bonus for 2002.



Indemnification Agreements



In addition to any other indemnity to which a director or Named Executive Officer may be entitled under the Georgia Business Corporation Code or any
Bylaw, resolution or agreement, the Company has entered into separate indemnification agreements with each of its directors and Named Executive Officers. The Company has agreed to hold harmless and indemnify each director and Named Executive Officer
against any and all expenses (including attorneys fees), judgments, fines and amounts paid in settlement incurred by the director or Named Executive Officer in connection with any threatened, pending or completed action, suit or proceeding to
which the director or Named Executive Officer is, was or at any time becomes a party, or is threatened to be made a party, by reason of the fact that the director or Named Executive Officer is, was, or at any time becomes a director, officer,
employee or agent of the Company. However, the Company shall not pay any indemnity with respect to any proceeding in which the director or Named Executive Office is adjudged, by final judgment not subject to further appeal, liable to the Company or
is subjected to injunctive relief in favor of the Company (i) for any appropriation, in violation of the directors or Named Executive Officers duties, of any business opportunity of the Company, (ii) for acts or omissions which involve
intentional misconduct or a knowing violation of law, (iii) for any transaction from which the director or Named Executive Officer received an improper personal benefit, and (iv) in the case of directors, for unlawful corporate distributions. In
addition, the Company shall not pay any indemnity with respect to any suit in which final judgment is rendered against the director or Named Executive Officer for an accounting of profits made from the purchase or sale of securities of the Company.



No amendment to the Articles of Incorporation or Bylaws of the
Company or any other corporate action shall in any way limit any directors or Named Executive Officers rights under his respective indemnification agreement. The Company believes that the above protections are necessary in order to
attract and retain qualified persons as directors and officers.



In addition, the Company agreed to maintain an insurance policy covering directors and Named Executive officers under which the insurer agrees to pay, subject to certain exclusions, certain claims made against the directors and Named
Executive officers of the Company in their capacities as directors and Named Executive officers.



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Compensation Committee Interlocks and Insider Participation



During 2002, George W. Baker, Sr. and J. Walker Smith, Jr. served on the
Compensation Committee the entire year; Jeffrey M. Cunningham served from January until June; and Randolph L. Booth served from June until December. None of these directors has ever been an employee of the Company. Mr. Baker is Boland T. Jones
father-in-law.



Report of the Compensation Committee and the 1995 Stock Plan
Committee of the Board of Directors



Introduction



The Compensation Committee is responsible for setting and approving the
compensation arrangements for the Companys executive officers, and the 1995 Stock Plan Committee is responsible for determining and administering option grants to executive officers and other employees under the 1995 Stock Plan. From January
to June 2002, the members of the Compensation Committee were Messrs. Smith, Baker and Cunningham; from June 2002 until October 2002, when Mr. Baker resigned from the Committee, the members of the Compensation Committee were Messrs. Smith, Baker and
Booth; and for the remainder of 2002 the members of the Compensation Committee were Messrs. Smith and Booth. During 2002, the members of the 1995 Stock Plan Committee were Messrs. Smith and Baker. The Compensation Committee and the 1995 Stock Plan
Committee each currently comprises J. Walker Smith, Jr. (Chair) and Raymond H. Pirtle, Jr. Mr. Pirtle joined the Compensation Committee and the 1995 Stock Plan Committee in April 2003 when Messrs. Booth and Baker resigned from the Board of
Directors.



The Companys executive compensation policy,
as implemented by the Compensation Committee and the 1995 Stock Plan Committee, is designed to provide a competitive compensation program that will enable the Company to attract, motivate, reward and retain executives who have the skills, experience
and talents required to promote the short- and long-term financial performance and growth of the Company.



Generally, in establishing levels of compensation for executive officers, the Compensation Committee and the 1995 Stock Plan Committee consider all
factors they deem appropriate, which may include, among others:



| |  | level and scope of responsibilities;
| | - | ------------------------------------



| |  | pay levels of executive officers in comparable companies;
| | - | ---------------------------------------------------------



| |  | experience, achievements and special expertise;
| | - | -----------------------------------------------



| |  | achievement of specific business initiatives;
| | - | ---------------------------------------------



| |  | appropriate inducements to initial and continued employment;
| | - | ------------------------------------------------------------



| |  | the Companys recent financial results compared to financial results for prior years and compared to the Companys business plan; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------



| |  | alignment of the interests of executive officers with those of shareholders through award opportunities that can result in ownership of Common Stock.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------



While some or all of these factors may be considered in a given circumstance,
all compensation decisions involve subjectivity.



The Company
has an employment agreement or employment letter with the following Named Executive Officers  Boland T. Jones, Jeffrey A. Allred, Richard J. Buyens, Patrick G. Jones and Theodore P. Schrafft. See Employment Agreements above. These
employment agreements or letter contain the general terms of each such executive officers employment and establish the minimum compensation that such officers are entitled to receive, but do not prohibit, limit or restrict these officers
ability to receive additional compensation from the Company, whether in the form of base salary, bonus, stock options or otherwise.



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The total compensation of the executive officers of the Company can be divided into three components:
base salary, annual incentive compensation and long-term incentive compensation. The following is a summary of the considerations underlying each component of compensation.



Base Salaries



The base salaries of the executive officers are initially determined pursuant to their employment agreements, which generally provide for an automatic
five percent increase each year. The employments agreements and employment letter for the Named Executive Officers provide for such increases. Initial salary levels are determined based on the factors discussed above and the recommendations of the
Chief Executive Officer for salaries other than his own; however, the Compensation Committee retains the discretion to increase the initial salary levels. The Compensation Committee periodically evaluates the salaries of the executive officers based
upon the level and scope of the responsibilities of the office, prior experience and achievements, the importance of each executives contributions to the Company and the pay levels of similarly positioned executive officers in comparable
companies.



Annual Incentive Compensation



The Companys executive officers are eligible to receive cash bonus
awards. The key components in determining the amount of such awards include the individual growth and success of the Company as measured by revenue growth, cash flows and other financial performance goals, including EBITDA (earnings before interest,
taxes, depreciation and amortization), as well as the financial performance of the Company in the context of the overall industry and economic environment. The judgment of the Compensation Committee, and of the Chief Executive Officer in the case of
other executive officers, as to the impact of the individual on the financial performance of the Company are also considered.



Long-Term Incentive Compensation



Grants of stock options and restricted stock to executive officers are generally made under the 1995 Stock Plan administered by the 1995 Stock Plan
Committee. That Committee believes that it is desirable to increase managements equity ownership in the Company in order to focus managements effort and commitment to build profitability and shareholder value, and that the grant of stock
options and restricted stock has been a particularly important component of its success in attracting and retaining talented management employees. The 1995 Stock Plan Committee believes that stock options and restricted stock give the executive
officers greater incentives to operate the Company in a manner that benefits the financial interests of the shareholders both on a long-term and short-term basis.



In determining the number of option shares and shares of restricted stock to grant executive officers, the 1995 Stock Plan
Committee considers on a subjective basis the same factors as the Compensation Committee does in determining the other components of compensation, with no single factor accorded special weight. The recommendation of the Chief Executive Officer is
important in determining awards to persons other than himself.



In light of restricted stock awards made late in 2001 and the completion of the option exchange program in December 2001, no awards of restricted stock were made to the Named Executive Officers in 2002. Mr. Buyens was granted stock options
in connection with his employment, but no other options were granted to the Named Executive Officers in 2002.



Loan Forgiveness



As
described in the report of the Compensation Committee in the Companys 2002 Proxy Statement, the Company made certain loans to Messrs. Boland Jones and Allred to cover the tax liability associated with equity grants made in prior years. Those
loans were later forgiven, and the Company made additional payments to the executives to cover the taxes related to such forgiveness of debt. A portion of that forgiveness of debt is reflected in the Summary Compensation Table as Other Annual
Compensation received in 2002. See Certain Relationships and Related Transactions.



Policy on Deductibility of Compensation



Section 162(m) of the Code disallows the deduction for certain annual compensation in excess of $1,000,000 paid to certain executive officers of the Company, unless the compensation qualifies as
performance-based as defined in the Code and applicable regulations. The 1995 Stock Plan permits the grant of stock options



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and other awards that are fully deductible under Code Section 162(m). All stock options that have been granted under the 1995 Stock Plan are fully
deductible, but restricted stock awards that have been granted under the 1995 Plan are subject to the Code Section 162(m) deduction limitation. The Compensation Committee and the 1995 Stock Plan Committee intend to maximize the deductibility of
executive compensation while retaining the discretion necessary to compensate executive officers in a manner commensurate with performance and the competitive market for executive talent.



Chief Executive Officer Compensation



Pursuant to his employment agreement, Mr. Boland Jones would have been entitled to a base salary in 2002 of $826,875 and a target annual bonus opportunity
equal to 100% of his base salary, based on the Company achieving its quarterly and annual targets for revenue and EBITDA. Mr. Jones agreed to reduce his base salary for 2002 from $826,875 to $750,000, and to reduce his target bonus for 2002 from
$826,875 to $200,000, in exchange for a grant of 156,125 shares of common stock of the Company in November 2001. The target annual bonus was subject to a sliding scale, with 80% of the target bonus allocated to achievement of cumulative quarterly
targets (20% per quarter) and 20% allocated to achievement of annual targets. Mr. Jones 2002 bonus was based two-thirds on achievement of EBITDA targets and one-third on achievement of revenue targets. He received a $96,000 cash bonus for 2002
based on the achievement of quarterly and annual targets for EBITDA and revenue. As indicated above, in light of restricted stock awards made late in 2001 and the completion of the option exchange program in December 2001, no awards of restricted
stock or options were made to Mr. Jones in 2002.



The foregoing
report has been submitted by the following current and former members of the Compensation Committee and 1995 Stock Plan Committee who participated in the deliberations described above:



| |  | Compensation Committee                         |  | 1995 Stock Plan Committee                
| |  | ---------------------------------------------- |  | -----------------------------------------
| |  |                                               
| |  | J. Walker Smith, Jr., Chair                    |  | J. Walker Smith, Jr., Chair              
| |  | Jeffrey M. Cunningham (Member until June 2002) |  | George W. Baker (Member until April 2003)
| |  | George W. Baker (Member until October 2002)    |  |                                          



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Stock Performance Graph



The following graph shows the cumulative total shareholder return on the Companys Common Stock, the Standard & Poors 500 Composite
Stock Price Index (the S&P 500), and a self-determined peer group (the Peer Group) for the period beginning December 31, 1997 and ending December 31, 2002. The graph assumes an investment in the Companys Common
Stock, the S&P 500 and the Peer Group of $100 on December 31, 1997, and that all dividends were reinvested. Total return calculations were prepared by the Center for Research in Securities Prices, The University of Chicago.



