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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported) February 4, 1999
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STAR Telecommunications, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 000-22581 77-0362681
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(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
223 E. De La Guerra, Santa Barbara, California 93101
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (805) 899-1962
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Not Applicable
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(Former name or former address, if changed since last report.)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
(a) Pursuant to the terms of that certain Amended and Restated
Agreement and Plan of Merger dated as of August 20, 1998, as amended on
September 1, 1998 and on December 29, 1998 (the "Merger Agreement"), by and
among STAR Telecommunications, Inc., a Delaware corporation ("STAR" or the
"Company"), Sierra Acquisition Co., Inc., a New York corporation and
wholly-owned subsidiary of the Company ("Acquisition"), PT-1 Communications,
Inc., a New York corporation ("PT-1"), and certain shareholders of PT-1 (the
"PT-1 Shareholders"), effective February 4, 1999 (the "Effective Date") STAR
acquired all of the outstanding shares of the capital stock of PT-1 (the "PT-1
Shares") in exchange for shares of the Company's Common Stock, $0.001 par value
per share (the "STAR Common Stock"). On the Effective Date, a Certificate of
Merger was filed with the Secretary of State of the State of New York, pursuant
to which Acquisition was merged with and into PT-1 (the "Merger"), in accordance
with the terms of the Merger Agreement and with the New York Business
Corporation Law, and PT-1 became a wholly-owned subsidiary of STAR.
On the closing of the Merger, the PT-1 Shareholders and the
holders of warrants and options to acquire PT-1 Shares received an aggregate of
15.05 million shares of STAR Common Stock and the PT-1 Shareholders received an
aggregate payment of $19.5 million in exchange for 49,006,196 PT-1 Shares and
share equivalents outstanding as of such date, resulting in an effective
exchange ratio of 0.300121885 shares of STAR Common Stock for each PT-1 Share.
The Merger Agreement also requires STAR to issue for no consideration an
aggregate of 250,000 shares of STAR Common Stock to selected distributors of
PT-1. A total of approximately 1.42 million of these shares (the "Escrow
Shares") will be deposited in a one-year escrow established at Santa Barbara
Bank and Trust. Such Escrow Shares may be used, at the option of STAR, to
offset any amounts owed to the Company pursuant to the indemnity obligations of
the PT-1 Shareholders set forth in the Merger Agreement.
On February 5, 1999, the first full trading date following the
Effective Date, the closing sales price of the STAR Common Stock on the NASDAQ
Stock Market was $13.75. As such, the aggregate purchase price paid by STAR for
PT-1 was approximately $229,875,000. The purchase price was arrived at through
arms-length negotiations between the Company, PT-1 and the PT-1 Shareholders.
Prior to the Closing, none of the PT-1 Shareholders nor any of the officers,
directors or employees of PT-1 were affiliates of the Company.
In connection with the transaction contemplated by the Merger
Agreement, Samer Tawfik, a PT-1 Shareholder and formerly the Chief Executive
Officer of PT-1, became a member of the Board of Directors of STAR.
Additionally, at the closing of the Merger, the Company and the PT-1
Shareholders entered into a Registration Rights and Restricted Share Agreement
which provides, among other things, certain piggyback
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registration rights relating to the shares of STAR Common Stock received by the
PT-1 Shareholders at the Closing.
(b) Prior to the Closing, PT-1 was in the business of providing
international long distance services to retail customers and telecommunications
carriers. Pursuant to the Merger, PT-1 became a direct wholly-owned subsidiary
of the Company. It is the present intention of the Company that PT-1 will
continue to engage in such business.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
The financial statements of PT-1 called for by Rule 3.05 of
Regulation S-X under the Securities Exchange Act of 1934, as amended, have been
previously filed by the Company with the Securities and Exchange Commission (the
"Commission") and can be found in the Company's Proxy Statement dated
January 15, 1999 (the "Proxy Statement"). Such financial statements, which can
be found at pages F-35 through F-56 of the Proxy Statement, are hereby
incorporated by reference into this Current Report on Form 8-K.
(b) PRO FORMA FINANCIAL INFORMATION.
The pro forma financial information required pursuant to Article 11 of
Regulation S-X have been previously filed by the Company with the Commission.
Such pro forma financial information can be found at pages 61 through 77 of the
Proxy Statement and are hereby incorporated by reference into this Current
Report on Form 8-K.
(c) EXHIBITS.
4.7 Registration Rights and Restricted Share Agreement dated
as of February 3, 1999 by and among the Company and the
PT-1 Shareholders
10.47 Amended and Restated Agreement and Plan of Merger dated
as of August 20, 1998 by and among the Company,
Acquisition, PT-1 and the PT-1 Shareholders, as amended
on September 1, 1998 and December 29, 1998 (1)
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(1) Previously filed as Annex A to the Proxy Statement and
incorporated herein by reference.
3.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: February 18, 1999
STAR TELECOMMUNICATIONS, INC.
