<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(MARK ONE)
<TABLE>
<C> <S>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE QUARTER ENDED MARCH 31, 2000
OR
<TABLE>
<C> <S>
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 000-22581
------------------------
STAR TELECOMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 77-0362681
(State of incorporation) (I.R.S. Employer
Identification Number)
223 EAST DE LA GUERRA, 93101
SANTA BARBARA, CALIFORNIA (Zip Code)
(Address of Principal Executive Offices)
</TABLE>
(805) 899-1962
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year if changed since last
report)
------------------------
Indicate by check mark whether the registrant (1) has filed all reports 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 / /
As of May 5, 2000, the number of shares of the registrant's Common Stock
outstanding was 58,631,802 shares.
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<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I - FINANCIAL INFORMATION:
Item 1: Financial Statements
Condensed Consolidated Balance Sheets As Of December 31,
1999
And March 31, 2000 (unaudited).............................. 3
Condensed Consolidated Statements Of Operations For The
Three Month Periods
Ended March 31, 1999 And 2000 (unaudited)................... 4
Condensed Consolidated Statements Of Cash Flows For The
Three Month Periods Ended March 31, 1999 And 2000
(unaudited)................................................. 5
Notes To Condensed Consolidated Financial Statements........ 7
Item 2: Management's Discussion And Analysis Of Financial Condition
And Results Of Operations................................... 12
Item 3: Quantitative And Qualitative Disclosures About Market
Risks....................................................... 16
PART II - OTHER INFORMATION......................................................... 17
</TABLE>
2
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 2000
------------ -----------
(UNAUDITED)
<S> <C> <C>
Current Assets:
Cash and cash equivalents................................. $ 25,561 $ 14,170
Short-term investments.................................... 1,482 1,316
Accounts and notes receivable, net........................ 167,403 164,935
Receivable from related parties........................... 1,390 845
Other current assets...................................... 39,250 45,745
-------- --------
Total current assets.................................... 235,086 227,011
-------- --------
Long-Term Assets:
Property and equipment, net............................... 363,089 309,734
Intangible assets, net.................................... 200,582 197,518
Other..................................................... 8,997 7,621
-------- --------
Total assets............................................ $807,754 $741,884
======== ========
Current Liabilities:
Revolving lines of credit................................. $ 43,540 $ 25,970
Current portion of long-term obligations.................. 18,528 18,314
Accounts payable.......................................... 159,920 162,758
Accrued network costs..................................... 147,672 118,165
Related party payable..................................... 1,133 1,329
Other accrued expenses.................................... 25,840 23,334
Deferred revenue.......................................... 36,374 37,886
-------- --------
Total current liabilities............................... 433,007 387,756
-------- --------
Long-Term Liabilities:
Long-term obligations, net of current portion............. 49,324 43,096
Other long-term liabilities............................... 47,369 40,964
-------- --------
Total long-term liabilities............................. 96,693 84,060
-------- --------
Stockholders' Equity:
Common stock $.001 par value:
Authorized - 100,000,000 shares........................... 58 58
Additional paid-in capital................................ 365,845 365,903
Deferred compensation..................................... (2,160) (1,985)
Note receivable from stockholder.......................... (3,714) (3,785)
Accumulated other comprehensive loss...................... (6,022) (7,646)
Accumulated deficit....................................... (75,953) (82,477)
-------- --------
Total stockholders' equity.............................. 278,054 270,068
-------- --------
Total liabilities and stockholders' equity.............. $807,754 $741,884
======== ========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
3
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1999 2000
-------- ---------
(UNAUDITED)
<S> <C> <C>
Revenue..................................................... $228,209 $ 255,105
Operating expenses:
Cost of services.......................................... 192,914 225,840
Selling, general and administrative expenses.............. 31,465 33,329
Depreciation and amortization............................. 8,730 13,050
Merger expense............................................ 1,442 --
-------- ---------
234,551 272,219
-------- ---------
Loss from operations...................................... (6,342) (17,114)
-------- ---------
Other income (expense):
Interest income........................................... 729 189
Interest expense.......................................... (1,213) (2,924)
Other..................................................... (2,021) 10,696
-------- ---------
(2,505) 7,961
-------- ---------
Loss before benefit for income taxes...................... (8,847) (9,153)
Benefit for income taxes.................................... (1,295) (2,629)
-------- ---------
Net loss.................................................... $ (7,552) $ (6,524)
======== =========
Basic and diluted loss per share............................ $ (0.14) $ (0.11)
======== =========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
4
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1999 2000
-------- --------
(UNAUDITED)
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss.................................................. $ (7,552) $ (6,524)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization........................... 8,730 13,050
Loss (Gain) on investment............................... 46 (12,898)
Loss on disposal of equipment........................... -- 1,508
Provision for doubtful accounts......................... 2,283 6,708
Deferred income taxes................................... (1,315) (95)
Deferred compensation................................... -- (68)
Change in assets and liabilities net of effects from
purchase of PT-1:
Accounts and notes receivable, net.................... (20,448) (20,310)
Receivable from related parties....................... 104 474
Other assets.......................................... 2,853 (1,558)
Accounts payable...................................... 10,685 53,355
Related party payable................................. (1,739) 196
Accrued network cost.................................. 16,027 (28,504)
Other accrued expenses................................ 11,407 (866)
Deferred revenue...................................... (2,160) 1,533
Other liabilities..................................... (328) (1,669)
-------- --------
Net cash provided by operating activities......... 18,593 4,332
-------- --------
Cash Flows From Investing Activities:
Capital expenditures...................................... (32,021) (7,612)
Short-term investments.................................... 920 102
Purchase of PT-1, net of cash acquired.................... 13,898 --
Payment to former shareholder of PT-1..................... (2,000) --
Sale of investments....................................... -- 13,830
Other long term assets.................................... (3,475) (838)
-------- --------
Net cash (used) provided by investing
activities...................................... (22,678) 5,482
-------- --------
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
5
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STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1999 2000
-------- ---------
(UNAUDITED)
<S> <C> <C>
Cash Flows From Financing Activities:
Borrowings under line of credit........................... -- 94,526
Repayments under lines of credit.......................... (15,230) (112,096)
Borrowings under long-term debt and capital lease
obligations............................................. 271 --
Payments under long-term debt and capital lease
obligations............................................. (6,264) (4,597)
Stock options exercised................................... 145 58
Other financing activities................................ (45) --
-------- ---------
Net cash used in financing activities............. (21,123) (22,109)
-------- ---------
Effects Of Foreign Currency Translation..................... (724) 904
Decrease in cash and cash equivalents....................... (25,932) (11,391)
Cash and cash equivalents, beginning of period.............. 47,297 25,561
-------- ---------
Cash and cash equivalents, end of period.................... $ 21,365 $ 14,170
======== =========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
6
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) GENERAL
The financial statements included herein are unaudited and have been
prepared in accordance with generally accepted accounting principles for interim
financial reporting and Securities Exchange Commission ("SEC") regulations.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. In
management's opinion, the financial statements reflect all adjustments (of a
normal and recurring nature) which are necessary to present fairly the financial
position, results of operations, stockholders' equity and cash flows for the
interim periods. These financial statements should be read in conjunction with
the audited financial statements for the year ended December 31, 1999, as set
forth in our Annual Report on Form 10-K. Certain prior year balances have been
reclassified to conform to the current year presentation. The results for the
three months ended March 31, 2000, are not necessarily indicative of the results
that may be expected for the year ending December 31, 2000.
(2) BUSINESS AND PURPOSE
We are a multinational telecommunications services company focused primarily
on the international long distance market. We offer low-cost switched voice
services on a wholesale basis primarily to U.S. based long distance carriers. We
provide international long distance services through a flexible network
comprised of foreign termination relationships, international gateway switches,
leased and owned transmission facilities and resale arrangements with other long
distance providers.
We operate several wholly-owned foreign subsidiaries to further expand our
international network. We have made substantial investments to install switch
facilities in four of our subsidiaries, Star Europe Limited ("SEL") which is
located in London, England, Star Telecommunications Deutschland Holding, GmbH
and affiliates ("GmbH") which is located in Frankfurt, Germany, Star
Telecommunications Switzerland which is located in Geneva, Switzerland, and Star
Telecommunications Austria GmbH, which is located in Vienna, Austria. We use
these switching facilities to decrease international traffic termination costs
and to initiate outbound calls from these local markets.
We provide domestic commercial long distance services throughout the United
States through our subsidiaries, CEO Telecommunications, Inc. ("CEO"), and CEO
California Telecommunications, Inc. ("CEO CA"), and AS Telecommunications, Inc.
("ALLSTAR Telecom").
Prepaid calling cards and dial around service are provided through our
subsidiary, PT-1 Communications, Inc. ("PT-1").
(3) NET LOSS PER COMMON SHARE
The following schedule summarizes the information used to compute basic and
diluted net loss per common share for the three month periods ended March 31,
1999 and 2000. No common share
7
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STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(3) NET LOSS PER COMMON SHARE (CONTINUED)
equivalents will be considered in the computation of diluted earnings per share
for 1999 and 2000, as the effect would be anti-dilutive (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
-------------------
1999 2000
-------- --------
<S> <C> <C>
Weighted number of common shares used to compute basic and
diluted loss per share.................................... 52,628 58,601
====== ======
</TABLE>
For the three month periods ended March 31, 1999 and 2000, stock options to
purchase 3,683,000 and 3,722,415 shares, respectively, of common stock were
outstanding, but were excluded from the computation of diluted earnings per
share, as such options were anti-dilutive.
(4) COMPREHENSIVE INCOME (LOSS)
On January 1, 1998, we adopted SFAS No. 130, "Reporting Comprehensive
Income". For year end financial statements, SFAS 130 requires us to display
comprehensive income (which is the total of net income and all other non-owner
changes in equity) with the same prominence as other consolidated financial
statements. For the year end financial statements, we display the components of
other comprehensive loss in the consolidated statements of stockholders' equity.
During the three-month periods ended March 31, 1999 and 2000, comprehensive loss
consisting of foreign currency translation adjustments of $2,122,000 and
$1,624,000, respectively, resulted in total comprehensive loss of $9,674,000 and
$8,148,000, respectively.
(5) SIGNIFICANT EVENTS
On January 18, 2000, we were notified that our capacity on the China-US
Undersea Cable System would be reclaimed, unless we made a payment of
approximately $47.2 million by February 1, 2000. The $47.2 million represents
the total amount of liabilities owed to the China-US Undersea Cable System as of
December 31, 1999. We allowed reclamation of the capacity to take place. As a
result, we removed the capitalized cost of $48.7 million, which is included in
operating equipment at December 31, 1999, and the related accounts payable
balance of $47.2 million in the first quarter of 2000. The remaining balance of
the capitalized cost of $1.5 million was expensed and included in other income
for the three months ended March 31, 2000.
On February 11, 2000, we entered into a definitive agreement to merge with
and into World Access, Inc. ("World Access"). Under the terms of the agreement,
each share of our common stock will be converted into 0.3905 shares of World
Access common stock. World Access may, at its election, pay up to 40% of the
merger consideration in cash.
The merger is subject to, among other things, certain regulatory approvals,
the approval of the shareholders of World Access and STAR, and the divestiture
of our prepaid calling card and dial around business for minimum net cash
proceeds of $150 million. Any net proceeds in excess of $150 million would be
added to the merger consideration. The merger will be accounted for as a
purchase transaction. The transaction is expected to close in the third quarter
of 2000.
8
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(5) SIGNIFICANT EVENTS (CONTINUED)
In connection with the acquisition of PT-1 on February 4, 1999, PT-1 and
STAR placed 500,000 shares of STAR common stock into escrow for issuance to
certain PT-1 distributors for no consideration. After further negotiations, we
entered into a distribution agreement with NY Phone Card Distributors LLC
("Distribution Co."), a partnership of distributors, on March 1, 2000. The
agreement provides for a total of 400,000 shares of our common stock to be
issued to Distribution Co. as follows: (i) 228,750 shares at the date of
execution, (ii) 31,250 shares at the end of May 2000, provided that the
agreement is still in effect, and (iii) 140,000 shares contingently issuable
based on certain minimum purchase requirements.
Under the agreement, we converted our accounts receivable balances totaling
$1.2 million as of March 1, 2000 into interest free notes receivable due in
monthly installments through January 2001.
The agreement requires Distribution Co. to purchase a minimum of
approximately $121 million of prepaid calling cards from PT-1 during the period
from March 2000 through May 2001, with additional quarterly increases of three
percent from June 2001 through May 2002.
On March 29, 2000, we entered into a letter of intent to sell the assets of
PT-1 to a third party ("PT-1 Acquiror") for cash proceeds of $150 million less
certain liabilities. The proceeds are subject to a purchase price adjustment
based on an audit of PT-1 after the sale is closed. Due diligence is currently
in process by PT-1 Acquiror and a definitive acquisition agreement is expected
to be completed by May 31, 2000. Upon obtaining shareholder approval of this
transaction we will record a loss of approximately $90 million.
On February 14, 2000, an individual shareholder of STAR filed a lawsuit in
Santa Barbara Superior Court seeking to block our pending merger with World
Access. The suit alleged that we and our board of directors failed to take
actions necessary to attain a higher valuation for STAR than as provided for in
the merger agreement. We filed demurrers on the grounds that the complaints were
legally deficient. On May 5, 2000, during a hearing to address the demurrers,
the Superior Court granted our demurrers without the opportunity to amend,
effectively dismissing the lawsuit.
(6) STATEMENTS OF CASH FLOWS
During the three month periods ended March 31, 1999 and 2000, cash paid for
interest was approximately $1,381,000 and $2,668,000, respectively. For the same
periods, cash paid for income taxes amounted to approximately $1,684,000 and
$239,000, respectively.
9
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STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(6) STATEMENTS OF CASH FLOWS (CONTINUED)
Non-cash investing and financing activities, which are excluded from the
consolidated statements of cash flows, are as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
--------------------
1999 2000
--------- --------
<S> <C> <C>
Equipment purchased through capital leases.................. $ -- $ 294
Assets acquired through a vendor financing arrangement...... -- 2,481
Disposition of cable systems................................ -- 47,200
Other non-cash transactions................................. -- 11,906
Detail of acquisition:
Fair value of assets acquired............................. 303,743 --
Liabilities assumed....................................... (144,563) --
Common stock issued....................................... (153,578) --
Notes payable issued...................................... (19,500) --
--------- -------
$ (13,898) $61,881
========= =======
</TABLE>
10
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(7) SEGMENT INFORMATION
At March 31, 2000, we have three separately managed business segments, North
American Wholesale, North American Commercial and European long distance
telecommunications.
<TABLE>
<CAPTION>
NORTH NORTH
AMERICAN AMERICAN
THREE MONTHS ENDED, MARCH 31, 1999 (IN THOUSANDS) WHOLESALE COMMERCIAL EUROPEAN TOTAL
- ------------------------------------------------- --------- ---------- -------- --------
<S> <C> <C> <C> <C>
Revenues from external customers........................... $127,702 $ 75,016 $25,491 $228,209
Revenues from other segments............................... 34,819 1,107 9,216 45,142
Interest income............................................ 643 75 11 729
Interest expense........................................... 479 418 316 1,213
Depreciation and amortization.............................. 3,595 3,003 2,132 8,730
Segment net income (loss) before provision (benefit) for
income taxes............................................. 5,378 (11,140) (3,085) (8,847)
Segment assets............................................. 195,037 318,608 125,029 638,674
</TABLE>
<TABLE>
<CAPTION>
NORTH NORTH
AMERICAN AMERICAN
THREE MONTHS ENDED, MARCH 31, 2000 (IN THOUSANDS) WHOLESALE COMMERCIAL EUROPEAN TOTAL
- ------------------------------------------------- --------- ---------- -------- --------
<S> <C> <C> <C> <C>
Revenues from external customers........................... $ 81,297 $135,150 $38,658 $255,105
Revenues from other segments............................... 103,885 -- 6,623 110,508
Interest income............................................ 6 62 121 189
Interest expense........................................... 1,859 296 769 2,924
Depreciation and amortization.............................. 5,059 4,337 3,654 13,050
Segment net income (loss) before provision (benefit) for
income taxes............................................. (5,538) (3,179) (436) (9,153)
Segment assets............................................. 232,298 339,737 169,849 741,884
</TABLE>
(8) RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998 and June 1999, the AICPA issued SFAS No. 133 "Accounting for
Derivative Instruments and Hedging Activities," and SFAS No. 137, which delayed
the effective date of SFAS No. 133. We will adopt SFAS No. 133 in January 2001.
We are currently analyzing the statement to determine the impact, if any, on our
financial position or results of operations.
(9) SUBSEQUENT EVENTS
On April 12, 2000, we signed a note agreement, which converted $56.0 million
of trade payables we owed to MCI WorldCom Network Services, Inc. ("WorldCom")
into a note payable. The note is secured by substantially all of our assets,
bears interest at 16% per annum and is payable at the earlier of (i) termination
of the merger agreement with World Access, (ii) the close of the World Access
merger or (iii) August 1, 2000. Management believes that the World Access merger
will close as planned and the WorldCom note will be satisfied at maturity.
On April 18, 2000, Samer Tawfik resigned as a director of STAR.
11
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Quarterly Report on Form 10-Q contains certain "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements are statements other than historical information or
statements of current condition. Some forward looking statements may be
identified by use of such terms as "believes", "anticipates", "intends", or
"expects". These forward-looking statements relate to the plans, objectives and
expectations of our future operations. In light of the risks and uncertainties
inherent in all such projected operation matters, the inclusion of
forward-looking statements in this report should not be regarded as a
representation by us or any other person that our objectives or plans will be
achieved or that any of our operating expectations will be realized. Our
revenues and results of operations are difficult to forecast and could differ
materially from those projected in the forward-looking statements contained in
this report as a result of numerous factors including among others, the
following: (i) changes in customer rates per minute; (ii) foreign currency
fluctuations; (iii) termination of certain service agreements or inability to
enter into additional service agreements; (iv) inaccuracies in our forecast of
traffic growth; (v) changes in or developments under domestic or foreign laws,
regulations, licensing requirements or telecommunications standards; (vi)
foreign political or economic instability; (vii) changes in the availability of
transmission facilities; (viii) loss of the services of key officers; (ix) loss
of a customer which provides us with significant revenues; (x) highly
competitive market conditions in the industry; (xi) concentration of credit
risk; and (xii) availability of long term financing. The foregoing review of the
important factors should not be considered as exhaustive; we undertake no
obligation to release publicly the results of any future revisions we may make
to forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
The following table sets forth income statement data as a percentage of
revenues for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
---------------------
1999 2000
-------- --------
<S> <C> <C>
Revenues.................................................... 100% 100%
Operating expenses:
Cost of services.......................................... 84.5 88.5
Selling, general and administrative....................... 13.8 13.1
Depreciation and amortization............................. 3.8 5.1
Merger expense............................................ 0.6 --
----- -----
102.8 106.7
----- -----
Loss from operations...................................... (2.8) (6.7)
----- -----
Other income (expense):
Interest income........................................... 0.3 0.1
Interest expense.......................................... (0.5) (1.1)
Other..................................................... (0.9) 4.2
----- -----
(1.1) 3.1
----- -----
Loss before benefit for income taxes........................ (3.9) (3.6)
Benefit for income taxes.................................... (0.6) (1.0)
----- -----
Net loss.................................................... (3.3)% (2.6)%
===== =====
</TABLE>
12
<PAGE>
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH, 31, 2000
REVENUES: Total revenues increased 11.8% to $255.1 million in the first
quarter of 2000 from $228.2 million in the first quarter of 1999. The increase
is primarily a result of the continued growth in the North American commercial
operations, which contributed revenues from prepaid calling card and dial around
programs, and the European operations.
Revenues from North American wholesale customers decreased 36.3% to $81.3
million in the current quarter from $127.7 million in the prior year's first
quarter. Minutes of use generated by North American wholesale customers
decreased 7.0% to 481.1 million in the first quarter of 2000, as compared to
517.3 million in the comparable quarter of the prior year. This decrease in
revenues and minutes is partially the result of our purchase of PT-1 on February
4, 1999, which was a significant wholesale customer. Revenues related to sales
to PT-1 prior to the acquisition and included in first quarter 1999 revenues
were $14.4 million generated by 45.1 million minutes of use. We continue to
experience growth in the number of North American wholesale customers, which
increased to 226 at March 31, 2000, up from 179 customers at March 31, 1999.
Potential growth in revenue for the first quarter of 2000 from the increase in
customers was substantially offset by a decline in rates per minute and
increased competition. The average North American wholesale rate per minute of
use declined 32.0% to $0.17 for the current quarter as compared to $0.25 for the
quarter ended March 31, 1999, reflecting continued pricing pressures on
competitive routes.
North American commercial revenues increased 80.2% to $135.2 million in the
first quarter of 2000 from $75.0 million in the first quarter of 1999. The
increase is due primarily to the consummation of the PT-1 acquisition in the
first quarter of 1999 which diversified our revenue base with both prepaid
calling cards and dial around programs. Minutes of use generated by North
American commercial customers increased 132.1% to 986.9 million in the first
quarter of 2000, as compared to 425.2 million in the comparable quarter of 1999.
The average North American commercial rate per minute decreased 22.2% to $0.14
cents per minute in the first quarter of 2000 from $0.18 cents per minute in the
first quarter of 1999, primarily due to continued competition on competitive
routes.
The first quarter of 2000 also included revenues generated from the European
operations, which increased 51.7% to $38.6 million, as compared to approximately
$25.5 million in the first quarter of 1999. The increase is due primarily to an
increase in the minutes of use of 146.3% from 385.2 million in the first quarter
of 1999 to 948.7 million in the first quarter of 2000. The growth in revenue is
primarily the result of an increase in wholesale customers from March 31, 1999
to March 31, 2000 from approximately 67 to approximately 520. Management
believes that the prospects for growth in Europe remain strong as STAR
Telecommunications Deutschland GmbH is fully utilizing its interconnect with
Deutsche Telekom AG, as well as with other European PTTs. In addition,
management expects continued growth in European revenues due to continued
development of the Austrian and Swiss markets.
COST OF SERVICES (EXCLUSIVE OF DEPRECIATION AND AMORTIZATION): Total cost
of services (exclusive of depreciation and amortization) increased 17.1% to
$225.8 million in the first quarter of 2000 from $192.9 million in the first
quarter of 1999 and increased as a percentage of revenues for the same periods
to 88.5% from 84.5%.
Cost of services (exclusive of depreciation and amortization) from North
American vendors increased 8.5% to $189.4 million in the first quarter of 2000
from $174.6 million in the first quarter of 1999 and increased as a percentage
of North American revenues to 87.5% from 86.1%, respectively. The growth in cost
of services (exclusive of depreciation and amortization) reflects the increase
in minutes of use from the commercial usage generated from prepaid calling card
and dial around programs offset by an overall declining average cost per minute.
The average cost per minute declined as a result of competitive pricing
pressures, a larger proportion of lower cost per minute countries, as well as an
increasing proportion of traffic routed on our proprietary network. Management
believes
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that the average cost per minute will continue to decline as we expand our
domestic and international network.
The first quarter of 2000 also includes cost of services (exclusive of
depreciation and amortization) from the European operations, which increased
over 98.9% to $36.4 million, compared to $18.3 million in the first quarter of
1999. The increase in cost of services (exclusive of depreciation and
amortization) from the European operations was attributable to increased usage
and private line costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: For the first quarter of
2000, total selling, general and administrative expenses, exclusive of merger
expenses, increased 5.9% to $33.3 million from $31.5 million in the first
quarter of 1999 and decreased as a percentage of revenues to 13.1% from 13.8%
over the comparable 1999 period. This compares to total selling, general and
administrative expenses, exclusive of merger expenses for the fourth quarter of
1999 of $41.7 million, representing a decrease of $8.4 million or 20.0% from the
fourth quarter of 1999 to the first quarter of 2000. This significant
improvement represents our continued cost saving efforts throughout our North
American operations.