LOGO



|                    |  | 12/31/97 |  | 12/31/98 |  | 12/31/99 |  | 12/29/00 |  | 12/31/01 |  | 12/31/02
|------------------- |  | -------- |  | -------- |  | -------- |  | -------- |  | -------- |  | --------
|PTEK Holdings, Inc. |  | 100.00   |  | 26.70    |  | 25.34    |  | 5.21     |  | 12.31    |  | 15.93   
|S&P 500             |  | 100.00   |  | 128.58   |  | 155.64   |  | 141.46   |  | 124.65   |  | 97.10   
|Peer Group          |  | 100.00   |  | 104.94   |  | 231.98   |  | 103.31   |  | 48.44    |  | 36.06   



The Peer Group
consists of each of the companies in the 2001 Peer Group included in the Companys Proxy Statement for its 2002 Annual Meeting of Shareholders, other than one company, General Magic, Inc., that is no longer applicable to the
Companys business because of the sale of the Voicecom business unit in 2002, plus three new peer group companies (Raindance Communications, Inc.; ClearOne Communications, Inc.; and Latitude Communications, Inc.). In addition to these three new
peer group companies, the Peer Group includes the following companies: ACT Teleconferencing, Inc.; Captaris, Inc.; Critical Path, Inc.; EasyLink Services Corporation; J2 Global Communications, Inc.; and West Corporation.



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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters



Security Ownership of Certain Beneficial Owners and Management



The following table sets forth to the best of the Companys knowledge certain information as of April 18, 2003 regarding the beneficial ownership of
the Companys voting common stock by:



| |  | each person who is known by the Company to be the beneficial owner of more than 5% of any class of the Companys voting securities;
| | - | -----------------------------------------------------------------------------------------------------------------------------------



| |  | each current director and each nominee for director of the Company;
| | - | -------------------------------------------------------------------



| |  | each Named Executive Officer of the Company (as defined below); and
| | - | -------------------------------------------------------------------



| |  | all of the Companys current executive officers, directors and each person nominated to become a director as a group.
| | - | ---------------------------------------------------------------------------------------------------------------------



|Name of Beneficial Owner                                             |  | Common SharesBeneficiallyOwned (1) |      |  | Percent ofCommonSharesOwned
|-------------------------------------------------------------------- |  | ---------------------------------- | ---- |  | ---------------------------
|Boland T. Jones                                                      |  | 4,627,479                          | (2)  |  | 8.65                       
|State Street Research & Management Company                           |  | 3,431,300                          | (3)  |  | 6.42                       
|Steel Partners II, L.P.                                              |  | 2,882,769                          | (4)  |  | 5.39                       
|Raymond H. Pirtle, Jr.                                               |  | 163,696                            | (5)  |  | *                          
|Jeffrey A. Allred                                                    |  | 1,365,278                          | (6)  |  | 2.55                       
|Jeffrey T. Arnold                                                    |  | 107,666                            | (7)  |  | *                          
|Jeffrey M. Cunningham                                                |  | 116,666                            | (8)  |  | *                          
|J. Walker Smith, Jr.                                                 |  | 67,666                             | (9)  |  | *                          
|George M. Miller, II                                                 |  | 10,000                             |      |  | *                          
|Patrick G. Jones                                                     |  | 428,991                            | (10) |  | *                          
|Richard J. Buyens                                                    |  | 251,000                            | (11) |  | *                          
|Theodore P. Schrafft                                                 |  | 120,716                            | (12) |  | *                          
|All current executive officers and directors as a group (12 persons) |  | 7,470,825                          |      |  | 13.88                      

---

|* | Less than one percent.
|- | ----------------------

|(1) | Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission that deem shares to be beneficially owned by any person who has or shares
voting or investment power with respect to such shares. Shares of the Companys Common Stock subject to warrants or options that are currently exercisable or exercisable within 60 days of March 12, 2003 are deemed to be outstanding and to be
beneficially owned by the person holding such warrants or options for the purpose of computing the percentage ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes 3,132,200 shares held of record by Mr. Jones; 4,689 shares held in the Companys 401(k) Plan for the benefit of Mr. Jones; 590 shares held of record by Mr. Jones
wife for which Mr. Jones holds the right to vote pursuant to an irrevocable proxy granted by Mrs. Jones to Mr. Jones; 50,000 shares held in a family trust; and 1,440,000 shares held by Seven Gables Partnership, L.P., a limited partnership whose
general partner is Seven Gables Management Company, LLC, a limited liability company whose sole members are Mr. and Mrs. Jones. Does not include 450 shares held of record by Mr. Jones wife, as custodian for the benefit of two unrelated minor
children under the Uniform Gifts to Minors Act, or 55,427 shares held in a trust, as to which shares Mr. Jones disclaims beneficial ownership. The address of Mr. Jones is 3399 Peachtree Road, N.E., The Lenox Building, Suite 700, Atlanta, Georgia
30326.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(3) | This information is based solely on a Schedule 13G filed by State Street Research & Management Company (State Street) on February 14, 2003. Such Schedule 13G states
that State Street has sole voting and dispositive power of 3,431,300 shares of Common Stock. Schedule 13G also states that State Street is a corporation whose address is One Financial Center, 30thFloor, Boston, MA 02111.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | This information is based solely on a Schedule 13D filed jointly by Steel Partners II, L.P. (Steel Partners) and Warren G. Lichtenstein on February 25, 2003
(collectively, the Filers). Such Schedule 13D states that Steel Partners has sole voting and dispositive power of 2,882,769 shares of Common Stock. Such Schedule 13D also states that (i) Steel Partners is a limited partnership, (ii)
Steel Partners, L.L.C. is the general partner of Steel Partners, (iii) Mr. Lichtenstein is the sole executive officer and managing member of Steel Partners, L.C.C., and (iv) Mr. Lichtenstein has voting and dispositive power of the shares owned by
Steel Partners by virtue of his position with Steel Partners. The address of the Filers is 150 East 52ndStreet,
21stFloor, New York, New York 10022.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Includes 44,000 shares held of record by Mr. Pirtle, 50,000 shares held in an individual retirement account for the benefit of Mr. Pirtle, and 3,030 shares issuable upon conversion
of $100,000 of the 53/4% Convertible Subordinated Notes of PTEK due 2004 which are convertible into Common Stock
at an exercise price of $33.00 per share, all of which are held in a 401(k) plan for the benefit of Mr. Pirtle. Also includes 66,666 shares subject to warrants or options currently exercisable or exercisable within 60 days.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Includes 1,250,090 shares held of record by Mr. Allred, 100,000 shares held in an individual retirement account for the benefit of Mr. Allred, 5,461 shares held in the
Companys 401(k) Plan for the benefit of Mr. Allred, and 9,727 shares held under the Companys Associate Stock Purchase Plan.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Includes 41,000 shares held of record by Mr. Arnold and 66,666 shares subject to options or warrants currently exercisable or exercisable within 60 days.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Includes 50,000 shares held of record by Mr. Cunningham and 66,666 shares subject to options or warrants currently exercisable or exercisable within 60 days.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Includes 1,000 shares held of record by Mr. Smith and 66,666 shares subject to options or warrants currently exercisable or exercisable within 60 days.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------

|(10) | Includes 165,873 shares held of record by Mr. Jones, 10,000 shares held in an individual retirement account for the benefit of Mr. Jones, 4,691 shares held in the Companys
401(k) Plan for the benefit of Mr. Jones, 193,000 shares subject to options or warrants currently exercisable or exercisable within 60 days, and 55,427 shares owned by a trust of which Mr. Jones is the sole trustee.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(11) | Includes 1,000 shares held of record by Mr. Buyens and 250,000 shares subject to options or warrants currently exercisable or exercisable within 60 days.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------

|(12) | Includes 99,796 shares held of record by Mr. Schrafft, 5,400 shares held in the Companys 401(k) Plan for the benefit of Mr. Schrafft, and 15,520 shares held under the
Companys Associate Stock Purchase Plan.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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One share of Series B Voting Preferred Stock is held of record by SunTrust Bank, Atlanta, who serves as
the voting trustee for the Series B Voting Preferred Stock. This share of Series B Voting Preferred Stock was issued for the benefit of the former shareholders of the Voice-Tel of Canada Ltd. and related entities that were acquired on April 30, 1997
who received Exchangeable Non-Voting Shares of our subsidiary Voice-Tel of Canada Ltd. All but two of such shareholders have since exchanged these shares for shares of the Companys common stock. The following table also sets forth to the best
of the Companys knowledge certain information as of April 18, 2003 regarding the beneficial ownership of the Companys Series B Voting Preferred Stock. The Series B Voting Preferred Stock votes only with the common stock and does not have
any right to vote as a class, except as may be required by law.



|Name of Beneficial Owner |  | Series B VotingPreferred StockBeneficiallyOwned |     |  | Percent ofSeries B VotingStock Owned
|------------------------ |  | ----------------------------------------------- | --- |  | ------------------------------------
|Brooks Equipment Limited |  | 0.42500                                         | (1) |  | 47.20                               
|Patrick Haney            |  | 0.47550                                         | (1) |  | 52.80                               

---

|(1) | The Series B Voting Preferred Stock is only entitled to vote with the Companys common stock, having a current total of 90,100 votes, of which 42,500 votes are directed by
Brooks Equipment Limited and 47,550 are directed by Mr. Haney.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Equity Compensation Plan Information



The
following table gives information as of December 31, 2002 about the Common Stock that may be issued under all of the Companys existing equity compensation plans. The table does not include information with respect to shares subject to
outstanding options granted under equity compensation plans assumed by the Company in connection with mergers and acquisitions of the companies that originally granted those options. Footnote (3) to the table sets forth the total number of shares of
the Companys Common Stock issuable upon the exercise of those assumed options as of December 31, 2002, and the weighted average exercise price of those options. No additional options may be granted under those assumed plans.



|Plan Category                                              |  | (a) Number of Securities to be Issued Upon Exercise ofOutstanding Options,Warrants and
Rights |  | (b) Weighted AverageExercise Price ofOutstanding Options,Warrants and Rights |       | (c ) Number of SecuritiesRemaining Available for Future Issuance
Under Equity Compensation Plans(Excluding Securities Reflected in Column (a)
|---------------------------------------------------------- |  | --------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------- | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------
|Equity Compensation Plans approved by shareholders (1)     |  | 4,174,448                                                                                     |  | $                                                                            | 5.002 |                                                                                                                                              
|                                                           |  |                                                                                               | 
|Equity Compensation Plans not approved by shareholders (2) |  | 4,575,776                                                                                     |  |                                                                              | 5.420 |                                                                                                                                              
|                                                           |  |                                                                                               | 
|Total                                                      |  | 8,750,224                                                                                     |  |                                                                              | 5.220 |                                                                                                                                              

---

|(1) | Includes options issued and shares available for issuance under the Companys 1995 Stock Plan, the 2000 Directors Stock Plan and the Associate Stock Purchase Plan. The
Associate Stock Purchase Plan was terminated on January 14, 2003 and no additional shares will be issued under that Plan.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes options issued and shares available for issuance under the Companys 1994 Stock Option Plan and the 1998 Stock Plan. Also includes individual stock option awards
granted to (i) certain former employees upon hire, (ii) certain former employees in connection with the Companys acquisition of Voice-Tel Enterprises, Inc., and (iii) a non-employee contractor for services performed.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(3) | This table does not include information for the following equity compensation plans assumed by the Company in connection with mergers and acquisitions of the companies that
originally established those plans: Xpedite Systems, Inc. 1992 Incentive Stock Option Plan, Xpedite Systems, Inc. 1993 Incentive Stock Option Plan, Xpedite System, Inc. 1996 Incentive Stock Plan, Xpedite Systems, Inc. Non-Employee Directors
Warrant Plan, certain individual Stock Purchase Warrants issued to former directors and non-employees of Xpedite, Intellivoice Communications, Inc. 1995 Incentive Stock Option Plan, VoiceCom Holdings, Inc. 1995 Stock Option Plan and VoiceCom
Holdings, Inc. Amended and Restated 1985 Stock Option Plan. As of December 31, 2002, a total of 222,629 shares of the Companys common stock were issuable upon exercise of outstanding options under those assumed plans. The weighted average
exercise price of those outstanding options is $11.027 per share. No additional options may be granted under those assumed plans.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Description of Plans and Individual Awards Not Approved by Shareholders



The Companys 1998 Stock Plan (the 1998 Plan) provides for the issuance of nonqualified stock options, restricted stock and stock
appreciation rights to employees and consultants of the Company. A total of 8,000,000 shares of stock have been reserved for awards under the 1998 Plan. The terms of options granted under the 1998 Plan are established by the 1998 Stock Plan
Committee, which is made up of at least two outside non-employee directors appointed from time to time by the Board of Directors. See further discussion in Note 17Equity Based Compensation Plans.