By: /s/ Kelly D. Enos
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Kelly D. Enos
Chief Financial Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
Number Description Number
------- ----------- ------
<S> <C> <C>
4.7 Registration Rights and Restricted Share Agreement dated
as of February 3, 1999 by and among the Company and the
PT-1 Shareholders
10.47 Amended and Restated Agreement and Plan of Merger dated as
of August 20, 1998 by and among the Company, Acquisition,
PT-1 and the PT-1 Shareholders, as amended on September 1,
1998 and December 29, 1998 (1)
</TABLE>
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(1) Previously filed as Annex A to the Proxy Statement and
incorporated herein by reference.
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REGISTRATION RIGHTS AND RESTRICTED SHARE AGREEMENT
THIS REGISTRATION RIGHTS AND RESTRICTED SHARE AGREEMENT ("Agreement") is
entered into as of February 3, 1999, between STAR Telecommunications, Inc., a
Delaware corporation ("Acquiror"), and the parties set forth on the signature
page hereto (collectively, the "Holders" and individually "Holder").
R E C I T A L S:
A. Pursuant to the terms and conditions of that certain Amended and
Restated Agreement and Plan of Merger dated August 20, 1998 by and among
Acquiror, Sierra Acquisition Co., Inc., a New York corporation and wholly-owned
subsidiary of the Acquiror, PT-1 Communications, Inc., a New York corporation,
and certain of the Holders, as amended by that certain First Amendment dated
September 1, 1998 and that certain Second Amendment dated December 29, 1998 (the
"Merger Agreement"), Acquiror will issue and deliver to each Holder, shares (the
"Shares") of Acquiror's common stock, $.001 par value per share ("Common
Stock").
B. In connection with the transactions contemplated by the Merger
Agreement, Acquiror has agreed to grant to the Holders the registration rights
set forth herein with respect to the Shares and the Holders have agreed to
certain restrictions on the transfer of the Shares.
A G R E E M E N T:
NOW, THEREFORE, intending to be legally bound, the parties agree as
follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
"Closing Date" shall mean the date and time that the transactions
contemplated by the Merger Agreement are consummated.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Prospectus" shall mean the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement and including
post-effective amendments and all material incorporated by reference in such
Prospectus.
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"Register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a Registration Statement and
taking all other actions that are necessary or appropriate in connection
therewith, and the declaration or ordering of effectiveness of such Registration
Statement by the SEC.
"Registration Expenses" shall have the meaning set forth in Section 5.
"Registrable Securities" shall mean (i) the Shares and (ii) any
securities issued or issuable with respect to such Shares by way of a stock
dividend, stock split, combination of shares, recapitalization, restructuring,
merger, consolidation or other reorganization of Acquiror, provided that such
term shall not include any such shares of Common Stock sold to the public by a
Holder pursuant to a Registration Statement or to Rule 144 under the Securities
Act or sold by a Holder in a private transaction in which such Holder's rights
hereunder were not assigned, and shall not include any Shares that are eligible
for resale to the public pursuant to Rule 144(k) of the Securities Act.
"Registration Statement" shall mean any registration statement of
Acquiror in compliance with the Securities Act that covers Registrable
Securities pursuant to the provisions of this Agreement, including, without
limitation, the Prospectus, all amendments and supplements to such Registration
Statement or Prospectus, including all post-effective amendments, all exhibits
and all material incorporated by reference in such Registration Statement.
"Securities Act" shall mean the Securities Act of 1933, as amended
from time to time.
"SEC" shall mean the Securities and Exchange Commission.
"Underwriter" shall mean a securities dealer who purchases any
Registrable Securities as principal in an underwritten offering and not as part
of such dealer's market-making activities.
"Underwritten registration" or "underwritten offering" shall mean a
registration in which securities of Acquiror are sold to an underwriter or
through an underwriter as agent for reoffering to the public.
2. RESTRICTIONS ON TRANSFER. Each Holder agrees that from and after the
Closing Date and until the second anniversary thereof, it will not sell,
transfer, assign, pledge or otherwise dispose of any of the Shares or enter into
a margin transaction or acquire any derivative securities relating to any of the
Shares, whether with or without consideration and whether voluntarily or
involuntarily or by operation of law (collectively, a "Transfer"), provided that
after the first anniversary of the Closing Date up to ten percent (10%) of the
Shares received by the Holders pursuant to the Merger Agreement (the "One-Year
Shares"),
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may be Transferred by those Holders holding such One-Year Shares, as further set
forth on Schedule 1 hereto. Notwithstanding anything contained herein to the
contrary, Shares may be Transferred by any Holder to his ancestor, descendants
or spouse or to trusts for the benefit of such persons, so long as such
transferee acknowledges the terms of this Agreement and agrees to be bound by
the terms hereof.