North American selling, general and administrative expenses decreased 9.4%
to $23.1 million in the first quarter of 2000 from $25.5 million in the first
quarter of 1999. For the first quarter of 2000, North American selling, general
and administrative expenses decreased as a percentage of North American revenues
to 10.7% from 12.6% in the first quarter of 1999. The decrease is primarily a
result of the elimination of redundant staff positions during the third quarter
of 1999 after the PT-1 and United Digital Network, Inc. ("UDN") mergers, and
decreased commission, advertising and promotion expenses during the first
quarter of 2000 as compared to the first quarter of 1999. Had the entire first
quarter of PT-1's operating results been included in the first quarter of 1999,
selling, general and administrative expenses, exclusive of merger expenses,
would have decreased $6.8 million dollars in the first quarter of 2000 or
approximately 22.6% as compared to the first quarter of 1999.
Selling, general and administrative expenses related to the European
operations increased 70.0% to $10.2 million in the first quarter of 2000 from
approximately $6.0 million in the first quarter of 1999. The increase is
primarily a result of increases in compensation, advertising and promotion
expenses during the first quarter of 2000, as compared to the first quarter of
1999. This reflects our commitment during 1999 to expand our commercial sales
force and back office support personnel in Germany.
DEPRECIATION AND AMORTIZATION: Depreciation and amortization expense
increased over 49.5% to $13.1 million for the first quarter of 2000 from $8.7
million for the first quarter of 1999, and increased as a percentage of revenues
to 5.1% from 3.8% over the comparable period in the prior year. The increase is
due primarily to significant asset additions in Europe and the inclusion of the
depreciation expense for PT-1 assets. Depreciation expense also increased as a
result of our investment in domestic broadband capacity during 1999.
Depreciation and amortization expense attributable to North American assets
amounted to $9.4 million in the first quarter of 2000. European operations
realized total depreciation and amortization expense of $3.7 million in the
first quarter of 2000. We expect depreciation and amortization expense to
continue to increase as a percentage of revenues as we continue to expand our
global telecommunications network.
LOSS FROM OPERATIONS: In the first quarter of 2000, loss from operations
was $17.1 million compared to loss from operations of $6.3 million in the first
quarter of 1999. Operating margin in the first quarter of 2000 was a negative
6.7% as compared to a negative 2.8% in the first quarter of 1999. Operating
margin decreased in the first quarter of 2000 primarily due to rate compression
in the wholesale market, the increase in depreciation and amortization expense,
and increased expenses due to our continued European expansion.
OTHER INCOME (EXPENSE): We reported other income, net, of approximately
$8.0 million in the first quarter of 2000, as compared to other expense, net, of
approximately $2.5 million for the first
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quarter of 1999. This is primarily due to a gain of approximately $12.9 million
on the sale of a foreign investment by our German subsidiary. This gain was
offset by interest expense of $2.9 million on our line of credit and capital
lease obligations for switches and a $1.5 million loss on the disposal of our
cable systems.
BENEFIT FOR INCOME TAXES: We recorded a tax benefit of $2.6 million in the
first quarter of 2000 due to operating losses compared to a tax benefit of $1.3
million in the first quarter of 1999.
LIQUIDITY AND CAPITAL RESOURCES.
We have incurred significant operating and net losses over the past fifteen
months. Several factors have contributed to this situation. We experienced
significant pricing pressures in the wholesale market, with deteriorating
wholesale gross margins during the last fifteen months. We continue to deploy
new international direct circuits in an effort to increase the number of on-net
countries which historically have provided higher wholesale margins.
As of March 31, 2000, we had cash and cash equivalents of approximately
$14.2 million, short-term investments of $1.3 million, and a working capital
deficit of $160.7 million.
Cash provided by operating activities for the three months ended March 31,
2000, totaled $4.3 million as compared with cash provided by operating
activities of $18.6 million for the same period in 1999 reflecting increases in
accounts payable offset by the use of cash to fund operating losses, increases
in accounts receivables, and decreases in accrued network cost.
Cash provided by investing activities for the three months ended March 31,
2000, totaled $5.5 million primarily as a result of sale of investments of
approximately $13.8 million. Cash received from the sale of investments was
offset by capital expenditures of $7.6 million. Capital expenditures for the
same period last year totaled $32.0 million. These capital expenditures for the
three months ended March 31, 2000 related primarily to the continued development
of our network, which included switch expansion, and the replacement of leased
line facilities with IRU's and ownership interests on both domestic and
international cable systems.
Cash used by financing activities for the three months ended March 31, 2000,
totaled $22.1 million primarily reflecting additional borrowings under our line
of credit offset by repayments on the line of credit, long-term debt and capital
lease obligations. Our indebtedness at March 31, 2000 was approximately $87.4
million, of which $43.1 million was long-term debt and $44.3 million was short-
term debt. Our debt is currently a combination of credit facility borrowings and
capital leases for operating equipment.
As of March 31, 2000, we had $26.0 million outstanding on our receivables
financing agreement. The facility allows us to borrow up to $75 million based
upon our eligible accounts receivable, bears interest at prime plus 2.0% and
expires on November 30, 2001.
On April 12, 2000, we signed a note agreement, which converted $56.0 million
of trade payables we owed to MCI WorldCom Network Services, Inc. ("WorldCom")
into a note payable. The note is secured by substantially all of our assets,
bears interest at 16% per annum and is payable at the earlier of (i) termination
of the merger agreement with World Access, (ii) the close of the World Access
merger or (iii) August 1, 2000. Management believes that the World Access merger
will close as planned and the WorldCom note will be satisfied at maturity.
On February 11, 2000, we entered into a merger agreement with World Access.
The agreement calls for World Access to infuse cash in the form of a bridge loan
of up to $35 million with $25 million for U.S. operations and $10 million for
GmbH. The anticipated financing agreement with World Access will provide for
predetermined initial advances with additional advances to be made solely in
World Access's discretion.
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On March 29, 2000, we entered into a letter of intent to sell the assets of
PT-1 to a third party ("PT-1 Acquiror") for cash proceeds of $150 million less
certain liabilities. The proceeds are subject to a purchase price adjustment
based on an audit of PT-1 after the sale is closed. Due diligence is currently
in process by PT-1 Acquiror and a definitive acquisition agreement is expected
to be completed by May 31, 2000. Upon obtaining shareholder approval of this
transaction we will record a loss of approximately $90 million.
We believe that the PT-1 sale and the merger with World Access will be
completed as scheduled and that the WorldCom note payable will be satisfied at
maturity. We believe that our operating cash flow, World Access line of credit
availability and the proceeds from the PT-1 sale will be adequate to meet our
operating requirements for at least fiscal 2000. Nevertheless, as we continue to
expand our network facilities as needed, our liquidity needs may increase,
perhaps significantly, which could require us to seek additional financing, such
as capital leases, or the expansion of our borrowing capacity under current or
new lines of credit.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
FOREIGN CURRENCY RISK. As a global enterprise, we face exposure to adverse
movements in foreign currency exchange rates. Our foreign currency exposures may
change over time as the level of activity in foreign markets grows and could
have a material adverse impact upon our financial results. No material changes
have occurred in the quarter that would impact our exposure to foreign currency
risk.
INTEREST RATE RISK. We have borrowings under our purchase of receivable
facility and long-term debt for capital equipment. Some of these agreements are
based on variable interest rates. At any time, a sharp rise in interest rates
could have a material adverse impact upon our cost of working capital and
interest expense. No material changes have occurred in the quarter that would
impact our exposure to interest rate risk.
The following table presents the hypothetical impact on our financial
results for changes in interest rates for the variable rate obligations we held
at March 31, 2000. The modeling technique used measures the change in our
results arising from selected potential changes in interest rates. Market rate
changes reflect immediate hypothetical parallel shifts in the yield curve of
plus or minus 50 basis points ("BPS"), 100 BPS, and 150 BPS over a twelve month
time horizon.
INTEREST RATE EXPOSURE ANALYSIS
INCREASE OR (DECREASE) IN ANNUAL INTEREST EXPENSE DUE TO CHANGES IN INTEREST
RATES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DESCRIPTION 50 BPS 100 BPS 150 BPS (50) BPS (100) BPS (150) BPS
- ----------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Line of Credit.......................... $130 $260 $390 $ (130) $ (260) $ (390)
Long Term Debt.......................... $307 $615 $922 $ (307) $ (615) $ (922)
</TABLE>
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On February 14, 2000 and March 1, 2000, identical class action complaints
were filed against us and directors Christopher E. Edgecomb, Mary A. Casey, Mark
Gershein, Gordon Hutchins, Jr., John R. Snedegar, Arunas A. Chesonis and Samer
Tawfik. The complaints alleged causes of action for breach of fiduciary duty
arising from approval of the merger with World Access and sought both injunctive
relief and damages. We filed demurrers on the grounds that the complaints were
legally deficient. On May 5, 2000, during a hearing to address our demurrers,
the Superior Court granted our demurrers without the opportunity to amend,
effectively dismissing the lawsuit.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
At March 31, 2000, we were in compliance with all covenants under the
receivables financing agreement with RFC.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(A) EXHIBIT DESCRIPTION
<S> <C> <C>
10.75 Workout Agreement, dated April 12, 2000, between STAR, MCI
WorldCom Network Services, Inc. ("WorldCom") and certain of
STAR's subsidiaries.
10.76 Promissory Note, dated April 12, 2000, between STAR and
WorldCom.
10.77 Security Agreement, dated April 12, 2000, between STAR and
WorldCom and certain of STAR's subsidiaries.
10.78 Pledge Agreement, dated April 12, 2000, between STAR and
WorldCom and certain of STAR's subsidiaries.
10.79 Guaranty, dated April 12, 2000, between WorldCom and certain
of STAR's subsidiaries.
27.1 Financial Data Schedule.
</TABLE>
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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.
<TABLE>
<S> <C> <C>
STAR TELECOMMUNICATIONS, INC.
Dated: May 18, 2000 By: /s/ CHRISTOPHER E. EDGECOMB
-----------------------------------------
Christopher E. Edgecomb
CHIEF EXECUTIVE OFFICER AND DIRECTOR
(PRINCIPAL EXECUTIVE OFFICER)
By: /s/ JOHN J. PASINI
-----------------------------------------
John J. Pasini
VICE PRESIDENT OF FINANCE
(PRINCIPAL ACCOUNTING OFFICER)
</TABLE>
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<PAGE>
EXHIBIT 10.75
WORKOUT AGREEMENT
THIS WORKOUT AGREEMENT (this "AGREEMENT") is entered into as
of this 12th day of April, 2000, by and between STAR Telecommunications, Inc., a
Delaware corporation ("DEBTOR"), PT-1 Communications, Inc. ("PT-1"), Helvey Com,
LLC ("HELVEY"), CEO California Telecommunications, Inc., CEO Telecommunications,
Inc., Lucius Enterprises, Inc., AS Telecommunications, Inc.; PT-1 Long Distance,
Inc., PT-1 Holdings I, Inc., Phonetime Technologies, Inc., PT-1 Holdings II,
Inc., Nationwide Distributors, Inc., Technology Leasing, Inc., Investment
Services, Inc., and PT-1 Communications Puerto Rico, Inc. (collectively, the
"DEBTOR ENTITIES") and MCI WORLDCOM NETWORK SERVICES, INC., a Delaware
corporation having a place of business located at 6929 North Lakewood Avenue,
M.D. 5.2-510, Tulsa, Oklahoma 74117 ("WORLDCOM").
W I T N E S S E T H:
WHEREAS, WorldCom provides telecommunications services to
Debtor pursuant to certain services contracts now existing or hereafter executed
between such parties including, but not limited to, those carrier and other
agreements set forth on SCHEDULE A attached hereto as the same may have been
heretofore or may hereafter be amended, modified or supplemented from time to
time (collectively, the "Service Agreements"), pursuant to which WorldCom has
provided and continues to provide various switched telecommunications services
to and for the benefit of the Debtor, the Guarantors and their respective
Subsidiaries; and
WHEREAS, Debtor is in default to WorldCom for, INTER ALIA,
failure to pay its obligations to WorldCom in a timely manner (the "Past Due
Indebtedness"); and
WHEREAS, Debtor and WorldCom have agreed to restructure
certain of the Past Due Indebtedness due to WorldCom as of February 3, 2000, in
the form of a Promissory Note in the principal amount of $56,017,698.87 (the
"Workout Indebtedness"), of even date herewith (the "Note"), which has been
executed and delivered by Debtor to WorldCom; and
WHEREAS, Debtor has agreed to secure its performance and
payment of (a) all obligations for the provision of services by WorldCom to
Debtor pursuant to any, and all related notes, instruments, documents, or
agreements and any amendments, extensions, renewals or replacements to or of any
of the foregoing; and (b) all other obligations and indebtedness of Debtor to
WorldCom of whatever kind and however created, whether presently existing or
hereafter arising; and
WHEREAS, the Guarantors have agreed to guaranty and act as
surety for such obligations of the Debtor to WorldCom and to secure such
guaranty.
<PAGE>
NOW THEREFORE, the parties hereto, in consideration of the
promises contained herein and intending to be legally bound hereby, agree as
follows:
1. INCORPORATION OF RECITALS. The parties affirm
and acknowledge that the recitals set forth above are true and correct and
are incorporated into this Agreement by reference.
2. WORLDCOM DOCUMENTS. Unless and until (if ever) WorldCom and
Debtor shall enter into a written modification agreement, the WorldCom
Documents, as currently in effect, shall remain in full force and effect,
without change, and each party shall be responsible and liable for the
performance of its respective agreements and obligations in accordance with the
WorldCom Documents.
3. EXISTING EVENTS OF DEFAULT AND FORBEARANCE WITH RESPECT
THERETO. Debtor agrees that the Service Agreements are currently in default in
various respects, including, but not limited to, those Events of Default listed
in EXHIBIT A (the "Existing Defaults") attached hereto and made a part hereof.
WorldCom agrees that it shall forbear from exercising its rights and remedies
with respect to the Existing Defaults until the earlier to occur of (a)
termination of the Agreement and Plan of Merger dated February 11, 2000, by and
between the Debtor, STI Merger Co. and World Access, Inc. (the "Merger
Agreement"); (b) consummation of the merger transaction contemplated by the
Merger Agreement; or (c) August 1, 2000,
4. ACKNOWLEDGMENT OF INDEBTEDNESS. Debtor acknowledges
that the Workout Indebtedness is fully due and owing under the Service
Agreements, without setoff, recoupment, counterclaims or defenses.
5. PAYMENT FOR USAGE OF WORLDCOM'S NETWORK. Debtor shall
pay for usage of WorldCom's telecommunications network for usage incurred
after February 3, 2000 (collectively, the "Ongoing Usage") in accordance with
the terms and conditions of the Service Agreements.
6. CONDITIONS PRECEDENT. Debtor shall execute and deliver (or
cause to be executed and delivered) the following documents to WorldCom on or
before April 14, 2000: (i) Security Agreement; (ii) the Note; (iii) Pledge
Agreement and pledge of 100% of the outstanding Capital Stock of CEO California
Telecommunications, Inc., CEO Telecommunications, Inc., PT-1 Communications,
Inc. ("PT-1"), Helvey Com, LLC ("Helvey"), Lucius Enterprises, Inc., AS
Telecommunications, Inc.; PT-1 Long Distance, Inc., PT-1 Holdings I, Inc.,
Phonetime Technologies, Inc., PT-1 Holdings II, Inc., Nationwide Distributors,
Inc., Technology Leasing, Inc., Investment Services, Inc., and PT-1
Communications Puerto Rico, Inc. (iv) a Guaranty by each of PT-1 and Helvey
(collectively, the "Guarantors"); (v) stock or membership assignments, executed
in blank, and certificates representing the equity interests in the foregoing
entities; (vi) Security Agreements of each of the Guarantors; and (vii) UCC-1
financing statements related to the foregoing.
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<PAGE>
7. DEFAULT. A "DEFAULT" means the occurrence or existence
of one or more of the following events or conditions (whatever the reason for
such Default and whether voluntary, involuntary or effected by operation of
law):
(a) Debtor's or any Guarantor's breach of any of its
respective covenants, obligations or agreements contained in this Agreement,
including, without limitation, the covenants set forth in this Agreement; or
(b) The occurrence, existence or continuance of any
default or event of default under any of the WorldCom Documents, or the
Credit Agreement, other than the Debtor's failure to pay the Past Due
Indebtedness in a timely manner heretofore; or
(c) Any material representation or warranty made by
Debtor or any Guarantor in this Agreement, or any material statement made by
Debtor in any plan, certificate, report, document, exhibit or budget, as the
case may be, provided to WorldCom pursuant to this Agreement or the WorldCom
Documents proves to have been false or misleading in any material respect as
of the time when made; or
(d) Failure of Debtor to remain current with respect to
its Ongoing Usage; or
(e) Any material adverse change in the financial
condition, business, assets or operations of the Debtor or any of the
Guarantors occurs; or
(f) A proceeding shall be instituted in respect of the
Debtor or any Guarantor:
(i) seeking to have an order for relief entered in
respect of the Debtor or such Guarantor, or seeking a declaration or
entailing a finding that such entity is insolvent or a similar declaration or
finding, or seeking dissolution, winding-up, charter revocation or
forfeiture, liquidation, reorganization, arrangement, adjustment, composition
or other similar relief with respect to such entity, its assets or its debts
under any law relating to bankruptcy, insolvency, relief of debtors or
protection of creditors, termination of legal entities or any other similar
law now or in the future in effect; or
(ii) seeking appointment of a receiver, trustee,
custodian, liquidator, assignee, sequestrator or other similar official for
the Debtor or any Guarantor, or for all or any substantial part of its
property; or
(g) Debtor or Guarantor, as the case may be, shall
become insolvent, shall become generally unable to pay its debts as they
become due, shall voluntarily suspend transaction of its business, shall make
a general assignment for the benefit of creditors, shall institute a
proceeding described in Section 7(f)(i) of this Agreement or shall consent to
any order for relief,
3
<PAGE>
declaration, finding or relief described in Section 7(f)(i) of this
Agreement, shall institute a proceeding described in Section 7(f)(ii) of this
Agreement or shall consent to the appointment or to the taking of possession
by any such official of all or any substantial part of its property whether
or not any proceeding is instituted, dissolves, winds-up or liquidates itself
or any substantial part of its property, or shall take any action in
furtherance of any of the foregoing.
8. CONSEQUENCES OF A DEFAULT.
(a) If a Default specified in subsections (a) through (e)
of Section 7 of this Agreement occurs and continues or exists, WorldCom may
demand the principal balance due under the Note, interest accrued on the
unpaid principal amount and all other amounts owing by Debtor under this
Agreement and the other WorldCom Documents to be immediately due and payable
without presentment, demand, protest or further notice of any kind, all of
which are expressly waived, and an action for any amounts due shall accrue
immediately.
(c) If a Default specified in subsections (f) or (g)
of Section 7 of this Agreement occurs and continues or exists, WorldCom will
be under no further obligation to provide telecommunications services to
Debtor, the outstanding principal and all unpaid interest and all other
amounts owing by Debtor under this Agreement, and the other WorldCom
Documents shall become immediately due and payable without presentment,
demand, protest or notice of any kind, all of which are expressly waived, and
an action for any amounts due shall accrue immediately.
(d) Notwithstanding anything in this
Agreement to the contrary, upon the occurrence of a Default, WorldCom shall
be permitted to exercise all of its rights under any one or more of the
WorldCom Documents at law or in equity against Debtor.
9. WRITTEN AMENDMENT ONLY. No modifications to the WorldCom
Documents shall be deemed to have been entered into until () the parties to
such WorldCom Documents shall have reached agreement on all issues, and ()
such agreement has been reduced to a written agreement signed by each of the
parties to each such WorldCom Document in question.
10. RELEASE OF WORLDCOM. Each of the Debtor Entities forever
releases and discharges WorldCom, its agents, servants, employees, directors,
officers, attorneys, branches, parent, affiliates, subsidiaries, successors and
assigns and all persons, firms, corporations, and organizations acting on
WorldCom's behalf (collectively referred to as the "WORLDCOM RELEASED ENTITIES")
of and from any and all losses, damages, claims, demands, liabilities,
obligations, actions and causes of action, of any nature whatsoever in law or in
equity, including, without limitation, any claims or joinders for sole
liability, contribution or indemnity (collectively, the "CLAIMS"), which one or
more of the Debtor Entities may have or claim to have against WorldCom or any
one or more of the WorldCom Released Entities, as of the date of this Agreement,
whether presently known or unknown, and of every nature and extent whatsoever,
on account of or in any way touching, concerning, arising out of, founded upon
or relating to (i) the WorldCom Documents, (ii) the obligations of one or more
the Debtor Entities under the WorldCom Documents, (iii) this
4
<PAGE>
Agreement, (iv) enforcement or negotiation of any of the foregoing WorldCom
Documents or this Agreement, and (v) the dealings of the parties to this
Agreement with respect to the obligations of the Debtor Entities to WorldCom
under the WorldCom Documents or one or more of them.
11. EFFECTUATION OF RELEASES. Each of the Debtor Entities agrees
to execute all appropriate and necessary documents to enable WorldCom or any of
the WorldCom Entities, to plead the effect of the releases contained in Section
10 of this Agreement in any lawsuit. Each of the Debtor Entities also
understands and agrees that the covenants and consideration referred to in this
Agreement are in consideration for the continued forbearance by the parties in
enforcing their respective rights, including, without limitation, WorldCom's
forbearance in collecting or otherwise enforcing the Obligations owed to
WorldCom, and said forbearance by WorldCom shall not be construed as an
admission of any liability on the part of WorldCom or any WorldCom Released
Entity, and the Debtor's have not claimed any such liability.
12. CUMULATIVE NATURE OF RELEASE. Nothing contained in this
Agreement shall impair or be construed to impair the security of WorldCom or any
of the WorldCom Released Entities under the WorldCom Documents, nor affect nor
impair any rights or powers that WorldCom or any of the WorldCom Released
Entities may have under the WorldCom Documents for the recovery of the
indebtedness of the Debtor Entities to WorldCom in case of breach of the terms,
provisions and releases contained in this Agreement or breach or nonfulfillment
of the terms, agreements and covenants set forth in the WorldCom Documents. All
rights, powers and remedies of WorldCom or any of the WorldCom Released Entities
under any other agreement or release now or at any time in the future in force
between WorldCom and the Debtor with respect to the Obligations shall be
cumulative and not alternative and shall be in addition to all rights, powers
and remedies given to WorldCom or any of the WorldCom Released Entities by law.
13. BINDING RELEASE. The releases contained in Section 11 of this
Agreement shall be binding upon each of the Debtor Entities and shall inure
to the benefit of WorldCom and the WorldCom Released Entities, and any of
their respective successors and assigns.
14. CONSENT BY WORLDCOM TO SALE OF PT-1 OR ITS ASSETS.
Notwithstanding any provision in the WorldCom Documents to the contrary,
WorldCom consents to the sale of all of PT-1's stock or substantially all of its
assets. Notwithstanding the foregoing, WorldCom reserves any and all rights it
may have to the proceeds of any such sale and the Debtor Entities agree that an
aggregate amount of such proceeds equal to the obligations evidenced by the Note
shall not be disbursed, without WorldCom's consent, such consent not to be
unreasonably withheld.