The Companys 1994 Stock Option Plan (the 1994 Plan)
provides for the grant of nonqualified stock options to employees. A total of 960,000 shares of common stock have been reserved for awards under the 1994 Plan. The terms of options granted under the 1994 Plan are established by the 1994 Stock Option
Plan Committee, which is made up of at least two directors appointed from time to time by the Board of Directors. No additional options will be granted under this plan. See further discussion in Note 17Equity Based Compensation
Plans.



Individual stock option awards granted to
former employees in connection with the acquisition of Voice-Tel Enterprises, Inc. consist of the following outstanding options: 100,000 shares with an exercise price of $5.50 that terminates on April 30, 2005; 125,000 shares with an exercise price
of $5.50 that terminates on April 30, 2005; 15,000 options with an exercise price of $25.875 that terminates on May 2, 2005; 25,000 shares with an exercise price of $23.875 that terminates on April 30, 2003; 125,000 shares with an exercise price of
$5.50 that terminates on April 30, 2005; 95,000 shares with an exercise price of $5.50 that terminates on April 30, 2005; and 200,000 shares with an exercise price of $10.25 that terminates on April 30, 2005.



Individual stock option awards granted to three former employees upon hire
consist of the following outstanding options: 300,000 shares with an exercise price of $8.00 per share that was repriced to $.35 per share, which terminates on July 1, 2006 and 50,000 shares with an exercise price of $5.50 that terminates on June 8,
2006.



The individual stock option award granted to a
non-employee contractor consists of 125,000 shares at an exercise price of $30.00 that terminates on April 22, 2003.



Item 13. Certain Relationships and Related Transactions



The Company has made loans to Boland T. Jones, which loans are secured by Company stock held directly by Mr. Jones and Company stock held by Seven Gables Partnership, L.P., a limited partnership whose general partner
is Seven Gables Management Company, LLC, a limited liability company of which Mr. Jones and his wife are the sole members, and whose limited partner is a trust of which Mr. Jones was the grantor and his wife is the trustee. The loans were made
pursuant to Mr. Jones then current employment agreement for the exercise price of certain stock options and the taxes related thereto. Each loan is evidenced by a recourse promissory note bearing interest at the applicable Federal rate and is
secured by the Common Stock purchased. These loans mature between 2007 and 2010. The highest aggregate principal amount of the loans, including accrued interest, outstanding during 2002 was $5,042,028 and the terms of these loans are as follows:



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|Name            |  | Amount of Loan |           | InterestRate |      |   | Due Date |          | SharesPledged |           |   | Value of Collateralas of 12/31/02 |  
|--------------- |  | -------------- | --------- | ------------ | ---- | - | -------- | -------- | ------------- | --------- | - | --------------------------------- | -
|Boland T. Jones |  | $              | 1,322,173 |              | 6.31 | % |          | 12/29/07 |               | 100,000   |   |                                   | $
|                |  |                | 89,029    |              | 6.50 | % |          | 12/15/09 |               | 24,000    |   |                                   |  
|                |  |                | 2,873,173 |              | 5.96 | % |          | 10/31/10 |               | 1,440,000 |   |                                   |  
|                |  |                | 287,419   |              | 5.96 | % |          | 10/31/10 |               | 239,624   |   |                                   |  
|                |  |                | 327,242   |              | 4.94 | % |          | 12/29/07 |               | 100,000   | * |                                   |  
|                |  |                | 20,056    |              | 4.94 | % |          | 12/15/09 |               | 24,000    | * |                                   |  
|                |  |                | 77,044    |              | 5.43 | % |          | 10/31/10 |               | 1,440,000 | * |                                   |  
|                |  |                | 45,892    |              | 5.43 | % |          | 10/31/10 |               | 239,624   | * |                                   |  
|                |  |                |           |              |      |   |          |          |               |           |   |                                   |  
|                |  | $              | 5,042,028 |              |      |   |          |          |               |           |   |                                   | $
|                |  |                |           |              |      |   |          |          |               |           |   |                                   |  

---

|* | Separate loans are secured by the same shares of Company Common Stock. The value of such shares is only included once to determine the total value of collateral.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



On November 29, 2001, the Company offered a
restricted stock exchange program to its employees and directors, whereby the Company offered to purchase certain outstanding stock options which had an exercise price of more than $3.00 per share in exchange for restricted shares of the
Companys Common Stock at an exchange ratio of one share of restricted stock in exchange for each 2.5 options surrendered. On December 28, 2001, the exchange offer was completed. The restricted shares generally are subject to the same vesting
schedules as the tendered options. Other than Mr. Buyens, each of the Companys Named Executive Officers and four of its directors, Messrs. Baker, Pirtle and Arnold and Ms. Ward, participated in the program. The Company agreed to lend its
directors and executive officers upon request the amount of taxes due with respect to the shares of restricted stock granted, with each such loan evidenced by a 10-year recourse promissory note bearing interest at the applicable Federal rate, and
secured by the restricted stock. The following executive officers and directors exchanged stock options for restricted shares of the Companys common stock as set forth below:



|                       |  | Total OptionsHeld BeforeExchange |  | Number of Options Exchanged |    |  | Number of Shares Received in Exchange |  | Total SharesHeld AfterExchange(1) |  | % of Shares Received inthe Exchangeto TotalShares Held |  
|---------------------- |  | -------------------------------- |  | --------------------------- | -- |  | ------------------------------------- |  | --------------------------------- |  | ------------------------------------------------------ | -
|Boland T. Jones        |  | 801,789                          |  | 801,789 (100                | )% |  | 320,716                               |  | 4,627,606                         |  | 6.9                                                    | %
|Jeffrey A. Allred      |  | 1,138,849                        |  | 1,138,849 (100              | )% |  | 455,540                               |  | 1,375,198                         |  | 33.1                                                   | %
|Patrick G. Jones       |  | 433,000                          |  | 240,000 (55.4               | )% |  | 96,000                                |  | 189,689                           |  | 50.6                                                   | %
|Theodore P. Schrafft   |  | 206,137                          |  | 206,137 (100                | )% |  | 82,456                                |  | 110,842                           |  | 74.4                                                   | %
|Max A. Slifer, Jr.     |  | 401,360                          |  | 401,360 (100                | )% |  | 160,544                               |  | 205,809                           |  | 78.0                                                   | %
|George W. Baker, Sr.   |  | 220,000                          |  | 120,000 (54.5               | )% |  | 48,000                                |  | 158,832                           |  | 30.2                                                   | %
|Raymond H. Pirtle, Jr. |  | 210,000                          |  | 110,000 (52.4               | )% |  | 44,000                                |  | 44,000                            |  | 100.0                                                  | %
|Jackie M. Ward         |  | 200,000                          |  | 100,000 (50                 | )% |  | 40,000                                |  | 50,000                            |  | 80.0                                                   | %
|Jeffrey T. Arnold      |  | 200,000                          |  | 100,000 (50                 | )% |  | 40,000                                |  | 41,000                            |  | 97.6                                                   | %

---

|(1) | Based upon the information set forth in the Companys Proxy Statement dated April 30, 2002, exclusive of (i) options that were then currently exercisable or exercisable within
60 days of the date thereof and (ii) shares issuable upon conversion of convertible notes held by Mr. Pirtle.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Also, in November 2001, Messrs. Boland Jones, Allred, Buyens, Patrick Jones and Schrafft were granted
156,125; 100,750; 1,000; 39,345; and 14,750 shares of restricted stock of the Company, respectively, which vested on November 28, 2001. In addition, in November 2001, Messrs. Boland Jones and Allred were granted 280,000 and 80,000 shares of
restricted stock, respectively, that vest on January 1, 2005, subject to accelerated vesting in the event of a change in control or termination of their employment without cause. These shares were granted in replacement of stock options that the
1995 Stock Plan Committee had intended to grant to Messrs. Boland Jones and Allred in 2000, but were unable to do so due to certain annual grant limits in the 1995 Stock Plan. In November 2001, Mr. Allred was also granted 600,000 shares of
restricted stock, of which 240,000 shares vested on November 28, 2001 and 30,000 shares vest per quarter starting on March 31, 2002 and ending on December 31, 2004, subject to accelerated vesting upon a change in control of the Company or
termination of Mr. Allreds employment without cause. The Company has agreed to lend to Messrs. Boland Jones, Allred, Buyens, Patrick Jones and Schrafft upon request the amount of taxes due with respect to the shares of restricted stock
granted, with each such loan to be evidenced by a 10-year recourse promissory note bearing interest at the applicable Federal rate, and secured by the restricted stock.