3. DEMAND REGISTRATION.
(a) REQUEST FOR REGISTRATION. At any time after the second
anniversary of the Closing Date, any Holder or group of Holders (the "Initiating
Holders") may make a written request for registration under the Securities Act
of all or part of its Registrable Securities (a "Demand Registration"), provided
that such request for registration shall relate to the registration of at least
three million (3,000,000) shares of Registrable Securities. Any such request
for a Demand Registration must specify the number of shares of Registrable
Securities proposed to be sold and must also specify the intended method of
disposition thereof. Within twenty (20) days of receipt of the request for
registration by the Initiating Holder, Acquiror shall give written notice of
such request to all Holders, who shall be entitled, by written notice to
Acquiror within fifteen (15) days of receipt of Acquiror's notice, to include
shares of Registrable Securities in any registration prepared by Acquiror
pursuant to this Section 3(a).
(b) EFFECTIVE REGISTRATION. A registration will not count as a
Demand Registration until it has become effective and has remained effective
until (i) all the Registrable Securities covered by such Registration Statement
have been sold or (ii) the expiration of ninety (90) days, whichever occurs
first.
(c) UNDERWRITTEN OFFERING. If a Holder so elects, the offering of
such Registrable Securities pursuant to such Demand Registration shall be in the
form of an underwritten offering. Holders whose Registrable Securities are
included in any such Demand Registration shall select one or more firms of
investment bankers, to act as the managing Underwriter or Underwriters in
connection with such offering and shall also select any additional managers, to
be used in connection with the offering, provided that the managing Underwriters
selected shall be a regional or nationally-recognized investment banking firm
that is reasonably acceptable to Acquiror.
(d) REDUCTION OF OFFERING. If the Company or any of its security
holders request the right to include equity securities in a Registration
Statement filed pursuant to Section 3(a) and such securities are proposed to be
sold in a firm commitment underwritten offering and the managing Underwriters
advise the Company that, in their opinion, the total number of securities
requested to be included in such registration exceeds the number of securities
which can be sold in such offering without adversely affecting the price or
probability of success of such offering, the securities to be included in such
offering shall include (a) first, all of the Registrable Securities being
registered and (b) second, pro rata among the Company and the other holders of
the Company's securities requesting inclusion in
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such registration on the basis of the number of shares of securities requested
to be registered by the Company and such holders.
(e) PERMITTED DELAYS. Notwithstanding anything contained in this
Section 3 to the contrary, Acquiror may delay the registration of the
Registrable Securities upon request for a Demand Registration if (i) Acquiror
notifies the Initiating Holders that it is contemplating filing a Registration
Statement within forty-five (45) days of such demand or (ii) Acquiror notifies
the Holder that the Board of Directors, acting by a resolution of the Board, has
determined in good faith that filing a Registration Statement at that time would
be materially detrimental to Acquiror, provided that Acquiror shall not delay
the filing of the Demand Registration for more than a period of time determined
by the Board of Directors in connection with its determination refered to above,
and in any event not more than ninety (90) days from the time of the request for
a Demand Registration. Acquiror may not exercise the rights of postponement set
forth above more than once in any twelve (12) month period. If the request for
Demand Registration is withdrawn as a result of a postponement permitted
hereunder, no demand shall be deemed to have been made for purposes of this
Section 3.
(f) LIMITATIONS. Notwithstanding anything to the contrary contained
herein:
(i) Acquiror shall not be obligated to effect more than one (1)
Demand Registration during the third twelve-month period following the date of
this Agreement and one (1) Demand Registration during the fourth twelve-month
period following the date of this Agreement, provided that each such
twelve-month period shall be extended to the extent (and for an equal number of
days) that Acquiror postpones or delays the filing of a Demand Registration
pursuant to section 3(e) during such twelve-month period; and
(ii) No Holder shall have the right to request that Acquiror file
a Registration Statement with respect to a Demand Registration on any date that
is within six (6) months of the effective date of any Registration Statement
filed by Acquiror and pursuant to which the Holder was given rights for a
Piggy-Back Registration (as defined below) in accordance with Section 4, without
any allocation limits as provided in Section 4(d).
4. PIGGY-BACK REGISTRATION. At any time after the second anniversary of
the Closing Date, or, with respect to the One-Year Shares, at any time after the
first anniversary of the Closing Date, if Acquiror shall determine to register
any shares of Common Stock for its own account or for the account of any
stockholders (other than a registration relating either to the sale of
securities to employees of Acquiror pursuant to a stock option, stock purchase
or similar benefit plan or to a sale of securities pursuant to an SEC Rule 145
transaction), each Holder shall be entitled to include Registrable Securities in
such registration and related underwritten offering, if any (a "Piggyback
Registration"), on the following terms and conditions:
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(a) NOTICE. Acquiror shall give written notice of such determination
to each Holder, who, subject to the preceding clause of this Section 4, shall
then have the right to request, by written notice given to Acquiror within
fifteen (15) days of the receipt by such Holder of such notice, that a specific
number of such Holder's Registrable Securities be included in such Registration
Statement. If the Registration Statement relates to an underwritten offering,
the notice called for hereby shall specify the name of the managing Underwriter
for such offering and the number of securities to be registered for the account
of Acquiror and, if then known, for the account of any of the other stockholders
of Acquiror.