15. REPRESENTATIONS AND WARRANTIES OF DEBTOR ENTITIES. To induce
WorldCom to agree to the financial restructuring of the Debtor's obligations
to WorldCom, each of the Debtor Entities hereby represents and warrants to
WorldCom that:
5
<PAGE>
(a) WorldCom has acted in good faith in the performance and
enforcement of its rights under the WorldCom Documents, the Obligations and
the negotiation of this Agreement; and
(b) Each of the Debtor Entities is a corporation, limited
liability company, partnership, or limited partnership that (i) is duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation or formation, as applicable; (ii) is
qualified to do business in all jurisdictions where the nature of its
business or properties require such qualification; and (iii) is in compliance
in all material respects with all requirements under applicable laws, rules
and regulations. Set forth on SCHEDULE 15 hereto is a complete and accurate
listing with respect to Debtor, each of the Obligors and their respective
Subsidiaries, showing (1) the jurisdiction of its organization, and its
mailing address, which is the principal place of business and chief executive
office of each unless otherwise indicated; (2) the classes of Capital Stock
and shares of Capital Stock issued and outstanding in Debtor, and in each
such Subsidiary; and (3) with respect to Debtor's Subsidiaries, each record
and beneficial owner of outstanding Capital Stock on the date hereof,
indicating the ownership percentage.
(c) The board of directors (or group of similar authority)
of Debtor and each of its Subsidiaries that is an Obligor (or its general
partners or managing members, as applicable), have duly authorized the
execution, delivery, and performance of the WorldCom Documents to be executed
by Debtor and each such Subsidiary, as appropriate. Debtor and each such
Obligor has the full legal right, power, and authority to execute, deliver,
and perform the WorldCom Documents to which they are parties. The WorldCom
Documents constitute the legal, valid, and binding obligations of Debtor and
each such Obligor, as appropriate, enforceable in accordance with their terms
(subject as to enforcement of remedies to any applicable Debtor Relief Laws).
This Agreement and each other WorldCom Document have been duly executed and
delivered on behalf of Debtor or Subsidiaries of Debtor or any other Obligor,
as the case may be. This Agreement and each other WorldCom Document
constitutes a legal, valid, and binding obligation of Debtor and/or
Subsidiaries of Debtor and/or any other Obligor, as the case may be,
enforceable against such Person in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
(d) The execution, delivery, and performance of the
WorldCom Documents, does not and will not (i) violate any provision of any
law, rule, regulation, order, writ, judgment, injunction, decree,
determination, or award presently in effect having applicability to Debtor or
any Subsidiary of Debtor or any other Obligor or the articles of
incorporation, bylaws or other organic documents of Debtor or any Subsidiary
of Debtor or any other Obligor; (ii) result in, or require, the creation or
imposition of any Lien on any of the properties or revenues of Borrower or
any Subsidiary of Debtor or any other Obligor pursuant to any such law, rule,
regulation, order, writ, judgment, injunction, decree, determination, or
award; or (iii) result in a breach or constitute or cause a default under any
indenture, agreement, lease, or instrument to which Debtor or any
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Subsidiary of Debtor or any other Obligor is a party. Neither Debtor nor any
Subsidiary of Debtor nor any other Obligor is in default under any such law,
rule, regulation, order, writ, judgment, injunction, decree, determination,
or award or any such indenture, agreement, lease, or instrument.
(e) No statement contained in this Workout Agreement or any
of the other WorldCom Documents, or in any certificate or other document
delivered to WorldCom by Debtor, any Obligor, or by any of Debtor's
Subsidiaries (or by any of their respective representatives) or any other
Obligor in connection with this Agreement or the transactions contemplated
hereby, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained therein or
herein not misleading.
16. REPRESENTATIONS AND WARRANTIES OF WORLDCOM. WorldCom represents
and warrants to each of the other parties to this Agreement as follows:
(a) each of the Debtor Entities have acted in good faith in
the performance of their duties under the WorldCom Documents, the Obligations
and the negotiation of this Agreement;
(b) it is duly incorporated, validly existing and in good
standing under the laws of its state of incorporation or organization, and it is
duly qualified to do business as a foreign corporation or entity and in good
standing in all jurisdictions in which the failure to do so would have a
material adverse effect on such party;
(c) it has corporate power, and each has authority to execute,
deliver and perform the provisions of this Agreement and all such action has
been duly and validly authorized by all necessary corporate or other proceedings
on its part;
(d) this Agreement has been duly and validly executed by it
and constitutes a legal, valid and binding obligation of it, enforceable in
accordance with the terms of this Agreement; and
(e) neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated in this Agreement nor the
performance of or compliance with the terms and conditions of this Agreement
will violate any law or court order.
17. RECORDS. The unpaid obligations of Debtor to WorldCom, the
unpaid interest accrued thereon, the interest rate or rates applicable to such
unpaid principal amounts and the duration of such applicability shall at all
times be ascertained from the records of WorldCom, which shall be conclusive
absent manifest error.
18. NO IMPLIED WAIVER; CUMULATIVE REMEDIES. No course of dealing
and no delay or failure of WorldCom in exercising any right, power or privilege
under this Agreement or any of the other WorldCom Documents will affect any
other or future exercise of any such right, power or privilege or exercise of
any other right, power or privilege except as and to the extent that
7
<PAGE>
the assertion of any such right, power or privilege shall be barred by an
applicable statute of limitations; nor shall any single or partial exercise
of any such right, power or privilege or any abandonment or discontinuance of
steps to enforce such a right, power or privilege preclude any further
exercise of such right, power or privilege or of any other right, power or
privilege. The rights and remedies of WorldCom under this Agreement or any of
the other WorldCom Documents are cumulative and not exclusive of any rights
or remedies which WorldCom would otherwise have.
19. SEVERABILITY. The provisions of this Agreement are intended
to be severable. If any provision of this Agreement shall be held invalid or
unenforceable in whole or in part in any jurisdiction, such provision shall, as
to such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or enforceability
of such provision in any other jurisdiction or the remaining provisions of this
Agreement in any jurisdiction.
20. GOVERNING LAW, ETC. This agreement shall be governed by
Oklahoma law, without giving effect to principles of conflicts of laws. Each
party agrees that service of process may be duly effected by service in
accordance with the provisions of the Uniform Interstate and International
Procedure Act.
21. EFFECT OF RECOVERY OF PAYMENTS MADE TO WORLDCOM. If any
settlement, discharge, payment, fees, grant of security or transfer of property
relating to discharging any duty or liability to WorldCom created under this
Agreement or the WorldCom Documents is rescinded or avoided by virtue of any
provision of any bankruptcy, insolvency, or other similar law affecting
creditors' rights, WorldCom will be entitled to recover the value or amount of
any such settlement, discharge, payment, fees, grant of security or transfer of
property from the Debtor Entities under the WorldCom Documents or this
Agreement, as if such settlement, discharge, payment, grant of security or
transfer of property had not occurred, but only to the extent permitted by
applicable law.
22. CHOICE OF VENUE AND WAIVER OF JURY TRIAL. THE PARTIES AGREE
THAT ALL DISPUTES OF EVERY KIND AND NATURE ARISING UNDER OR IN CONNECTION WITH
THIS AGREEMENT SHALL BE RESOLVED EXCLUSIVELY IN THE STATE OR FEDERAL COURTS
LOCATED IN TULSA, OKLAHOMA. THE PARTIES EACH WAIVE THEIR RIGHTS TO A JURY TRIAL
WITH RESPECT TO ANY SUCH DISPUTE AND CONSENT TO THOSE COURTS EXERCISING SUBJECT
MATTER AND PERSONAL JURISDICTION WITH RESPECT TO ANY SUCH DISPUTE.
23. EXECUTION OF RELEASE AND WAIVER. EACH OF THE PARTIES
REPRESENTS AND WARRANTS TO THE OTHER THAT IT HAS CAREFULLY READ THE FOREGOING
TERMS AND CONDITIONS OF THIS AGREEMENT, THAT IT KNOWS AND UNDERSTANDS THE
CONTENTS AND EFFECT OF THIS AGREEMENT, THAT THE LEGAL EFFECT OF THIS AGREEMENT,
INCLUDING, WITHOUT LIMITATION, THE RELEASE AND WAIVER OF JURY TRIAL PROVISIONS
CONTAINED IN THIS
8
<PAGE>
AGREEMENT, HAVE BEEN FULLY EXPLAINED TO ITS SATISFACTION BY
ITS COUNSEL, AND EXECUTION OF THIS AGREEMENT IS A VOLUNTARY ACT.
24. INTERPRETATION. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, the singular
includes the plural, the part includes the whole, "including" is not limiting,
and "or" has the inclusive meaning represented by the phrase "and/or." The words
"hereof," "herein," "hereby," "hereunder," and similar terms in this Agreement
refer to this Agreement as a whole and not to any particular provision of this
Agreement.
25. MERGER. This Agreement and the WorldCom Documents are
intended by the parties as a final expression of their agreement and is intended
as a complete statement of the terms and conditions of their agreement and
supersedes all prior understandings and agreements, whether written or oral,
among the parties relating to the transactions provided for in this Agreement,
the Workout Note and the other WorldCom Documents. To the extent that this
Agreement conflicts with any of the WorldCom Documents, this Agreement shall
control.
26. DURATION; SURVIVAL. All representations and warranties of
Debtor contained in this Agreement or made in connection with this Agreement or
any of the other WorldCom Documents shall survive the making of and will not be
waived by the execution and delivery of this Agreement, the Note or any of the
other WorldCom Documents, or by any investigation by WorldCom. Notwithstanding
termination of this Agreement or a Default, all covenants and agreements of the
Debtor Entities will continue in full force and effect from and after the date
of this Agreement so long as any of the WorldCom Documents are in force, and
until payment in full of the Obligations, interest thereon, and all fees and
other obligations of the Debtor Entities under this Agreement and the other
WorldCom Documents. Without limitation, it is understood that all obligations of
Debtor to make payments to or indemnify WorldCom will survive the payment in
full of the Obligations and of all other obligations of the Debtor under this
Agreement and the other WorldCom Documents.
27. TERM OF AGREEMENT. This Agreement will terminate when all
indebtedness of the Debtor Entities to WorldCom is paid in full, and Debtor no
longer purchases telecommunications services from WorldCom, it being understood
that WorldCom has no obligation to continue providing telecommunications
services to Debtor under this Agreement after a Default.
28. NO WAIVER. No failure or delay on the part of any party in
exercising any right, remedy, power or privilege under this Agreement shall
operate as a waiver thereof or of any other right, remedy, power or privilege of
such party under this Agreement; nor shall any single or partial exercise of any
such right, remedy, power or privilege preclude any other right, remedy, power
or privilege or further exercise thereof or the exercise of any other right,
remedy, power or privilege. The rights, remedies, powers and privileges of the
parties under this Agreement are cumulative and not exclusive of any rights or
remedies which it may otherwise have.
9
<PAGE>
29. HEADINGS. The headings of the sections in this Agreement are
for purposes of reference only, and shall not limit or affect the meaning of
such section.
30. DEFINITIONS. In addition to other words and terms defined
elsewhere in this Agreement, the following words and terms have the following
meanings, respectively, unless the context otherwise clearly requires:
"BUSINESS DAY" means any day other than a Saturday, Sunday, public
holiday under the laws of the State of Oklahoma or other day on which the
banks are authorized or obligated to close in Tulsa, Oklahoma.
"CAPITAL STOCK" means, as to any Person, the equity interests in
such Person, including, without limitation, the shares of each class of
capital stock of any Person that is a corporation; each class of partnership
interests (including, without limitation, general, limited, and preference
units) in any Person that is a partnership; and membership interests in
limited liability companies.
"COLLATERAL" means all real and personal property, accounts,
accounts receivable, contract rights, indefeasible rights of use in
telecommunications cable systems, equipment, inventory, chattel paper,
general intangibles, Capital Stock and other assets of Debtor and/or any of
Debtor's affiliates or Subsidiaries which may be pledged as collateral for
the Obligations from time to time pursuant to any security agreement,
guaranty, pledge agreement or any such other security documents as may be
executed and delivered to WorldCom by or on behalf of Debtor and/or any of
Debtor's affiliates or Subsidiaries or any other Obligor from time to time,
including, without limitation, any property or assets referred to in any of
the WorldCom Documents as securing the Obligations.
"CREDIT AGREEMENT" means the Credit Agreement by and between Debtor
and World Access, Inc., dated as of April ___, 2000.
"DEBTOR RELIEF LAWS" means applicable bankruptcy,
reorganization, moratorium, or similar laws, or principles of equity, affecting
the enforcement of creditors' rights generally.
"LAW" means any law (including common law), constitution,
statute, treaty, regulation, rule, ordinance, order, injunction, writ, decree or
award of any Official Body.
"LIEN" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), claim, title
defect, restriction, easement, charge of any kind, or other security interest or
any preference, priority, or other security agreement of any kind or nature
whatsoever.
"OBLIGATIONS" means all present and future obligations,
indebtedness, and liabilities (whether such obligations, indebtedness, and
liabilities are direct, indirect, fixed, or contingent), and
10
<PAGE>
all renewals and extensions of all or any part thereof, of Debtor and each
other Obligor to MCI WorldCom, Inc., its subsidiaries and affiliates arising
from, by virtue of, or pursuant to this Agreement, any of the other WorldCom
Documents, and any and all renewals and extensions thereof or any part
thereof or future amendments thereto; all interest accruing on all or any
part thereof; and reasonable attorneys' fees incurred by WorldCom for the
administration of all or any part thereof, the execution of waivers,
amendments, and consents in connection with any part thereof, and in
connection with any restructuring, workouts, or in the enforcement or the
collection of all or any part thereof. Without limiting the generality of the
foregoing, "Obligations" includes all amounts which would be owed by Debtor,
each other Obligor and any other Person (other than WorldCom) to WorldCom
under any WorldCom Document but for the fact that they are unenforceable or
not allowable due to the existence of a bankruptcy, reorganization, or
similar proceeding involving Debtor, any other Obligor, or any other Person
(including all such amounts which would become due or would be secured but
for the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization, or like proceeding of the Debtor, any other
Obligor, or any other Person under any Debtor Relief Law).
"OBLIGOR" means Debtor and any other Person liable to the
WorldCom under any of the WorldCom Documents.
"OFFICIAL BODY" means any government or political subdivision
or any agency, authority, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury or arbitrator, in
each case whether foreign or domestic.
"PERSON" means an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, any supranational, national, state,
municipal, local, or non-U.S. government, any instrumentality, subdivision,
court, administrative agency, or commission or other authority thereof, or any
quasi-governmental or private body exercising any regulatory, taxing, importing,
or other governmental or quasi-governmental authority, or other entity or group
of whatever nature.
"SUBSIDIARY" and "SUBSIDIARIES" of any Person means any
corporation, partnership, limited liability company, joint venture, trust, or
estate of which (or in which) more than fifty percent (50%) of:
(a) the outstanding Capital Stock having voting power to elect
a majority of the Board of Directors of such corporation (or other Persons
performing similar functions of such entity, and irrespective of whether at the
time Capital Stock of any other class or classes of such corporation shall or
might have voting power upon the occurrence of any contingency),
(b) the interest in the capital or profits of such
partnership or joint venture, or
(c) the beneficial interest of such trust or estate
11
<PAGE>
is at the time directly or indirectly owned by (i) such Person, (ii) such
Person and one or more of its Subsidiaries, or (iii) one or more of such
Person's Subsidiaries. Unless otherwise qualified, all references to a
"Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a
Subsidiary or Subsidiaries of Debtor.
"WORLDCOM DOCUMENTS" means, as each such document may be
amended, revised, renewed, extended, substituted, or replaced from time to time:
this Agreement, the Service Agreement, the Note, the Security Agreement, the
Pledge Agreement, all other guarantys executed by any Person guaranteeing
payment of any portion of the Obligations; all security agreements and pledge
agreements granting any interest in any of the Collateral, stock certificates
and partnership agreements constituting part of the Collateral; mortgages, deeds
of trust, financing statements, collateral assignments, and other documents and
instruments granting WorldCom an interest in any portion of the Collateral or
related to the perfection of WorldCom's interest in any portion of the
Collateral and/or the transfer to WorldCom of an interest in any portion of the
Collateral; all collateral assignments or other agreements granting to WorldCom
a lien on any intercompany note, including without limitation, all other
documents, instruments, agreements, or certificates executed or delivered by
Debtor or any other Obligor as security for Debtor's obligations under the Note,
the Service Agreements, or otherwise.
31. NO PARTNERSHIP OR JOINT VENTURE. It is understood by the
parties that this Agreement shall not in any way be construed as an agreement of
partnership, general or limited, or of creating a joint venture between WorldCom
and any other party to this Agreement, or any one or more of them, or of
creating any relationship other than that of debtor and creditor.
32. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same Agreement.
33. JOINT PREPARATION. The preparation of this Agreement has been a
joint effort of the parties and the resulting document shall not, solely as a
matter of judicial construction, be construed more severely against one of
the parties than the other.
34. NOTICES. Except as otherwise provided herein, whenever it is
provided in this Agreement, that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon any
of the parties by another, or whenever any of the parties desires to give or
serve upon another any communication with respect to this Agreement, each such
notice, demand, request, consent, approval, declaration or other communication
shall be in writing and shall be delivered either in person, with receipt
acknowledged, or by certified or registered mail, postage prepaid, or by
telecopy and confirmed by telecopy answerback or sent by a nationally recognized
overnight air delivery service, shipping charges prepaid, addressed as follows:
If to Debtor or STAR Telecommunications, Inc.
any Debtor Entity: 223 East De La Guerra
12
<PAGE>
Santa Barbara, California 93101
Facsimile No.: (805) 884-1137
Attention: Christopher E. Edgecomb
with a copy to: Riordan & McKinzie
Twenty-Ninth Floor
300 South Grand Avenue
Los Angeles, California 90071
Facsimile No.: (213) 229-8550
Attention: Richard J. Welch
If to WorldCom: MCI WorldCom Network Services, Inc.
6929 N. Lakewood
Mail Drop: 5.2-510
Tulsa, Oklahoma 74117
Attn: Robert S. Vetera, Vice President Corporate
Credit Facsimile No.: (918) 590-0366
with copy to: Klett Rooney Lieber & Schorling, P.C.
One Oxford Centre, 40th Floor
Pittsburgh, Pennsylvania 15219-6498
Attn: Many Emamzadeh, Esq.
Facsimile No. (412) 392-2128
35. THIRD PARTY BENEFICIARIES. The terms and conditions of this
Agreement are not intended to affect or benefit in any way any third parties
other than the WorldCom Entities, all of which are explicitly intended to be
third party beneficiaries under this Agreement.
36. SUCCESSORS AND ASSIGNS. This Agreement will be binding upon and
inure to the benefit of the respective parties, and their respective
successors and assigns, including any bankruptcy trustee, except that neither
party may assign or transfer any of its rights or delegate any of its duties
under this Agreement without the prior written consent of the other party.
IN WITNESS WHEREOF, the parties hereto by their authorized
representatives have executed this Workout Agreement as of the day and year
first above written.
STAR TELECOMMUNICATIONS, INC. By:__________________________
Name: _______________________
By:_________________________ Title:_______________________
Name:_______________________
Title:______________________ HELVEY COM, LLC
PT-1 COMMUNICATIONS, INC. By:__________________________
13
<PAGE>
Name:_______________________ PT-1 HOLDINGS II, INC.
Title:______________________
CEO TELECOMMUNICATIONS, INC. By:___________________________
Name:_________________________
Title:________________________
By:_________________________
Name:_______________________ NATIONWIDE DISTRIBUTORS, INC.
Title:______________________ TECHNOLOGY LEASING, INC.
CEO CALIFORNIA TELECOMMUNICATIONS, INC.
By:___________________________
By:_________________________ Name:_________________________
Name:_______________________ Title:________________________
Title:
INVESTMENT SERVICES, INC.
LUCIUS ENTERPRISES, INC.
By:___________________________
Name:_________________________
By:_________________________ Title:________________________
Name:_______________________
Title:______________________ PT-1 COMMUNICATIONS PUERTO RICO, INC.
AS TELECOMMUNICATIONS, INC. By:___________________________
Name:_________________________
By:_________________________ Title:________________________
Name:_______________________
Title:______________________ PHONETIME TECHNOLOGIES, INC.
PT-1 LONG DISTANCE, INC. By:___________________________
Name:_________________________
Title:________________________
By:_________________________
Name:_______________________
Title:______________________
PT-1 HOLDINGS I, INC.
By:_________________________
Name:_______________________
Title:______________________
14
<PAGE>
MCI WORLDCOM NETWORK SERVICES,
INC.
By:__________________________
Thomas Tracey
Director of Workouts
<TABLE>
<CAPTION>
EXHIBIT A
WORLDCOM DOCUMENTS
<S> <C> <C>
- ------------------------------------------------- ----------------- ------------------------------------------------
Document Date Parties
- ------------------------------------------------- ----------------- ------------------------------------------------
Wiltel, Inc. Carrier Digital Services Contract 8/1/95 Star Vending, Inc. dba Star Telecommunications
- ------------------------------------------------- ----------------- ------------------------------------------------
Assignment Agreement 2/18/95 PT-1 Communications, Inc. Assignor to Star
Telecommunications, Inc.
- ------------------------------------------------- ----------------- ------------------------------------------------
Digital Services Agreement 8/1/95
- ------------------------------------------------- ----------------- ------------------------------------------------
Wilmax, Inc Universal Telecom Services Agreement 1/27/97 Star Vending, Inc. dba Star
Telecommunications, Inc.
Amendment 3
Amendment 4 2/24/98
Amendment 5 2/18/98
Amendment 6- 3/5/98
Amendment 7 4/6/98
Amendment 10 4/22/98
Amendment 26 8/6/98
Amendment 46 3/29/99
Amendment 50 8/10/99
8/31/99
- ------------------------------------------------- ----------------- ------------------------------------------------
Transcend Telecommunications Services Agreement 2/21/96 CTN - Custom Telecommunications Network of
Arizona, Inc.
- ------------------------------------------------- ----------------- ------------------------------------------------
Wilmax, Inc. Telecommunications Service 10/28/94
Agreement
- ------------------------------------------------- ----------------- ------------------------------------------------
Digital Network Services, Inc
- ------------------------------------------------- ----------------- ------------------------------------------------
</TABLE>
<PAGE>
The parties acknowledge that this Exhibit A may be replaced by a
completed Exhibit A, without amending the Workout Agreement, and such
replacement, to the extent it is provided to WorldCom within ten (10)
Business Days of the date of this Agreement, shall be effective as of the
date of this Agreement.
2
<PAGE>
SCHEDULE 15
INFORMATION RELATING TO DEBTOR, OBLIGORS AND SUBSIDIARIES THEREOF
<PAGE>
EXHIBIT 10.76
PROMISSORY NOTE
$56,017,698.87 April 12, 2000
FOR VALUE RECEIVED on February 3, 2000 (the "Effective Date"),
the undersigned, STAR TELECOMMUNICATIONS, INC., with its chief executive offices
located at 223 East De La Guerra, Santa Barbara, California, 93101, a Delaware
corporation (together with its successors and assigns, the "Maker"), promises to
pay to the order of MCI WORLDCOM NETWORK SERVICES, INC., with offices located at
6929 N. Lakewood Avenue, Mail Drop 5.2- 510, Tulsa, Oklahoma 74117 ("Holder"),
the principal sum of FIFTY-SIX MILLION, SEVENTEEN THOUSAND, SIX HUNDRED AND
NINETY-EIGHT AND 87/100 DOLLARS ($56,017,698.87), together with interest on the
unpaid principal amount of this Note from the Effective Date, accruing at a rate
of sixteen percent (16%) PER ANNUM, based on a year of 365 or 366 days, as the
case may be, and actual days elapsed, on or before the earlier to occur of (such
date being referred to herein as the ("Maturity Date"): (a) termination of the
Agreement and Plan of Merger dated February 11, 2000, by and between the Maker,
STI Merger Co. and World Access, Inc. (the "Merger Agreement"); (b) consummation
of the merger transaction contemplated by the Merger Agreement; or (c) August 1,
2000, without notice, demand or presentment. Notwithstanding any provision in
this Note to the contrary, upon an Event of Default, as defined below, interest
on the outstanding obligations evidenced hereby shall accrue at the rate of
eighteen percent (18%) PER ANNUM.