The total amount of all outstanding loans that are greater than $60,000 to the Companys directors and Named Executive
Officers related to taxes on restricted shares as of December 31, 2002, including accrued interest, and the material terms of such loans were:



|Name                 |  | Amount ofLoan |            | InterestRate |      |   | DueDate |         | SharesPledged |         |   | Value of ShareCollateral as of 12/31/02 |  
|-------------------- |  | ------------- | ---------- | ------------ | ---- | - | ------- | ------- | ------------- | ------- | - | --------------------------------------- | -
|Boland T. Jones      |  | $             | 147,689.84 |              | 5.46 | % |         | 1/3/12  |               | 320,716 |   |                                         | $
|                     |  |               | 221,353.14 |              | 5.46 | % |         | 1/3/12  |               | 156,125 |   |                                         |  
|                     |  |               |            |              |      |   |         |         |               |         |   |                                         |  
|                     |  | $             | 369,042.98 |              |      |   |         |         |               |         |   |                                         | $
|                     |  |               |            |              |      |   |         |         |               |         |   |                                         |  
|Jeffrey A. Allred    |  | $             | 142,842.73 |              | 5.46 | % |         | 1/3/12  |               | 100,750 |   |                                         | $
|                     |  |               | 280,014.37 |              | 5.46 | % |         | 1/3/12  |               | 455,540 | * |                                         |  
|                     |  |               | 33,452.50  |              | 5.62 | % |         | 4/12/12 |               | 455,540 | * |                                         |  
|                     |  |               | 447,425.81 |              | 5.46 | % |         | 1/3/12  |               | 600,000 |   |                                         |  
|                     |  |               |            |              |      |   |         |         |               |         |   |                                         |  
|                     |  | $             | 903,735.41 |              |      |   |         |         |               |         |   |                                         | $
|                     |  |               |            |              |      |   |         |         |               |         |   |                                         |  
|Patrick G. Jones     |  | $             | 19,509.18  |              | 5.60 | % |         | 2/1/12  |               | 96,000  | * |                                         | $
|                     |  |               | 55,783.17  |              | 5.46 | % |         | 1/3/12  |               | 39,345  |   |                                         |  
|                     |  |               | 72,590.89  |              | 5.46 | % |         | 1/3/12  |               | 96,000  | * |                                         |  
|                     |  |               | 12,544.53  |              | 5.62 | % |         | 4/12/12 |               | 96,000  | * |                                         |  
|                     |  |               |            |              |      |   |         |         |               |         |   |                                         |  
|                     |  | $             | 160,427.77 |              |      |   |         |         |               |         |   |                                         | $
|                     |  |               |            |              |      |   |         |         |               |         |   |                                         |  
|Theodore P. Schrafft |  | $             | 76,393.87  |              | 5.46 | % |         | 1/3/12  |               | 82,456  | * |                                         | $
|                     |  |               | 20,912.40  |              | 5.46 | % |         | 1/3/12  |               | 14,750  |   |                                         |  
|                     |  |               | 15,570.07  |              | 5.60 | % |         | 2/1/12  |               | 82,456  | * |                                         |  
|                     |  |               |            |              |      |   |         |         |               |         |   |                                         |  
|                     |  | $             | 112,876.34 |              |      |   |         |         |               |         |   |                                         |  
|                     |  |               |            |              |      |   |         |         |               |         |   |                                         |  

---

|* | Separate loans are secured by the same shares of Company Common Stock. The value of such shares is only included once to determine the total value of collateral per Named Executive
Officer.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Company is obligated, pursuant to
extensions of credit agreed to by the issuer prior to July 30, 2002, to make additional loans to pay taxes associated with the future vesting of the restricted shares described above under the same terms as the existing loans, but the dollar amount
of such loans will be based on the fair market value of the Company Common Stock on the vesting date and cannot be calculated at this time.



In March 2002, the Board of Directors approved an arrangement with Jeffrey M. Cunningham pursuant to which he became Vice Chairman, a non-employee
position, and in such position he provides services to the



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Company with respect to customer development, business development and strategic planning. In connection therewith, the
Company granted to Mr. Cunningham an option to purchase 200,000 shares of the Companys Common Stock at an exercise price of $4.08, which was the fair market value of the Common Stock on the date of grant. These options vest and become
exercisable five years after the date of grant provided that Mr. Cunningham is a member of the Board on that date, subject to accelerated vesting in the event certain revenue targets are achieved or in the event of a change in control of the
Company. In addition, the Company agreed to pay Mr. Cunningham a maximum of $200,000 in cash compensation over the five-year term of the agreement, payable $10,000 per month for the first twelve months of the agreement and up to $80,000 at any time
during the five-year term if certain revenue targets are achieved. Mr. Cunningham received a total of $90,000 in 2002 under the monthly payment arrangement. The agreement expires March 5, 2007 unless earlier terminated by the parties.



During 2002, a subsidiary of the Company leased the use of an airplane from
Prado Aviation, LLC, a limited liability company that is owned 99% by Boland T. Jones and one percent by Premiere Communications, Inc., a subsidiary of the Company. In connection with this lease arrangement, the Company incurred costs of $1.9
million in 2002 to maintain and operate the airplane. The terms of the lease arrangement were based on an informal review of rates for similar types of airplanes, and the Company believes that the rates it paid for the use of the airplane were
comparable to what it would have received from an independent third party.



PART IV



Item 15. 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
| | -- | --------



EXHIBIT INDEX



|Exhibit Number |  | Description                                                                                                                                                                                                                                                                                                                                                              
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1            |  | Agreement and Plan of Merger, together with exhibits, dated 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 on April 4, 1997).
|               | 
|2.2            |  | Agreement and Plan of Merger, together with exhibits, dated 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 on April 4, 1997).                                    
|               | 
|2.3            |  | Transfer Agreement dated 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 on May 14, 1997).                                                                                     
|               | 
|2.4            |  | Transfer Agreement dated 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 on May 14, 1997).            



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|Exhibit Number |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                        
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.5            |  | Stock Purchase Agreement, together with exhibits, dated 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).                                                                                                
|               | 
|2.6            |  | Agreement and Plan of Merger, together with exhibits, dated November 13, 1997 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 and filed on December 23, 1997).                                                   
|               | 
|2.7            |  | 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 on April 28, 1998).                                                                                                
|               | 
|2.8            |  | Membership Interests Purchase Agreement as of March 25, 2002 by and among Voicecom Telecommunications, LLC, the Registrant, Premiere Communications, Inc., Voice-Tel of Canada
Ltd., Intellivoice Communications, LLC, Voice-Tel Enterprises, LLC and Voicecom Telecommunications, Inc. (incorporated by reference to Exhibit 2.1 of the Registrants Current Report on Form 8-K dated March 26, 2002 and filed on April 10,
2002).
|               | 
|2.9            |  | Bill of Sale and Assignment as of March 25, 2002 by and between Voicecom Telecommunications, LLC and Premiere Communications, Inc. (incorporated by reference to Exhibit 2.2 of the
Registrants Current Report on Form 8-K dated March 26, 2002 and filed on April 10, 2002).                                                                                                                                                     
|               | 
|2.10           |  | Assignment and Assumption Agreement as of March 25, 2002 by and between Voicecom Telecommunications, LLC and Premiere Communications, Inc. (incorporated by reference to Exhibit
2.3 of the Registrants Current Report on Form 8-K dated March 26, 2002 and filed on April 10, 2002).                                                                                                                                             
|               | 
|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            |  | Articles of Amendment of Articles of Incorporation of Premiere Technologies, Inc. (changing the name of the Registrant to PTEK Holdings, Inc.) (incorporated by reference to
Exhibit 3.2 to the Registrants Yearly Report on Form 10-K for the year ended December 31, 1999 and filed on March 30, 2001).                                                                                                                         
|               | 
|3.3            |  | Amended and Restated Bylaws of Premiere Technologies, Inc., as amended (incorporated by reference to Exhibit 3.1 to the Registrants Amended Quarterly Report on Form 10-Q/A
for the quarter ended June 30, 2001).                                                                                                                                                                                                                 
|               | 
|3.4            |  | Amendment No. 6 to Amended and Restated Bylaws of PTEK Holdings, Inc. (incorporated by reference to Exhibit 3.3(a) to the Registrants Yearly Report on Form 10-K for the year
ended December 31, 2001).                                                                                                                                                                                                                           
|               | 
|3.5            |  | Amendment No. 7 to Amended and Restated Bylaws of PTEK Holdings, Inc. (incorporated by reference to Exhibit 3.3(b) to the Registrants Quarterly Report on Form 10-Q for the
quarter ended March 31, 2002, as filed on May 15, 2002).                                                                                                                                                                                              
|               | 
|3.6            |  | Amendment No. 8 to Amended and Restated Bylaws of PTEK Holdings, Inc. (incorporated by reference to Exhibit 3.3(c) to the Registrants Quarterly Report on Form 10-Q for the
quarter ended March 31, 2002).                                                                                                                                                                                                                        
|               | 
|4.1            |  | See Exhibits 3.1-3.3 for provisions of the Articles of Incorporation and Bylaws defining the rights of the holders of common stock of the Registrant.                                                                                                                                                                                                                                                                              



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|Exhibit Number |  | Description                                                                                                                                                                                                                                                                                                                                         
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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 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 on 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
on August 5, 1997).                                                                                                                                                    
|               | 
|4.5            |  | Registration Rights Agreement dated 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 on August 5, 1997).
|               | 
|4.6            |  | 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 on June 26, 1998).                                                                                 
|               | 
|10.1           |  | Shareholder Agreement dated 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           |  | 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).                                                                                               
|               | 
|10.3           |  | 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)).                                                                                                          
|               | 
|10.4           |  | 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)).                                                                                                                
|               | 
|10.5           |  | Restricted Stock Award Agreement dated May 5, 1999 between the Registrant and Boland T. Jones (incorporated by reference to Exhibit 10.12 to the Registrants Annual Report on
Form 10-K for the year ended December 31, 1999).                                                                                                                     
|               | 
|10.6           |  | Restricted Stock Award Agreement dated May 5, 1999 between the Registrant and Jeffrey A. Allred (incorporated by reference to Exhibit 10.13 to the Registrants Annual Report
on Form 10-K for the year ended December 31, 1999).                                                                                                                   
|               | 
|10.7           |  | Restricted Stock Award Agreement dated May 5, 1999 between the Registrant and Patrick G. Jones (incorporated by reference to Exhibit 10.14 to the Registrants Annual Report
on Form 10-K for the year ended December 31, 1999).                                                                                                                    
|               | 
|10.8           |  | Recourse Promissory Note dated December 20, 1999 payable to the Registrant by Boland T. Jones (incorporated by reference to Exhibit 10.15 to the Registrants Annual Report on
Form 10-K for the year ended December 31, 1999).                                                                                                                     



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|Exhibit Number |  | Description                                                                                                                                                                                                                                                                                                                                                                   
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.9           |  | Recourse Promissory Note dated December 20, 1999 payable to the Registrant by Jeffrey A. Allred (incorporated by reference to Exhibit 10.16 to the Registrants Annual Report
on Form 10-K for the year ended December 31, 1999).                                                                                                                                             
|               | 
|10.10          |  | 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)).                                                                                                                                                                                                  
|               | 
|10.11          |  | 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)).                                                                                                                                                            
|               | 
|10.12          |  | 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).
|               | 
|10.13          |  | 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)).                                                                                                                                                     
|               | 
|10.14          |  | 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)).                                                                                                                                                                                                                   
|               | 
|10.15          |  | 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)).                                                                                                                                                                                                                      
|               | 
|10.16          |  | 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)).                                                                                                                                                                                                                    
|               | 
|10.17          |  | 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 on August 5, 1997).                     
|               | 
|10.18          |  | 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)).                                                                                                                                              
|               | 
|10.19          |  | 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)).                                                                                                                                                                
|               | 
|10.20          |  | 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)).                                                                                                                        
|               | 
|10.21          |  | 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).                                                                                           
|               | 
|10.22          |  | 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).                                                                                                                                                      