(b) UNDERWRITTEN OFFERING. If the Registration Statement relates to
an underwritten offering, each Holder agrees to enter into an underwriting
agreement containing standard and customary terms and conditions and to sell his
Registrable Securities pursuant to the terms thereof, provided that the
indemnification obligations of each such Holder pursuant to such underwriting
agreement shall be subject to any appropriate negotiations between such Holder
and the managing Underwriter for such offering.
(c) REDUCTION OF OFFERING. If the managing Underwriter for the
underwritten offering under the Registration Statement to be filed by Acquiror
pursuant to this Section 4 determines that inclusion of all or any portion of
the Registrable Securities in such offering would adversely affect the ability
of the Underwriter for such offering to sell all of the securities requested to
be included for sale in such offering, the number of shares that may be included
in such registration in such offering shall be allocated as follows: (i) first,
Acquiror shall be permitted to include all shares of capital stock to be
registered by Acquiror for its own account and (ii) second, each Holder shall be
allowed to include such additional amount as the managing Underwriter deems
appropriate, such amount to be allocated among each participating Holder and any
other selling stockholders on a pro rata basis based on the total number of
shares of capital stock requested to be included in such Registration Statement.
The foregoing sentence notwithstanding, if the underwritten offering is being
registered by Acquiror at the instance of a stockholder or stockholders, other
than a Holder, to whom Acquiror has granted the right to require that Acquiror
undertake such registration, (hereinafter, "Other Demand Right Holders"), then
the managing Underwriter of such offering may reduce the number of any Holder's
Registrable Securities included in such offering, or exclude them entirely,
without any reduction of the shares to be included in such offering by any such
Other Demand Right Holders.
(d) WITHDRAWAL OF SHARES. Each Holder may elect to withdraw its
Registrable Securities from the Registration Statement at any time prior to the
effective date thereof, but if the same relates to an underwritten offering and
an underwriting agreement has been entered into, a Holder may only do so during
the time period and on terms deemed appropriate by the Underwriters for such
underwritten offering as specified in such underwriting agreement. Acquiror may
also elect to terminate or withdraw any registration initiated by it under this
Section 4 prior to the effective date of such registration, whether or not any
Holder has elected to include Registrable Securities in such registration.
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5. REGISTRATION PROCEDURES. In the case of each registration of
Registrable Securities pursuant to this Agreement, Acquiror shall promptly take
the following steps:
(a) FILING REGISTRATION STATEMENT. Acquiror shall prepare and file
with the SEC a Registration Statement with respect to such Registrable
Securities and use its best efforts to cause such Registration Statement to
become effective as soon as practicable thereafter, and, upon the request of any
Holder, keep such Registration Statement effective for up to ninety (90) days,
provided that, not less than ten (10) days before filing with the SEC any
Registration Statement or Prospectus or not less than three (3) days before
filing with the SEC any amendments or supplements thereto, Acquiror will furnish
to each Holder and his counsel, copies of all such documents proposed to be
filed, including, without limitation, documents incorporated by reference in the
Prospectus and, if requested by any Holder, the exhibits incorporated by
reference therein, and each Holder shall have the opportunity to object to any
information pertaining solely to such Holder that is contained therein and
Acquiror will make the corrections reasonably requested by such Holder with
respect to such information prior to filing any Registration Statement or
amendment thereto or any Prospectus or any supplement thereto. Acquiror will
not include or name any Holder in any Registration Statement or Prospectus
without the consent of such Holder, unless required to do so by the Securities
Act and the rules and regulations thereunder.
(b) AMENDMENT AND SUPPLEMENTS. Acquiror shall prepare and file with
the SEC such amendments, post-effective amendments and supplements to the
Registration Statement and the Prospectus as may be necessary to keep such
Registration Statement effective for a period of up to ninety (90) days, or such
shorter period as is necessary to complete the distribution of the securities
covered by such Registration Statement and to comply with the provisions of the
Securities Act and the rules and regulations thereunder with respect to the
disposition of all securities covered by such Registration Statement. Upon the
occurrence of any event contemplated by Section 5(c)(v), Acquiror shall also
prepare a supplement or post-effective amendment to the Registration Statement
or the Prospectus or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the purchasers of
the Registrable Securities, the Prospectus will not contain an untrue statement
of a material fact or omit to state any material fact necessary to make the
statements therein not misleading.