Maker shall be permitted to make voluntary prepayments of
principal under this Note, without penalty on any such payment date. The
acceptance by Holder of any payment hereunder that is less than payment in full
of all amounts due and payable at the time of such payment shall not constitute
a waiver of the right to exercise any of Holder's rights and remedies hereunder
at that time, or at any subsequent time, or nullify any prior exercise of any
such right or remedy without the express written consent of Holder.
All payments and prepayments to be made in respect of
principal, interest or other amounts due from the Maker under this Note shall be
payable on or before 12:00 noon, Tulsa time, on the day when due, and shall be
payable to Holder at the address set forth above for Holder, and directed to the
attention of Robert S. Vetera, Vice President of Corporate Credit, or at such
other place as Holder may designate in writing, in lawful money of the United
States of America in immediately available funds without setoff, counterclaim or
other deduction of any nature. The Maker expressly waives presentment, demand,
notice, protest and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of this Note, and an
action for any amounts due and unpaid shall therefore accrue immediately.
If any payment of principal or interest under this Note
becomes due on a day which is a Saturday, Sunday or other day on which lending
institutions are authorized or obligated to close in Tulsa, Oklahoma, such
payment shall be made on the next following business day on which such
<PAGE>
lending institutions are open for business and such extension of time will be
included in computing interest in connection with such payment.
All notices and other communications required or permitted to
be made to the Maker or Holder, as the case may be, hereunder shall be made in
writing and will be deemed delivered when received by the other party by
messenger, telex, telecopier, overnight courier, or mail, which notice shall be
delivered to the respective addresses of Maker and Holder, as the case may be,
set forth in the Workout Agreement of even date herewith by and between Maker
and Holder (the "Workout Agreement"), or such other address as each party may
notify the other party in writing from time to time.
Upon the occurrence of any one of the following events (each
an "Event of Default"), the entire principal amount outstanding hereunder
together with accrued interest, shall (i) at the option of Holder in the case of
the "Events of Default" set forth in (a) through (c), below, or (ii) without the
necessity for any demand, notice or action by Holder in the case of the "Events
of Default" set forth in (d) through (f), below, become immediately due and
payable in full and Holder may, without further delay, undertake any one or more
of the actions and become entitled to any of the remedies specified in this Note
or any other WorldCom Document, as defined below, or which are otherwise
available at law or in equity:
(a) Failure of Maker to pay any installment of principal
or interest or any other sum on the date when it is due under this Note; or
(b) Maker fails to perform or observe any of its other
covenants or agreements under this Note, the Workout Agreement, or any of the
WorldCom Documents, as defined in the Workout Agreement, or otherwise fails to
perform or observe any of its covenants or agreements under any agreement,
contract, instrument, note, and any amendments, extensions, renewals or
replacements to or of any of the foregoing, whether presently existing or
hereafter arising, and such default continues beyond any applicable grace,
waiver or cure period set forth therein, if any; or
(c) Any representation or warranty made by the Maker pursuant
to this Note or any other WorldCom Document shall prove to have been false or
misleading in any material respect as of the time when made; or
(d) If Maker, or any guarantor or surety of the obligations
evidenced by this Note, shall make a general assignment for the benefit of its
respective creditors, or shall admit in writing its inability to pay its debts
as they become due, or shall file a petition in bankruptcy, or shall be
adjudicated bankrupt or insolvent, or shall file a petition seeking any relief
under any present or future statute, law or regulation relating to bankruptcy or
insolvency or shall file an answer admitting or not contesting the material
allegations of a petition filed against it in any such proceeding or shall seek
or consent to or acquiesce in the appointment of any trustee or receiver of
itself or any material part of its respective properties; or
2
<PAGE>
(e) If any proceeding against Maker seeking any relief under
any present or future statute, law or regulation relating to bankruptcy or
insolvency shall have been filed or shall be prosecuted or if an appointment
shall have been made without the consent or acquiescence of Maker or of any
material part of their respective properties and such appointment shall not have
been vacated; or
(f) A writ or warrant of attachment, garnishment, execution,
distraint or similar process shall have been issued against Maker or any of its
properties involving a sum in excess of $50,000 which shall have remained
undischarged or unstayed for a period of thirty (30) days.
If an Event of Default occurs, then, Maker agrees to indemnify
and hold Holder harmless from any and all reasonable fees and expenses of
Holder's attorneys, accountants, appraisers, consultants, engineers and other
professional, paraprofessional or non-professional fees and expenses incurred by
Holder in collecting the obligations evidenced hereby, or in protecting or
otherwise enforcing any of its rights under this Note or any of the other
WorldCom Documents, or in the prosecution or defense of any action related to
this Note or any of the WorldCom Documents, or the preservation, maintenance,
disposition or liquidation of any collateral securing the Maker's obligations
evidenced by this Note, or any portion thereof.
The exercise of any remedy hereunder or under any other
WorldCom Document shall not be construed as a waiver by Holder of any remedy
available to Holder under any other agreement, document, or applicable law.
Holder hereby expressly reserves all of its rights under applicable law.
In the event the rate of interest provided for in this Note is
finally determined by any government or political subdivision or any agency,
authority, bureau, central bank, commission, department or instrumentality of
either, or any court, tribunal, grand jury or arbitrator, in each case whether
foreign or domestic (each as "Official Body"), to exceed the maximum rate of
interest permitted by applicable usury or similar law (including common law),
constitution, statute, treaty, regulation, rule, ordinance, order, injunction,
writ, decree or award of any Official Body ("Law"), their or its application
will be suspended and there will be charged instead the maximum rate of interest
permitted by such Laws. Interest at the rates applicable to the Note as set
forth herein shall continue to accrue on any judgment entered on this Note until
the judgment together with interest and costs has been paid in full.
This Note is governed by, and will be construed and enforced
in accordance with, the laws of the State of Oklahoma without regard to
principles of conflicts of law in the State of Oklahoma. The Maker consents to
the exclusive jurisdiction and venue of the Federal and State courts located in
Tulsa, Oklahoma with respect to any suit arising out of, relating to, or
mentioning this Note. The terms of this Note shall be binding upon and inure to
the benefit of the successors and assigns of Holder, and shall not be assignable
by Maker, unless Holder has provided its prior, written consent to such
assignment.
3
<PAGE>
EACH OF MAKER AND HOLDER EXPRESSLY, KNOWINGLY AND VOLUNTARILY WAIVES ALL BENEFIT
AND ADVANTAGE OF ANY RIGHT TO A TRIAL BY JURY, AND NEITHER WILL AT ANY TIME
INSIST UPON, OR PLEAD OR IN ANY MANNER WHATSOEVER CLAIM OR TAKE THE BENEFIT OR
ADVANTAGE OF A TRIAL BY JURY IN ANY ACTION ARISING IN CONNECTION HEREWITH OR THE
OTHER WORLDCOM DOCUMENTS.
INITIAL:
____ MAKER
____ HOLDER
IN WITNESS WHEREOF, and intending to be legally bound, the
Maker has executed, issued and delivered this Workout Note as of the day and
year first above written, effective as of February 3, 2000.
ATTEST:
By: _______________________
Name: _______________________
Title: _______________________
STAR TELECOMMUNICATIONS, INC.
By: _______________________
Name: _______________________
Title: _______________________
<PAGE>
EXHIBIT 10.77
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (as amended, restated, or otherwise modified
from time to time, this "Agreement"), dated as of April 12, 2000, is made by
______________________ ("Debtor"), in favor of MCI WORLDCOM NETWORK SERVICES,
INC., a Delaware corporation ("Agent"), for itself and as collateral agent for
MCI WorldCom, Inc., and its subsidiaries and affiliates, with its principal
office at 6929 North Lakewood, Mail Drop 5.2-510, Tulsa, Oklahoma 74117,
(collectively, "WorldCom").
W I T N E S S E T H:
WHEREAS, WorldCom provides telecommunications services to Debtor
pursuant to the Service Agreements; and
WHEREAS, Debtor is in default to WorldCom for, INTER ALIA, failure to
pay its obligations to WorldCom in a timely manner (the "Past Due
Indebtedness"); and
WHEREAS, Debtor and WorldCom have agreed to restructure certain of the
Past Due Indebtedness due to MCI WorldCom Network Services, Inc., as of February
3, 2000, pursuant to the terms and conditions of the Workout Agreement between
the parties of even date herewith (the "Workout Agreement"); and
WHEREAS, specifically, Debtor and WorldCom have agreed to restructure
Debtor's outstanding trade payables due WorldCom as of February 3, 2000 in the
aggregate amount of $56,017,698.87 into a Promissory Note, of even date herewith
(the "Note"), which contemporaneously herewith will be executed and delivered by
Debtor to WorldCom; and
WHEREAS, Debtor has agreed to secure its performance and payment of (a)
all obligations for the provision of services by WorldCom to Debtor pursuant to
any, and all related notes, instruments, documents, or agreements and any
amendments, extensions, renewals or replacements to or of any of the foregoing;
and (b) all other obligations and indebtedness of Debtor to WorldCom of whatever
kind and however created, whether presently existing or hereafter arising.
NOW, THEREFORE, for and in consideration of the premises set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Debtor hereby agrees with Agent,
for WorldCom's benefit, as follows:
<PAGE>
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. Unless otherwise defined in this Agreement, terms used
herein shall have the meanings set forth in the Workout Agreement, or Credit
Agreement, in that order. Unless the context indicates otherwise or the terms
are otherwise defined herein, definitions in the Uniform Commercial Code as
enacted in the State of Oklahoma (the "UCC") apply to words and phrases in this
Agreement. "Debtor" includes, without limitation, such Person, such Person's
heirs, successors and assigns, such Person as a debtor-in-possession, and any
receiver, trustee, liquidator, conservator, custodian, or similar party
appointed for such Person or all or substantially all of its assets under any
law.
ARTICLE II
GRANT OF SECURITY INTEREST
2.1 ASSIGNMENT AND GRANT OF SECURITY INTEREST. Debtor hereby, in
partial consideration for WorldCom's agreement to restructure the Past Due
Obligations and to induce WorldCom to enter into such restructuring which will
facilitate the pending merger between the Debtor and World Access, Inc., assigns
and pledges to Agent, for the benefit of WorldCom, a security interest in the
entire right, title, and interest of Debtor in and to all assets of Debtor,
whether now owned or hereafter acquired, including, but not limited to, the
following property, wherever located, whether now owned or hereafter acquired by
the Debtor (collectively, the "Pledged Collateral")1, to secure payment of the
Obligations and performance by the Debtor of its obligations hereunder, under
the WorldCom Documents, and all other obligations and indebtedness of Debtor to
WorldCom of whatever kind and however created, whether now existing or hereafter
arising:
(a) all equipment in all of its forms, wherever located, now
or hereafter existing, all parts thereof and all accessions thereto, including,
but not limited to, all machinery, satellite receivers, antennas, headend
electronics, cables, telecommunications cable systems switches,
telecommunications switching systems, computers, computer systems, furniture,
motor vehicles, aircraft, rolling stock, operating equipment, and office
equipment, including specifically, but without limitation, those certain items
of equipment listed on Schedule 1 attached hereto and made a part
_________________
(1) The security interest in the Pledged Collateral described
herein is governed by that (i) certain Intercreditor Agreement dated as of
April 12, 2000, by and between World Access, Inc., a Delaware corporation,
and MCI WorldCom Network Services, Inc., a Delaware corporation and (ii)
certain Intercreditor Agreement dated as of April 12, 2000, by and between
World Access, Inc., MCI WorldCom Network Services, Inc., and RFC Capital
Corporation, a Delaware corporation.
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hereof (any and all such equipment, parts, and accessions being referred to
herein as the "Equipment");
(b) all inventory in all of its forms, wherever located, now
or hereafter existing, including, but not limited to, (i) all raw materials and
work in process therefor, finished goods thereof, and materials used or consumed
in the manufacture or production thereof; (ii) goods in which Debtor has an
interest in mass or a joint or other interest or right of any kind (including,
without limitation, goods in which Debtor has an interest or right as
consignee); and (iii) goods which are returned to or repossessed by Debtor and
all accessions thereto and products thereof and documents therefor (any and all
such inventory, accessions, products, and documents being referred to herein as
the "Inventory");
(c) all accounts, accounts receivable, contract rights,
chattel paper, documents, instruments, deposit accounts, general intangibles,
tax refunds and other obligations of any kind owing to Debtor, now or hereafter
existing, whether or not arising out of or in connection with the sale or lease
of goods or the rendering of services, and all rights now or hereafter existing
in and to all security agreements, leases, subleases, and other contracts
securing or otherwise relating to any such accounts, contract rights, chattel
paper, documents, instruments, deposit accounts, general intangibles, or
obligations (any and all such accounts, contract rights, chattel paper,
documents, instruments, deposit accounts, general intangibles, and obligations,
including those described in Section 2.1(e) hereto being referred to herein as
the "Receivables");
(d) all end user and wholesale customer accounts, end user and
wholesale customer bases, end user and wholesale letters of authorization, end
user and wholesale service agreements, end user and wholesale customer lists,
all documents containing the names, addresses, telephone numbers, and other
information regarding Debtor's end users, subscribers, and wholesale customers,
billing records, third-party verification records, call detail records, tapes,
programs, printouts, disks, and other material and documents (in whatever media)
relating to the recording, billing, or analyzing of any of the foregoing, and
any other right to payment (collectively, the "Customer Base", "End User Base",
or "Wholesale Base");
(e) all other general intangibles, whether now existing or
hereafter arising and wherever arising, including, but not limited to, all (i)
partnership, corporate, and other interests in and to any Person; (ii) letters
of authorization, permits, licenses, consents, contract rights, franchises,
documents, certificates, records, customer lists, customer and supplier
contracts, easements, variances, certifications and approvals of tribunals,
bills of lading (negotiable and non-negotiable), warehouse receipts, any claim
of Debtor against WorldCom, liquidated or unliquidated, and other rights,
privileges and goodwill obtained or used in connection with any property
described in this Section 2.1; (iii) rights of Debtor under any equipment
leases; and (iv) tax refunds and other refunds or rights to receive payment from
U. S. federal, state or local governments or foreign governments or other
tribunals;
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(f) all bank accounts, deposit accounts, and margin accounts,
maintained by Debtor with financial institutions, brokers, dealers, and all
other persons or entities relating to commodities and/or securities, including
all funds held therein and all certificates and instruments, if any, from time
to time representing or evidencing such accounts;
(g) all investment property (as defined in Section 9-115 of
the Uniform Commercial Code) ("Investment Property");
(h) to the extent it is possible to create a security interest
or perfect a security interest in such Pledged Collateral by filing a UCC-1
financing statement centrally, or in the case of dual filing states, centrally
and at the county level, as applicable, all of Debtor's fixtures now existing or
hereafter acquired, all substitutes and replacements therefor, all accessions
and attachments thereto, and all tools, parts, and equipment now or hereafter
added to or used in connection with the fixtures on or above all real property
now owned or hereafter acquired by Debtor;
(i) all Indefeasible Rights of Use in telecommunications
cables and cable systems ("IRU's"), including but not limited to the IRU's
described on Schedule 1 attached hereto and made a part hereof;
(j) all records and documents relating to any and all of the
foregoing, including, without limitation, records of account, whether in the
form of writing, microfilm, microfiche, tape, or electronic media;
(k) all obligations that support, and liens that secure, any
of Debtor's foregoing rights to payment, whether now in existence or hereafter
arising; and
(l) all substitutes and replacements for, accessions,
attachments, and other additions to tools, parts, and equipment used in
connection with, and all proceeds, products, and increases of, any and all of
the foregoing Pledged Collateral (including, without limitation, proceeds which
constitute property of the types described in this Section 2.1), in whatever
form, whether cash or non-cash; interest, premium, and principal payments,
redemption proceeds and subscription rights, and shares or other proceeds of
conversions or splits of any securities in Pledged Collateral, and returned or
repossessed Pledged Collateral; and, to the extent not otherwise included, all
(i) payments under insurance, or any indemnity, warranty or guaranty, payable by
reason of loss or damage to or otherwise with respect to any of the foregoing
Pledged Collateral, (ii) cash and (iii) security for the payment of any of the
Pledged Collateral, and all goods which gave or will give rise to any of the
Pledged Collateral or are evidenced, identified, or represented therein or
thereby;
provided, however, that the Pledged Collateral shall not include, and shall
specifically exclude, any right, title or interest in, to or under any
"Receivable", whether or not any such Receivable is a "Purchased Receivable," or
the "Lockbox Account", as such terms are defined by that certain Receivables
Sale Agreement, dated as of November 30, 1999, as may be amended from time to
time, by and among Debtor and certain of its affiliates, individually and
collectively as seller and
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subservicer thereunder, and RFC Capital Corporation, a Delaware corporation,
located at 130 E. Chestnut Street, Suite 400, Columbus, Ohio 43215, as
purchaser thereunder (the "Receivables Sale Agreement").
The inclusion of proceeds in this Agreement does not authorize
Debtor to sell, dispose of or otherwise use the Pledged Collateral in any manner
not specifically authorized by this Agreement.
2.2 SECURITY FOR OBLIGATIONS. This Agreement creates a second-priority
security interest, securing the payment and performance of any and all of the
Obligations, junior only to the liens and security interests of World Access,
Inc. ("World Access"). Without limiting the generality of the foregoing, this
Agreement secures the payment of all amounts which constitute part of the
Obligations and would be owed by Debtor, each Subsidiary, or any other Person to
WorldCom under any WorldCom Document, but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding under any Debtor Relief Law involving
Debtor, any Subsidiary, or any other Person (including, however, all such
amounts which would become due or would be secured but for the filing of any
petition in bankruptcy, or the commencement of any insolvency, reorganization,
or like proceeding of Debtor, any Subsidiary or any other Person under any
Debtor Relief Law).
2.3 DEBTOR REMAINS LIABLE. Anything herein to the contrary
notwithstanding, (a) Debtor shall remain liable under the contracts and
agreements included in the Pledged Collateral to the extent set forth therein to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by Agent of any of the
rights hereunder shall not release Debtor from any of its duties or obligations
under the contracts and agreements included in the Pledged Collateral, and (c)
neither Agent nor WorldCom shall have any obligation or liability under the
contracts and agreements included in the Pledged Collateral by reason of this
Agreement, nor shall Agent or WorldCom be obligated to perform any of the
obligations or duties of Debtor thereunder or to take any action to collect or
enforce any claim for payment assigned hereunder.
2.4 AGREEMENT WITH RESPECT TO PLEDGED COLLATERAL. Debtor and Agent
agree that to the extent that any of the Pledged Collateral may be deemed to be
a Fixture as opposed to Equipment, Inventory or any other form of Pledged
Collateral that may be perfected by the filing of a UCC financing statement, it
is the intention of each of these parties that such Pledged Collateral be deemed
to be Equipment, Inventory or any other form of Pledged Collateral that may be
perfected by the filing of a UCC financing statement and such Pledged Collateral
not be deemed to be a Fixture.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES. Debtor represents and
warrants, with respect to itself and the Pledged Collateral, as follows:
(a) All of the Equipment and Inventory pledged by Debtor
hereunder is located at the places specified on SCHEDULE 2 hereto (as
supplemented from time to time by Debtor by written notice to Agent) or in
transit to a place specified on SCHEDULE 2 hereto (as supplemented from time to
time by Debtor by written notice to Agent) or in transit (i) for sale to a
third-party purchaser that, upon such sale, will become the obligor under a
Receivable or (ii) in the ordinary course of Debtor's business. The chief place
of business and chief executive office of Debtor and the office where Debtor
keeps all of its records concerning the Receivables are set forth on SCHEDULE 15
of the Workout Agreement.
(b) All chattel paper, promissory notes, or other instruments
evidencing the Receivables, and all Investment Property have been delivered and
pledged to Agent or World Access, on behalf of Agent, as the case may be, duly
endorsed and accompanied by such duly executed instruments of transfer or
assignment as are necessary for such pledge to be held as Pledged Collateral.
(c) Debtor is the legal and beneficial owner of, or has valid
leasehold title to, the Pledged Collateral pledged by it free and clear of any
Lien, security interest, option or other charge or encumbrance except for the
security interest created by this Agreement (other than Permitted Liens, as
defined in the Credit Agreement. No effective financing statement or other
similar document used to perfect and preserve a security interest under the laws
of any jurisdiction covering all or any part of the Pledged Collateral is on
file in any recording office, except such as may have been filed (i) in respect
of Permitted Liens and (ii) in favor of Agent relating to this Agreement. As of
the date hereof, Debtor (including any corporate or partnership predecessor) has
not existed or operated under any name other than as stated in the preamble to
this Agreement.
(d) Debtor has possession and/or control of the Equipment and
Inventory pledged by it hereunder.
(d) This Agreement and the pledge of the Pledged Collateral
pursuant hereto creates a valid security interest in the Pledged Collateral
senior to all other liens and encumbrances, other than the Permitted Liens,
securing the payment of the Obligations which upon filings and other necessary
actions to perfect such security interest will create a perfected, security
interest in such collateral, junior only to the Permitted Liens, to the extent
that such security interest can be perfected by filing a UCC financing
statement.
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(e) Except as described on SCHEDULE 3 hereto, no consent of
any other Person and no authorization, approval, or other action by, and no
notice to or filing with, any tribunal is required (i) for the pledge by Debtor
of the Pledged Collateral pledged by it hereunder, for the grant by Debtor of
the security interest granted hereby or for the execution, delivery, or
performance of this Agreement by Debtor, (ii) for maintenance of the pledge,
assignment, and security interest created hereby or for the perfection of the
pledge, assignment, and security interest created hereby by filing a UCC- I
financing statement centrally, or in the case of dual filing states, centrally
and at the county level, as applicable (including the first priority nature of
such pledge, assignment, and security interest except for Permitted Liens) or
(iii) except as otherwise provided by law, for the exercise by Agent of the
rights provided for in this Agreement or the remedies in respect of the Pledged
Collateral pursuant to this Agreement, except for consents, authorizations,
filings, notices, actions, and approvals by or with the FCC or any applicable
PUC ("FCC and PUC Consents").
(f) Debtor possesses all material licenses and permits,
including but not limited to all applicable certificates of occupancy, licenses,
and permits and all health and sanitation permits, required for the operations
of its business.
(g) Debtor has made no contract or arrangement of any kind or
type whatsoever (whether oral or written, formal, or informal), the performance
of which by the other party thereto could give rise to a lien on the Pledged
Collateral (other than Permitted Liens), except for its contracts (all of which
have been disclosed in writing to Agent) made by Debtor with parties who have
executed and delivered lien waivers to Debtor, and which, in the opinion of
Agent's counsel, will not create rights in existing or future lien claimants
which may be superior to this Agreement.
ARTICLE IV
COVENANTS
4.1 FURTHER ASSURANCES.
(a) Debtor agrees to obtain the necessary consent to or waiver
of any restriction from any Person so as to enable Debtor to effectively grant
to Agent the security interests contemplated under this Agreement.
(b) Debtor agrees that from time to time, at the expense of
Debtor, Debtor will promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or desirable, or
that Agent may reasonably request, in order to perfect and protect any pledge,
assignment, or security interest granted or purported to be granted hereby, and
the priority thereof, or to enable Agent to exercise and enforce its rights and
remedies hereunder with respect to any Pledged Collateral. Without limiting the
generality of the foregoing, upon written request by Agent, Debtor will: (i)
mark conspicuously each chattel paper included in the Receivables, and, at the
request of Agent, each of its records pertaining to the Pledged Collateral with
the following legend:
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THIS INSTRUMENT IS SUBJECT TO A SECURITY INTEREST AND LIEN PURSUANT TO
A SECURITY AGREEMENT DATED AS OF APRIL 12, 2000, MADE BY DEBTOR, IN
FAVOR OF MCI WORLDCOM NETWORK SERVICES, INC., AS AGENT FOR MCI
WORLDCOM, INC. AND ITS SUBSIDIARIES AND AFFILIATES.
or such other legend, in form and substance satisfactory to and as specified by
Agent, indicating that such chattel paper or Pledged Collateral is subject to
the pledge, assignment, and security interest granted hereby; (ii) if any
Pledged Collateral shall be evidenced by a promissory note or other instrument
or be chattel paper, deliver and pledge to Agent hereunder such note,
instrument, or chattel paper duly endorsed and accompanied by duly executed
instruments of transfer or assignment, all in form and substance satisfactory to
Agent; and (iii) execute and file such financing or continuation statements, or
amendments thereto and such other instruments or notices, as may be necessary or
desirable, or as Agent may request, in order to perfect and preserve the pledge,
assignment, and security interest granted or purported to be granted hereby.