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|Exhibit Number |  | Description                                                                                                                                                                                                                                                     
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.23          |  | 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).                                                        
|               | 
|10.24          |  | 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).                                   
|               | 
|10.26          |  | Amendment No. 1 to the Premiere Technologies, Inc. Amended and Restated 1998 Stock Plan (incorporated by reference to Exhibit 10.45 to the Registrants Annual Report on Form
10-K for the year ended December 31, 1999).                                       
|               | 
|10.25          |  | Premiere Technologies, Inc., Amended and Restated 1998 Stock Plan (incorporated by reference to Exhibit 10.1 to the Registrants Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999).                                                            
|               | 
|10.27          |  | Xpedite Systems, Inc. 1992 Incentive Stock Option Plan (assumed by the Registrant) (incorporated by, reference to Xpedites Registration Statement on Form S-1 (No.
33-73258)).                                                                                 
|               | 
|10.28          |  | Xpedite Systems, Inc. 1993 Incentive Stock Option Plan (assumed by the Registrant) (incorporated by reference to Xpedites Registration Statement on Form S-I (No.
33-73258)).                                                                                  
|               | 
|10.29          |  | Xpedite Systems, Inc. 1996 Incentive Stock Option Plan (assumed by the Registrant) (incorporated by reference to Xpedites Annual Report on Form 10-K for the year ended
December 31, 1995).                                                                    
|               | 
|10.30          |  | 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).                                               
|               | 
|10.31          |  | 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).                                             
|               | 
|10.32          |  | Associate Stock Purchase Plan (incorporated by reference to Appendix A to the Registrants Definitive Proxy Statement distributed in connection with the Registrants
June 22, 1999 Annual Meeting of Shareholders, filed on May 19, 1999).                     
|               | 
|10.33          |  | Intellivoice Communications, Inc. 1955 Incentive Stock Plan (assumed by the Registrant) (incorporated by reference to Exhibit 10.52 to the Registrants Annual Report on Form
10-K for the year ended December 31, 1999).                                       
|               | 
|10.34          |  | Employment Agreement dated January 1, 2000 by and between American Teleconferencing Services, Ltd. And Theordore P. Schrafft (incorporated by reference to Exhibit 10.1 to the
Registrants Quarterly Report on Form 10-Q for the quarter ended March 31, 2000).
|               | 
|10.35          |  | PTEK Holdings, Inc. 2000 Directors Stock Plan (incorporated by reference to Exhibit A to the Registrants Definitive Proxy Statement distributed in connection with the
Registrants June 7, 2000 Annual Meeting of Shareholders, filed April 28, 2000).        
|               | 
|10.36          |  | Settlement Agreement dated April 7, 2000 by and between PTEK Holdings, Inc. and MCI WorldCom, Inc. (incorporated by reference to Exhibit 10.1 to the Registrants Quarterly
Report on Form 10-Q for the quarter ended June 30, 2000).*                          



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|Exhibit Number |  | Description                                                                                                                                                                                                                                                                                               
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.37          |  | Amendment No. 1 dated January 1, 2000 to Telecommunications Service Agreement dated October 29, 1999 by and between Premiere Technologies, Inc. and MCI WorldCom, Inc.
(incorporated by reference to Exhibit 10.2 to the Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 2000).*
|               | 
|10.38          |  | Addendum A dated January 1, 2000 to Carrier Services Agreement dated as of October 29, 1999 by and between PTEK Holdings, Inc. and MCI WorldCom, Inc. (incorporated by reference to
Exhibit 10.3 to the Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 2000).*                 
|               | 
|10.39          |  | Credit Agreement dated September 29, 2000 by and among Xpedite Systems, Inc., PTEK Holdings, Inc. and ABN Amro Bank, N.V. (incorporated by reference to Exhibit 10.1 to the
Registrants Quarterly Report on Form 10-Q for the quarter ended September 30, 2000).                                          
|               | 
|10.40          |  | Asset Sale Agreement, together with exhibits, dated August 25, 2000 by and between Telecare, Inc. and Premiere Communications, Inc. (incorporated by reference to Exhibit 10.2 to
the Registrants Quarterly Report on Form 10-Q for the quarter ended September 30, 2000).                                
|               | 
|10.41          |  | PTEK Holdings, Inc. Associate Stock Purchase Plan (incorporated by reference to Appendix B to the Registrants Definitive Proxy Statement distributed in connection with the
Registrants June 5, 2001 Annual Meeting of Shareholders, filed April 30, 2001).                                             
|               | 
|10.42          |  | PTEK Holdings, Inc. 1995 Stock Plan, as amended (incorporated by reference to Appendix C to the Registrants Definitive Proxy Statement distributed in connection with the
Registrants June 5, 2001 Annual Meeting of Shareholders, filed April 30, 2001).                                               
|               | 
|10.43          |  | Letter to shareholders, employees and friends of PTEK (incorporated by reference to Exhibit 99.1 of the Registrants Current Report on Form 8-K dated February 21, 2001 and
filed on February 21, 2001).                                                                                                  
|               | 
|10.44          |  | Letter to shareholders, employees and friends of PTEK (incorporated by reference to Exhibit 99.1 of the Registrants Current Report on Form 8-K dated July 11, 2001 and filed
on July 11, 2001).                                                                                                          
|               | 
|10.45          |  | PTEK Holdings, Inc. Associate Stock Purchase Plan, as amended (incorporated by reference to Appendix B to the Registrants Definitive Proxy Statement distributed in
connection with the Registrants June 5, 2002 Annual Meeting of Shareholders, filed on April 30, 2002).                              
|               | 
|10.46          |  | PTEK Holdings, Inc. 2000 Directors Stock Plan, as amended (incorporated by reference to Appendix C to the Registrants Definitive Proxy Statement distributed in connection
with the Registrants June 5, 2002 Annual Meeting of Shareholders, filed on April 30, 2002).                                  
|               | 
|10.47          |  | Premiere Technologies, Inc. 1994 Stock Option Plan (previously provided as an exhibit to the Registrants Annual Report on Form 10-K for the year ended December 31, 2002 and
filed on March 31, 2003).                                                                                                   
|               | 
|10.48          |  | PTEK Holdings, Inc. 1995 Stock Plan (incorporated by reference to Appendix C to the Registrants Definitive Proxy Statement distributed in connection with the
Registrants June 5, 2002 Annual Meeting of Shareholders, filed on April 30, 2002).                                                        
|               | 
|10.49          |  | Share Purchase Agreement dated February 27, 2003 by and between the Registrant and AT&T Corp. (incorporated by reference to Exhibit 1 to Amendment No. 1 to Schedule 13D of
AT&T Corp., filed with respect to the Issuer on March 6, 2003).                                                               
|               | 
|10.50          |  | Note Purchase Agreement dated February 27, 2003 by and between the Registrant and AT&T Corp. (incorporated by reference to Exhibit 2 to Amendment No. 1 to Schedule 13D of
AT&T Corp., filed with respect to the Issuer on March 6, 2003).                                                                



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|Exhibit Number |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.51          |  | Third Modification of Lease dated July 15, 1998 by and between The Retail Property Trust and Premiere Communications, Inc. to the Agreement of Lease between Corporate Property
Investors and Premiere Communications, Inc. dated October 30, 1997, as amended by Fourth Modification of Lease dated August 27, 1998, as amended by Fifth Modification of Lease dated April 1, 1999, as amended by Sixth Modification of Lease dated 1999
(previously provided as an exhibit to the Registrants Annual Report on Form 10-K for the year ended December 31, 2002 and filed on March 31, 2003).
|               | 
|10.52          |  | Seventh Amendment to Lease dated February 28, 2001 by and between Property Georgia OBJLW Two Corporation and Premiere Communications, Inc. to the Agreement of Lease between
Corporate Property Investors and Premiere Communications, Inc. dated October 30, 1997, as amended by Eighth Amendment to Lease dated June 24, 2001 (previously provided as an exhibit to the Registrants Annual Report on Form 10-K for the year
ended December 31, 2002 and filed on March 31, 2003).                                                                                                          
|               | 
|10.53          |  | Standard Office Lease dated May 23, 1996 by and between 2221 Bijou, LLC and American Teleconferencing Services, Ltd., as amended by First Amendment to Standard Office Lease dated
May 4, 1999, as amended by Second Amendment to Standard Office Lease dated May 1998, as amended by Third Amendment to Standard Office Lease dated September 1999 (previously provided as an exhibit to the Registrants Annual Report on Form 10-K
for the year ended December 31, 2002 and filed on March 31, 2003).                                                                                      
|               | 
|10.54          |  | Second Amended and Restated Executive Employment Agreement effective as of January 1, 2002 by and among the Registrant, Premiere Communications, Inc. and Boland T. Jones
(previously provided as an exhibit to the Registrants Annual Report on Form 10-K for the year ended December 31, 2002 and filed on March 31, 2003).                                                                                                                                                                                                                                                                
|               | 
|10.55          |  | Second Amended and Restated Executive Employment Agreement effective as of January 1, 2002 by and among the Registrant and Jeffrey A. Allred (previously provided as an exhibit to
the Registrants Annual Report on Form 10-K for the year ended December 31, 2002 and filed on March 31, 2003).                                                                                                                                                                                                                                                                                             
|               | 
|10.56          |  | Employment Offer Letter dated August 6, 2001 by the Registrant to Richard J. Buyens (previously provided as an exhibit to the Registrants Annual Report on Form 10-K for the
year ended December 31, 2002 and filed on March 31, 2003).                                                                                                                                                                                                                                                                                                                                                      
|               | 
|10.57          |  | Stock Pledge Agreement dated January 3, 2002 by and between Boland T. Jones and the Registrant (previously provided as an exhibit to the Registrants Annual Report on Form
10-K for the year ended December 31, 2002 and filed on March 31, 2003).                                                                                                                                                                                                                                                                                                                                           
|               | 
|10.58          |  | Stock Pledge Agreement dated January 3, 2002 by and between Jeffrey A. Allred and the Registrant (previously provided as an exhibit to the Registrants Annual Report on Form
10-K for the year ended December 31, 2002 and filed on March 31, 2003).                                                                                                                                                                                                                                                                                                                                         
|               | 
|10.59          |  | Stock Pledge Agreement dated January 3, 2002 by and between Patrick G. Jones and the Registrant (previously provided as an exhibit to the Registrants Annual Report on Form
10-K for the year ended December 31, 2002 and filed on March 31, 2003).                                                                                                                                                                                                                                                                                                                                          
|               | 
|10.60          |  | Stock Pledge Agreement dated January 3, 2002 by and between Richard J. Buyens and the Registrant (previously provided as an exhibit to the Registrants Annual Report on Form
10-K for the year ended December 31, 2002 and filed on March 31, 2003).                                                                                                                                                                                                                                                                                                                                         
|               | 
|10.61          |  | Stock Pledge Agreement dated January 3, 2002 by and between Theodore P. Schrafft and the Registrant (previously provided as an exhibit to the Registrants Annual Report on
Form 10-K for the year ended December 31, 2002 and filed on March 31, 2003).                                                                                                                                                                                                                                                                                                                                      