(c) NOTIFICATION. Acquiror shall promptly notify each Holder
(i) when the Registration Statement, any pre-effective amendment, the Prospectus
or any Prospectus supplement or post-effective amendment has been filed, and,
with respect to the Registration Statement or any post-effective amendment, when
the same has become effective, (ii) of any request by the SEC for amendments or
supplements to the Registration Statement or the Prospectus or for additional
information, (iii) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
for that purpose, (iv) of the receipt by Acquiror of any notification with
respect to the suspension of the qualification of the Registrable Securities for
sale in any jurisdiction or the
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initiation or threatening of any proceeding for such purpose and (v) of the
happening of any event which makes any statement made in the Registration
Statement, the Prospectus or any document incorporated therein by reference
untrue or which requires the making of any changes in the Registration
Statement, the Prospectus or any document incorporated therein by reference in
order to make the statements therein not misleading.
(d) WITHDRAWL OF SUSPENSION ORDER. Acquiror shall use its best
efforts to obtain the withdrawal of any order suspending the effectiveness of
the Registration Statement.
(e) COPIES. Acquiror shall furnish to each Holder, without charge,
at least one signed copy of the Registration Statement and any amendment or
supplement thereto, the Prospectus included in such Registration Statement
(including, without limitation, each preliminary prospectus), including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference) and such
other documents as each Holder may reasonably request in order to facilitate the
disposition of the Registrable Securities. Acquiror shall also deliver to each
Holder, without charge, such reasonable number of conformed copies of the
Registration Statement (including any amendment or supplement thereto) and such
number of copies of the Prospectus (including each preliminary prospectus) and
any amendment or supplement thereto (and any documents incorporated by reference
therein) as any Holder may reasonably request, all in full conformity with the
Securities Act; Acquiror consents to the use of the Prospectus or any amendment
or supplement thereto by any Holder in connection with the offer and sale of the
Registrable Securities covered by the Prospectus or any amendment or supplement
thereto.
(f) STATE SECURITIES LAWS COMPLIANCE. Prior to any offering of
Registrable Securities covered by a Registration Statement, Acquiror shall use
its best efforts to register or qualify or cooperate with each Holder in
connection with the registration or qualification of such Registrable Securities
for offer and sale under the securities or blue sky laws of such jurisdictions
as such Holder reasonably requests, and use its best efforts to keep each such
registration or qualification effective, including through new filings, or
amendments or renewals, during the period such Registration Statement is
required to be kept effective pursuant to the terms of this Agreement; and do
any and all other acts or things necessary or advisable to enable the
disposition in all such jurisdictions reasonably requested by such Holder of the
Registrable Securities covered by such Registration Statement, provided that
under no circumstances shall Acquiror be required in connection therewith or as
a condition thereof to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(g) EARNINGS STATEMENTS. Acquiror shall make generally available to
each Holder consolidated earnings statements satisfying the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder, as soon as
practicable after the end of any twelve (12)-month period (or ninety (90) days,
if such period is a fiscal year) (i) commencing at the end of any fiscal quarter
in which Registrable Securities are sold to underwriters in a
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firm or best efforts underwritten offering, or (ii) if not sold to underwriters
in such an offering, beginning with the first month of Acquiror's first fiscal
quarter commencing after the effective date of the Registration Statement, which
statements shall cover said twelve (12)-month period.
(h) LISTING. Acquiror shall use its best efforts to cause all
Registrable Securities covered by each Registration Statement to be listed
subject to notice of issuance, prior to the date of the first sale of such
Registrable Securities pursuant to such Registration Statement, on each
securities exchange on which the Common Stock issued by Acquiror are then
listed, and admitted to trading on The Nasdaq Stock Market, if the Common Stock
is then admitted for quotation on The Nasdaq Stock Market.
(i) OPINION OF COUNSEL. In the case of an underwritten offering,
Acquiror shall cause to be delivered to each Holder and the Underwriters, if
any, opinions of counsel to Acquiror in customary form, covering such matters as
are customarily covered by opinions for an underwritten public offering as the
Underwriters may request and addressed to the Underwriters and each Holder.
(j) RECORDS. Acquiror shall use its reasonable efforts to make
available for inspection by each Holder, any Underwriter participating in any
disposition pursuant to such Registration Statement, and any attorney,
accountant or other agent retained by any Holder or any Underwriter, all
financial and other records, pertinent corporate documents and properties of
Acquiror, and cause Acquiror's officers, directors, employees and independent
accountants to supply all information reasonably requested by any Holder or any
such Underwriter, attorney, accountant or agent in connection with such
Registration Statement.
(k) TRANSFER AGENT. Acquiror shall provide a transfer agent and
registrar for all such Registrable Securities not later than the effective date
of such Registration Statement.
(l) INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS. Acquiror shall cause
to be delivered, immediately prior to the effectiveness of the Registration
Statement (and, in the case of an underwritten offering, at the time of delivery
of any Registrable Securities sold pursuant thereto), letters from Acquiror's
independent certified public accountants addressed to each Holder and
underwriter, if any, stating that such accountants are independent public
accountants within the meaning of the Securities Act and the applicable
published rules and regulations thereunder, and otherwise in customary form and
covering such financial and accounting matters as are customarily covered by
letters of the independent certified public accountants delivered in connection
with primary or secondary underwritten public offerings, as the case may be.