(c) Debtor hereby authorizes Agent to file one or more
financing or continuation statements, and amendments thereto, relating to all or
any part of the Pledged Collateral without the signature of Debtor where
permitted by applicable law. A photocopy or other reproduction of this Agreement
or any financing statement covering the Pledged Collateral or any part thereof
shall be sufficient as a financing statement where permitted by applicable law.
(d) Debtor will furnish to Agent from time to time statements
and schedules (including schedules to this Agreement) further identifying and
describing the Pledged Collateral and such other reports in connection with the
Pledged Collateral as Agent may reasonably request, all in reasonable detail.
Debtor will promptly furnish to Agent a copy of each new or renewal,
restatement, or modification of any agreement included in Pledged Collateral or
otherwise described in Section 2.1 herein.
(e) From and after the date hereof, Debtor shall not establish
or maintain any deposit or similar bank account unless Agent receives prior
written notice thereof, Debtor executes and delivers to Agent assignments of
such account in such form as Agent may request, and the financial institution in
which such account will be maintained delivers to Agent acknowledgments of the
assignment of such account in form and substance satisfactory to Agent.
(f) In addition to such other information as shall be
specifically provided for herein, Debtor and each of Debtor's Subsidiaries shall
permit such site visitations and inspections and furnish to Agent such other
information with respect to the Pledged Collateral as Agent may reasonably
request from time to time in connection with the Pledged Collateral, or the
protection, preservation, maintenance or enforcement of the security interest or
the Pledged Collateral as provided pursuant to the terms of the Credit
Agreement.
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(g) Debtor shall not sell, lease, exchange, or otherwise
dispose of any of the Pledged Collateral without the prior written consent of
Agent.
(h) Debtor shall not suffer to exist any loss, theft, damage,
destruction, levy, seizure, or attachment of any of the Pledged Collateral.
(i) Debtor shall diligently and in good faith use its best
efforts to protect the value of the Pledged Collateral and to prevent any action
from being taken that would or could, in the exercise of reasonable business
judgment, jeopardize or diminish the security afforded to Agent by this
Agreement or in any way diminish the value of the Pledged Collateral.
4.2 EQUIPMENT, FIXTURES AND INVENTORY.
(a) Debtor shall keep the Equipment, Fixtures, and Inventory
pledged by it hereunder (other than Inventory sold in the ordinary course of
business) at the places therefor specified in Section 3.1(a) herein or, upon
thirty days' prior written notice to Agent, at such other places in such
jurisdiction where all action required by Section 4.1 herein shall have been
taken with respect to the Equipment and Inventory.
(b) Debtor shall, and shall cause each Subsidiary of Debtor
to, maintain or cause to be maintained all their material properties necessary
to the conduct of their business (whether owned or held under lease) in
reasonably good repair, working order, and condition, taken as a whole, and from
time to time make or cause to be made all appropriate repairs, renewals,
replacements, additions, betterments, and improvements thereto.
(c) Debtor shall, and shall cause each Subsidiary of Debtor
to, pay and discharge all taxes, assessments, and governmental charges or levies
imposed upon it or its income or properties prior to the date on which penalties
attach thereto, and all lawful material claims for labor, materials, and
supplies which, if unpaid, might become a Lien upon any of their properties,
except those taxes, assessments, and charges contested by Debtor diligently in
good faith, and for which adequate reserves have been established in accordance
with GAAP. Debtor shall, and shall cause each Subsidiary of Debtor to, timely
file all information returns required by federal, state, or local tax
authorities.
4.3 INSURANCE. Debtor shall, and shall cause each Subsidiary
of Debtor to, maintain insurance from responsible companies in such amounts
and against such risks as shall be customary and usual in the industry for
companies of similar size and capability, but in no event less than the
amount and types insured as of the date hereof. Debtor shall promptly furnish
to Agent evidence of such insurance in form and content satisfactory to
Agent. If Debtor fails to perform or observe any applicable covenants as to
insurance on any of such Pledged Collateral, Agent may at its own option
obtain insurance on only Agent's interest in such Pledged Collateral, any
premium thereby paid by Agent to become part of the Obligations and bear
interest as provided in the Note. In the event Agent maintains such
substitute insurance, the additional premium for such insurance shall be due
on
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demand and payable by Debtor to Agent in accordance with any notice
delivered to Debtor by Agent. Debtor hereby grants Agent a security interest
in any refunds of unearned premiums in connection with any cancellation,
adjustment, or termination of any policy of insurance required by Agent and
in all proceeds of such insurance and hereby appoints Agent its
attorney-in-fact to endorse any check or draft that may be payable to Debtor
in order to collect such refunds or proceeds. Any such sums collected by
Agent shall be credited, except to the extent applied to the purchase by
Agent of similar insurance, to any amounts then owing on the Obligations in
accordance with the Note.
4.4 PLACE OF PERFECTION; RECORDS; COLLECTION OF RECEIVABLES.
(a) Debtor shall keep its chief place of business and chief
executive office and the office where it keeps its records concerning the
Receivables, and the originals of all chattel paper (until delivered to Agent),
at the location therefor specified in Section 3.1(a) herein. Debtor shall have
given written notice thereof to Agent no later than thirty (30) days prior to
the moving thereto. Debtor will hold and preserve such records and chattel paper
and will permit representatives of Agent to inspect and make abstracts from and
copies of such records and chattel paper as provided in the Credit Agreement.
Debtor shall deliver to Agent or World Access, as the case may be, all
instruments and Investment Property to be held by Agent or World Access, as the
case may be, as collateral.
(b) Except as otherwise provided in this Section 4.4(b),
Debtor shall continue to collect, at its own expense, all amounts due or to
become due Debtor under the Receivables. In connection with such collections,
Debtor may take (and, at Agent's direction, shall take) such action as Debtor or
Agent may deem reasonably necessary or advisable to enforce collection of the
Receivables; PROVIDED, however, that Agent shall have the right (upon an Event
of Default which is continuing) (without notice to Debtor) to notify the account
debtors or obligors under any Receivables of the assignment of such Receivables
to Agent and to direct such account debtors or obligors to make payment of all
amounts due or to become due to Debtor thereunder directly to Agent and, at the
expense of Debtor, to enforce collection of any such Receivables and to adjust,
settle, or compromise the amount or payment thereof, in the same manner and to
the same extent as Debtor might have done. Upon and after the occurrence of a
Default or Event of Default that is continuing, all amounts and proceeds
(including instruments) received by Debtor in respect of the Receivables shall
be received in trust for the benefit of Agent hereunder, shall be segregated
from other funds of Debtor, and shall be forthwith paid over to Agent in the
same form as so received (with any necessary indorsement) to be held as cash
collateral and either (a) released to Debtor so long as no Default or Event of
Default shall have occurred and be continuing or (b) if any Default or Event of
Default shall have occurred and be continuing, applied as provided herein.
Debtor shall not adjust, settle, or compromise the amount or payment of any
Receivable, release wholly or partly any account debtor or obligor thereof, or
allow any credit or discount thereon.
4.5 TRANSFERS AND OTHER LIENS. Debtor shall not (a) sell, assign
(by operation of law or otherwise), or otherwise dispose of, or grant any
option with respect to, any of the Pledged Collateral, except for sales of
Inventory in the ordinary course of business, or (b) create or permit
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to exist any Lien, security interest, option or other charge or encumbrance
upon or with respect to any of the Pledged Collateral, except for Permitted
Liens and the security interest under this Agreement.
4.6 AGENT APPOINTED ATTORNEY-IN-FACT. Debtor hereby irrevocably
appoints Agent as Debtor's attorney-in-fact, with full authority in the place
and stead of Debtor and in the name of Debtor or otherwise to take any action
and to execute any instrument which Agent may deem necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation
(provided that the actions listed in each clause below, other than the
obtainment and adjustment of insurance, may only be taken or exercised after
the occurrence of an Event of Default):
(a) to obtain and adjust insurance required to be paid
to Agent pursuant to Section 4.3 herein;
(b) to ask, demand, collect, sue for, recover, compromise,
receive, and give acquittance and receipts for moneys due and to become due
under or in connection with the Pledged Collateral;
(c) to endorse and collect any drafts or other instruments,
documents, and chattel paper; and
(d) to file any claims or take any action or institute any
proceedings which Agent may deem necessary or desirable for the collection of
any of the Pledged Collateral or otherwise to enforce compliance with the terms
and conditions of any Pledged Collateral or the rights of Agent with respect to
any of the Pledged Collateral. UPON AND AFTER THE OCCURRENCE OF A DEFAULT OR
EVENT OF DEFAULT, DEBTOR HEREBY IRREVOCABLY GRANTS TO AGENT DEBTOR'S PROXY
(EXERCISABLE FROM AND AFTER THE OCCURRENCE OF AN EVENT OF DEFAULT) TO VOTE ANY
SECURITIES COLLATERAL AND APPOINTS AGENT DEBTOR'S ATTORNEY-IN-FACT TO PERFORM
ALL OBLIGATIONS OF DEBTOR UNDER THIS AGREEMENT AND TO EXERCISE ALL OF AGENT'S
RIGHTS HEREUNDER. THE PROXY AND POWER OF ATTORNEY HEREIN GRANTED, AND EACH STOCK
POWER AND SIMILAR POWER NOW OR HEREAFTER GRANTED (INCLUDING ANY EVIDENCED BY A
SEPARATE WRITING), ARE COUPLED WITH AN INTEREST AND ARE IRREVOCABLE PRIOR TO
FINAL PAYMENT IN FULL OF THE OBLIGATIONS.
ARTICLE V
RIGHTS AND POWERS OF AGENT
5.1 AGENT MAY PERFORM. If Debtor fails to perform any agreement
contained herein, Agent may itself perform, or cause performance of, such
agreement, and the expenses of Agent incurred in connection therewith shall
be payable by Debtor under Section 5.4 herein.
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5.2 AGENT'S DUTIES. The powers conferred on Agent hereunder
are solely to protect its interest in the Pledged Collateral and shall not
impose any duty upon Agent to exercise any such powers. Except for the safe
custody of any Pledged Collateral in its possession and the accounting for
moneys actually received by it hereunder, Agent shall have no duty as to any
Pledged Collateral, as to ascertaining or taking action with respect to
calls, conversions, exchanges, maturities, tenders, or other matters relative
to any Pledged Collateral, whether or not Agent has or is deemed to have
knowledge of such matters, or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights pertaining to any
reasonable care in the custody and preservation of any Pledged Collateral in
its possession if such Pledged Collateral is accorded treatment substantially
equal to that which Agent accords its own property. Except as provided in
this Section 5.2, Agent shall not have any duty or liability to protect or
preserve any Pledged Collateral or to preserve rights pertaining thereto.
Nothing contained in this Agreement shall be construed as requiring or
obligating Agent, and Agent shall not be required or obligated, to (a)
present or file any claim or notice or take any action with respect to any
Pledged Collateral or in connection therewith or (b) notify Debtor of any
decline in the value of any Pledged Collateral.
5.3 REMEDIES. If any Event of Default shall have occurred and be
continuing:
(a) Agent may exercise in respect of the Pledged Collateral,
in addition to other rights and remedies provided for herein or otherwise
available to Agent, all the rights and remedies of a secured party on default
under the Uniform Commercial Code in effect in the state in which the Pledged
Collateral is located at that time (whether or not the Uniform Commercial Code
applies to the affected Pledged Collateral), and also may (i) require Debtor to,
and Debtor hereby agrees that it will at its expense and upon request of Agent
forthwith, assemble all or part of the Pledged Collateral as directed by Agent
and make it available to Agent at a place to be designated by Agent which is
reasonably convenient to both parties or (ii) without notice, except as
specified below, sell the Pledged Collateral or any portion thereof in one or
more parcels at public or private sale, at any of Agent's offices or elsewhere,
for cash, on credit or for future delivery, and upon such other terms as Agent
may deem commercially reasonable. Debtor agrees that, to the extent notice of
sale shall be required by law, ten (10) days' notice to Debtor of the time and
place of any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. Agent shall not be obligated to make
any sale of Pledged Collateral regardless of notice of sale having been given.
Agent may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned.
(b) All cash proceeds received by Agent upon any sale of,
collection of, or other realization upon, all or any part of the Pledged
Collateral shall be applied as follows:
FIRST: To the payment of all out-of-pocket costs
and expenses incurred in connection with the sale of,
collection of, or other realization upon Pledged
Collateral, including reasonable attorneys' fees and
disbursements;
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SECOND: To the payment of the Obligations as provided
in the Credit Agreement and in such order and in such
manner consistent with applicable laws as Agent in its
reasonable discretion shall decide (with Debtor
remaining liable for any deficiency); and
THIRD: To the extent of the balance (if any) of such
proceeds,to the payment of the balance (if any) of
such proceeds to Debtor or other Person legally
entitled thereto.
(c) All payments received by Debtor under or
in connection with any Pledged Collateral shall be received in trust for
the benefit of Agent, shall be segregated from other funds of Debtor, and
shall be forthwith paid over to Agent in the same form as so received (with
any necessary indorsement).
5.4 INDEMNITY AND EXPENSES.
(a) Debtor agrees to indemnify Agent from
and against any and all claims, losses, and liabilities (including
reasonable attorneys' fees) growing out of or resulting from this Agreement
(including, without limitation, enforcement of this Agreement), expressly
including such claims, losses, or liabilities arising out of mere negligence
of Agent, except claims, losses, or liabilities resulting from Agent's gross
negligence or willful misconduct.
(b) Debtor will upon demand pay to Agent
the amount of any and all reasonable expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, which Agent
may incur in connection with (i) the administration of this Agreement, (ii)
the custody, preservation, use, or operation of, or the sale of, collection
from, or other realization upon, any of the Pledged Collateral, (iii) the
exercise or enforcement of any of the rights of Agent hereunder, or (iv) the
failure by Debtor to perform or observe any of the provisions hereof. Any
payments so made shall be a part of the Obligations, shall be payable upon
demand, and shall bear interest as provided in Section 2 of the Credit
Agreement.
5.5 FURTHER APPROVALS REQUIRED. In connection with the exercise
by Agent of its rights hereunder that affects the disposition of or
use of any Pledged Collateral, it may be necessary to obtain the prior
consent or approval of tribunals and other Persons to a transfer or
assignment of Pledged Collateral, including, without limitation, the FCC and
any applicable public utility commission or similar commission ("PUC"). In
connection with the exercise by Agent of its rights hereunder relating to the
disposition of or operation under any license issued by the FCC or any
applicable PUC or any other authorizations, agreements, permits, licenses,
and franchises constituting property of Debtor, it may be necessary to obtain
the prior consent or approval of the FCC or any applicable PUC, other
governmental authority, or other Persons to the exercise of rights with
respect to the Pledged Collateral. Debtor hereby agrees to execute, deliver,
and file, and hereby appoints (to the extent permitted under applicable law)
Agent as its attorney upon the occurrence and during the continuation of an
Event of Default to execute, deliver, and file on Debtor's behalf and
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in Debtor's name, all applications, certificates, filings, instruments, and
other documents (including, but not limited to, any application for an
assignment or transfer of control or ownership) that may be necessary or
appropriate, in Agent's opinion, to obtain such consents or approvals. Debtor
further agrees to use its best efforts to obtain such consents or approvals
upon and after the occurrence of a Default or Event of Default that is
continuing. Debtor acknowledges that there is no adequate remedy at law for
failure by Debtor to comply with the provisions of this section and that such
failure would not be adequately compensable in damages and therefore agrees
that this Section 5.5 may be specifically enforced.
ARTICLE IV
MISCELLANEOUS
6.1 CUMULATIVE RIGHTS. All rights of Agent under the Loan
Documents are cumulative of each other and of every other Right which Agent
may otherwise have at law or in equity or under any other contract or other
writing for the enforcement of the security interest granted hereby or the
collection of the Obligations. The exercise of one or more rights shall not
prejudice or impair the concurrent or subsequent exercise of other rights.
6.2 MODIFICATION, AMENDMENTS, ETC. No amendment or waiver of any
provision of this Agreement, and no consent to any departure by Debtor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by Agent, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
6.3 CONTINUING SECURITY INTEREST. This Agreement shall create
a continuing security interest in the Pledged Collateral and shall (a)
remain in full force and effect until final payment in full of the
Obligations and all amounts payable under this Agreement, (b) be binding upon
Debtor, its successors, and assigns, and (c) inure to the benefit of and be
enforceable by Agent and its successors, transferees, and assigns.
6.4 GOVERNING LAW; WAIVER OF JURY TRIAL; SERVICE OF PROCESS.
(a) THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE
IN TULSA, OKLAHOMA, AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF OKLAHOMA AND THE UNITED STATES OF AMERICA,
EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST
GRANTED HEREBY, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PLEDGED
COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
OKLAHOMA. WITHOUT EXCLUDING ANY OTHER JURISDICTION AND NOT AS A LIMITATION OF
THIS SECTION 6.4, DEBTOR AGREES THAT THE STATE AND FEDERAL COURTS OF OKLAHOMA
LOCATED IN TULSA, OKLAHOMA, WILL HAVE JURISDICTION OVER ALL PROCEEDINGS IN
CONNECTION HEREWITH. TO THE
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MAXIMUM EXTENT PERMITTED BY LAW, DEBTOR AND AGENT HEREBY WAIVE ANY RIGHT THAT
EITHER MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE (WHETHER A CLAIM IN TORT,
CONTRACT, EQUITY, OR OTHERWISE) ARISING UNDER OR RELATING TO THIS AGREEMENT,
THE OTHER WORLDCOM DOCUMENTS, OR ANY RELATED MATTERS, AND AGREE THAT ANY SUCH
DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
(b) DEBTOR HEREBY WAIVES PERSONAL SERVICE OF ANY LEGAL
PROCESS UPON IT. DEBTOR AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON IT BY
REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO DEBTOR AT ITS ADDRESS
DESIGNATED FOR NOTICE UNDER THIS AGREEMENT AND SERVICE SO MADE SHALL BE
DEEMED TO BE COMPLETED FIVE DAYS AFTER DEPOSIT IN THE UNITED STATES MAIL.
NOTHING IN THIS SECTION 6.4 SHALL AFFECT THE RIGHT OF AGENT TO SERVE LEGAL
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
6.5 NO AGENCY. Neither Agent nor WorldCom is an agent or
representative of Debtor, and Debtor is not an agent or representative of
Agent or WorldCom, and nothing in this Agreement shall be construed to make
Agent or WorldCom liable to anyone for debts or claims accruing against
Debtor.
6.6 NO PARTNERSHIP OR JOINT VENTURE. This Agreement shall not in
any respect be interpreted, deemed, or construed as making Agent a partner or
joint venturer with Debtor or with any Subsidiary of Debtor or as creating
any similar relationship or entity, and Debtor agrees that Debtor will not
make any contrary assertion, contention, claim, or counterclaim in any
action, suit, or other legal proceeding involving Agent and Debtor.
6.7 AGENT'S RIGHT TO USE AGENTS. Agent may exercise its
rights under this Agreement through an agent or other designee.
6.8 NO INTERFERENCE, COMPENSATION, OR EXPENSE. Agent may
exercise its rights under this Agreement (a) without resistance or
interference by Debtor and (b) without payment of any rent, license fee, or
compensation of any kind to Debtor.
6.9 WAIVER. No waiver of any Event of Default shall be deemed to
be a waiver of any other subsequent Event of Default, nor shall any such
waiver be deemed to be a continuing waiver. No delay or omission by Agent in
exercising any Right hereunder, or under any other Loan Documents, shall
impair any such Right or be construed as a waiver thereof or any acquiescence
therein, nor shall any single or partial exercise of any such Right preclude
other or further exercise thereof, or the exercise of any other Right of
Agent hereunder or under such other agreements.
6.10 WAIVERS BY DEBTOR. Debtor waives notice of the creation,
advance, increase, existence, extension, or renewal of, or of any indulgence
with respect to, the Obligations; waives
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presentment, demand, notice of dishonor, and protest; and waives notice of
the amount of the Obligations outstanding at any time, notice of any change
in financial condition of any Subsidiary. Debtor waives (a) any claim that,
as to any part of the Pledged Collateral, a public sale, should Agent elect
so to proceed, is, in and of itself, not a commercially reasonable method of
sale for such Pledged Collateral, (b) except as otherwise provided in this
Agreement, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE OR JUDICIAL
HEARING IN CONNECTION WITH AGENT'S DISPOSITION OF ANY OF THE PLEDGED
COLLATERAL, INCLUDING ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY
PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT THAT DEBTOR WOULD OTHERWISE
HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY
STATE, AND ALL OTHER REQUIREMENTS AS TO THE TIME, PLACE, AND TERMS OF SALE OR
OTHER REQUIREMENTS WITH RESPECT TO THE ENFORCEMENT OF AGENT'S RIGHTS
HEREUNDER, and (c) all rights of redemption, appraisal, or valuation.
6.11 OTHER PARTIES AND OTHER COLLATERAL. No renewal, increase, or
extension of, or any other indulgence with respect to, the Obligations or any
part thereof, no release, exchange, or taking of any security, no release of
any Person (including any Subsidiary, maker, endorser, guarantor, or surety)
liable on the Obligations, no delay in enforcement of payment, no delay or
omission or lack of diligence or care in exercising any Right or power with
respect to the Obligations or any security therefor or guaranty thereof or
under this Agreement, and no other circumstance or event which might
constitute a defense available to or discharge of Debtor, any Subsidiary, or
any other Person, shall in any manner impair or affect the rights of Agent
hereunder, under any other of the Loan Documents, at law, or in equity. Agent
need not file suit or assert a claim for personal judgment against any Person
for any part of the Obligations or seek to realize upon any other security
for the Obligations before foreclosing upon the Pledged Collateral for the
purpose of paying the Obligations. Debtor waives any Right to the benefit of
or to require or control application of any other security or proceeds
thereof and agrees that Agent shall have no duty or obligation to Debtor to
apply any such other security or proceeds thereof to the Obligations. Debtor
hereby waives all rights by which it might be entitled to require suit on an
accrued right of action in respect of any of the Obligations or require suit
against Debtor, any Subsidiary, or others, whether arising pursuant to any
statutory or case law of any jurisdiction or otherwise.
6.12 NOTICES. All notices, communications, and materials to be
given or delivered pursuant to this Agreement shall be given or delivered in
the manner provided in, and shall be deemed the effective in accordance with,
the provisions of the Credit Agreement. For purposes of notices,
communications, and materials to be given or delivered pursuant to this
Agreement, addresses and facsimile numbers and the individuals or departments
to whose attention the same shall be directed are, for Agent, as set forth in
the Credit Agreement and are, for Debtor, as follows:
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If to Debtor: ____________________________
____________________________
____________________________
____________________________
____________________________
with a copy to: Riordan & McKinzie
Twenty-Ninth Floor
300 South Grand Avenue
Los Angeles, California 90071
Facsimile No.: (213) 229-8550
Attention: Richard J. Welch
or at such other addresses or facsimile numbers or to the attention of such
other individuals or departments as Debtor may hereafter specify in a notice
to the other party specifically captioned "Notice of Change of Address."