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|Exhibit Number |  | Description                                                                                                                                                                                                                                                                                                                                                         
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.62          |  | Promissory Note dated January 3, 2002 payable to the Registrant by Boland T. Jones (previously provided as an exhibit to the Registrants Annual Report on Form 10-K for the
year ended December 31, 2002 and filed on March 31, 2003).                                                                                                                             
|               | 
|10.63          |  | Promissory Note dated January 3, 2002 payable to the Registrant by Jeffrey A. Allred (previously provided as an exhibit to the Registrants Annual Report on Form 10-K for the
year ended December 31, 2002 and filed on March 31, 2003).                                                                                                                           
|               | 
|10.64          |  | Promissory Note dated January 3, 2002 payable to the Registrant by Patrick G. Jones (previously provided as an exhibit to the Registrants Annual Report on Form 10-K for the
year ended December 31, 2002 and filed on March 31, 2003).                                                                                                                            
|               | 
|10.65          |  | Promissory Note dated January 3, 2002 payable to the Registrant by Richard J. Buyens (previously provided as an exhibit to the Registrants Annual Report on Form 10-K for the
year ended December 31, 2002 and filed on March 31, 2003).                                                                                                                           
|               | 
|10.66          |  | Promissory Note dated January 3, 2002 payable to the Registrant by Theodore P. Schrafft (previously provided as an exhibit to the Registrants Annual Report on Form 10-K for
the year ended December 31, 2002 and filed on March 31, 2003).                                                                                                                        
|               | 
|10.67          |  | Agreement dated March 5, 2002 by and among the Registrant and Jeffrey M. Cunningham (previously provided as an exhibit to the Registrants Annual Report on Form 10-K for the
year ended December 31, 2002 and filed on March 31, 2003).                                                                                                                            
|               | 
|10.68          |  | Lease Agreement from Townsend XPD, LLC to Xpedite Systems, Inc. dated June 15, 2000 (previously provided as an exhibit to the Registrants Annual Report on Form 10-K for the
year ended December 31, 2002 and filed on March 31, 2003).                                                                                                                            
|               | 
|10.69          |  | Pine Ridge Business Park Standard Office Lease dated January 29, 1999 by and between Perg Buildings, LLC and American Teleconferencing Services, Ltd., as amended by First
Amendment to Lease dated May 4, 1999 (previously provided as an exhibit to the Registrants Annual Report on Form 10-K for the year ended December 31, 2002 and filed on March 31, 2003).
|               | 
|10.70          |  | Promissory Note dated December 29, 1997 payable to the Registrant by Boland T. Jones.                                                                                                                                                                                                                                                                               
|               | 
|10.71          |  | Stock Pledge Agreement dated December 29, 1997 by and between Boland T. Jones and the Registrant.                                                                                                                                                                                                                                                                   
|               | 
|10.72          |  | Promissory Note dated December 15, 1999 payable to the Registrant by Boland T. Jones.                                                                                                                                                                                                                                                                               
|               | 
|10.73          |  | Stock Pledge Agreement dated December 15, 1999 by and between Boland T. Jones and the Registrant.                                                                                                                                                                                                                                                                   
|               | 
|10.74          |  | Agreement for Assignment of Stock Options dated February 5, 1999 by and among Boland T. Jones, Seven Gables Management Company, LLC, Seven Gables Partnership, L.P. and the
Registrant.                                                                                                                                                                             
|               | 
|10.75          |  | Promissory Note dated October 31, 2000 payable to the Registrant by Boland T. Jones.                                                                                                                                                                                                                                                                                
|               | 
|10.76          |  | Stock Pledge Agreement date October 31, 2000 by and between Seven Gables Partnership, L.P. and the Registrant.                                                                                                                                                                                                                                                      
|               | 
|10.77          |  | Promissory Note dated October 31, 2000 payable to the Registrant by Boland T. Jones.                                                                                                                                                                                                                                                                                



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|Exhibit Number |  | Description                                                                                                                                                                        
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.78          |  | Stock Pledge Agreement dated October 31, 2000 by and between Boland T. Jones and the Registrant.                                                                                   
|               | 
|10.79          |  | Promissory Note dated April 17, 2001 payable to the Registrant by Boland T. Jones.                                                                                                 
|               | 
|10.80          |  | Promissory Note dated April 17, 2001 payable to the Registrant by Boland T. Jones.                                                                                                 
|               | 
|10.81          |  | Promissory Note dated April 17, 2001 payable to the Registrant by Boland T. Jones.                                                                                                 
|               | 
|10.82          |  | Promissory Note dated April 17, 2001 payable to the Registrant by Boland T. Jones.                                                                                                 
|               | 
|10.83          |  | Restricted Stock Award Agreement dated November 27, 2001 by and between Boland T. Jones and the Registrant.                                                                        
|               | 
|10.84          |  | Promissory Note dated November 27, 2001 payable to the Registrant by Boland T. Jones.                                                                                              
|               | 
|10.85          |  | Stock Pledge Agreement dated November 27, 2001 by and between Boland T. Jones and the Registrant.                                                                                  
|               | 
|10.86          |  | Restricted Stock Award Agreement dated December 28, 2001 by and between Boland T. Jones and the Registrant.                                                                        
|               | 
|10.87          |  | Restricted Stock Award Agreement dated November 27, 2001 by and between Boland T. Jones and the Registrant.                                                                        
|               | 
|10.88          |  | Restricted Stock Award Agreement dated November 27, 2001 by and between Jeffrey A. Allred and the Registrant.                                                                      
|               | 
|10.89          |  | Promissory Note dated January 3, 2002 payable to the Registrant by Jeffrey A. Allred.                                                                                              
|               | 
|10.90          |  | Stock Pledge Agreement dated January 3, 2002 by and between Jeffrey A. Allred and the Registrant.                                                                                  
|               | 
|10.91          |  | Restricted Stock Award Agreement dated December 28, 2001 by and between Jeffrey A. Allred and the Registrant.                                                                      
|               | 
|10.92          |  | Promissory Note dated April 12, 2002 payable to the Registrant by Jeffrey A. Allred.                                                                                               
|               | 
|10.93          |  | Amendment to Stock Pledge Agreement dated April 12, 2002 by and between Jeffrey A. Allred and the Registrant.                                                                      
|               | 
|10.94          |  | Restricted Stock Award Agreement dated November 27, 2001 by and between Jeffrey A. Allred and the Registrant.                                                                      
|               | 
|10.95          |  | Promissory Note dated January 3, 2002 payable to the Registrant by Jeffrey A. Allred.                                                                                              
|               | 
|10.96          |  | Stock Pledge Agreement dated January 3, 2002 by and between Jeffrey A. Allred and the Registrant.                                                                                  
|               | 
|10.97          |  | Restricted Stock Award Agreement dated November 27, 2001 by and between Jeffrey A. Allred and the Registrant.                                                                      
|               | 
|21.1           |  | Subsidiaries of the Registrant (previously provided as an exhibit to the Registrants Annual Report on Form 10-K for the year ended December 31, 2002 and filed on March 31,
2003).



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|Exhibit Number |  | Description                                                                                                                                       
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|23.1           |  | Consent of PricewaterhouseCoopers LLP.                                                                                                            
|               | 
|31.1           |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                               
|               | 
|31.2           |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                               
|               | 
|32.1           |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|               | 
|32.2           |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

---

|* | 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.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



(b) Reports on Form 8-K.



The Registrant did not file any Current Reports on
Form 8-K during the fourth quarter of 2002.



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SIGNATURES



Pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



PTEK Holdings, Inc.By:

/s/ Boland T. JonesBoland T. Jones, Chairman of the Board and Chief Executive OfficerDate: December 19, 2003




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EXHIBIT INDEX



|Exhibit Number |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                        
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1            |  | Agreement and Plan of Merger, together with exhibits, dated 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 on April 4, 1997).                                                          
|               | 
|2.2            |  | Agreement and Plan of Merger, together with exhibits, dated 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 on April 4, 1997).                                                                                              
|               | 
|2.3            |  | Transfer Agreement dated 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 on May 14, 1997).                                                                                                                                               
|               | 
|2.4            |  | Transfer Agreement dated 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 on May 14, 1997).                                                                      
|               | 
|2.5            |  | Stock Purchase Agreement, together with exhibits, dated 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).                                                                                                
|               | 
|2.6            |  | Agreement and Plan of Merger, together with exhibits, dated November 13, 1997 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 and filed on December 23, 1997).                                                   
|               | 
|2.7            |  | 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 on April 28, 1998).                                                                                                
|               | 
|2.8            |  | Membership Interests Purchase Agreement as of March 25, 2002 by and among Voicecom Telecommunications, LLC, the Registrant, Premiere Communications, Inc., Voice-Tel of Canada
Ltd., Intellivoice Communications, LLC, Voice-Tel Enterprises, LLC and Voicecom Telecommunications, Inc. (incorporated by reference to Exhibit 2.1 of the Registrants Current Report on Form 8-K dated March 26, 2002 and filed on April 10,
2002).
|               | 
|2.9            |  | Bill of Sale and Assignment as of March 25, 2002 by and between Voicecom Telecommunications, LLC and Premiere Communications, Inc. (incorporated by reference to Exhibit 2.2 of the
Registrants Current Report on Form 8-K dated March 26, 2002 and filed on April 10, 2002).                                                                                                                                                     
|               | 
|2.10           |  | Assignment and Assumption Agreement as of March 25, 2002 by and between Voicecom Telecommunications, LLC and Premiere Communications, Inc. (incorporated by reference to Exhibit
2.3 of the Registrants Current Report on Form 8-K dated March 26, 2002 and filed on April 10, 2002).                                                                                                                                             
|               | 
|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).                                                                                                                                                                                                                            