(m) SELLING HOLDER'S OBLIGATION TO SUSPEND DISTRIBUTION. Each Holder
agrees that, upon receipt of any notice from Acquiror of the happening of any
event of the kind described in clauses (ii) through (v) of Section 5(c) hereof,
such Holder will forthwith
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discontinue disposition of Registrable Securities under the Prospectus related
to the applicable Registration Statement until such Holder's receipt of the
copies of the supplemented or amended Prospectus, or until he is advised in
writing by Acquiror that the use of the Prospectus may be resumed, and if so
directed by Acquiror, such Holder will deliver to Acquiror all copies then in
such Holder's possession, of the most recent prospectus covering such
Registrable Securities at the time of receipt of such notice.
(n) SELLING HOLDER'S OBLIGATION TO PROVIDE INFORMATION. It shall be
a condition precedent to the obligations of Acquiror to take any action pursuant
to this Section 5 with respect to the Registrable Securities of any Holder that
such Holder shall furnish to Acquiror such information regarding himself and the
Registrable Securities held by him as shall be required by the Securities Act to
effect the registration of such Holder's Registrable Securities.
6. REGISTRATION EXPENSES. All expenses incident to any registration to
be effected hereunder and incident to Acquiror's performance of or compliance
with this Agreement, including without limitation all registration, filing and
qualification fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, NASD, stock exchange
and qualification fees, fees and disbursements of Acquiror's counsel and of
independent certified public accountants of Acquiror (all such expenses being
herein called "Registration Expenses") will be borne by Acquiror. Each Holder
shall bear (i) all underwriting commissions (and transfer taxes, if any)
relating to the Registrable Securities sold and (ii) the fees and expenses of
his legal counsel and accountants.
7. RESTRICTIONS ON PUBLIC SALE.
(a) If a Holder's Registrable Securities are included (in whole or in
part) in a Registration Statement filed by Acquiror under Section 3 or Section 4
for sale in an underwritten offering, such Holder agrees, if requested by the
managing Underwriter of such offering, not to sell, make any short sale of,
loan, grant any option for the purchase of, dispose of or effect any public sale
or distribution of securities of the same series and class as (or securities
exchangeable or exercisable for or convertible into securities of the same
series and class as) the Registrable Securities included in the Registration
Statement, including a sale pursuant to Rule 144 under the Securities Act
(except as part of such underwritten registration), during the ten (10)-day
period prior to, and during the ninety (90)-day period beginning on the
effective date of such Registration Statement.
(b) Pursuant to any Demand Registration, Acquiror agrees (i) not to
effect any public sale or distribution of its Common Stock during the ten
(10)-day period prior to, and during the forty-five (45)-day period following
the effective date of any underwritten Demand Registration (except for sales or
other distributions of shares of Common Stock (w) pursuant to registrations on
Form S-8 or any successor form, (x) registrations on Form S-4 or any successor
form, (y) issuable on the grant and/or exercise of stock options and/or
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<PAGE>
(z) issuable in connection with any acquisition transaction) and unless the
Underwriters managing such offering otherwise agree and (ii) to use its best
efforts to obtain agreements from its officers and directors to agree not to
effect any public sale or distribution (excluding sales pursuant to Rule 144) of
any such securities during such period (except as part of such underwritten
registration, if otherwise permitted), unless the underwriters managing such
registered public offering otherwise agree.
8. INDEMNIFICATION.
(a) INDEMNIFICATION BY ACQUIROR. If a Holder's Registrable
Securities are sold under a Prospectus which is a part of a Registration
Statement, Acquiror agrees to indemnify and hold harmless such Holder from and
against any and all losses, claims, damages and liabilities (including any
investigation, legal or other expenses reasonably incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claim asserted) to which such Holder may become subject under the Securities
Act, the Exchange Act or other federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement, Prospectus
or preliminary prospectus or any amendment or supplement thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) any violation or alleged violation by Acquiror of the Securities Act, the
Exchange Act or any state securities or blue sky laws in connection with the
Registration Statement, Prospectus or preliminary prospectus or any amendment or
supplement thereto, provided that Acquiror will not be liable to any Holder to
the extent that such loss, claim, damage or liability arises from or is based
upon any untrue statement of a material fact or omission of a material fact that
was made in such Registration Statement, Prospectus or preliminary prospectus or
any amendment or supplement thereto in reliance upon and in conformity with
written information furnished to Acquiror by such Holder expressly for use
therein.