6.13 PARTIES BOUND. This Agreement shall be binding on Debtor and
its successors, assigns, and other legal representatives and shall inure to
the benefit of Agent and its successors and assigns; PROVIDED, however, that
Debtor may not assign its rights or obligations hereunder without the prior
written consent of Agent. The rights, powers, and interests held by Agent
hereunder may be transferred or assigned, in whole or in part.
6.14 SEVERABILITY. If any provision of this Agreement is held
to be illegal, invalid, or unenforceable under present or future laws, such
provision shall be fully severable, this Agreement shall be construed and
enforced as if such illegal, invalid, or unenforceable provision had never
comprised a part hereof, and the remaining provisions hereof shall remain in
full force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance therefrom. Furthermore, in lieu
of such illegal, invalid, or unenforceable provision there shall be added
automatically as a part of this Agreement a legal, valid, and enforceable
provision as similar in terms to the illegal, invalid, or unenforceable
provision as may be possible.
6.15 CONTROL. Notwithstanding anything herein to the contrary,
this Agreement and the transactions contemplated hereby do not and shall not
constitute, create, or have the effect of constituting or creating, directly
or indirectly, actual or practical ownership by Agent of Debtor or any issuer
of the Pledged Collateral, or control, affirmative or negative, direct or
indirect, by Agent or WorldCom over the management or any aspect of the
day-to-day operation of Debtor or any such issuer, which control remains in
Debtor, each such issuer, and their respective boards of directors, partners,
and officers (as appropriate); PROVIDED, however, that if Agent becomes the
owner of any partnership interest, or other equity or ownership interest in
any issuer whether through foreclosure or otherwise, Agent shall be entitled
to exercise such legal rights as it may have by being an owner of such
partnership interest or other equity or ownership interest.
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6.16 HEADINGS; CONSTRUCTION. The headings of the articles,
sections, and subsections of this Agreement are for the convenience of
reference only, are not to be considered a part hereof or thereof, and shall
not limit or otherwise affect any of the terms hereof. Whenever the singular
or plural number, or the masculine, feminine, or neuter gender is used
herein, each shall equally include the other.
6.17 WORLDCOM DOCUMENT. This Agreement is a WorldCom Document
executed pursuant to the Workout Agreement and shall (unless otherwise
expressly indicated herein) be construed, administered, and applied in
accordance with the terms and provisions thereof.
6.18 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but
one and the same instrument.
6.19 ENTIRE AGREEMENT. THIS AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES HERETO REGARDING THE SUBJECT MATTER HEREOF AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES HERETO REGARDING THE SUBJECT MATTER HEREOF.
THERE ARE NO CONTEMPORANEOUS ORAL AGREEMENTS WITH RESPECT TO THE SUBJECT
MATTER HEREOF.
6.20 TIME. Time is of the essence of this Agreement.
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IN WITNESS WHEREOF, Debtor and Agent, for the benefit of WorldCom,
have caused this Agreement to be duly executed and delivered as of the date
first above written.
DEBTOR:
By:________________________
By:_________________________
Its:________________________
Attest:_________________________________
Name: __________________________________
Title:__________________________________
(CORPORATE SEAL)
AGENT:
MCI WORLDCOM NETWORK SERVICES, INC.
By:_____________________________________
Name:___________________________________
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PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT dated as of April 12, 2000 (this "Agreement"),
by ____________________________ ("Pledgor" or "Debtor"), is made in favor of
MCI WORLDCOM NETWORK SERVICES, INC., a Delaware corporation (the "Agent"),
for the benefit of MCI WORLDCOM, INC., its subsidiaries and affiliates
(collectively, "WorldCom").
W I T N E S S E T H:
WHEREAS, WorldCom provides telecommunications services to Debtor
pursuant to the Service Agreements; and
WHEREAS, Debtor is in default to WorldCom for, INTER ALIA, failure
to pay its obligations to WorldCom in a timely manner (the "Past Due
Indebtedness"); and
WHEREAS, Debtor and WorldCom have agreed to restructure certain of
the Past Due Indebtedness due to MCI WorldCom Network Services, Inc., as of
February 3, 2000, pursuant to the terms and conditions of the Workout
Agreement between the parties of even date herewith (the "Workout
Agreement"); and
WHEREAS, Debtor and WorldCom have agreed to restructure certain of
the Past Due Indebtedness due to MCI WorldCom Network Services, Inc., as of
February 3, 2000, in the form of a Promissory Note in the principal amount of
$56,017,698.87, of even date herewith (the "Note"), which has been executed
and delivered by Debtor to MCI WorldCom Network Services, Inc.; and
WHEREAS, Pledgor has agreed to secure its performance and payment of
(a) all obligations for the provision of services by WorldCom to Debtor
pursuant to any, and all related notes, instruments, documents, or agreements
and any amendments, extensions, renewals or replacements to or of any of the
foregoing; and (b) all other obligations and indebtedness of Debtor to
WorldCom of whatever kind and however created, whether presently existing or
hereafter arising; and
WHEREAS, Pledgor has determined that the execution, delivery, and
performance of this Agreement is necessary and convenient to the conduct,
promotion, and attainment of Pledgor's business; and
WHEREAS, Pledgor desires to induce WorldCom to enter into the
financial restructuring with the Debtor, to extend the term of the Past Due
Obligations, and to facilitate the pending merger between Debtor and World
Access, Inc. ("WAXS"), all of which are reasonably expected to benefit,
directly or indirectly, Pledgor.
NOW, THEREFORE, in consideration of the premises set forth herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and in order to induce WorldCom, as set forth
above, Pledgor hereby agrees with Agent for its benefit as follows:
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ARTICLE I
PLEDGE
1.01. PLEDGE. Pledgor hereby grants, pledges, assigns, hypothecates,
and transfers to Agent, a first and prior pledge and security interest in
100% of all Capital Stock owned by Pledgor in all domestic Persons
(specifically excluding all Persons organized or existing under the laws of
any jurisdiction other than the United States of America or any state
thereof) and each other Person which is a successor to such Persons (singly,
"Issuer" and collectively, "Issuers"), now or hereafter owned beneficially or
of record by Pledgor, and any certificate or instrument evidencing such
interest, including, without limitation, the interests listed on Schedule 1
hereto, and, without affecting the obligation of Pledgor or Issuer under any
agreement prohibiting such action, in the event of any consolidation or
merger in which each Issuer is not the surviving entity, or in the event of
any sale, lease, transfer, or other disposition of all or substantially all
of the assets of such Issuer, all Capital Stock, equity, partnership, limited
liability company ("LLC"), or other interest of the successor entity formed
by or resulting from such consolidation or merger, or of the Person to which
such sale, lease, transfer, or other disposition shall have been made, owned
by Pledgor, and all proceeds and products of the foregoing (collectively, the
"Capital Stock Collateral"), to secure the payment and performance of all of
the Obligations.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.01. REPRESENTATIONS AND WARRANTIES CONCERNING PLEDGOR. Pledgor
represents and warrants to Agent that (a) the chief place of business and
chief executive office of Pledgor is located at 223 E. De La Guerra, Santa
Barbara, California 93101, and (b) no consent of any other Person and no
authorization, approval, or other action by, and no notice to or filing with,
any tribunal is required (i) for the pledge by Pledgor of the Capital Stock
Collateral pledged by it hereunder, for the grant by Pledgor of the security
interest granted hereby or for the execution, delivery or performance of this
Agreement by Pledgor, (ii) for the perfection or maintenance of the pledge,
assignment and security interest created hereby (including the first-priority
nature of such pledge, assignment and security interest), or (iii) for the
exercise by Agent of the rights provided for in this Agreement or the
remedies in respect of the Capital Stock Collateral pursuant to this
Agreement.
2.02. REPRESENTATIONS AND WARRANTIES CONCERNING CAPITAL STOCK
COLLATERAL. Pledgor represents and warrants to Agent that (a) Pledgor is the
sole legal and beneficial owner of the Capital Stock Collateral pledged by it
free and clear of any Lien, other than the Lien in favor of WAXS, security
interest, option or other charge or encumbrance except for the security
interest created by this Agreement or Permitted Liens; (b) no effective
financing statement or other similar document used to perfect and preserve a
security interest under the laws of any jurisdiction covering all or any part
of the Capital Stock Collateral is on file in any recording office, except
such as may have been filed in favor of WAXS or in favor of Agent relating to
this Agreement; (c) Schedule 1 is a complete and correct description of all
interest of Pledgor in each of its Subsidiaries, including each class of
interest and number of units or percentage of ownership owned by Pledgor; (d)
the pledge, assignment, and delivery of the Capital Stock Collateral
hereunder, and filing of an appropriate
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financing statement, create a valid first and prior perfected security
interest in the Capital Stock Collateral, securing the Obligations; (e) the
Capital Stock pledged hereunder is duly authorized, validly issued, fully
paid, and non-assessable and was not issued in violation of the rights of any
Person; (f) no unpaid capital call or dispute exists with respect to any of
the Capital Stock Collateral; (g) none of the Capital Stock Collateral is
evidenced by a certificate, instrument, or other writing that has not been
delivered to Agent; (h) the interest of Pledgor in each of its Subsidiaries
is a 100% interest of all Capital Stock of Pledgor's Subsidiaries specified
on Schedule 1 unless otherwise indicated on Schedule 1; (i) none of the
Capital Stock Collateral is subject to any buy-sell, voting trust, transfer
restriction (other than transfer restrictions arising under the Exchange
Act), preferential right to purchase, or similar agreement or any option,
warrant, put or call or similar agreement, which would restrict Pledgor's
ability to pledge same hereunder; and (j) Pledgor's federal taxpayer
identification number is 77-0362681. The delivery at any time by Pledgor to
Agent or WAXS, as the case may be, of the Capital Stock Collateral shall
constitute a representation and warranty by Pledgor under this Agreement
that, with respect to such Capital Stock Collateral, Pledgor is the sole
legal and beneficial owner of the Capital Stock Collateral, and that the
matters set forth in this Section 2.02 are true and correct with respect to
such Capital Stock Collateral.
2.03. REPRESENTATIONS AND WARRANTIES CONCERNING BENEFIT. Pledgor
represents and warrants to Agent that (a) the value of the consideration
received and to be received by Pledgor is reasonably worth at least as much
as the liability and obligation of Pledgor hereunder, and such liability and
obligation may reasonably be expected to benefit Pledgor directly or
indirectly; and (b) neither Agent nor any other Person has made any
representation, warranty, or statement to Pledgor (other than as set forth in
the Loan Documents) in order to induce Pledgor to execute this Agreement.
ARTICLE III
COVENANTS
3.01. AFFIRMATIVE COVENANTS. Pledgor covenants and agrees (a)
promptly to deliver to WAXS, on behalf of Agent, all instruments,
certificates, documents, or agreements evidencing any of the Capital Stock
Collateral; (b) promptly to notify Agent of any material change in any fact
or circumstances warranted or represented by Pledgor in this Agreement or in
any other WorldCom Document; (c) promptly to notify Agent of any claim,
action, or proceeding affecting Pledgor's title to the Capital Stock
Collateral, or any part thereof, or the security interest therein granted
hereunder, and, at the request of Agent, appear in and defend, at Pledgor's
expense, any such action or proceeding; (d) promptly to pay to Agent the
amount of all court costs and reasonable attorney's fees incurred by Agent
hereunder; and (e) promptly notate the lien and security interest of Agent on
its books and records related to the Capital Stock Collateral.
3.02. NEGATIVE COVENANTS. Pledgor covenants and agrees that it shall
not (a) transfer or seek to transfer directly, or create any other security
interest or pledge in, mortgage, or otherwise encumber the Capital Stock
Collateral or any part thereof, or permit the same to be or become subject to
any lien, attachment, execution, sequestration, other legal or equitable
process, or any encumbrance of any kind or character, or grant any option,
warrant, or other rights in the Capital Stock Collateral in favor of any
Person other than Agent; (b) cause or permit any Issuer to authorize
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and issue any additional Capital Stock or take any other action that would
otherwise dilute any of the Capital Stock Collateral; (c) approve any
amendment to the articles of incorporation, partnership agreement, LLC
agreement, by-laws, or other organizational or governance document of any
Issuer; (d) permit the merger, consolidation or dissolution of any Issuer, or
the sale by any Issuer of any material portion of its assets other than in
the ordinary course of business; or (e) sell, lease, transfer or otherwise
dispose of any Capital Stock Collateral in any manner.
3.03. RIGHT TO DISTRIBUTIONS. With respect to any certificates,
bonds, or other instruments or securities constituting a part of the Capital
Stock Collateral, Agent, shall have authority during the continuance of an
Event of Default, without notice to Pledgor, either to have the same
registered in Agent's name, or in the name of a nominee, and, with or without
such registration, to demand of the Issuer thereof, and to receive and
receipt for, any and all distributions (including any stock or similar
dividend or distribution) payable in respect thereof, whether they be
ordinary or extraordinary. Subject to the next sentence hereof, if Pledgor
shall become entitled to receive or shall receive any interest in or
certificate (including, without limitation, any interest in or certificate
representing a distribution in connection with any reclassification,
increase, or reduction of capital or issued in connection with any
reorganization), or any option or rights arising from or relating to any of
the Capital Stock Collateral, whether as an addition to, in substitution of,
as a conversion of, or in exchange for any of the Capital Stock Collateral,
or otherwise, Pledgor agrees to accept the same as Agent's agent and to hold
the same in trust on behalf of and for the benefit of Agent, and to deliver
the same immediately to Agent, in the exact form received, with appropriate
undated stock, partnership interest, LLC membership interest, or similar
powers, duly executed in blank, to be held by Agent, subject to the terms
hereof, as Capital Stock Collateral. Unless an Event of Default is in
existence or would occur as a result thereof, Pledgor shall be entitled to
receive and utilize for its own purposes, all cash distributions (other than
distributions constituting a return of capital) paid in respect of any of the
Capital Stock Collateral. Agent shall be entitled to all distributions, and
to any sums paid upon or in respect of any Capital Stock Collateral, upon the
liquidation, dissolution, or reorganization of the Issuer thereof or which
constitute a return of capital, which distribution shall be paid to Agent, to
be held by it as additional Capital Stock Collateral security for the
Obligations, or for application to the Obligations at the discretion of
Agent. All distributions paid or distributed in respect of the Capital Stock
Collateral which are received by Pledgor in violation of this Agreement
shall, until paid or delivered to Agent, be held by Pledgor in trust as
additional Capital Stock Collateral for the Obligations.
3.04. RECORDS OF CAPITAL STOCK COLLATERAL. Pledgor at all times
shall maintain accurate books and records concerning the Capital Stock
Collateral. Pledgor shall cause all Issuers of the Capital Stock Collateral
to mark immediately all books and records of issue, registration, and
transfer relating to the Capital Stock Collateral with an entry showing the
Capital Stock Collateral assignment of the Capital Stock Collateral to Agent.
3.05. INFORMATION AND INSPECTION. Pledgor shall, and shall cause
each Issuer to, (a) allow Agent to inspect and copy, or at the option of
Agent, furnish copies of, all records relating to the Capital Stock
Collateral and the Obligations; and (b) furnish Agent such information as it
may
<PAGE>
request with respect to the Capital Stock Collateral, any distributions
thereon, and any proceeds thereof, at the time and in the form requested by
Agent.
3.06. INDEMNITY AND EXPENSES.
(a) Pledgor shall indemnify Agent from and against any and
all claims, losses, and liabilities (including reasonable attorneys' fees)
growing out of or resulting from this Agreement (including, without
limitation, enforcement of this Agreement), expressly including such claims,
losses, or liabilities arising out of mere negligence of Agent, except
claims, losses, or liabilities resulting from Agent's gross negligence or
willful misconduct.
(b) Pledgor will upon demand pay to Agent, as the case
may be, the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents,
which Agent may incur in connection with (i) the sale of, collection from, or
other realization upon, any of the Capital Stock Collateral; (ii) the
exercise or enforcement of any of the rights of Agent hereunder; or (iii) the
failure by Pledgor to perform or observe any of the provisions hereof.
(c) Any payment made or cost borne by Agent (or incurred
on Agent's behalf) shall be a part of the Obligations, shall be payable
upon demand, and shall bear interest as provided in the Credit Agreement.
3.07. ADDITIONAL DOCUMENTS. Pledgor, at its expense, shall take all
actions and execute and deliver such further instruments, agreements, blank
stock, partnership interest, LLC membership interest, or similar powers, and
assignments as Agent shall deem necessary or appropriate to obtain, maintain,
and perfect the security interest granted hereunder, including the security
interest in after-acquired Capital Stock Collateral granted herein, and to
enable Agent to comply with all applicable federal or state laws in order to
obtain or perfect Agent's interest in the Capital Stock Collateral, to effect
its rights hereunder, or to obtain distributions and other proceeds of the
Capital Stock Collateral as provided herein.
3.08. ADDITIONAL CAPITAL STOCK COLLATERAL. Upon acquisition by
Pledgor of any additional interest in any Issuer, Pledgor shall be deemed to
grant hereunder, and shall cause to be granted, Liens and security interests
on such interest to Agent, as security for the Obligations. Pledgor agrees to
take, and to cause to be taken, at its own cost and expense, such actions as
Agent shall deem necessary or appropriate to create, evidence, and perfect
such Liens and assure the priority of such Liens, which may only be junior to
the prior security interests, if any, of World Access, Inc.
ARTICLE V
RIGHTS AND POWERS OF AGENT
4.01. REMEDIES UPON DEFAULT. Agent, during the continuance of an
Event of Default and without liability to Pledgor, may without notice or
demand: obtain from any Person information regarding Pledgor, any Issuer of
the Capital Stock Collateral, or any of their businesses, which
<PAGE>
information any such Person also may furnish without liability to Pledgor or
any other Person; require Pledgor to give possession or control of any of the
Capital Stock Collateral to Agent; endorse as Pledgor's agent or
attorney-in-fact any instruments or documents representing proceeds of the
Capital Stock Collateral; unless earlier permitted hereunder, take control of
funds generated by the Capital Stock Collateral and any other proceeds, and
exercise all other rights which an owner of such Capital Stock Collateral may
exercise; at any time transfer any of the Capital Stock Collateral or
evidence thereof into its own name or that of its nominee; vote any Capital
Stock Collateral and exercise any rights with respect thereto; and demand,
collect, convert, redeem, receipt for, settle, compromise, adjust, sue for,
foreclose, or realize upon the Capital Stock Collateral, in its own name or
in the name of Pledgor as Agent may determine. Agent shall not be liable for
failure to collect any distribution or other proceeds or for any act or
omission on the part of Agent, its officers, agents, employees, or other
representatives, except willful misconduct and gross negligence. The
foregoing rights of Agent shall be in addition to, and not a limitation upon,
any right of Agent given by law, elsewhere in this Agreement or any other
Loan Documents, or otherwise.
4.02. RIGHT OF AGENT TO NOTIFY ISSUERS. At any time during the
continuance of an Event of Default and at such other times as Agent is
entitled to receive distributions and other property constituting Capital
Stock Collateral pursuant to the terms of this Agreement, Agent may notify
Issuers of the Capital Stock Collateral to make payments of the applicable
distributions directly to Agent, and Agent may take control of all applicable
proceeds of any Capital Stock Collateral. Until Agent elects to exercise such
right, during the continuance of an Event of Default, Pledgor, as agent of
Agent, shall collect and segregate all distributions and other amounts paid
or distributed with respect to the Capital Stock Collateral.
4.03. DELIVERY OF RECEIPTS TO AGENT. Upon Agent's demand during the
continuance of an Event of Default, Pledgor shall deposit, upon receipt and
in the form received, with any necessary endorsement, all payments received
as proceeds of or otherwise in connection with the Capital Stock Collateral,
in a special bank account in a bank of Agent's choice over which Agent alone
shall have power of withdrawal. The funds in such account shall secure the
Obligations. Agent is authorized, and is hereby appointed during the
continuance of an Event of Default as Pledgor's attorney-in-fact, to make any
endorsement in Pledgor's name and behalf. Pending such deposit, Pledgor shall
not mingle any such payments with any of Pledgor's other funds or property
but shall hold them separate and upon an express trust for Agent. During the
continuance of an Event of Default, Agent may from time to time apply the
whole or any part of the funds in the special account against the Obligations.
4.04. VOTING RIGHTS. It is expressly understood and agreed that
Pledgor shall retain all voting or management rights to the Capital Stock
Collateral unless an Event of Default shall occur, at which time such voting
rights shall transfer to or be exercised as directed by, at its sole
discretion; PROVIDED, however, that no voting or management rights shall be
exercised, vote cast, consent, waiver, or ratification given, or action taken
by Pledgor which would be inconsistent with or violate any provision of this
Agreement or any other WorldCom Document.
4.05. REALIZATION UPON CAPITAL STOCK COLLATERAL. During the
continuance of an Event of Default, Agent, without notice or demand, but
subject to any limitations or restrictions imposed by
<PAGE>
applicable law, may exercise any right of a secured party under the Uniform
Commercial Code of Oklahoma or any other applicable jurisdiction ("UCC"),
under this Agreement, under any other WorldCom Documents, or otherwise and
also may (i) require Pledgor to, and Pledgor hereby agrees that it will at
its expense and upon request of Agent, forthwith, assemble all or part of the
Capital Stock Collateral as directed by Agent, and make it available to
Agent, at a place to be designated by Agent, which is reasonably convenient
to both parties or (ii) without notice, except as specified below, sell the
Capital Stock Collateral or any portion thereof in one or more parcels at
public or private sale, at any of Agent's offices or elsewhere, for cash, on
credit or for future delivery, and upon such other terms as Agent may deem
commercially reasonable. Unless the Capital Stock Collateral is of a type
customarily sold on a recognized market, Agent shall give Pledgor reasonable
written notice of the time and place of any public sale thereof or of the
time after which any private sale or other intended disposition thereof is to
be made. Pledgor agrees that ten days advance written notice thereof shall
constitute reasonable notice. Agent shall not be obligated to make any sale
of Capital Stock Collateral, regardless of notice of sale having been given.
Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
Expenses of retaking, holding, preparing for sale, selling, or the like shall
include Agent's reasonable attorneys' fees and legal expenses and constitute
a portion of the Obligations. During the continuance of an Event of Default,
Agent shall be entitled to immediate possession of all books and records
maintained by Pledgor with respect to the Capital Stock Collateral, and shall
have the authority to enter upon any premises upon which any of the same may
be situated and remove the same therefrom without liability. Upon disposition
of Capital Stock Collateral during an Event of Default, Pledgor shall be
entitled to any surplus with respect to the Capital Stock Collateral
following payment in full of the Obligations and termination hereof and shall
be liable to Agent for any deficiency with respect thereto. All cash proceeds
received by Agent upon any sale of, collection of, or other realization upon
all or any part of the Capital Stock Collateral shall be applied as follows:
FIRST: To the payment of all out-of-pocket expenses incurred in
connection with the sale of, collection of, or other realization
upon the Capital Stock Collateral, including reasonable attorneys'
fees and disbursements;
SECOND: To the payment of the Obligations, in such order and in such
manner consistent with applicable law as Agent in its discretion and
in accordance with its agreements shall decide; and
THIRD: To the extent of the balance (if any) of such proceeds, to the
payment of such balance (if any) of such proceeds to Pledgor or other
Person legally entitled thereto.
Non-cash proceeds of any disposition of the Capital Stock Collateral
available to satisfy the Obligations shall be applied to the Obligations in
such order and in such manner consistent with applicable law as Agent in its
discretion shall decide.
<PAGE>
4.06. SECURITIES AND OTHER LAWS; CONTRACTUAL RESTRICTIONS;
REGISTRATION.