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|Exhibit Number |  | Description                                                                                                                                                                                                                                                                                                                                         
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.2            |  | Articles of Amendment of Articles of Incorporation of Premiere Technologies, Inc. (changing the name of the Registrant to PTEK Holdings, Inc.) (incorporated by reference to
Exhibit 3.2 to the Registrants Yearly Report on Form 10-K for the year ended December 31, 1999 and filed on March 30, 2001).                                          
|               | 
|3.3            |  | Amended and Restated Bylaws of Premiere Technologies, Inc., as amended (incorporated by reference to Exhibit 3.1 to the Registrants Amended Quarterly Report on Form 10-Q/A
for the quarter ended June 30, 2001).                                                                                                                                  
|               | 
|3.4            |  | Amendment No. 6 to Amended and Restated Bylaws of PTEK Holdings, Inc. (incorporated by reference to Exhibit 3.3(a) to the Registrants Yearly Report on Form 10-K for the year
ended December 31, 2001).                                                                                                                                            
|               | 
|3.5            |  | Amendment No. 7 to Amended and Restated Bylaws of PTEK Holdings, Inc. (incorporated by reference to Exhibit 3.3(b) to the Registrants Quarterly Report on Form 10-Q for the
quarter ended March 31, 2002, as filed on May 15, 2002).                                                                                                               
|               | 
|3.6            |  | Amendment No. 8 to Amended and Restated Bylaws of PTEK Holdings, Inc. (incorporated by reference to Exhibit 3.3(c) to the Registrants Quarterly Report on Form 10-Q for the
quarter ended March 31, 2002).                                                                                                                                         
|               | 
|4.1            |  | See Exhibits 3.1-3.3 for provisions of the Articles of Incorporation and Bylaws defining the rights of the holders of common stock of the Registrant.                                                                                                                                                                                               
|               | 
|4.2            |  | Specimen Stock Certificate (incorporated by reference to Exhibit 4.2 to the Registrants Registration Statement on Form S-1 (No. 33-80547)).                                                                                                                                                                                                        
|               | 
|4.3            |  | Indenture dated 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 on 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
on August 5, 1997).                                                                                                                                                    
|               | 
|4.5            |  | Registration Rights Agreement dated 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 on August 5, 1997).
|               | 
|4.6            |  | 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 on June 26, 1998).                                                                                 
|               | 
|10.1           |  | Shareholder Agreement dated 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           |  | 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).                                                                                               
|               | 
|10.3           |  | 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)).                                                                                                          



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|Exhibit Number |  | Description                                                                                                                                                                                                                                                                                                                                                               
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.4           |  | 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)).                                                                                                                                      
|               | 
|10.5           |  | Restricted Stock Award Agreement dated May 5, 1999 between the Registrant and Boland T. Jones (incorporated by reference to Exhibit 10.12 to the Registrants Annual Report on
Form 10-K for the year ended December 31, 1999).                                                                                                                                           
|               | 
|10.6           |  | Restricted Stock Award Agreement dated May 5, 1999 between the Registrant and Jeffrey A. Allred (incorporated by reference to Exhibit 10.13 to the Registrants Annual Report
on Form 10-K for the year ended December 31, 1999).                                                                                                                                         
|               | 
|10.7           |  | Restricted Stock Award Agreement dated May 5, 1999 between the Registrant and Patrick G. Jones (incorporated by reference to Exhibit 10.14 to the Registrants Annual Report
on Form 10-K for the year ended December 31, 1999).                                                                                                                                          
|               | 
|10.8           |  | Recourse Promissory Note dated December 20, 1999 payable to the Registrant by Boland T. Jones (incorporated by reference to Exhibit 10.15 to the Registrants Annual Report on
Form 10-K for the year ended December 31, 1999).                                                                                                                                           
|               | 
|10.9           |  | Recourse Promissory Note dated December 20, 1999 payable to the Registrant by Jeffrey A. Allred (incorporated by reference to Exhibit 10.16 to the Registrants Annual Report
on Form 10-K for the year ended December 31, 1999).                                                                                                                                         
|               | 
|10.10          |  | 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)).                                                                                                                                                                                              
|               | 
|10.11          |  | 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)).                                                                                                                                                        
|               | 
|10.12          |  | Agreement of Lease between Corporate Property Investors and Premiere Communications, Inc. dated 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).
|               | 
|10.13          |  | 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)).                                                                                                                                                 
|               | 
|10.14          |  | 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)).                                                                                                                                                                                                               
|               | 
|10.15          |  | 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)).                                                                                                                                                                                                                  
|               | 
|10.16          |  | 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)).                                                                                                                                                                                                                
|               | 
|10.17          |  | 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 on August 5, 1997).                 



117



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##### Table of Contents

|Exhibit Number |  | Description                                                                                                                                                                                                                                                                        
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.18          |  | 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)).                                                   
|               | 
|10.19          |  | 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)).                                                                     
|               | 
|10.20          |  | 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)).                             
|               | 
|10.21          |  | 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).
|               | 
|10.22          |  | 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).                                                           
|               | 
|10.23          |  | 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).                                                                           
|               | 
|10.24          |  | 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).                                                      
|               | 
|10.25          |  | Premiere Technologies, Inc., Amended and Restated 1998 Stock Plan (incorporated by reference to Exhibit 10.1 to the Registrants Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999).                                                                               
|               | 
|10.26          |  | Amendment No. 1 to the Premiere Technologies, Inc. Amended and Restated 1998 Stock Plan (incorporated by reference to Exhibit 10.45 to the Registrants Annual Report on Form
10-K for the year ended December 31, 1999).                                                          
|               | 
|10.27          |  | Xpedite Systems, Inc. 1992 Incentive Stock Option Plan (assumed by the Registrant) (incorporated by, reference to Xpedites Registration Statement on Form S-1 (No.
33-73258)).                                                                                                    
|               | 
|10.28          |  | Xpedite Systems, Inc. 1993 Incentive Stock Option Plan (assumed by the Registrant) (incorporated by reference to Xpedites Registration Statement on Form S-I (No.
33-73258)).                                                                                                     
|               | 
|10.29          |  | Xpedite Systems, Inc. 1996 Incentive Stock Option Plan (assumed by the Registrant) (incorporated by reference to Xpedites Annual Report on Form 10-K for the year ended
December 31, 1995).                                                                                       
|               | 
|10.30          |  | 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).                                                                  
|               | 
|10.31          |  | 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).                                                                



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|Exhibit Number |  | Description                                                                                                                                                                                                                                                                                               
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.32          |  | Associate Stock Purchase Plan (incorporated by reference to Appendix A to the Registrants Definitive Proxy Statement distributed in connection with the Registrants
June 22, 1999 Annual Meeting of Shareholders, filed on May 19, 1999).                                                               
|               | 
|10.33          |  | Intellivoice Communications, Inc. 1955 Incentive Stock Plan (assumed by the Registrant) (incorporated by reference to Exhibit 10.52 to the Registrants Annual Report on Form
10-K for the year ended December 31, 1999).                                                                                 
|               | 
|10.34          |  | Employment Agreement dated January 1, 2000 by and between American Teleconferencing Services, Ltd. And Theordore P. Schrafft (incorporated by reference to Exhibit 10.1 to the
Registrants Quarterly Report on Form 10-Q for the quarter ended March 31, 2000).                                          
|               | 
|10.35          |  | PTEK Holdings, Inc. 2000 Directors Stock Plan (incorporated by reference to Exhibit A to the Registrants Definitive Proxy Statement distributed in connection with the
Registrants June 7, 2000 Annual Meeting of Shareholders, filed April 28, 2000).                                                  
|               | 
|10.36          |  | Settlement Agreement dated April 7, 2000 by and between PTEK Holdings, Inc. and MCI WorldCom, Inc. (incorporated by reference to Exhibit 10.1 to the Registrants Quarterly
Report on Form 10-Q for the quarter ended June 30, 2000).*                                                                    
|               | 
|10.37          |  | Amendment No. 1 dated January 1, 2000 to Telecommunications Service Agreement dated October 29, 1999 by and between Premiere Technologies, Inc. and MCI WorldCom, Inc.
(incorporated by reference to Exhibit 10.2 to the Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 2000).*
|               | 
|10.38          |  | Addendum A dated January 1, 2000 to Carrier Services Agreement dated as of October 29, 1999 by and between PTEK Holdings, Inc. and MCI WorldCom, Inc. (incorporated by reference to
Exhibit 10.3 to the Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 2000).*                 
|               | 
|10.39          |  | Credit Agreement dated September 29, 2000 by and among Xpedite Systems, Inc., PTEK Holdings, Inc. and ABN Amro Bank, N.V. (incorporated by reference to Exhibit 10.1 to the
Registrants Quarterly Report on Form 10-Q for the quarter ended September 30, 2000).                                          
|               | 
|10.40          |  | Asset Sale Agreement, together with exhibits, dated August 25, 2000 by and between Telecare, Inc. and Premiere Communications, Inc. (incorporated by reference to Exhibit 10.2 to
the Registrants Quarterly Report on Form 10-Q for the quarter ended September 30, 2000).                                
|               | 
|10.41          |  | PTEK Holdings, Inc. Associate Stock Purchase Plan (incorporated by reference to Appendix B to the Registrants Definitive Proxy Statement distributed in connection with the
Registrants June 5, 2001 Annual Meeting of Shareholders, filed April 30, 2001).                                             
|               | 
|10.42          |  | PTEK Holdings, Inc. 1995 Stock Plan, as amended (incorporated by reference to Appendix C to the Registrants Definitive Proxy Statement distributed in connection with the
Registrants June 5, 2001 Annual Meeting of Shareholders, filed April 30, 2001).                                               
|               | 
|10.43          |  | Letter to shareholders, employees and friends of PTEK (incorporated by reference to Exhibit 99.1 of the Registrants Current Report on Form 8-K dated February 21, 2001 and
filed on February 21, 2001).                                                                                                  
|               | 
|10.44          |  | Letter to shareholders, employees and friends of PTEK (incorporated by reference to Exhibit 99.1 of the Registrants Current Report on Form 8-K dated July 11, 2001 and filed
on July 11, 2001).                                                                                                          
|               | 
|10.45          |  | PTEK Holdings, Inc. Associate Stock Purchase Plan, as amended (incorporated by reference to Appendix B to the Registrants Definitive Proxy Statement distributed in
connection with the Registrants June 5, 2002 Annual Meeting of Shareholders, filed on April 30, 2002).                              