(b) INDEMNIFICATION OF ACQUIROR BY EACH HOLDER. If a Holder's
Registrable Securities are sold under a Prospectus which is a part of a
Registration Statement, such Holder agrees to indemnify and hold harmless
Acquiror, its directors and each officer who signed such Registration Statement
and each person who controls Acquiror (within the meaning of Section 15 of the
Securities Act) from and against any and all losses, claims, damages and
liabilities (including any investigation, legal or other expenses reasonably
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claim asserted) to which Acquiror or any other such
person may become subject under the Securities Act, the Exchange Act or other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities arise out of or are based
upon (i) any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, Prospectus or preliminary prospectus or
any amendment or supplement thereto, (ii) the omission or alleged omission to
state therein a material fact
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<PAGE>
required to be stated therein or necessary to make the statements therein not
misleading and (iii) any violation or alleged violation by Acquiror of the
Securities Act, the Exchange Act or any state securities or blue sky laws in
connection with the Registration Statement, Prospectus or preliminary prospectus
or any amendment or supplement thereto, but in each case only to the extent that
such losses, claims, damages and liabilities arise out of or are based upon any
untrue statement of a material fact or omission of a material fact that was made
in the Prospectus, the Registration Statement, or any amendment or supplement
thereto, in reliance upon and in conformity with information furnished in
writing to Acquiror by such Holder expressly for use therein, provided that in
no event shall the aggregate liability of any Holder exceed the amount of the
net proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any person entitled to
indemnification hereunder will (i) give prompt notice to the indemnifying party
of any claim with respect to which it seeks indemnification and (ii) permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party, provided that any person entitled to
indemnification hereunder shall have the right to employ separate counsel and to
participate in the defense of such claim, but the fees and expenses of such
counsel shall be at the expense of such person and not of the indemnifying party
unless (A) the indemnifying party has agreed to pay such fees or expenses,
(B) the indemnifying party shall have failed to assume the defense of such claim
and employ counsel reasonably satisfactory to such person, or (C) in the
reasonable judgment of such person, based upon advice of their counsel, a
conflict of interest may exist between such person and the indemnifying party
with respect to such claims (in which case, if the person notifies the
indemnifying party in writing that such person elects to employ separate counsel
at the expense of the indemnifying party, the indemnifying party shall not have
the right to assume the defense of such claim on behalf of such person). If
such defense is not assumed by the indemnifying party, the indemnifying party
will not be subject to any liability for any settlement made without consent
(but such consent will not be unreasonably withheld or delayed). No indemnified
party will be required to consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
all claimants or plaintiffs to such indemnified party of a release from all
liability in respect of such claim or litigation. Any indemnifying party who is
not entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim. As used in
this Section 6(c), the terms "indemnifying party", "indemnified party" and other
terms of similar import are intended to include only Acquiror (and its officers,
directors and control persons as set forth above) and the Holders, as
applicable.
(d) CONTRIBUTION. If for any reason the foregoing indemnity is
unavailable or insufficient to hold harmless an indemnified party in respect of
any losses, claims, damages, liabilities or expenses (or actions in respect
thereof), then the indemnifying party shall contribute to the amount paid or
payable by the indemnified party as a result of such losses,
11
<PAGE>
claims, damages, liabilities or expenses (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and the indemnified party on the other hand in connection
with statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the indemnifying party or the indemnified
party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission.
Notwithstanding the foregoing, no Holder shall be required to contribute any
amount in excess of the amount such Holder would have been required to pay to an
indemnified party if the indemnity under Section 8(b) hereof was available. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(e) OTHER RIGHTS. The provisions of this Section 8 shall be in
addition to any other rights of indemnification or contribution which any
indemnified party may have pursuant to law, equity, contract or otherwise and
shall remain in full force and effect regardless of any investigation made by or
on behalf of an indemnified party.
(f) TIMING OF PAYMENTS. An indemnifying party shall make payments of
all amounts required to be made pursuant to the foregoing provisions of this
Section 8 to or for the account of the indemnified party from time to time
promptly upon receipt of bills or invoices relating thereto or when otherwise
due or payable.
(g) SURVIVAL. The indemnity and contribution agreements contained in
this Section 8 shall remain in full force and effect and shall survive the
transfer of such Registrable Securities by any Holder.
9. RULE 144. Acquiror covenants that it will file, on a timely basis,
the reports required to be filed by it under the Securities Act and the Exchange
Act and the rules and regulations adopted by the SEC thereunder, and it will
take such further action as any Holder may reasonably request (including,
without limitation, compliance with the current public information requirements
of Rule 144(c) under the Securities Act), all to the extent required from time
to time to enable such Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the conditions
provided by Rule 144 under the Securities Act, as such Rule may be amended from
time to time, or any similar rule or regulation hereafter adopted by the SEC.
Upon the request of any Holder, Acquiror will deliver to such Holder a written
statement verifying that it has complied with such requirements.