(a) Because of the Securities Act of 1933, as amended (the
"Securities Act"), and other laws, including, without limitation, state
"blue sky" laws, or contractual restrictions or agreements imposed upon
certain Persons, there may be legal restrictions or limitations affecting
Agent in any attempts to dispose of the Capital Stock Collateral and the
enforcement of its rights hereunder. For these reasons, Agent is hereby
authorized by Pledgor, but not obligated, during the continuance of any Event
of Default to sell or otherwise dispose of any of the Capital Stock
Collateral at private sale, subject to an investment letter, or in any other
manner which will not require the Capital Stock Collateral, or any part
thereof, to be registered in accordance with the Securities Act, or the rules
and regulations promulgated thereunder, or any other law. Agent is also
hereby authorized by Pledgor, but not obligated, to take such actions, give
such notices, obtain such consents, and do such other things as Agent may
deem required or appropriate under the Securities Act or other securities
laws or other laws or contractual restrictions or agreements in the event of
a sale or disposition of any of the Capital Stock Collateral. Pledgor clearly
understands that Agent may in its discretion approach a restricted number of
potential purchasers and that a sale under such circumstances may yield a
lower price for the Capital Stock Collateral than would otherwise be
obtainable if the same were registered and sold in the open market. No sale
so made in good faith by Agent shall be deemed to be not "commercially
reasonable" because so made. Pledgor agrees that in the event Agent shall,
during the continuance of an Event of Default, sell the Capital Stock
Collateral or any portion thereof at any private sale or sales, Agent shall
have the right to rely upon the advice and opinion of appraisers and other
Persons, which appraisers and other Persons are acceptable to Agent, as to
the best price reasonably obtainable upon such a private sale thereof. In the
absence of fraud, such reliance shall be evidence that Agent handled such
matter in a commercially reasonable manner under applicable law.
(b) If Agent shall determine to exercise its right to sell
any or all of the Capital Stock Collateral, and if in the opinion of counsel
for Agent it is necessary, or if in the opinion of Agent it is advisable, to
have the Capital Stock Collateral (or that portion thereof to be sold)
registered under the provisions of the Securities Act, Pledgor will, to the
fullest extent it has the capability to do so, cause the Issuer or Issuers of
the Capital Stock Collateral contemplated to be sold to execute and deliver,
and cause the directors and officers of each thereof to execute and deliver,
all at Pledgor's expense, all such instruments and documents, and to do or
cause to be done all such other acts and things, as may be necessary or, in
the opinion of Agent, advisable to register the Capital Stock Collateral (or
that portion thereof to be sold) under the provisions of the Securities Act
and to cause the registration statement relating thereto to become effective
and to remain effective for such period as Agent may deem appropriate to
facilitate the sale or other disposition of such Capital Stock Collateral
from the date of the first public offering of the Capital Stock Collateral
(or that portion thereof to be sold) and to make all amendments thereto
and/or to the related prospectus which, in the opinion of Agent, are
necessary or advisable, all in conformity with the requirements of the
Securities Act. Pledgor shall use its best efforts to cause each Issuer to
comply with the provisions of the securities or "blue sky" laws of any
jurisdiction which Agent shall designate and to cause each Issuer to make
available to its security holders, as soon as practicable, an earnings
statement which will satisfy the provisions of the Securities Act and
applicable "blue sky" laws.
<PAGE>
4.07 FURTHER APPROVALS REQUIRED.
(a) In connection with the exercise by Agent of its
rights hereunder that effects the disposition of or use of any Capital Stock
Collateral, it may be necessary to obtain the prior consent, waiver, or
approval of tribunals and other Persons to a transfer or assignment of
Capital Stock Collateral, including, without limitation, the FCC.
(b) Pledgor hereby agrees, upon the occurrence of an
Event of Default, to execute, deliver, and file, and hereby appoints (to the
extent permitted under applicable law) Agent, as its attorney-in-fact, upon
the occurrence of an Event of Default, to execute, deliver, and file on
Pledgor's behalf and in Pledgor's name, all applications, certificates,
filings, instruments, and other documents (including without limitation any
application for an assignment or transfer of control or ownership) that may
be necessary or appropriate, in Agent's opinion, to obtain such consents,
waivers, or approvals. Pledgor acknowledges that there is no adequate remedy
at law for failure by it to comply with the provisions of this Section 4.07
and that such failure would not be adequately compensable in damages and
therefore agrees that this Section 4.07 may be specifically enforced.
4.08 CONVERTIBLE SECURITIES. Upon the occurrence of an Event of
Default, Agent may present for conversion any Capital Stock Collateral which
is convertible into any other instrument, investment security, or cash. Agent
shall not have any duty, however, to present for conversion any of the
Capital Stock Collateral, unless it shall have received from Pledgor detailed
written instructions to that effect at a time reasonably far in advance of
the final conversion date to make such conversion possible and such
conversion does not violate any provisions of any WorldCom Document.
4.09. ISSUER LIABILITIES. By taking a security interest in the
Capital Stock Collateral pursuant to this Agreement, Agent does not assume,
accept, or become liable with respect to any debts, liabilities, or
obligations of or owed to any Issuer of any Capital Stock Collateral.
4.10. POWER OF ATTORNEY. PLEDGOR HEREBY IRREVOCABLY GRANTS TO AGENT
PLEDGOR'S PROXY (EXERCISABLE FROM AND AFTER THE OCCURRENCE OF AN EVENT OF
DEFAULT) TO VOTE ANY CAPITAL STOCK COLLATERAL AND, UPON THE OCCURRENCE OF AN
EVENT OF DEFAULT, APPOINTS AGENT, AS PLEDGOR'S ATTORNEY-IN-FACT TO PERFORM
ALL OBLIGATIONS OF PLEDGOR UNDER THIS AGREEMENT AND TO EXERCISE ALL OF
AGENT'S RIGHTS HEREUNDER. THE PROXY AND POWER OF ATTORNEY HEREIN GRANTED, AND
EACH STOCK, PARTNERSHIP INTEREST, OR LLC MEMBERSHIP INTEREST POWER AND
SIMILAR POWER NOW OR HEREAFTER GRANTED (INCLUDING ANY EVIDENCED BY A SEPARATE
WRITING), ARE COUPLED WITH AN INTEREST AND ARE IRREVOCABLE PRIOR TO FINAL
PAYMENT IN FULL OF THE OBLIGATIONS.
<PAGE>
ARTICLE II
MISCELLANEOUS
5.01. CUMULATIVE RIGHTS. All rights of Agent under the WorldCom
Documents are cumulative of each other and of every other right which Agent
may otherwise have at law or in equity or under any other contract or other
writing for the enforcement of the security interest granted hereunder or the
collection of the Obligations. The exercise of one or more rights shall not
prejudice or impair the concurrent or subsequent exercise of any other right.
5.02. AGENT'S DUTIES. The powers conferred on Agent hereunder are
intended solely to protect Agent's interest in the Capital Stock Collateral
and shall not impose any duty upon Agent to exercise any such powers. Except
for the safe custody of any Capital Stock Collateral in its possession and
the accounting for moneys actually received by it hereunder, Agent shall have
no duty as to any Capital Stock Collateral, as to ascertaining or taking
action with respect to calls, conversions, exchanges, maturities, tenders, or
other matters relative to any Capital Stock Collateral, whether or not Agent
has or is deemed to have knowledge of such matters, or as to the taking of
any necessary steps to preserve rights against prior parties or any other
rights pertaining to any reasonable care in the custody and preservation of
any Capital Stock Collateral in its possession if such Capital Stock
Collateral is accorded treatment substantially equal to that which Agent
accords its own property. Except as provided in this Section 5.02, Agent
shall not have any duty or liability to protect or preserve any Capital Stock
Collateral or to preserve rights pertaining thereto. Nothing contained in
this Agreement shall be construed as requiring or obligating Agent, and Agent
shall not be required or obligated, to (a) present or file any claim or
notice or take any action with respect to any Capital Stock Collateral or in
connection therewith or (b) notify Pledgor of any decline in the value of any
Capital Stock Collateral.
5.03. WAIVER. No waiver of any Event of Default shall be deemed to
be a waiver of any other subsequent Event of Default, nor shall any such
waiver be deemed to be a continuing waiver. No delay or omission by Agent in
exercising any right hereunder, or under any other of the Loan Documents,
shall impair any such right or be construed as a waiver thereof or any
acquiescence therein, nor shall any single or partial exercise of any such
right preclude other or further exercise thereof or the exercise of any other
right of Agent hereunder or under any other of the Loan Documents.
5.04. WAIVERS BY PLEDGOR. Pledgor waives notice of the creation,
advance, increase, existence, extension, or renewal of, or of any indulgence
with respect to, the Obligations; waives presentment, demand, notice of
dishonor, and protest; waives notice of the amount of the Obligations
outstanding at any time, notice of any Default or Event of Default, and all
other notices respecting the Obligations; and agrees that maturity of the
Obligations and any part thereof may be accelerated, extended, or renewed one
or more times by Agent, in its sole discretion, without notice to Pledgor.
Pledgor waives (a) any claim that, as to any part of the Capital Stock
Collateral, a public sale, should Agent elect so to proceed, is, in and of
itself, not a commercially reasonable method of sale for such Capital Stock
Collateral; (b) except as otherwise provided in this Agreement, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, NOTICE OR JUDICIAL HEARING IN
<PAGE>
CONNECTION WITH AGENT'S DISPOSITION OF ANY OF THE CAPITAL STOCK COLLATERAL,
INCLUDING ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR
REMEDIES AND ANY SUCH RIGHT THAT PLEDGOR WOULD OTHERWISE HAVE UNDER THE
CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE AND ALL
OTHER REQUIREMENTS AS TO THE TIME, PLACE, AND TERMS OF SALE OR OTHER
REQUIREMENTS WITH RESPECT TO THE ENFORCEMENT OF AGENT'S RIGHTS HEREUNDER; AND
(C) ALL RIGHTS OF REDEMPTION, APPRAISAL, OR VALUATION.
5.05. OTHER PARTIES AND OTHER CAPITAL STOCK COLLATERAL. No renewal,
increase, or extension of or any other indulgence with respect to the
Obligations or any part thereof, no release, exchange, or taking of any
security, no release of any Person (including Pledgor, any of Pledgor's
Subsidiaries, maker, endorser, guarantor, or surety) liable on the
Obligations, no delay in enforcement of payment, no delay or omission or lack
of diligence or care in exercising any right or power with respect to the
Obligations or any security therefor or guaranty thereof or under this
Agreement, and no other circumstance or event which might constitute a
defense available to or discharge of Pledgor, any of Pledgor's Subsidiaries,
or any other Person shall in any manner impair or affect the rights of Agent
hereunder, under any other of the Loan Documents, at law, or in equity. Agent
need not file suit or assert a claim for personal judgment against any Person
for any part of the Obligations or seek to realize upon any other security
for the Obligations before foreclosing upon the Capital Stock Collateral for
the purpose of paying the Obligations. Pledgor waives any right to the
benefit of or to require or control application of any other security or
proceeds thereof and agrees that Agent shall have no duty or obligation to
Pledgor to apply any such other security or proceeds thereof to the
Obligations. Pledgor hereby waives all rights by which it might be entitled
to require suit on an accrued right of action in respect of any of the
Obligations or require suit against any of Pledgor's Subsidiaries, or others,
whether arising pursuant to Oklahoma statutory or case law or otherwise.
5.06. CONTINUING SECURITY INTEREST. This Agreement constitutes a
continuing security interest in the Capital Stock Collateral and shall remain
in full force and effect until final payment and performance in full of the
Obligations.
5.07. PARTIES BOUND. This Agreement shall be binding on Pledgor and
its successors, assigns, and other legal representatives and shall inure to
the benefit of Agent and its successors and assigns; PROVIDED, however, that
Pledgor may not assign its rights or obligations hereunder without the prior
written consent of Agent. The rights, powers, and interests held by Agent
hereunder may be transferred or assigned, in whole or in part, in accordance
with the Credit Agreement, without the consent of Pledgor.
5.08. NOTICES AND DELIVERIES. All notices, communications, and
materials to be given or delivered pursuant to this Agreement shall be given
or delivered in the manner provided in, and shall be deemed effective in
accordance with, the provisions of the Note. For purposes of notices,
communications, and materials to be given or delivered pursuant to this
Agreement, addresses and facsimile numbers and the individuals or departments
to whose attention the same shall be directed are, for Agent, as set forth in
the Note and are, for Pledgor, as follows:
<PAGE>
If to Pledgor:
----------------------------
----------------------------
----------------------------
----------------------------
----------------------------
with a copy to:
Riordan & McKinzie
Twenty-Ninth Floor
300 South Grand Avenue
Los Angeles, California 90071
Attention: Richard J. Welch
Facsimile No.: (213) 229-8550
or at such other addresses or facsimile numbers or to the attention of such
other individuals or departments as Pledgor may hereafter specify in a notice
to the other party specifically captioned "Notice of Change of Address."
5.09. MODIFICATIONS, AMENDMENTS, ETC. No amendment or waiver of any
provision of this Agreement, and no consent to any departure by Pledgor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by Agent, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
5.10. FINANCING STATEMENT. A carbon, photographic, or other
reproduction of this Agreement or any financing statement covering the
Capital Stock Collateral shall be sufficient as a financing statement.
Pledgor hereby authorizes Agent to file one or more financing or continuation
statements, and amendments thereto, relating to any Capital Stock Collateral,
without the signature of Pledgor where permitted by law.
5.11. DEFINITIONS. Unless otherwise defined in this Agreement, terms
used herein shall have the meanings set forth in the Workout Agreement, or
Credit Agreement, in that order. Unless the context indicates otherwise or
the terms are otherwise defined herein, definitions in the Uniform Commercial
Code as enacted in the State of Oklahoma (the "UCC") apply to words and
phrases in this Agreement. The terms "Pledgor" and "Issuer" shall include,
without limitation, such Person, such Person's heirs, successors and assigns,
such Person as a debtor-in-possession, and any receiver, trustee, liquidator,
conservator, custodian, or similar party appointed for such Person or all or
substantially all of its assets under any law.
5.12. SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future laws, such
provision shall be fully severable, this Agreement shall be construed and
enforced as if such illegal, invalid, or unenforceable provision had never
<PAGE>
comprised a part thereof, and the remaining provisions thereof shall remain
in full force and effect and shall not be affected by the illegal, invalid,
or unenforceable provision or by its severance therefrom. Furthermore, in
lieu of such illegal, invalid, or unenforceable provision there shall be
added automatically as a part of this Agreement a legal, valid, and
enforceable provision as similar in terms to the illegal, invalid, or
unenforceable provision as may be possible.
5.13. COUNTERPARTS. This Agreement and the other Loan Documents may
be executed in any number of counterparts, all of which taken together shall
constitute one and the same instrument. In making proof of any such
agreement, it shall not be necessary to produce or account for any
counterpart other than one signed by the party against which enforcement is
sought.
5.14. CONTROL.
(a) Notwithstanding anything herein to the contrary, this
Agreement, the other Loan Documents, and the transactions contemplated hereby
and thereby (i) prior to a foreclosure of the Liens granted under this
Agreement and the other Loan Documents, do not and will not constitute,
create, or have the effect of constituting or creating, directly or
indirectly, actual or practical ownership of Pledgor, any Issuer of any
Capital Stock Collateral, or any Subsidiary of Pledgor by Agent or control,
affirmative or negative, direct or indirect, by Agent over the management or
any other aspect of the operation of Pledgor, any Issuer of Capital Stock
Collateral, or any Subsidiary of Pledgor, which ownership and control remains
exclusively and at all times in Pledgor, such Subsidiary of Pledgor, or such
Issuer of Capital Stock Collateral; and (ii) do not and will not constitute
the transfer, assignment, or disposition in any manner, voluntarily or
involuntarily, directly or indirectly, of any license or certificate at any
time issued by the FCC or other applicable tribunal to Pledgor, any Issuer of
Capital Stock Collateral, or any Subsidiary of Pledgor ("License") or the
transfer of control of Pledgor, any Issuer of Capital Stock Collateral, or
any Subsidiary of Pledgor within the meaning of Section 310(d) of the
Communications Act of 1934, as amended, or any other applicable laws.
(b) Notwithstanding any other provision of this Agreement,
any foreclosure on, sale, transfer, or other disposition of, or the exercise
of any right to vote or consent with respect to, any of the Capital Stock
Collateral as provided herein or any other action taken or proposed to be
taken by Agent hereunder which would affect the operational, voting, or other
control of Pledgor, any Subsidiary of Pledgor, any Issuer of Capital Stock
Collateral, or any Subsidiary of any Issuer of Capital Stock Collateral shall
be in accordance with applicable law.
(c) If an Event of Default shall have occurred, Pledgor
shall take any action which Agent may reasonably require in order to transfer
and assign to Agent, or to such one or more third parties as Agent may
designate or to a combination of the foregoing, each License of the Pledgor,
each Subsidiary, or any Issuer of the Capital Stock Collateral. To enforce
the provisions of this Section 5.14, Agent is empowered, upon the occurrence
during the continuance of an Event of Default, to require the appointment of
a receiver from any court of competent jurisdiction. Such receiver shall be
instructed to seek from the FCC or other applicable tribunal an involuntary
transfer of control of each such License for the purpose of seeking a bona
fide purchaser to whom control
<PAGE>
will ultimately be transferred. Pledgor hereby agrees to authorize such an
involuntary transfer of control upon the request of the receiver so appointed
and, if Pledgor shall refuse to authorize the transfer, its approval may be
required by the court. Upon the occurrence of an Event of Default, Pledgor
shall further use its best efforts to assist in obtaining approval of the FCC
or other applicable tribunal, if required, for any action or transactions
contemplated by this Agreement, including, without limitation, the
preparation, execution, and filing with the FCC or other applicable tribunal
of the assignor's or transferor's portion of any application or applications
for consent to the assignment of any License or transfer of control necessary
or appropriate under the rules and regulations of the FCC or other applicable
tribunal for approval of the transfer or assignment of any portion of the
Capital Stock Collateral, together with any License.
(d) Pledgor acknowledges that the assignment or transfer
of each License of Pledgor, each Subsidiary of Pledgor, and Issuer of the
Capital Stock Collateral is integral to Agent's realization of the value of
the Capital Stock Collateral pledged by Pledgor, that there is no adequate
remedy at law for failure by Pledgor to comply with the provisions of this
Section 5.14, and that such failure would not be adequately compensable in
damages and therefore agrees, without limiting the right of Agent to seek and
obtain specific performance of other obligations of Pledgor contained in this
Agreement, that the agreements contained in this Section 5.15 may be
specifically enforced.
5.15. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF OKLAHOMA (OTHER THAN
THE CONFLICT OF LAWS RULES THEREOF AND EXCEPT TO THE EXTENT THAT THE VALIDITY
OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN
RESPECT OF ANY PARTICULAR CAPITAL STOCK COLLATERAL ARE GOVERNED BY THE LAWS
OF A JURISDICTION OTHER THAN THE STATE OF OKLAHOMA).
5.16. WAIVER OF JURY TRIAL. AGENT AND PLEDGOR HEREBY WAIVE TRIAL BY
JURY IN ANY JUDICIAL PROCEEDINGS INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER (WHETHER IN TORT, CONTRACT, OR OTHERWISE) IN ANYWAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR THE RELATIONSHIP ESTABLISHED
HEREUNDER.
5.17. AGENT'S RIGHT TO USE AGENTS. Agent may exercise its rights
under this Agreement through an agent or other designee.
5.18. NO INTERFERENCE, COMPENSATION, OR EXPENSE. Agent may exercise
its rights under this Agreement (a) without resistance or interference by
Pledgor and (b) without payment of any rent, license fee, or compensation of
any kind to Pledgor.
5.19. WAIVER OF SUBROGATION. Pledgor shall not assert, enforce, or
otherwise exercise (a) any right of subrogation to any of the rights or Liens
of Agent or any other Person against Pledgor, any of Pledgor's Subsidiaries,
or any other Person on all or any part of the Obligations or any Capital
Stock Collateral or other security, or (b) any right of recourse,
reimbursement, contribution,
<PAGE>
indemnification, or similar right against Pledgor, any of Pledgor's
Subsidiaries, or any other Person on all or any part of the Obligations or
any Capital Stock Collateral or any security, and Pledgor hereby agrees not
to exercise any and all of the foregoing rights and any right to participate
in any collateral or other security given to Agent to secure payment of the
Obligations, however any such rights arise, whether hereunder or any other
Loan Document or by operation of law. If any amount shall be paid to Pledgor
in violation of the immediately preceding sentence, such amount shall be
deemed to have been paid to Pledgor for the benefit of, and held in trust for
the benefit of, Agent and shall forthwith be paid to Agent to be credited and
applied against the Obligations, whether matured or unmatured, in accordance
with the terms of the Credit Agreement. The provisions of this Section 5.20
shall survive the termination of this Agreement, and any satisfaction and
discharge of Pledgor and each other Person by virtue of any payment, court
order, or law.
5.20. LOAN DOCUMENT. This Agreement is a Loan Document executed
pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered, and applied in accordance with
the terms and provisions thereof.
5.21. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument.
5.22. ENTIRE AGREEMENT. THIS AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN PLEDGOR AND AGENT REGARDING THE SUBJECT MATTER HEREOF AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY PRIOR ORAL, CONTEMPORANEOUS, OR
SUBSEQUENT AGREEMENTS OF THE PARTIES HERETO. PLEDGOR ACKNOWLEDGES THAT THERE
ARE NO CONTEMPORANEOUS ORAL AGREEMENTS BETWEEN PLEDGOR AND AGENT REGARDING
THE SUBJECT MATTER HEREOF.
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THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
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IN WITNESS WHEREOF, Pledgor has executed this Pledge Agreement as of
the date first set forth above.
PLEDGOR:
----------------------------------------
By:
-------------------------------------
Its:
------------------------------------
Attest:
---------------------------------
Name:
--------------------------
Title:
-------------------------
(CORPORATE SEAL)
<PAGE>
EXHIBIT 10.79
GUARANTY
THIS GUARANTY, dated as of April 12, 2000 (as amended, restated, and
otherwise modified from time to time, this "Guaranty"), is made by
___________________________ ("Guarantor"), of the obligations of STAR
Telecommunications, Inc. ("Debtor"), under the WorldCom Documents, as defined
below, by and between Debtor and MCI WORLDCOM NETWORK SERVICES, INC., a Delaware
corporation ("WorldCom"), as agent for itself and MCI WORLDCOM, INC., its
affiliates and subsidiaries (collectively, the "WorldCom Entities").
W I T N E S S E T H:
WHEREAS, WorldCom provides telecommunications services to Debtor,
Guarantor and certain of their respective Subsidiaries pursuant to the Service
Agreements; and
WHEREAS, Debtor is in default to WorldCom for, INTER ALIA, failure to
pay its obligations to WorldCom in a timely manner (the "Past Due
Indebtedness"); and
WHEREAS, Debtor and WorldCom have agreed to restructure certain of the
Past Due Indebtedness due to WorldCom as of February 3, 2000, in the form of a
Promissory Note in the principal amount of $56,017,698.87, of even date herewith
(the "Note"), which has been executed and delivered by Debtor to WorldCom; and
WHEREAS, Guarantor has determined that the execution, delivery, and
performance of this Guaranty is necessary and convenient to the conduct,
promotion, and attainment of Guarantor's business; and
WHEREAS, Guarantor desires to induce WorldCom to accept delivery of the
Note, extend the term of the obligations evidenced by the Note, and otherwise
restructure the credit relationship between Debtor and WorldCom to facilitate
the potential merger between Debtor and World Access, Inc., all of which are
reasonably expected to benefit, directly or indirectly, Guarantor.
NOW, THEREFORE, in consideration of the foregoing premises and in
order to, INTER ALIA, induce WorldCom to agree to the financial restructuring
with the Debtor, Guarantor hereby agrees as follows:
1. DEFINITIONS. Unless otherwise defined in this Agreement,
terms used herein shall have the meanings set forth in the Workout Agreement,
or Credit Agreement, in that order. Unless the context indicates otherwise or
the terms are otherwise defined herein, definitions in the Uniform Commercial
Code as enacted in the State of Oklahoma (the "UCC") apply to words and
phrases in this Agreement. "Debtor" includes, without limitation, such
Person, such Person's heirs, successors and assigns, such Person as a
debtor-in-possession, and any receiver, trustee, liquidator, conservator,
custodian, or similar party appointed for such Person or all or substantially
all of its assets under any law.