119



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|Exhibit Number |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.46          |  | PTEK Holdings, Inc. 2000 Directors Stock Plan, as amended (incorporated by reference to Appendix C to the Registrants Definitive Proxy Statement distributed in connection
with the Registrants June 5, 2002 Annual Meeting of Shareholders, filed on April 30, 2002).                                                                                                                                                                                                                                                                                                                      
|               | 
|10.47          |  | Premiere Technologies, Inc. 1994 Stock Option Plan (previously provided as an exhibit to the Registrants Annual Report on Form 10-K for the year ended December 31, 2002 and
filed on March 31, 2003).                                                                                                                                                                                                                                                                                                                                                                                       
|               | 
|10.48          |  | PTEK Holdings, Inc. 1995 Stock Plan (incorporated by reference to Appendix C to the Registrants Definitive Proxy Statement distributed in connection with the
Registrants June 5, 2002 Annual Meeting of Shareholders, filed on April 30, 2002).                                                                                                                                                                                                                                                                                                                                            
|               | 
|10.49          |  | Share Purchase Agreement dated February 27, 2003 by and between the Registrant and AT&T Corp. (incorporated by reference to Exhibit 1 to Amendment No. 1 to Schedule 13D of
AT&T Corp., filed with respect to the Issuer on March 6, 2003).                                                                                                                                                                                                                                                                                                                                                   
|               | 
|10.50          |  | Note Purchase Agreement dated February 27, 2003 by and between the Registrant and AT&T Corp. (incorporated by reference to Exhibit 2 to Amendment No. 1 to Schedule 13D of
AT&T Corp., filed with respect to the Issuer on March 6, 2003).                                                                                                                                                                                                                                                                                                                                                    
|               | 
|10.51          |  | Third Modification of Lease dated July 15, 1998 by and between The Retail Property Trust and Premiere Communications, Inc. to the Agreement of Lease between Corporate Property
Investors and Premiere Communications, Inc. dated October 30, 1997, as amended by Fourth Modification of Lease dated August 27, 1998, as amended by Fifth Modification of Lease dated April 1, 1999, as amended by Sixth Modification of Lease dated 1999
(previously provided as an exhibit to the Registrants Annual Report on Form 10-K for the year ended December 31, 2002 and filed on March 31, 2003).
|               | 
|10.52          |  | Seventh Amendment to Lease dated February 28, 2001 by and between Property Georgia OBJLW Two Corporation and Premiere Communications, Inc. to the Agreement of Lease between
Corporate Property Investors and Premiere Communications, Inc. dated October 30, 1997, as amended by Eighth Amendment to Lease dated June 24, 2001 (previously provided as an exhibit to the Registrants Annual Report on Form 10-K for the year
ended December 31, 2002 and filed on March 31, 2003).                                                                                                          
|               | 
|10.53          |  | Standard Office Lease dated May 23, 1996 by and between 2221 Bijou, LLC and American Teleconferencing Services, Ltd., as amended by First Amendment to Standard Office Lease dated
May 4, 1999,, as amended by Second Amendment to Standard Office Lease dated May 1998, as amended by Third Amendment to Standard Office Lease dated September 1999 (previously provided as an exhibit to the Registrants Annual Report on Form 10-K
for the year ended December 31, 2002 and filed on March 31, 2003).                                                                                     
|               | 
|10.54          |  | Second Amended and Restated Executive Employment Agreement effective as of January 1, 2002 by and among the Registrant, Premiere Communications, Inc. and Boland T. Jones
(previously provided as an exhibit to the Registrants Annual Report on Form 10-K for the year ended December 31, 2002 and filed on March 31, 2003).                                                                                                                                                                                                                                                                
|               | 
|10.55          |  | Second Amended and Restated Executive Employment Agreement effective as of January 1, 2002 by and among the Registrant and Jeffrey A. Allred (previously provided as an exhibit to
the Registrants Annual Report on Form 10-K for the year ended December 31, 2002 and filed on March 31, 2003).                                                                                                                                                                                                                                                                                             
|               | 
|10.56          |  | Employment Offer Letter dated August 6, 2001 by the Registrant to Richard J. Buyens (previously provided as an exhibit to the Registrants Annual Report on Form 10-K for the
year ended December 31, 2002 and filed on March 31, 2003).                                                                                                                                                                                                                                                                                                                                                      



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|Exhibit Number |  | Description                                                                                                                                                                                                                                                                                                                                                         
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.57          |  | Stock Pledge Agreement dated January 3, 2002 by and between Boland T. Jones and the Registrant (previously provided as an exhibit to the Registrants Annual Report on Form
10-K for the year ended December 31, 2002 and filed on March 31, 2003).                                                                                                                 
|               | 
|10.58          |  | Stock Pledge Agreement dated January 3, 2002 by and between Jeffrey A. Allred and the Registrant (previously provided as an exhibit to the Registrants Annual Report on Form
10-K for the year ended December 31, 2002 and filed on March 31, 2003).                                                                                                               
|               | 
|10.59          |  | Stock Pledge Agreement dated January 3, 2002 by and between Patrick G. Jones and the Registrant (previously provided as an exhibit to the Registrants Annual Report on Form
10-K for the year ended December 31, 2002 and filed on March 31, 2003).                                                                                                                
|               | 
|10.60          |  | Stock Pledge Agreement dated January 3, 2002 by and between Richard J. Buyens and the Registrant (previously provided as an exhibit to the Registrants Annual Report on Form
10-K for the year ended December 31, 2002 and filed on March 31, 2003).                                                                                                               
|               | 
|10.61          |  | Stock Pledge Agreement dated January 3, 2002 by and between Theodore P. Schrafft and the Registrant (previously provided as an exhibit to the Registrants Annual Report on
Form 10-K for the year ended December 31, 2002 and filed on March 31, 2003).                                                                                                            
|               | 
|10.62          |  | Promissory Note dated January 3, 2002 payable to the Registrant by Boland T. Jones (previously provided as an exhibit to the Registrants Annual Report on Form 10-K for the
year ended December 31, 2002 and filed on March 31, 2003).                                                                                                                             
|               | 
|10.63          |  | Promissory Note dated January 3, 2002 payable to the Registrant by Jeffrey A. Allred (previously provided as an exhibit to the Registrants Annual Report on Form 10-K for the
year ended December 31, 2002 and filed on March 31, 2003).                                                                                                                           
|               | 
|10.64          |  | Promissory Note dated January 3, 2002 payable to the Registrant by Patrick G. Jones (previously provided as an exhibit to the Registrants Annual Report on Form 10-K for the
year ended December 31, 2002 and filed on March 31, 2003).                                                                                                                            
|               | 
|10.65          |  | Promissory Note dated January 3, 2002 payable to the Registrant by Richard J. Buyens (previously provided as an exhibit to the Registrants Annual Report on Form 10-K for the
year ended December 31, 2002 and filed on March 31, 2003).                                                                                                                           
|               | 
|10.66          |  | Promissory Note dated January 3, 2002 payable to the Registrant by Theodore P. Schrafft (previously provided as an exhibit to the Registrants Annual Report on Form 10-K for
the year ended December 31, 2002 and filed on March 31, 2003).                                                                                                                        
|               | 
|10.67          |  | Agreement dated March 5, 2002 by and among the Registrant and Jeffrey M. Cunningham (previously provided as an exhibit to the Registrants Annual Report on Form 10-K for the
year ended December 31, 2002 and filed on March 31, 2003).                                                                                                                            
|               | 
|10.68          |  | Lease Agreement from Townsend XPD, LLC to Xpedite Systems, Inc. dated June 15, 2000 (previously provided as an exhibit to the Registrants Annual Report on Form 10-K for the
year ended December 31, 2002 and filed on March 31, 2003).                                                                                                                            
|               | 
|10.69          |  | Pine Ridge Business Park Standard Office Lease dated January 29, 1999 by and between Perg Buildings, LLC and American Teleconferencing Services, Ltd., as amended by First
Amendment to Lease dated May 4, 1999 (previously provided as an exhibit to the Registrants Annual Report on Form 10-K for the year ended December 31, 2002 and filed on March 31, 2003).



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|Exhibit Number |  | Description                                                                                                                                                                            
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               | 
|10.70          |  | Promissory Note dated December 29, 1997 payable to the Registrant by Boland T. Jones.                                                                                                  
|               | 
|10.71          |  | Stock Pledge Agreement dated December 29, 1997 by and between Boland T. Jones and the Registrant.                                                                                      
|               | 
|10.72          |  | Promissory Note dated December 15, 1999 payable to the Registrant by Boland T. Jones.                                                                                                  
|               | 
|10.73          |  | Stock Pledge Agreement dated December 15, 1999 by and between Boland T. Jones and the Registrant.                                                                                      
|               | 
|10.74          |  | Agreement for Assignment of Stock Options dated February 5, 1999 by and among Boland T. Jones, Seven Gables Management Company, LLC, Seven Gables Partnership, L.P. and the
Registrant.
|               | 
|10.75          |  | Promissory Note dated October 31, 2000 payable to the Registrant by Boland T. Jones.                                                                                                   
|               | 
|10.76          |  | Stock Pledge Agreement date October 31, 2000 by and between Seven Gables Partnership, L.P. and the Registrant.                                                                         
|               | 
|10.77          |  | Promissory Note dated October 31, 2000 payable to the Registrant by Boland T. Jones.                                                                                                   
|               | 
|10.78          |  | Stock Pledge Agreement dated October 31, 2000 by and between Boland T. Jones and the Registrant.                                                                                       
|               | 
|10.79          |  | Promissory Note dated April 17, 2001 payable to the Registrant by Boland T. Jones.                                                                                                     
|               | 
|10.80          |  | Promissory Note dated April 17, 2001 payable to the Registrant by Boland T. Jones.                                                                                                     
|               | 
|10.81          |  | Promissory Note dated April 17, 2001 payable to the Registrant by Boland T. Jones.                                                                                                     
|               | 
|10.82          |  | Promissory Note dated April 17, 2001 payable to the Registrant by Boland T. Jones.                                                                                                     
|               | 
|10.83          |  | Restricted Stock Award Agreement dated November 27, 2001 by and between Boland T. Jones and the Registrant.                                                                            
|               | 
|10.84          |  | Promissory Note dated November 27, 2001 payable to the Registrant by Boland T. Jones.                                                                                                  
|               | 
|10.85          |  | Stock Pledge Agreement dated November 27, 2001 by and between Boland T. Jones and the Registrant.                                                                                      
|               | 
|10.86          |  | Restricted Stock Award Agreement dated December 28, 2001 by and between Boland T. Jones and the Registrant.                                                                            
|               | 
|10.87          |  | Restricted Stock Award Agreement dated November 27, 2001 by and between Boland T. Jones and the Registrant.                                                                            
|               | 
|10.88          |  | Restricted Stock Award Agreement dated November 27, 2001 by and between Jeffrey A. Allred and the Registrant.                                                                          
|               | 
|10.89          |  | Promissory Note dated January 3, 2002 payable to the Registrant by Jeffrey A. Allred.                                                                                                  
|               | 
|10.90          |  | Stock Pledge Agreement dated January 3, 2002 by and between Jeffrey A. Allred and the Registrant.                                                                                      



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|Exhibit Number |  | Description                                                                                                                                                                        
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.91          |  | Restricted Stock Award Agreement dated December 28, 2001 by and between Jeffrey A. Allred and the Registrant.                                                                      
|               | 
|10.92          |  | Promissory Note dated April 12, 2002 payable to the Registrant by Jeffrey A. Allred.                                                                                               
|               | 
|10.93          |  | Amendment to Stock Pledge Agreement dated April 12, 2002 by and between Jeffrey A. Allred and the Registrant.                                                                      
|               | 
|10.94          |  | Restricted Stock Award Agreement dated November 27, 2001 by and between Jeffrey A. Allred and the Registrant.                                                                      
|               | 
|10.95          |  | Promissory Note dated January 3, 2002 payable to the Registrant by Jeffrey A. Allred.                                                                                              
|               | 
|10.96          |  | Stock Pledge Agreement dated January 3, 2002 by and between Jeffrey A. Allred and the Registrant.                                                                                  
|               | 
|10.97          |  | Restricted Stock Award Agreement dated November 27, 2001 by and between Jeffrey A. Allred and the Registrant.                                                                      
|               | 
|21.1           |  | Subsidiaries of the Registrant (previously provided as an exhibit to the Registrants Annual Report on Form 10-K for the year ended December 31, 2002 and filed on March 31,
2003).
|               | 
|23.1           |  | Consent of PricewaterhouseCoopers LLP.                                                                                                                                             
|               | 
|31.1           |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                
|               | 
|31.2           |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                
|               | 
|32.1           |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                 
|               | 
|32.2           |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                 

---

|* | 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.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



123