10. LEGEND. Each certificate evidencing the Shares shall be stamped or
otherwise imprinted with a legend in substantially the following form:
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<PAGE>
"THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS, INCLUDING
CERTAIN RESTRICTIONS ON TRANSFER, SET FORTH IN THAT CERTAIN REGISTRATION
RIGHTS AND RESTRICTED SHARE AGREEMENT DATED AS OF FEBRUARY 3, 1999 BY AND
AMONG THE COMPANY AND THE SIGNATORIES THERETO. A COPY OF SUCH REGISTRATION
RIGHTS AND RESTRICTED SHARE AGREEMENT SHALL BE FURNISHED WITHOUT CHARGE BY
THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST."
11. TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or attempted
Transfer of any Shares in violation of any provision of this Agreement shall be
void, AB INITIO, and the Company shall not record such Transfer on its books or
treat any purported transferee(s) of such Shares as the owner of such Shares for
any purpose.
12. NO INCONSISTENT AGREEMENTS. Acquiror will not enter into any
agreement offering registration rights to any holders of Common Stock that
conflict with or violate the rights set forth herein without the consent of each
Holder, which consent may be granted or withheld in the sole discretion of each
Holder.
13. ASSIGNMENT OF RIGHTS. Each Holder may assign his rights under this
Agreement to any transferee of Registrable Securities, if (i) such transferee
has acquired at least twenty-five percent (25%) of the Registrable Securities
originally held by such Holder, and (ii) such transferee has executed a writing
wherein such transferee agrees to be bound by the terms hereof.
14. NOTICES. All notices required or permitted under the terms of this
Agreement shall be delivered in the manner called for in the Merger Agreement.
15. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon each Holder and his legal representatives, successors and
assigns, and upon Acquiror and its successors and assigns, including without
limitation any corporation resulting from any merger or consolidation of
Acquiror with or into such corporation (in which Acquiror is not the surviving
corporation) or any entity whose securities are issued in exchange for any
Registrable Securities.
16. SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
17. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
the parties with respect to the subject matter hereof and shall supersede and
preempt any prior understandings, agreements or representations, written or
oral, by or among the parties hereto.
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18. COUNTERPARTS. This Agreement may be executed (including by facsimile
transmission) with counterpart signature pages or in any number of counterparts,
each of which shall be original, and all of which together shall constitute one
instrument.
19. AMENDMENT. Any provision of this Agreement may be amended, waived or
modified only by a writing signed by Acquiror and by each Holder.
20. GOVERNING LAW. This Agreement and the legal relations between the
parties shall be governed by and construed in accordance with the laws of the
State of Delaware, without reference to such jurisdiction's conflicts of law
principles.
21. TERMINATION OF RESTRICTIONS. Immediately prior to the consummation of
a Change in Control of Acquiror, (a) the provisions of Section 2 shall no longer
be applicable to the Shares, (b) the phrase "the second anniversary of" shall be
deleted from Section 3(a) and shall have no further force or effect and (c) the
phrases "the second anniversary of" and "or, with respect to the One-Year
Shares, at any time after the first anniversary of the Closing Date" shall be
deleted from Section 4 and shall have no further force or effect. As used
herein, "Change in Control" shall mean (i) the sale of all or substantially all
of the capital stock or assets of Acquiror, or the consummation of any
transaction or series of related transactions, including any merger,
reorganization or recapitalization, in which any person or group acting together
for the purpose of acquiring, holding, voting or disposing of the capital stock
of Acquiror shall have acquired beneficial ownership (as defined pursuant to
Rule 13d-3 of the Securities Exchange Act, as such Rule is in effect as of the
date hereof) of more than fifty percent (50%) of the outstanding capital stock
of Acquiror.
[THE REMAINDER OF THIS PAGE IS LEFT BLANK INTENTIONALLY]
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IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights and Restricted Share Agreement as of the day and year first above
written.
"Acquiror": STAR Telecommunications, Inc.,
a Delaware corporation
By: /s/ Kelly Enos
---------------------------------------------
Chief Financial Officer
"Holders":
/s/ Samer Tawfik
--------------------------------------------------
Samer Tawfik
/s/ Peter Vita
--------------------------------------------------
Peter M. Vita
/s/ Douglas Barley
--------------------------------------------------
Douglas Barley
/s/ Joseph Pannulo
--------------------------------------------------
Joseph A. Pannulo
/s/ Helene Kidary
--------------------------------------------------
Helene Kidary
John Klusaritz
--------------------------------------------------
John J. Klusaritz
15
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SCHEDULE 1
<TABLE>
<CAPTION>
Name Shares Held One-Year Shares Two-Year Shares
- ---- ----------- --------------- ---------------
<S> <C> <C> <C>
Samer Tawfik 9,138,711 430,671 8,708,040
Peter M. Vita 2,626,066 123,756 2,502,310
Douglas Barley 1,050,427 49,502 1,000,925
Joseph A. Pannullo 314,708 314,708 0
John J. Klusaritz 575,214 27,108 548,106
Helene Kidary 3,001 141 2,860
</TABLE>
16