<PAGE>
2. GUARANTY.
(a) Guarantor hereby unconditionally guarantees to
WorldCom the punctual payment and performance of, and promises to pay and
perform when due, whether at stated maturity, by acceleration, or otherwise,
all of the Obligations, and agrees to pay any and all reasonable expenses
(including reasonable attorneys' fees and expenses) incurred in enforcement
or collection of all or any part thereof, whether such obligations,
indebtedness, and liabilities are direct, indirect, fixed, contingent, joint,
several, or joint and several, and in enforcement of any rights under this
Guaranty.
(b) Anything contained in this Guaranty to the
contrary notwithstanding, the obligations of Guarantor hereunder shall be
limited to a maximum aggregate amount equal to the largest amount that would
not render its obligations hereunder subject to avoidance as a fraudulent
transfer or conveyance under Section 548 of Title 11 of the United States
Code or any applicable provisions of comparable state law (collectively, the
"Fraudulent Transfer Laws"), in each case after giving effect to all other
liabilities of Guarantor, contingent or otherwise, that are relevant under
the Fraudulent Transfer Laws (specifically excluding, however, any
liabilities of Guarantor in respect of intercompany indebtedness to Debtor or
other affiliates of Debtor to the extent that such indebtedness would be
discharged in an amount equal to the amount paid by Guarantor hereunder) and
after giving effect as assets, subject to Paragraph 5(a) hereof, to the value
(as determined under the applicable provisions of the Fraudulent Transfer
Laws) of any rights to subrogation or contribution of Guarantor pursuant to
(i) applicable law or (ii) any agreement providing for an equitable
allocation among Guarantor and other affiliates of Debtor of obligations
arising under guaranties by such parties.
3. GUARANTY ABSOLUTE. This is a guaranty of payment
and performance and not of collection. The liability of Guarantor
hereunder shall be joint and several with any other guarantors of the
Obligations guaranteed hereby. Guarantor guarantees that the Obligations will
be paid strictly in accordance with the terms of the WorldCom Documents,
regardless of any applicable law, regulation, or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of
WorldCom with respect thereto. The obligations and liabilities of Guarantor
hereunder are independent of the obligations of Debtor under the WorldCom
Documents and any applicable law, to the extent that Guarantor's obligations
to make such payments are not in violation of any applicable law. The
liability of Guarantor under this Guaranty shall be absolute and
unconditional irrespective of:
(a) the taking or accepting of any other security or
guaranty for any or all of the Obligations;
(b) any increase, reduction, or payment in full at any
time or from time to time of any part of the Obligations;
(c) any lack of validity or enforceability of the any of
the WorldCom Documents or any other agreement or instrument relating
thereto, including but not limited to the
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unenforceability of all or any part of the Obligations by reason of the fact
that (i) the act of creating the Obligations, or any part thereof, is ULTRA
VIRES, (ii) the officers creating same acted in excess of their authority, or
(iii) for any other reason;
(d) any lack of corporate power of Debtor or any other
Person at any time liable for the payment of any or all of the Obligations;
(e) any Debtor Relief Laws affecting the rights of
creditors generally involving Debtor, Guarantor, or any other Person
obligated on any of the Obligations;
(f) any renewal, compromise, extension, acceleration, or
other change in the time, manner, or place of payment of, or in any other
term of, all or any of the Obligations; any adjustment, indulgence,
forbearance, or compromise that may be granted or given by WorldCom to
Debtor, Guarantor, or any Person at any time liable for the payment of any or
all of the Obligations; or any other modification, amendment, or waiver of or
any consent to departure from any of the WorldCom Documents or any other
agreement or instrument relating thereto without notification of Guarantor
(the right to such notification being herein specifically waived by
Guarantor);
(g) any exchange, release, sale, subordination, or
non-perfection of any Collateral or Lien thereon or any lack of validity or
enforceability or change in priority, destruction, reduction, or loss or
impairment of value of any Collateral or Lien thereon;
(h) any release or amendment or waiver of or consent to
departure from any other guaranty for all or any of the Obligations;
(i) the failure by WorldCom to make any demand upon or to
bring any legal, equitable, or other action against Debtor or any other
Person (including, without limitation, Guarantor), or the failure or delay by
WorldCom to, or the manner in which WorldCom shall, proceed to exhaust rights
against any direct or indirect security for the Obligations;
(j) the existence of any claim, defense, set-off, or
other rights which Debtor or Guarantor may have at any time against Debtor,
WorldCom, or Guarantor, or any other Person, whether in connection with this
Guaranty, the other WorldCom Documents, the transactions contemplated
thereby, or any other transaction;
(k) any failure of WorldCom to notify Guarantor of any
renewal, extension, or assignment of the Obligations or any part thereof, or
the release of any security, or of any other action taken or refrained from
being taken by WorldCom, it being understood that WorldCom shall not be
required to give Guarantor any notice of any kind under any circumstances
whatsoever with respect to or in connection with the Obligations;
(l) any payment by Debtor to WorldCom is held to
constitute a preference under any Debtor Relief Law or if for any other
reason WorldCom is required to refund such payment or pay the amount thereof
to another Person; or
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<PAGE>
(m) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, Debtor, Guarantor, any
other guarantor or other Person liable on the Obligations, including, without
limitation, any defense by reason of any disability or other defense of
Debtor, or the cessation from any cause whatsoever of the liability of
Debtor, or any claim that Guarantor's obligations hereunder exceed or are
more burdensome than those of Debtor.
This Guaranty shall continue to be effective or be reinstated, as the
case may be, if at any time any payment of any of the Obligations is rescinded
or must otherwise be returned by WorldCom or any other Person as a result of the
insolvency, bankruptcy, or reorganization of Debtor or Guarantor or otherwise,
all as though such payment had not been made.
4. WAIVER. Guarantor hereby waives: (a) any incapacity, lack of
authority, death, or disability of Guarantor or any other Person or entity;
(b) any failure of WorldCom to commence an action against Debtor or any other
Person or entity (including, without limitation, other guarantors, if any),
or to file or enforce a claim against the estate (either in administration,
bankruptcy, or any other proceeding) of Debtor or any other Person or entity,
whether or not demand is made upon WorldCom to file or enforce such claim;
(c) any failure of WorldCom to give notice of the existence, creation, or
incurring of any new or additional indebtedness or other obligation or of any
action or nonaction on the part of any other Person or entity in connection
with any of the WorldCom Documents or any obligation hereby guaranteed; (d)
any failure on the part of WorldCom to ascertain the extent or nature of the
Collateral or any insurance or other rights with respect thereto, or the
liability of any party liable for the WorldCom Documents or the obligations
evidenced or secured thereby, or any failure on the part of WorldCom to
disclose to Guarantor any facts it may now or hereafter know regarding
Debtor, the Collateral, or such other parties; (e) any lack of acceptance or
notice of acceptance of this Guaranty by WorldCom; (f) any lack of
presentment, demand, protest, or notice of demand, protest, dishonor or
nonpayment with respect to any indebtedness or obligations under any of the
WorldCom Documents; (g) any lack of notice of disposition or of manner of
disposition of any Collateral; (h) any lack of other notices to which
Guarantor might otherwise be entitled; (i) failure to properly record any
document or any other lack of due diligence by WorldCom in creating or
perfecting a security interest in or collection, protection, or realization
upon any Collateral or in obtaining reimbursement or performance from any
Person or entity now or hereafter liable for the WorldCom Documents or any
obligation secured thereby; (j) any invalidity, irregularity, or
unenforceability, in whole or in part, of any one or more of the WorldCom
Documents; (k) the inaccuracy of any representation or other provision
contained in any WorldCom Document; (l) any sale or assignment of the
WorldCom Documents, in whole or in part; (m) any sale or assignment by Debtor
of the Collateral, or any portion thereof, whether or not consented to by
WorldCom; (n) any lack of commercial reasonableness in dealing with
Collateral; (o) any deficiencies in the Collateral or any deficiency in the
ability of WorldCom to collect or obtain performance from any Persons or
entities now or hereafter liable for the payment or performance of any
obligation hereby guaranteed; (p) an assertion or claim that the automatic
stay provided by 11 U.S.C. ss. 362 (arising upon the voluntary or involuntarY
bankruptcy proceeding of Debtor), or any other stay provided under any other
Debtor Relief Law (whether statutory, common law, case law, or otherwise) of
any jurisdiction whatsoever, now or hereafter in effect, which may be or
become applicable, shall operate or be interpreted to stay, interdict,
condition, reduce or inhibit the ability
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<PAGE>
of WorldCom to enforce any of its rights, whether now or hereafter acquired,
which WorldCom may have against Guarantor or the Collateral; (q) any
modifications of the WorldCom Documents or any of the Obligations by
operation of law or by action of any court, whether pursuant to the
Bankruptcy Reform Act of 1978, as amended, or any other Debtor Relief Law
(whether statutory, common law, case law, or otherwise) of any jurisdiction
whatsoever, now or hereafter in effect, or otherwise; (r) notices of any of
the events described in Paragraph 3 hereof and of any other occurrence or
matter with respect to any of the Obligations, this Guaranty, or any of the
other of the WorldCom Documents (s) any right to assert against WorldCom as a
counterclaim, set-off or cross-claim, any counterclaim, set-off, or claim
which it may now or hereafter have against Debtor or other Person liable on
the Obligations; (t) any right to participate in any collateral or any right
benefitting WorldCom in respect of the Obligations; and (u) any right by
which Guarantor might be entitled to require suit on an accrued right of
action in respect of any of the Obligations or require suit against Debtor or
any other Person, whether arising pursuant to any provision of statutory or
case law or otherwise.
5. SUBROGATION AND SUBORDINATION.
(a) Notwithstanding any reference to subrogation contained
herein to the contrary, Guarantor hereby irrevocably waives any claim or
other rights which it may have or hereafter acquire against Debtor that arise
from the existence, payment, performance, or enforcement of Guarantor's
obligations under this Guaranty, including, without limitation, any right of
subrogation, reimbursement, exoneration, contribution, indemnification, any
right to participate in any claim or remedy of WorldCom against Debtor, or
any other Person at any time liable for the payment of any or all of the
Obligations, or any Collateral, which WorldCom now has or hereafter acquires,
whether or not such claim, remedy or right arises in equity, or under
contract, statutes or common law, including, without limitation, the right to
take or receive from Debtor, directly or indirectly, in cash or other
property or by set-off or in any other manner, payment or security on account
of such claim or other rights. If any amount shall be paid to Guarantor in
violation of the immediately preceding sentence, such amount shall be deemed
to have been paid to Guarantor for the benefit of, and held in trust for the
benefit of, WorldCom, and shall forthwith be paid to WorldCom to be credited
and applied against the Obligations, whether matured or unmatured, in
accordance with the terms of the Note or the other WorldCom Documents.
Guarantor acknowledges that it will receive direct and indirect benefits from
the financing arrangements contemplated by the Note and the restructuring of
the Debtor's obligations to WorldCom and that the waiver set forth in this
Paragraph 5(a) is knowingly made in contemplation of such benefits.
(b) If Guarantor becomes the holder of any indebtedness
payable by Debtor, Guarantor hereby subordinates all indebtedness owing to it
from Debtor to all indebtedness of Debtor to WorldCom and agrees that upon
the occurrence and continuance of a Default or an Event of Default, it shall
not accept any payment on the same until payment in full of the Obligations
of Debtor under the Note, and all other WorldCom Documents and shall in no
circumstance whatsoever attempt to set-off or reduce any obligations
hereunder because of such indebtedness. If any amount shall nevertheless be
paid to Guarantor by Debtor or on behalf of Debtor prior to payment in full
of
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<PAGE>
the Obligations, such amount shall be held in trust for the benefit of
WorldCom and shall forthwith be paid to WorldCom to be credited and applied
to the Obligations, whether matured or unmatured.
6. INTENTIONALLY OMITTED.
7. COVENANTS. Guarantor covenants and agrees (a) punctually and
properly to perform all of Guarantor's covenants and duties under any other
of the WorldCom Documents; (b) from time to time promptly to furnish WorldCom
with any information or writings which WorldCom may request concerning this
Guaranty; and (c) promptly to notify WorldCom of any claim, action, or
proceeding affecting this Guaranty.
8. AMENDMENTS, ETC. No amendment or waiver of any provision of
this Guaranty nor consent to any departure by Guarantor therefrom shall in
any event be effective unless the same shall be in writing and signed by
Guarantor and WorldCom, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
9. NOTICES. All notices, communications, and materials to be given
or delivered pursuant to this Agreement shall be given or delivered in the
manner provided in, and shall be deemed to be effective in accordance with,
the provisions of the Workout Agreement. For purposes of notices,
communications, and materials to be given or delivered pursuant to this
Agreement, addresses and facsimile numbers and the individuals or departments
to whose attention the same shall be directed are, for WorldCom, as set forth
in the Security Agreement and are, for Guarantor, as follows:
If to Guarantor:
--------------------------
--------------------------
--------------------------
Facsimile No.:
------------
Attention:
----------------
with a copy to: Riordan & McKinzie
Twenty-Ninth Floor
300 South Grand Avenue
Los Angeles, California 90071
Attention: Ronn S. Davids
Facsimile No.: (213) 229-8550
or at such other addresses or facsimile numbers or to the attention of such
other individuals or departments as Guarantor may hereafter specify in a notice
to the other party specifically captioned "Notice of Change of Address."
10. NO WAIVER; REMEDIES. No failure on the part of WorldCom to
exercise, and no delay in exercising, any right hereunder or under any of
the WorldCom Documents shall operate as a waiver thereof, nor shall any
single or partial exercise of any right hereunder or under any of the
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<PAGE>
WorldCom Documents preclude any other or further exercise thereof or the
exercise of any other right. WorldCom shall not be required to (a) prosecute
collection or seek to enforce or resort to any remedies against Debtor or any
other Person liable on any of the Obligations, (b) join Debtor or any other
Person liable on any of the Obligations in any action in which WorldCom
prosecutes collection or seeks to enforce or resort to any remedies against
Debtor or other Person liable on any of the Obligations, or (c) seek to
enforce or resort to any remedies with respect to any Liens granted to (or
benefitting, directly or indirectly) WorldCom by Debtor or any other Person
liable on any of the Obligations. WorldCom shall not have any obligation to
protect, secure, or insure any of the Collateral or any of the Liens or the
properties or interests in properties subject thereto. The remedies herein
provided are cumulative and not exclusive of any remedies provided by
applicable law.
11. RIGHT OF SET OFF. Upon the occurrence and during the
continuance of any Event of Default, WorldCom is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set
off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time
owing by WorldCom to or for the credit or the account of Guarantor against
any and all of the obligations of Guarantor now or hereafter existing under
this Guaranty, irrespective of whether or not WorldCom shall have made any
demand under this Guaranty. The rights of WorldCom under this Paragraph 11
are in addition to other rights and remedies (including, without limitation,
other rights of set off) which WorldCom or any other WorldCom Entity may have.
12. LIENS. Guarantor agrees that WorldCom, in its discretion,
without notice or demand to or upon Guarantor and without affecting either
the liability of Guarantor, Debtor or any other Person liable on any of the
Obligations under, or the Liens and security interests created by, the Note,
or the other WorldCom Documents, or this Guaranty, or any security interest
or other Lien, may foreclose any deed of trust or mortgage or similar Lien
covering interests in real or personal property, and the interests in real or
personal property secured thereby, by nonjudicial sale; and Guarantor hereby
waives any defense to the recovery by WorldCom hereunder against Debtor,
Guarantor, or any collateral of any deficiency after a nonjudicial sale, and
Guarantor expressly waives any defense or benefits that may be derived from
any statute or case law in effect in any jurisdiction. Without limiting the
foregoing, Guarantor waives any defense arising out of any such nonjudicial
sale even though such sale operates to impair or extinguish any right of
reimbursement or subrogation or any other right or remedy of Guarantor
against Debtor or any other Person or any Collateral or any other collateral.
Guarantor hereby agrees that Guarantor shall be liable, subject to the
limitations of Paragraph 2(b) hereof, for any part of the Obligations
remaining unpaid after any foreclosure.
13. CONTINUING GUARANTY; TRANSFER OF NOTE. This Guaranty is an
irrevocable continuing guaranty of payment and shall (a) remain in full force
and effect until payment in full of all of the Obligations and all other
amounts payable under this Guaranty, (b) be binding upon Guarantor, its
successors and assigns, and (c) inure to the benefit of and be enforceable by
WorldCom and its successors, transferees, and assigns. Without limiting the
generality of the foregoing clause, (c) WorldCom may assign or otherwise
transfer its rights under the any of the WorldCom Documents or any interest
therein to any other Person, and such other Person shall thereupon become
vested with
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all the rights or any interest therein, as appropriate, in respect thereof
granted to WorldCom herein or otherwise.
14. INFORMATION. Guarantor acknowledges and agrees that it shall
have the sole responsibility for obtaining from Debtor such information
concerning Debtor's financial condition or business operations as Guarantor
may require and that WorldCom has no duty at any time to disclose to
Guarantor any information relating to the business operations or financial
conditions of Debtor.
15. GOVERNING LAW; SERVICE OF PROCESS.
(a) THIS GUARANTY SHALL BE DEEMED A CONTRACT MADE UNDER THE
LAWS OF THE STATE OF OKLAHOMA AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF OKLAHOMA, EXCEPT TO
THE EXTENT THAT FEDERAL LAWS MAY GOVERN THE VALIDITY, CONSTRUCTION,
ENFORCEMENT, AND INTERPRETATION OF ALL OR ANY PART OF THIS GUARANTY.
GUARANTOR AGREES THAT THE FEDERAL AND STATE COURTS LOCATED IN TULSA COUNTY,
OKLAHOMA, WILL HAVE JURISDICTION OVER ALL PROCEEDINGS IN CONNECTION HEREWITH.
(b) GUARANTOR HEREBY WAIVES PERSONAL SERVICE OF ANY LEGAL
PROCESS UPON IT. IN ADDITION, GUARANTOR AGREES THAT SERVICE OF PROCESS MAY BE
MADE UPON IT BY REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO
GUARANTOR AT ITS ADDRESS DESIGNATED FOR NOTICE UNDER THIS GUARANTY AND THAT
SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON RECEIPT BY GUARANTOR.
NOTHING IN THIS PARAGRAPH 15 SHALL AFFECT THE RIGHT OF LENDER TO SERVE LEGAL
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
16. WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY LAW,
GUARANTOR AND WORLDCOM HEREBY WAIVE ANY RIGHT THAT EITHER MAY HAVE TO A TRIAL
BY JURY OF ANY DISPUTE (WHETHER A CLAIM IN TORT, CONTRACT, EQUITY, OR
OTHERWISE) ARISING UNDER OR RELATING TO THIS GUARANTY, THE OTHER WORLDCOM
DOCUMENTS, OR ANY RELATED MATTERS AND AGREE THAT ANY SUCH DISPUTE SHALL BE
TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
17. WAIVER OF RIGHTS. Guarantor hereby waives and renounces, to the
fullest extent permitted by law, all rights to the benefits of any statute of
limitations and any moratorium, reinstatement, marshaling, forbearance,
valuation, stay, extension, redemption, appraisement, exemption and homestead
law or principle of law now or hereafter provided by the Constitution and
laws of the United States of America and of each state thereof, both as to
itself and in and to all of
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its property, real and personal, against the enforcement and collection of
the Obligations evidenced by this Guaranty.
18. LIMIT OF VALIDITY. If from any circumstances whatsoever
fulfillment of any provisions of this Guaranty, at the time performance of
such provision shall be due, shall involve transcending the limit of validity
presently prescribed by any applicable usury statute or any other applicable
law, with regard to obligations of like character and amount, then IPSO FACTO
the obligation to be fulfilled shall be reduced to the limit of such
validity, so that in no event shall any exaction be possible under this
Guaranty that is in excess of the current limit of such validity, but such
obligation shall be fulfilled to the limit of such validity. The provisions
of this section shall control every other provision of this Guaranty.
19. GUARANTOR INSOLVENCY. Should Guarantor become insolvent, fail
to pay its debts generally as they become due, voluntarily seek, consent to,
or acquiesce in the benefits of any Debtor Relief Laws, or become a party to
or be made the subject of any proceeding provided for by any Debtor Relief
Laws (other than as a creditor or claimant) that could suspend or otherwise
adversely affect the rights of WorldCom granted hereunder, then the
obligations of Guarantor under this Guaranty shall be, as between Guarantor
and WorldCom, fully matured, due, and payable obligations of Guarantor to
WorldCom (without regard to whether Debtor is then in default under any of
the WorldCom Documents or whether any of the Obligations may then be due and
owing by Debtor to WorldCom), payable in full by Guarantor to WorldCom upon
demand, which shall be the estimated amount owing in respect of the
contingent claim created hereunder.
20. ENTIRE AGREEMENT. THIS GUARANTY REPRESENTS THE FINAL AGREEMENT
BETWEEN GUARANTOR AND WORLDCOM REGARDING THE GUARANTYING OF THE OBLIGATIONS
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS WITH RESPECT THERETO. GUARANTOR ACKNOWLEDGES
THAT THERE ARE NO CONTEMPORANEOUS ORAL AGREEMENTS WITH RESPECT TO THE SUBJECT
MATTER HEREOF.
21. MISCELLANEOUS. Time is of the essence with respect to all
obligations of Guarantor hereunder. This Guaranty shall in no event be
impaired by any change which may arise by reason of the dissolution of Debtor
or Guarantor. Guarantor expressly waives notice of transfer or assignment of
this Guaranty and acknowledges that the failure by WorldCom to give any such
notice shall not affect the liabilities of Guarantor hereunder.
Notwithstanding the foregoing, Guarantor shall not assign any of its rights
or obligations under this Guaranty. All personal pronouns used herein,
whether used in the masculine, feminine, or neuter gender, shall include all
other genders; and the singular shall include the plural and vice versa.
Titles of articles and sections are for convenience only and in no way
define, limit, amplify, or describe the scope or intent of any provisions
hereof. If Guarantor is a partnership, all of the provisions hereof referring
to Guarantor shall be construed to apply to each of the general partners of
Guarantor and of any and all further tiers of general partners in the
structure of Guarantor.
9.
<PAGE>
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be
duly executed and delivered by its respective officers thereunto duly authorized
as of the date first above written.
GUARANTOR:
BY:
---------------------------
By:
-----------------------
Its:
----------------------
Attest:
-----------------------
Name:
------------------
Title:
-----------------
(CORPORATE SEAL)
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONDENSED CONSOLIDATED BALANCE SHEETS, CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS AND CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 14,170
<SECURITIES> 1,316
<RECEIVABLES> 205,960
<ALLOWANCES> 41,025
<INVENTORY> 0
<CURRENT-ASSETS> 227,011
<PP&E> 370,716
<DEPRECIATION> 60,982
<TOTAL-ASSETS> 741,884
<CURRENT-LIABILITIES> 387,756
<BONDS> 61,410
0
0
<COMMON> 58
<OTHER-SE> 270,010
<TOTAL-LIABILITY-AND-EQUITY> 741,884
<SALES> 255,105
<TOTAL-REVENUES> 255,105
<CGS> 0
<TOTAL-COSTS> 272,219
<OTHER-EXPENSES> (10,696)
<LOSS-PROVISION> 6,708
<INTEREST-EXPENSE> 2,924
<INCOME-PRETAX> (9,153)
<INCOME-TAX> (2,629)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,524)
<EPS-BASIC> (.11)
<EPS-DILUTED> (.11)
</TABLE>
